EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), entered into as of December
16, 1996, is by and between MERRIMAC INDUSTRIES, INC. (the "Company") and XXXXXX
X. XXXXXXX (the "Executive").
In consideration of the promises in this Agreement, the mutuality and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Employment. The Company hereby employs the Executive and the Executive
hereby accepts employment by the Company under the terms and conditions set
forth in this Agreement.
2. Term. Subject to the provisions of Paragraph-6 herein ("Termination of
Employment"), the initial term of the Executive's employment under this
Agreement will commence on December 16, 1996 and will end on December 31, 1999,
and will continue from year to year thereafter, unless:
(A) either party gives notice of termination of this Agreement to the other
at least ninety (90) days prior to the end of the then present term, in which
case the Executive's employment will terminate at the end of the then present
term; or
(B) the Executive's employment is terminated under Paragraph 6, in which
event the Agreement will terminate on the date set forth in Paragraph 6.
3. Title and Duties. The Executive will serve as the Vice Chairman of the
Company. The Executive shall be responsible for, among other things, assisting
the President and Chief Executive Officer of the Company and performing such
other duties and responsibilities that are consistent with his position,
including duties consistent with his position that may be assigned to him from
time to time by the President and Chief Executive Officer. The Executive shall
report exclusively to the President and Chief Executive Officer. The Executive
agrees to devote his full time, attention, skill and energy to the duties set
forth herein and to the operations of the Company, to use his efforts to promote
the success of the Company, and to cooperate fully with the President and Chief
Executive Officer in the advancement of the best interests of the Company. The
Executive will serve, without additional compensation, as a director of the
Company. Nothing in this Agreement prevents Executive from engaging in
additional activities in connection with personal investments and community
affairs that are not inconsistent with the Executive's duties4. Compensation and
Related Matters. (a) In consideration for Executive's services to the Company
during the first year of employment, Executive shall receive a base salary at
the annual rate of One Hundred and Eighty Thousand Dollars (U.S. $ 180,000)
("Base Salary"). The Base Salary shall be payable in accordance with the
Company's regular payroll schedule, from which the Company shall withhold and
deduct all federal and state income, social security and disability taxes and
other deductions as required by applicable laws. The Base Salary will be
reviewed by the Board of Directors on an annual basis and may be adjusted upward
but not downward to reflect the Executive's performance and the scope and
success of the Company.
(b) Sign-On Bonus. (i) In connection with the execution of this Agreement,
the Company shall grant to the Executive stock options (the "Options") to
purchase 50,000 shares of the common stock of the Company, such Options to be
exercisable at the fair market price of the common stock at the close of trading
on December 31, 1996 and to have a term of ten (10) years. The Options shall
vest as follows:
Options to purchase 20,000 shares shall vest on the first anniversary of
the execution of this Agreement
Options to purchase 15,000 shares shall vest on the second anniversary of
the execution of this Agreement
Options to purchase 15,000 shall vest on the third anniversary of the
execution of this Agreement.
(ii) Except as otherwise provided in this Agreement, the provisions of the
Stock Option Plan shall govern in respect of the Executive's rights and
obligations relating to the Options.
-1-
5. Employment Benefits. During the term of this Agreement, Executive shall
be eligible for the following benefits:
(a) Employee Benefits. The Executive shall be entitled to participate in
the Company's employee benefit plans, including but not limited to medical
benefits, life insurance, Employee Stock Purchase Plans, Stock Option Plan,
401(k) plan and profit sharing plans, as may be in effect from time to time,
under the same terms and conditions as similarly situated employees.
(b) Vacation and Holidays. The Executive shall be entitled to four (4)
weeks paid vacation per year, plus those paid holidays to which other similarly
situated employees of the Company shall be entitled.
(c) Bonuses and Stock Options. The Executive is eligible to receive bonuses
and stock options, in addition to and separate from the stock options specified
in paragraph 4(b), to the extent bonuses and stock options are awarded by the
Company as determined within the sole discretion of the Board of Directors.
(d) Automobile. The Executive shall be entitled to the use of an automobile
at the Company's expense, up to $700 per month, for the Executive's performance
of his duties under this Agreement. The car shall be provided either by the
Company, either owned or leased, or through reimbursement by the Company for the
costs of the car. The costs for which the Company shall be responsible are the
costs of maintenance and repair, applicable insurance and gasoline costs
incurred by the Executive for business purposes in connection with the
Executive's use of such automobile.
(e) Expenses. During his employment hereunder, the Executive shall be
entitled to receive prompt reimbursement for all reasonable and necessary
expenses incurred by him in performing services hereunder, provided that the
Executive properly accounts for such expenses in accordance with the Company's
policy then in effect.
(f) Deferral of Compensation. The Company and the Executive agree to create
a deferred compensation arrangement for some portion of the Executive's
compensation hereunder for retirement purposes, consistent with applicable law
as in effect from time to time.
