Exhibit 10.1


 


AMENDED AND RESTATED

SEVERANCE PROTECTION AGREEMENT


 


THIS AGREEMENT
is made as of the 22nd day of December, 2008, by and between Axsys
Technologies, Inc. (the “Company”) and Stephen W. Bershad (the “Executive”).


 


WHEREAS, the
Board of Directors of the Company (the “Board”) recognizes that the possibility of a
Change in Control (as hereinafter defined) exists and that the threat or the
occurrence of a Change in Control can result in significant distraction of the
Company’s key management personnel because of the uncertainties inherent in
such a situation;


 


WHEREAS, the
Board has determined that it is essential and in the best interests of the
Company and its stockholders for the Company to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive’s continued dedication and efforts in such event without
undue concern for the Executive’s personal financial and employment security;


 


WHEREAS, in
order to induce the Executive to remain in the employ of the Company and/or one
of its Affiliates (the entity or entities employing the Executive, the “Employing Affiliate”),
particularly in the event of a threat or the occurrence of a Change in Control,
the Company desires to enter into this Agreement with the Executive to provide
the Executive with certain benefits in the event the Executive’s employment is
terminated as a result of, or in connection with, a Change in Control; and


 


WHEREAS, the
Company and the Executive desire for this Amended and Restated Severance
Protection Agreement to amend and supersede the Severance Protection Agreement,
originally dated February 11, 1999, and amended and restated as of June 9,
2005, between the Company and the Executive and any other severance agreements
entered into prior to the date hereof.


 


NOW,
THEREFORE, in consideration of the respective agreements of the parties
contained herein, it is agreed as follows:


 


1.             Term
of Agreement.  This Agreement shall
commence as of the date of this Agreement and shall continue in effect until January 1,
2010 (the “Term”);
provided, however, that on January 1,
2009, and on each January 1 thereafter, the Term shall automatically be
extended for one year unless either the Executive or the Company shall have
given written notice to the other at least ninety days prior thereto that the
Term shall not be so extended; provided, further, however, that following the
occurrence of a Change in Control, the Term shall not expire prior to the
expiration of twenty-four months after such occurrence.


 


2.             Termination
of Employment.  If, during the Term,
the Executive’s employment with the Company or an Employing Affiliate shall be
terminated within twenty-four months following a Change in Control, the
Executive shall be entitled to the following compensation and benefits:


 


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(a)           If
the Executive’s employment with the Company or an Employing Affiliate shall be
terminated (1) by the Company for Cause or Disability, (2) by reason
of the Executive’s death, or (3) by the Executive other than for Good
Reason or pursuant to a Window Period Termination, the Company shall pay to the
Executive the Accrued Compensation.


 


(b)           If
the Executive’s employment with the Company or an Employing Affiliate shall be
terminated for any reason other than as specified in Section 2(a), or if
the Executive terminates his employment with or without Good Reason during the
one month period ending on the earlier of (i) the end of the second month
of the calendar year following the calendar year in which the Change in Control
occurs, or (ii) the last day of the seventh month following a Change in
Control (a “Window
Period Termination”), the Executive shall be entitled to the
following:


 


(1)                                  the
Company shall pay the Executive the Accrued Compensation;


 


(2)                                  the
Company shall pay the Executive as severance pay an amount equal to 2.99 times
the sum of (a) the highest annual base salary paid to the Executive during
the 12-month period immediately prior to the Termination Date and (b) the
average of the annual cash bonuses paid to the Executive during the 3 calendar
years prior to the year in which the Termination Date occurs (prorated for any
lesser period during which the Executive has been employed or for which bonuses
have been determined, if applicable, and, in the case of each of (a) and
(b), determined without reduction for any portion thereof that has been
deferred by the Executive); provided,
however, that, if the Executive has been employed for less than a
full year as of the Termination Date, the amount of clause (b) hereof
shall be equal to the Executive’s target bonus amount for such year, prorated
for the period during which the Executive has been employed; and


 


(3)                                  for
twelve months following the Termination Date (the “Continuation Period”),
the Company shall continue on behalf of the Executive and his dependents and
beneficiaries the life insurance, disability, medical, dental, prescription
drug and hospitalization coverages and benefits provided to the Executive immediately
prior to a Change in Control (the “Benefits Continuation”), or, if greater, the
coverages and benefits provided at any time thereafter.  The coverages and benefits (including
deductibles and costs to the Executive) provided in this Section 2(b)(3) during
the Continuation Period shall be no less favorable to the Executive and his
dependents and beneficiaries than the most favorable of such coverages and
benefits referred to above. 
Notwithstanding the foregoing, or any other provision of this Agreement,
for purposes of determining the period of continuation coverage to which the
Executive or any of the Executive’s dependents is entitled pursuant to Section 4980B
of the Internal Revenue Code of 1986, as amended (the “Code”), under the
Company’s medical, dental and other group health plans, or successor plans, the
Executive’s “qualifying event” will be the termination of the Continuation
Period and the Executive will be considered to have remained actively employed
on a full-time basis through that date. 
The Company’s obligation hereunder with respect to the foregoing
coverages and benefits shall be reduced to the extent that the Executive
obtains any such coverages and benefits pursuant to a subsequent employer’s
benefit plans, in which case the Company may reduce any of the coverages or
benefits it is required to provide the Executive hereunder so long as the
aggregate coverages and benefits (including deductibles and costs to the
Executive) of the combined benefit plans are no less favorable to the 


