EMPLOYMENT AGREEMEMENT

     This Employment  Agreement (the  "Agreement"),  entered into as of December
19, 1996, is by and between MERRIMAC INDUSTRIES,  INC. (the "Company") and MASON
N. CARTER (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  Caldwell,  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.

                                      -1-
<PAGE>

     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.

                                      -2-
<PAGE>

     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).

                                      -3-
<PAGE>

     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.

                                      -4-
<PAGE>

     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.

                                      -5-
<PAGE>

     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. 
     41 Fairfield  Place 
     West  Caldwell,  New Jersey 07006  
     Facsimile:  (201)  575-0531  
     Attention:   Chairman  of  the  Compensation Committee

     With a Copy to:

     Chadbourne  & Parke,  LLP 
     30  Rockefeller  Plaza 
     New York,  New York  10112
     Facsimile: (212) 541-5369 
     Attention: Thomas C. Meriam, Esq.

     If to the Executive:

     Mason N. Carter 
     Box 775 
     Old Farm Road 
     Bedminster, New Jersey 07921


     With a copy to:

     Mail To:

     Pitney,  Hardin,  Kipp  &  Szuch  
     P.O.  Box  1945  
     Morristown,  New  Jersey 07962-1945 
     Attn: Henry Nelson Massey, Esq. 
     Facsimile No.: (201) 966-1550

     Delivery To:

     Pitney,  Hardin,  Kipp & Szuch 
     200 Campus Drive  
     Florham  Park,  New Jersey 07932-0950 
     Attn: Henry Nelson Massey, Esq.


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


                                       MERRIMAC INDUSTRIES, INC.





                                       By: Reynold K. Green
                                       ------------------------
                                       Name:   Reynold K. Green




                                        MASON N. CARTER
                                        ---------------
                                        Mason N. Carter



                                      -6-