GENRAD, INC.
                               SEVERANCE AGREEMENT

     This is an AGREEMENT entered into between GenRad, Inc. (the "Company") and
Lori B. Hannay ("Executive") effective as of the 9th day of May, 1997.

     Executive is a key executive of the Company and a vital part of its
management. In consideration of Executive's continued employment with the
Company, the parties agree as follows:

     1. Term; Window Period. The term during which this Agreement (the
"Agreement") will be in effect (the "Term of the Agreement") will begin on May
9, 1997 (the "Effective Date") and, except as provided below, will terminate on
the date which is two years from the date the Company advises the Executive in
writing that it is terminating this Agreement. If a Change of Control (as
defined in Exhibit A) occurs during the Term of the Agreement, the Agreement
will remain in effect until all obligations hereunder have been discharged. The
period starting on the date of such a Change of Control and ending on the third
anniversary of the Change of Control will be a "Window Period" during which
special provisions of this Agreement will apply.

     2. Positions and Duties. Subject to the provisions of the Agreement:

     2.1 Executive will serve as Vice President, Human Resources of the Company
with responsibilities consistent with these positions.

     2.2 Executive will be a full-time employee of the Company and, except for
reasonable work-related travel, will perform his duties at the Company's
headquarters location or, if different, the location at which he now principally
performs his employment duties for the Company.

     2.3 Executive will devote his entire business time and attention and his
best efforts to the duties and services of his positions. However, Executive may
serve on boards of directors of other businesses and attend to personal
investments and community and charitable service, provided that such activities
are not competitive with the business of the Company and do not interfere with
the performance of Executive's duties to the Company.

     3. Compensation and Benefits. During the term of the Agreement, the Company
will provide compensation and benefits to Executive as follows:

     3.1 Base Salary. Executive's base salary as of the Effective Date will be
$150,000.00 per year, payable in accordance with the applicable payroll
practices of the Company. The Company will review Executive's base salary
annually, and Executive will receive such increases in base salary, if any, for
each succeeding year as the Board of


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                                                             Severance Agreement
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Directors of the Company (the "Board") determines in its sole discretion.
Executive's Base Salary will not be decreased during the Term of the Agreement
except as part of a general reduction in which the base salaries of all
corporate officers of the Company have been decreased and will not be decreased
during a Window Period without Executive's prior written agreement.

     3.2 Performance Bonus. Executive will be eligible for an annual performance
bonus. Executive's bonus for any year ending during a Window Period will not be
less than 100 percent of his bonus for the completed year immediately preceding
the Change of Control.

     3.3 Other Benefits. Executive will be entitled to participate in all
policies and arrangements (or in any successor or supplemental plans, policies
or arrangements) generally made available to officers of the Company. Such
benefits shall not be reduced during the Window Period.

     4. Termination of Employment; Severance Benefits.

     4.1 Terminability of Employment. Either the Company or Executive may at any
time terminate Executive's employment with the Company after giving 30 days'
written notice to the other party. However, if Executive's employment terminates
during the Term of the Agreement, the parties will be required to discharge the
applicable obligations described in this Section 4 and elsewhere in this
Agreement. If Executive's employment terminates at any time other than during
the Term of the Agreement, Executive will have no rights under the Agreement.

     4.2 Termination upon Death or Disability. If Executive ceases to be an
employee of the Company as a result of death or disability, the Executive will
be entitled to receive the severance benefits set forth in Section 4.4. However,
nothing in this Agreement is intended to interfere with the rights of Executive
and his family or beneficiaries under other applicable plans, policies or
arrangements of the Company. For purposes of this Section 4.2, the Company may
terminate Executive's employment for "disability" if, because of physical or
mental incapacity, Executive is unable for a period of 30 consecutive days to
perform each of the material duties of his position and if determined by a
qualified physician chosen by the Company (and, if during a Window Period,
approved by the Executive or his conservator) to be probable that such
incapacity will continue for an additional 60 consecutive days.

