Exhibit
10.4





RESTRICTED STOCK
AGREEMENT








This
Agreement is made as of the 19th day of December, 2002, by and between
Valpey-Fisher Corporation (the “Company”) and Michael Ferrantino (the
“Employee”).




WHEREAS, the Employee has
become an employee of the Company;




WHEREAS, as an inducement to
becoming an employee of the Company, the Board of Directors of the Company has
authorized the issuance of 100,000 shares of Common Stock of the Company par
value $.05 per share, (the “Common Stock”) on the terms and conditions set forth
herein.




NOW, THEREFORE, in
consideration of the foregoing, the mutual promises hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company and the Employee hereby agree as
follows:




1.           a)           Promptly
following receipt of the Purchase Price hereinafter set forth the Company will
cause to be issued to the Employee for a purchase price of $.05 per share (the
“Purchase Price”), 100,000 shares of Common Stock (the “Restricted
Stock”).




b)           The
Employee hereby agrees to purchase the Restricted Stock and pay the Purchase
Price therefore promptly following execution hereof.




2.             Restrictions on Transfer of
Restricted Stock.  Except as otherwise provided pursuant to or
in accordance with the terms and provisions of this Agreement, the Restricted
Stock shall be subject to the following restrictions (the “Restrictions”);
namely the Restricted Stock shall not be sold, exchanged, assigned, transferred
or permitted to be transferred, voluntarily, involuntarily, or by operation of
law, delivered, encumbered, discounted, pledged, hypothecated, or otherwise
disposed of for a period of 5 years (the “Restricted Period”) from October 23,
2002 (said October 23, 2002 herein referred to as “the Effective Date”) except
in accordance with the following provisions:




a)           Except
as otherwise provided herein, the Restrictions will terminate with respect to
20% of the Restricted Stock, upon each anniversary of the Effective Date, so
that all such Restrictions shall terminate on the fifth anniversary of the
Effective Date.  Upon the termination of the Restrictions with respect
to shares of Restricted Stock, whether through the passage of time or as
otherwise provided herein, the Employee shall be entitled to receive share
certificates with respect to such shares hereunder free of such
Restrictions.




b)           Five
stock certificates, each for 20,000 shares of Common Stock, shall be issued to
and registered in the name of the Employee, shall bear the restrictive legend
referred to in Section 2(e) and such other legends as may be appropriate, and
shall be subject to appropriate stop-transfer orders; provided, however, that
such certificates shall be deposited with and held in escrow with the Escrow
Agent as provided in Section 4 until the Restrictions relating thereto otherwise
terminate, and the Employee shall deliver to such Escrow Agent stock powers
endorsed in blank relating to the Restricted Stock.


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c)              
(i)           To the
extent the Restrictions have not otherwise terminated and the Restricted Stock
has not otherwise been forfeited, as provided in subsection (d) of this Section
2, such Restrictions shall terminate (1) with respect to 20% of the Restricted
Stock, upon the death of the Employee after the first anniversary of the
Effective Date, (other than on an anniversary of the Effective Date, and (2)
entirely, upon a Change of Control of the Company.




(ii)           For
the purposes of this Agreement a Change in Control of the Company shall
occur:




(a)           if
any “Person”, as such term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) (provided that the term
“Person” shall not include Theodore Valpey, Jr., the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock in the
Company), becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
70% or more of the combined voting power of the Company’s then outstanding
securities;




(b)           the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation; other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) 30% or more of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation or (ii) a
merger or consolidation effected to implement a re-capitalization of the Company
(or similar transaction) in which no “Person” (as hereinabove defined) acquires
70% or more of the combined voting power of the Company’s then outstanding
securities; or




(c)           the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets.




d)           To
the extent the Restrictions have not otherwise terminated, shares of Restricted
Stock shall be forfeited and returned to the Company upon cessation of the
Employee’s employment with the Company.


e)           During the
Restricted Period certificates evidencing the Restricted Stock shall bear the
following additional legend:


“These
shares are subject to forfeiture to Valpey-Fisher Corporation (the “Company”) in
accordance with the terms of an Agreement between the Company and the person in
whose name the certificate is registered.  These shares may not be
sold, pledged, exchanged, transferred, hypothecated or otherwise disposed of
except in accordance with the terms of said Agreement.”




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3.           Investment Representation. The
Employee agrees that he is acquiring the shares subject to this Agreement for
his own account and not with a view to distribution thereof and that the shares
of Restricted Stock acquired by the Employee will not be sold except pursuant to
an effective registration statement under the Act or pursuant to an exemption
from registration under the Act.




4.           Deposit of Restricted
Stock.  (a) The Employee consents to the deposit with the
Treasurer of the Company or his successor, of the certificates evidencing the
Restricted Stock, together with stock powers or other instruments of transfer
required by the Company or its counsel appropriately endorsed in blank by
him.  Such deposit shall remain in effect until the time the Company
reacquires the Restricted Stock under and pursuant to the terms and provisions
of this Agreement, or until said Restricted Stock shall be released from the
Restrictions under this Agreement.