 


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Executive than the coverages and benefits required to be provided
hereunder.  This Section 2(b)(3) shall
not be interpreted so as to limit any benefits to which the Executive, his
dependents or beneficiaries may be entitled under any of the Company’s employee
benefit plans, programs or practices following the Executive’s termination of
employment, including but not limited to retiree medical and life insurance
benefits.  To the extent the Benefit
Continuation involves the reimbursement of expenses pursuant to the Company’s
supplemental medical plan, such reimbursement will occur in all events prior to
the last day of the calendar year following the calendar year in which the
Executives incurred the expense.  In no
event will the amount of expenses so reimbursed by the Company in one year
affect the amount of expenses eligible for reimbursement, or in-kind benefits
to be provided, in any other taxable year.


 


(c)                                  The
cash amounts provided for in Sections 2(a) and 2(b) shall be paid in
a single lump sum cash payment within ten days after the Termination Date (or
earlier, if required by applicable law).


 


(d)                                 The
Executive may terminate his employment for Good Reason and be eligible for the
cash amount provided for in Section 2(b) only if he gives notice to
the Company of the occurrence of any of the conditions described in Section 16.8
within ninety days following his knowledge of such condition and the Company
fails to remedy such condition within thirty days following the Executive’s
written notice of such condition.  The
severance pay and benefits provided for in this Section 2 shall be in lieu
of any other severance pay to which the Executive may be entitled under any
severance or employment agreement with the Company or any other plan, agreement
or arrangement of the Company or any other Affiliate of the Company.  The Executive’s entitlement to any
compensation or benefits other than as provided herein shall be determined in
accordance with the employee benefit plans of the Company and any of its
Affiliates and other applicable agreements, programs and practices as in effect
from time to time.


 


(e)                                  If
the Executive’s employment is terminated by the Company or an Employing
Affiliate without Cause prior to the date of a Change in Control but the
Executive reasonably demonstrates that such termination (1) was at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a “Third Party”) and who
effectuates a Change in Control or (2) otherwise arose in connection with,
or in anticipation of, a Change in Control which has been threatened or
proposed and which actually occurs, such termination shall be deemed to have
occurred after a Change in Control, it being agreed that any such action taken
following shareholder approval of a transaction which if consummated would
constitute a Change in Control, shall be deemed to be in anticipation of a
Change in Control provided such transaction is actually consummated.


 


3.                                       Effect
of Section 280G of the Internal Revenue Code.


 


(a)                                  Anything
in this Agreement to the contrary notwithstanding, in the event that this
Agreement becomes operative and it is determined (as hereafter provided) that
any payment (other than the Gross-Up payments provided for in this Section 3
and Annex A) or distribution by the Company or any of its Affiliates to or
for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise pursuant to
or by reason of any other agreement, policy, plan, program or arrangement,
including without limitation any stock option, performance share, performance
unit, stock 


 


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appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a “Payment”), would be
subject to the excise tax imposed by Section 4999 of the Code (or any
successor provision thereto) by reason of being considered “contingent on a
change in ownership or control” of the Company, within the meaning of Section 280G
of the Code (or any successor provision thereto) or to any similar tax imposed
by state or local law, or any interest or penalties with respect to such tax
(such tax or taxes, together with any such interest and penalties, being
hereafter collectively referred to as the “Excise Tax”), then the Executive will be
entitled to receive an additional payment or payments (collectively, a “Gross-Up Payment”).  The Gross-Up Payment will be in an amount such
that, after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.


 


(b)                                 The
obligations set forth in Section 3(a) will be subject to the
procedural provisions described in Annex A.


 


4.                                       Notice
of Termination.  Following a Change
in Control, any intended termination of the Executive’s employment by the
Company or an Employing Affiliate shall be communicated by a Notice of
Termination from the Company to the Executive, and any intended termination of
the Executive’s employment by the Executive for Good Reason or pursuant to a
Window Period Termination shall be communicated by a Notice of Termination from
the Executive to the Company.


 


5.                                       Fees
and Expenses.  The Company shall pay,
as incurred, all legal fees and related expenses (including the costs of
experts, evidence and counsel) that the Executive may reasonably incur
following a Change in Control as a result of or in connection with (a) the
Executive’s contesting, defending or disputing the basis for the termination of
the Executive’s employment, (b) the Executive’s hearing before the Board
of Directors of the Company as contemplated in Section 16.4 or (c) the
Executive’s seeking to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Company or one
of its Affiliates under which the Executive is or may be entitled to receive
benefits.  All reimbursements under this Section 5
shall be for expenses incurred by the Executive during his lifetime.  Reimbursement shall be made within
90 days following the Executive submitting evidence of such incurrence of
such expenses, and in all events prior to the last day of the calendar year
following the calendar year in which the Executive incurred the expense.  In no event will the amount of expenses so
reimbursed by the Company in one year affect the amount of expenses eligible
for reimbursement, or in-kind benefits to be provided, in any other taxable
year.