     4.3 Termination by the Company for Cause or by Executive Without Good
Reason. If the Company terminates Executive's employment for Cause (as defined
in this Section 4.3) or if Executive terminates his employment other than for
Good Reason (as defined in Section 4.4), the Company will have no further
obligation or liability to Executive hereunder other than for Base Salary earned
and unpaid at the time of termination and compensation for accrued vacation, and
the term of the Agreement will end when those amounts are paid.


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                                                             Severance Agreement
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     "Cause" mean (a) willful malfeasance or gross negligence in the performance
by Executive of his duties, resulting in harm to the Company, (b) fraud or
dishonesty by Executive with respect to the Company, or (c) Executive's
conviction of a felony.

     4.4 By the Company Without Cause or by Executive for Good Reason.

          (a) Entitlement to Severance Benefits. If, during the Term of the
     Agreement, the Company terminates Executive's employment without Cause, or
     if Executive terminates his employment for Good Reason, the Company will,
     subject to Section 5 below, provide severance benefits to Executive as set
     forth below in this Section 4.4.

          "Good Reason" means (i) failure by the Company to maintain Executive
     in the positions described in Section 2 or assignment to Executive of
     duties materially inconsistent with such positions, (ii) failure by the
     Company to provide Executive with the compensation and benefits described
     in Section 3, or (iii) relocation of Executive's principal place of work to
     a location more than 50 miles from the previous location.

          (b) Normal Severance Benefits. Except as provided in paragraph (c),
     the Company will provide severance benefits as follows:

               (i)  The Company will pay to Executive within 30 days of the
                    termination a lump-sum cash amount equal to one hundred
                    percent (100%) of his annual Base Salary in effect at the
                    time of his termination (or, if his Base Salary has been
                    reduced within 60 days of the termination, his Base Salary
                    in effect prior to the reduction).

               (ii) The Company will continue for a period of one year from the
                    date of termination to provide Executive with the benefits
                    set forth in Section 3.3 above. To the extent that the
                    Company is unable to provide such benefits to Executive
                    under its existing plans and arrangements, it will pay
                    Executive cash amounts equal to the cost the Company would
                    have incurred to provide these benefits.

              (iii) Notwithstanding any contrary provisions of the plans or
                    arrangements under which they are granted, all options to
                    purchase Company stock held by Executive will immediately
                    become exercisable.


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                                                             Severance Agreement
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          (c) Severance Benefits Following a Change of Control. If the
     termination occurs during a Window Period, the Company will, instead of the
     benefits prescribed in paragraph (b), provide severance benefits to
     Executive as follows:

               (i)  The Company will pay to Executive within 30 days of the
                    termination a lump-sum cash amount equal to two hundred
                    percent (200%) of the sum of (A) Executive's annual Base
                    Salary in effect immediately prior to the termination (or,
                    if his Base Salary has been reduced within 60 days of the
                    termination or at any time after the Change of Control, his
                    Base Salary in effect prior to the reduction), plus (B) an
                    amount equal to the bonus earned by Executive for the fiscal
                    year completed immediately prior to the termination.

               (ii) The Company will also pay to Executive within 30 days of the
                    termination a pro-rata portion of his target bonus (provided
                    for in Section 3.2 above) for the year of termination.

              (iii) The Company will continue for a period of three years from
                    the date of termination to provide Executive with the
                    benefits set forth in Section 3.3 above. To the extent the
                    Company is unable to provide such benefits to Executive
                    under its existing plans and arrangements, it will either
                    arrange to provide Executive with substantially similar
                    benefits upon comparable terms or pay Executive cash amounts
                    equal to Executive's cost of obtaining such benefits.

               (iv) Notwithstanding any contrary provisions of the plans or
                    arrangements under which they are granted, all options to
                    purchase Company stock held by Executive will immediately
                    become exercisable.

