Exhibit 10.18

 

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is
made as of the 28th day of August, 2013 by and between Aeroflex Incorporated, a
Delaware corporation (together with its successors and assigns permitted
hereunder, the “Company”), and Edward S. Wactlar (hereinafter the “Executive”
and together with the Company, the “Parties”).

 

WITNESSETH:

 

WHEREAS, the Parties entered into an Employment Agreement dated July 1, 2010
(the “Effective Date”), as amended on September 28, 2012 (collectively, the
“Prior Agreement”) under which the Parties agreed upon the terms pursuant to
which the Executive would be employed by the Company as further described
therein, and

 

WHEREAS, the Parties desire to amend and restate the Agreement as set forth
herein.

 

NOW, THEREFORE, the Company and the Executive agree as follows:

 

1.          Employment Period. Subject to Section 3, the Company hereby agrees
to employ the Executive, and the Executive hereby agrees to be employed by the
Company, in accordance with the terms and provisions of this Agreement, for a
period commencing as of the Effective Date and continuing for a three (3) year
period, renewing daily, unless either party provides notice of non-renewal (the
“Employment Period”). Upon such notice of non-renewal, the Employment Period
shall continue for a period of three (3) years from the date such notice is
received by the non-notifying party; provided, however, if no such non-renewal
notice is received by the non-notifying party prior to the five year anniversary
of the Effective Date, the Employment Period shall continue for a period of one
(1) year from the date such notice of non-renewal is thereafter received by the
non-notifying party.

 

2.          Terms of Employment.

 

(a)          Positions and Duties.

 

(i)          During the term of the Executive’s employment hereunder, the
Executive shall serve as, and have the title of Senior Vice President, General
Counsel and Secretary of the Company and, in so doing, shall report directly to
the President and the Board of Directors of the Company. The Executive shall
have such management, supervisory and operational functions and other powers,
functions and duties consistent with the Executive’s title and duties as may
from time to time reasonably be prescribed by the Board.

 

 

 

 

(ii)         During the term of the Executive’s employment hereunder, and
excluding any periods of vacation, paid holiday, and sick and personal leave to
which the Executive is entitled, the Executive agrees to devote substantially
all of his business time to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive’s reasonable best efforts to perform faithfully,
effectively and efficiently such responsibilities. During the term of the
Executive’s employment, it shall not be a violation of this Agreement for the
Executive to (1) serve on civic or charitable boards or committees, (2) serve,
with the Board’s prior written approval (which may be withheld in the sole
discretion of the Board), on corporate boards or committees, (3) manage personal
investments, and/or (4) serve as an officer of one or more affiliates of the
Company, including the Company’s parent, so long as such activities, either
individually or in the aggregate, do not significantly interfere with the
performance of the Executive’s responsibilities as an employee of the Company in
accordance with this Agreement.

 

(b)          Compensation.

 

(i)          Base Salary. During the term of the Executive’s employment
hereunder, the Executive shall receive an annual salary of Three Hundred Seventy
Five Thousand Dollars ($375,000.00), as the same may be increased (but not
decreased) from time to time by the Board in its sole discretion (the “Base
Salary”), which shall be paid in accordance with the customary payroll practices
of the Company for services rendered by officers of the Company.

 

(ii)         Bonus.

 

(1)         For the 2014 Fiscal Year, the Executive shall be eligible to receive
an annual bonus of between 33-1/3% and 100% of his Base Salary based upon the
achievement of the Company’s EBITDA targets for the 2014 Fiscal Year as
established by the Board. More particularly, (i) 33-1/3% of the Executive’s 2014
Base Salary will be awarded to the Executive as a bonus if the Company’s 2014
EBITDA is equal to the minimum 2014 EBITDA target established by the Board (the
“Threshold EBITDA”); (ii) 66-2/3% of the Executive’s Base Salary will be awarded
as a bonus if the Company’s 2014 EBITDA is equal to the 2014 EBITDA Target
established by the Board (the “ EBITDA Target” or the “2014 Target Bonus”); and
(iii) 100% of the Executive’s Base Salary will be awarded to the Executive as a
bonus if the Company’s 2014 EBITDA is equal to or greater than the maximum 2014
EBITDA Target established by the Board (the “Maximum EBITDA”). The Executive’s
2014 bonus shall be determined by linear interpolation if the Company’s 2014
EBITDA is between the Threshold EBITDA and the EBITDA Target or between the
EBITDA Target and the Maximum EBITDA, as the case may be. No annual bonus will
be paid if the Company’s 2014 EBITDA is below the Threshold EBITDA for the 2014
Fiscal Year. The EBITDA Target shall be subject to equitable redetermination by
the Board in the event of any divestiture, acquisition or other extraordinary
event and to such modification, as may be appropriate, to reflect various types
of accounting adjustments that historically and otherwise have been or are
approved by the Compensation Committee.

