Document:

HONEYWELL                                                             MEMORANDUM

Date:       April 28, 2005

To:         Charles Korbell

From:       Tom Weidenkopf

Subject:    Employment Separation Agreement and Release

This Employment Separation Agreement and Release ("Agreement and Release")
confirms our mutual understanding regarding your rights and benefits under the
terms of your employment agreement with Clarke American Checks Inc. dated
September 19, 1995 (the "Employment Agreement") and the terms of the Final Pay
Policy (the "Policy") incident to your termination of employment with Honeywell
International Inc., Security Printing, Inc., Clarke American Checks, Inc., and
their predecessor companies, affiliates, parent companies, subsidiaries and
business units, past and present (collectively, the "Company"). By signing this
Agreement and Release, you hereby acknowledge that these benefits are in full
satisfaction of all rights to termination or severance related benefits for
which you may have been eligible or may claim to be eligible under any agreement
or promise, whether written or oral, express or implied, or any Company
sponsored severance plan or program, including, but not limited to, the
Employment Agreement and the Policy.

DATE OF TERMINATION

You have previously been informed of your termination of employment from the
Company. Accordingly, your last day of work ("Last Day of Active Employment")
will be April 28, 2005.

VACATION PAY

Unused current year accrued vacation pay shall be paid out as a lump sum as soon
as practicable after your Last Day of Active Employment.

SEVERANCE PAY

You shall receive an amount equal to twelve (12) months of your base salary
("Base Severance Pay") following your Last Day of Active Employment. Your Base
Severance Pay shall be paid over a twenty-four (24) month period as follows:

      (i)   your Base Severance Pay shall generally be payable bi-monthly (or
bi-weekly, at the Company's sole discretion) over the twenty-four (24) month
period following your Last Day of Active Employment (the "Salary Continuation
Period");

      (ii)  notwithstanding (i) above, the first six (6) months of your Base
Severance Pay shall be paid in a lump sum on November 1, 2005.

                                     Page 1

Your Salary Continuation Period shall extend from April 29, 2005 through April
28, 2007.

In addition to the Base Severance Pay, you shall receive an amount equal to two
(2) times your average incentive bonus attributable to 2003 and 2004, payable in
a lump sum as soon as practicable following the execution of this Agreement and
Release and the expiration of the seven (7) day revocation period described in
this Agreement and Release ("Lump Sum Severance Pay").

The Base Severance Pay and Lump Sum Severance Pay are hereinafter collectively
referred to as "Severance Pay."

The Company reserves the right in its sole discretion to continue your Severance
Pay and/or certain benefits while you review this Agreement and Release,
provided that this Severance Pay and benefits continuation shall in no event be
construed as a waiver by the Company of the provision in the Final Pay Policy
making benefits contingent on execution of a release of claims in favor of the
Company.

Provided that you have signed and returned this Agreement and Release in the
form provided, in the event of your death after your Last Day of Active
Employment, payment of any remaining Severance Pay owing under this Agreement
and Release will be made to your estate.

All vacation and Severance Pay benefits are subject to federal, state and other
applicable taxes and withholdings.

EMPLOYEE BENEFITS AND ADDITIONAL BENEFITS

You will be entitled to continue to participate in the Company's health plan on
the same basis as you were participating therein immediately prior to your Last
Day of Active Employment. You may continue such health plan participation for
the duration of your Salary Continuation Period or until you become employed by
an unrelated employer, if earlier. In satisfaction of its obligation under the
foregoing paragraph with respect to health care continuation, the Company will
amend its health plan to enable you to continue coverage thereunder for up to
twenty-four (24) months after your Last Day of Active Employment. Consistent
therewith, the Company shall, as soon as practicable, pay you a single sum
amount of $14,343, which amount is intended to reimburse you for the estimated
Company share of health plan premiums for twenty-four (24) months. Any amounts
not reimbursed hereunder for health care continuation shall be borne solely by
you. Any continuation coverage provided hereunder shall be deemed to be coverage
provided pursuant to COBRA, it being the intention of the parties that your
COBRA continuation period shall run concurrently with any continuation coverage
provided under this Agreement and Release.

In full satisfaction of its obligation to provide any additional welfare plan
coverage to you after your Last Day of Active Employment, the Company shall, as
soon as practicable, pay you a single sum amount of $20,000, less applicable
taxes.