     5. Limitations on Severance Benefits.

     5.1 Except as provided in Section 5.2 below, the payments and benefits to
which Executive will be entitled under Section 4 of this Agreement will be
reduced to the extent necessary to prevent Executive from becoming liable for
the excise tax levied on certain "excess parachute payments" under section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"). If a reduction is
made under this Section 5.1, Executive will have the right to determine which
payments and benefits will be reduced.


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                                                             Severance Agreement
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     5.2 The limitations of Section 5.1 will not apply if--

          (i)  the present value, net of all federal, state and other income and
               excise taxes, of all payments and benefits to which Executive is
               entitled hereunder without such limitations, exceeds

          (ii) the present value, net of all federal, state and other income and
               excise taxes, of all payments and benefits to which Executive
               would be entitled hereunder if such limitations applied.

     5.3 Determinations under this Section 5 will be made by the firm of
certified public accountants then serving as the Company's auditor unless
Executive has reasonable objections to the use of that firm, in which case the
determinations will be made by a comparable firm chosen by Executive after
consultation with the Company. The determinations of such firm will be binding
upon the Company and Executive.

     6. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be required
by law.

     7. Fees and Expenses. In the event of Executive's termination of employment
during a Window Period, the Company will pay any and all fees and expenses
(including legal fees and other costs of arbitration or litigation) that may be
incurred by Executive in enforcing his rights under this Agreement. If the
termination of employment does not occur during a Window Period, the Company
will pay that amount of such fees and expenses that bears the same ratio to the
total fees and expenses as the dollar amount of payments and benefits determined
to be payable to Executive bears to the total dollar amount of payments and
benefits in dispute.

     8. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay in
consideration of his past service and his continued service from the Effective
Date, and his entitlement thereto will neither be governed by any duty to
mitigate his damages by seeking further employment nor offset by any
compensation that he may receive from other employment.

     9. Confidentiality and Exclusivity. Executive agrees to maintain the
confidentiality of the Company's (and its related entities and projects) books,
records, financial information, technical information, business plans and/or
strategies, and other confidential matters unless required to make disclosure in
the performance of his duties for the Company or as a result of a legal
proceeding or other legally mandated cause. In the event of termination without
Good Reason by Executive, other than such a termination occurring during a
Window Period, Executive will not for one year following termination act as an
executive officer for any company that directly competes against the Company.
The parties recognize and agree that should the Company be required to


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                                                             Severance Agreement
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pursue a claim against Executive under this Section 9, the Company will likely
be required to seek injunctive relief as well as damages at law. Accordingly,
Section 11, Arbitration, will not apply to any action by the Company against
Executive for violation of this Section 9. Executive agrees for purposes of any
disputes arising under this Section 9 to submit to the exclusive jurisdiction of
the federal and state courts in the Commonwealth of Massachusetts.

     10. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and costs),
actions, causes of action or proceedings arising directly or indirectly from
Executive's performance of this Agreement or services as an employee of the
Company. Executive may retain his own counsel to defend himself in such actions,
and the Company will pay for the reasonable costs and expense of such counsel.
This indemnification is in addition to any right of indemnification to which
Executive may be entitled under the Company's Articles of Organization and
By-laws and any insurance policies that may be maintained by the Company.

     11. Arbitration. Except as otherwise provided in Section 9, any dispute or
controversy between the parties involving the construction or application of any
terms, covenants or conditions of this Agreement, or any claim arising out of or
relating to this Agreement, or any claim arising out of or relating to
Executive's employment by the Company that is not resolved within ten days by
the parties will be settled by arbitration in Boston, Massachusetts, in
accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. The Company and Executive agree that
the arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon the
parties. Upon request, the arbitrator(s) shall submit written findings of fact
and conclusions of law. The parties agree and understand that they hereby waive
their rights to a jury trial of any dispute or controversy relating to the
matters specified above in this Section 11.

