-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GYi9aE1bm+tq5km+zo9gQrqqvQuAnVWB2gsSdmMrIm51TZHMtfD+P9bMWYNrmUPC 3AoWr6AzzfI5Y303M5aoRQ== 0000927016-98-003081.txt : 19980814 0000927016-98-003081.hdr.sgml : 19980814 ACCESSION NUMBER: 0000927016-98-003081 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROWN & SHARPE MANUFACTURING CO /DE/ CENTRAL INDEX KEY: 0000014637 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 050113140 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05881 FILM NUMBER: 98685028 BUSINESS ADDRESS: STREET 1: PO BOX 456 STREET 2: PRECISION PK - 200 FRENCHTOWN RD CITY: NORTH KINGSTOWN STATE: RI ZIP: 02852 BUSINESS PHONE: 4018862000 10-Q 1 FORM 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-5881 ------ BROWN & SHARPE MANUFACTURING COMPANY ---------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 050113140 -------- --------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Precision Park, 200 Frenchtown Road, North Kingstown, Rhode Island 02852 ------------------------------------------------------------------------- (Address of principal executive offices and zip code) (401) 886-2000 -------------- (Registrant's telephone number, including area code) -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ------- ______ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date; 12,873,769 shares of Class A common stock, 511,083 shares of Class B common stock, par value $1 per share, outstanding as of June 30, 1998. 1 PART I. FINANCIAL INFORMATION --------------------- Item 1. FINANCIAL STATEMENTS* - ------ -------------------- BROWN & SHARPE MANUFACTURING COMPANY ------------------------------------ CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (Dollars in Thousands Except Per Share Data) (Unaudited)
For the Quarter Ended June 30, For the Six Months Ended June 30, ----------------------------- --------------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Net sales $ 86,786 $ 78,094 $ 172,509 $ 148,896 Cost of sales 58,229 51,450 115,748 97,707 Research and development expense 2,907 1,936 5,653 4,562 Selling, general and administrative expense 20,930 21,992 42,219 41,852 ---------- ---------- ---------- ---------- Operating profit 4,720 2,716 8,889 4,775 Interest expense 1,458 1,499 2,926 2,933 Other income, net 580 294 542 616 ---------- ---------- ---------- ---------- Income before income taxes 3,842 1,511 6,505 2,458 Income tax provision 883 302 1,496 492 ---------- ---------- ---------- ---------- Net income $ 2,959 $ 1,209 $ 5,009 $ 1,966 ========== ========== ========== ========== Net income per common share: Basic and diluted $ .22 $ .09 $ .37 $ .15 ========== ========== ========== ========== Weighted average shares outstanding 13,573,731 13,251,274 13,439,014 13,226,698 ========== ========== ========== ==========
* The accompanying notes are an integral part of the financial statements. 2 BROWN & SHARPE MANUFACTURING COMPANY ------------------------------------ CONSOLIDATED BALANCE SHEETS --------------------------- (Dollars in Thousands)
June 30, 1998 December 31, 1997 -------------- ------------------ ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 18,348 $ 20,458 Accounts receivable, net of allowances for doubtful accounts of $3,150 and $3,456 110,520 106,072 Inventories 77,226 73,430 Deferred income taxes 1,274 1,274 Prepaid expenses and other current assets 3,606 5,176 -------- -------- Total current assets 210,974 206,410 Property, plant and equipment: Land 6,549 6,627 Buildings and improvements 41,297 41,211 Machinery and equipment 87,201 85,405 -------- -------- 135,047 133,243 Less-accumulated depreciation 84,743 82,470 -------- -------- 50,304 50,773 Goodwill, net 8,855 9,211 Other assets 35,781 33,680 -------- -------- $305,914 $300,074 ======== ======== LIABILITIES AND SHAREOWNERS' EQUITY CURRENT LIABILITIES: Notes payable and current installments of long-term debt $ 3,932 $ 3,995 Accounts payable 45,552 44,532 Accrued expenses and income taxes 48,851 44,699 -------- -------- Total current liabilities 98,335 93,226 Long-term debt 70,201 72,067 Long-term liabilities 18,200 18,283 SHAREOWNERS' EQUITY: Preferred stock, $1 par value; authorized 1,000,000 shares - - Common stock: Class A, par value $1; authorized 30,000,000 shares; issued and outstanding 12,916,361 shares in 1998 and 12,821,867 shares in 1997 12,916 12,822 Class B, par value $1; authorized 2,000,000 shares; issued and outstanding 511,083 shares in 1998 and 513,065 shares in 1997 511 513 Additional paid in capital 112,468 111,772 (Deficit) Earnings employed in business (5,748) (10,757) Accumulated other comprehensive (loss) income (514) 2,603 Treasury stock: 42,592 shares in 1998 and in 1997 at cost (455) (455) -------- -------- Total shareowners' equity 119,178 116,498 -------- -------- $305,914 $300,074 ======== ========
* The accompanying notes are an integral part of the financial statements. 3 BROWN & SHARPE MANUFACTURING COMPANY ------------------------------------ CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------ (Dollars in Thousands) (Unaudited)
For the Six-Months Ended June 30, ----------------------------------- 1998 1997 ----------------- ---------------- CASH PROVIDED BY OPERATIONS: Net income $ 5,009 $ 1,966 Adjustment for Noncash Items: Depreciation and amortization 5,557 4,964 Unfunded pension 179 196 Deferred compensation -- 26 Termination indemnities (48) 562 Changes in Working Capital: (Increase) Decrease in accounts receivable (5,063) 13,871 Increase in inventories (4,737) (12,556) Decrease in prepaid expenses and other current assets 1,516 1,609 Increase (Decrease) in accounts payable and accrued expenses 5,802 (5,115) ------- -------- Net Cash Provided by Operations 8,215 5,523 ------- -------- INVESTMENT TRANSACTIONS: Capital expenditures (4,443) (4,803) Sale of an investment 891 -- Investment in other assets (4,710) (2,288) ------- -------- Cash (Used in) Investment Transactions (8,262) (7,091) ------- -------- FINANCING TRANSACTIONS: Increase in short-term debt (22) (77) Principal payments of long-term debt (1,554) (1,744) Exercise of stock options 696 -- Other financing activities (81) (19) ------- -------- Cash Provided by (Used in) Financing Transactions (961) (1,840) ------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,102) (225) ------- -------- CASH AND CASH EQUIVALENTS: (Decrease) during the period (2,110) (3,633) Beginning balance 20,458 20,158 ------- -------- Ending balance $18,348 $ 16,525 ======= ======== SUPPLEMENTARY CASH FLOW INFORMATION: Interest paid $ 2,589 $ 2,379 ======= ======== Taxes paid $ 958 $ 952 ======= ========
* The accompanying notes are an integral part of the financial statements. 4 BROWN & SHARPE MANUFACTURING COMPANY ------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (Dollars in Thousands) 1. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Brown & Sharpe Manufacturing Company's annual report on Form 10-K for the year ended December 31, 1997. 2. Cash and cash equivalents are comprised of cash-on-hand deposits in banks and short-term marketable securities with a maturity at acquisition of three months or less. 3. The composition of inventory is as follows: June 30, 1998 Dec. 31, 1997 ------------- ------------- Parts, raw materials, and supplies $31,770 $29,760 Work in process 17,039 17,341 Finished goods 28,417 26,329 ------- ------- $77,226 $73,430 ======= ======= 4. The composition of long-term liabilities is as follows: June 30, 1998 Dec. 31, 1997 ------------- ------------- Other long-term liabilities $ 2,097 $2,270 Deferred income taxes 2,068 2,001 Unfunded accrued pension cost 5,445 5,297 Termination indemnities 8,590 8,715 ------- ------ $18,200 18,283 ======= ====== 5. Income taxes include provisions for federal, foreign and state income taxes and are based on the Company's estimate of effective income tax rates for the full year. The tax provision for the first six months of 1998 and 1997 is $1,496 and $492, respectively. 5 6. The following table sets forth the computation of basic and diluted earnings per share:
For the Quarter Ended June 30, For the Six Months Ended June 30, ------------------------------ --------------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Numerator: Net income $ 2,959 $ 1,209 $ 5,009 $ 1,966 Denominator: Denominator for basic earnings per share: Weighted - average shares 13,574 13,251 13,439 13,227 Effect of dilutive securities: Employee stock options 180 243 120 246 ------- ------- ------- ------- Denominator for diluted earnings per share: Weighted - average shares and assumed conversions 13,754 13,494 13,559 13,473 ======= ======= ======= ======= Basic Earnings Per Share $ .22 $ .09 $ .37 $ .15 ======= ======= ======= ======= Diluted Earnings Per Share $ .22 $ .09 $ .37 $ .15 ======= ======= ======= =======
7. As of January 1, 1998, the Company adopted Statement 130, Reporting Comprehensive Income. Statement 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this Statement had no impact on the Company's net income or shareholders' equity. Statement 130 requires unrealized gains or losses on the Company's foreign currency translation adjustments, which prior to adoption were reported separately in shareholders' equity, to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of Statement 130. Accumulated other comprehensive (loss) income, net of related tax, at June 30, 1998 and December 31, 1997 is composed of foreign currency translation adjustments amounting to $(514) and $2,603, respectively. Components of comprehensive income (loss) are as follows:
For the Quarter Ended June 30, For the Six Months Ended June 30, ------------------------------ --------------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Net Income $2,959 $1,209 $ 5,009 $ 1,966 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments (695) (662) (3,117) (9,949) ------ ------ ------- ------- Comprehensive (loss) $2,264 $ (547) $(1,892) $(7,983) ====== ====== ======= =======
6 8. Contingencies. Labor Relations. The registrant references its earlier filed report on Form 10-Q for the quarter ending March 30, 1998 furnishing information concerning litigation brought against the Company by the International Association of Machinists and Aerospace Workers ("IAM") which arose out of a strike by approximately 1,800 production employees represented by the IAM at the Company's Rhode Island operations which began in October of 1981. On June 15, 1998, the Supreme Court of the United States entered an order denying the IAM's petition for a writ of certiorari and declined to review a December 1997 decision of the U.S. Circuit Court of Appeals for the District of Columbia upholding an earlier decision of the National Labor Relations Board dismissing unfair labor practice charges brought by the IAM against the Company following commencement of the strike. As a result of the Supreme Court's ruling, the litigation brought against the Company by the IAM, which has been pending for seventeen years, is now concluded. Environmental. On March 1, 1995, the Company received a notice from the State of New York asserting a claim against it, along with a group of approximately ten other companies, to recover costs incurred by the New York State Department of Environmental Conservation to clean up a waste disposal site in Poughkeepsie, New York. The State has alleged that the Company's former subsidiary, Standard Gage Company, Poughkeepsie, New York, acquired in 1987 and merged with and into the Company in 1991, contributed hazardous waste to the site for disposal and that the Company is a PRP as the surviving corporation to the merger. The total claim asserted by the State against all parties is approximately $500,000, with no volumetric assignment of responsibility having yet been determined; however, the State has expressed a willingness to settle its claim with all PRPs receiving the notice. The Company is continuing efforts to settle this claim and believes that any potential loss it might incur as a result of any involvement or settlement at this site would not be material. On April 20, 1998, the Company received a notice of responsibility letter from the Rhode Island Department of Environmental Management informing it that the Company is one of a group of at least twenty-five other companies similarly notified that have responsibility under State environmental laws and RIDEM regulations to perform investigation and remedial clean-up action at the closed Sanitary Landfill site in Cranston, RI. The RIDEM has indicated it believes the total cost of remediation of the Site to be in the range of $3 to $4 million, and that there are numerous other responsible parties who were not notified of their responsibility. The Company is working with the notified group of responsible parties and the State to determine its response action at the Site. At this time, the Company does not believe it was a major contributor of industrial waste to the site or that its potential liability at the site is material. On May 8, 1998, the Company received a notice from the United States Environmental Protection Agency, Region II, informing it that the Company is, along with numerous other PRPs, most of whom have settled their liability, a potentially responsible party ("PRP") having liability under Federal Environmental law for past and future clean-up costs incurred and to be incurred by the government at the Hertel Landfill Superfund Site, Plattekill, New York. The Company's former subsidiary Standard Gage Company, Inc. of Poughkeepsie, NY, which was acquired in 1987 and merged with and into the Company in 1991, generated certain wastes which were disposed of at the Site in the mid-1970's. On July 24, 1998, the EPA made an offer of settlement to the Company to resolve its liability at the Site for a cash payment of $87,600 which includes a release and covenant not to sue from the EPA and contribution protection from claims for response costs incurred by any other parties. The EPA settlement offer does not however include a release of liability for costs incurred by the EPA for future groundwater remediation at the Site. Groundwater remediation is not presently being conducted at the Site but is provided for in the Record of Decision for the Site, and the EPA will consider whether to eliminate or modify the groundwater component of the remedial action plan based on the test results of future groundwater monitoring. The Company is in negotiations with the EPA to resolve its liability at the Site based on the EPA's settlement offer. Product Liability and Other Litigation Incidental to the Business. The Company is involved in a number of product liability claims and lawsuits by plaintiffs seeking monetary damages for personal injury which arose out of and were incidental to the sale of products manufactured by the Company in its discontinued 7 metal cutting machine tool and fluid power businesses and certain other litigation and claims incidental to the conduct of its business. The potential liability of the Company for these claims and suits is adequately covered by insurance or reserves established for such contingencies. The Company is contesting or defending these claims and suits and management believes that the ultimate liability, if any, resulting from these matters will not have a material effect on the Company's financial position. 8 BROWN & SHARPE MANUFACTURING COMPANY ------------------------------------ Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS - ------ OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ RESULTS OF OPERATIONS (Quarter Ended June 30, 1998 compared to Quarter Ended June 30, 1997) Sales. Sales for the second quarter of 1998 were $86.8 million compared with the second quarter of 1997 of $78.1 million, which is 11.1% above the 1997 level. Second quarter sales for 1998 would have been $2.8 million higher than reported in 1998, if foreign denominated sales had been translated at 1997 foreign exchange rates. The reduced U.S. Dollar value of 1998 foreign sales, which results from translating the 1998 foreign denominated sales using lower exchange rates, is due to the continued strength of the U.S. Dollar. When 1998 second quarter sales are translated at the second quarter of 1997 exchange rates, 1998 sales amount to $89.6 million, an $11.5 million increase over 1997. The $11.5 million sales increase was caused by an $11.0 million increase in the Measuring Systems Division ("MS") sales, and a $0.9 million increase in the Precision Measuring Instruments Division ("PMI"), offset by a $0.4 million decrease in the Custom Metrology Division ("CM"). The $11.0 million increase in MS sales was primarily due to an increase of approximately $7.0 million in machine shipments and an increase of approximately $4.0 million of aftermarket services revenue. Of the $7.0 million increase, approximately $3.0 million of the increase was due to additional sales of smaller coordinated measuring machines ("CMM") including the Gage 2000 and Chameleon machines, and the remaining $4.0 million increase was from additional sales of the larger, more fully configured, CMMs. Approximately $1.3 million of the $4.0 million increase in aftermarket services revenue is due to the inclusion of the sales of Automation Software, Inc. ("ASI"), which had been accounted for by the equity method in 1997 until the Company's acquisition of the remaining 50% interest of ASI in the third quarter of 1997. Sales for PMI were up $0.9 million due to increased sales volume in Europe, while sales in the United States were flat. Sales for CM were down $0.4 million due to decreased sales volume of calibration equipment. Earnings. The Company's net income for the second quarter of 1998 was $3.0 million, which compared with $1.2 million for the same period in 1997. The Company had an operating profit of $4.7 million in the second quarter of 1998 compared to $2.7 million in 1997 for the same period. Gross profit for the second quarter of 1998 was $28.6 million, or 32.9%, of sales. This compares with a 1997 gross profit of $26.7 million, or 34.1% of sales. The $1.9 million increase in 1998 gross profit comes primarily from MS. The 1.2% decrease in gross profit percentage of net sales is due to lower margins of 1.5% for MS, which is due to slightly lower margins for more fully configured CMMs that was partially offset by improved gross margins for the smaller measuring systems. In addition, PMI's gross margin in 1998 was also 0.4% lower than 1997 due to product mix. CM's gross margin in 1998 was higher than 1997, bringing the overall gross margin in 1998 to 32.9% of net sales. Research and development expenses were $1.0 million higher in 1998 due to increased spending of approximately $1.6 million in software development and $0.1 million for non-contact sensing technology, offset by decreased expenditures of $0.7 million in other product development areas, where common design efforts are reducing duplicative development efforts at our various operations. Selling, general and administrative expenses ("SG&A") in the second quarter of 1998 were 24.1% of sales as compared to 28.2% for the period in 1997. 1998 SG&A expenses were $1.1 million lower than 1997. SG&A expenses for 1998 translated at 1997 exchange rates were $0.4 million higher than the 9 $20.9 million reported for the quarter ended June 30, 1998. 1998 SG&A expenses, expressed in 1997 foreign exchange rates, is $0.7 million lower than 1997 SG&A expenses. 