**Exhibit 10.26**

 

| ** ** | **Execution Copy** |
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**EXECUTIVE EMPLOYMENT AGREEMENT**

 

THISEXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is entered into effectively asof 1st day of July 2010 (the “Effective Date”), by and between AeroflexIncorporated, a Delaware corporation (together with its successors and assignspermitted hereunder, the “Company”), and Edward S. Wactlar (the “Executive”).

 

WHEREAS,the Board of Directors of the Company (the “Board”) has determined that it isin the best interests of the Company to employ the Executive, and the Executivedesires to be employed by the Company, on the terms and conditions set forthherein.

 

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

 

1.             **EmploymentPeriod**.  Subject to Section 3,the Company hereby agrees to employ the Executive, and the Executive herebyagrees to be employed by the Company, in accordance with the terms andprovisions of this Agreement, for a period commencing as of the Effective Dateand continuing for a three (3) year period, renewing daily, unless eitherparty provides notice of non-renewal (the “Employment Period”).  Upon such notice of non-renewal, theEmployment Period shall continue for a period of three (3) years from thedate such notice is received by the non-notifying party; p*rovided,however*, if no such non-renewal notice is received by thenon-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 thedate such notice of non-renewal is thereafter received by the non-notifyingparty.

 

2.                                      **Termsof Employment**.

 

(a)                                 Positions andDuties.

 

(i)            During the term of the Executive’semployment hereunder, the Executive shall serve as, and have the title ofSenior Vice President, General Counsel and Secretary of the Company and, in sodoing, shall report directly to the President and the Board of Directors of theCompany.  The Executive shall have suchmanagement, supervisory and operational functions and other powers, functionsand duties consistent with the Executive’s title and duties as may from time totime reasonably be prescribed by the Board.

 

(ii)           During the term of the Executive’semployment hereunder, and excluding any periods of vacation, paid holiday, andsick and personal leave to which the Executive is entitled, the Executiveagrees to devote substantially all of his business time to the business andaffairs of the Company and, to the extent necessary to discharge

 

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theresponsibilities assigned to the Executive hereunder, to use the Executive’sreasonable best efforts to perform faithfully, effectively and efficiently suchresponsibilities.  During the term of theExecutive’s employment, it shall not be a violation of this Agreement for theExecutive to (1) serve on corporate, civic or charitable boards orcommittees, or (2) manage personal investments, or (3) serve as anofficer of one or more affiliates of the Company, including the Company’sparent, so long as such activities, either individually or in the aggregate, donot significantly interfere with the performance of the Executive’sresponsibilities as an employee of the Company in accordance with thisAgreement.

 

(b)                                 Compensation.

 

(i)            Base Salary.  During the term of the Executive’s employmenthereunder, the Executive shall receive an annual salary of Three HundredSeventy Five Thousand Dollars ($375,000.00), as the same may be increased (butnot decreased) from time to time by the Board in its sole discretion (the “BaseSalary”), which shall be paid in accordance with the customary payrollpractices of the Company for services rendered by officers of the Company.

 

(ii)           Bonus.  For each Fiscal Year ending during theEmployment Period, the Executive shall be eligible to receive an annual bonusof between 50% and 75% of his Base Salary based upon the achievement of theCompany’s  EBITDA target for such FiscalYear (the “FY EBITDA Target”) as established by the Board of Directors of theCompany (the “Board”).  Moreparticularly, 50% of his Base Salary will be awarded to the Executive as abonus if the Company’s EBITDA is $10,000,000 less than the FY EBITDA Targetestablished by the Board (the “Threshold EBITDA”), and, correspondingly, 75% ofhis Base Salary will be awarded to the Executive as a bonus if the Company’sEBITDA is $10,000,000 or more than the FY EBITDA Target established by theBoard (the “Maximum EBITDA”) The Executive’s bonus shall be determined bylinear interpolation as follows:

 

(A) ifthe Company’s  EBITDA is between the FYEBITDA Target and the Threshold EBITDA (but not less than the ThresholdEBITDA), then the amount of the bonus to be paid to the Executive shall becalculated by (w) *dividing*by $10 million, the total of $10 million *minus* the difference between the FYEBITDA Target and the EBITDA achieved by the Company, (x) *multiplying* the result by 12.5% (y) *adding* the resultant percentage amount(rounded to the nearest hundredth of a percent) to 50% to obtain the “MultiplierPercentage”, and then (z) multiplying the Base Salary by the MultiplierPercentage.

