Document:

Exhibit 10.1

 

AMENDMENT NO.
11 TO SALE AND SERVICING AGREEMENT
 (VFCC
Transaction with Ares Capital CP Funding LLC)

 

THIS AMENDMENT
NO. 11 TO THE SALE AND SERVICING AGREEMENT,
dated as of September 8, 2008 (this “Amendment”),
is entered into in connection with that certain Sale and Servicing Agreement,
dated as of November 3, 2004 (as amended, modified, waived, supplemented
or restated through the date hereof, the “Sale and Servicing Agreement”),
by and among Ares Capital CP Funding LLC, as the borrower (together with its
successors and assigns in such capacity, the “Borrower”), Ares Capital
Corporation, as the originator (together with its successors and assigns in
such capacity, the “Originator”)
and as the servicer (together with its successors and assigns in such capacity,
the “Servicer”),
each of the Conduit Purchasers and Institutional Purchasers from time to time
party thereto, each of the Purchaser Agents from time to time party thereto,
Wachovia Capital Markets, LLC,  as
the Administrative Agent (together with its successors and assigns in such
capacity, the “Administrative Agent”) and as the Purchaser Agent with
respect to Variable Funding Capital Company LLC (f/k/a Variable Funding Capital
Corporation), as Conduit Purchaser (together with its successors and assigns in
such capacity, the “VFCC Agent”), U.S. Bank National Association, as the
trustee (together with its successors and assigns in such capacities, the “Trustee”), and
Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) as the
backup servicer (together with its successors and assigns in such capacity, the
“Backup Servicer”).  Capitalized terms used and not otherwise
defined herein shall have the meanings given to such terms in the Sale and
Servicing Agreement.

 

RECITALS

 

WHEREAS, the
above-named parties have entered into the Sale and Servicing Agreement, and,
pursuant to and in accordance with Section 13.1 thereof, the parties
hereto desire to amend the Sale and Servicing Agreement, in certain respects as
provided herein;

 

NOW, THEREFORE,
based upon the above Recital, the mutual premises and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the undersigned, intending to be legally
bound, hereby agree as follows:

 

SECTION 1.         AMENDMENTS.

 

(a)           Section 1.1
of the Sale and Servicing Agreement is hereby amended by inserting the
following defined terms in appropriate alphabetical sequence:

 

“Lien Release Dividend”:  Defined in Section 2.21(a).

 

“Lien Release Dividend Date”:  The date specified by the Borrower, which
date may be any Business Day, provided written notice is given in accordance
with Section 2.21(a).

 

(b)           Section 2.18(a)(i) of
the Sale and Servicing Agreement is hereby amended and restated in its entirety
as follows:

 

 

“(i)          the Borrower has recommended to the
Administrative Agent (with a copy to the Trustee) in writing that the Loan to
be replaced should be replaced (each a “Replaced Loan”);”

 

(c)           Section 2.18(a)(iv) of
the Sale and Servicing Agreement is hereby amended and restated in its entirety
as follows:

 

“(iv)        the sum of the Outstanding
Loan Balances of such Substitute Loans shall be equal to or greater than the
sum of the Outstanding Loan Balances of the Replaced Loans;”

 

(d)           Section 2.18(a)(v) of
the Sale and Servicing Agreement is hereby amended and restated in its entirety
as follows:

 

“(v)         such Substitute Loans, at
the time of substitution by the Borrower, shall not cause the Weighted Average
Life of the Loans included in the Borrowing Base to increase by more than .25
years;”

 

(e)           Section 2.18(a)(viii) of
the Sale and Servicing Agreement is hereby amended by deleting the phrase “[Reserved];”
and replacing it with the following:

 

“(viii)      the sum of (1) the
Outstanding Loan Balances of all Loans that are Substitute Loans plus (2) the Outstanding Loan
Balances of all Loans that have been sold pursuant to Discretionary Sales, in
each case excluding Warranty Loans, shall not exceed 20% of the Facility Amount
for any month during the 12-month period immediately preceding such date of
determination (or such lesser number of months as shall have elapsed as of such
date);”

 

(f)            Section 2.18(a)(ix) of
the Sale and Servicing Agreement is hereby amended by deleting the phrase “[Reserved];”
and replacing it with the following:

 

“(ix)         the sum of the
Outstanding Loan Balances of all Substitute Loans substituted for Delinquent
Loans and Charged-Off Loans shall not exceed 10% of the Facility Amount for any
month during the 12-month period immediately preceding such date of
determination (or such lesser number of months as shall have elapsed as of such
date);”

 

(g)           Section 2.18(a) of
the Sale and Servicing Agreement is hereby amended by adding the following to
the end of the final paragraph thereof:

 

“Notwithstanding any provision
contained in this Section 2.18(a) to the contrary, upon
receipt by the Borrower of the right, title and interest in, to and under such
Replaced Loan from the Trustee, the Borrower shall not, and the Originator
agrees not to cause the Borrower to, transfer any such Replaced Loan that is
not a Warranty Loan to the Originator except: (i)(1) at the then-current
fair market value determined by the Borrower employing a valuation procedure
substantially similar to one that it would employ in a similar sale to an
independent third party and substantially consistent with the value of such
Replaced Loan as determined in the most recent periodic portfolio review
conducted 

 

2

 

by the
Borrower, but taking into account relevant market or other changes affecting
the value of such Replaced Loan since such periodic portfolio review, and (2) with
the consent of the independent director of the Borrower; or (ii) as a
distribution to the Originator to the extent such Replaced Loan was initially
contributed by the Originator to the Borrower.”

 

(h)           Section 2.18(c)(i) of
the Sale and Servicing Agreement is hereby amended by inserting the sentence “For
the avoidance of doubt, any substitution of a Delinquent Loan or a Charged-Off
Loan under Section 2.18(a) shall not constitute a Defaulted
Loan Sale.” immediately after the sentence ending with the phrase “fair market
terms.”