 

(2)         Beginning with Fiscal Year 2015 and for each Fiscal Year thereafter,
during the term of the Executive’s employment hereunder, the Executive shall be
eligible to earn an annual performance bonus (the “Performance Bonus”). The
target amount of such annual bonus (if any) will be 66-2/3% percent of
Executive’s Base Salary for the applicable fiscal year (the “Target Bonus”). The
minimum amount of such annual bonus will be 33-1/3% percent of Executive’s Base
Salary for the applicable fiscal year (the “Minimum Bonus”) and the maximum
amount of such annual bonus will be 100% percent of Executive’s Base Salary for
the applicable fiscal year (the “Maximum Bonus”). The terms and conditions of
the Performance Bonus will be as set forth in the Company’s applicable
performance bonus plan, as the Company may adopt from time to time.

 

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(3)         Any annual bonus payable pursuant to this Section 2(b)(ii) shall be
paid on or prior to March 15 of the year following the year such bonus is
earned.

 

(iii)        Investment Plans. During the term of the Executive’s employment
hereunder, the Executive shall be entitled to participate in all savings, equity
and retirement plans, practices, policies and programs (“Investment Plans”)
appertaining to his position in accordance with practices established by the
Board, including 401K and supplemental life insurance plans, but Executive shall
not participate in the Company’s Supplemental Executive Retirement Plan.

 

(iv)        Welfare Benefit Plans. During the term of the Executive’s employment
hereunder, the Executive shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices, policies and
programs (“Welfare Plans”) provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance, group
life, accidental death and travel accident insurance plans and programs) to the
extent applicable to executive employees generally in accordance with practices
established by the Board.

 

(v)         Expenses. During the term of the Executive’s employment hereunder,
the Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in performing his duties
hereunder, including, without limitation, transportation, hotel, and living
expenses and other business and entertainment expenses, in accordance with the
policies, practices and procedures of the Company.

 

(vi)        Vacation and Holidays. During each complete twelve month period of
the Executive’s employment hereunder, the Executive shall be entitled to 27 days
of personal time off and such paid holiday and leave time as are in accordance
with the plans, policies, programs and practices of the Company.         .

 

(vii)       Car Allowance. The Company will provide the Executive with a car
allowance of One Thousand Dollars ($1,000.00) per month, such amount to be paid
monthly in accordance with the normal payroll practices of the Company.

 

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3.           Termination of Employment.

 

(a)          Death or Disability.   The Executive’s employment shall terminate
automatically upon the Executive’s death during the Employment Period. If a
Disability (as defined below) of the Executive has occurred during the
Employment Period, the Company may give to the Executive written notice in
accordance with Section 13(b) hereunder of its intention to terminate the
Executive’s employment. In such event, the Executive’s employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the “Disability Effective Date”); provided, that within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive’s duties. For purposes of this Agreement,
“Disability” shall mean the Executive’s inability to perform his duties and
obligations hereunder for a period of 90 consecutive days due to mental or
physical incapacity as determined by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive’s legal representative
(such agreement as to acceptability not to be withheld unreasonably).
Notwithstanding the foregoing, no such condition shall be considered a
“Disability” unless such condition also meets the requirements of being
“Disabled” under Section 409A(a)(2)(C) of the Internal Revenue Code of 1986, as
amended (the “Code”).