1997 SG&A expenses include $0.7 million of realized foreign exchange losses that were not incurred in 1998. However, 1998 SG&A expenses include $0.9 million of expenses incurred by ASI, which were not included in 1997 for the same reason described above. The net improvement in SG&A expenses in 1998 over 1997 equals about $0.9 million and resulted from various savings, including reduced payroll and sundry other costs. Other income was higher in the second quarter of 1998 by $0.3 million as compared to the same period in 1997. This is due to increased interest income of $0.1 million and increased miscellaneous income of $0.2 million. Results for the second quarter of 1998 included a $0.9 million tax provision as compared to $0.3 million in the second quarter of 1997. The effective tax rate in the second quarter of 1998 was 23% as compared to 20% in the same period in 1997. The increase is due primarily to a change in the tax law in a foreign jurisdiction in 1998. RESULTS OF OPERATIONS (First Six Months Ended June 30, 1998 compared to First Six Months Ended June 30, 1997) Sales. Sales for the first six months of 1998 were $172.5 million compared with the first six months of 1997 of $148.9 million, which is 15.8% above the 1997 level. First six months sales for 1998 would have been $5.6 million higher than reported in 1998, if foreign denominated sales had been translated at 1997 foreign exchange rates. The reduced U.S. Dollar value of 1998 foreign sales, which results from translating the 1998 foreign denominated sales using lower exchange rates, is due to the continued strength of the U.S. Dollar. When 1998 first six months sales are translated at the first six months of 1997 exchange rates, the first six months of 1998 sales amount to $178.1 million, a $29.2 million increase over 1997. The $29.2 million sales increase was caused by a $27.2 million increase in MS sales with most of the remaining $2.0 million increase from PMI. The $27.2 million increase in MS sales was primarily due to an increase of approximately $21.1 million in machine shipments and an increase of $6.1 million of aftermarket services revenue. Of the $21.1 million increase, approximately $14.9 million of the increase was from additional sales of the larger, more fully configured, CMMs, and the remaining $6.5 million was due to additional sales of smaller CMMs, including Gage 2000 and Chameleon machines. Approximately $3.7 million of the $6.1 million increase in aftermarket services revenue is due to the inclusion of the sales of ASI which were not included in 1997 sales for the same reason described above. Sales for PMI were up $1.8 million due to increased sales volume in Europe and the United States, and sales for CM were up $0.2 million due to increased sales volume of can gauging machines which was partially offset by reduced sales of calibration equipment. Earnings. The Company's net income for the first six months of 1998 was $5.0 million, which compared with $2.0 million for the same period in 1997. The Company had an operating profit of $8.9 million in the first six months of 1998 compared to $4.8 million in 1997 for the same period. Gross profit for the first six months of 1998 was $56.8 million, or 32.9%, of sales. This compares with a 1997 gross profit of $51.2 million, or 34.4% of sales. The $5.6 million increase in 1998 gross profit comes primarily from MS. The 1.5% decrease in gross profit percentage of net sales is due to lower margins for MS, which occurred in both the smaller and more fully configured CMMs. In addition, PMI's gross margin in 1998 was also lower than 1997 due to product mix. CM's gross margin in 1998 was higher than 1997, bringing the overall gross margin in 1998 to 32.9% of net sales. 10 Research and development expenses were $1.1 million higher in 1998 due to increased spending of approximately $2.6 million in software development and $0.3 million for non-contact sensing technology offset by decreased expenditures of $1.8 million in other product development areas, where common design efforts are reducing duplicative development efforts at our various operations. Selling, general and administrative expenses ("SG&A") in the first six months of 1998 were 24.5% of sales as compared to 28.1% for the period in 1997. SG&A expenses were $0.3 million higher in 1998. SG&A expenses for 1998 translated at 1997 exchange rates were $1.2 million higher than the $42.2 million reported for the six months ended June 30, 1998. The adjusted 1998 SG&A expenses were $1.5 million higher than 1997 SG&A expenses. The major reasons for the $1.5 million difference was due to the inclusion of $0.7 million of realized foreign exchange losses in 1997 SG&A expenses, which were not included in 1998 SG&A expenses, and $1.8 million of additional expenses in 1998 that applied to ASI, which were not included in 1997 SG&A expenses for the same reason described above. Results in the first six months of 1998 included a $1.5 million tax provision as compared to $0.5 million in the first six months of 1997. The effective tax rate in the first six months of 1998 was 23% as compared to 20% in the same period in 1997. The increase is due primarily to a change in the tax law in a foreign jurisdiction in 1998. LIQUIDITY AND CAPITAL RESOURCES Over the last several years, prior to the 1996 equity offering, the Company had funded its working capital, capital expenditure, research and development and other cash needs from operating cash flows, sales proceeds from discontinued businesses, borrowings under short-term credit facilities, and an aggregate of $33.5 million of term and mortgage indebtedness incurred in 1994. In October 1996, the Company completed a $48 million public equity offering of 4.4 million new shares of common stock. In November 1997, the final phase of the planned restructuring of the Company's balance sheet was completed when the Company entered into two financing arrangements to refinance certain existing debt obligations of about $45.0 million and provide additional financing for future needs of the Company. One of the borrowings was a $50.0 million private placement of senior notes with a 10 year maturity and an interest rate of 7.29%. The other arrangement was a $30.0 million three year syndicated multi-currency revolving credit facility with four banks. 65% of the shares of certain of the Company's foreign subsidiaries are pledged as security under the 1997 financings. $11.7 million of the private placement was used to repay a bridge loan incurred two months earlier to pay a portion of the $25.0 million notes payable due September 28, 1997, the balance of which was paid with internally generated funds. $13.0 million of the private placement was used to retire the 9 1/4% convertible subordinated debentures, and the remaining balance is cash available for payment of the $6.8 million mortgage when it matures in 1999 and to fund certain of the Company's development plans and for other general corporate purposes. As of June 30, 1998, the Company has not borrowed any amount under the revolving credit facility described above. At June 30, 1998, the Company's outstanding indebtedness was $74.1 million (including the current portion) of long-term debt. There was no short-term debt outstanding at June 30, 1998. The Company's cash and cash equivalents at June 30, 1998 were $18.3 million. At December 31, 1997, the annual maturities of the Company's long-term debt were $4.0 million, $9.0 million, $3.8 million, $12.1 million, and $7.8 million for 1998, 1999, 2000, 2001, and 2002, respectively, and $39.4 million thereafter. Management believes that the two 1997 financing arrangements and the 1996 public equity offering and the further additional borrowing capacity the offering allows along with the available existing short- and long-term borrowings, cash on hand and future cash flow from operations will be sufficient to meet foreseeable cash requirements of the Company for the next three to four years. Significant acquisitions or strategic partnerings could, however, increase the Company's capital requirements, and in such event the Company might seek to raise additional debt or equity. 11 CASH FLOW. Net cash provided by operations in the first six months of 1998 was $8.2 million, as compared to net cash provided by operations of $5.5 million in 1997. For the six months ended June 30, 1998, cash flow included, net income of $5.0 million increased by depreciation and other non-cash items of $5.7 million, further was decreased by increases in working capital of $2.5 million. For the six months ended June 31, 1997, cash flow included, net income of $2.0 million, increased by depreciation and other non-cash items of $5.7 million and decreases in working capital of $2.2 million. Net cash used in investment transactions in 1998 was $8.3 million as compared to net cash used in investment transactions during 1997 of $7.1 million. During the first six months of 1998, investment transactions included capital expenditures of $4.4 million and $3.7 million for a continuing upgrade of its management information systems. Also during the first six months of 1998, the Company sold an investment for $0.9 million which was offset partially by investing in other assets $0.8 million. During the first six months of 1997, investment transactions included capital expenditures of $4.8 million and $1.1 million for certain information systems. Cash used in financing transactions was $1.0 million during the first six months of 1998 compared with $1.8 million used by financing transactions for the same period in 1997. Financing transactions during 1998 consisted of a decrease of $0.2 million in short-term borrowings and principal payments of long-term debt of $1.6 million, offset by $0.7 million due to the exercise of stock options. Financing transactions during the same period in 1997 consisted of a $0.1 million decrease in short-terms borrowings, offset by principal payments of $1.7 million of long-term debt. WORKING CAPITAL. Working capital of $112.6 million at June 30, 1998 decreased from $113.2 million at December 31, 1997 principally due to a decrease in cash and an increase in accrued expenses partially offset by an increase of inventories and receivables. Inventories increased to $77.2 million at June 30, 1998, an increase of $3.8 million from the end of 1997, and accounts receivable increased $4.4 million from December 31, 1997. In addition, total short- and long-term borrowing of $74.1 million at June 30, 1998 compared to $76.1 million at December 31, 1997. PRODUCT DESIGN AND MANUFACTURING ENGINEERING. The Company invested $9.1 million, or 5.3% of sales, and $6.9 million, or 4.7% of sales, respectively, for product design and manufacturing engineering for the first six months of 1998 and 1997. FORWARD-LOOKING INFORMATION This section and other portions of this report include certain forward-looking statements about the Company's sales, expenditures, and various risks and uncertainties, including those set forth in "Risk Factors". Such statements are subject to risks that could cause the actual results or needs to vary materially from those currently anticipated by the Company. These risks are discussed in "Risk Factors" in the Company's Report on Form 10-K for the year 1997. 12 PART II. OTHER INFORMATION ----------------- Item 1. LEGAL PROCEEDINGS - ------ ----------------- Refers to footnote 8 under contingencies for further details. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------ --------------------------------------------------- The Company's 1998 Annual Meeting of Stockholders was held on Friday, May 1, 1998. At the meeting, the stockholders voted: (1) to fix the number of directors at nine and to elect three nominees to the Board of Directors to serve for the ensuing three-year term; and (2) to ratify and approve the appointment by the Board of Directors of Ernst & Young LLP as the Company's independent accountants for the year 1998. The following is a summary of the results of matters submitted to security holders: (1) The following persons were elected to serve as directors for three year terms expiring in 2001 and received the votes listed. There were no abstentions or broker non-votes applicable to the election of directors: Name For Withheld ---- --- -------- Class A Common Stock ------------------------- Howard K. Fuguet 10,950,061 100,871 Henry D. Sharpe, III 10,950,061 100,871 J. Robert Held 10,950,061 100,871 Class B Common Stock ------------------------- Howard K. Fuguet 3,997,662 102,600 Henry D. Sharpe, III 3,997,662 102,600 The following directors have terms of office which continued after the meeting: Frank T. Curtin, Paul R. Tregurtha, Russell A. Boss, John M. Nelson, and Roger E. Levien. For Against Abstain No Vote --- ------- ------- ------- (2) Appointment of Ernst & Young L.L.P. as the Company's independent accountants 14,732,782 56,767 62,781 307,864 13 Item 6. EXHIBITS AND REPORTS ON FORM 8-K - ------ -------------------------------- A. See Exhibit Index annexed. B. No Form 8-K was filed during the quarter ended June 30, 1998. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. BROWN & SHARPE MANUFACTURING COMPANY By: /s/ Charles A. Junkunc -------------------------------------- Charles A. Junkunc Vice President and Chief Financial Officer (Principal Financial Officer) August 13, 1998 14 BROWN & SHARPE MANUFACTURING COMPANY ------------------------------------ EXHIBIT INDEX ------------- 10.92 Severence agreement between Brown & Sharpe Manufacturing Company and Frank T. Curtin dated February 17, 1998. 10.93 Severence agreement between Brown & Sharpe Manufacturing Company and Charles A. Junkunc dated February 17, 1998. 10.94 Severence agreement between Brown & Sharpe Manufacturing Company and Philip James dated February 17, 1998. 10.95 Severence agreement between Brown & Sharpe Manufacturing Company and Antonio Aparicio dated February 17, 1998. 10.96 Severence agreement between Brown & Sharpe Manufacturing Company and Marcus Burton dated February 17, 1998. 10.97 Severence agreement between Brown & Sharpe Manufacturing Company and Edward D. DiLuigi dated February 17, 1998. 10.98 Severence agreement between Brown & Sharpe Manufacturing Company and Christopher J. Garcia dated February 17, 1998. 10.99 Severence agreement between Brown & Sharpe Manufacturing Company and Brian Gaunt dated February 17, 1998. 10.100 Severence agreement between Brown & Sharpe Manufacturing Company and Alfred J. Corso dated February 17, 1998. 10.101 Severence agreement between Brown & Sharpe Manufacturing Company and James W. Hayes, III dated February 17, 1998. 10.102 Severence agreement between Brown & Sharpe Manufacturing Company and Les W. Sgnilek dated February 17, 1998. 10.103 Severence agreement between Brown & Sharpe Manufacturing Company and Bryn Edwards dated February 17, 1998. 10.104 Severence agreement between Brown & Sharpe Manufacturing Company and Kenneth Kirkendall dated February 17, 1998. 10.105 Severence agreement between Brown & Sharpe Manufacturing Company and Fred Shutter dated February 17, 1998. 10.106 Key Employee's Long-Term Deferred Cash Incentive Plan as amended through February 23, 1998. 10.107 Supplemental Executive Retirement Plan as amended February 13, 1998. 10.108 Senior Executive Supplemental Umbrella Pension Plan dated February 13, 1998. 27. Financial Data Schedule. 15 EX-10.92 2 SEVERENCE AGREEMENT FRANK T. CURTIN EXHIBIT 10.92 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Frank T. Curtin, Chairman of the Board of Directors, President, and Chief Executive Officer ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to twice (two times) the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to twice (two times) the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive) under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credits that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs and for the succeeding year, assuming for each of such years, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twenty-four (24) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 24-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of two years from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Frank T. Curtin 56 Main Street Wickford, RI 02852 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long-Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h), below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - ---------------------------- -------------------------------------------- Charles A. Junkunc Corporate Vice President and Chief Financial Officer WITNESSED: - ---------------------------- -------------------------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer EX-10.93 3 SEVERENCE AGREEMENT CHARLES A. JUNKUNC EXHIBIT 10.93 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Charles A. Junkunc, Corporate Vice President and Chief Financial Officer ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to twice (two times) the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to twice (two times) the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive) under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credits that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs and for the succeeding year, assuming for each of such years, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twenty-four (24) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 24-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of two years from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. 7.1. Notice of Termination. After a Change in Control, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Charles A. Junkunc 110 Signal Ridge Way East Greenwich, RI 02818 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long-Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h), below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - -------------------------- -------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: - -------------------------- -------------------------- Charles A. Junkunc Corporate Vice President and Chief Financial Officer EX-10.94 4 SEVERENCE AGREEMENT PHILIP JAMES EXHIBIT 10.94 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Philip James, Corporate Group Vice President - Measuring Systems ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to twice (two times) the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to twice (two times) the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive) under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credits that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs and for the succeeding year, assuming for each of such years, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twenty-four (24) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 24-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of two years from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Philip James 100 Kristen Court Warwick, RI 02888 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long-Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h), below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - -------------------------- -------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: - -------------------------- -------------------------- Philip James Corporate Group Vice President - Measuring Systems EX-10.95 5 SEVERENCE AGREEMENT ANTONIO APARICIO EXHIBIT 10.95 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Antonio Aparicio, Corporate Vice President and General Manager - Precision Measuring Instruments Division ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to twice (two times) the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to twice (two times) the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive) under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credits that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs and for the succeeding year, assuming for each of such years, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twenty-four (24) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 24-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of two years from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Antonio Aparicio Chemin des Creuses 35 1008 Prilly, Switzerland 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long-Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h), below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By _________________________ ____________________________________________ Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: _________________________ ____________________________________________ Antonio Aparicio Corporate Vice President and General Manager - Precision Measuring Instruments Division EX-10.96 6 SEVERENCE AGREEMENT MARCUS BURTON EXHIBIT 10.96 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Marcus Burton, Corporate Vice President and General Manager - Custom Metrology Division ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to twice (two times) the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to twice (two times) the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive) under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credits that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs and for the succeeding year, assuming for each of such years, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twenty-four (24) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 24-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of two years from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Marcus Burton 32 Glen Brook Road Priorslee Telford, Shropshire TF7 9QY England 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long-Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h), below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - ------------------------ ------------------------ Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: - ------------------------ ------------------------ Marcus Burton Corporate Vice President and General Manager Custom Metrology Division EX-10.97 7 SEVERENCE AGREEMENT EDWARD DILUIGI EXHIBIT 10.97 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Edward D. DiLuigi, Corporate Vice President and General Manager, Measuring Systems - U.S.A. and Wetzlar ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to twice (two times) the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to twice (two times) the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive) under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credits that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs and for the succeeding year, assuming for each of such years, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twenty-four (24) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 24-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of two years from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Edward D. DiLuigi 25 Wood Duck Court East Greenwich, RI 02818 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long-Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h), below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - ------------------------- ------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: - ------------------------- ------------------------- Edward D. DiLuigi Corporate Vice President and General Manager, Measuring Systems - U.S.A. and Wetzlar EX-10.98 8 SEVERENCE AGREEMENT CHRISTOPHER GARCIA EXHIBIT 10.98 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Christopher J. Garcia, Corporate Vice President - Software Product Development ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs, assuming for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twelve (12) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twelve (12) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 12-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of one year from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Christopher J. Garcia 25 Shepherd Street Foxboro, MA 02035 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - ------------------------- ------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: - ------------------------- ------------------------- Christopher J. Garcia Corporate Vice President Software Product Development EX-10.99 9 SEVERENCE AGREEMENT BRIAN GAUNT EXHIBIT 10.99 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Brian Gaunt, Corporate Vice President and Managing Director - Brown & Sharpe DEA S.p.A. ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to twice (two times) the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to twice (two times) the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive) under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credits that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs and for the succeeding year, assuming for each of such years, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twenty-four (24) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 24-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of two years from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------- 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Brian Gaunt Villa Taverna Via Roma 1 22020 Torno (Como), Italy 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long-Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h), below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - -------------------- -------------------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: - -------------------- -------------------------------------- Brian Gaunt Corporate Vice President and Managing Director Brown & Sharpe DEA S.p.A. EX-10.100 10 SEVERENCE AGREEMENT ALFRED CORSO EXHIBIT 10.100 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Alfred J. Corso, Corporate Controller ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs, assuming for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twelve (12) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twelve (12) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 12-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of one year from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Alfred J. Corso 6 Lewis Street Barrington, RI 02806 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - --------------------------- --------------------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: - --------------------------- --------------------------------------- Alfred J. Corso Corporate Controller EX-10.101 11 SEVERENCE AGREEMENT JAMES HAYES EXHIBIT 10.101 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and James W. Hayes, III, Corporate Secretary and General Counsel ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs, assuming for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twelve (12) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twelve (12) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 12-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of one year from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: James W. Hayes, III 16 Mather Street Cranston, RI 02905 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - ------------------------- ---------------------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: - ------------------------- ---------------------------------------- James W. Hayes, III Corporate Secretary and General Counsel EX-10.102 12 SEVERENCE AGREEMENT LES SGNILEK EXHIBIT 10.102 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Les W. Sgnilek, Corporate Treasurer ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs, assuming for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twelve (12) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twelve (12) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 12-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of one year from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Les W. Sgnilek 107 Hedgerow Drive Warwick, RI 02886 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - --------------------------- --------------------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: - --------------------------- --------------------------------------- Les W. Sgnilek Corporate Treasurer EX-10.103 13 SEVERENCE AGREEMENT BRYN EDWARDS EXHIBIT 10.103 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Bryn Edwards, General Manager - Brown & Sharpe Aftermarket Services Inc. ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. ] 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs, assuming for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twelve (12) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twelve (12) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 12-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of one year from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Bryn Edwards 2533 Universal Drive Pinckney, MI 48169 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including wothout limitation the Long Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY - ----------------------------------- By ----------------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: - ----------------------------------- ----------------------------------- Bryn Edwards General Manager - Brown & Sharpe Aftermarket Services Inc. EX-10.104 14 SEVERENCE AGREEMENT KENNETH KIRKENDALL EXHIBIT 10.104 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Kenneth Kirkendall, Corporate Chief Information Officer ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs, assuming for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twelve (12) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twelve (12) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 12-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of one year from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Kenneth Kirkendall 98 Beauchamp Drive Saunderstown, RI 02874 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - ------------------------------- ----------------------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: - ------------------------------- ----------------------------------------- Kenneth Kirkendall Corporate Chief Information Officer EX-10.105 15 SEVERENCE AGREEMENT FRED SHUTTER EXHIBIT 10.105 "CIC" AGREEMENT --------------- THIS AGREEMENT dated as of February 17, 1998, is made by and between Brown & Sharpe Manufacturing Company, a Delaware Corporation, (the "Company") and Fred Schutter, General Manager, Brown & Sharpe Wetzlar Factory ("Executive"). WHEREAS the Compensation and Nominating Committee of the Board of Directors of the Company (the "Committee" and the "Board", respectively) recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the resultant uncertainty as to the Executive's responsibilities, compensation or continued employment, may result in the departure or distraction of the Executive, and whereas the Board believes it is important to the Company and the interests of its stockholders, should the Company receive acquisition or combination proposals from outside parties, to enable the Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties and to act objectively in connection with any such proposals; and WHEREAS the Company considers it essential to the best interests of the Company, its shareholders, and its employees generally to agree to provide the benefits set forth below; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definition of capitalized terms used in this ------------- Agreement is provided in the last Section hereof. 2. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect until terminated by written agreement between the Company and the Executive or until the Executive's employment with the Company has been terminated under circumstances not involving a Change in Control. 3. Company's Covenants Summarized. In consideration of the Executive's ------------------------------ covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated following a Change in Control. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment prior to the date of a Change in Control and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. 4. The Executive's Covenants. The Executive agrees that if the Company ------------------------- enters into an agreement described in Section 15(C)(v), or if there is a public announcement described in Section 15(C)(vi), or if the Board adopts a resolution described in Section 15(C)(vii), in each case regardless of whether such agreement or the action or actions contemplated by such announcement or resolution have yet resulted in a Change in Control, the Executive will, if requested by the Company, remain in the employ of the Company until the earlier of (A) a date specified in such request which is not later than three (3) months after the date on which the actions ultimately resulting in a Change in Control are consummated (but one (1) month if Section 15(C)(vi) is applicable), or (B) the date of termination by the Executive of the Executive's employment for Good Reason (determined, for purposes of this clause (B), without regard to Section 15(K)(a)) or by reason of death or Disability, or the efforts to effect a Change in Control have been abandoned or terminated. 5. Compensation Other Than Severance Payment. ----------------------------------------- 5.1. Following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of such period (or the rate in effect immediately prior to the Change in Control, if higher), together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability or the Executive resumes full-time duties, subject to the other termination provisions of this Agreement. 5.2. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or the rate in effect immediately prior to the Change in Control, if higher), together with all prorated compensation and benefits payable to the Executive or creditable to his plan account under the terms of any compensation or benefit plan, program or arrangement maintained by the Company prior to the Date of Termination (or such terms as in effect immediately prior to the Change in Control, if more favorable to the Executive) were the Executive employed by the Company on the last day of the year. In the case of the PIP payout, the amount to be paid shall be equal to the larger of (i) the PIP amount that would be payable if all objectives were met 100% (payout factor of 1.0) or (ii) the largest PIP amount paid to the Executive during the past three years, in either case prorated for the period of the Executive's employment during such year and paid in cash within 15 days of the date of termination. In the case of the Company's Savings and Retirement Plan for Management Employees ("SARP"), Employee Stock Ownership Plan and Trust ("ESOP"), the excess benefit restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, and any other plan benefits under the first sentence of this section for the year or period in which the Executive's termination of employment occurs shall be determined without regard either to the right of the Board to not authorize any contribution to the SARP, ESOP, SERP, or other plan for that year or to any requirement in such plan or program that the Executive continue employment until the end of such year or period and as so determined shall be prorated for the period of the Executive's employment during such year or period provided that if such contributions cannot validly be made pursuant to the terms of the plans, then the amount that could not be so contributed to the SARP, ESOP, or other plan shall be paid under this Agreement in cash in a lump sum to the Executive within 15 days of the Date of Termination. In the case of the Company's Long Term Deferred Cash Incentive Plan (the "LTDCIP"), for purposes of the first sentence of this Section, there shall be paid to the Executive in a cash lump sum payment within 15 days of the Date of Termination an amount equal to the applicable pro rate portion, based on the days of the Executive's employment in the year prior to the Date of Termination of the award or credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs assuming, for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected as Adjusted Pretax Profit in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the Executive's percentage award opportunity specified in the most recent award to the Executive preceding the Change in Control. Upon a Change in Control, all options held by the Executive at such date shall immediately vest and become exercisable and all restrictions on restricted stock shall lapse, to the extent that such vesting or lapse has not occurred by said date under the terms of the Equity Incentive Plan (or other applicable plan). 5.3. If the Executive's employment shall be terminated for any reason following a Change in Control, the Company shall pay the Executive's post- termination compensation and benefits to the Executive as such payments become due, as determined under and paid in accordance with the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements and agreements, including the plans referred to in Section 5.2, other than this Agreement; provided, however, that the Severance Payments under Section 6 of this Agreement shall be the only severance and benefits paid or provided following a Change in Control for a termination by the Executive with Good Reason or a termination by the Company Without Cause unless the Executive elects within 30 days after the Termination Date to take such other payments and benefits exclusively in lieu of the Severance Payments under Section 6. 6. Severance Payments. ------------------ 6.1. Subject to Section 6.2 hereof, the Company shall pay the Executive the payments and benefits described in this Section 6.1 ("Severance Payments"), in addition to the applicable payments and benefits described in Section 5 hereof, upon any termination after a Change in Control by the Company Without Cause or by the Executive for Good Reason. (i) Within 15 days of the Date of Termination, the Company shall make a lump sum cash payment to the Executive equal to the sum of (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based or in effect immediately prior to the Change in Control, and (b) the highest annualized (for a partial year of service) annual aggregate bonuses paid, or accrued to be paid if not then yet paid (or, in the event that the Executive has been recently hired and has not had a full fiscal year of employment and Profit Incentive Plan opportunity, then the higher of the amount paid in the prior year, recalculated as if the Executive had been employed for the full entire year, or the planned amount of Profit Incentive Plan bonus payout for the Executive for the year in which the termination occurs) to the Executive under the Profit Incentive Plan or its successor plan or by vote of the Board of Directors (or a committee thereof) or bonuses of Sales Incentive Compensation or other bonuses, in each case determined (except as provided above with respect to a recently hired Executive) over the period beginning with the fifth (5th) year preceding the year in which occurs the Change in Control and ending with the period in which occurs the Date of Termination. (ii) Within 15 days of the Date of Termination, the Company shall make an additional lump sum cash severance payment to the Executive equal to the annual level of contributions, credits or other benefits the Executive was receiving (or that were being made or were required to be made for the Executive's benefit) for the most recent applicable plan period prior to the Change in Control or prior to the Notice of Termination (whichever is more favorable to the Executive under any employee benefits plan then existing including the SARP, the ESOP, the "excess benefit" restoration account under the Company's Supplemental Executive Retirement Plan, the Company's Senior Executive Supplemental Umbrella Pension Plan, the Company's matching contribution under its 401(k) plan applicable to the Executive and (subject to the following sentence) the LTDCIP (and in each case any successor plan or arrangement), in each case based on the levels of compensation taken into account under Section 6.1(i). In the case of the LTDCIP the payment shall equal to an amount equal to the award credit that would have been credited to the Executive's account under the LTDCIP for the calendar year in which the Date of Termination occurs, assuming for such year, (i) the Company's Adjusted Pretax Profit (as defined in the LTDCIP) had equaled the amount projected for the applicable year as Adjusted Pretax Profit (as defined in LTDCIP) in the Company's latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior the Change in Control (or if not available, the best equivalent), and (ii) the Executive's percentage award opportunity had equaled the percentage award opportunity which was the Executive's most recent award level preceding the Change in Control. For the period of twelve (12) months following the Date of Termination, the Company shall arrange to provide the Executive with any employee welfare benefits including health, dental, disability, life, and accident insurance benefits substantially similar to those which the Executive is receiving on the same premium cost share basis as was applicable to the Executive immediately prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive (without utilizing or limiting the Executive's subsequent resort to COBRA rights under applicable laws and without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive under any employee welfare benefits including health, dental, disability, life, and accident insurance pursuant to this Section 6.1(ii) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost or at a lower cost than was charged to the Executive prior to the Change in Control or the Notice of Termination (whichever is more favorable to the Executive) during the twelve (12) month period following the Executive's termination of employment (and any such benefits actually received or made available by the Executive shall be reported to the Company by the Executive). In the event that the Company self-insures with respect to one of these benefits, such as for example dental benefits, then the Executive shall be reimbursed for all dental expenses during the 12-month period that would have been reimbursed under the self-funded policy in effect prior to the Notice of Termination or the Change in Control, whichever is more favorable to the Executive. If the benefits provided to the Executive under this Section 6.1(ii) shall result in a decrease, pursuant to Section 6.2, in the Severance Payments and as a result the Section 6.1(ii) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or availability of comparable benefits, the Company shall, at the time of such reduction, pay to the Executive the lesser of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2, or (b) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code. 6.2. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether or not received pursuant to the terms of this Agreement or otherwise) (all such payments and benefits, including option benefits and the Severance Payments, being hereinafter called the "Total Payments") would be subject in whole or in part to the Excise Tax, then the Severance Payments shall be reduced to the extent, but only to the extent, necessary so that no portion of the Total Payments is subject to the Excise Tax; provided, that no such reduction shall be effected unless the net amount of the Total Payments after such reduction in the Severance Payments and after deduction of the net amount of federal, state and local income taxes on such reduced Total Payments would be greater than the excess of (A) the net amount of the Total Payments without such reduction in the Severance Payments but after deduction of the net amount of federal, state and local income taxes (other than the Excise Tax) on such unreduced Total Payments, over (b) the Excise Tax to which the Total Payments are subject. The determination as to whether a reduction in Severance Payments is to be made under this Section 6.2 and, if so, the amount of any such reduction shall be made by the firm of certified public accountants that had been acting as the Company's auditors prior to the Change in Control or by such other firm of certified public accountants, benefits consulting firm or legal counsel as the Board may designate for such purpose, with the approval of the Executive, prior to the Change in Control. The Company shall provide the Executive with the auditor's calculations of the amounts referred to in this Section 6.2 and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. 6.3. In the event of a termination following a Change in Control, the Company also shall pay to the Executive all legal fees and expenses, if any, incurred in disputing in good faith any such termination or in seeking in good faith to obtain or enforce any payment, benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 6.4. During the period of one year from the Termination Date, the Company shall engage, at the request of the Executive, made in writing in the Termination Notice or within ten days of receipt by the Executive of a Notice of Termination, a mutually agreed upon, full executive outplacement counseling service of national reputation, reasonably proximate to the Executive's home or home office, to assist the Executive in obtaining employment. 7. Termination Procedures and Compensation During Dispute. ------------------------------------------------------ 7.1. Notice of Termination. After a Change in Control, any purported --------------------- termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership (excluding the Executive, if a Director) of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2. Date of Termination. "Date of Termination", with respect to any ------------------- purported termination of the Executive's employment after a Change in Control during the term of this Agreement, shall mean, subject to the provisions of Section 7.3: (A) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (B) 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 by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days from the date such Notice of Termination is given. 7.3. Dispute Concerning Termination. If within fifteen (15) days after ------------------------------ any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by arbitrator's award, or, to the extent permitted by Section 14, by a final judgment, order or decree of a court of competent jurisdiction on the arbitrator's award (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. 7.4. Compensation During Dispute. If a purported termination occurs --------------------------- following a Change in Control and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation (including, but not limited to, salary) in effect when the notice giving rise to the dispute was given and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement. In the event of such purported termination by the Company or the Executive, the Executive need not provide any services to the Company and no mitigation requirement shall apply. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by an arbitration proceeding or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if the Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from the Executive the benefits intended to be provided to the Executive hereunder or in the event of arbitration proceedings instituted as contemplated by Section 7.3 above, the Company confirms that it has irrevocably authorized the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the arbitration proceeding provided for above (or in any other legal proceeding), whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction which may adversely affect Executive's rights under this Agreement. Without limiting the provisions of Section 7.3 above, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' fees and related expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision thereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision thereof. Interest at the rate of prime of The First National Bank of Boston (or its successor) plus 2 shall be payable monthly on all amounts due but not paid under this Agreement. 8. No Mitigation, etc. The Company agrees that, if the Executive's ------------------ employment by the Company is terminated after a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than the health or insurance benefits in Section 6.1(ii)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. In the event that the Executive's employment is terminated by the Company after a Change in Control without Cause or by the Executive for Good Reason, the Executive shall not be required to refrain from competition with Company or any subsidiary but shall not be entitled to use or disclose trade secrets or confidential information of the Company or any subsidiary. 9. Successors; Binding Agreement. ----------------------------- 9.1. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business and/or assets of the Company 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to or promptly after the effectiveness of any such succession, unless remedied within ten days after written notice by the Executive to the Company, shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In any event this agreement shall be binding upon the Company and any successors or assignees. 9.2. This Agreement shall inure to the benefit of and be enforceable by the Executive's guardian, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. For the purpose of this Agreement, notices and all other ------- communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered in hand or when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Brown & Sharpe Manufacturing Company Precision Park 200 Frenchtown Road North Kingstown, RI 02852 Attention: Secretary To the Executive: Fred Schtter Hauptstrasse 43 56337 Arzbach Germany 11. Miscellaneous. No provision of this Agreement may be modified or ------------- waived unless such waiver or modification is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (other then its internal conflict of laws) and this Agreement shall be an instrument under seal. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6, 7, 8 and 14 shall survive the expiration of the term of this Agreement. The Company shall have no right of setoff against any payments required to be made by the Company hereunder, and any claims by the Company against the Executive may not be set off and must be made against the Executive in an independent proceeding. Nothing herein shall adversely affect any of the Executive's rights under the terms of any option, employee benefit plan or agreement, including without limitation the Long Term Deferred Cash Incentive Plan, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the Company's Salary and Retirement Plan for Management Employees and the Employee Stock Ownership Plan and Trust, or any offer letter or employment agreement, subject to the controlling provisions of Sections 5.3 and 6. Nothing in this Agreement shall detract from or limit the Executive's right to participate in any stock option, bonus or other plan which may become applicable to executives of the Company resulting from any merger of consolidation of the Company or sale of all or substantially all of the assets of the Company. 12. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In addition, if any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, then such provision shall be deemed modified to the extent necessary to enable such provision to be valid and enforceable. 13. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. All claims by the Executive for ----------------------------------- benefits under this Agreement shall be directed to the Board c/o the Secretary of the Company and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board then shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration (except to the limited extent provided below) in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement by a proceeding in such arbitration or by a proceeding for such relief in the federal court in Boston or the Massachusetts state court in Suffolk County. Each party irrevocably submits, with respect to the matter specified in the proviso to the immediately preceding sentence, to the jurisdiction of the United States District Court for the Commonwealth of Massachusetts and to the jurisdiction of the Massachusetts state court of Suffolk County for the purpose of any suit or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such proceeding shall be brought or maintained only in such courts and waives, to the extent not prohibited by applicable law, and agrees not to assert in any such proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that any such proceeding brought or maintained in a court provided for above may not be properly brought or maintained in such court, should be transferred to some other court or should be stayed or dismissed by reason of the pendency of some other proceeding in some other court, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 15. Definitions. For purposes of this Agreement, the following terms ----------- shall have the meanings indicated below: (A) "Board" shall have the meaning given it in the first "WHEREAS" clause of this Agreement. (B) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean: (i) intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement in competitive activity with respect to any business of the Company or its subsidiaries, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board (or from the Chief Executive Officer with respect to officers other than the Chief Executive Officer); provided, however, that the termination for Cause shall have been approved or ratified by the Board after notice to the Executive, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. (C) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied. (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company; (2) any wholly-owned or otherwise controlled subsidiary of the Company; (3) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (4) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of capital stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining "beneficial ownership" used in clause (1) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iv) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (v) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided, however, that if such agreement requires approval by the Company's shareholders of the agreement or transaction or the satisfaction of other conditions, a Change in Control shall not be deemed to have taken place unless and until such approval is secured and all conditions are satisfied (but upon any such approval and the satisfaction of such conditions and the consummation of the transaction, a Change in Control shall be deemed to have occurred on the date of execution of such agreement); or (vi) the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control, provided that a Change in Control will not be deemed to have taken place unless and until actions are taken that constitute a Change in Control (but upon the taking of any such actions a Change in Control shall be deemed to have occurred on the date of such announcement); or (vii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control will occur upon the taking of certain action provided that the Change in Control shall not be deemed to have taken place unless and until such action is taken (but upon the taking of such action, a Change in Control shall be deemed to have occurred on the date of such resolution of the Board). (D) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (E) "Company" shall mean Brown & Sharpe Manufacturing Company and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(C) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession). (F) "Date of Termination" shall have the meaning stated in Section 7.2 hereof. (G) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (H) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (I) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code or any successor section. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent), within not more than three years after the Change in Control, of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (a), (d), (e), (f), (g), or (h) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (a) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or an adverse alteration in the nature or status of the Executive's responsibilities, authority or reporting relationships from those in effect immediately prior to the Change in Control, as outlined on attached Exhibit A, including, for the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, Secretary and Corporate Counsel and the Chief Information Officer, the change in status from an officer of a "public company" to an officer of a "private" company or a "public" company in which another person owns more than 20% of the voting power; (b) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of the Company's principal executive office to a location more than twenty (20) miles from the location of such office immediately prior to the Change in Control or the Company's requiring the Executive to be based anywhere other than the Company's principal executive office, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations prior to the Change in Control; provided that if the Executive was not located prior to the Change in Control at the principal executive office then such office where the Executive was located shall be substituted for the term "principal executive office"; (d) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company, without the Executive's consent, 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, within seven (7) days of the date such compensation is due; (e) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue in effect any compensation plan (until its stated expiration date) in which the Executive participated immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to the Company's Equity Incentive Plan, the Profit Incentive Plan, the LTDCIP, the Supplemental Executive Retirement Plan, the Senior Executive Supplemental Umbrella Pension Plan, the SARP and the ESOP (all of which plans are deemed material) or any substitute plans adopted prior to the Change in Control, but in each case only if such plan is one in which the Executive participated immediately prior to the Change in Control, unless a substantially equivalent equitable arrangement, reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis on which benefits were provided or made available to the Executive prior to the Change in Control. For purposes of the preceding provision, it is understood that the LTDCIP is a Company before tax profit based plan and that effective continuity of this plan or any substantial equivalent to it by definition requires with regard to the determination of the benefit (i) continuity of the existing organizations within the Company immediately prior to the Change in Control whereby these revenue and profit generating capability of each part and in total is no less than it was immediately prior to the Change in Control, (ii) the accounting and consolidation methodologies are equivalent and (iii) the participant award factors remain unchanged, and (iv) change of bases used in determining the annual participant award credit or accrual within a fiscal year shall require use of the new bases for the whole fiscal year. If any of the above conditions (15(K)(e) (i), (ii), (iii) or (iv)) is not satisfied, then the LTDCIP's continuity or equivalency may only be achieved for purposes of this paragraph by determining the annual participant award credit or accrual based on the Company's planned Adjusted Pretax Profit (as defined in the LTDCIP) for the applicable period per the latest "BNS Five Year Plan - Base Case" provided to the Company's investment banker prior to the Change in Control (or if not available, the best equivalent thereof). (f) the failure, not corrected within five (5) days after written notice thereof to the Company, by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medial, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control (other than changes required by law), the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Company's normal vacation policy in effect prior to the Change in Control; (g) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1; and for purposes of this Agreement, no such purported termination shall be effective; or (h) any breach by the Company of any provision of this Agreement, not corrected within 15 days after notice by the Executive to the Company. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued performance shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (L) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof. (M) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include: (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (N) "Severance Payments" shall mean those payments and benefits described in Section 6.1 hereof. (O) "Terminate Without Cause" shall mean a termination by the Company, within not more than three years after the Change in Control, other than a termination upon death, disability or retirement at age 65 (or such later age as may be established by the Board of Directors or the Compensation and Nominating Committee) or for Cause (as defined above). (P) "Total Payments" shall mean those payments described in Section 6.2 hereof. IN WITNESS WHEREOF, the undersigned parties have each executed or caused this Agreement to be duly executed as of the date set forth above. WITNESSED: BROWN & SHARPE MANUFACTURING COMPANY By - -------------------------- -------------------------- Frank T. Curtin Chairman of the Board of Directors, President, and Chief Executive Officer WITNESSED: -------------------------- -------------------------- Fred Schutter General Manager, Brown & Sharpe Wetzlar Factory EX-10.106 16 KEY EMPLOYEES LONG-TERM DEFFERED EXHIBIT 10.106 BROWN & SHARPE MANUFACTURING COMPANY KEY EMPLOYEES' LONG-TERM DEFERRED CASH INCENTIVE PLAN (AS AMENDED THROUGH FEBRUARY 23, 1998) 1. PURPOSE The purpose of the Brown & Sharpe Long-Term Deferred Cash Incentive Plan (the "Plan") is to promote the long term success of Brown & Sharpe (the "Company") and its shareholders by providing long-term incentive compensation to key employees of the Company. 2. TERM The Plan, which was originally effective January 1, 1995, will remain in effect until terminated by the Company's Board of Directors (the "Board"). 3. PLAN ADMINISTRATION The Plan is administered by the Compensation and Nominating Committee of the Board (the "Committee"). The Committee has full and exclusive power to interpret the Plan in its discretion and to adopt such rules, regulations and guidelines for carrying out the Plan as it may deem necessary. The Committee may delegate administrative responsibilities under the Plan to such person or persons as it deems advisable. As used herein, the term "Administrator" refers to the Committee and such other person or persons, if any, as the Committee may appoint to assist in the administration of the Plan pursuant to the preceding sentence. 