 

(i)            The following Section 2.21
shall be added to the Sale and Servicing Agreement in its appropriate numerical
order:

 

“Section 2.21.      Lien Release
Dividend.

 

(a)           Notwithstanding any
provision contained in this Agreement to the contrary, provided there is not
then existing an Unmatured Termination Event, a Termination Event or a Servicer
Default, on a Lien Release Dividend Date, the Borrower may dividend to the
Originator a portion of those Loans that were contributed to the Borrower from
the Originator, or portions thereof (each, a “Lien Release Dividend”),
subject to the following terms and conditions, as certified by the Borrower and
the Originator to the Administrative Agent (with a copy to the Trustee):

 

(i)            The Borrower and the
Originator shall have given the Administrative Agent and each Purchaser, with a
copy to the Trustee and the Backup Servicer, at least five Business Days prior
written notice requesting that the Purchasers consent to the effectuation of a
Lien Release Dividend, in the form of Exhibit O hereto (a “Notice
and Request for Consent”), which consent shall be given in the sole and
absolute discretion of each Purchaser; provided
that, if a Purchaser shall not have responded to the Notice and Request for
Consent by 11:00 A.M. on the day that is one Business Day prior to the
proposed Lien Release Dividend Date, such Purchaser shall be deemed not to have
given its consent;

 

(ii)           on any Lien Release
Dividend Date, no more than four Lien Release Dividends shall have been made
during the 12-month period immediately preceding the proposed Lien Release
Dividend Date;

 

(iii)          with respect to any Lien
Release Dividend, the sum of the Outstanding Loan Balances of all Loans which
were Delinquent Loans, Charged-Off Loans or Loans subject to a Warranty Event
which were (x) included in all Lien Release Dividends or (y) replaced
by the Borrower pursuant to Section 2.18, in each case during the
12-month period immediately preceding the proposed Lien Release Dividend Date,
does not exceed 10% of the highest Aggregate Outstanding Loan Balance of any
month during such 12-month period;

 

3

 

(iv)          After giving effect to
the Lien Release Dividend on the Lien Release Dividend Date, (A) the
Availability is greater than or equal to $0, (B) the representations and
warranties contained in Sections 4.1 and 4.2 hereof shall
continue to be correct in all material respects, except to the extent relating
to an earlier date, (C) the eligibility of any Loan remaining as part of
the Collateral after the Lien Release Dividend will be redetermined as of the
Lien Release Dividend Date, (D) the Concentration Limits will be
redetermined as of the Lien Release Dividend Date, (E) neither an
Unmatured Termination Event, a Termination Event nor a Servicer Default shall
have resulted, (F) no claim has been asserted or proceeding commenced
challenging the enforceability or validity of any of the Required Loan
Documents, (G) there shall have been no material adverse change as to the
Servicer or the Borrower, and (H) the Weighted Average Life of the Loans
included in the Collateral (weighted based on Outstanding Loan Balances) will
not exceed six years;

 

(v)           Such Lien Release
Dividend must be in compliance with Applicable Law and may not (A) be made
with the intent to hinder, delay or defraud any creditor of the Borrower or (B) leave
the Borrower, immediately after giving effect to the Lien Release Dividend, (i) insolvent,
(ii) with insufficient funds to pay its obligations as and when they
become due or (iii) with inadequate capital for its present and
anticipated business and transactions;

 

(vi)          On or prior to the Lien
Release Dividend Date, the Borrower shall have (A) delivered to the
Administrative Agent, with a copy to the Trustee and the Backup Servicer, a
list specifying all Loans or portions thereof to be transferred pursuant to such
Lien Release Dividend and the Administrative Agent shall have approved same in
its sole discretion and (B) obtained all authorizations, consents and
approvals required to effectuate the Lien Release Dividend;

 

(vii)         A portion of a Loan may
be transferred pursuant to a Lien Release Dividend provided that (A) such
transfer does not have an adverse effect on the portion of such Loan remaining
as a part of the Collateral, any other Collateral, the Purchasers, the
Administrative Agent or any other Secured Party and (B) a new promissory
note (other than with respect to a Noteless Loan) for the portion of the Loan
remaining as a part of the Collateral has been executed, and the original
thereof has been endorsed to the Administrative Agent and delivered to the
Trustee;

 

(viii)        Each Loan, or portion
thereof, as applicable, shall be transferred at a value equal to the
Outstanding Loan Balance thereof, exclusive of any accrued and unpaid interest
or Accreted Interest thereon;

 

(ix)           The Borrower shall
deliver a Borrowing Base Certificate (including a calculation of the Borrowing
Base after giving effect to such Lien Release Dividend) to the Administrative
Agent; and

 

4

 

(x)            The Borrower shall
have paid in full an aggregate amount equal to the sum of all amounts due and
owing to the Administrative Agent, the Purchasers, the Trustee, the Backup
Servicer and any Hedge Counterparty, as applicable, under this Agreement and
the other Transaction Documents, to the extent accrued to such date (including,
without limitation, Breakage Costs and Hedge Breakage Costs) with respect to
the Loans to be transferred pursuant to such Lien Release Dividend and incurred
in connection with the transfer of such Loans pursuant to such Lien Release
Dividend and the termination of any Hedge Transactions that may be required to
be terminated, in whole or in part, in connection therewith.