 

(B) ifthe Company’s EBITDA is equal to or greater than the FY EBITDA Target, then theamount of the bonus to be paid to the Executive shall be calculated by (w) *dividing* by $10 million, the sum of $10million *plus* the differencebetween the EBITDA achieved by the Company (up to an amount no greater than $10million more than the FY EBITDA Target) and the FY EBITDA Target, (x) *multiplying* the result by 12.5%, (y) *adding* the resultant percentage amount(rounded to the nearest hundredth of a percent) to 

 

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50%to obtain the Multiplier Percentage, and then (z) *multiplying* the Base Salary by theMultiplier Percentage.

 

Noannual bonus will be paid if the Company’s EBITDA is below the Threshold EBITDAfor any Fiscal Year. The FY EBITDA Target shall be equitably adjusted by theBoard in the event of any divestiture, acquisition or other extraordinaryevent. Any annual bonus payable hereunder shall be paid on or prior to March 15of the year following the year such bonus is earned. In the event the ThresholdEBITDA and the Maximum EBITDA parameters are revised by the Board and theemployment agreements of the other senior executive officers are amendedaccordingly, the Threshold EBITDA and the Maximum EBITDA parameters hereinshall be deemed amended as well in a manner commensurate therewith.

 

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

 

(iv)          Welfare Benefit Plans.  During the term of the Executive’s employmenthereunder, the Executive shall be eligible for participation in and shallreceive all benefits under welfare benefit plans, practices, policies andprograms (“Welfare Plans”) provided by the Company (including, withoutlimitation, 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 withpractices established by the Board.

 

(v)           Expenses.  During the term of the Executive’s employmenthereunder, the Executive shall be entitled to receive prompt reimbursement forall reasonable expenses incurred by the Executive in performing his dutieshereunder, including, without limitation, transportation, hotel, and livingexpenses and other business and entertainment expenses, in accordance with thepolicies, practices and procedures of the Company.

 

(vi)          Vacation and Holidays.  During each complete twelve month period ofthe Executive’s employment hereunder, the Executive shall be entitled to 20paid vacation days and such paid holiday and leave time as are in accordancewith the plans, policies, programs and practices of the Company.

 

(vii)         Equity Awards.  The Company shall grant to Executive anoption to purchase            sharesof the common stock of Aeroflex Holding Corp., on or after the effective dateof the initial public offering of Aeroflex Holding Corp., which shall not bemutually exclusive of any other equity grants or awards as the Board (or anycommittee thereof) shall grant to the Executive from time to time during theEmployment Period. The option grantedhereunder will be subject to the terms of an option award

 

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agreementand may be subject to the terms of an applicable equity plan of the Company orits affiliates.  The per share exerciseprice of the option will be no less than the fair market value of a share ofthe common stock of Aeroflex Holding Corp. on the date of grant.

 

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

 

3.                                      **Terminationof Employment**.

 

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

 

(b)           Cause.  The Company may terminate the Executive’semployment during the Employment Period for Cause or without Cause.  For purposes of this Agreement, “Cause” shallmean (i) a breach by the Executive of the Executive’s material obligationsunder Section 2(a) which is not cured within ten (10) days ofthe receipt by the Executive of written notice thereof from the Company; (ii) commissionby the Executive of an act of fraud upon, or willful misconduct of a materialnature toward, the Company, as reasonably determined by a majority of theBoard, (iii) a material breach by the Executive of  any of Sections 6, 8 or 10; (iv) theconviction of the Executive of any felony or the conviction of the Executive ofany misdemeanor involving any acts of dishonesty including embezzlement, fraudor any other act that results or reasonably could be expected to result in aneconomic loss or harm to the Employer (or a plea of *nolocontendere* thereto); (v) the Executive being found liable inany civil proceeding for an act by the Executive constituting work placeharassment; or (vi) the willful and continuing failure of the Executive tocarry out, or comply with, in any material respect any reasonable directive ofthe Board or the President consistent with the terms of this Agreement.

