Document:

Exhibit 10.4

AMENDED AND RESTATED

SEVERANCE
PROTECTION AGREEMENT

THIS AGREEMENT is
made as of the 9th day of June 2005, 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,
dated February 11, 1999, 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, 2007 (the “Term”); provided,
however, that on January 1, 2006,
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:

(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 commencing six months 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 Executive’s Base Amount; 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; provided, however, that
within five days following the Termination Date, the Executive may elect to
receive from the Company in cash, in lieu of the Benefits Continuation, the
value of the Benefits Continuation.  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 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.

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(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 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 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 

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to the Excise Tax imposed upon the
Payment.  For purposes of determining the
amount of the Gross-Up Payment, the Executive will be considered to pay (x)
federal income taxes at the highest rate in effect in the year in which the
Gross-Up Payment will be made and (y) state and local income taxes at the
highest rate in effect in the state or locality in which the Gross-Up Payment
would be subject to state or local tax.

(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 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.

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 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.

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(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
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 

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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 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.

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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 

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and arrangements,
oral or written, between the parties hereto, with respect to the subject matter
hereof.

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.

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         Base Amount. For purposes of this Agreement, “Base
Amount” shall mean, with respect to a Change in Control, the Executive’s “base
amount” as determined under Section 280G of the Code and the regulations
proposed thereunder.

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 

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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 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”
(as described in Rule 14a-11 promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on 

 9
 

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

(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);

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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 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 

 11
 

termination of his
employment for Disability, Cause, as a result of his death or by the Executive
other than for Good Reason;

(2)           a 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 25 miles from the location of such offices
immediately prior to a Change in Control, or the requirement that the Executive
be based anywhere other than at such offices, except to the extent the
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 or to pay to the Executive any portion of an installment
of deferred compensation under any deferred compensation program of the Company
or an Employing Affiliate in which the Executive participated, 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 

 12
 

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 (a) in the case of the Executive’s
death, his date of death, (b) if the Executive’s employment is terminated for
Disability, thirty days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of his duties on a full-time
basis during such thirty day period) and (c) if the Executive’s employment is
terminated for any other reason, the date specified in the Notice of
Termination (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 be 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
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.

17.           Compliance with 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.  This
Agreement shall be administered in a manner consistent with this intent, and
any provision that would cause the Agreement to fail to satisfy
Section 409A of the Code shall have no force and effect until amended to
comply with Section 409A of the Code (which amendment may be retroactive
to the extent permitted by Section 409A of the Code and may be made by the
Company without the consent of the Executive). 
In particular, to the extent the Executive becomes entitled to receive
payment subject to Section 409A upon an event that does not constitute a
permitted distribution event under Section 409A(a)(2) of the Code, then
notwithstanding anything to the contrary in this Agreement, payment will be
made to the Executive on the earlier of (a) the Executive’s “separation
from service” with the Company (determined in accordance with
Section 409A); provided, however, that if the Executive is a “specified
employee” (within the meaning of Section 409A), the Executive’s date of
payment shall be made on the date which is 6 months after the date of the
Executive’s separation from service with the Company or (b) the Executive’s
death.

18.           Prior Agreement.  This Agreement supersedes, as of the date
first above written, the Severance Protection Agreement, dated as of February
11, 1999 (the “Prior 

 13
 

Agreement”) between the
Company and the Executive and the Executive agrees that he has no further
rights under the Prior Agreement.

 14
 

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

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ STEPHEN W. BERSHAD

  	
   

  
	
   

  	
  Stephen W.
  Bershad

  
				

 

 

 15

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 within five business days after receipt of such
  determination and calculations with respect to any Payment to the Executive.
  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 within
  five business days after receipt of such determination and calculations.

  
	
   

  	
   

  
	
  (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.

  

 

 A-1
 

 

	
  (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 within five business days after receipt
  from the Executive of a statement therefor and reasonable evidence of the
  Executive’s payment thereof.

  
	
   

  	
   

  
	
  (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

  

 

 A-2
 

 

	
  

  	
  (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.

  
	
   

  	
   

  	
   

  
	
  (1)

  	
  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.

