EMPLOYMENT AGREEMEMENT
This Employment Agreement (the "Agreement"), entered into as of December
19, 1996, is by and between MERRIMAC INDUSTRIES, INC. (the "Company") and XXXXX
X. XXXXXX (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. The Executive shall be based at the principal executive
offices of the Company in West Xxxxxxxx, New Jersey, except for reasonable
required travel on Company business.
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 19, 1996 and will end on December 31, 1999
(the "Initial Term"), and will automatically renew for successive twelve month
periods commencing January 1, 2000, unless:
(A) either party gives written notice of termination of this Agreement to
the other at least six (6) months 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.
(a) The Executive will serve as the President and Chief Executive Officer
of the Company. The Executive shall be responsible for performing such duties
and responsibilities that are consistent with his position or that may be
assigned to him from time to time by the Board of Directors of the Company
consistent therewith. The Executive agrees to devote substantially all of his
working 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 Board of Directors in the advancement
of the best interests of the Company. Nothing in this Agreement prevents
Executive from engaging in additional activities in connection with personal
investments and community affairs, or serving as a director for one or more
other corporations, as are consistent with the Executive's duties hereunder.
(b) The Executive currently serves as a director of the Company. During the
period of Executive's service as a director of the Company, the Executive shall
not entitled to receive any additional compensation as a director, but shall be
entitled to reimbursement of expenses reasonably incurred as a director, in
accordance with the Company's policies for such reimbursement as are in effect
from time to time. The Company will indemnify the Executive as an officer and
director, to the same extent as it indemnifies other officers and directors,
consistent with the Company's by-laws.
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4. 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 Two Hundred Thousand Dollars (U.S. $
200,000) ("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 to
reflect the Executive's performance and the scope and success of the Company;
[provided, however, that during the Initial Term of this Agreement, the
Executive's Base Salary shall not be less than $200,000].
(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 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) For purposes of paragraphs (d) through (g), inclusive, of Section 6 of
the Stock Option Plan, it shall be deemed to have been determined at the time of
grant that the Options, once vested, may be exercised at any time on or before
the end of their 10 year term. The Company shall cause all stock issued upon
exercise of the Options to be fully registered under the federal securities
laws.
(iii) 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.
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, on
terms and conditions at least as favorable as any other executive officer of the
Company.
(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, 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 automobile allowance shall be provided,
at the Executive's option, either through a Company car, either owned or leased
by the Company, or through prompt reimbursement by the Company for the costs of
an automobile owned or leased by the Executive. 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, provided that the
Executive submit on a timely manner appropriate documentation supporting such
costs. If the Company leases the car, the Executive shall have the option to
purchase the car at the end of the lease term.
(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 (including as a
director if appropriate), provided that the Executive properly accounts for such
expenses in accordance with the Company's policy then in effect.
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6. Termination of Employment.
(a) Death. The Executive's employment under this Agreement 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 for any accrued or vested benefits under this Agreement, the
Stock Option Plan or otherwise, or as may be required by law.
(b) Disability. The Executive's employment under this Agreement shall
terminate if the Executive has a "Disability" (as defined herein) as reasonably
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,
the Participant is unable to perform the essential duties of his position or
poses a direct threat to the safety and health of Participant or others and
there is no reasonable accommodation that can be provided by the Company that
would allow Participant to perform the essential functions of Participant's
position as determined under applicable law; or (ii) the Participant is absent
from Participant's 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.
(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). 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; or (vi) violation of any material term of this
Agreement and failure to cure within ten days after receipt of written notice of
such violation or, if reasonable under the circumstances, such additional period
of time during which the Executive is using his best efforts to so cure, not to
exceed thirty (30) days in total. 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
under this Agreement, the Stock Option Plan or otherwise, or as may be required
by law.
(d) Notice of Termination. Any termination of employment by the Company
shall be communicated by a written notice of termination to the Executive.