 

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(c)           Termination for Good Reason by theExecutive.  The Executive mayterminate this Agreement for Good Reason and such termination shall constitutea termination without Cause by the Company. “Good Reason” shall mean the occurrence of a breach by the Company ofits material obligations to the Executive which is not cured within ten (10) BusinessDays of the receipt by the Company of written notice thereof from the Executiveand shall include, without limitation,  (i) the loss of, or an  adverse change in,the Executive’s position or titles; (ii) a diminution or materiallyadverse change in the duties and responsibilities of the Executive or theassignment to the Executive of duties and responsibilities which areinconsistent with the Executive’s position in the Company; (iii) a reductionin the Executive’s Base Salary or the failure to pay the same or any bonus orother benefits hereunder when due or within a reasonable period of timethereafter, (iv) the relocation of the Executive’s office to a locationwhich is more than 25 miles from the current location of corporate headquartersof the Company.

 

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

 

(e)           Date of Termination.  “Date of Termination” means (i) if theExecutive’s employment is terminated by the Company for Cause, the date of theNotice of Termination or any later date specified therein, as the case may be; (ii) ifthe 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 anylater date specified by the Board; and (iii) if the Executive’s employmentis terminated by reason of death or Disability, the date of death of theExecutive or the Disability Effective Date, as the case may be.

 

4.                                      **Obligationsof the Company upon Termination**.

 

(a)           Without Cause.  If during the Employment Period, the Companyshall terminate the Executive’s employment without Cause or the Executive shallterminate his employment for Good Reason, except in either such case withineighteen (18) months following a Change in Control (as defined below), theCompany shall pay to the Executive or his heirs (1) within ten (10) daysafter the Date of Termination, the sum

 

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ofthe Executive’s Base Salary through the Date of Termination, to the extent nottheretofore paid, plus all accrued vacation pay, unreimbursed business expensesand other accrued but unpaid compensation described in Section 2(b) above(the “Accrued Obligations”) (2) an amount equal to the Executive’s BaseSalary for the remainder of the Employment Period immediately following theDate of Termination, but no event less than one (1) year if suchtermination shall occur after the 5 year anniversary of the Effective Date,payable in such increments and at such intervals as is in accordance with theCompany’s normal payroll practices, as if the Executive had remained anemployee of the Company through the expiration of such period; and (3) anyamount arising from the Executive’s participation in, or benefits under, anyInvestment Plans (“Accrued Investments”), which amounts shall be payable inaccordance with the terms and conditions of such Investment Plans; and (4) annualbonuses for the remainder of the Employment Period in accordance with Section 2(b) (ii),as if the Executive had not been terminated, such bonuses, if any, shall bepaid at the time the company pays bonuses to other senior executives of theCompany; *provided, however*, if such terminationoccurs after the five year anniversary of the Effective Date, then the bonusapplicable for the Fiscal Year in which the Date of Termination occurs, shallbe prorated to the Date of Termination, but in no event less than 50% of thebonus to which the Executive otherwise would have been entitled for that FiscalYear pursuant to Section 2(b)(ii). In addition, all outstanding equitycompensation awards, including the equity awards described in Section 2(b) (vii),shall immediately vest, and the Executive and qualifying members of theExecutive’s family shall be entitled to continue to participate, at the Company’sexpense, in the Company’s Welfare Plans, including medical, dental andprescription coverage, for the remainder of such Employment Period, but in noevent less than one year.