                                     Page 2

The Company will reimburse you, up to a maximum of $25,000, for amounts you
expend through December 31, 2005 for (i) executive outplacement assistance, or
(ii) legal fees incurred by you from April 28, 2005 to the date you execute this
Agreement and Release, provided such legal fees were incurred in proximate
relation to your termination of employment with the Company.

Pursuant to the terms of your Employment Agreement, you shall be deemed to be
two years older than your actual age for purposes of calculating the benefits
payable to you under the Deferred Compensation Agreement dated March 22, 1990.

In addition, the Company shall assign to you the life insurance policy under
your Deferred Compensation Arrangement. Consistent with your Employment
Agreement, the Company shall recoup 50% of the policy's cash value by deducting
such amount from your Lump Sum Severance Pay.

You shall be entitled to benefits under your Supplemental Employee Retirement
Plan ("SERP") in accordance the terms and conditions of your SERP agreement
dated effective January 1, 1998.

This description of certain employee benefits hereunder is not intended to
supplant the applicable plan documents and summary plan descriptions. If you
have specific questions regarding any employee benefit plan, please consult the
applicable plan document and summary plan description. In the event of any
conflict between this description and the actual employee benefit plan document,
the employee benefit plan document shall control. The Company reserves the
right, in its sole discretion, to amend, modify or terminate its employee
benefit plans at any time and for any reason.

CONSIDERATION FOR THE RELEASE

The Severance Pay (the "Consideration") is something of value that will be
available to you only in return for your signed Agreement and Release in the
form provided to you. If you choose not to sign this Agreement and Release in
the form provided to you, you will not be entitled to the Consideration.

CONTINGENCIES

In order to receive the Consideration under this Agreement and Release, you must
return this signed Agreement and Release in the form provided to Tom Weidenkopf
at 101 Columbia Road, Morristown, New Jersey 07962, no later than June 10, 2005.

In the event that before the end of your Salary Continuation Period you (i)
accept a position with the Company as an employee, or (ii) return to work at the
Company as a leased employee, consultant or independent contractor, all
Consideration under this Agreement and Release will terminate as of the date
your employment with the Company resumes. In such event, all Consideration paid
to you before you are reinstated or rehired shall be considered to be valuable
legal consideration to which you were not otherwise entitled and the Release of
Claims and

                                     Page 3

Confidentiality provisions of this Agreement and Release shall remain in effect
and fully enforceable.

Subject to the preceding paragraph, your acceptance of a position with another
company will not affect your eligibility for the Consideration under this
Agreement and Release. However, the Company reserves the right to cancel your
Consideration in the event that you engage in activities determined to be
significantly detrimental to the Company's interests, including, without
limitation, (i) recruiting, hiring or soliciting Novar employees for employment
or the performance of services with a competing company during your Salary
Continuation Period, (ii) breach of any obligations under any confidentiality
agreement or intellectual property agreement, (iii) making knowingly false or
misleading statements about the Company or its products, officers or employees
to competitors, customers, potential customers or to current or former employees
of the Company, (iv) commission of any fraud or misappropriation of property,
proprietary information, intellectual property or trade secrets of Novar for
personal gain or for the benefit of another party, (v) engaging in intentional
misconduct substantially damaging to the property or business of Novar,
including, but not limited to the non-compete covenants made in this Agreement
and Release, (vi) holding yourself out as an active Novar employee, and (vii)
materially breaching any of the terms of this Agreement and Release. For
purposes of this Agreement and Release, "Novar" shall be deemed to include all
business units, whether incorporated or unincorporated, of the former Novar plc,
including, but not limited to, the Novar corporate function, the aluminum
extrusion business, the specialty printing business and the intelligent building
systems business.