  

 

 A-3Exhibit
10.5

AMENDED AND RESTATED

SEVERANCE
PROTECTION AGREEMENT

THIS AGREEMENT is made as of 9th day of June 2005, by and between Axsys
Technologies, Inc. (the “Company”) and David A. Almeida (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, dated May
13, 2003, 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, 2007 (the “Term”);
provided, however, that on January 1, 2006, 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:

 

	
  (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 commencing
  six months 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; provided,
  however, that within five days following the Termination Date, the
  Executive may elect to receive from the Company in cash, in lieu of the
  Benefits Continuation, the value of the Benefits Continuation. 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

  
	
   

  
					

 2
 

 

(including deductibles and costs to the Executive) of the combined
benefit plans are no less favorable to the 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.

	
   (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 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
  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

  

 

 3
 

“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.  For
purposes of determining the amount of the Gross-Up Payment, the Executive will
be considered to pay (x) federal income taxes at the highest rate in effect in
the year in which the Gross-Up Payment will be made and (y) state and local
income taxes at the highest rate in effect in the state or locality in which
the Gross-Up Payment would be subject to state or local tax.

	
  

  	
   (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 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.

  
	
   

  	
   

  	
   

  
	
  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 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, 

  

 

 4
 

 

	
  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 is engaged in the precision
  systems or industrial components business or otherwise 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 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 

  

 

 5
 

 

	
  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 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,

  

 

 6
 

 

	
  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.

  
	
   

  	
   

  
	
  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

  

 

 7
 

 

	
  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.

  
	
   

  	
   

  
	
  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 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

  

 

 8
 

 

	
  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” (as described in Rule 14a-11
  promulgated under the Exchange Act) 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

  
	
   

  	
   

  
	
   (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:

  

 

 9
 

 

	
  (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 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

 10

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 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 25 miles from the location of such
offices immediately prior to a Change in Control, or the requirement that the
Executive be based anywhere other than at such offices, except to the extent
the 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 or to pay to the Executive any portion of an installment
of deferred compensation under any deferred 

 11
 

compensation program of
the Company or an Employing Affiliate in which the Executive participated,
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 (a) in the case of the Executive’s death, his date of
death, (b) if the Executive’s employment is terminated for Disability,
thirty days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty day period) and (c) if the
Executive’s employment is terminated for any other reason, the date specified
in the Notice of Termination (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 be 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 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 

 12
 

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.

17.           Compliance with 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.  This
Agreement shall be administered in a manner consistent with this intent, and
any provision that would cause the Agreement to fail to satisfy Section 409A
of the Code shall have no force and effect until amended to comply with
Section 409A of the Code (which amendment may be retroactive to the extent
permitted by Section 409A of the Code and may be made by the Company
without the consent of the Executive). 
In particular, to the extent the Executive becomes entitled to receive
payment subject to Section 409A upon an event that does not constitute a
permitted distribution event under Section 409A(a)(2) of the Code, then
notwithstanding anything to the contrary in this Agreement, payment will be made
to the Executive on the earlier of (a) the Executive’s “separation from
service” with the Company (determined in accordance with Section 409A); provided, however,
that if the Executive is a “specified employee” (within the meaning of
Section 409A), the Executive’s date of payment shall be made on the date
which is 6 months after the date of the Executive’s separation from service
with the Company or (b) the Executive’s death.

18.           Prior Agreement.  This Agreement supersedes, as of the date
first above written, the Severance Protection Agreement, dated as of May 13,
2003 (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/ Stephen W. Bershad

  	
   

  
	
   

  	
  By: Stephen W.
  Bershad

  
	
   

  	
  Its: Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David A. Almeida

  	
   

  
	
   

  	
  David A. Almeida

  
	
   

  	
   

  
	
   

  	
   

  
	
  ATTEST

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
				

 

 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 within five business days
after receipt of such determination and calculations with respect to any
Payment to the Executive.  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 within five business
days after receipt of such determination and calculations.

(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.

 A-1
 

 

(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 within five business days after
receipt from the Executive of a statement therefor and reasonable evidence of
the Executive’s payment thereof.

(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 

 A-2
 

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.

 

 A-3

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