 

(b)           In connection with the
Lien Release Dividend, there shall be sold and assigned to the Borrower,
without recourse, representation or warranty, all of the right, title and
interest of the Trustee, on behalf of the Secured Parties, in, to and under the
Loans or portions thereof so transferred (together with any related Collateral
(provided that in the case of a transfer of a portion of a Loan, a pro rata
interest in the Related Property and other related Collateral shall be
released)) and such Loans or portions thereof so transferred (together with any
related Collateral (provided that in the case of a transfer of a portion of a
Loan, a pro rata interest in the Related Property and other related Collateral
shall be released)) shall be released from the Lien of this Agreement (subject
to the requirements of Section 2.21(a) above).

 

(c)           The Borrower hereby
agrees to pay the reasonable legal fees and expenses of the Administrative
Agent, the Trustee and the other Secured Parties in connection with any Lien
Release Dividend (including, but not limited to, expenses incurred in
connection with the release of the Lien of the Administrative Agent, on behalf
of the Secured Parties, and any other party having an interest in the Loans in
connection with such Lien Release Dividend).

 

(d)           In connection with any
Lien Release Dividend, on the related Lien Release Dividend Date, the Trustee,
on behalf of the Secured Parties, shall, at the request of the Administrative
Agent and the expense of the Borrower (1) execute such instruments of
release with respect to the Loans or portions thereof to be transferred to the
Borrower (together with, in the case of the transfer of the Loans but not
portions thereof, any related Collateral), in recordable form if necessary, in
favor of the Borrower as the Borrower may reasonably request, (2) deliver
any portion of the Loans or portions thereof to be transferred to the Borrower
(together with, in the case of the transfer of the Loans but not portions
thereof, any related Collateral) in its possession to the Borrower and (3) otherwise
take such actions, and cause or permit the Trustee to take such actions, as are
necessary and appropriate to release the Lien of the Trustee on behalf of the
Secured Parties on the Loans or portions thereof to be transferred to the
Borrower (together with, in the case of the transfer of the Loans but not
portions thereof, any related Collateral) and release and deliver to the
Borrower such Loans or portions thereof to be transferred to the Borrower
(together with, in the case of the transfer of the Loans but not portions
thereof, any related Collateral).”

 

5

 

(j)            Exhibit C
of the Sale and Servicing Agreement is hereby amended and restated in its
entirety with the Exhibit C attached hereto as Schedule I.

 

(k)           Exhibit O,
attached hereto as Schedule II, is hereby incorporated into the Sale and
Servicing Agreement.

 

SECTION 2.         LIEN RELEASE DIVIDEND.

 

The Borrower and the Originator hereby notify the Purchasers of, and
the Purchasers hereby consent to, a Lien Release Dividend as set forth in the
Sale and Servicing Agreement, as modified hereby, on the Loans or portions
thereof that have been provided to the Administrative Agent, with a copy to the
Trustee and the Backup Servicer, as of the date hereof and of which the
Administrative Agent, the Trustee and the Backup Servicer acknowledge receipt
(together with, in the case of a transfer of the Loans but not portions
thereof, any related Collateral), and that such Lien Release Dividend be made
on September 9, 2008 (the “Lien Release Dividend Date”), following
the execution of this Amendment. Except as set forth in this Section 2,
the Administrative Agent, the Purchasers, the Trustee and the Backup Servicer
hereby waive any further notice requirements with respect to such Lien Release
Dividend.

 

The Borrower and the Originator represent and warrant, as of the
effective date of this Amendment and as of the requested Lien Release Dividend
Date, as follows:

 

(i)            No
Unmatured Termination Event, Termination Event or Servicer Default is
continuing.

 

(ii)           After
giving effect to the Lien Release Dividend on the Lien Release Dividend Date, (1) Availability
will be greater than or equal to $0, (2) the representations and
warranties contained in Sections 4.1 and 4.2 of the Sale and Servicing
Agreement, as modified hereby, shall continue to be correct in all material
respects, except to the extent relating to an earlier date, (3) neither an
Unmatured Termination Event, a Termination Event nor a Servicer Default shall
have resulted, (4) no claim shall have been asserted or proceeding
commenced challenging the enforceability or validity of any of the Required
Loan Documents, (6) the Weighted Average Life of the Loans included in the
Collateral (weighted based on Outstanding Loan Balances) will not exceed six
years, and (7) after giving effect to the requested Lien Release Dividend,
no more than four Lien Release Dividends shall have occurred within the 12
month period ending on the Lien Release Dividend Date.

 

In conjunction
with this Lien Release Dividend, the Borrower has provided to the
Administrative Agent, of which the Administrative Agent hereby acknowledges
receipt, a Borrowing Base Certificate, including a calculation of the Borrowing
Base after giving effect to such Lien Release Dividend.

 

SECTION 3.         AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED.

 

Except as
specifically amended hereby, all provisions of the Sale and Servicing Agreement
are hereby ratified and shall remain in full force and effect.  After this Amendment becomes effective, all
references to the Sale and Servicing Agreement, and corresponding 

 

6

 

references thereto or therein such as “hereof,” “herein,” or words of
similar effect referring to the Sale and Servicing Agreement shall be deemed to
mean the Sale and Servicing Agreement as amended hereby.  This Amendment shall not be deemed to
expressly or impliedly waive, amend or supplement any provision of the Sale and
Servicing Agreement other than as expressly set forth herein, and shall not
constitute a novation of the Sale and Servicing Agreement.

 

SECTION 4.         REPRESENTATIONS.