(e) Certain Payments Upon Termination. If the Executive's employment is
terminated by the Company before the end of the term other than by death,
Disability or for Cause, the Company shall provide the following to the
Executive: (i) payment on a monthly basis of Base Salary (less applicable
withholdings) as in effect on the date of termination, from the date of
termination to the end of the then present term, (ii) continued group medical
coverage, under the Company's group medical plan in effect from time to time,
under the same terms and conditions as provided to comparable employees, for the
same period as payment of the Base Salary above, (iii) payment of an amount
representing annual bonuses (calculated and paid as set forth herein) and
(iv) continuation of the car allowance set forth in Paragraph 5(d) for the
lesser of one year from the date of termination or for the period from date of
termination to the end of the Agreement and, further, all unvested stock Options
held by the Executive shall immediately vest, and be exercisable in accordance
with their terms. In the event that the Executive's employment is terminated by
the Company before the end of the term of the Agreement other than as by
contemplated by Paragraph 6(a), (b) or (c), including any termination of
employment under Paragraph 7 upon a Change in Control, the annual bonus to which
the Executive might otherwise be entitled shall be an amount equal to 20% of the
Executive's Base Salary in effect on the date of termination, which amount shall
be paid in respect of each period of twelve months remaining during the then
term of this Agreement, and a pro-rated amount shall be paid in respect of any
period of less than twelve months. Any such payments for bonus shall be made at
the time that other annual bonuses are paid to other executive officers of the
Company (or if no annual bonus is paid during a particular year, in December of
the applicable year).
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7. Change in Control. If the Executive resigns from his employment with the
Company for Good Reason (as defined herein) or is dismissed without Cause within
twelve (12) months following the date of a Change in Control (as defined
herein), the Company agrees to pay Executive the greater of (a) twelve month
salary and benefits (including bonus as calculated in Paragraph 6(e)) or (b)
salary and benefits from the date of resignation to the end of then present term
of the Agreement. In the event of a Change in Control, all unvested stock
options held by the Executive shall become immediately exercisable and all
rights and benefits relating to such options may be exercised and shall become
fixed and not subject to change or revocation by the Company. "Good Reason" is
defined as a material diminution of the Executive's duties and responsibilities
or a substantial reduction in the Executive's compensation and benefits. A
"Change in Control" will be deemed to have occurred if (a) the Company is merged
or consolidated with, or, in any transaction or series of transactions, all or
substantially all of the business or assets of the Company shall be sold or
otherwise acquired by, another corporation or entity and, as a result thereof,
the stockholders of the Company immediately prior thereto shall not have at
least 50% or more of the combined voting power of the surviving, resulting or
transferee corporation or entity; or
(b) any person (as that term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended,) who is not now a current affiliate
or a 5% or more holder, is or becomes the beneficial owner (as that term is used
in Section 13(d) of the Exchange Act and the applicable rules and regulations)
of stock of the Company entitled to cast more than (25%) of the votes at the
time entitled to be cast generally for the election of directors.
8. 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.
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9. Non-Competition.
(a) The Executive agrees that if his employment with the Company terminates
for Cause, or he leaves the Company voluntarily without Good Reason, 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 for business in
competition with the Company 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-9 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-9, 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-9 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-9 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-9 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.
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. If the Executive brings a claim
against the Company to enforce the terms of this Agreement and achieves a
successful result, other than as a result of a negotiated settlement, the
Company shall be liable to pay reasonable attorneys' fees and expenses incurred
by the Executive.
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.
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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
With a Copy to:
Xxxxxxxxxx & Xxxxx, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
If to the Executive:
Xxxxx X. Xxxxxx
Box 000
Xxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
With a copy to:
Mail To:
Pitney, Xxxxxx, Xxxx & Xxxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attn: Xxxxx Xxxxxx Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
Delivery To:
Pitney, Xxxxxx, Xxxx & Xxxxx
000 Xxxxxx Xxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000-0000
Attn: Xxxxx Xxxxxx Xxxxxx, Esq.
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
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Name: Xxxxxxx X. Xxxxx
XXXXX X. XXXXXX
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Xxxxx X. Xxxxxx
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