 

(b)          Cause. The Company may terminate the Executive’s employment during
the Employment Period for Cause or without Cause. For purposes of this
Agreement, “Cause” shall mean (i) a breach by the Executive of the Executive’s
material obligations under Section 2(a) which is not cured within ten (10) days
of the receipt by the Executive of written notice thereof from the Company; (ii)
commission by the Executive of an act of fraud upon, or willful misconduct of a
material nature toward, the Company, as reasonably determined by a majority of
the Board, (iii) a material breach by the Executive of any of Sections 6, 8 or
10; (iv) the conviction of the Executive of any felony or the conviction of the
Executive of any misdemeanor involving any acts of dishonesty including
embezzlement, fraud or any other act that results or reasonably could be
expected to result in an economic loss or harm to the Employer (or a plea of
nolo contendere thereto); (v) the Executive being found liable in any civil
proceeding for an act by the Executive constituting work place harassment; or
(vi) the willful and continuing failure of the Executive to carry out, or comply
with, in any material respect any reasonable directive of the Board or the
President consistent with the terms of this Agreement.

 

(c)          Termination for Good Reason by the Executive. The Executive may
terminate this Agreement for Good Reason and such termination shall constitute a
termination without Cause by the Company. “Good Reason” shall mean the
occurrence of a breach by the Company of its material obligations to the
Executive which is not cured within ten (10) Business Days of the receipt by the
Company of written notice thereof from the Executive and shall include, without
limitation, (i) the loss of, or an adverse change in, the Executive’s position
or titles; (ii) a diminution or materially adverse change in the duties and
responsibilities of the Executive or the assignment to the Executive of duties
and responsibilities which are inconsistent with the Executive’s position in the
Company; (iii) a reduction in the Executive’s Base Salary or the failure to pay
the same or any bonus or other benefits hereunder when due or within a
reasonable period of time thereafter, (iv) the relocation of the Executive’s
office to a location which is more than 25 miles from the current location of
corporate headquarters of the Company.

 

(d)          Notice of Termination. Any termination (i) by the Company, whether
for Cause or without Cause, or (ii) by the Executive, whether or not for Good
Reason, shall be communicated by Notice of Termination (as defined below) to the
other party hereto given in accordance with Section 13(b). For purposes of this
Agreement, a “Notice of Termination” means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances,
if any, claimed to provide a basis for termination of the Executive’s employment
under the provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies the
termination date. The failure by the Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of Cause shall not waive any right of the Executive or the Company
hereunder or preclude the Executive or the Company from asserting such fact or
circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

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(e)          Date of Termination. “Date of Termination” means (i) if the
Executive’s employment is terminated by the Company for Cause, the date of the
Notice of Termination or any later date specified therein, as the case may be;
(ii) if the Executive’s employment is terminated by the Company other than for
Cause, the date on which the Company notifies the Executive of such termination
or any later date specified by the Board; and (iii) if the Executive’s
employment is terminated by reason of death or Disability, the date of death of
the Executive or the Disability Effective Date, as the case may be.

 

4.           Obligations of the Company upon Termination.

 