 

Each of the
Originator, the Servicer and the Borrower, severally for itself only,
represents and warrants as of the date of this Amendment as follows:

 

(i)            it
is duly incorporated or organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization;

 

(ii)           the
execution, delivery and performance by it of this Amendment and the Sale and
Servicing Agreement as amended hereby are within its powers, have been duly
authorized, and do not contravene (A) its charter, by-laws, or other
organizational documents, or (B) any Applicable Law;

 

(iii)          no
consent, license, permit, approval or authorization of, or registration, filing
or declaration with any governmental authority, is required in connection with
the execution, delivery, performance, validity or enforceability of this
Amendment and the Sale and Servicing Agreement as amended hereby by or against
it;

 

(iv)          this
Amendment has been duly executed and delivered by it;

 

(v)           each
of this Amendment and the Sale and Servicing Agreement as amended hereby
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally or by general
principles of equity;

 

(vi)          it
is not in default under the Sale and Servicing Agreement, as amended hereby;
and

 

(vii)         upon
giving effect to this Amendment, there is no Termination Event, Unmatured
Termination Event, or Servicer Default.

 

SECTION 5.         CONDITIONS TO EFFECTIVENESS.

 

The
effectiveness of this Amendment is conditioned upon: (i) payment of the
outstanding fees and disbursements of the Purchasers; (ii) payment of the
outstanding fees and disbursements of Dechert LLP, as counsel to the
Administrative Agent and the Purchasers; (iii) delivery of executed
signature pages by all parties hereto to the Administrative Agent; and (iv) delivery
of favorable opinions of counsel for the Originator, the Borrower and the
Servicer in form and substance satisfactory to the Administrative Agent.

 

7

 

SECTION 6.         MISCELLANEOUS.

 

(a)           Without in any way
limiting any other obligation hereunder or under the Transaction Documents, the
Borrower agrees to provide, from time to time, any additional documentation and
to execute additional acknowledgements, amendments, instruments or other
agreements as may be reasonably requested and required by the Administrative
Agent to effectuate the foregoing.

 

(b)           This Amendment may be
executed in any number of counterparts (including by facsimile), and by the
different parties hereto on the same or separate counterparts, each of which
shall be deemed to be an original instrument but all of which together shall
constitute one and the same agreement.

 

(c)           The descriptive
headings of the various sections of this Amendment are inserted for convenience
of reference only and shall not be deemed to affect the meaning or construction
of any of the provisions hereof.

 

(d)           This Amendment may not
be amended or otherwise modified except as provided in the Sale and Servicing
Agreement.

 

(e)           The failure or
unenforceability of any provision hereof shall not affect the other provisions
of this Amendment or the Sale and Servicing Agreement.

 

(f)            Whenever the context
and construction so require, all words used in the singular number herein shall
be deemed to have been used in the plural, and vice versa, and the masculine
gender shall include the feminine and neuter and the neuter shall include the
masculine and feminine.

 

(g)           This Amendment and the
Sale and Servicing Agreement represent the final agreement between the parties
only with respect to the subject matter expressly covered hereby and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral
agreements between the parties.  There
are no unwritten oral agreements between the parties.

 

(h)           THIS AMENDMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE CHOICE OF LAW
PROVISIONS SET FORTH IN THE SALE AND SERVICING AGREEMENT AND SHALL BE SUBJECT
TO THE WAIVER OF JURY TRIAL AND NOTICE PROVISIONS SET FORTH IN THE SALE AND
SERVICING AGREEMENT.

 

[Remainder of Page Intentionally Left
Blank]

 

8

 

IN WITNESS WHEREOF,
the undersigned have caused this Amendment to be executed by their respective
officers thereunto duly authorized, as of the date first above written.

 

 

	
  THE BORROWER:

  	
  ARES CAPITAL CP FUNDING LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott Lem

  
	
   

  	
   

  	
  Name: Scott Lem

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE ORIGINATOR 

  	
  ARES CAPITAL CORPORATION

  
	
  AND THE SERVICER:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard S. Davis

  
	
   

  	
   

  	
  Name: Richard S. Davis

  
	
   

  	
   

  	
  Title: Chief Financial Officer

  

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

Ares Capital CP Funding LLC

Amendment No. 11 to Sale and Servicing Agreement

 

 

	
  CONDUIT PURCHASER:

  	
  VARIABLE FUNDING CAPITAL

  COMPANY LLC (f/k/a Variable Funding

  Capital Corporation)

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Wachovia Capital Markets, LLC, 

  
	
   

  	
   

  	
  as attorney-in-fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Haojin Wu

  
	
   

  	
   

  	
  Name: Haojin Wu

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE ADMINISTRATIVE AGENT 

  	
  WACHOVIA CAPITAL MARKETS, LLC

  
	
  AND THE VFCC AGENT:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kevin Sunday

  
	
   

  	
   

  	
  Name: Kevin Sunday

  
	
   

  	
   

  	
  Title: Vice President

  

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

Ares Capital CP Funding LLC

Amendment No. 11 to Sale and Servicing Agreement

 

 

	
  THE TRUSTEE:

  	
  U.S. BANK NATIONAL ASSOCIATION,

  not in its individual capacity but solely as

  Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John T. Edwards

  
	
   

  	
   

  	
  Name: John T. Edwards

  
	
   

  	
   

  	
  Title: Assistant Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE BACKUP SERVICER:

  	
  LYON FINANCIAL SERVICES, INC.,

  d/b/a U.S. Bank Portfolio Services not in its

  individual capacity but solely as Backup

  Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Docken

  
	
   

  	
   

  	
  Name: John Docken

  
	
   

  	
   

  	
  Title: Senior Vice President

  

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

Ares Capital CP Funding LLC

Amendment No. 11 to Sale and Servicing AgreementExhibit 10.1

 

AMENDED AND RESTATED EMPLOYMENT
AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated
as of September 4, 2008 (this “Agreement”), is entered into by and
between Axsys Technologies, Inc., a Delaware corporation (the “Company”),
and Stephen W. Bershad (the “Executive”).