4. ELIGIBILITY The Committee shall designate those key employees of the Company or its subsidiaries who will participate in the Plan ("Participants"). In addition to the Chief Executive Officer of the Company, only those key employees who report directly to the Chief Executive Officer of the Company (or, in the case of an otherwise eligible division or group general manager, who reports directly to an individual who has a direct report to the Chief Executive Officer of the Company) shall be eligible to be designated as Participants. Persons who have been designated as Participants by the Committee shall be eligible to share in awards until such time, if any, as their participation is terminated by the Committee (or until they cease to be employed by the Company, if earlier). Employment by a subsidiary of the Company shall be deemed to be employment by the Company for purposes of the Plan. 5. BONUS POOL; AWARD CREDITS; ACCOUNTS A. With respect to each fiscal year beginning with the 1998 fiscal year, the Committee shall specify for each Participant an award opportunity for the year expressed as a percentage of Adjusted Pretax Profit (as defined on Schedule A) for the year. The determination of awards for fiscal years prior to the 1998 fiscal year shall be made under the terms of the Plan as in effect prior to 1998. B. Each Participant employed on December 31 of such year shall become, subject to E below and Section 10, entitled to an award credit (an "Award Credit") equal to (i) with respect to the 1998 fiscal year and later fiscal years, the dollar amount of his or her award opportunity, if any, determined under A above, or (ii) with respect to fiscal years prior to 1998, the amount determined under Section 5.B of the Plan as in effect prior to 1998. A Participant who retires during 1998 or any later year under Section 5.E(i)(b) or (c) below shall become, subject to the remaining provisions of E below and Section 10, entitled to an Award Credit equal to a prorated portion of his or her award opportunity for such year, based on the period of service during such year prior to retirement. C. Each Award Credit shall, as soon as practicable after it is determined and effective as of the January 1 immediately following the fiscal year to which the Award Credit relates, be credited to a memorandum account (an "Account") maintained under the Plan to reflect the Company's unfunded deferred compensation obligation to the Participant under the terms of the Plan. Effective as of such date (on or after January 1, 1998) as may be specified by the Administrator (the "Investment Date"), the Administrator shall specify one or more mutual funds or other market-based investments (each, an "Investment Alternative"), including common stock of the Company (the "Company Stock Investment Alternative"), to be used to measure the notional investment of Accounts. Notional investments in the Company Stock Investment Alternative will be expressed in whole and fractional shares of common stock of the Company. Effective as of the Investment Date, the then balance of each Participant's Account under the Plan (determined under the terms of the Plan as in effect prior to 1998) shall be treated (solely for purposes of the Plan) as having been invested in such Investment Alternative or Alternatives as may be selected by the Participant from among those specified by the Administrator, or in the absence of such a Participant selection in such Investment Alternative or Alternatives as the Administrator may determine. Each Participant shall be entitled thereafter, by written notice to the Administrator, to reallocate the notional investment of his or her Account (as the same may be adjusted for additional Award Credits, distributions, or notional investment experience under this paragraph C) among the Investment Alternative or Alternatives specified by the Administrator, any such change to take effect as of the beginning of the calendar quarter (i.e., January 1, April 1, July 1 or October 1) next following receipt (at least ten days prior thereto) by the Administrator of such change notice, except in the event of the Participant's retirement or termination in which case the Participant can make such change with one day's notice. The Administrator may prescribe rules and procedures for the notional investment of Accounts under this paragraph and may at any time and from time to time eliminate (including as to existing Account balances) or add one or more Investment Alternatives from or to those Investment Alternatives that are available for the notional investment of Accounts hereunder. In determining the interest of any Participant under the Plan, the Administrator shall maintain such accounts (including such accounts or sub-accounts as may be necessary to track the vesting provisions of paragraph E below) as it deems necessary or advisable. D. Notwithstanding C above, if as of January 1 of any year commencing on or after January 1, 1998 the number of shares of Company common stock attributable to the Participant for purposes of the Company's executive stock ownership policy (as from time to time in effect, the "Stock Ownership Policy") is smaller than the number of shares required under the Stock Ownership Policy, there shall be notionally invested in the Company Stock Investment Alternative the Award Credit (if any) to be credited to the Participant's Account as of such date or, if less, the portion of such Credit that is needed to satisfy the Stock Ownership Policy. The Company Stock Investment Alternative may include fractional shares. For 1998 there shall also be notionally invested in the Company Stock Investment Alternative, as of the Investment Date, such portion, if any, of a Participant's remaining balance in his or her Account as is needed to satisfy the Stock Ownership Policy. Notional investments in the Company Stock Investment Alternative under the first sentence of this Paragraph D shall be determined by dividing the amount to be invested by the closing price of a share of common stock of the Company on the trading day coinciding with the date the Committee makes its final determination as to the Participant's Award Credit, or if such date was not a trading day, then on the next preceding trading day. For 1998, any additional notional investments in the Company Stock Investment Alternative under the second sentence of this Paragraph D shall be determined by dividing the additional amount to be invested by the closing price of a share of common stock of the Company on the Investment date. At no time shall a Participant be entitled to direct the notional investment of any portion of his or her Account out of the Company Stock Investment Alternative if, after giving effect to such notional investment change, there would be attributable to the Participant for purposes of the Stock Ownership Policy fewer shares of Company common stock than are then required under the Stock Ownership Policy. The Stock Ownership Policy shall cease to apply from and after a Change in Control as defined in Schedule B. In the event of a Change in Control as so defined, the value of a Participant's interest (if any) in the Company Stock Investment Alternative shall be based on a value for the common stock of the Company that is not less than the highest closing price of such stock during the ten (10) trading days immediately preceding the Change in Control. In the event of a distribution date under the Rights Agreement between the Company and BankBoston, N.A. dated as of February 13, 1998, the preceding sentence shall also be applied by substituting such distribution date for the date of a Change in Control. E. (i) Subject to subparagraph (ii) below, a Participant shall become vested in that portion of his or her Account attributable to an Award Credit (and any notional investment experience with respect thereto) upon the earliest to occur of (a) the date of the Participant's death or disability (as determined by the Administrator) while an employee of the Company, (b) the date of a Participant's retirement from the Company at or after age 65 with at least five years of service (as determined by the Administrator), (c) the date of the Participant's retirement from the Company at or after age 60 but before age 65 with at least 10 years of service (as determined by the Administrator), or (d) the third anniversary of the close of the fiscal year to which the Award Credit relates, provided the Participant has been continuously employed by the Company through and including such third anniversary date; provided, that if the Participant's employment with the Company terminates (other than by reason of the Participant having been terminated for cause as described in (ii) below) after he or she has attained age 55 and after at least 5 years of service (as determined by the Administrator), the Participant shall be deemed to be vested in the portion of his or her Account in which he or she would have been vested had clause (d) above been applied by substituting the words "first anniversary" for "third anniversary". (ii) A Participant shall forfeit his or her Account (vested and unvested) if he or she is terminated for cause at any time. "Termination for cause" shall mean termination on account of intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement of competitive activity with respect to any business of the Company or its subsidiaries as provided in Section 7 below, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board or the Chief Executive Officer; provided, however, that the termination for cause shall have been approved or ratified by the Board after notice to the Participant. (iii) Notwithstanding clause (i), but subject to the over-riding provisions of clause (ii) above, in the event of a Change in Control of the Company (as defined in Schedule B), all Participants employed by the Company immediately prior to such Change in Control shall have a fully vested and nonforfeitable interest in their Accounts as of the date immediately preceding the Change in Control and, as to such Participants, the provisions of Section 7 below shall cease to apply. F. Except as otherwise provided by the Committee, in the event that a Participant forfeits all or a portion of his or her Account, the amount of such forfeiture (i) shall be added to the Bonus Pool for the fiscal year with respect to which the amount being forfeited had originally been credited to the forfeiting Participant, with respect to forfeitures occurring prior to January 1, 1998, and (ii) in every other case shall be disregarded in determining any other Participant's rights to an award or benefit under the Plan. 6. PAYMENT OF ACCOUNTS That portion of a Participant's Account that is notionally invested in the Company Stock Investment Alternative on the date of the Participant's termination of employment shall, to the extent vested, be distributed in shares of Class A common stock of the Company within 20 days of such termination, except that the value of any fractional share shall be distributed in cash. In connection with his or her initial participation in the Plan (or by March 31, 1998, if later), each Participant shall elect, in such manner and form as the Administrator may determine, how the remainder of the Participant's vested Account (the "residual vested Account") under the Plan (as the same may accumulate and be adjusted) shall be paid from among the following options: (a) A lump sum cash payment within 20 days of termination of employment. (b) Three annual cash installments, the first such installment (equal to one-third of the Participant's residual vested Account) being paid within 20 days of termination of employment, the second installment (equal to one- half of the residual vested Account remaining after the first installment, as adjusted for notional investment experience) being paid on the first anniversary of the termination of employment, and the third and final installment (equal to the entirety of the residual vested Account remaining after the first and second installments, as adjusted for notional investment experience) being paid on the second anniversary of the termination of employment. (c) A single life annuity, payable monthly in cash for the Participant's life commencing with the first day of the month coinciding with or next following the Participant's termination of employment and ending with the month of the Participant's death, that is the actuarial equivalent of the Participant's residual vested Account hereunder at termination of employment determined by the Administrator using the actuarial assumptions set forth in Schedule C. (d) A 50% joint and survivor annuity (that is actuarially equivalent to the Participant's residual vested Account hereunder at termination of employment determined by the Administrator using the actuarial assumptions set forth in Schedule C) providing monthly cash payments to the Participant commencing with the first day of the month coinciding with or next following the Participant's termination of employment, with 50% of such monthly cash amount being paid thereafter to the person to whom the Participant was married at the date annuity payments to the Participant commenced or to such other person as the Participant may designate with the consent of the Administrator (the "contingent annuitant"), provided the contingent annuitant survives the Eligible Employee, with the last such payment being made for the month in which the contingent annuitant dies. A Participant who has made an initial election as described above may change such election by delivering a notice of such change, in such form and manner as the Administrator may determine, to the Administrator not later than December 31 of the second calendar year preceding the calendar year in which termination of employment occurs. Any change in form of payment, upon becoming effective, shall apply to the Participant's entire residual vested Account (including future accumulations, if any) unless later changed again in accordance with this Section. If a Participant's employment terminates prior to January 1 of the second year following the year in which he or she has made a change in election described above, his or her residual vested Account, if any, shall be distributed in accordance with the most recent distribution election. In the absence of an effective election, the Participant's residual vested Account, if any, shall be distributed in three annual installments as described at (b) above. Notwithstanding the foregoing, (1) the distribution alternatives described at (c) and (d) above shall not be available with respect to any residual vested Account having a balance at termination of employment of $50,000 or less. In the event any Participant has made an otherwise effective election to have his or her residual vested Account distributed under an alternative described at (c) or (d) above, but the residual vested Account balance at termination of employment is $50,000 or less, distribution shall be made in three annual installments as described at (b) above; (2) if a Participant effectively elects the form of distribution described in (b) above and dies or becomes disabled (as determined by the Administrator) during the installment distribution period, the Administrator may provide for immediate payment of the remaining balance in the Participant's residual vested Account; and (3) if the Participant's termination of employment occurs within twelve (12) months following a Change in Control of the Company as defined in Schedule B, the Participant's entire residual vested Account shall be promptly distributed in a single lump sum cash payment, unless the Participant and the Company agree in writing on another form of distribution. Payment to a Participant under any of the forms of payment described above, including distribution of shares of common stock of the Company, shall be conditional on a Participant's compliance with the covenant not to compete described in Section 7 below. If the Participant does not comply with the terms of Section 7, he or she shall forfeit all amounts not already paid under the Plan and shall be required to disgorge to the Company any amounts already paid. A Participant shall execute all documents as the Administrator may deem appropriate or necessary, including without limitation such documents as may be appropriate to evidence the covenant not to compete, before any distributions will be made from his or her Account. Notwithstanding the foregoing, the Administrator may defer payment of all or a portion of a Participant's Account beyond the scheduled payment dates if in the judgment of the Administrator such deferral is necessary to avoid disallowance of a deduction under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Amounts, if any, deferred pursuant to the preceding sentence shall be paid or commence to be paid not later than the date Code Section 162(m) would no longer limit the deductibility of such payment, as reasonably determined by the Administrator. 7. COVENANT NOT TO COMPETE The Participant agrees, as a condition of obtaining any Award Credit, that until two years after the Participant's employment with the Company and its affiliates terminates, the Participant shall not, without the prior written consent of the Administrator, directly or indirectly, whether as owner, partner, principal, investor, consultant, agent, employee, co-venturer or otherwise, compete with any business of the Company or any of its affiliates within the United States and any other country in which the Company and its affiliates is engaged in business at the time or, if employment has terminated, at the date of termination of employment, or undertake any planning for any such business competitive with the Company or any of its affiliates in the United States and such other countries. To the extent any portion of this Section 7 is determined by a court of competent jurisdiction to be invalid or unenforceable, this Section 7 shall be reformed so as to avoid such illegality and unenforceability and the resulting provisions shall be fully enforceable. 8. ASSIGNMENT The Company's obligations under the Plan shall be binding upon it and any successor to all or a major portion of its business or assets. Awards and rights to benefits under the Plan may not be assigned, alienated, sold or otherwise transferred by the Participant other than by will or the laws of descent and distribution. A Participant shall file with the Company the names of the beneficiaries to receive amounts, if any, remaining in his or her Account at the time of the Participant's death. 9. WITHHOLDING TAXES The Company will have the right to deduct withholding taxes from any payments made pursuant to the Plan, or make such other provisions as it deems necessary or appropriate to satisfy its obligations for withholding federal, state or local income, employment, excise or other taxes of the United States or other applicable foreign jurisdiction (including without limitation satisfying withholding obligations from a Participant's base salary) as a result of Plan awards or as a result of other payments or benefits, not under the Plan, to a Participant. 10. AMENDMENT AND MODIFICATION The Board or the Committee may terminate the Plan at any time and the Board may amend the Plan at any time and from time to time, with or without retroactive effect, including without limitation amendments that change the form or timing of distributions or amendments that accelerate the vesting of all or a portion of a Participant's Account; provided, that no such amendment shall, without the consent of the affected Participant, reduce the balance (vested and unvested) of any Participant's Account below what it was immediately prior to the amendment or alter the definition of "Change in Control". Without limiting the foregoing, the Board shall have power to make such adjustments in the definition of Adjusted Pre-Tax Profit as it deems equitable to carry out the purposes of the Plan. Any decision of the Board or Committee shall be final and binding on all parties. If it determines such action to be necessary to preserve or reinstate the Plan's status as a "top hat" plan under Sections 201(2), 301(a)(3) or 401(a)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA"), or to ensure effective tax deferral under the Plan, the Committee may at any time exclude any individual from participation in the Plan or may make such other changes in the deferral or distribution rules hereunder as are reasonably determined by the Committee to be necessary to accomplish such result or results. 11. NO CONTRACT OF EMPLOYMENT By participating in the Plan, each Participant expressly acknowledges and agrees that (i) nothing in the Plan or in its operation, including deferrals hereunder, limits the right of the Company to terminate the employment of the Participant at any time, with or without cause, and that (ii) neither the Participant nor his or her beneficiaries will claim lost compensation or associated tax benefits related to discontinuance of participation in the Plan as damages or as a measure of damages in connection with any termination of employment. 