(a)          Without Cause. If during the Employment Period, the Company shall
terminate the Executive’s employment without Cause or the Executive shall
terminate his employment for Good Reason, except in either such case within
eighteen (18) months following a Change in Control (as defined below), the
Company shall pay to the Executive or his heirs (1) within ten (10) days after
the Date of Termination, the sum of the Executive’s Base Salary through the Date
of Termination, to the extent not theretofore paid, plus all accrued PTO pay,
unreimbursed business expenses and other accrued but unpaid compensation
described in Section 2(b) above (the “Accrued Obligations”); (2) any amount
arising from the Executive’s participation in, or benefits under, any Investment
Plans (“Accrued Investments”), which amounts shall be payable in accordance with
the terms and conditions of such Investment Plans; (3) subject to Executive’s
execution and non-revocation of a general release in favor of Aeroflex, its
affiliates and their current and former officers, directors and employees, in
substantially the form attached hereto as Exhibit A within 30 days following the
date of such termination (the “Release”), commencing, notwithstanding any
provision to the contrary in Sections 4(a)(3)(A)-(D), on the 30th day following
such Date of Termination (provided that, payments or benefits that would
otherwise have been owed to Executive prior to the 30th day after the Date of
Termination shall be made to or on behalf of Executive on the 30th day after the
Date of Termination), (A) an amount equal to the Executive’s Base Salary payable
for the remainder of the Employment Period immediately following the Date of
Termination as if the Executive had not been terminated and remained an employee
of the Company through the expiration of such period, but no event less than one
(1) year if such termination shall occur after the 5 year anniversary of the
Effective Date and (B) annual bonuses in the amount of the Target Bonus for the
remainder of the Employment Period in accordance with Section 2(b)(ii), as if
the Executive had not been terminated (including a prorated bonus for any
partial Fiscal Year), but in no event, in the aggregate, less than the amount of
(i) three (3) times the Target Bonus if such termination occurs prior to the
five year anniversary of the Effective Date and (ii) one (1) times the Target
Bonus if such termination occurs after the five year anniversary of the
Effective Date; (C) without duplication to (B), the unpaid bonus, based on the
Company’s actual performance for the Fiscal Year in which the Date of
Termination occurs, if any, prorated to the Date of Termination, such bonus, if
any, to be paid at the time that the Company pays bonuses, if any, to other
senior executives of the Company; and (D) all outstanding equity compensation
awards, including the equity awards described in Section 2(b) (vii), shall
immediately vest, and the Executive and qualifying members of the Executive’s
family shall be entitled to continue to participate, at the Company’s expense,
in the Company’s Welfare Plans, including medical, dental and prescription
coverage, for the remainder of such Employment Period, but in no event less than
one year.

 

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(b)          Death or Disability. If the Executive’s employment is terminated by
reason of the Executive’s death or Disability during the Employment Period, the
Company shall pay to his legal representatives (i) in a lump sum in cash within
twenty (20) days after the Date of Termination, the Accrued Obligations; (ii)
the Accrued Investments which shall be payable in accordance with the terms and
conditions of the Investment Plans; and (iii) an annual bonus in the amount of
the Target Bonus applicable for the Fiscal Year in which the Executive’s death
or Disability occurs, prorated to the Date of Termination, such bonus to be paid
at the time the Company pays such bonuses to other senior executives of the
Company. In addition, the qualifying members of the Executive’s family shall be
entitled to continue their participation at the Company’s expense in the
Company’s Welfare Plans for a period of twenty-four (24) months after the Date
of Termination.

 

(c)          Cause. If the Executive’s employment shall be terminated by the
Company for Cause during the Employment Period, the Company shall have no
further payment obligations to the Executive other than for payment of Accrued
Obligations, Accrued Investments (which shall be payable in accordance with the
terms and conditions of the Investment Plans), and the continuance of benefits
under the Welfare Plans to the Date of Termination.

 