 

WHEREAS, the Executive currently serves as Chairman (“Chairman”)
of the Board of Directors (the “Board”) and Chief Executive Officer (“CEO”)
of the Company;

 

WHEREAS, the Company and the Executive entered into an
Employment Agreement, dated as of October 12, 2000 (the “Prior
Agreement”), that set forth certain terms and conditions of the Executive’s
employment as Chairman and CEO;

 

WHEREAS, the Company continues to believe that the
Executive possesses skills, experience and knowledge that are of value to the
Company;

 

WHEREAS, the Company continues to desire to secure
additional services of the Executive as Chairman and CEO and the Executive
continues to be willing to render such services; and

 

WHEREAS, the Company and the Executive desire to
replace and supersede the Prior Agreement in its entirety and enter into this
Agreement to again set forth certain terms and conditions of the Executive’s
employment as Chairman and CEO as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual
covenants contained herein, the parties hereto agree as follows:

 

1.             Employment Term.  The “Employment Term” shall continue
as of the date of this Agreement (the “Effective Date”) and shall expire
on the fifth anniversary of the termination of the Initial Period, unless
earlier terminated as provided herein.

 

2.             Employment.

 

(a)           The Company agrees to
employ the Executive and the Executive agrees to perform services as an
employee of the Company during the Employment Term as described above.  During the Initial Period (and thereafter as
the Company and the Executive may agree), the Executive shall be employed as
Chairman and CEO.  For purposes of this
Agreement, the “Initial Period” shall commence on the Effective Date and
continue until, and end upon, the first anniversary of the Effective Date; provided,
however, that on the calendar day immediately preceding the first
anniversary of the Effective Date (the “Renewal Date”) and on each
anniversary of the 

 

 

Renewal Date thereafter during the Employment Term (each such date, an “Extension
Deadline”), the Initial Period shall automatically be extended for one
additional year unless either (1) (i) the Company, acting through its
Board, gives the Executive written notice not later than 30 days prior to the
applicable Extension Deadline or (ii) the Executive gives the Company
written notice not later than 30 days prior to the applicable Extension
Deadline, that the Initial Period should not be so extended or (2) the
Employment Term has been earlier terminated in accordance with this
Agreement.  Upon termination of the
Initial Period and for the remainder of the Employment Term, the Executive
shall be appointed and serve or continue to serve as Chairman.  As Chairman and/or CEO, the Executive shall
perform the duties, undertake the responsibilities and exercise the authority
customarily performed, undertaken and exercised by him in accordance with past
practice, including without limitation, the responsibility for determining the
strategic direction of the Company and any entity, directly or indirectly,
controlled by, controlling or under common control with the Company (“Affiliates”),
and such other duties and responsibilities and/or any changes in the duties and
responsibilities set forth above, as agreed to by the Executive and the Company
from time to time.  In performing his
duties hereunder, the Executive will report directly to the Board.

 

(b)           During the Initial
Period, excluding periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote such portion of his business time and
attention to the business and affairs of the Company as may be necessary to
fulfill his responsibilities hereunder; provided, however, that
the Executive may (1) serve on corporate, civic or charitable boards or
committees; (2) manage personal investments; and (3) deliver lectures
and teach at educational institutions, so long as such activities do not
significantly interfere with the performance of the Executive’s responsibilities
hereunder.  The parties acknowledge and
agree that, during the Employment Term, the Executive may pursue other business
interests and endeavors unrelated to the business and affairs of the Company
and that, following the Initial Period, such other interests and endeavors may
constitute a significant portion of the Executive’s business time and
attention.

 

(c)           During the Employment
Term, the Company shall provide the Executive with an appropriate office and
administrative support at one of the Company’s offices, commensurate with the
Executive’s status and position.  The
Executive shall not be required to live at or near any of the offices of the
Company.

 

3.             Compensation.  In consideration of the performance by the
Executive of the Executive’s obligations during the Employment Term (including
any services by the Executive as an officer, director, employee or member of
any committee of any Affiliate of the Company, or otherwise on behalf of the
Company), the Executive shall be compensated as follows:

 

(a)           Base Salary.  The Executive shall receive a base salary
(the “Base Salary”) at an annual rate not less than the Executive’s rate
of base salary 

 

2

 

immediately prior to the date of this Agreement.  The Base Salary shall be reviewed by the
Board from time to time in its sole discretion. 
The Base Salary shall be payable in accordance with the normal payroll
practices of the Company then in effect.

 

(b)           Bonus.  For each fiscal year of the Company ending
during the Employment Term, the Company shall provide the Executive with the
opportunity to earn an annual incentive bonus based on performance goals
determined by the Board at the beginning of such fiscal year, prorated for any
portion of a fiscal year in the manner described in Section 5 relating to
the Pro Rata Bonus.

 

(c)           Equity Awards.  The Executive shall participate in the
Company’s Long Term Stock Incentive Plan or any successor plan on terms and at
such level as may be determined by the Board from time to time consistent with
such plans.

 

(d)           Benefits.  The Executive shall be entitled to
participate in any employee or executive benefit plans, policies or programs
that are provided generally to senior executives of the Company as such plans,
policies or programs may be in effect from time to time.

 

(e)           Expenses.  The Executive will be entitled to
reimbursement of all reasonable business, travel and entertainment expenses
incurred by him on behalf of the Company in the course of the performance of
his duties hereunder; provided, however, that such expenses must
be paid no later than the last day of the calendar year following the calendar
year in which such expenses were incurred, and further provided that in no
event will the amount of expenses so reimbursed in one taxable year affect the
amount of expenses eligible for reimbursement in any other taxable year.

 

(f)            Taxes.  The Executive shall be solely responsible for
taxes imposed on the Executive by reason of any compensation and benefits
provided under this Agreement, and all such compensation and benefits shall be
subject to applicable withholding taxes.