12. PLAN TO BE UNFUNDED, ETC. The Plan is intended to be a "pension plan" (within the meaning of Section 3(2) of ERISA) that is unfunded for ERISA and tax purposes and that qualifies for the exemptions described in ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Committee shall be the "plan administrator" of the Plan and shall have discretion to construe its terms and determine each Participant's eligibility for awards or distributions hereunder. If any person claims any benefit hereunder, the Administrator shall make and communicate its decision with respect to the claim within 90 days from the date the claim was received. Where special circumstances require additional time for processing the claim, the ninety-day response period may be extended by the plan administrator to 180 days. If the Administrator does not render a written determination prior to the expiration of such 90-day (or 180-day) period, the claim will be deemed denied. If a claim hereunder is denied, the claimant may, within 60 days of such denial, appeal the denial by written request for review delivered to the Committee, which request may include a request to review pertinent documents and to submit issues and comments in writing. The Committee shall render a decision on the appeal within 60 days (or, if special circumstances require an extension of the time for processing, 120 days) after receipt of the request for review; but if no written decision is rendered within such period(s), the appeal will be deemed denied. Nothing in this Section or in Section 5 shall be construed as prohibiting the Company from establishing and maintaining a "rabbi trust" or similar trust or account in connection with the Plan, so long as the maintenance and funding of such a trust or account does not jeopardize the unfunded status of the Plan under ERISA or effective tax deferral under the Code. 13. CERTAIN ADJUSTMENTS In the event of stock split, stock dividend, recapitalization, merger, consolidation or similar change affecting the capital stock of the Company, the Committee shall make appropriate adjustments in the units representing the deemed investments under the Company Stock Investment Alternative and in the provisions of Section 6 relating to distributions in respect of the Company Stock Investment Alternative, to reflect such stock split, stock dividend or other change. 14. GOVERNING LAW The Plan shall be construed under the laws of the State of Delaware. SCHEDULE A "Adjusted Pretax Profit" for any fiscal year subsequent to 1997 (the "current year") shall mean the product of (i) Profit Before Tax for such year and (ii) the ratio of The Weighted Average Outstanding Shares (1997) to The Weighted Average Outstanding Shares for the current year where: "Current Fiscal Year" means the fiscal year on which an Award Credit is based, "The Weighted Average Outstanding Shares" for the current year means the current year's monthly average of the sum of the Company's common shares including, without limitation, Class A common stock and Class B common stock determined by the definitions and methods specified in APB No. 15 and as reported in Exhibit 11 of the Company's 10-K for such year. "The Weighted Average Outstanding Shares (1997)" shall be 13,256,993, as adjusted from time for all stock splits, stock dividends and similar transactions. "Profit Before Tax" means the Company's consolidated net profit before income taxes, computed taking into account all expenses and charges except (a) the current fiscal year's expense for the Plan and (b) gains and losses that result from extraordinary transactions or events, mergers, consolidations, acquisitions and dispositions or other extraordinary or unusual transactions or events, if it is determined by the Administrator that an adjustment in respect of such transaction or event is appropriate to avoid distortion in the operation of the Plan. SCHEDULE B Change in Control ----------------- A "Change in Control" shall be deemed to have occurred if: (a) any "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act") (other than (i) the Company; (ii) any subsidiary of the Company; (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (iv) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of Stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the 1934 Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the 1934 Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (b) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining 'beneficial ownership' used in clause (a) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (c) during any period of two consecutive years (not including any period prior to the execution of the Plan), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (b), or (d) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. SCHEDULE C Actuarial Assumptions --------------------- Interest rate: 7.5% Mortality: 1983 Group Annuity Mortality Table (male rates) EX-10.107 17 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EXHIBIT 10.107 BROWN & SHARPE MANUFACTURING COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (FEBRUARY 13, 1998) 1. Purpose and Nature of Plan. This Plan is intended to provide -------------------------- supplemental retirement benefits to certain key employees and former employees of Brown & Sharpe Manufacturing Company (the "Company"). The Plan is not intended to be a tax-qualified plan. Although the Company reserves the right to establish a so-called grantor trust or another funding medium or investment vehicle to provide for the payment of benefits hereunder, nothing in the Plan will be construed to create a trust or to obligate the Company or any other person to segregate a fund, purchase an insurance contract, or in any other way currently to fund the future payment of any benefits hereunder, nor will anything herein be construed to give any employee or any other person rights to any specific assets of the Company or of any other person. 2. Meaning of Terms. Except as may otherwise be clearly indicated by the ---------------- context, for purposes of the Plan the following terms shall have the following meanings: . "Administrator" has the meaning given it in Section 3. . "Board" means the Board of Directors of the Company. . "Change in Control" means a change in control of the Company as defined in Exhibit A. . "Code" means the Internal Revenue Code of 1986, as from time to time amended. . "Committee" means the Compensation and Nominating Committee of the Board. . "Company" means Brown & Sharpe Manufacturing Company and any successor to all or a major portion of its business or assets. . "Eligible Employee" means an individual who (i) is employed by the Company or a subsidiary of the Company, (ii) is a U.S. citizen or resident, (iii) is individually designated (or is a member of a classification of persons designated) by the Committee as eligible to participate in the Plan, and (iv) satisfies the requirements of the following sentence. No person shall be eligible to participate in the Plan unless he or she (A) is the Chief Executive Officer of the Company, or (B) reports directly to the Chief Executive Officer of the Company, or (C) in the case of a division or group general manager, reports directly to an individual described in (B), or (D) reports directly to an individual described in (B) or (C). . "ESOP" means the Brown & Sharpe Employee Stock Ownership Plan as from time to time in effect. . "Investment Alternative" means any of the mutual funds or other market- based investments, including common stock of the Company, designated from time to time by the Committee as notional investment options for that portion of a Participant's Plan account attributable to credits under Section 5. The Committee may at any time and from time to time change the Investment Alternatives available under the Plan, including as to amounts already accrued or deferred hereunder. . "Investment Date" means the date fixed by the Committee for initiating the use of Investment Alternatives to adjust the balances of Section 5 Accounts. . "Non-Directed Account" has the meaning given it in Section 7. . "Nondiscretionary Fund" means, from and after the Investment Date, the investment fund or funds designated by the Committee as the measure of notional investment return for the Non-Directed Account. It is anticipated that upon and after the establishment of a "rabbi trust" or similar fund permissible under Section 1, the Nondiscretionary Fund shall consist of the investments of that portion of the assets of such trust or fund accumulated to help meet the Company's obligations hereunder with respect to the Non-Directed Account. . "Plan" means the Brown & Sharpe Manufacturing Company Supplemental Executive Retirement Plan as set forth herein, together with any and all amendments hereto. . "Participant" means an Eligible Employee who participates in deferrals under the Plan or for whom one or more accounts are maintained under the Plan. . "Salary" has the same meaning as the term "Salary" under the Savings Plan, determined without regard to the limitations described in Section 401(a)(17) of the Code and any corresponding limitation language in the Savings Plan and without regard to any deferrals hereunder. . "Savings Plan" means the Brown & Sharpe Savings and Retirement Plan for Management Employees as from time to time in effect. . "Section 5 Account" has the meaning given it in Section 7. . "Subject Rate" means, for any period prior to the Investment Date, the rate credited for that year with respect to amounts invested in the Guaranteed Interest Fund within the Savings Plan; provided, that if for any period the Guaranteed Interest Fund (or a comparable fund investing in guaranteed interest contracts) shall no longer be maintained within the Savings Plan, the Subject Rate shall be the prime rate as in effect at Rhode Island Hospital Trust National Bank; and further provided, that the Committee may at any time prior to the beginning of a year fix a Subject Rate for such year different than the rate determined in accordance with the foregoing. 3. Administration. The Plan shall be administered by the Committee, which -------------- shall serve as "plan administrator" for purposes of ERISA, and by such person or persons, if any, as the Committee may appoint to assist it in such administration (the Committee and such persons being hereinafter referred to as the "Administrator"). The Administrator shall have the discretionary authority to construe the Plan, determine all questions relating to eligibility for or the amount of benefits payable under the Plan, prescribe such forms and procedures as it or they deem necessary or appropriate for the administration of the Plan, and generally to determine all matters pertaining to the administration of the Plan. The Committee's determination in any such matter shall be final and binding on all parties. If any person claims any benefit hereunder, the Administrator shall make and communicate its decision with respect to the claim within 90 days from the date the claim was received. Where special circumstances require additional time for processing the claim, the ninety-day response period may be extended by the plan administrator to 180 days. If the Administrator does not render a written determination prior to the expiration of such 90-day (or 180-day) period, the claim will be deemed denied. If a claim hereunder is denied, the claimant may, within 60 days of such denial, appeal the denial by written request for review delivered to the Committee, which request may include a request to review pertinent documents and to submit issues and comments in writing. The Committee shall render a decision on the appeal within 60 days (or, if special circumstances require an extension of the time for processing, 120 days) after receipt of the request for review; but if no written decision is rendered within such period(s), the appeal will be deemed denied. 4. Participation. Each Eligible Employee shall be notified of his or her ------------- eligibility to participate in the Plan as soon as practicable after designation by the Committee. In order to elect deferrals under the Plan, a Participant must enter into an agreement with the Company, in such form as the Administrator shall approve or prescribe, providing for deferral of future Salary in accordance with the rules set forth in Section 5 below. Any Participant with amounts deferred under the Plan (or his or her surviving beneficiary, in the event of the Participant's death), shall remain a Participant until all amounts credited to his or her account have been paid out, or until the termination of the Plan if earlier. 5. Deferral Elections. For any year commencing on or after January 1, ------------------ 1988 a Participant may elect to defer any number of whole percentage points between 1 and 50 (or such other percentage limit, if any, as the Administrator may specify for such year) of his or her Salary payable in such year (including bonuses that may be attributable in part to services in prior periods). The Administrator may provide for separate elections as to base salary and bonuses and may permit deferrals up to a dollar limit rather than or in conjunction with a percentage limit. The Participant may also elect that, in the event the aggregate of elective contributions to the Savings Plan for his or her benefit for such year are prospectively reduced by the plan administrator under the Savings Plan on account of the nondiscrimination requirements of section 401(k) of the Code or the limitations of sections 402(g) or 415 of the Code (including the corresponding provisions of the Savings Plan), an amount equal to such reduction shall be automatically deferred hereunder rather than paid currently to the Participant. Each election hereunder shall be made in writing prior to the commencement of the year of reference and shall be effective beginning with the first pay period in such year, except that a person who becomes an Eligible Employee prior to December 1 of a given year may elect to participate hereunder for the remainder of such year by submitting a properly executed election within thirty (30) days of becoming eligible to participate, such election to take effect with the first pay period following the receipt of such election by the Company. An election once made hereunder shall continue in force from year to year unless revoked or altered as to Salary to be earned in a subsequent year. 6. Additional Credits. For each year in which an Eligible Employee is a ------------------ participant in either the Savings Plan or the ESOP, or both, there shall be credited to the Eligible Employee's account hereunder an amount equal to the excess, if any, of (a) over (b), where (a) is the aggregate for such year of all Company contributions, other than elective contributions under the Savings Plan but including allocations from the ESOP supplemental suspense account (such ESOP allocations to be valued for purposes of this paragraph in the same manner as for purposes of determining "annual additions" under paragraph (b) below), that would have been allocated to the Eligible Employee's accounts under the Savings Plan or the ESOP but for the limitations of section 415 or section 401(a)(17) of the Code and the corresponding limitation language of those plans provided that credits hereunder in lieu of matching contributions under the Savings Plan shall be made only if the eligible Employee was participating to the fullest extent possible (taking into account applicable limitations) in elective contributions under the Savings Plan; and (b) is the aggregate of the "annual additions" (as defined in section 415(c) of the Code) actually made to or allocated under the Savings Plan and the ESOP for such year for the benefit of the Eligible Employee, other than elective contributions for his or her benefit for such year under the Savings Plan. 7. Accounts. For each Participant there shall be maintained hereunder -------- memorandum accounts to which shall be credited amounts deferred under Section 5 and any other credits made under the Plan (including credits, if any, under Section 6). Amounts deferred under Section 5 shall be allocated to accounts as of the end of the calendar quarter in which the corresponding Salary, if paid in cash, would have been paid. Amounts credited under Section 6 or Section 9 shall be allocated as of the end of the year or at such other time or times as the Administrator may determine. From and after the Investment Date there shall be separate accounting for amounts described in Section 5 and related notional investment experience (the "Section 5 Account") and other balances under the Plan (the "Non-Directed Account"). Effective as of the Investment Date, each Participant's Section 5 Account, if any, adjusted for interest at the Subject Rate through the immediately preceding day, shall be treated (solely for purposes of the Plan) as having been invested in such Investment Alternative or Investment Alternatives as the Participant shall have selected from among those made available under the Plan, or in the absence of such a Participant selection in such Investment Alternative or Alternatives as the Administrator may determine. Each Participant with a Section 5 Account shall be entitled thereafter, by written notice to the Company, to reallocate the notional investment of such Account (as the same may be adjusted for additional credits, distributions, or notional investment experience under this paragraph) among the Investment Alternative or Alternatives made available under the Plan, any such change to take effect as of the beginning of the calendar quarter (i.e., January 1, April 1, July 1 or October 1) next following receipt by the Company of such change notice, except in the event of the Participant's retirement or termination in which case the Participant can make such change with one day's notice. All Participant selections of or changes in notional investments under this paragraph shall be made by written notice delivered to the Company. The Administrator may prescribe such additional rules and procedures for the notional investment of Section 5 Accounts as it deems advisable. As of the end of each calendar quarter (i.e., March 31, June 30, September 30 and December 31) and as of the Investment Date there shall be allocated to each Non-Directed Account notional interest at an annual rate equal to the Subject Rate. Thereafter, each Non-Directed Account shall be adjusted for notional investment experience as though invested (as of the Investment Date) in the Nondiscretionary Fund. A Participant's account or accounts shall continue to be maintained and adjusted for notional interest or other notional investment experience until distributed in full. 8. Distribution. Subject to such restrictions and limitations as the ------------ Administrator may impose, benefits under the Plan shall be distributed as follows. In connection with his or her initial participation in the Plan (or by March 31, 1998, if later), each Participant shall elect, in such manner and form as the Administrator may determine and separately as to the Participant's Section 5 Account and vested Non-Directed Account under the Plan, how such Accounts (as the same may accumulate and be adjusted in the future) shall be paid from among the following options: (a) A lump sum cash payment within 20 days of termination of employment. (b) Three annual cash installments, the first such installment (equal to one-third of the Participant's vested Account) being paid within 20 days of termination of employment, the second installment (equal to one-half of the vested Account remaining after the first installment, as adjusted for notional investment experience) being paid on the first anniversary of the termination of employment, and the third and final installment (equal to the entirety of the vested Account remaining after the first and second installments, as adjusted for notional investment experience) being paid on the second anniversary of the termination of employment. (c) A single life annuity, payable monthly in cash for the Participant's life commencing with the first day of the month coinciding with or next following the Participant's termination of employment and ending with the month of the Participant's death, that is the actuarial equivalent of the Participant's vested Account hereunder at termination of employment determined by the Administrator using the actuarial assumptions set forth in Exhibit B. (d) A 50% joint and survivor annuity (that is actuarially equivalent to the Participant's vested Account hereunder at termination of employment determined by the Administrator using the actuarial assumptions set forth in Exhibit B) providing monthly cash payments to the Participant commencing with the first day of the month coinciding with or next following the Participant's termination of employment, with 50% of such monthly cash amount being paid thereafter to the person to whom the Participant was married at the date annuity payments to the Participant commenced or to such other person as the Participant may designate with the consent of the Administrator (the "contingent annuitant"), provided the contingent annuitant survives the Eligible Employee, with the last such payment being made for the month in which the contingent annuitant dies. A Participant who has made an initial election as described above may change such election by delivering a notice of such change, in such form and manner as the Administrator may determine, to the Administrator not later than December 31 of the second calendar year preceding the calendar year in which termination of employment occurs. Any change in form of payment with respect to a Participant's Section 5 Account or vested Non-Directed Account, as the case may be, upon becoming effective shall apply to the entirety of such Account, including future accumulations, if any, unless later changed again in accordance with this Section. If a Participant's employment terminates prior to January 1 of the second year following the year in which he or she has made a change in election described above, his or her vested Accounts, if any, shall be distributed in accordance with the most recent distribution elections applicable to such Accounts. In the absence of an effective election with respect to a Participant's Section 5 Account or vested Non-Directed Account, as the case may be, the entirety of such vested Account, if any, shall be distributed in accordance with the election, if any, in effect with respect to the remainder of the Participant's vested interest in the Plan, and in the absence of any such election in three annual installments as described at (b) above. Notwithstanding the foregoing, the distribution alternatives described at (c) and (d) above shall not be available with respect to any Account if the totality of the Participant's vested Accounts at termination of employment have a balance of $50,000 or less. In the event any Participant has made an otherwise effective election to have his or her Section 5 Account or vested Non-Directed Account distributed under an alternative described at (c) or (d) above, but the totality of the Participant's vested Accounts at termination of employment have a balance of $50,000 or less, distribution shall be made in three annual installments as described at (b) above. If a Participant effectively elects the form of distribution described in (b) above and dies or becomes disabled (as determined by the Administrator) during the installment distribution period, the Administrator may provide for immediate payment of the remaining balance in the Participant's Account. Notwithstanding the foregoing, the Company prior to a Change in Control may defer distributions hereunder (but not beyond a Change in Control) to the extent it determines that the distributable amount, if not deferred, would (together with other compensation paid to the Eligible Employee) result in amounts that are not deductible to the Company by reason of Section 162(m) of the Code. Any distributable amount deferred under the preceding sentence shall continue to earn notional interest at the Subject Rate pursuant to Section 7 above until actually paid. Prior to termination of employment, an Eligible Employee who has suffered a severe and unanticipated financial emergency may petition the Committee for a hardship withdrawal in an amount not to exceed the vested balances of his or her Section 5 Account and/or Non-Directed Account. The Committee shall have complete discretion to determine whether a hardship withdrawal will be permitted and, if so, the amount of the withdrawal. The balance of an Eligible Employee's Accounts shall be reduced to reflect any hardship withdrawal under this paragraph. 