SEPARATION AGREEMENT


     THIS SEPARATION AGREEMENT (the "Agreement") made and entered into as of the
23 day of December, 1998, by and between Merrimac Industries,  Inc. ("Merrimac")
and Eugene W. Niemiec (the "Executive"):

                              W I T N E S S E T H:

     WHEREAS, the Executive is Vice Chairman and a director of Merrimac;

     WHEREAS, the Executive desires to resign as Vice Chairman and terminate his
employment with Merrimac;

     WHEREAS,  the Executive and Merrimac  entered into that certain  Employment
Agreement dated as of December 16, 1996;

     WHEREAS, parties desire to terminate said Employment Agreement;

     WHEREAS,  the  Executive  will  continue  as  a  non-employee  director  of
Merrimac; and

     WHEREAS, the parties hereto desire to set forth their respective rights and
obligations in respect of the Executive's resignation from Merrimac;

     NOW, THEREFORE,  in consideration of the covenants and conditions set forth
herein, the parties, intending to be legally bound, agree as follows:

     1. The  Executive  hereby  resigns  from  employment,  the  office  of Vice
Chairman  and all other  offices held with  Merrimac  other than his seat on the
Board of  Directors  of  Merrimac,  effective  as of the  close of  business  on
December 31, 1998 (the "Effective Date").

     2. Subject to Section 3 below, Merrimac agrees:

     (a) to pay the Executive five days after the Effective Date, the sum of One
Hundred Fifty One Thousand Seven Hundred Dollars ($151,700);

     (b) to pay the Executive,  within thirty days after the Effective Date, the
sum of One Hundred Eighty Five Thousand Five Hundred Dollars ($185,500); and

     (c) to pay the Executive,  within seven days after the first anniversary of
the  Effective  Date,  the sum of One Hundred  Eighty Five Thousand Five Hundred
Dollars ($185,500).

     3. The Executive agrees to repay the outstanding loan balance of his 401(k)
account by having  Merrimac  withhold  said  outstanding  loan  balance from the
payment  provided  for in  Section  2(a)  above  and  remit  this  amount to the
administrator  of the 401(k) plan.  The payment made under Section 2(a) shall be
subject  to  any  required  withholding  for  federal,  state  and  local  taxes
(including, without limitation,  F.I.C.A. and Medicare taxes). The payments made
under  Sections  2(b) and (c) shall be subject to any required  withholding  for
federal, state and local taxes (including, without limitation, Medicare taxes).

                                      -1-
<PAGE>
     (b) In the event that the death of the  Executive  should  occur before all
the payments  contemplated  in Section 2 are  completed,  then  Merrimac  shall,
subject to the provisions of Section 3(a), pay all  outstanding  payments to the
estate of the Executive.

     4.  Except as  expressly  provided  for in  Section 5 below,  all  employee
benefits  coverage  provided by Merrimac to the Executive  shall cease as of the
Effective Date.

     5. After the Effective Date and subject to Section 6 below,  Merrimac shall
provide to the Executive and his spouse medical coverage as follows:

     (a) for the first 18 months  following the Effective  Date,  Merrimac shall
pay for the premiums for COBRA coverage for the Executive and his spouse;

     (b) at the  expiration of 18 months from the  Effective  Date and until the
Executive  turns 65 years of age,  Merrimac  shall provide the Executive and his
spouse with (i) a standard New Jersey Individual  Insurance Policy with the most
liberal  benefits,  with terms  substantially as set forth on Exhibit A attached
hereto,  or (ii)  should  the policy  outlined  in clause (i) above no longer be
available, then a comparable policy in all material respects, provided, however,
that the cost  shall not  exceed  what was or would have been the cost under the
policy outlined in clause (i).

     (c) upon the  Executive  becoming  65 years of age and until  the  eleventh
anniversary of the Effective Date,  Merrimac shall pay for a "Medigap" Insurance
policy to cover the Executive and his spouse,  with terms  substantially  as set
forth on Exhibit B attached hereto.

     6. The  obligations  of  Merrimac  under  Section 5 shall  expire  upon the
earlier of:

     (a) expiration of eleven years from the Effective Date;

     (b) the death of the Executive; or

     (c) the  employment  of the  Executive by any Person for whom the Executive
works at least  thirty  hours per  calendar  week and is  eligible  for  medical
coverage.  For  purposes of this  Agreement,  "Person"  shall mean any  company,
partnership,  trust, person or any other employer.  Should the Executive violate
the non-compete  provision  contained in Section 10,  this Agreement shall be in
breach and Merrimac shall be entitled to stop all payments hereunder.

     7. (a)  Merrimac  will  provide the use of the leased car the  Executive is
currently using for one year from the Effective  Date. In connection  therewith,
Merrimac  will pay for the lease and  insurance  expenses of the car during such
period. All other expenses, including, but not limited to, gas, maintenance and,
if  applicable,  excess  mileage  charges,  shall be the  responsibility  of the
Executive.  The  Executive  has  the  responsibility  to  maintain  the  car  in
accordance  with the terms of the lease, a copy of which will be provided to the
Executive should he request one.

