<PAGE>

                                                                  Exhibit 10.4

* Portions of this document, marked with an asterisk "*", have been omitted 
pursuant to a request for confidential treatment. The full documents have 
been filed separately.

                          DIVESTMENT INCENTIVE PROGRAM

         This Divestment Incentive Program is hereby entered into this 8th day
of September 1998, between AAF-McQuay Inc. (hereinafter "the Company") and
Andrew R. Morrison (hereinafter "Employee"), who are collectively referred to
herein as the "Parties."

         WHEREAS, the Company's shareholder plans to sell the Company, and the
Company wants to provide an incentive package to certain key employees in
exchange for their agreement to remain employed up to and beyond the sale of the
Company.

         NOW, THEREFORE, in consideration of the mutual promises contained
herein, and other good and valuable consideration as hereinafter recited, the
receipt and adequacy of which are hereby acknowledged, the parties, intending to
be legally bound, covenant and agree as follows:

          1.   The Employee agrees to continue his employment with the Company
               in his position as Chief Financial Officer, and to perform his
               customary and regular duties, up to and including the effective
               date of the sale of the Company (the "Effective Date"). The
               Company agrees that it will continue to pay the Employee his
               salary at his current monthly rate of $16,500 (Sixteen Thousand,
               Five Hundred Dollars). The Employee further agrees that, if the
               purchasing company makes a written offer to the Employee on or
               prior to the Effective Date of a comparable position for at least
               two years along with comparable salary and benefits in a location
               not requiring the Employee to relocate, the Employee will accept
               that employment and remain employed by the purchasing company for
               at least two years after the Effective Date. An offer or request
               pursuant to this paragraph 1 is hereinafter referred to as a
               "Continued Employment Offer."

          2.   If the Employee agrees to, and remains, employed as described in
               paragraph 1 above, and if he has not breached any of the
               provisions of this Agreement (including, without limitation,
               sections 4 and 5 hereof) (a "Breach"), he will be eligible to
               receive the following additional incentive payments:

               (a)  If the Employee remains employed up to and including the
                    Effective Date and the purchasing company does not make a
                    Continued Employment Offer, the Company agrees to pay the
                    Employee $396,000, (Three Hundred Ninety Six Thousand
                    Dollars) which amount is equal to 24 months compensation at
                    his current rate, as severance pay, less applicable
                    withholding tax. This severance pay will be considered
                    earned as of the first business day after the Effective Date
                    and will be paid to the Employee within one week after the
                    Effective Date. If the 

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                    Employee's employment with the Company is terminated without
                    cause prior to the expiration of two years from the date of
                    acceptance of his Continued Employment Offer, this severance
                    pay will be considered earned as of the first business day
                    after such termination and will be paid to the Employee
                    within one week after such termination.

               (b)  Provided that the Company is sold prior to the Termination
                    Date of this Agreement, it is the Company's intention to
                    create a bonus pool (the "Executive Bonus Pool"). The
                    Employee's share of the Executive Bonus Pool will be a
                    function both of the Employee's base salary and a
                    performance factor. Individual payouts will be based on
                    appraised performance during the sale process by the
                    Employee's direct supervisor and additional higher levels of
                    senior management, including the CEO. In addition, potential
                    payouts, less applicable withholding tax, will be based upon
                    the selling price and the ultimate equity proceeds received
                    by the current shareholder as described below:


<TABLE>
<CAPTION>

Employee                             Equity Proceeds to Shareholder      Employee's Potential Share of
                                                                         Executive Bonus Pool
<S>                                <C>                                <C>
Andrew R. Morrison                   *                                         $      0
                                                                               $152,938
                                                                               $251,800
                                                                               $367,249
                                                                               $497,447
</TABLE>


                    Interpolation will apply based on actual equity proceeds to
                    shareholder. In addition, the Potential Bonus amounts listed
                    above are based on the assumption that the Employee meets or
                    exceeds the expectations of management during the sale
                    process and are subject to change.

                    If the Employee remains employed up to and including the
                    Effective Date and the purchasing company makes a Continued
                    Employment Offer, 50% of the Employee's share, if any, of
                    the Executive Bonus Pool will be paid to the Employee on the
                    Effective Date and 50% of the Employee's share, if any, of
                    the Executive Bonus Pool will be paid to the Employee on the
                    first anniversary of the Effective Date. If the Employee
                    remains employed up to and including the Effective Date and
                    the purchasing company does not make a Continued Employment

* Portions of this document have been omitted pursuant to a request for
confidential treatment. The full documents have been filed separately.