 

(b)           Death or Disability.  If the Executive’s employment is terminatedby 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 incash within twenty (20) days after the Date of Termination, the AccruedObligations; and (ii) the Accrued Investments which shall be payable inaccordance with the terms and conditions of the Investment Plans; and (iii) theunpaid bonus provided for in Section 2(b)(ii) applicable for the yearin which the Executive’s death or Disability occurs, based on the actualperformance of the Company for such year, paid at the time the Company payssuch bonuses to other senior executives of the Company.  In addition, the qualifying members of theExecutive’s family shall be entitled to continue their participation at theCompany’s expense in the Company’s Welfare Plans for a period of twenty-fourmonths after the Date of Termination.

 

(c)           Cause.  If the Executive’s employment shall beterminated by the Company for Cause during the Employment Period, the Companyshall have no further payment obligations to the Executive other than forpayment of Accrued Obligations, Accrued Investments (which shall be payable inaccordance with the terms and conditions of the Investment Plans), and thecontinuance 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 uponthe occurrence of, a Change in Control as hereinafter defined, then, if theExecutive’s employment is terminated by the Company without Cause (including bya notice of non-renewal by the Company pursuant to Section 1), or by theExecutive for Good Reason, in either case within eighteen (18) monthsthereafter, the Company shall pay to the Executive or his heirs within ten (10) daysof the Date of Termination (subject to Section 4(e)), the following: (i) theAccrued Obligations, (ii) the Accrued Investments, and (iii) a lumpsum severance payment equal to (A) the amount of the Executive’s BaseSalary for the remainder of the Employment Period, but in no event less thanthree years, if such termination shall occur prior to the five year anniversaryof the Effective Date or (B)  the Executive’s Base Salary for one year ifsuch termination shall occur at any time after the five year anniversary of theEffective Date, together with an amount equal to either (x) three timesthe average of the annual bonuses received by the Executive for the prior threeFiscal Years of the Company if the termination occurs prior to the 5 yearanniversary of the Effective Date or (y) one times the average of theannual bonuses received by the Executive for each of the prior three FiscalYears of the Company if the termination occurs after the 5 year anniversary ofthe Effective Date. In addition, all outstanding equity compensation awards,including the equity awards described in Section 2(b) (vii), shallvest immediately, and the Executive and the qualifying members of the Executive’sfamily shall continue their participation at the Company’s expense in all ofthe Company’s Welfare Plans, including medical, dental and prescriptioncoverage, for the balance of the Employment Period but in no event less thanone year.  Notwithstanding the foregoing,if all or any portion of the payments and/or benefits provided under thisAgreement, and/or any other payments and benefits that the Executive receivesor is entitled to receive from the Company, its subsidiaries or any of itsaffiliates, constitutes an excess “parachute payment” within the meaning of Section 280G(b) ofthe Internal Revenue Code of 1986, as amended, (the “Code”) (each suchparachute payment, a “Parachute Payment”) and will result in the imposition onthe Executive of an excise tax under Section 4999 of the Code, then, theParachute Payments shall instead be reduced to the aggregate amount ofParachute Payments that may be made to the Executive without incurring suchexcise tax, as determined by the Company’s auditors.  Any such reduction in the preceding sentenceshall be done first by reducing any cash payments with the last payment reducedfirst; next any equity or equity derivatives that are included under Section 280Gof the Code at full value rather than accelerated value; next any equity orequity derivatives based on acceleration value shall be reduced with thehighest value reduced first (as such values are determined under Treasury RegulationSection 1.280G-1, Q&A 24); finally any other non-cash benefits will bereduced.  For the purpose of thisSection, a “Change in Control” (which in all respects shall satisfy therequirements 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 theownership”, a “change in the effective control” or a “change in the ownershipof a substantial portion of the assets” of the Company determined as follows:

 

(i)                a “change in the ownership” ofthe Company shall occur on the date on which any one person or more than oneperson acting as a group, directly or indirectly, acquires ownership of stockof the Company that, together with the stock held

 