     12. Rights of Survivors. If Executive dies after becoming entitled to
benefits under Section 4 following termination of employment but before all such
benefits have been provided, (a) all unpaid cash amounts will be paid to the
beneficiary that have been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable insurance
coverage will be provided to Executive's family as though Executive had
continued to live, and (c) any stock options that become exercisable under
Section 4.4(b)(iii) or Section 4.4(iv) will be exercisable by the beneficiary,
or if none, the estate.

     13. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale, merger
or consolidation (where the


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                                                             Severance Agreement
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Company is not the surviving corporation), lease or otherwise, by agreement in
form and substance satisfactory to Executive, to assume this Agreement
expressly. This Agreement is not otherwise assignable by the Company.

     14. Subsidiaries. For purposes of this Agreement, employment by a
corporation or other entity that is controlled directly or indirectly by the
Company will be deemed to be employment by the Company. Thus, references in the
Agreement to "Company" include such corporations or other entities where
appropriate in the context.

     15. Amendment or Modification; Waiver. Except as provided in clause (1) of
Exhibit A, this Agreement may not be amended unless agreed to in writing by
Executive and the Company. No waiver by either party of any breach of this
Agreement will be deemed a waiver of a subsequent breach.

     16. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.

     17. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law without regard to the conflict of laws principles
thereof.

     18. Superseded Agreement. This Agreement supersedes any prior or
contemporaneous agreement between the parties with respect to the subject matter
hereof.

     19. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified mail,
return receipt requested, and addressed as follows:

     If to the Company:

     GenRad, Inc.
     300 Baker Avenue
     Concord, MA 01742-2174
     Attn: President

     If to Executive:

     Lori B. Hannay
     84 Barnard Road
     Marlborough, MA 01752


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     Either party may change its address for receiving notices by giving notice
to the other party.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.

                                            /s/ Lori B. Hannay
                                            ------------------------------------


                                            GENRAD, INC.


                                            By  /s/ James F. Lyons
                                               ---------------------------------
                                               Its President


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                                                             Severance Agreement
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                                    EXHIBIT A

     "Change of Control" means the occurrence of any of the following events:

     (1) any Person becomes the owner of 20% or more of the Company's Common
Stock; provided, however, that the Board of Directors of the Company may
unilaterally amend this clause (1) to increase the 20% threshold to any
percentage up to, but not exceeding, 50%; or

     (2) individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Continuing Directors") cease for any reason to
constitute at least a majority of such Board; provided, however, that any
individual becoming a director after the Effective Date whose election or
nomination for election by the Company's shareholders was approved by a vote of
at least a majority of the Continuing Directors will be deemed to be a
Continuing Director, but excluding for this purpose any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-l1 of
Regulation 14A promulgated under the Securities and Exchange Act of 1934 (the
"Exchange Act")) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

     (3) approval by the shareholders of the Company of a reorganization,
merger, consolidation or other transaction that will result in the transfer of
ownership of more than 50% of the Company's Common Stock; or

     (4) liquidation or dissolution of the Company or sale of substantially all
of the Company's assets.

     In addition, for purposes of this definition the following terms have the
meanings set forth below:

     "Common Stock" means the then outstanding Common Stock of the Company plus,
for purposes of determining the stock ownership of any Person, the number of
unissued shares of Common Stock which such Person has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term "Common Stock"
does not include shares of preferred stock or convertible debt or options or
warrants to acquire shares of Common Stock (including any shares of Common Stock
issued or issuable upon the conversion or exercise thereof) to the extent that
the Board expressly so determines in any future transaction or transactions.


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                                                             Severance Agreement
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     A Person will be deemed to be the "owner" of any Common Stock of which such
Person would be the "beneficial owner", as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.

     "Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related Party, or
any group of which the Executive or Executive Related Party is a member, or (ii)
the Company or a wholly-owned subsidiary of the Company or an employee benefit
plan (or related trust) of the Company or of a wholly-owned subsidiary.

     An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 12b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means, in
this case, the Company.