 

4.             Termination.  The Employment Term shall terminate upon the
earliest to occur of any of the following events:

 

(a)           Mutual Agreement.  Termination by the mutual agreement of the
Company and the Executive.

 

(b)           Expiration of
Employment Term.  The sixth
anniversary of the date of the Agreement (or such later date as determined in
accordance with Section 2(a) or as may be agreed upon by the Board
and the Executive).

 

(c)           Death.  The death of the Executive.

 

3

 

(d)           Disability.  The termination of the Executive’s employment
by the Company for Disability.  For
purposes of this Agreement, “Disability” shall mean the inability of the
Executive to perform his duties, services and responsibilities hereunder by
reason of a physical or mental infirmity, as reasonably determined by the
Board, for a total of 180 consecutive days.

 

(e)           By the Company for
Cause.  The termination of the
Executive’s employment by the Company for Cause.  For purposes of this Agreement, “Cause” shall
mean that the Executive:

 

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

 

(2)           intentionally and
continually failed substantially to perform his reasonably assigned duties with
the Company (other than a failure resulting from the Executive’s incapacity due
to physical or mental illness until such conditions result in a Disability or
from the assignment to the Executive of duties that would constitute Good
Reason) which failure continued for a period of at least 30 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

 

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

 

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.  Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board 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.  The
termination of employment of the Executive shall not be deemed to be for Cause
pursuant to subparagraph (2) or (3) 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 (2) or (3) 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.

 

4

 

(f)            By the Company
Without Cause.  The termination of
the Executive’s employment by the Company other than for Cause or Disability.

 

(g)           By the Executive for
Good Reason.  The termination of the
Executive’s employment by the Executive for Good Reason.  For purposes of this Agreement, “Good
Reason” shall mean the occurrence of any of the following conditions and
the failure of the Company to remedy such condition(s) within thirty (30)
days after receipt by the Company of written notice thereof from the Executive,
which notice must be provided by the Executive to the Company within ninety
(90) days of the initial existence of such condition(s):

 

(1)           a material diminution
in the Executive’s authority, duties or responsibilities;

 

(2)           a requirement that the
Executive report to a corporate officer or employee instead of reporting
directly to the Board (or similar governing body);

 

(3)           a material diminution
in the Executive’s base compensation (as such term is used in Treasury
Regulation § 1.409A-1(n)(2)(ii) or any successor provision);

 

(4)           a material diminution
in the budget over which the Executive retains authority;

 

(5)           a material change in
the geographic location at which the Executive must perform services; or

 

(6)           any other action or
inaction that constitutes a material breach by the Company or its subsidiaries
of the Agreement, including the failure by the Company to obtain the assumption
of the obligation to perform this Agreement by any Successors and Assigns as
contemplated in Section 14 hereof.

 

(h)           By the Executive
Without Good Reason.  Termination by
the Executive without Good Reason.

 

5.             Compensation
Upon Termination.

 

(a)           Death
or Disability; By Company for Cause; By the Executive without Good Reason;
Mutual Agreement; Expiration of Employment Term.  If the Employment Term is terminated by
reason of the Executive’s death or Disability, by the Company for Cause, by the
Executive without Good Reason, by mutual agreement of the parties, or by
expiration of the Employment Term, the Company’s sole obligation hereunder
shall be to pay the Executive or his estate, as the case may be, the Accrued
Employment Compensation in a lump sum within thirty (30) days following the 

 

5

 

Employment Termination Date (defined below) (or, in
the case of amounts described in clause (3) of the following sentence, in
accordance with the terms of the applicable plan, program or arrangement).  For purposes of this Agreement, “Accrued Employment
Compensation” shall mean all amounts of compensation for services rendered
to the Company or any of its Affiliates, including (1) any accrued and
unpaid Base Salary, accrued and unpaid bonus and vacation pay as of the
Employment Termination Date, (2) a “Pro Rata Bonus” equal to the
Bonus Amount (defined below) multiplied by a fraction, (i) the numerator
of which is the number of days the Executive served in the year in which the
Employment Termination Date occurs through the Employment Termination Date, and
(ii) the denominator of which is three hundred and sixty-five (365), (3) all
benefits accrued and unpaid under any benefit plans, programs or arrangements
in which the Executive shall have been a participant as of such Employment
Termination Date in accordance with the applicable terms and conditions of such
plans, programs or arrangements, and (4) any reimbursable expenses
incurred by the Executive on behalf of the Company or any of its Affiliates
during the period ending on the Employment Termination Date but not previously
paid to the Executive.  For purposes of
this Section 5(a), “Bonus Amount” shall mean, as of the Employment
Termination Date, an amount equal to the annual incentive bonus that the
Executive would have earned for the fiscal year in which the Employment
Termination Date occurs if the degree of achievement of applicable performance
goals measured through the Employment Termination Date is projected on a
straight-line basis through the end of such fiscal year.

 

(b)           By
Company Without Cause; By Executive for Good Reason.  If the Employment Term is terminated by the
Company other than for Cause or by the Executive for Good Reason, the Executive
shall be entitled to the following compensation:

 

(1)           within ten (10) days
of the Employment Termination Date (or, in the case of amounts described in
clause (3) of the definition of Accrued Employment Compensation above, in
accordance with the terms of the applicable plan, program or arrangement), the
Company shall pay the Executive all Accrued Employment Compensation, except
that for purposes of this Section 5(b)(1) and Section 5(b)(2), “Bonus
Amount” shall mean, as of the Employment Termination Date, the highest
annual bonus paid or payable to the Executive in respect of any of the three
full fiscal years of the Company immediately preceding the Employment
Termination Date;

 

(2)           within thirty (30) days
following such Employment Termination Date, the Company shall pay the Executive
as severance pay and in lieu of any further compensation for periods subsequent
to the Employment Termination Date, a lump sum amount equal to the greater of (x) two
(2) times the sum of (i) the Executive’s Base Salary at the rate in 