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(d)          Change of Control. In the event there shall be, and only upon the
occurrence of, a Change in Control as hereinafter defined, then, if the
Executive’s employment is terminated by the Company without Cause (including by
a notice of non-renewal by the Company pursuant to Section 1), or by the
Executive for Good Reason, in either case within eighteen (18) months
thereafter, the Company shall pay to the Executive or his heirs within ten (10)
days of the Date of Termination (subject to Section 4(e)), the following: (i)
the Accrued Obligations, (ii) the Accrued Investments, and (iii) a lump sum
severance payment, in no event less than that amount to which the Executive is
entitled pursuant to Sections 4(a)(3)(A), (B) and (C), equal to (A) the amount
of the Executive’s Base Salary for the remainder of the Employment Period, but
in no event less than three years, if such termination shall occur prior to the
five year anniversary of the Effective Date or (B) the Executive’s Base Salary
for the remainder of the Employment Period but in no event less than one year if
such termination shall occur at any time after the five year anniversary of the
Effective Date, together with an amount equal to either (x) three times the
Target Bonus if the termination occurs prior to the 5 year anniversary of the
Effective Date or (y) one times the Target Bonus if the termination occurs after
the 5 year anniversary of the Effective Date, and (C) the unpaid bonus in the
amount of the Target Bonus, applicable for the Fiscal Year in which the Date of
Termination occurs, prorated to the Date of Termination, to be paid at the time
the Company pays bonuses to other senior executives of the Company. In addition,
all outstanding equity compensation awards, including the equity awards
described in Section 2(b) (vii), shall vest immediately, and the Executive and
the qualifying members of the Executive’s family shall continue their
participation at the Company’s expense in all of the Company’s Welfare Plans,
including medical, dental and prescription coverage, for the balance of the
Employment Period but in no event less than one year. Notwithstanding the
foregoing, if any payment or distribution by the Company to or for the benefit
of the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise pursuant to, or by reason
of, any other agreement, policy, plan, program or arrangement or the lapse or
termination of any restriction on or vesting or exercisability of any payment or
benefit (each a “Payment”), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code (or any successor provision thereto)
or to any similar tax imposed by state or local law (the “Excise Tax”), then the
aggregate amount of Payments payable to the Executive shall be reduced to the
aggregate amount of Payments that may be made to the Executive without incurring
an Excise Tax; provided, however, that such reduction shall only be effected if
the aggregate after-tax value of the Payments retained by Executive (after
giving effect to such reduction) is equal to or greater than the aggregate
after-tax value (after giving effect to the Excise Tax) of the Payments to the
Executive without any such reduction, as determined by the Company’s auditors.
Any such reduction in the preceding sentence shall be done first by reducing any
cash payments with the last payment reduced first; next any equity or equity
derivatives that are included under Section 280G of the Code at full value
rather than accelerated value; next any equity or equity derivatives based on
acceleration value shall be reduced with the highest value reduced first (as
such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24);
finally any other non-cash benefits will be reduced. For the purpose of this
Section, a “Change in Control” (which in all respects shall satisfy the
requirements of a “change in control event” as set forth in Treasury Regulations
§ 1.409A-3(i) (5)), shall mean the occurrence of a “change in the ownership”, a
“change in the effective control” or a “change in the ownership of a substantial
portion of the assets” of the Company determined as follows:

 

(i)          a “change in the ownership” of the Company shall occur on the date
on which any one person or more than one person acting as a group, directly or
indirectly, acquires ownership of stock of the Company that, together with the
stock held by such person or group, constitutes more than 50% of the total fair
market value or total voting power of the stock of the Company, as determined in
accordance with Treasury Regulations § 1.409A-3(i)(5)(v); provided, however, if
any one person or more than one person acting as a group is considered to own
already more than 50% of the total fair market value or total voting power of
the stock of the Company, the acquisition of additional stock by the same person
or persons is not considered to cause a “change in the ownership” of the Company
(or to cause a “change in the effective control” of the Company as contemplated
in subsection (ii) or (iii) below); provided, however, that the following
acquisitions shall not constitute a Change in Control: (A) any acquisition by or
from the Company or any corporation or other entity in which the Company owns or
controls, directly or indirectly, at least 50 percent of the total combined
voting power represented by all classes of stock issued by such corporation, or
in the case of a noncorporate entity, at least 50% of the profits or capital
interest in such entity or by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any subsidiary, (B) any acquisition by
an individual who as of the Effective Date is a member of the Board, (C) any
acquisition by any underwriter in any firm commitment underwriting of securities
to be issued by the Company, or (D) any acquisition by any corporation (or other
entity) if, immediately following such acquisition, 50% or more of the then
outstanding shares of common stock (or other equity unit) of such corporation
(or other entity) and the combined voting power of the then outstanding voting
securities of such corporation (or other entity), are beneficially owned,
directly or indirectly, by all or substantially all of the individuals or
entities who, immediately prior to such acquisition, were the beneficial owners
of the then outstanding voting securities of the Company in substantially the
same proportions, respectively, as their ownership immediately prior to the
acquisition of the stock and voting securities (collectively with (A), (B), and
(C), the “Exempt Acquisitions”);

 

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(ii)         a “change in the effective control” of the Company shall occur on
the date any one person, or more than one person acting as a group, acquires (or
has acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Company
possessing 30 percent or more of the total voting power of the stock of the
Company; provided, however, that none of the Exempt Acquisitions shall
constitute a Change in Control;

 