 


6.                                       Unauthorized
Disclosure.


 


(a)                                  The
Executive agrees and understands that during the Executive’s employment with
the Company or an Employing Affiliate, the Executive has been and will be
exposed to and receive information relating to the affairs of the Company
considered by the Company to be confidential and in the nature of trade secrets
(including but not limited to procedures, memoranda, notes, records and
customer lists, whether such information has been or 


 


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is made, developed or compiled by the Executive or otherwise has been
or is made available to him) (any and all such information, the “Confidential Information”).  The Executive agrees that, during the Term
and thereafter, he shall keep such Confidential Information confidential and
will not disclose such Confidential Information, either directly or indirectly,
to any third person or entity without the prior written consent of the Company;
provided, however, that (i) the
Executive shall have no such obligation to the extent such Confidential
Information is or becomes publicly known other than as a result of the
Executive’s breach of his obligations hereunder or is received by the Executive
following the Termination Date and (ii) the Executive may, after giving
prior notice to the Company to the extent practicable under the circumstances,
disclose such Confidential Information to the extent required by applicable
laws or governmental regulations or judicial or regulatory process.


 


(b)                                 The
Executive agrees that all Confidential Information is and will remain the property
of the Company.  The Executive further
agrees that, during the Term and thereafter, he shall hold in the strictest
confidence all Confidential Information, and shall not, directly or indirectly,
duplicate, sell, use, lease, commercialize, disclose or otherwise divulge to
any person or entity any portion of the Confidential Information or use any
Confidential Information for his own benefit or profit or allow any person or
entity, other than the Company and its authorized employees, to use or otherwise
gain access to any Confidential Information.


 


(c)                                  All
memoranda, notes, records, customer lists and other documents made or compiled
by the Executive or otherwise made available to him concerning the business of
the Company or its subsidiaries or Affiliates shall be the Company’s property
and shall be delivered to the Company upon the termination of the Executive’s
employment with the Company or an Employing Affiliate or at any other time upon
request by the Company, and the Executive shall retain no copies of those
documents.  The Executive shall never at
any time have or claim any right, title or interest in any material, invention
or matter of any sort created, prepared or used in connection with the business
of the Company or its subsidiaries or Affiliates.


 


7.                                       Non-competition.


 


(a)                                  By
and in consideration of the Company’s entering into this Agreement and the
payments to be made and benefits to be provided by the Company hereunder and
further in consideration of the Executive’s exposure to the proprietary
information of the Company, the Executive agrees that the Executive will not,
during the Term, and thereafter during the Non-competition Term (as hereinafter
defined), directly or indirectly, own, manage, operate, join, control, be
employed by, or participate in the ownership, management, operation or control
of, or be connected in any manner with, including but not limited to holding
any position as a shareholder, director, officer, consultant, independent
contractor, employee, partner, or investor in, any Restricted Enterprise (as
defined below); provided, however, that in no
event shall ownership of less than one percent of the outstanding equity
securities of any issuer whose securities are registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), standing alone, be prohibited
by this Section 7.  For purposes of
this paragraph, the term “Restricted
Enterprise” shall mean any person, corporation, partnership or
other entity that competes, directly or indirectly, with any business or
activity conducted or proposed to be conducted by the Company or any of its
subsidiaries or Affiliates as of the date of the Executive’s termination of
employment.  Following termination of
employment, upon request of 


 


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the Company, the Executive shall notify the Company of the Executive’s
then current employment status.  For
purposes of this Agreement, the “Non-competition Term” shall mean the period
beginning on the Termination Date and ending on the first anniversary of such
date.  Any material breach of the terms
of this paragraph shall be considered Cause under Section 16.4.


 


(b)                                 The
Executive agrees that any breach of the terms of this Section 7 would
result in irreparable injury and damage to the Company and/or its subsidiaries
or Affiliates for which the Company and/or its subsidiaries or Affiliates would
have no adequate remedy at law; the Executive therefore also agrees that in the
event of said breach or any threat of breach, the Company and/or its
subsidiaries or Affiliates, as applicable, shall be entitled to an immediate
injunction and restraining order to prevent such breach and/or threatened
breach and/or continued breach by the Executive and/or any and all persons
and/or entities acting for and/or with the Executive, without having to prove
damages, in addition to any other remedies to which the Company and/or its
subsidiaries or Affiliates may be entitled at law or in equity.  The terms of this paragraph shall not prevent
the Company and/or its subsidiaries or Affiliates from pursuing any other
available remedies for any breach or threatened breach hereof, including but
not limited to the recovery of damages from the Executive.  The Executive and the Company further agree
that the provisions of the covenants contained in this Section 7 are
reasonable and necessary to protect the businesses of the Company and its
subsidiaries or Affiliates because of the Executive’s access to Confidential
Information and his material participation in the operation of such
businesses.  Should a court or arbitrator
determine, however, that any provision of the covenants contained in this Section 7
is not reasonable or valid, either in period of time, geographical area, or
otherwise, the parties hereto agree that such covenants should be interpreted
and enforced to the maximum extent which such court or arbitrator deems
reasonable or valid.