9. Additional Accounts. In addition to credits under Section 5 or Section ------------------- 6 above, the Committee in its sole discretion may provide for discretionary credits hereunder with respect to any employee or former employee of the Company who is designated by the Committee, whether or not such employee is otherwise designated an Eligible Employee with rights of participation under the Plan. Any credits under this Section 9 shall be allocated to the Participant's Non- Directed Account and, if there are other amounts allocated to such Account, shall be separately accounted for as a sub-account of such Account. The Committee may impose such vesting rules as it may determine on an individual's right to receive a distribution in respect of any amounts described in this Section. Subject to such vesting rules, the balance of any account maintained under this Section 9 shall be distributed at such time or times and in such manner as the Committee shall determine, subject, however, to the provisions of Section 15 below. 10. Death. In the event a Participant hereunder should die prior to ----- complete distribution of his or her accounts, the remaining balance of such accounts shall be distributed as soon as practicable thereafter in a lump-sum payment to the Participant's designated beneficiary or beneficiaries. A Participant may at any time specify or add a beneficiary, or revoke an existing beneficiary designation, by notice in writing delivered to the Secretary of the Company. If the Participant dies without a beneficiary designation in effect, the death benefit payable hereunder shall be paid to the Participant's estate. 11. No Assignment. No Participant and no beneficiary of a Participant ------------- shall have any right to assign or otherwise alienate the right to receive payments hereunder, in whole or in part. 12. Taxes. All distributions from the Plan shall be subject to, and ----- reduced by, applicable tax withholding. To the extent amounts deferred under the Plan are determined by the Company to be subject to FICA or Medicare tax at time of deferral or at any later time prior to distribution, the Company in its discretion may withhold the required taxes from other amounts payable to the Eligible Employee or may require the Eligible Employee to pay the required taxes by separate check; but if the required taxes are not so paid or withheld, the Eligible Employee's account balance hereunder shall be appropriately reduced. 13. Amendment; Termination. The Committee or the Board may terminate and ---------------------- the Board may at any time and from time to time amend the Plan; provided, that no such amendment to the definition of "Change in Control" shall be effective as to any Participant without his or her consent; further provided, that no amendment or termination following a Change in Control shall affect the rights of Participants to an immediate payment of amounts deferred or credited under the Plan prior to the Change in Control; and further provided, that accounts maintained under the Plan shall continue to be adjusted for notional interest or other notional earnings until distributed in full. If the Committee in its sole discretion should at any time deem it necessary to preserve the qualification of the plan under Title I of the Employee Retirement Income Security Act of 1974, as amended, as a plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, it may terminate the Plan solely as to those Participants whose continued participation in the Plan would or, in the determination of the Committee, might cause the Plan to fail to be so qualified. Upon termination of the Plan as to any individual, no further deferrals or credit under Section 5 or 6 shall be made in respect of such individual, and the Committee in its sole discretion may elect to accelerate the payment of any or all of such individual's remaining benefits under the Plan. 14. No Employment Rights. Nothing in this Plan shall be construed as -------------------- giving any person rights to be employed or remain employed by the Company or to receive any remuneration from the Company, except payment of deferrals and credits as described above. Nothing in this Plan shall be construed as obligating the Company in any way to maintain either the Savings Plan or the ESOP. By participating in the Plan, each Eligible Employee affirms and acknowledges the Company's absolute right, subject only to the limitations of law, to make such changes in the Saving Plan and the ESOP as the Company may from time to time see fit, or to terminate one or both of those plans if it so chooses. 15. Acceleration Upon Change in Control. In the event of a Change in ----------------------------------- Control, all amounts theretofore deferred or credited under the Plan shall become immediately due and payable and shall be distributed in a lump sum not later than by the 60th day following the Change in Control. 16. Governing law. The Plan shall be construed under the laws of the ------------- State of Delaware. EXHIBIT A Change in Control ----------------- A "Change in Control" shall be deemed to have occurred if: (a) any "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act") (other than (i) the Company; (ii) any subsidiary of the Company; (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (iv) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of Stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the 1934 Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the 1934 Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (b) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining 'beneficial ownership' used in clause (a) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (c) during any period of two consecutive years (not including any period prior to the execution of the Plan), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (b), or (d) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. EXHIBIT B Actuarial Assumptions --------------------- Interest rate: 7.5% Mortality: 1983 Group Annuity Mortality Table (male rates) EX-10.108 18 SENIOR EXECUTIVE SUPPLEMENTAL PENSION EXHIBIT 10.108 BROWN & SHARPE MANUFACTURING COMPANY SENIOR EXECUTIVE SUPPLEMENTAL UMBRELLA PENSION PLAN (FEBRUARY 13, 1998) 1. Purpose and Nature of Plan. The Senior Executive Supplemental Umbrella -------------------------- Pension Plan set forth herein (as the same may be amended, the "Plan") is intended to assure certain senior executives of Brown & Sharpe Manufacturing Company (the "Company") and its subsidiaries, subject to the terms of the Plan, a specified level of retirement benefits upon retirement from the employ of the Company and its subsidiaries. The Plan is intended to be unfunded for purposes of both the Internal Revenue Code of 1986, as amended (the "Code") and the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and as a plan maintained for the benefit of a select group of management or highly compensated employees for purposes of Sections 201(2), 301(a)(2) and 401(a)(2) of ERISA, and shall be construed accordingly. Although the Company reserves the right to establish a so-called grantor trust or another funding medium or investment vehicle to provide for the payment of benefits hereunder, nothing in the Plan will be construed to create a trust or to obligate the Company or any other person to segregate a fund, purchase an insurance contract, or in any other way currently to fund the future payment of any benefits hereunder, nor will anything herein be construed to give any employee or any other person rights to any specific assets of the Company or of any other person. 2. Meaning of Terms. Except as may otherwise be clearly indicated by the ---------------- context, for purposes of the Plan the following terms shall have the following meanings: . "Actuarial Equivalent" means a benefit that is the actuarial equivalent of a benefit payable in another form or commencing at another time or both, as determined by the Committee based on the actuarial assumptions set forth in Exhibit B. . "Administrator" has the meaning given it in Section 8. . "Applicable Annuity Factor" for any age means the factor set forth in Exhibit C for such age, representing the Actuarial Equivalent present value of a single life annuity of one dollar ($1.00) per year payable monthly commencing at such age. . "Applicable Percentage" means such percentage as the Committee may specify in the case of any Eligible Employee. . "Average Annual Plan Compensation" means, in the case of any Eligible Employee, the amount determined by (a) determining for each Compensation Component the three calendar years (or such lesser period during which the Eligible Employee was employed by the Company and its subsidiaries) out of the ten consecutive calendar-year period ended on December 31 next preceding (i) the date of the Eligible Employee's retirement or other termination of employment, in the case of a determination under Sections 3 or 4, (ii) the date of the Participant's death, in the case of a determination under Section 6, or (iii) the date of a Change in Control, in the case of a determination under Section 10, during which the amount of such Compensation Component paid or accrued with respect to the Eligible Employee was highest, and determining an annual average for such Compensation Component using such three high years; and (b) adding together the results of the annual averages determined under (a). For the avoidance of doubt, the three years used to average one Compensation Component need not be the same three years used to average other Compensation Components. . "Board" means the Board of Directors of the Company. . "Change in Control" means a change in control of the Company as defined in Exhibit A. . "Code" has the meaning given it in Section 1. . "Committee" means the Compensation and Nominating Committee of the Board. . "Company" has the meaning given it in Section 1 and includes any successor to all or a major portion of the business or assets of Brown & Sharpe Manufacturing Company. . "Compensation Component" means any of the following as applied to an Eligible Employee: (i) the Eligible Employee's base salary using annual rate in a partial year of service, (ii) any annual bonus plus special bonuses paid or accrued for the benefit of the Eligible Employee, whether or not under the Company's Profit Incentive Plan, (iii) "Participating Employer Contributions" (as that term is defined in the SARP under Section 5.2) for the Eligible Employee's benefit under SARP, (iv) allocations (other than of income or earnings) to the Eligible Employee's account under the ESOP, (v) credits under Section 6 of the SERP to the Eligible Employee's "Non-Directed Account" as that term is defined in the SERP, and (vi) "Matching Contributions" (as that term is defined in the SARP under Section 5.1A). For the avoidance of doubt, the following shall not constitute Compensation Components: accruals or benefits under the Company's Long Term Deferred Compensation Incentive Plan or any similar long-term plan, payments or reimbursements of or for relocation or moving expenses, or income in respect of the grant, vesting or exercise of stock (including restricted stock) awards or stock options. . "Eligible Employee" means an individual who (i) is employed by the Company or a subsidiary of the Company, (ii) is the Chief Executive Officer of the Company or reports directly to the Chief Executive Officer of the Company (or in the case of an otherwise eligible division or group general manager, reports to an individual who has a direct report to the Chief Executive Officer of the Company), and (iii) is individually designated (or is a member of a classification of persons designated) by the Committee as eligible to participate in the Plan. . "ESOP" means the Brown & Sharpe Employee Stock Ownership Plan as from time to time amended and in effect. . "ESOP Benefit" means, with respect to any Eligible Employee, the following expressed as an annual benefit: a 50% Joint and Survivor Annuity that is the Actuarial Equivalent of the Eligible Employee's account balance under the ESOP determined as of the date of the Eligible Employee's retirement or other termination of employment with the Company and its subsidiaries (the "applicable ESOP valuation date") by assuming, instead of the actual value of such account on such date, that the dollar value of the Eligible Employee's account balance under the ESOP as of January 1, 1998, as thereafter increased by allocations of employer contributions and forfeitures, had been increased with interest from time to time through the applicable ESOP valuation date at a rate equal to the Test Rate. If the Eligible Employee has received a distribution or withdrawal from his or her ESOP account prior to the applicable ESOP valuation date, the value of the Eligible Employee's ESOP account as of the applicable ESOP valuation date shall be increased by an amount equal to each such distribution or withdrawal increased by interest at the Test Rate from the date of such distribution or withdrawal through the applicable ESOP valuation date. . "50% Joint and Survivor Annuity" means an annuity payable monthly in cash to the Eligible Employee commencing with the month next following the month in which the Eligible Employee retires or otherwise terminates employment with the Company and its subsidiaries and continuing for the Eligible Employee's lifetime, with 50% of such monthly cash amount being paid thereafter to the person to whom the Eligible Employee was married at the date annuity payments to the Eligible Employee commenced or to such other person as the Eligible Employee may designate with the consent of the Administrator, provided such spouse or other person survives the Eligible Employee, with the last such payment being made for the month in which such surviving spouse or other person dies. . "Plan" has the meaning given it in Section 1. . "SARP" means the Brown & Sharpe Savings and Retirement Plan for Management Employees as from time to time amended and in effect. . "SARP Benefit" means, with respect to any Eligible Employee, the following expressed as an annual benefit: a 50% Joint and Survivor Annuity that is the Actuarial Equivalent of that portion of the Eligible Employee's accounts under the SARP, determined as of the SARP valuation date that coincides with or next follows the first day of the month coinciding with or next following the date of the Eligible Employee's retirement or other termination of employment with the Company and its subsidiaries (the "applicable SARP valuation date"), that is attributable to "Participating Employer Contributions" as that term is defined in the SARP under Section 5.2 (including similar contributions under any predecessor version of SARP) (the "applicable SARP account") by assuming, instead of the actual value of the applicable SARP account on such date, that the dollar value of the Eligible Employee's accounts under SARP as of January 1, 1998, as thereafter increased by "Participating Employer Contributions", had been increased with interest from time to time through the applicable SARP determination date at a rate equal to the Test Rate but excluding "Matching Contributions" (as that term is defined in the SARP under Section 5.1A). If the Eligible Employee has received a distribution or withdrawal from his or her SARP accounts prior to the applicable SARP valuation date, the value of the Eligible Employee's SARP accounts as of the applicable SARP valuation date shall be increased by an amount equal to each such distribution or withdrawal increased by interest at the Test Rate from the date of such distribution or withdrawal through the applicable SARP valuation date. . "SERP" means the Company's Supplemental Executive Retirement Plan as from time to time amended and in effect. . "SERP Benefit" means, with respect to any Eligible Employee, the following expressed as an annual benefit: a 50% Joint and Survivor Annuity that is the Actuarial Equivalent of that portion of the Eligible Employee's "Non-Directed Account" (as that term is defined in SERP) attributable to credits under Section 6 of SERP (and notional earnings with respect thereto), determined as of the date of the Eligible Employee's retirement or other termination of employment with the Company and its subsidiaries but excluding "Matching Contributions" (as that term is defined in the SARP under Section 5.1A). . "Service" means, in the case of any Eligible Employee and except as otherwise determined by the Administrator, the Eligible Employee's most recent period of uninterrupted service as an employee of the Company and its subsidiaries. . "Social Security Benefit" means, except as provided in the following paragraph, the retirement benefit (expressed as an annual amount) which an Eligible Employee would be eligible to receive from Social Security during his lifetime, assuming no offsets or reductions for other earnings and commencing with the month next following the month of his or her retirement or other termination of employment from the Company and its subsidiaries, as determined by the Administrator in its reasonable discretion. Determination of such benefit will reflect the provision of the Social Security Act in effect on the January 1 preceding the Eligible Employee's retirement or termination of employment, as applicable. If an Eligible Employee retires or his or her employment terminates prior to age 62 and at a time when he or she is not yet eligible to receive Social Security, the Eligible Employee's Social Security Benefit for purposes of the Plan shall be zero (0) until the month next following the Eligible Employee's 62nd birth date and thereafter shall be the Actuarial Equivalent (expressed as an annual amount) of the retirement benefit that he or she would have been eligible to receive from Social Security at age 62, based on the methodology described in the preceding paragraph and assuming that the Eligible Employee's earnings in the year prior to termination or retirement continued at the same rate until the year prior to attainment of age 62. . "Test Rate" means, except as otherwise determined by the Committee with respect to future periods, a rate equal to the monthly average of the Merrill Lynch Government Master Treasury Bond Index (Ten Plus Years). 