(iii)        a “change in the effective control” of the Company shall occur on
the date on which a majority of the members of the Company’s Board of Directors
is replaced during any 12 month period by directors whose appointment or
election is not endorsed by a majority of the members of the Company’s Board of
Directors before the date of the appointment or election, as determined in
accordance with Treasury Regulations § 1.409A-3(i)(vi); and

 

(iv)         a “change in the ownership of a substantial portion of the assets”
of the Company shall occur on the date on which any one person or more than one
person acting as a group, acquires (or has acquired during the 12 month period
ending on the date of the most recent acquisition by such person or persons),
directly or indirectly, assets from the Company that have a total gross fair
market value equal to or more than 50% of the total gross fair market value of
all of the assets of the Company immediately before such acquisition or
acquisitions, as determined in accordance with Treasury Regulation §
1.409A-3(i)(5) (viii); provided, however, a transfer of assets shall not be
treated as a “change in the ownership of a substantial portion of the assets” of
the Company when such transfer is made to an entity that is controlled by the
shareholders of the Company, as determined in accordance with Treasury
Regulation § 1.409A-3(i)(5)(vii)(B).

 

(e)          Payments; Compliance with Section 409A of the Code. Notwithstanding
anything herein to the contrary, if (i) the Executive is to receive payments or
benefits under Section 4 by reason of his separation from service (as such term
is defined in Section 409A of the Code) other than as a result of his death,
(ii) the Executive is a “specified employee” within the meaning of Code Section
409A for the period in which the payment or benefits would otherwise commence,
and (iii) such payment or benefit would otherwise subject the Executive to any
tax, interest or penalty imposed under Section 409A of the Code (or any
regulation promulgated thereunder) if the payment or benefit would commence
within six months of a termination of the Executive’s employment, then such
payment or benefit required under Section 4 shall not commence until the first
day which is at least six months after the termination of the Executive’s
employment. Such payments or benefits, which would have otherwise been required
to be made over such six month period, shall be paid to the Executive in one
lump sum payment or otherwise provided to the Executive as soon as
administratively feasible after the first day which is at least six months after
the termination of the Executive’s employment. Thereafter, the payments and
benefits shall continue, if applicable, for the relevant period set forth in
Section 4. Each severance installment contemplated under Section 4 shall be
treated as a separate payment in a series of separate payments under Treasury
Regulation Section 1.409A-2(b)(2)(iii). For purposes of this Agreement, all
references to “termination of employment” and other similar language shall be
deemed to refer to the Executive’s “separation from service” as defined in
Treasury Regulation Section 1.409A-1(h).

 

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5.           Full Settlement, Mitigation. In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment. Neither the Executive nor the Company shall be liable
to the other party for any damages in addition to the amounts payable under
Section 4 arising out of the termination of the Executive’s employment prior to
the end of the Employment Period; provided, however, that the Company shall be
entitled to seek damages for any breach of Sections 6, 7, 8, 10 or criminal
misconduct.

 

6.           Confidential Information.

 

(a)          The Executive acknowledges that the Company and their affiliates
have trade, business and financial secrets and other confidential and
proprietary information (collectively, the “Confidential Information”). As
defined herein, Confidential Information shall not include (i) information that
is known to other persons or entities generally, (ii) information required to be
disclosed by the Executive pursuant to a subpoena or court order, or pursuant to
a requirement of a governmental agency or law of the United States of America or
a state thereof or any governmental or political subdivision thereof, and (iii)
information that the Executive possessed on or prior to the Effective Date.

 

(b)          The Executive agrees (i) to hold such Confidential Information in
confidence and (ii) not to release such information to any person (other than
Company employees and other persons to whom the Company has authorized the
Executive to disclose such information and then only to the extent that such
Company employees and other persons authorized by the Company have a need for
such knowledge or to the Executive’s attorneys, accountants and personal
representatives for purposes of representing the Executive).

 

(c)          The Executive further agrees not to use any Confidential
Information for the benefit of any person or entity other than the Company or as
authorized by the Company.

 

(d)          As used in this Section 6 and in Sections 7, 8 and 10, “Company”
shall include the Company and any of its subsidiaries.