 


The existence
of any claim or cause of action by the Executive against the Company and/or its
subsidiaries or Affiliates, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of the
covenants contained in this Section 7.


 


8.                                       Notice.  For the purposes of this Agreement, notices
and all other communications provided for in this Agreement (including any
Notice of Termination) shall be in writing, shall be signed by the Executive if
to the Company or by a duly authorized officer of the Company if to the
Executive, and shall be deemed to have been duly given when personally
delivered or sent by certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses last given by each party to the other,
provided that all notices to the Company shall be directed to the attention of
the Board with a copy to the Secretary of the Company.  All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof (whichever is earlier), except that
notice of change of address shall be effective only upon receipt.


 


9.                                       Non-Exclusivity
of Rights.  Nothing in this Agreement
shall prevent or limit the Executive’s continuing or future participation in
any benefit, bonus, incentive or other plan or program provided by the Company
or any other Affiliate of the Company for which the Executive may qualify, nor
shall anything herein limit or reduce such rights as the Executive may have
under any other agreements with the Company or any other Affiliate of the
Company.  Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under 


 


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any plan or program of the Company or any other Affiliate of the
Company shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement.


 


10.                                 (a)                                  Full
Settlement.  The Company’s obligation
to make the payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any circumstances, including
but not limited to any set-off, counterclaim, defense, recoupment, or other
claim, right or action which the Company may have against the Executive or
others.


 


(b)                                 No
Mitigation.  The Executive shall not
be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise and no such payment shall be
offset or reduced by the amount of any compensation or benefits provided to the
Executive in any subsequent employment except as provided in Section 2(b)(3).


 


11.                                 Miscellaneous.  No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and the Company.  No waiver by any party hereto at any time of
any breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.  No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by any party which are not
expressly set forth in this Agreement.


 


12.                                 Successors;
Binding Agreement.


 


(a)                                  This
Agreement shall be binding upon and shall inure to the benefit of the Company
and its Successors and Assigns.  The
Company shall require its Successors and Assigns to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place.


 


(b)                                 Neither
this Agreement nor any right or interest hereunder shall be assignable or
transferable by the Executive, his beneficiaries or legal representatives,
except by will or by the laws of descent and distribution.  This Agreement shall inure to the benefit of
and be enforceable by the Executive’s legal personal representative.


 


13.                                 Governing
Law.  This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware without giving effect to the conflict of laws principles
thereof.  Any action brought by any party
to this Agreement shall be brought and maintained in a court of competent
jurisdiction in the State of Delaware.


 


14.                                 Severability.  The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.


 


15.                                 Entire
Agreement.  This Agreement
constitutes the entire agreement between the parties hereto, and supersedes all
prior agreements, if any, understandings and arrangements, oral or written,
between the parties hereto, with respect to the subject matter hereof.


 


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16.                                 Definitions.


 


16.1                           Accrued
Compensation.  For purposes of this
Agreement, “Accrued
Compensation” shall mean all amounts of compensation for
services rendered to the Company or an Employing Affiliate that have been
earned or accrued through the Termination Date but that have not been paid as
of the Termination Date, including (a) base salary, (b) reimbursement
for reasonable and necessary business expenses incurred by the Executive on
behalf of the Company or an Employing Affiliate during the period ending on the
Termination Date and (c) vacation pay; provided, however, that
Accrued Compensation shall not include any amounts described in clause (a) that
have been deferred pursuant to any salary reduction or deferred compensation
elections made by the Executive.  Any
reimbursement for reasonable and necessary business expenses incurred by the
Executive that is included within the meaning of Accrued Compensation will be
made in accordance with the Company’s expense reimbursement policy and in all
events no later than the last day of the calendar year following the calendar
year in which the Executive incurred the expense.  In no event will the amount of expenses so reimbursed
by the Company in one year affect the amount of expenses eligible for
reimbursement, or in-kind benefits to be provided, in any other taxable year.


 


16.2                           Affiliate.  For purposes of this Agreement, “Affiliate” means,
with respect to any Person, any entity, directly or indirectly, controlled by,
controlling or under common control with such Person.


 


16.3                           [Intentionally
Omitted.]


 


16.4                           Cause.  For purposes of this Agreement, a termination
of employment is for “Cause”
if the Executive


 


(a)                                  has
been convicted of a felony (including a plea of nolo contendere);


 


(b)                                 intentionally
and continually failed substantially to perform his reasonably assigned duties
with the Company or an Employing Affiliate (other than a failure resulting from
the Executive’s incapacity due to physical or mental illness or from the
assignment to the Executive of duties that would constitute Good Reason) which
failure continued for a period of at least thirty days after a written notice
of demand for substantial performance, signed by a duly authorized officer of
the Company, has been delivered to the Executive specifying the manner in which
the Executive has failed substantially to perform such duties; or


 


(c)                                  intentionally
engaged in illegal conduct or willful misconduct which is demonstrably and
materially injurious to the Company or an Employing Affiliate.