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bysuch person or group, constitutes more than 50% of the total fair market valueor total voting power of the stock of the Company, as determined in accordancewith Treasury Regulations § 1.409A-3(i)(5)(v); *provided,however*, if any one person or more than one person acting as a groupis considered to own already more than 50% of the total fair market value ortotal voting power of the stock of the Company, the acquisition of additionalstock by the same person or persons is not considered to cause a “change in theownership” of the Company (or to cause a “change in the effective control” ofthe Company as contemplated in subsection (ii) or (iii) below); provided,however, that the following acquisitions shall not constitute a Change inControl: (A) any acquisition by or from the Company or any corporation orother entity in which the Company owns or controls, directly or indirectly, atleast 50 percent of the total combined voting power represented by all classesof 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 anyemployee benefit plan (or related trust) sponsored or maintained by the Companyor any subsidiary, (B) any acquisition by an individual who as of theEffective Date is a member of the Board, (C) any acquisition by anyunderwriter in any firm commitment underwriting of securities to be issued bythe Company, or (D) any acquisition by any corporation (or other entity) if,immediately following such acquisition, 50% or more of the then outstandingshares of common stock (or other equity unit) of such corporation (or otherentity) and the combined voting power of the then outstanding voting securitiesof such corporation (or other entity), are beneficially owned, directly orindirectly, by all or substantially all of the individuals or entities who,immediately prior to such acquisition, were the beneficial owners of the thenoutstanding voting securities of the Company in substantially the same proportions,respectively, as their ownership immediately prior to the acquisition of thestock and Voting Securities (collectively with (A), (B), and (C), the “ExemptAcquisitions”)

 

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

 

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

 

(iv)          a “change in the ownership of asubstantial portion of the assets” of the Company shall occur on the date onwhich any one person or more than one person acting as a group, acquires (orhas acquired during the 12 month period ending on the date of the most recentacquisition by such person or persons), directly or indirectly, assets from theCompany that have a total gross fair market value equal to or

 

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morethan 50% of the total gross fair market value of all of the assets of theCompany immediately before such acquisition or acquisitions, as determined inaccordance with Treasury Regulation § 1.409A-3(i)(5) (viii); *provided, however*, a transfer of assets shall not be treatedas a “change in the ownership of a substantial portion of the assets” of theCompany when such transfer is made to an entity that is controlled by theshareholders of the Company, as determined in accordance with TreasuryRegulation § 1.409A-3(i)(5)(vii)(B).

 

(e)           Payments; Compliance with Section 409Aof the Code. Notwithstanding anything herein to the contrary, if (i) theExecutive is to receive payments or benefits under Section 4 by reason ofhis separation from service (as such term is defined in Section 409A ofthe Code) other than as a result of his death, (ii) the Executive is a “specifiedemployee” within the meaning of Code Section 409A for the period in whichthe payment or benefits would otherwise commence, and (iii) such paymentor benefit would otherwise subject the Executive to any tax, interest orpenalty imposed under Section 409A of the Code (or any regulationpromulgated thereunder) if the payment or benefit would commence within six monthsof a termination of the Executive’s employment, then such payment or benefitrequired under Section 4 shall not commence until the first day which isat least six months after the termination of the Executive’s employment.  Such payments or benefits, which would haveotherwise been required to be made over such six month period, shall be paid tothe Executive in one lump sum payment or otherwise provided to the Executive assoon as administratively feasible after the first day which is at least six monthsafter the termination of the Executive’s employment.  Thereafter, the payments and benefits shallcontinue, if applicable, for the relevant period set forth in Section 4.  Each severance installment contemplated underSection 4 shall be treated as a separate payment in a series of separatepayments under Treasury Regulation Section 1.409A-2(b)(2)(iii). Forpurposes of this Agreement, all references to “termination of employment” andother similar language shall be deemed to refer to the Executive’s “separationfrom service” as defined in Treasury Regulation Section 1.409A-1(h).

 

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

 

6.             **ConfidentialInformation**.

 

(a)           The Executive acknowledges that theCompany and their affiliates have trade, business and financial secrets andother confidential and proprietary information (collectively, the “ConfidentialInformation”).  As defined herein, 

 

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ConfidentialInformation shall not include (i) information that is known to otherpersons or entities generally, (ii) information required to be disclosedby the Executive pursuant to a subpoena or court order, or pursuant to arequirement of a governmental agency or law of the United States of America ora state thereof or any governmental or political subdivision thereof, and (iii) informationthat the Executive possessed on or prior to the Effective Date.