6. Termination of Employment.
(a) Death. The Executive's employment shall terminate immediately upon his
death. In such event, the Company shall pay to the Executive's estate all salary
and benefits accrued but unpaid through the date of death, and the Company shall
not have any further obligations under this Agreement, except as set forth in
paragraphs 6(e), 6(f), 6(g) and as except for any accrued or vested benefits or
as may otherwise be required by law.
(b) Disability. The Executive's employment under this Agreement shall
terminate if the Executive is deemed to have a "Disability" (as defined herein)
as determined by the Board of Directors. For purposes of this Agreement, the
term "Disability" means that (i) as a result of physical or mental illness or
injury as determined under applicable law and as confirmed by a medical doctor
of appropriate experience, the Executive is unable to perform the essential
duties of his position for a period of four consecutive months; or (ii) the
Executive is absent from his position for a period of ninety (90) consecutive
work days or for a period of 120 non-consecutive work days in a twelve-month
period. In such event, the Company shall pay to Executive all salary and
benefits accrued but unpaid through the date of termination, and the Company
shall not have any further obligations under this Agreement, except as set forth
in paragraphs 6(e), 6(f) and 6(g), and as except for any accrued or vested
benefits or as may otherwise be required by law.
(c) For Cause. Notwithstanding any of the foregoing provisions of this
Agreement, the Company may, at any time during the term of this Agreement
without prior notice, discharge the Executive for "Cause" (as hereinafter
defined). In such event, the Company shall pay to Executive all salary and
benefits accrued but unpaid through the date of termination, and the Company
shall not have any further obligations under this Agreement, except for any
accrued or vested benefits or as may otherwise be required by law. For the
purposes of this Agreement, the Company shall be deemed to have Cause to
terminate the Executive's employment hereunder for: (i) willful failure to
perform normal and customary duties for an extended period for any reason other
than death or total disability; (ii) gross negligence or willful misconduct,
including but not limited to, fraud, embezzlement or intentional
misrepresentation; (iii) commission of, or indictment or conviction for, a
felony; (iv) willfully engaging in competitive activities against the Company or
purposely aiding a competitor of the Company; (v) misappropriation of a material
opportunity of the Company; and (vi) violation of any material term of this
Agreement and failure to cure within ten days after receipt of notice of such
violation. If the Executive is dismissed for Cause, the Company shall pay to
Executive all salary and benefits accrued but unpaid through the date of
Termination, and the Company shall not have any further obligations under this
Agreement, except for any accrued or vested benefits or as may otherwise be
required by law.
-2-
(d) Notice of Termination. Any termination of employment by the Company
shall be communicated by a written notice of termination to the Executive.
(e) Severance Benefits. If the Executive's employment is terminated before
the end of the term as a result of death or Disability, or if the Company gives
notice of termination pursuant to Section 2(A), or the Executive's employment
ends and the Company elects not to renew the Agreement, then (i) the Company
shall pay to the Executive (or his estate), on a monthly basis, the Base Salary
(less applicable withholdings) as in effect on the date of termination, from the
date of termination to (x) the end of the then present term or (y) eighteen (18)
months, whichever period is greater (the "Severance Period"); (ii) the Company
shall continue the Executive's group medical coverage for the Executive and his
spouse under the Company's group medical plan in effect from time to time, under
the same terms and conditions as provided to comparable employees, during the
Severance Period; (iii) the Company shall provide life insurance benefits and
long-term disability insurance benefits for the Executive during the Severance
Period; and (iv) all unvested stock Options held by the Executive shall
immediately vest and be exercisable by the Executive of his estates'
representative in accordance with their terms. During the Severance Period, the
Executive agrees to provide consulting services to the Company as reasonably
requested.
(f) Consulting Agreement. At the conclusion of the Severance Period, the
Company and the Executive shall enter into a Consulting Agreement, pursuant to
which the Executive shall provide consulting services to the Company as
reasonably requested for a period of ten (10) years. In consideration of the
Executive's services under the Consulting Agreement, during the term of the
Consulting Agreement the Company (i) shall pay to the Executive an annual amount
equal to one-half of his Base Salary as in effect as of the date of termination
of employment, (ii) provide to the Executive and his spouse continued coverage
under the Company's group health plan as in effect from time to time; and (iii)
maintain life insurance for the Executive in the amount of $500,000 and
long-term disability insurance intended to provide the Executive with 2/3 of his
compensation under the Consulting Agreement in the event that the Executive
becomes disabled. In the event that the Executive dies or becomes disabled
during the Severance Period or during the term of the Consulting Agreement, the
Company's obligations to the Executive cease and the Executive (or his estate)
shall be eligible to receive the benefits provided under the applicable
insurance policy as provided therein, and any other accrued or vested benefits
or other benefits as required by law.
(g) Severance Benefit Agreement. To the extent the Executive's employment
is terminated by the Company, and the Executive is otherwise entitled to receive
benefits under a Severance Benefit Agreement between the Company and the
Executive, the Executive shall receive either the benefits provided under this
Agreement or the benefits provided under the Severance Benefit Agreement if
applicable, whichever are greater.