 


For purposes
of this Agreement, no act, or failure to act, on the Executive’s part shall be
considered “intentional” unless the Executive has acted, or failed to act, with
a lack of good faith and with a lack of reasonable belief that the Executive’s
action or failure to act was in the best interest of the Company or an
Employing Affiliate.  Any act, or failure
to act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Company’s Chairman of the Board, Chief
Executive Officer or a senior officer of the Company or based upon the advice
of counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best interests of
the Company or 


 


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an Employing
Affiliate.  The termination of employment
of the Executive shall not be deemed to be for Cause pursuant to subparagraph (b) or
(c) above unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-fourths of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive is guilty of the conduct described in subparagraph (b) or
(c) above, and specifying the particulars thereof in detail.  Notwithstanding anything contained in this
Agreement to the contrary, no failure to perform by the Executive after a
Notice of Termination is given to the Company by the Executive shall constitute
Cause for purposes of this Agreement.


 


16.5                           Change
in Control.  A “Change in Control”
shall mean the occurrence during the Term of:


 


(a)                                  An
acquisition (other than directly from the Company) of any common stock of the
Company (“Common Stock”)
or other voting securities of the Company entitled to vote generally for the
election of directors (the “Voting Securities”) by any “Person” (as the term “person”
is used for purposes of Section 13(d) or 14(d) of the Exchange
Act), immediately after which such Person has “Beneficial Ownership” (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent
or more of the then outstanding shares of Common Stock or the combined voting
power of the Company’s then outstanding Voting Securities; provided,
however, in determining whether a Change in Control has occurred,
Common Stock or Voting Securities which are acquired in a Non-Control
Acquisition (as hereinafter defined) shall not constitute an acquisition which
would cause a Change in Control.  A “Non-Control Acquisition”
shall mean an acquisition by (i) an employee benefit plan (or a trust
forming a part thereof) maintained by (A) the Company or (B) any
corporation or other Person of which a majority of its voting power or its
voting equity securities or equity interest is owned, directly or indirectly,
by the Company (a “Subsidiary”),
(ii) the Company or its Subsidiaries or (iii) any Person in
connection with a Non-Control Transaction (as hereinafter defined);


 


(b)                                 The
individuals who, as of the date of this Agreement, are members of the Board
(the “Incumbent Board”),
cease for any reason to constitute at least a majority of the members of the
Board; provided, however, that if the election,
or nomination for election by the Company’s shareholders, of any new director
was approved by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered a member of the
Incumbent Board; provided further, however, that no individual shall be considered
a member of the Incumbent Board if such individual initially assumed office as
a result of either an actual or threatened election contest (with respect to
the election or removal of directors) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board (a “Proxy Contest”)
including by reason of any agreement intended to avoid or settle any election
contest or Proxy Contest; or


 


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(c)                                  The
consummation of:


 


(1)                                  A
merger, consolidation, reorganization or other business combination with or
into the Company or in which securities of the Company are issued, unless such
merger, consolidation, reorganization or other business combination is a “Non-Control Transaction.”  A “Non-Control Transaction” shall mean a merger,
consolidation, reorganization or other business combination with or into the
Company or in which securities of the Company are issued where:


 


(a)                                  the
shareholders of the Company, immediately before such merger, consolidation,
reorganization or other business combination own directly or indirectly
immediately following such merger, consolidation, reorganization or other
business combination, at least fifty percent of the combined voting power of
the outstanding voting securities of the corporation resulting from such merger
or consolidation, reorganization or other business combination (the “Surviving Corporation”)
in substantially the same proportion as their ownership of the Voting
Securities immediately before such merger, consolidation, reorganization, or
other business combination,


 


(b)                                 the
individuals who were members of the Incumbent Board immediately prior to the
execution of the agreement providing for such merger, consolidation,
reorganization or other business combination constitute at least two-thirds of
the members of the board of directors of the Surviving Corporation, or a
corporation beneficially directly or indirectly owning a majority of the
combined voting power of the outstanding voting securities of the Surviving
Corporation, and


 


(c)                                  no
Person other than (i) the Company, (ii) any Subsidiary, (iii) any
employee benefit plan (or any trust forming a part thereof) that, immediately
prior to such merger, consolidation, reorganization or other business
combination was maintained by the Company, the Surviving Corporation, or any
Subsidiary, or (iv) any Person who, immediately prior to such merger,
consolidation, reorganization or other business combination had Beneficial
Ownership of fifty percent or more of the then outstanding Voting Securities or
common stock of the Company, has Beneficial Ownership of fifty percent or more
of the combined voting power of the Surviving Corporation’s then outstanding
voting securities or its common stock.


 


(2)                                  A
complete liquidation or dissolution of the Company; or


 


(3)                                  The
sale or other disposition of all or substantially all of the assets of the
Company to any Person (other than (i) any such sale or disposition that
results in at least fifty percent of the Company’s assets being owned by a
Subsidiary or Subsidiaries or (ii) a distribution to the Company’s
stockholders of the stock of a Subsidiary or any other assets);


 


provided,
however, that no transaction or series of transactions
by which Stephen W. Bershad, or any Person in which Stephen W. Bershad has
Beneficial Ownership, directly or indirectly, of 25 percent of the outstanding
ownership interests or voting power, acquires fifty percent or more of


 


10

















 


the then outstanding shares of
Common Stock or the combined voting power of the Company’s then outstanding
Voting Securities shall constitute a Change in Control for purposes of this
Agreement (regardless of the form of transaction or series of transactions by
which such acquisition occurs (including, without limitation, any acquisition
described in clause (a) hereof or any merger or other transaction
described in clause (c) hereof)).