 

(b)           The Executive agrees (i) to holdsuch Confidential Information in confidence and (ii) not to release suchinformation to any person (other than Company employees and other persons towhom the Company has authorized the Executive to disclose such information andthen only to the extent that such Company employees and other personsauthorized by the Company have a need for such knowledge or to the Executive’sattorneys, accountants and personal representatives for purposes of representingthe Executive).

 

(c)           The Executive further agrees not touse any Confidential Information for the benefit of any person or entity otherthan the Company or as authorized by the Company.

 

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

 

7.             **Surrenderof Materials Upon Termination**. Upon any termination of the Executive’s employment, the Executive shallimmediately return to the Company all copies, in whatever form, of any and allConfidential Information and other properties of the Company and theiraffiliates which are in the Executive’s possession custody or control and shallcause any third parties to whom he has entrusted such information whether ornot in compliance with Section 6, to return such information to theCompany.

 

8.             **Non-Competition.**  During the Employment Period, the Executivewill not, without the Company’s express written consent, engage in any otheremployment or business activity directly related to the business in which theCompany is at the time involved or actively considering becoming involved, norwill the Executive engage in any other activities which conflict with hisobligations to the Company except as provided in Section 2(a)(ii) above.  During the Employment Period and (a) inthe case of termination by the Company for Cause or termination by theExecutive without Good Reason, for one year after the Date of Termination, (x) directlyor indirectly, either as principal, agent, employee, consultant, officer,director, stockholder, or in any other capacity, engage in or have a financialinterest in, any business, or the relevant division or subsidiary of any suchbusiness, which is competitive with the business of the Company or any of itssubsidiaries or affiliates, provided, however, that the Executive’s ownershipof not more than two percent (2%) of the outstanding stock of a publicly tradedcompany shall not be prohibited by this clause (x); (y) induce employeesof the Company or any of its subsidiaries or affiliates to join with theExecutive in any capacity, direct or indirect, in any business in which theExecutive may be or become interested whether or not competitive with theCompany; or (z) solicit customers of the Company.  If any 

 

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restrictionset forth in this Section is found by any court of competent jurisdictionto be unenforceable cause it extends for too long a period of time or over toogreat a range of activities or in too broad a geographic areas, it shall beinterpreted to extend only over the maximum period of time, range of activitiesor geographic areas as to which it may be enforceable.

 

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

 

10.          **Ownership and Disclosureof Information, Ideas, Concepts, Improvements, Discoveries andInventions, and All Original Works of Authorship**.  All information, ideas, concepts,improvements, discoveries and inventions, whether patentable or not, which areconceived, made, developed or acquired by the Company or which are created bythe Executive in the course and scope of his employment or which are disclosedor made known to the Executive, individually or in conjunction with others,during the Executive’s employment by the Company whether during or outside ofusual working hours, and whether on the Company’s premises or not, and whichrelate 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 identityof customers or their requirements or of key contacts within the customer’sorganizations, or marketing and merchandising techniques), operating andacquisition strategies, are and shall be (insofar s 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 andall 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 theCompany.

 

11.          **Indemnification**.  The Company shall indemnify and hold harmlessthe Executive from and against all liabilities and expenses (including amountspaid in satisfaction of judgments, in compromise, as fines and penalties, andas counsel fees) (collectively, “Losses”) incurred by the Executive inconnection with the investigation, defense or disposition of any action, suitor other proceeding in which the Executive may be involved or with which theExecutive may be threatened (whether arising out of or relating to mattersasserted by third parties or incurred or sustained by the Executive in theabsence of a third-party claim), by reason of his being a director, officer oremployee of the Company or of any subsidiary or affiliate of the Company, orthat arises out of or results from any act taken, or any failure to act, by theExecutive which was, in his good faith judgment, in the best interests of theCompany, whether within the course of performance of his duties or otherwise; *provided, however*, that the Company shall not be required toindemnify or hold the Executive harmless from any Losses which arise out of orresult from the Executive’s gross negligence or willful misconduct or any otheraction  

 

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ornon-action that would constitute a basis for termination for cause by theCompany pursuant to Section 3(b).