 

7.           Surrender of Materials Upon Termination. Upon any termination of
the Executive’s employment, the Executive shall immediately return to the
Company all copies, in whatever form, of any and all Confidential Information
and other properties of the Company and their affiliates which are in the
Executive’s possession custody or control and shall cause any third parties to
whom he has entrusted such information whether or not in compliance with Section
6, to return such information to the Company.

 

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8.           Non-Competition. During the Employment Period, the Executive will
not, without the Company’s express written consent, engage in any other
employment or business activity directly related to the business in which the
Company is at the time involved or actively considering becoming involved, nor
will the Executive engage in any other activities which conflict with his
obligations to the Company except as provided in Section 2(a)(ii) above. During
the Employment Period and (a) in the case of termination by the Company for
Cause or termination by the Executive without Good Reason, for one year after
the Date of Termination, (x) directly or indirectly, either as principal, agent,
employee, consultant, officer, director, stockholder, or in any other capacity,
engage in or have a financial interest in, any business, or the relevant
division or subsidiary of any such business, which is competitive with the
business of the Company or any of its subsidiaries or affiliates, provided,
however, that the Executive’s ownership of not more than two percent (2%) of the
outstanding stock of a publicly traded company shall not be prohibited by this
clause (x); (y) induce employees of the Company or any of its subsidiaries or
affiliates to join with the Executive in any capacity, direct or indirect, in
any business in which the Executive may be or become interested whether or not
competitive with the Company; or (z) solicit customers of the Company. If any
restriction set forth in this Section is found by any court of competent
jurisdiction to be unenforceable because it extends for too long a period of
time or over too great a range of activities or in too broad a geographic area,
it shall be interpreted to extend only over the maximum period of time, range of
activities or geographic areas as to which it may be enforceable.

 

9.           Effect of Agreement on Other Benefits. The existence of this
Agreement shall not prohibit or restrict the Executive’s entitlement to full
participation in the executive compensation, employee benefit and other plans or
programs appertaining to his position in accordance with any policy or practice
established by the Board.

 

10.         Ownership and Disclosure of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions, and All Original Works of Authorship.
All information, ideas, concepts, improvements, discoveries and inventions,
whether patentable or not, which are conceived, made, developed or acquired by
the Company or which are created by the Executive in the course and scope of his
employment or which are disclosed or made known to the Executive, individually
or in conjunction with others, during the Executive’s employment by the Company
whether during or outside of usual working hours, and whether on the Company’s
premises or not, and which relate to the Company’s past, present or reasonably
anticipated business, products or services (including all such information
relating to research, formulations, processes, computer programs, simulations,
and data bases, manufacturing techniques, designs, financial and sales models
and other data, pricing and trading terms, evaluations, opinions,
interpretations, the identity of customers or their requirements or of key
contacts within the customer’s organizations, or marketing and merchandising
techniques), operating and acquisition strategies, are and shall be (insofar as
the Executive is concerned) the sole and exclusive property of the Company.
Moreover, all drawings, memoranda, notes, records, files, correspondence,
manuals, models, specifications, computer programs, maps and all other writings
or materials of any type embodying any of such information, ideas, concepts,
improvements, discoveries and inventions are and shall be (insofar the Executive
is concerned) the sole and exclusive property of the Company.

 

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11.         Indemnification. The Company shall indemnify and hold harmless the
Executive from and against all liabilities and expenses (including amounts paid
in satisfaction of judgments, in compromise, as fines and penalties, and as
counsel fees) (collectively, “Losses”) incurred by the Executive in connection
with the investigation, defense or disposition of any action, suit or other
proceeding in which the Executive may be involved or with which the Executive
may be threatened (whether arising out of or relating to matters asserted by
third parties or incurred or sustained by the Executive in the absence of a
third-party claim), by reason of his being a director, officer or employee of
the Company or of any subsidiary or affiliate of the Company, or that arises out
of or results from any act taken, or any failure to act, by the Executive which
was, in his good faith judgment, in the best interests of the Company, whether
within the course of performance of his duties or otherwise; provided, however,
that the Company shall not be required to indemnify or hold the Executive
harmless from any Losses which arise out of or result from the Executive’s gross
negligence or willful misconduct or any other action or non-action that would
constitute a basis for termination for cause by the Company pursuant to Section
3(b).