 


Notwithstanding the foregoing,
a Change in Control shall not be deemed to occur solely because any Person (the
“Subject Person”)
acquired Beneficial Ownership of more than the permitted amount of the then
outstanding Common Stock or Voting Securities as a result of the acquisition of
Common Stock or Voting Securities by the Company which, by reducing the number
of shares of Common Stock or Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person,
provided that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of shares of Common Stock or Voting
Securities by the Company, and after such share acquisition by the Company, the
Subject Person becomes the Beneficial Owner of any additional shares of Common
Stock or Voting Securities which increase the percentage of the then
outstanding shares of Common Stock or Voting Securities Beneficially Owned by
the Subject Person, then a Change in Control shall occur.


 


16.6                           Company.  For purposes of this Agreement, all
references to the Company shall include its Successors and Assigns.


 


16.7                           Disability.  For purposes of this Agreement, “Disability” shall
mean a physical or mental infirmity which impairs the Executive’s ability to
substantially perform his duties with the Company or an Employing Affiliate for
six consecutive months, and within the time period set forth in a Notice of
Termination given to the Executive (which time period shall not be less than
thirty days), the Executive shall not have returned to full-time performance of
his duties; provided, however, that if the Company’s
Long Term Disability Plan, or any successor plan (the “Disability Plan”), is
then in effect, the Executive shall not be deemed disabled for purposes of this
Agreement unless the Executive is also eligible for long-term disability
benefits under the Disability Plan (or similar benefits in the event of a
successor plan).


 


16.8                           Good
Reason.


 


(a)                                  For
purposes of this Agreement, “Good Reason” shall mean the occurrence after a Change in
Control of any of the following events or conditions:


 


(1)                                  a
material adverse change in the Executive’s duties or responsibilities
(including reporting responsibilities), except in connection with the
termination of his employment for Disability, Cause, as a result of his death
or by the Executive other than for Good Reason;


 


(2)                                  a
material reduction in the Executive’s annual base salary;


 


(3)                                  the
relocation of the offices of the Company or an Employing Affiliate at which the
Executive is principally employed to a location more than 50 miles from the
location of such offices immediately prior to a Change in Control, or any other
material change in the geographic location at which the Executive be based,
except to the extent the


 


11

















 


Executive was not previously
assigned to a principal location and except for required travel on the business
of the Company or an Employing Affiliate to an extent substantially consistent
with the Executive’s business travel obligations at the time of a Change in
Control; or


 


(4)                                  the
failure by the Company or an Employing Affiliate to pay to the Executive any
portion of the Executive’s current compensation, within seven days of the date
such compensation is due.


 


(b)                                 Any
event or condition described in Section 16.8(a)(1) through (4) which
occurs prior to a Change in Control but which the Executive reasonably
demonstrates (i) was at the request of a Third Party who effectuates a
Change in Control or (ii) otherwise arose in connection with or in
anticipation of a Change in Control which has been threatened or proposed and
which actually occurs, shall constitute Good Reason for purposes of this
Agreement notwithstanding that it occurred prior to a Change in Control, it
being agreed that any such action taken following shareholder approval of a
transaction which if consummated would constitute a Change in Control, shall be
deemed to be in anticipation of a Change in Control provided such transaction
is actually consummated.


 


16.9                           Notice
of Termination.  For purposes of this
Agreement, following a Change in Control, “Notice of Termination” shall mean a written
notice of termination of the Executive’s employment, signed by the Executive if
to the Company or by a duly authorized officer of the Company if to the
Executive, which indicates the specific termination provision in this
Agreement, if any, relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated. 
The failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason, Disability or Cause shall not serve to waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing
the Executive’s or the Company’s rights hereunder.


 


16.10                     Successors and Assigns.  For purposes of this Agreement, “Successors and Assigns”
shall mean, with respect to the Company, a corporation or other entity
acquiring all or substantially all the assets and business of the Company, as
the case may be, whether by operation of law or otherwise.


 


16.11                     Termination Date.  For purposes of this Agreement, “Termination Date”
shall mean the date on which the Executive incurs a “separation from service”
from the Company within the meaning of Section 409A of the Code.  In the case of the Executive’s death, the
Termination Date shall be the date of death. 
For all other terminations, the Notice of Termination shall specify the
proposed Termination Date (which, in the case of a termination for Cause shall
not be less than thirty days, and in the case of a termination for Good Reason
shall not be more than sixty days, from the date such Notice of Termination is
given); provided, however, that if within thirty
days after any Notice of Termination is given the party receiving such Notice
of Termination in good faith notifies the other party that a dispute exists
concerning the basis for the termination, the Termination Date shall not occur
until the date on which the dispute is finally determined, either by mutual
written agreement of the parties, or by the final judgment, order or decree of
a court of competent jurisdiction (the time for appeal therefrom 


 