(b)           The
Employee consents to the appointment of the Treasurer of the Company, and his
successor, as escrow agent (the “Escrow Agent”) for said certificates during the
Restricted Period.  If during such Restricted Period, shares of
Restricted Stock are forfeited in accordance with this Agreement, the Employee
hereby authorizes the Escrow Agent to cause such certificates for such stock to
be canceled on the stock record books of the Company.  The Employee
agrees that the Escrow Agent is acting merely as a depository and shall have no
liability hereunder except as a depository to retain the shares of Restricted
Stock and to dispose of them in accordance with the terms of this
Agreement.  If the Escrow Agent is notified of any adverse claim or
demand by any persons, he is hereby authorized to hold such certificates until
the dispute shall have been settled by the parties and notice submitted to him
by persons so interested, or until the rights of the parties have been fully
adjudicated in a court of competent jurisdiction.  So long as the
shares of Restricted Stock are held in escrow, the Employee shall be entitled to
all rights of a stockholder with respect thereto, except as may be limited by
the terms of this Agreement.




5.           Lapse of
Restrictions.  Upon the termination of the Restrictions with
respect to shares pursuant to Section 2 as to which shares of Restricted Stock
have not before then been forfeited, the stock certificates for such Restricted
Stock and the related stock powers shall be delivered by the Escrow Agent to the
Employee, and such shares shall be free of all Restrictions and the legend
referred to in Section 2(e).




6.           Withholding and Section 83(b)
Election.  (a) The Company shall withhold all applicable taxes
required by law upon any taxable event with respect to the Restricted Stock; (b)
Promptly following the issuance of the Restricted Stock, Employee will execute
and timely file an election pursuant to Section 83(b) of the Internal Revenue
Code of 1986 as amended, to include as ordinary income the difference between
the value of the Restricted Stock and the aggregate Purchase Price, and
concurrently deliver a copy of such election to the Company, and for purposes of
such election, will declare the value of the Restricted Stock to be no less than
$3.25 per share.




7.           Distributions with Respect to
Stock.  Any cash dividends paid with respect to shares of
Restricted Stock shall be paid in cash to the Employee, which payment shall be
subject to any applicable withholding.  Any shares of stock received
as a stock dividend, or as a result of stock splits, recapitalizations,
combinations, exchanges of shares, reorganizations, mergers, consolidations or
otherwise, directly or indirectly, with respect to shares of Restricted Stock
shall have the same status, be subject to this Agreement, and shall bear the
same legend as the shares of Restricted Stock and shall be delivered to the
Escrow Agent to be held under the same terms and conditions as the Restricted
Stock.




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8.           Rights of
Stockholder.  Subject to the terms and provisions of applicable
law and of this Agreement, the Employee shall have all rights of a stockholder
of the Company with respect to the Restricted Stock, including the right to vote
the Restricted Stock and to receive all dividends or other distributions paid or
made with respect thereto, subject to applicable withholding
requirements.




9.           No Right to Continued
Employment.
Nothing herein shall obligate the Company or any affiliate or subsidiary to
continue the Employee’s employment for any particular period.




10.           Burden and Benefit.The terms and provisions
of this Agreement shall be binding upon, and shall inure to the benefit of, the
Company, and its successors and assigns and the Employee and his executors or
administrators, heirs, and personal and legal representatives.




11.           Governing Law.  This
Agreement shall be construed and enforced in accordance with the laws of the
State of Maryland without regard to the conflict of laws principles
thereof.




12.           Modifications.  No
change or modification of this Agreement shall be valid unless it is in writing
and signed by the parties hereto.




13.           Entire
Agreement.  This Agreement, sets forth all of the promises,
agreements, conditions, understandings, warranties and representations, oral or
written, express or implied, between the parties hereto with respect to this
Agreement.




14.           Genders.  The use of
any gender herein shall be deemed to include the other gender and the use of the
singular herein shall be deemed to include the plural and vice versa, wherever
appropriate.




15.           Notices.  Any and
all notices required herein shall be addressed:  (a) if the Company,
to the principal executive office of the Company; and (b) if to the Employee, to
his address as reflected in the stock records of the Company.




16.           Invalid or Unenforceable
Provisions.  The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if the invalid
or unenforceable provisions were omitted.




IN WITNESS WHEREOF, the
Company and the Employee have executed this Agreement as of the day and year
first above written.




VALPEY-FISHER
      CORPORATIONBy: /s/ Ted Valpey, Jr./s/Michael FerrantinoMichael
      Ferrantino




Accepted
and Agreed as
 Escrow
Agent hereunder:
 
 /s/ Michael J.
Kroll
 Michael J.
Kroll, Treasurer
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