7. Confidential Information.
(a) The Executive agrees not to disclose, either while in the Company's
employ or at any time thereafter, to any person not employed by the Company, or
not engaged to render services to the Company, any confidential information
obtained by him while in the employ of the Company, including, without
limitation, any of the Company's inventions, software, data lists, client lists,
trading policies, pricing policies, business plans, or customer or trade
secrets; provided, however, that this provision shall not preclude the Executive
from use or disclosure of information which is in the public domain or from
disclosure required by law or court order. The Executive also agrees that upon
leaving the Company's employ he will not take with him, without the prior
written consent of the Board of Directors, any document of the Company, which is
of a confidential nature relating to the Company or its affiliates, or, without
limitation, relating to its or their customers or trade secrets.
-3-
8. Non-Competition.
(a) The Executive agrees that if his employment with the Company terminates
for Cause, or he leaves the Company voluntarily, he will not, without the prior
written consent of the Company, for a period of twelve (12) months thereafter,
alone or with or for others, in whatever capacity, directly or indirectly,
solicit or attempt to solicit clients or customers of the Company with whom he
did business during his employment with the Company, or solicit or attempt to
solicit employees of the Company to leave the Company's employ.
(b) The Executive expressly acknowledges and understands that the remedy of
law for any breach by him of this Section-8 will be inadequate, and that the
damages flowing from such breach are not readily susceptible to being measured
in monetary terms. Accordingly, it is acknowledged that upon the Executive's
violation of any provision of this Section-8, the Company shall be entitled to
immediate injunctive relief and may obtain a temporary order restraining any
threatened or further breach. Nothing in this Section-8 shall be deemed to limit
the Company's remedies at law or in equity for any breach by the Executive of
any of the provisions of this Section-8 which may be pursued or availed of by
the Company.
(c) If following termination of the Executive's employment any of the
restrictions pursuant to this Section-8 shall for any reason be held by to be
excessively broad as to duration, geographical scope, activity or subject, such
restrictions shall be construed so as to thereafter be limited or reduced to the
extent required to be enforceable in accordance with applicable law; it being
understood and agreed that by execution of this Agreement the parties hereto
regard such restrictions as reasonable and compatible with their respective
rights.
9. Indemnification. The Executive agrees to indemnify and hold harmless the
Company and its directors, officers, employees and agents, for all damages,
losses, claims and expenses, including reasonable attorneys' fees, arising out
of any violation by Executive of the terms of this Agreement, or from any acts
of intentional wrongdoing by the Executive. The Company agrees to indemnify and
hold harmless the Executive for all damages, losses, claims and expenses,
including reasonable attorneys' fees, arising out of any violation by the
Company of the terms of this Agreement.
10. Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the subject matter of this Agreement and supersedes
all prior agreements and understandings, oral or written, between the parties
with respect to the subject matter of this Agreement. This Agreement may be
amended only by an agreement in writing signed by both parties.
11. Governing Law; Arbitration. This Agreement will be governed by and
construed in accordance with the laws of the State of New Jersey, without giving
effect to the principles of conflicts of laws.
All disputes concerning the Executive's employment with the Company, the
termination thereof, the breach by either party of the terms of this Agreement
or any other matters relating to or arising from Executive's employment with the
Company shall be resolved in binding arbitration in a proceeding administered by
and under the rules and regulations of the American Arbitration Association, in
the AAA office located in New York, New York. The arbitrator shall not have
authority to modify or change any of the terms of this Agreement. Both parties
and the arbitrator will treat the arbitration process and the activities which
occur in the proceedings as confidential.
12. Binding Effect; Delegation of Duties Prohibited. This Agreement will
inure to the benefit of and will be binding upon the parties and their
respective successors, heirs and legal representatives. Neither the Company nor
the Executive may assign or delegate their respective performance of this
Agreement.
-4-
13. Notices. All notices and other communications that are required or may
be given under this Agreement must be in writing and will be deemed to have been
duly given when delivered in person, when received by telecopy (provided that
the sender has retained a copy of the notice showing the date and time of
receipt), upon delivery by a nationally recognized overnight courier service, or
three days after being mailed by registered or certified first class mail,
postage prepaid, return receipt requested, to the party to whom the notice is
being given, as follows:
If to the Company:
Merrimac Industries, Inc.
00 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Chairman of the Compensation Committee
If to the Executive:
Xxxxxx X. Xxxxxxx
00 Xxxxxx Xx.
Xxxxx Xxxxx, Xxx Xxxxxx 00000
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
MERRIMAC INDUSTRIES, INC.
By: Xxxxxxx X. Xxxxx
-----------------------
Name: Xxxxxxx X. Xxxxx
XXXXXX X. XXXXXXX
---------------------
By: Xxxxxx X. Xxxxxxx
-5-