12

















 


having expired and no appeal
having been taken).  Notwithstanding the
pendency of any such dispute, the Company or an Employing Affiliate shall
continue to pay the Executive his base salary and continue the Executive as a
participant (at or above the level provided prior to the date of such dispute)
in all compensation, incentive, bonus, pension, profit sharing, medical,
hospitalization, prescription drug, dental, life insurance and disability
benefit plans in which he was participating when the notice giving rise to the
dispute was given, until the dispute is finally resolved whether or not the dispute
is resolved in favor of the Company, and the Executive shall not be obligated
to repay to the Company or an Employing Affiliate any amounts paid or benefits
provided pursuant to this sentence. 
Notwithstanding the foregoing, in no event shall the Termination Date
occur until the Executive experiences a “separation from service” within the
meaning of Section 409A of the Code, and notwithstanding anything
contained herein to the contrary, the date on which such separation from
service takes place shall be the Termination Date.


 


17.                                 Compliance
with Section 409A of the Code.


 


(a)                                  Each
payment or reimbursement and the provision of each benefit under this Agreement
shall be considered a separate payment and not one of a series of payments for
purposes of Section 409A of the Code. 
To the extent applicable, it is intended that this Agreement comply with
the provisions of Section 409A of the Code so that the income inclusion
provisions of Section 409A(a)(1) do not apply to the Executive.  This Agreement shall be administered in a
manner consistent with this intent. 
Reference to Section 409A of the Code is to Section 409A of
the Internal Revenue Code of 1986, as amended, and will also include any
regulations, or any other formal guidance, promulgated with respect to such Section by
the U.S. Department of the Treasury or the Internal Revenue Service.


 


(b)                                 Notwithstanding
anything in this Agreement to the contrary, if the Executive is a “specified
employee” (within the meaning of Section 409A) on the Termination Date, in
the case of any payment made or benefit provided pursuant to this Agreement
that is considered to be a “deferral of compensation” (as such phrase is
defined for purposes of Section 409A) and which is payable upon the
Executive’s “separation from service” (within the meaning of Section 409A
of the Code) and which otherwise is payable within six months of such
separation from service, the payment date for such payment or benefit shall be
the date that is the first day of the seventh month after the date of the
Executive’s “separation from service” (determined in accordance with Section 409A).


 


18.                                 Prior
Agreement.  This Agreement
supersedes, as of the date first above written, the Amended and Restated
Severance Protection Agreement, dated as of June 9, 2005 (the “Prior Agreement”)
between the Company and the Executive and the Executive agrees that he has no
further rights under the Prior Agreement.


 


13

















 


IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officers and the Executive has executed this
Agreement as of the day and year first above written.


 


	
   

  	
  AXSYS TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
    /s/ David A. Almeida

  
	
   

  	
  By:

  	
  David A. Almeida

  
	
   

  	
  Its:

  	
  Chief Financial Officer and Executive 

  
	
   

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
    /s/ Stephen W. Bershad

  
	
   

  	
  Stephen W. Bershad

  



 


14

















 


Annex A


 


Excise Tax Gross-Up Procedural Provisions


 


(1)                                  Subject
to the provisions of Paragraph 5, all determinations required to be made under Section 3
and this Annex A, including whether an Excise Tax is payable by the Executive
and the amount of such Excise Tax and whether a Gross-Up Payment is required to
be paid by the Company to the Executive and the amount of such Gross-Up
Payment, if any, will be made by a nationally recognized accounting or law firm
(the “National Firm”)
selected by the Executive in the Executive’s sole discretion.  The Executive will direct the National Firm
to submit its determination and detailed supporting calculations to both the
Company and the Executive within 30 calendar days after the date of termination
of the Executive’s employment, if applicable, and any such other time or times
as may be requested by the Company or the Executive.  If the National Firm determines that any
Excise Tax is payable by the Executive, the Company will pay the required
Gross-Up Payment to the Executive after receipt of such determination and
calculations with respect to any Payment to the Executive as provided in
Paragraph 7.  If the National Firm
determines that no Excise Tax is payable by the Executive with respect to any
material benefit or amount (or portion thereof), it will, if requested by the
Executive, at the same time as it makes such determination, furnish the Company
and the Executive with an opinion that the Executive has substantial authority
not to report any Excise Tax on the Executive’s federal, state or local income
or other tax return with respect to such benefit or amount.  As a result of the uncertainty in the
application of Section 4999 of the Code and the possibility of similar
uncertainty regarding applicable state or local tax law at the time of any
determination by the National Firm hereunder, it is possible that Gross-Up Payments
that will not have been made by the Company should have been made (an “Underpayment”),
consistent with the calculations required to be made hereunder.  In the event that the Company exhausts or
fails to pursue its remedies pursuant to Paragraph 5 and the Executive
thereafter is required to make a payment of any Excise Tax, the Executive will
direct the National Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting calculations
to both the Company and the Executive as promptly as possible.  Any such Underpayment will be promptly paid
by the Company to, or for the benefit of, the Executive after receipt of such
determination and calculations as provided in Paragraph 7.