     (b) On or prior to December 31, 1999,  the Executive  shall have the option
to  purchase,  at his sole  expense,  the car on the terms  specified in the car
lease agreement,  provided,  however, that Merrimac is unconditionally  released
from the  lease  agreement.  Merrimac  will  execute  any  documents  reasonably
requested by the Executive in order to effectuate his purchase of the car.

     (c)  Solely  for  purposes  of this  Section  7,  should  the  death of the
Executive  occur  on or prior to  December  31,  1999,  then the  estate  of the
Executive shall be entitled to the benefits and provisions set forth in Sections
7(a) and (b) above.

                                      -2-
<PAGE>
     8. In consideration  of the obligations of Merrimac  herein,  the Executive
reaffirms his  resignation of employment with Merrimac,  and releases  Merrimac,
and its affiliated,  parent,  subsidiary and related entities, and their present
and former  directors,  officers,  employees,  agents,  successors  and  assigns
(together,  the  "Released  Parties"),  from any and all manner of  actions  and
causes of action,  suits, debts, dues, accounts,  bonds,  covenants,  contracts,
agreements,  judgments,  charges,  claims,  and  demands  whatsoever  which  the
Executive,  his heirs,  executors,  administrators  and assigns  has, had or may
hereafter have against the Released  Parties or any of them arising out of or by
reason of any cause,  matter or thing whatsoever from the beginning of the world
to the date hereof, including without limitation any and all matters relating to
his employment by Merrimac and the cessation  thereof,  his employee  retirement
benefits,  and all matters  arising under any federal,  state or local  statute,
rule or regulation or principle of contract law or common law, including but not
limited to Title VII of the Civil  Rights  Act of 1964,  as  amended,  42 U.S.C.
Section 2000e et seq.,  the Age  Discrimination  in  Employment  Act of 1967, as
amended,  29 U.S.C.  Section 621 et seq., the Americans with Disabilities Act of
1990, 42 U.S.C.  Section 12101 et seq., the Employee  Retirement Income Security
Act of 1974, as amended, 29 U.S.C.  Section 1001 et seq., and the New Jersey Law
Against Discrimination,  as amended, N.J. Stat. Ann. Section 10:5. The foregoing
release shall not extend to any actions, causes of action, demands, etc. arising
from the breach or the claimed breach of this Agreement by Merrimac.

     9. Merrimac,  on behalf of itself and its successors and assigns,  releases
and  discharges  the  Executive  and  his  heirs,   executors,   administrators,
successors and assigns from all actions,  causes of action,  suits, debts, dues,
sums of money,  accounts,  reckonings,  bonds,  bills,  specialties,  covenants,
contracts, controversies,  agreements, promises, variances, trespasses, damages,
judgments,  executions,  claims, and demands whatsoever, in law or equity, which
against the  Executive,  Merrimac and its  successors  and assigns ever had, now
have or hereafter can, shall or may have, for, upon, or by reason of any matter,
cause or thing  whatsoever  from the  beginning of the world to the date of this
Agreement.  The  foregoing  release  shall not extend to any actions,  causes of
action,  demands,  etc.  arising  from the breach or the claimed  breach of this
Agreement by the Executive.

     10.  For  purposes  of  this  Agreement,  "Group"  means  Merrimac  and the
subsidiaries, affiliates and parents thereof.

     (a) The  Executive  covenants  and agrees that until  December 31, 1999, he
will not, directly or indirectly, anywhere in the United States, either alone or
in conjunction  with any individual or firm,  corporation,  association or other
entity,  whether as  principal,  agent,  shareholder,  creditor  or in any other
capacity whatsoever:

     (i) carry on, or be engaged in,  concerned with or interested in,  directly
or  indirectly,  any  business  which  relates  to the  manufacture,  promotion,
marketing or distribution,  whether in design, development,  marketing or sales,
of  Multi-Mix(TM)  Microtechnology,  (except for an equity share investment in a
public company whose shares are listed on a stock exchange where such investment
does  not in the  aggregate  exceed  2% of the  issued  equity  shares  of  such
company);

     (ii) attempt to solicit  away from the Group any person  dealing  with,  or
entities  with  whom  the  Group is  engaged,  including  suppliers,  employees,
customers,  agents,  distributors  or  resellers,   relating  to,  Multi-Mix(TM)
Microtechnology; or

     (iii) take any act as a result of which the relations between the Group and
any of its suppliers, customers, employees, agents, distributors or resellers of
Multi-Mix(TM) Microtechnology may be impaired.

                                      -3-
<PAGE>

     (b) The Executive expressly acknowledges and understands that the remedy of
law for any breach by him of this  Section 10  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 10,  Merrimac  shall be entitled to
immediate  injunctive  relief and may obtain a temporary  order  restraining any
threatened  or further  breach.  Nothing in this  Section 10  shall be deemed to
limit Merrimac's remedies at law or in equity for any breach by the Executive of
any of the  provisions of this  Section 10  that may be pursued or availed of by
Merrimac.

     (c) If for any reason any term of this Section 10 be held 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.