 

12.         Compliance with Code Section 409A. It is intended that any expense
reimbursement made under this Agreement shall be exempt from Code Section 409A.
Notwithstanding the foregoing, if any expense reimbursement shall be determined
to be “deferred compensation” within the meaning of Code Section 409A,
including, without limitation, any reimbursement under Sections 2(b)(v) or 4(a),
then the reimbursement shall be made to the Executive as soon as practicable
after submission of the reimbursement request, but no later than December 31 of
the year following the year during which the expense was incurred.

 

13.         Miscellaneous.

 

(a)          This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to such states conflict of
laws principles. For all actions or proceedings arising under, or relating to,
this Agreement, the parties unconditionally and irrevocably consent to the
personal jurisdiction of the courts of the State of New York situated in Nassau
County, and agree not to commence any such action in any other courts. The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect. Whenever the terms “hereof”, “hereby”, “herein”, or words of
similar import are used in this Agreement, they shall be construed as referring
to this Agreement in its entirety rather than to a particular section or
provision, unless the context specifically indicates to the contrary. Any
reference to a particular “Section” or “paragraph” shall be construed as
referring to the indicated section or paragraph of this Agreement unless the
context indicates to the contrary. The use of the term “including” herein shall
be construed as meaning “including without limitation.” This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.

 

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(b)          All notices, requests, consents, and other communications under
this Agreement shall be in writing and shall be delivered by hand, overnight
courier or given by electronic facsimile transmission or mailed by first class,
certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive: Mr. Edward S. Wactlar   4 Westchester Avenue   Jericho, New
York 11753   Mobile Telephone No.:  (516) 382-4022     If to the Company:
Aeroflex Incorporated   35 South Service Road   P.O. Box 6022   Plainview, New
York 11803-0622   Attention:  President   Telecopier No.:  (516)  694-4823  
Telephone No.:  (516)  694-6700     with a copy to: Moomjian, Waite & Coleman,
LLP   100 Jericho Quadrangle, Suite 225   Jericho, New York 11753   Telecopier
No.:  (516) 937-5900   Telephone No.:  (516) 937-5050

 

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

 

(c)          If any provision of this Agreement is held to be illegal, invalid
or unenforceable under present or future laws effective during the term of this
Agreement, such provision shall be fully severable; this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a portion of this Agreement; and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from this
Agreement.

 

(d)          The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

 

(e)          The Executive’s or the Company’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder shall not be deemed to be
a waiver of such provision or right or any other provision or right of this
Agreement.

 

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(f)          The Executive acknowledges that money damages would be both
incalculable and an insufficient remedy for a breach of Sections 6, 7, 8 and 10
by the Executive and that any such breach would cause the Company irreparable
harm. Accordingly, the Company, in addition to any other remedies at law or in
equity it may have, including a claim for damages, shall be entitled to seek
equitable relief, including injunctive relief and specific performance, in
connection with a breach of Sections 6, 7, 8 and 10 by the Executive.

 

(g)          The provisions of this Agreement constitute the complete
understanding and agreement, and supersede and entirely replace any other
agreement, between the parties with respect to the subject matter hereof.

 

(h)          This Agreement may be executed in two or more counterparts.

 

(i)          As used in this Agreement, “affiliate” means, with respect to a
person, any other person controlling, controlled by or under common control with
the first person; the term “Control”, and correlative terms, means the power,
whether by contract, equity ownership or otherwise, to direct the policies or
management of a person; and “person” means an individual, partnership,
corporation, limited liability company, trust or unincorporated organization, or
a government or agency or political subdivision thereof.

 

(j)          This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive’s heirs,
successors, estate and legal representatives. This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns.

 

(k)          The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly 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.
As used in this Agreement, “Company” shall mean the Company as hereinbefore
defined, its parent, Aeroflex Holding Corp., and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

 

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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and,
pursuant to the authorization from the Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.

 

  EXECUTIVE:      /s/ Edward S. Wactlar   Edward S. Wactlar       AEROFLEX
INCORPORATED     By: /s/ Leonard Borow     Leonard Borow, President, Chief
Executive     Officer

 

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