 

12.          **Compliance with Code Section 409A**.  It is intended that any expense reimbursementmade under this Agreement shall be exempt from Code Section 409A.Notwithstanding the foregoing, if any expense reimbursement shall be determinedto be “deferred compensation” within the meaning of Code Section 409A,including, without limitation, any reimbursement under Sections 2(b)(v) or4(a), then the reimbursement shall be made to the Executive as soon aspracticable after submission of the reimbursement request, but no later than December 31of the year following the year during which the expense was incurred.

 

13.          **Miscellaneous.**

 

(a)           This Agreement shall be governed byand construed in accordance with the laws of the State of New York withoutregard to such states conflict of laws principles. For all actions orproceedings arising under, or relating to, this Agreement, the partiesunconditionally and irrevocably consent to the personal jurisdiction of thecourts of the State of New York situated in Nassau County, and agree not tocommence any such action in any other courts. The captions of this Agreementare 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 construedas referring to this Agreement in its entirely rather than to a particularsection or provision, unless the context specifically indicates to thecontrary.  Any reference to a particular “Section”or “paragraph” shall be construed as referring to the indicated section orparagraph of this Agreement unless the context indicates to the contrary.  The use of the term “including” herein shallbe construed as meaning “including without limitation.”  This Agreement may not be amended or modifiedotherwise than by a written agreement executed by the parties hereto or theirrespective successors and legal representatives.

 

(b)           All notices, requests, consents, andother communications under this Agreement shall be in writing and shall bedelivered by hand, overnight courier or given by electronic facsimiletransmission or mailed by first class, certified mail, return receiptrequested, 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 |

 

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|             | Telecopier  No.:  (516)  694-4823

Telephone  No.:  (516)  694-6700                                                                                                                                                  |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |                                                                                                                                                                                                                                     |
| with  a copy to: | Moomjian,  Waite, Wactlar & Coleman, LLP.

100  Jericho Quadrangle, Suite 225

Jericho,  New York 11753

Attention: Lonnie Coleman, Esq.

Telecopier No.:   (516) 937-5900

Telephone  No.:  (516) 937-5050 |

 

orto such other address as either party shall have furnished to the other inwriting in accordance herewith.  Noticeand communications shall be effective when actually received by the addressee.

 

(c)           If any provision of this Agreement isheld to be illegal, invalid or unenforceable under present or future lawseffective during the term of this Agreement, such provision shall be fullyseverable; this Agreement shall be construed and enforced as if such illegal,invalid or unenforceable provision had never comprised a portion of thisAgreement; and the remaining provisions of this Agreement shall remain in fullforce and effect and shall not be affected by the illegal, invalid orunenforceable provision or by its severance from this Agreement.

 

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

 

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

 

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

 

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

 

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

 

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(i)            As used in this Agreement, “affiliate”means, with respect to a person, any other person controlling, controlled by orunder common control with the first person; the term “Control”, and correlativeterms, means the power, whether by contract, equity ownership or otherwise, todirect the policies or management of a person; and “person” means anindividual, partnership, corporation, limited liability company, trust orunincorporated organization, or a government or agency or political subdivisionthereof.

 

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

 

(k)           The Company will require anysuccessor (whether direct or indirect, by purchase, merger, consolidation orotherwise) to all or substantially all of the business and/or assets of theCompany to assume expressly and agree to perform this Agreement in the samemanner and to the same extent that the Company would be required to perform itif no such succession had taken place. As used in this Agreement, “Company” shall mean the Company ashereinbefore defined and any successor to its business and/or assets asaforesaid which assumes and agrees to perform this Agreement by operation oflaw, or otherwise.

 

INWITNESS WHEREOF, the Executive has hereunto set the Executive’s  hand and, pursuant to the authorization fromthe Board, the Company has caused this Agreement to be executed in its name onits 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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