     11. The  Executive  agrees not to  disclose  to any person not  employed by
Merrimac,  or not  engaged to render  services  to  Merrimac,  any  confidential
information  obtained  by him  while in the  employ of the  Company,  including,
without limitation,  any of Merrimac'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 he
will not take  with  him,  without  the prior  written  consent  of the Board of
Directors,  any document of Merrimac, which is of a confidential nature relating
to Merrimac or its affiliates, or, without limitation,  relating to its or their
customers or trade secrets.

     12. (a) The  Executive  covenants  and  agrees not to publish or  otherwise
communicate  any  disparaging  remarks  concerning  Merrimac  and its former and
present directors, officers, employees and agents.

     (b) Merrimac  covenants and agrees not to publish or otherwise  communicate
any disparaging remarks concerning the Executive.

     13. (a) The Executive  shall remain a director of Merrimac  until  December
31, 1999 or such earlier date as he may elect to resign his seat.  While serving
on the Board during this period,  the Executive shall be compensated on the same
basis as all other non-employee directors.

     (b) Solely for purposes of this  Section 13(a)  above,  should the death of
the Executive occur prior to December 31, 1999, then the estate of the Executive
shall  be  entitled  to any  remaining  payments  due to the  Executive  for his
services as a non-employee director.

     14. The parties agree that the terms and  conditions of this  Agreement are
confidential  and that  neither  party  shall  disclose  the  existence  of this
Agreement or any of its terms to any third parties,  other than immediate family
members,  attorneys for the parties,  as required by law, or as may be necessary
to enforce this Agreement.  

     15. The  Non-Qualified  Stock  Option  Agreement  dated  December  31, 1996
between  Merrimac and the  Executive  entered into pursuant to the Merrimac 1993
Stock Option Plan, with respect to non-qualified options ("Options") to purchase
an aggregate of 55,000  shares of Merrimac  Common  Stock  ("Shares")  is hereby
amended as follows:

     (a)  non-qualified  Options for 16,500 Shares scheduled to vest on December
16, 1999 shall vest immediately on the Effective Date; and

     (b)  non-qualified  Options for 55,000 Shares which would otherwise  expire
three  months  after the  Executive's  termination  of  employment  shall remain
exercisable until December 31, 2003.

     16. The Employment Agreement dated as of December 16, 1996 between Merrimac
and the Executive is hereby terminated in all respects, except Section 4(b) with
regard to the non-qualified Options to purchase 55,000 Shares.

     17. The computer  equipment and monitor  currently located in the office of
the Executive shall be given to him upon the Effective Date.

                                      -4-
<PAGE>

     18. Except for this Separation Agreement,  at the Effective Date, all prior
or  contemporaneous  agreements  between the Executive and Merrimac are canceled
and deemed by both parties to be null and void.

     19.  The  Executive  warrants  that  he is  entering  into  this  Agreement
voluntarily,  and that,  except as set forth herein,  no promises or inducements
for this  Agreement  have been made, and that he is entering into this Agreement
without  reliance  upon any statement or  representation  by any of the Released
Parties or any other person, concerning any fact material hereto.

     20. Merrimac hereby advises the Executive to consult with an attorney prior
to executing this Agreement.

     21. The  Executive  represents  and warrants that Merrimac has provided him
the  opportunity to review and consider this Agreement for twenty-one  (21) days
from the date Merrimac provided the Executive with a copy of this Agreement, and
that he has  chosen,  of his  own  free  will,  without  any  duress  and  after
consultation  with his attorney,  to waive his right to the full twenty-one (21)
day period.

     22. The  Executive  represents  and  warrants  that he has  obtained  legal
counsel  concerning  this  Agreement  and  fully  understands  the terms of this
Agreement and that he knowingly and voluntarily,  of his own free will,  without
any duress and after  consultation  with his attorney,  being fully informed and
after  due  deliberation,  accepts  its terms and signs the same as his own free
act.

     23. The Executive may revoke this Agreement  within seven (7) days after he
executes this Agreement.  This Agreement becomes effective on the eighth (8) day
following the date of execution by the Executive.

     24. This Agreement will be governed by and construed in accordance with the
laws of the State of New Jersey,  except that no doctrine of choice of law shall
be used to apply any law other than that of the State of New Jersey.

     25. The parties understand and intend that each provision in this Agreement
shall be construed as separable and divisible  from every other  provision.  The
illegality  or  unenforceability  of any provision of this  Agreement  shall not
affect the validity and enforceability, in whole or in part, of any provision of
this Agreement.

     26. This Agreement  constitutes  the entire  agreement  between the parties
with respect to the subject  matter  hereof,  and  supersedes  any and all prior
agreements or  understandings  between the parties.  This  Agreement may only be
changed by written agreement executed by the parties.



     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the day and year first above written.

                                            

                                             /s/  Eugene W. Niemiec
                                             ----------------------------
                                                  Eugene W. Niemiec



                                      
                                             MERRIMAC INDUSTRIES, INC.

                                             /s/  Mason N. Carter
                                             ----------------------------
                                                  Chairman, President and 
                                                  Chief Executive Officer
   


                                       -5-