<PAGE>
 
EXHIBIT 10.1


                             EMPLOYMENT AGREEMENT
                             --------------------


     Agreement, dated as of May 8, 1997, by and between VICTOR ELECTRIC WIRE &
CABLE CORP., a New York corporation with offices at 618 Main Street, Coventry,
Rhode Island 02863 (the "Company"), and John V. Palermo, an individual residing
at 53 Conanicus Avenue, #2H, Jamestown, Rhode Island 02835 (hereinafter referred
to as the "Employee").

                             W I T N E S S E T H:
                             - - - - - - - - - - 

     WHEREAS, the Company and the Employee mutually desire to enter into an
Employment Agreement with respect to the Employee's employment by the Company;

     NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration the receipt of which is hereby
acknowledged, the Company and the Employee hereby agree as follows:

     1.  Term and Position.
          ----------------- 

     The Company agrees to employ the Employee as its President and Chief
Executive Officer for the period (the "Employment Period") commencing on the
date hereof and terminating May 8, 2000.  The Employment Period shall thereafter
continue for successive one year periods unless notice of non-continuation is
given by the Company by the commencement of the previous one year period. The
Employee accepts such employment, agrees to perform the functions  and duties
incident to such position, and further agrees to perform such other services as
shall from time to time be assigned to him by, or pursuant to authorization of,
the Board of Directors of the Company and agrees to devote substantially all of
his business time, skill and attention to such services.

     2.   Compensation and Benefits.
          ------------------------- 

          a.  The Company shall pay to the Employee, and the Employee shall
accept from the Company, for the Employee's services hereunder during the
Employment Period, (i) base compensation at the initial rate of $215,000 per
annum, which rate shall be reviewed by the Board of Directors annually with
respect to increases, payable in accordance with the customary payroll policy of
the Company and subject to such payroll deductions as are required by law; and
(ii) such bonus each year as shall be determined pursuant to a bonus plan which
shall be adopted by the Board of Directors of Quadrax Corporation, the Company's
parent,
<PAGE>
 
following such Board of Directors' approval of a strategic plan for the business
of the Company which strategic plan shall be developed by Employee.


          b.  The Company agrees to reimburse the Employee for all reasonable
business expenses incurred by him during the Employment Period in connection
with the performance of his services hereunder, including expenses incurred in
connection with activities associated with promoting the business of the Company
that are authorized from time to time by the Board of Directors, upon
presentation by Employee of an accounting of such expenses in such detail as may
be required by then-applicable tax laws.

          c.  The Employee will be entitled to four weeks of paid annual
vacation and shall participate at the Company's expense on the same basis,
subject to the same qualifications, as other executive officers of the Company
in any pension, savings, hospitalization, long-term disability, and other fringe
benefit plans (the "Fringe Benefits") in effect from time to time with respect
to executive officers of the Company. The Company agrees that each of the Fringe
Benefits in effect on the date hereof or at any time during the Employment
Period shall not be terminated or modified in any manner which reduces the
benefits of the Employee without the written consent of the Employee. In
addition, during the Employment Period the Company agrees (i) to pay the future
premiums on the Employee's existing $1,000,000 life insurance policy, (ii) to
provide the Employee with an automobile allowance of $700 monthly, (iii) to pay
for reasonable automobile insurance premiums each month on the automobile
Employee uses for business and (iv) to pay the premiums on a long-term
disability insurance policy providing a benefit of at least $4,000 per month
unless such benefit is already provided by another Company program.

          d.  The Employee will be granted options to purchase 150,000 shares of
Quadrax Corporation common stock under to the Quadrax Corporation 1993 Stock
Plan (the "Plan").  The vesting schedule for such options shall be as follows:

<TABLE>
<CAPTION>
          Options To Purchase           Vesting Date
          -------------------           ------------   
          <S>                           <C>
          50,000 Shares                 May 8, 1997
          50,000 Shares                 December 31, 1997
          50,000 Shares                 December 31, 1998
</TABLE>

     The Employee must be employed by the Company on each Vesting Date in order
for the applicable options to vest.  The options, when vested, will be
exercisable at a price per share equal to the closing bid price of Quadrax
Corporation's common stock on The Nasdaq SmallCap Market System on the
applicable Vesting Date (or the last trading day prior to such Vesting Date in
the event the

                                       2
<PAGE>
 
Vesting Date is not a trading day).  All other terms shall be as specified in
the Plan.