<PAGE>

                    Offer, 100% of the Employee's share, if any, of the
                    Executive Bonus Pool will be paid to the Employee on the
                    Effective Date.

          3.   If the Employee's employment with the Company terminates for any
               reason (other than a termination without cause) prior to the
               Effective Date or, in the event the purchasing company makes a
               Continued Employment Offer, or if the Employee commits a Breach,
               the Company shall have no obligation to make any payments of any
               kind to the Employee, including but not limited to severance
               payments or, in certain cases, incentive payments as described
               above.

          4.   The Employee recognizes that the Company's business interests
               require a confidential relationship between the Company and the
               Employee. Accordingly, THE EMPLOYEE AGREES DURING HIS EMPLOYMENT
               WITH THE COMPANY FOR A TWO-YEAR PERIOD THEREAFTER TO KEEP
               CONFIDENTIAL AND NOT TO DISCLOSE TO ANYONE ANY CONFIDENTIAL OR
               PROPRIETARY INFORMATION OF THE COMPANY, INCLUDING PARTICIPATION
               IN THIS DIVESTMENT INCENTIVE PROGRAM.

          5.   The Parties agree that any breach by the Employee of the
               confidentiality provisions in this Agreement will cause
               immediate, material and irreparable injury and damage, and that
               there is no adequate remedy at law for such breach. In the event
               of a breach of the confidentiality provisions of the Agreement,
               the Company or its successor shall be entitled immediately to
               seek enforcement of this Agreement in a court of competent
               jurisdiction by means of a decree of specific performance, and
               injunction without the posting of a bond, any other form of
               equitable relief, and any other remedy it may have at law or in
               equity. In the event that a court holds any provision of this
               Agreement to be unenforceable, the parties agree that that
               provision shall be reduced to the degree necessary to render it
               enforceable without affecting the rest of this Agreement.

          6.   In the event any dispute arises under this Agreement that is
               adjudicated to a final verdict in the Employee's favor by a court
               of competent jurisdiction, no further appeal is permitted and the
               Employee has complied with paragraph 4 hereof, the Company shall
               reimburse the Employee for his reasonable expenses of counsel
               incurred in connection with such dispute from the time the
               Company is notified of the dispute to its final adjudication.

          7.   Any other provision of this Agreement notwithstanding, this
               Agreement shall terminate and no longer be of any force or effect
               (i) immediately if the Company aborts the sale process and, (ii)
               in any case if a sale of the 

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               Company has not occurred on or before June 30, 1999 (the
               "Termination Date").

          8.   Each of the parties hereto (a) consents to submit himself or
               itself to the personal jurisdiction of any federal court located
               in the State of Maryland or any Maryland State court in the event
               any dispute arises out of this Agreement or any of the
               transactions contemplated by this Agreement, (b) agrees that he
               or it will not attempt to deny or defeat such personal
               jurisdiction by motion or other request for leave from any such
               court, and (c) agrees that he or it will not bring any action
               relating to this Agreement or any of the transactions
               contemplated by this Agreement in any court other than a federal
               court sitting in the State of Maryland or a Maryland State court.

          9.   This Agreement supersedes all prior Agreements between the
               parties concerning the subject matter hereof, and this Agreement
               constitutes the entire Agreement between the parties with respect
               to the subject matter hereof. This Agreement may be modified only
               by a written instrument signed by the Employee and by the
               President of the Company. The validity and construction of this
               Agreement and any of its provisions shall be determined under the
               laws of the State of Maryland.

          10.  The Employee acknowledges that he has read this Agreement in its
               entirety, understands all of its terms and conditions, that he
               has the opportunity to consult with any individuals of his choice
               including legal counsel of his choice, that he is entering into
               this Agreement of his own free will, without coercion from any
               source, and that he agrees to abide by all of the terms and
               conditions herein contained.

          IN WITNESS HEREOF, the parties have duly executed this Agreement as of
the day and year first written above.


WITNESS:                                    AAF-McQUAY INC.

__September 8, 1998_____________    By:____/s/ Joseph B. Hunter__________
                                       Joseph B. Hunter
                                       President and Chief Executive Officer

__September 8, 1998_____________    ___/s/ Andrew R. Morrison_____________
                                    Employee