 

6

 

effect on the
Employment Termination Date and (ii) the Executive’s Bonus Amount and (y) the
amount of the Base Salary and Bonus Amount which would have been paid to the
Executive during the Employment Term had it not been terminated, assuming that
all of the Bonus Amount would have been paid to the Executive for each full
fiscal year during the Employment Term;

 

(3)           during the greater of (i) the
twenty-four (24) month period following the Employment Termination Date and (ii) the
balance of the Employment Term (the “Continuation Period”), the Company
shall at its expense continue on behalf of the Executive and his dependents and
beneficiaries the medical, dental, hospitalization, prescription drug, and life
insurance coverages and benefits provided to the Executive immediately prior to
the Employment Termination Date.  The
coverages and benefits (including deductibles and costs) provided in this Section 5(b)(3) during
the Continuation Period shall be in accordance with Section 3(d).  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 of the combined benefit plans
is no less favorable to the Executive than the coverages and benefits required
to be provided hereunder.  This Section 5(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 without limitation, retiree medical and life insurance
benefits, if any; and

 

(4)           (i) notwithstanding
any contrary provisions contained in the applicable stock option agreements or
option plan, all stock options held by the Executive which are outstanding on
the Employment Termination Date shall become fully vested on the Employment
Termination Date and shall remain outstanding for their entire term and (ii) notwithstanding
any contrary provision in the applicable restricted stock or other equity based
award agreement or plan, all restrictions on all shares of restricted stock or
other equity based awards shall lapse and all such shares held by the Executive
on the Employment Termination Date shall become fully vested on the Employment
Termination Date.

 

(5)           (i)            Notwithstanding anything contained in this
Agreement to the contrary, to the extent that the payments and benefits 

 

7

 

provided under this
Agreement and benefits provided to, or for the benefit of, the Executive under
any other Company plan or agreement (such payments or benefits collectively
referred to herein as the “Payments”) would be subject to the excise tax
(the “Excise Tax”) imposed under Section 280G of the Internal
Revenue Code of 1986, as amended (the “Code”), the Payments shall be
reduced (but not below zero) if and to the extent necessary so that no Payment
to be made or benefit to be provided to the Executive shall be subject to the
Excise Tax (such reduced amount is hereinafter referred to as the “Limited
Payment Amount”).  If a Limited
Payment Amount is necessary, the Company shall reduce or eliminate the Payments
by first reducing or eliminating the portion of the Payments that is payable
immediately in cash, next (if necessary) reducing or eliminating any remaining
portion of the Payments that is payable in cash, and finally (if necessary)
reducing or eliminating the portion of the Payments that is not payable in
cash.

 

(ii)           The determination of
whether the Payments shall be reduced to the Limited Payment Amount pursuant to
this Agreement and the amount of such Limited Payment Amount shall be made, at
the Company’s expense, by an accounting firm selected by the Company and
reasonably acceptable to the Executive which is one of the four largest accounting
firms in the United States (the “Accounting Firm”).  The Accounting Firm shall provide its
determination (the “Determination”), together with detailed supporting
calculations and documentation to the Company and the Executive within ten (10) days
of the date of the Executive’s termination of employment, if applicable, or
such other time as requested by the Company or by the Executive (provided the
Executive reasonably believes that any of the Payments may be subject to the
Excise Tax) and if the Accounting Firm determines that no Excise Tax is payable
by the Executive with respect to the Payments, it shall furnish the Executive
with an opinion reasonably acceptable to the Executive that no Excise Tax will
be imposed with respect to any such Payments. 
The Determination shall be binding, final and conclusive upon the
Company and the Executive.

 

(c)           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 5(b)(3).

 

(d)           Other Severance Pay
Arrangements.  If an event occurs
that entitles the Executive to receive payments and/or benefits concurrently
under this 

 

8

 

Agreement and under the Amended and Restated Severance Protection
Agreement, made as of the 9th day of June, 2005, by and between the
Executive and the Company, as may be amended from time to time (the “Severance
Agreement”), the Executive shall receive the payments and/or benefits set
forth under the Severance Agreement, and payments and/or benefits under this
Agreement shall cease.

 

(e)           For purposes of this
Agreement, “Employment Termination Date” shall mean (1) in the
case of mutual agreement between the parties to terminate this Agreement, the
date agreed upon by such persons, (2) in the case of the expiration of the
Employment Term as described in Section 4(b), the date of expiration, (3) in
the case of the Executive’s death, his date of death, (4) if the Executive’s
employment is terminated for Disability, thirty (30) days after Notice of
Termination (as defined below) is given (provided, however, that
the Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period), and (5) 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 (30) days and, in the case of a termination for
Good Reason shall not be more than sixty (60) days, from the date such Notice
of Termination is given); provided, however, that any party
receiving such Notice of Termination that in good faith believes that a dispute
exists concerning the basis for the termination must notify the party having
given such Notice of Termination within thirty (30) days of receipt of such
Notice of Termination.

 

6.             Notice of Termination.  Any intended termination by the Company of
the Executive’s employment as Chairman and/or CEO shall be communicated by a
Notice of Termination from the Company to the Executive, and any intended termination
by the Executive of the Executive’s employment as Chairman and/or CEO shall be
communicated by a Notice of Termination from the Executive to the Company.  For purposes of this Agreement, “Notice of
Termination” shall mean a written notice of termination of the Executive’s
employment as Chairman and/or CEO, as applicable, 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 or service under the provision so indicated.  Any purported termination by the Company or
by the Executive shall be communicated by written Notice of Termination to the
other.  For purposes of this Agreement,
no such purported termination of employment or service shall be effective
without such Notice of Termination.