     3.   Termination.
          ----------- 

          a.   For Cause.
               --------- 

          This Agreement may be terminated immediately by the Company upon the
occurrence of any of the following events: (i) the death of Employee; (ii)
Employee's loss of legal capacity for any reason; (iii) willful breach of this
Agreement or his duties hereunder by Employee; (iv) any act committed by the
Employee against the Company, its parent Quadrax Corporation, its subsidiaries
or divisions constituting (A) fraud, (B) misappropriation of corporate
opportunity, (C) self-dealing without the express prior approval of the Board of
Directors of the Company or (D) embezzlement of funds; (v) any act committed by
the Employee constituting intentional dishonesty; (vi) a felony conviction for
conduct involving moral turpitude or other criminal conduct; (vii) the breach or
default by Employee in the performance of any material duty or responsibility to
the Company, Company policy or material covenant on the part of the Employee to
be performed under this Agreement, which breach or default shall continue for a
period of fourteen (14) days after receipt of written notice from the Company;
(viii) gross negligence or willful misconduct in the performance of the
Employee's duties hereunder; (ix) chronic alcoholism or any other form of drug
addiction which impairs the Employee's ability to perform his duties hereunder;
or (x) disability of Employee, which prevents Employee from performing any
material amount of his duties hereunder, and such disability is expected, in the
opinion of a physician engaged by the Company for such purpose, to continue in
excess of 120 days. In the event of disability, Employee shall be entitled to
cause his own physician to make an examination of Employee, and if such personal
physician disagrees with the opinion of the Company's doctor, then the two
doctors shall together appoint a third physician to examine Employee, and the
determination of such third physician shall be final. The fees of such third
physician shall be paid by the Company.

          b.   Without Cause.
               ------------- 

          This Agreement may be terminated by the Company at any time without
cause, subject to the payments set forth in subsection 3.c below.

          c.   Compensation Upon Termination.
               ----------------------------- 

          In the event that Employee is terminated for cause (other than death,
in which case the Company will pay to Employee's estate

                                       3
<PAGE>
 
six months' base compensation, based on the Employee's base compensation rate in
the year of death), as set forth in Section 3.a above, then the obligation of
the Company to compensate Employee shall cease with the payment of all amounts
accrued (including reimbursement of expenses properly incurred by Employee prior
to termination) as of such date. In the event that Employee is terminated
without cause, as set forth in Section 3.b above, then the Company shall be
obligated to pay Employee as his sole compensation upon termination his regular
salary and benefits (exclusive of discretionary bonuses, except for a pro-rata
discretionary bonus for the year in which termination occurs if said termination
occurs later than the seventh month of that year) through the initial term of
this Agreement and, if termination without cause occurs thereafter, then for a
period of one year, in regular salary payments without setoff for new employment
by Employee.

     4.   Non-Competition.
          --------------- 

          a.  During the entire Employment Period as defined in paragraph 1 
hereof, whether or not this Agreement or the Employment Period provided 
hereunder has expired or terminated, (such period hereinafter the "Non-
Competition Period"), Employee agrees that he will not, anywhere in the United 
States, directly or indirectly enter into or participate (whether as owner,
partner, shareholder, officer, director, salesman, consultant, employee or
otherwise) in any business which designs, develops, manufactures, markets,
distributes and/or otherwise sells any Products (as defined below) or which is
otherwise in competition with any substantial business conducted by the Company
during any period in which the Employee is employed by the Company, without
first having obtained the consent of the Company, in writing; provided, that 
the Employee may own up to five (5%) percent of the outstanding equity
securities of any entity that is subject to the public reporting requirements of
the Securities Exchange Act of 1934. As used herein, the term "Products" means
any and all goods and/or products of the type at any time sold by the Company,
including but not limited to a broad range of wire, cable, cord sets and
thermoplastic composites (produced by Quadrax Corporation) and goods
manufactured therefrom, and any functionally similar goods and/or products.

          b.  During the Non-Competition Period, the Employee shall not, without
the prior written consent of the Company, directly or indirectly (i) solicit,
request, cause or induce any person who is at the time, or three months prior
thereto had been, an employee of or a consultant to the Company, to leave the
employ of or terminate his relationship with the Company, (ii) employ, hire,
engage or be associated with, or endeavor to entice away from the Company, any
such person or (iii) induce any customers of the Company to discontinue doing
business with the Company.

                                       4
<PAGE>
 
          c.  The Company shall be entitled to extend the Non-Competition Period
for a period of one year following the voluntary or involuntary termination of
the employment of the Employee for any reason whatsoever (whether or not by
consent, by retirement, or with or without cause), and at any time (whether or
not this Agreement or the Employment Period provided hereunder has expired or
terminated) by providing Employee written notice of its intention to do so, and
                                                                            --- 
by continuing to pay Employee his base compensation equal to the amount most
recently paid to Employee (excluding bonuses and other fringe benefits) on the
same terms as paid during the period of employment.

     5.   Non-Disclosure of Confidential Information.
          ------------------------------------------ 

          a.  The Employee acknowledges that it is the policy of the Company to
maintain as secret and confidential all valuable and unique information
heretofore or hereafter acquired, developed or used by the Company relating to
the business, operations employees and customers of the Company, which
information gives the Company a competitive advantage in its industry, and which
information includes technical knowledge, know-how or trade secrets and
information concerning the operations, sales, personnel, suppliers, customers,
costs, profits, markets, pricing policies, "Confidential Material" (as
hereinafter defined), and the results of any investigations or experiments of
the Company (as such information is hereinafter referred to as "Confidential
Information").  The Employee recognizes that the services to be performed by the
Employee are special and unique, and that by reason of his duties he will
acquire Confidential Information.  The Employee recognizes that all such
Confidential Information is the sole and exclusive property of the Company.  In
consideration of the Company's entering into this Agreement, the Employee agrees
that:

              i. he shall never for so long as such information is valuable and
unique (but in no case for longer than five years following the termination of
Employee's employment by the Company), directly or indirectly, use, publish,
disseminate or otherwise disclose any Confidential Information obtained during
his employment by the Company without the prior written consent of the Company's
Board of Directors, it being understood that this subparagraph shall survive the
term of this Agreement;

              ii. the parties hereto agree that the Employee, during the course
of his employment, may be directed to perform services for the benefit of a
customer of the Company, such customer shall be deemed a third party beneficiary
of the provisions of this Agreement and, in addition to the proscriptions
contained in subparagraph (i) above, shall not disclose any "confidential
information" which relates to the customer (defined with respect to such
customer in the same manner as for the
                                       5
<PAGE>
 
Company) to any person, firm or enterprise without the prior written consent of
the Company and such customer;

               iii.  during the term of his employment by the Company, he shall
exercise all due and diligent precautions to protect the integrity of the
Company's customer lists, mailing lists and sources thereof, statistical data
and compilations, Agreements, contracts, manuals or other documents and any and
all other materials embodying any Confidential Information (the "Confidential
Materials") and, upon termination of his employment hereunder, or at such
earlier time as the Company may so request, he shall immediately return to the
Company all such Confidential Materials (and copies thereof) then in his
possession or control;

               iv.   the Employee agrees that he will at all times comply with
all security regulations (a) in effect from time to time at the Company's or its
customers' premises and (b) in effect for materials belonging to the Company or
its customers; and

               v.    the Employee agrees that the provisions of this subsection
(a) are reasonably necessary to protect the proprietary rights of the Company in
the Confidential Information and its trade secrets, goodwill and reputation.

          b.  The Employee acknowledges that any breach of the provisions of
this Section 5 can cause irreparable harm to the Company for which the Company
would have no adequate remedy at law. In the event of a breach or threatened
breach by the Employee of any of such provisions, in addition to any and all
other rights and remedies it may have under this Agreement or otherwise, the
Company may immediately seek any judicial action deemed necessary, including,
without limitation, temporary and preliminary injunctive relief.

     6.   Arbitration.
          ----------- 
 
          Except as otherwise provided herein, any controversy or claim arising
out of or in connection with this Employment Agreement or any breach of this
Employment Agreement or any default under this Employment Agreement shall be
settled by arbitration in the State of Rhode Island in accordance with the rules
of the American Arbitration Association and judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction.

     7.   Successors and Assigns.
          ---------------------- 

          This Employment Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, administrators,
executors, successors and assigns; provided, 

                                       6
<PAGE>
 
however, that this Employment Agreement may not be assigned by either party
hereto.

     8.   Governing Law.
          ------------- 

          This Employment Agreement shall be governed by, and construed in
accordance with, the laws of the State of Rhode Island.

     9.   Notice.
          ------ 

          Any notice required hereunder shall be delivered by hand, sent by
telecopy, or sent by registered or certified mail, addressed to the other party
hereto at its address set forth above or at such other address as notice thereof
shall have been given in accordance with the provisions of this Section 9. Any
such notice shall become effective (a) when mailed, three days after having been
deposited in the mails, postage prepaid, and (b) in the case of delivery by hand
or telecopy, upon delivery.



     10.  Agreement; Amendment.
          -------------------- 

          This Agreement supersedes any prior Agreements or understandings, oral
or written, between the parties hereto and represents their entire understanding
and Agreement with respect to the subject matter hereof, and this Agreement can
be amended, supplemented or changed, and any provision hereof can be waived,
only by written instrument making specific reference to this Agreement which is
signed by the party against whom enforcement of any such amendment, supplement,
modification or waiver is sought.

     11.  Severability.
          ------------ 

          In the event of the invalidity or unenforceability of any one or more
provisions of this Agreement, such illegality or unenforceability shall not
affect the validity or enforceability of the other provisions hereof and such
other provisions shall be deemed to remain in full force and effect. The
Employee specifically acknowledges and agrees that the provisions of Sections 4
and 5 hereof are reasonable and valid in all respects. If any tribunal having
jurisdiction determines that any of the provisions of either Section 4 or
Section 5 or any part or parts thereof, is invalid or unenforceable because of
the duration or scope of such provision, such tribunal shall have the power to
reduce the duration or scope of such provision, and in its reduced form, such
provision shall then be enforceable.

                                       7
<PAGE>
 
     IN WITNESS WHEREOF, each of the parties hereto has executed this Employment
Agreement the day and year first above written.


                              VICTOR ELECTRIC WIRE & CABLE CORP.


                              By: /s/ James J. Palermo
                                 ---------------------------
                                  James J. Palermo, Director


                              EMPLOYEE:


                                  /s/ John V. Palermo
                              ------------------------------
                                   John V. Palermo


AGREED TO AND ACCEPTED
AS TO SECTION 2(d)
QUADRAX CORPORATION


/s/ James J. Palermo
---------------------
By:  James J. Palermo
     President

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