 


(2)                                  The
Company and the Executive will each provide the National Firm access to and
copies of any books, records and documents in the possession of the Company or
the Executive, as the case may be, reasonably requested by the National Firm,
and otherwise cooperate with the National Firm in connection with the
preparation and issuance of the determinations and calculations contemplated by
Paragraph 1.  Any determination by the
National Firm as to the amount of the Gross-Up Payment will be binding upon the
Company and the Executive.


 

















 


(3)                                  The
federal, state and local income or other tax returns filed by the Executive
will be prepared and filed on a consistent basis with the determination of the
National Firm with respect to the Excise Tax payable by the Executive.  The Executive will report and make proper
payment of the amount of any Excise Tax, and at the request of the Company,
provide to the Company true and correct copies (with any amendments) of the
Executive’s federal income tax return as filed with the Internal Revenue
Service and corresponding state and local tax returns, if relevant, as filed
with the applicable taxing authority, and such other documents reasonably
requested by the Company, evidencing such payment.  If prior to the filing of the Executive’s
federal income tax return, or corresponding state or local tax return, if
relevant, the National Firm determines that the amount of the Gross-Up Payment
should be reduced, the Executive will within five business days pay to the
Company the amount of such reduction.


 


(4)                                  The
fees and expenses of the National Firm for its services in connection with the
determinations and calculations contemplated by Paragraph 1 will be borne by
the Company.  If such fees and expenses
are initially paid by the Executive, the Company will reimburse the Executive
the full amount of such fees and expenses after receipt from the Executive of a
statement therefor and reasonable evidence of the Executive’s payment thereof,
as provided in Paragraph 7.


 


(5)                                  The
Executive will notify the Company in writing of any claim by the Internal
Revenue Service or any other taxing authority that, if successful, would
require the payment by the Company of a Gross-Up Payment.  Such notification will be given as promptly
as practicable but no later than 10 business days after the Executive actually
receives notice of such claim and the Executive will further apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid (in each case, to the extent known by the Executive).  The Executive will not pay such claim prior
to the expiration of the 30-calendar-day period following the date on which the
Executive gives such notice to the Company or, if earlier, the date that any
payment of amount with respect to such claim is due. If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive will:


 


(a)                                  provide
the Company with any written records or documents in Executive’s possession
relating to such claim reasonably requested by the Company;


 


(b)                                 take
such action in connection with contesting such claim as the Company reasonably
requests in writing from time to time, including without limitation accepting
legal representation with respect to such claim by an attorney competent in
respect of the subject matter and reasonably selected by the Company;


 


(c)                                  cooperate
with the Company in good faith in order effectively to contest such claim; and


 

















 


(d)                                 permit
the Company to participate in any proceedings relating to such claim; provided, however, that the Company will bear and pay
directly all costs and expenses (including interest and penalties) incurred in
connection with such contest and will indemnify and hold harmless the
Executive, on an after-tax basis, for and against any Excise Tax or income or
other tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses.  Without limiting the foregoing provisions of
this Paragraph 5, the Company will control all proceedings taken in connection
with the contest of any claim contemplated by this Paragraph 5 and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim (provided, however, that the Executive may participate
therein at the Executive’s own cost and expense) and may, at its option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company
determines; provided, however, that if the Company
directs the Executive to pay the tax claimed and sue for a refund, the Company
will advance the amount of such payment to the Executive on an interest-free
basis and will indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income or other tax, including interest or penalties
with respect thereto, imposed with respect to such advance; and provided
further, however, that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with respect to which
the contested amount is claimed to be due is limited solely to such contested
amount.  Furthermore, the Company’s
control of any such contested claim will be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive will be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.


 


(6)                                  If,
after the receipt by the Executive of an amount advanced by the Company
pursuant to Paragraph 5, the Executive receives any refund with respect to such
claim, the Executive will (subject to the Company’s complying with the
requirements of Paragraph 5) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after any taxes applicable
thereto).  If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Paragraph 5, a
determination is made that the Executive is not entitled to any refund with
respect to such claim and the Company does not notify the Executive in writing
of its intent to contest such denial or refund prior to the expiration of 30
calendar days after such determination, then such advance will be forgiven and
will not be required to be repaid and the amount of any such advance will
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid by the Company to the Executive pursuant to Section 3 and this
Annex A.


 

















 


(7)                                  Notwithstanding
any other provision of this Annex A to the contrary, but subject to Section 17,
all taxes and expenses described in Section 3 and this Annex A shall be
paid or reimbursed within 5 business days after the Executive submits evidence
of incurrence of such taxes and/or expenses, provided that in all events such
reimbursement shall be made on or before the last day of the year following (a) the
year in which the applicable taxes are remitted or expenses are incurred or, (b) in
the case of reimbursement of expenses incurred due to a tax audit or litigation
in which there is no remittance of taxes, the year in which the audit is
completed or there is a final and nonappealable settlement or other resolution
of the litigation, in accordance with Treasury Regulation §1.409A-3(i)(1)(v).  The Executive shall be required to submit all
requests for reimbursements no later than 30 days prior to the last day
for reimbursement described in the prior sentence.  Any expense reimbursed by the Company in one
taxable year in no event will affect the amount of expenses required to be
reimbursed by the Company in any other taxable year