 

7.             Covenants.

 

(a)           Non-Competition.  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, 

 

9

 

during the Employment 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 5% 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 Employment Termination Date and ending on the second
anniversary of such date.  Any material
breach of the terms of this paragraph shall be considered Cause under Section 4(e).

 

(b)           Unauthorized
Disclosure.  The Executive agrees and
understands that during the Executive’s employment with the Company, 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 Employment 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 (1) 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 Employment Termination Date and (2) 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.  The Executive agrees
that all Confidential Information is and will remain the property of the
Company.  The Executive further agrees
that, during the Employment 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 

 

10

 

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.  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 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.

 

(c)           Non-Solicitation.  Until the expiration of two (2) years
following the Employment Termination Date, the Executive will not directly or
indirectly at any time solicit or induce or attempt to solicit or induce any
employee(s), sales representative(s), agent(s) or consultant(s) of
the Company or its subsidiaries or Affiliates to terminate their employment,
representation or other association with the Company or its subsidiaries or
Affiliates.

 

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

 

11

 

constitute a defense to the enforcement by the Company
of the covenants contained in this Section 7.

 

8.             Fees and Expenses.  The Company shall pay all reasonable legal
fees and related expenses (including the costs of experts, evidence and
counsel) incurred by the Executive as they become due 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 or (b) 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 under
which the Executive is or may be entitled to receive benefits.  All payments by the Company of the reasonable
legal fees and related expenses of the Executive under this Section 8
shall be for fees and expenses incurred during the Executive’s lifetime and
shall be made within ninety (90) days following the date the Executive submits
evidence of the incurrence of such fees and expenses, and in all events prior
to the last day of the calendar year following the calendar year in which the
Executive incurs the fees and expenses. 
In no event will the amount of fees or expenses reimbursed or paid in
one year affect the amount of fees or expenses eligible for reimbursement, or
payment to, or for the Executive in any other taxable year.

 

9.             Non-Exclusivity of Rights.  Except as provided in Section 5(b)(3) and
Section 5(d), 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 of its Affiliates 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 of its Affiliates.  Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan or program of the Company or any of its Affiliates shall be payable in
accordance with such plan or program, except as explicitly modified by this
Agreement.

 

10.           Settlement of Claims.  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, without
limitation, any set-off, counterclaim, defense, recoupment, or other right
which the Company may have against the Executive or others.

 

11.           Indemnification.  The Company agrees to indemnify the Executive
for his activities as Chairman and CEO (as applicable) to the fullest extent
permitted by law and any applicable indemnification agreement then in effect to
which the Executive and the Company are parties, and to cover the Executive
under any directors and officers liability insurance obtained by the Company.

 

12.           Non-Waiver of Rights.  The failure to enforce at any time the provisions
of this Agreement or to require at any time performance by any other party of
any of the provisions hereof shall in no way be construed to be a waiver of
such 

 

12

 

provisions or to affect either the validity of this Agreement or any
part hereof, or the right of any party to enforce each and every provision in
accordance with its terms.

 

13.           Notice.  For the purposes of this Agreement, notices
and all other communications provided for in this Agreement (including the
Notice of Termination) shall be in writing and shall be delivered in person, by
telecopier (with confirmation of receipt) or by United States mail, postage
prepaid, certified or registered, addressed to the Company at its principal
office to the attention of the President, or to the Executive at his residence
address shown on the employment records 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, except that notice of change of address
shall be effective only upon receipt.

 

14.           Successors and Assigns.

 

(a)           This Agreement shall be
binding upon and shall inure to the benefit of the Company and its Successors
and Assigns, and the Company shall require any Successor or Assign 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 succession or
assignment had taken place.  For purposes
of this Agreement, “Successors and Assigns” shall mean a corporation or
other entity with which the Company may be merged or consolidated or which
acquires all or substantially all the assets and business of the Company,
whether by operation of law or otherwise. 
The term “Company” as used herein shall include such Successors
and Assigns.

 

(b)           Neither this Agreement
nor any right or interest hereunder shall be assignable or transferable by the
Executive, his beneficiaries or his 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.

 

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

 

16.           Severability.  If any provision of this Agreement, or any
application thereof to any circumstances, is invalid, in whole or in part, such
provision or application shall to that extent be severable and shall not affect
other provisions or applications of this Agreement.

 

17.           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 choice of law principles thereof.

 

13

 

18.           Number and Headings.  Whenever any words used herein are in the
singular form, they shall be construed as though they were also used in the
plural form in all cases where they would so apply.  The headings contained herein are solely for
purposes of reference, are not part of this Agreement and shall not in any way
affect the meaning or interpretation of this Agreement.

 

19.           Counterparts.  This Agreement may be executed in two (2) counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

 

20.           Section 409A of
the Code.

 

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

 

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

 

21.           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 either party hereto at any time
of any breach by the 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
agreement or representation, oral or otherwise, express or implied, with
respect to the subject matter hereof has been made by either party which is not
expressly set forth in this Agreement.

 

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14

 

IN WITNESS WHEREOF, the
Company has caused this Agreement to be executed by authority of its Board, and
the Executive has hereunto set his hand, on the day and year first above
written.

 

	
   

  	
  AXSYS TECHNOLOGIES,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  :  /s/ Eliot
  Fried

  
	
   

  	
   

  	
   Name:

  	
  Eliot M. Fried

  
	
   

  	
   

  	
   Title:

  	
  Director & Chairman of the

  
	
   

  	
   

  	
   

  	
  Compensation Committee of the

  
	
   

  	
   

  	
   

  	
  Board of Directors of

  
	
   

  	
   

  	
   

  	
  Axsys Technologies, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
      /s/ Stephen W. Bershad

  
	
   

  	
  Stephen W. Bershad

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