3. Benefits at Normal or Early Retirement. Each Eligible Employee with at -------------------------------------- least five (5) years of Service who retires from the employ of the Company and its subsidiaries upon or after attaining age 65, or upon or after attaining age 60 with at least ten (10) years of Service, will be entitled to a benefit, payable in the form described in Section 5, that is the Actuarial Equivalent of the benefit described in this Section. The benefit described in this Section is a 50% Joint and Survivor Annuity where each of the monthly payments payable during the Eligible Employee's lifetime equals one-twelfth (1/12) the amount obtained by subtracting (b) from (a), where (a) is the Applicable Percentage of the Eligible Employee's Average Annual Plan Compensation; and (b) is the sum of the Eligible Employee's (i) SERP Benefit; (ii) SARP Benefit; (iii) ESOP Benefit; and (iv) Social Security Benefit. 4. Benefits Upon Other Termination of Employment. Each Eligible Employee --------------------------------------------- with at least five (5) years of Service whose employment with the Company and its subsidiaries terminates (other than by reason of a retirement described in Section 3 above) after the Eligible Employee attains age 55 will be entitled to a benefit, payable in the form described in Section 5, that is the Actuarial Equivalent of the benefit described in this Section. The benefit described in this Section is a 50% Joint and Survivor Annuity where each of the monthly payments payable during the Eligible Employee's lifetime equals one-twelfth (1/12) the amount obtained by subtracting (b) from (a), multiplying the result by (c), and multiplying the result of that computation by (d), where (a) is the Applicable Percentage of the Eligible Employee's Average Annual Plan Compensation; (b) is the sum of the Eligible Employee's (i) SERP Benefit; (ii) SARP Benefit; (iii) ESOP Benefit; and (iv) Social Security Benefit; (c) is one (1) minus the fraction determined under (i) or (ii), whichever is applicable: (i) If the Eligible Employee's age at the beginning of his or her period of Service taken into account under the Plan (determined to the nearest whole month) was 55 or older, the applicable fraction for purposes of this paragraph (c) shall be a fraction, the numerator of which is the excess of 65 over the Eligible Employee's age at termination of employment (determined to the nearest whole month), and the denominator of which is the excess of 65 over the Eligible Employee's age at the beginning of the period of Service taken into account under the Plan (determined to the nearest whole month). (ii) If the Eligible Employee's age at the beginning of his or her period of Service taken into account under the Plan was less than 55, the applicable fraction for purposes of this paragraph (c) shall be a fraction, the numerator of which is the excess of the Eligible Employee's "full accrual age" (determined to the nearest whole month) over the Eligible Employee's age at termination of employment (determined to the nearest whole month), and the denominator of which is the excess of 65 over his or her age at the beginning of the period of Service taken into account under the Plan (determined to the nearest whole month), where "full accrual age" means the later of age 60 or the age at which the Eligible Employee would have completed 10 years of Service assuming continued employment; and (d) is (1) divided by (2), where (1) is the Applicable Annuity Factor at age 65, if the Eligible Employee's age at the beginning of his or her period of Service taken into account under the Plan was 55 or greater, and in every other case the Applicable Annuity Factor at the Eligible Employee's "full accrual age" as determined under (c)(ii) above, and (2) is the Applicable Annuity Factor at the Eligible Employee's age at termination of employment. 5. Form of Payment. The benefit with respect to an Eligible Employee who --------------- retires or whose employment terminates under Section 4 or Section 5 above shall be paid in accordance with this Section 5. In connection with his or her initial participation in the Plan (or by March 31, 1998, if later), each Participant shall elect, in such manner and form as the Administrator may determine, how the Participant's entire benefit under the Plan shall be paid from among the following options: (a) A lump sum cash payment within 20 days of termination of employment. (b) Three annual cash installments, the first such installment (equal to one-third of the lump-sum amount described in (a)) being paid within 20 days of termination of employment, the second installment (equal to one- third of the amount described in (a), increased by interest at the Test Rate) being paid on the first anniversary of the termination of employment, and the third and final installment (equal to one-third the amount described in (a), increased by interest at the Test Rate) being paid on the second anniversary of the termination of employment. (c) A single life annuity payable monthly in cash for the Eligible Employee's life commencing with the first day of the month coinciding with or next following the Eligible Employee's retirement or other termination of employment and ending with the month of the Eligible Employee's death. (d) A 50% Joint and Survivor Annuity; provided, that if the Eligible Employee elects the form of benefit described in this paragraph (d) and wishes to designate a contingent annuitant other than the Eligible Employee's spouse, any such designation must be made at the time of the election and shall be subject to approval by the Administrator. An Eligible Employee who has made an initial election as described above may change such election by delivering a notice of such change, in such form and manner as the Administrator may determine, to the Administrator not later than December 31 of the second calendar year preceding the calendar year in which retirement or other termination of employment occurs. Any change in form of payment, upon becoming effective, shall apply to the Eligible Employee's entire benefit, if any, hereunder unless later changed again in accordance with this Section. If an Eligible Employee retires or his or her employment terminates prior to January 1 of the second year following the year in which he or she has made a change in election described above, his or her benefit, if any, shall be distributed in accordance with the most recent distribution election. In the absence of an effective election, the Eligible Employee's benefit, if any, shall be distributed in the annuity option described in (c) above if the Eligible Employee is not married on the date of retirement or other termination of employment and otherwise in the form of the annuity option described in (d) above (with the Eligible Employee's spouse as the contingent annuitant). Notwithstanding the foregoing, the distribution alternatives described at (c) and (d) above shall not be available with respect to any benefit with an Actuarial Equivalent value at retirement or other termination of employment of $50,000 or less. In the event any Eligible Employee has made an otherwise effective election to have his or her benefit, if any, distributed under an alternative described at (c) or (d) above, but the Actuarial Equivalent value of such benefit at retirement or other termination of employment is $50,000 or less, distribution shall be made in three annual installments as described at (b) above. 6. Certain Death Benefits. If a married Eligible Employee dies prior to ---------------------- retirement or other termination of employment but after attaining age 55 with at least five years of Service and is survived by his or her spouse, such spouse shall be entitled to an annuity for the remainder of her or his lifetime equal to the annuity to which she or he would have been entitled had the Eligible Employee retired or terminated employment and commenced receiving benefits under Section 5(d) immediately prior to death, having designated his or her spouse as the contingent annuitant. Notwithstanding the foregoing, if the lump sum Actuarial Equivalent determined as of the date of death of the survivor benefit described in the preceding sentence is $50,000 or less, the Administrator shall cause the entire benefit to be paid in a single lump sum payment to the surviving spouse as soon as practicable following the date of the Eligible Employee's death. 7. No other benefits payable. Except as provided under Sections 3, 4, 5 ------------------------- and 6 above, no benefits shall be payable under the Plan upon the retirement, death or other termination of employment of an Eligible Employee or upon the death of an Eligible Employee following retirement or other termination of employment. 8. Administration. The Plan shall be administered by the Committee (which -------------- shall serve as "plan administrator" for purposes of ERISA) with assistance from such person or persons, if any, as the Committee appoints to assist it in such administration. The Committee and those persons to whom the Committee delegates its authority (such persons together with the Committee, the "Administrator") shall have the discretionary authority to construe the Plan, determine all questions relating to eligibility for or the amount of benefits payable under the Plan, prescribe such forms and procedures as it or they deem necessary or appropriate for the administration of the Plan, and generally to determine all matters pertaining to the administration of the Plan. The Committee's determination in any such matter shall be final and binding on all parties. If any person claims any benefit hereunder, the Administrator shall make and communicate its decision with respect to the claim within 90 days from the date the claim was received. Where special circumstances require additional time for processing the claim, the ninety-day response period may be extended by the plan administrator to 180 days. If the Administrator does not render a written determination prior to the expiration of such 90-day (or 180-day) period, the claim will be deemed denied. If a claim hereunder is denied, the claimant may, within 60 days of such denial, appeal the denial by written request for review delivered to the Committee, which request may include a request to review pertinent documents and to submit issues and comments in writing. The Committee shall render a decision on the appeal within 60 days (or, if special circumstances require an extension of the time for processing, 120 days) after receipt of the request for review; but if no written decision is rendered within such period(s), the appeal will be deemed denied. 9. Termination for cause; covenant not to compete. Notwithstanding any ---------------------------------------------- other provision of the Plan, (a) no benefit shall be payable hereunder to or on account of any Eligible Employee whose employment with the Company or its subsidiaries is terminated for cause. For purposes of the preceding sentence, termination for "cause" shall mean termination on account of intentional commission of theft, embezzlement, or other serious and substantial crimes against the Company, intentional wrongful engagement of competitive activity with respect to any business of the Company or its subsidiaries as provided in (b) below, or intentional wrongful commission of material acts in clear and direct contravention of instructions from the Board or the Chief Executive Officer; provided, however, that the termination for cause shall have been approved or ratified by the Board after notice to the Participant; and (b) no benefit shall be payable hereunder to or on account of any Eligible Employee who at any time during his or her employment with the Company and its subsidiaries or within the two-year period following retirement or other termination of employment competes with the Company. For purposes of this clause (b), an Eligible Employee shall be deemed to be competing with the Company if, without the prior written consent of the Committee, he or she directly or indirectly, whether as owner, partner, principal, investor, consultant, agent, employee, co-venturer or otherwise competes with any business of the Company or any of its affiliates within the United States and any other country in which the Company and its affiliates is engaged in business at the time or, if employment has terminated, at the date of termination of employment, or undertakes any planning for any business competitive with the Company or any of its affiliates in the United States and such other countries. If an Eligible Employee does not comply with the terms of this paragraph he or she shall forfeit all amounts not already paid under the Plan and shall be required to disgorge to the Company any amounts already paid. An Eligible Employee shall execute all documents that the Administrator may deem appropriate or necessary, including without limitation such documents as may be appropriate to evidence the covenant not to compete, before any benefits are payable with respect to the Eligible Employee hereunder. (c) To the extent any portion of this Section 9 is determined by a court of competent jurisdiction to be invalid or unenforceable, this Section 9 shall be reformed so as to avoid such illegality and unenforceability and the resulting provisions shall be fully enforceable. 10. Change in Control. In the event of a Change in Control of the ----------------- Company, the provisions of this Section 10 shall apply notwithstanding any other provision of the Plan to the contrary. Each Eligible Employee who is employed immediately prior to the Change in Control shall have a fully vested benefit that is the Actuarial Equivalent (determined as of the date of the Change in Control) of the benefit to which such Eligible Employee would have been entitled under Section 3 or Section 4 had he or she retired or terminated employment (other than by reason of a termination for cause) upon the later of the date of the Change in Control or the date on which the Eligible Employee would have attained age 55, determined taking into account the following special rules: (a) The Eligible Employee's Average Annual Plan Compensation, SARP Benefit, SERP Benefit, ESOP Benefit, Social Security Benefit, and Early Commencement Factor shall be determined as of the date of the Change in Control. (b) The Eligible Employee's entitlement to a benefit shall be determined without regard to whether he or she has the minimum five years of Service referenced in the first sentence of each of Sections 3 and 4. (c) In the case of an Eligible Employee who is a party to a Change in Control agreement with the Company under which the Eligible Employee may become entitled to severance or severance-type payments in connection with or following a Change in Control, (i) the Eligible Employee's age shall be increased by the number of years and months constituting the maximum period that would be used under such agreement to measure any such severance or severance-type payments, whether or not the Eligible Employee has become entitled to such severance or severance-type payments at the time of the Change in Control, and (ii) the Eligible Employee's Service for purposes of the ten (10) years of Service requirement under Section 3 and/or the ten (10) years of Service requirement for attaining "full accrual age" under Section 4(c)(ii) shall be increased by the same period. The benefit described in this Section shall be paid in a single lump sum cash payment of Actuarial Equivalent value as soon as practicable following the Change in Control and in all events not later than thirty (30) days thereafter. In the event of a Change in Control, the restrictions of Section 9(b) shall cease to apply. 11. Binding effect; no assignment. The Company's obligations under the ----------------------------- Plan shall be binding upon its successors and assigns. Awards and rights to benefits under the Plan may not be assigned, alienated, sold or otherwise transferred by the Eligible Employee or any other person. 12. Taxes. The Company will have the right to deduct withholding taxes ----- from any payments made pursuant to the Plan, or make such other provisions as it deems necessary or appropriate to satisfy its obligations for withholding federal, state or local income, employment, excise or other taxes of the United States or other applicable foreign jurisdiction (including without limitation satisfying withholding obligations from an Eligible Employee's salary) as a result of Plan accruals or payments or as a result of other payments or benefits, not under the Plan, to an Eligible Employee. 13. Amendment and termination. The Committee or the Board may terminate ------------------------- the Plan at any time and the Board may amend the Plan at any time and from time to time, with or without retroactive effect, including without limitation amendments that change the form or timing of distributions or amendments that accelerate the vesting of all or a portion of an Eligible Employee's Account; provided, that in the case of an Eligible Employee who has attained age 55 and has at least five years of Service, no such amendment (other than a change in the actuarial assumptions set forth in Exhibit B or the Early Commencement Factors in Exhibit C) shall, without the consent of the affected Eligible Employee, alter the definition of "Change in Control" or reduce the amount of the benefit to which the Eligible Employee would have been entitled if he or she had terminated employment immediately prior to such amendment. Without limiting the foregoing, if it determines such action to be necessary to preserve or reinstate the Plan's status as a "top hat" plan under Sections 201(2), 301(a)(3) or 401(a)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA"), or to ensure effective tax deferral under the Plan, the Committee may at any time exclude any individual from participation in the Plan or may make such other changes in the deferral or distribution rules hereunder as are reasonably determined by the Committee to be necessary to accomplish such result or results. 14. No contract of employment. Nothing in the Plan or in its operation ------------------------- limits the right of the Company to terminate the employment of any Eligible Employee at any time, with or without cause, and no Eligible Employee nor any other persons shall have any right to claim lost compensation or associated benefits related to discontinuance of participation in the Plan as damages or as a measure of damages in connection with any termination of employment. 15. Governing law. The Plan shall be construed under the laws of the ------------- State of Delaware. EXHIBIT A Change in Control ----------------- A "Change in Control" shall be deemed to have occurred if: (a) any "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act") (other than (i) the Company; (ii) any subsidiary of the Company; (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company; or (iv) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of Stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of the 1934 Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the 1934 Act) of such person, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (b) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (with the exception given and the method of determining 'beneficial ownership' used in clause (a) of this definition) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (c) during any period of two consecutive years (not including any period prior to the execution of the Plan), individuals who, at the beginning of such period, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (b), or (d) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or (d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. EXHIBIT B Actuarial Assumptions --------------------- Interest rate: 7.5% Mortality: 1983 Group Annuity Mortality Table (male rates) EXHIBIT C Applicable Annuity Factors --------------------------
AGE ANNUITY FACTOR 45 12.1203 46 12.0160 47 11.9071 48 11.7937 49 11.6757 50 11.5529 51 11.4252 52 11.2923 53 11.1538 54 11.0093 55 10.8585 56 10.7006 57 10.5353 58 10.3621 59 10.1807 60 9.9913 61 9.7939 62 9.5889 63 9.3770 64 9.1588 65 8.9353
Factors for ages between the ages specified shall be interpolated on a straight- line basis to the nearest completed month. EX-27 19 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1998 DEC-31-1998 JUN-30-1998 18,348 0 113,670 3,150 77,226 4,880 135,047 84,743 305,914 98,335 0 0 0 13,427 105,751 305,914 172,509 172,509 0 115,748 47,872 0 2,926 6,505 1,496 5,009 0 0 0 5,009 .37 .37
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