RELEASE OF CLAIMS BY YOU

In exchange for the Consideration, you do hereby waive and do hereby release,
knowingly and willingly, Honeywell International Inc., Security Printing, Inc.,
Clarke American Checks Inc., their future parent corporations, their predecessor
companies, their past, present and future parent companies, subsidiaries,
affiliates, divisions, business units and all related companies, as well as
their respective successors and assigns and all past, present and future
directors, officers, employees and agents of these entities, personally and as
directors, officers, employees and agents (collectively the "Honeywell Group"),
from any and all claims of any nature whatsoever you have arising out of your
employment and/or the termination of your employment with the Honeywell Group,
known or unknown, including but not limited to any claims you may have under
federal, state or local employment, labor, or anti-discrimination laws, statutes
and case law and specifically claims arising under the federal Age
Discrimination in Employment Act, the Civil Rights Acts of 1866 and 1964, as
amended, the Americans with Disabilities Act, Executive Order 11246, the
Employee Retirement Income Security Act of 1974 ("ERISA"), the Family and
Medical Leave Act, the Rehabilitation Act of 1973, the Fair Labor Standards Act,
the Labor-Management Relations Act, the Equal Pay Act and the Worker Adjustment
Retraining and Notification Act, the Texas Employment Discrimination Law, the
Texas Constitution, Texas common law, and any and all other applicable state,
county or local statutes, ordinances or regulations, including claims for
attorneys' fees; provided, however, that this release does not apply to claims
for benefits under Honeywell Group sponsored benefit plans covered under ERISA
(other than claims for severance and severance related benefits), does not apply
to claims arising out of obligations expressly undertaken in this Agreement and
Release, and does not apply to
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claims arising out of any act or omission occurring after the date you sign this
Agreement and Release. All claims, including contingent claims, for incentive
compensation awards under any Honeywell Group plan or payroll practice, along
with any claims under any state wage and hour laws, are specifically subject to
this release of claims. Any rights to benefits (other than severance benefits)
under Honeywell Group sponsored benefit plans are governed exclusively by the
written plan documents.

YOU ACKNOWLEDGE AND UNDERSTAND THAT YOU HAVE ACCEPTED THE CONSIDERATION
REFERENCED IN THIS AGREEMENT AND RELEASE IN FULL SATISFACTION OF ALL CLAIMS AND
OBLIGATIONS OF THE HONEYWELL GROUP TO YOU REGARDING ANY MATTER OR INCIDENT UP TO
THE DATE YOU EXECUTE THIS AGREEMENT AND RELEASE (EXCEPT TO THE EXTENT EXPRESSLY
EXCEPTED FROM THE TERMS OF THIS AGREEMENT AND RELEASE) AND YOU AFFIRMATIVELY
INTEND TO BE LEGALLY BOUND THEREBY.

YOU HEREBY AGREE AND ACKNOWLEDGE THAT YOU ARE NOT ENTITLED TO RECEIVE ANY
ADDITIONAL PAYMENTS OR BENEFITS FROM THE HONEYWELL GROUP RELATED TO YOUR
EMPLOYMENT OR TERMINATION OF EMPLOYMENT OTHER THAN AS EXPRESSLY PROVIDED HEREIN.

RELEASE OF CLAIMS BY THE COMPANY

Honeywell International Inc., Security Printing, Inc. and Clarke American
Checks, Inc., on behalf of themselves and their predecessor companies,
affiliates, parent companies, subsidiaries and business units, past and present,
do hereby settle, compromise, release and discharge all claims of any nature
whatsoever they may have against you arising out of your employment and/or the
termination of your employment with the Honeywell Group, whether known or
unknown; provided, however, that this release does not apply to claims arising
out of obligations expressly undertaken in this Agreement and Release, and does
not apply to claims arising out of any act or omission occurring after the date
you sign this Agreement and Release.

NONDISCLOSURE

You hereby agree to maintain the confidentiality of all Company privileged or
confidential information including, without limitation, attorney-client
privileged communications and attorney work product, unless the Company's law
department expressly authorizes such disclosure. You further agree to notify
the Company promptly of any requests to you for information related to any
pending or potential legal claim or litigation involving the Company, to review
any such request with a designated representative of the Company prior to
disclosing any such information, and to permit a representative of the Company
to be present during any communication of such information.

EXCESS PARACHUTE PAYMENTS

The Company hereby warrants that none of the payments called for under this
Agreement and Release shall constitute an "Excess Parachute Payment" under
Section 280G of the Internal Revenue Code of 1986, and any limitation on the
payment of amounts following a change of control under Section 15(h) of your
Employment Agreement shall be null and void.

                                     Page 5

NON-COMPETITION AGREEMENT

In further exchange for the Consideration you receive under this Agreement and
Release, you agree that for the entirety of your Salary Continuation Period you
will not, without the written consent of the Company, directly or indirectly,
engage or be interested in (without any geographic restrictions or limitations),
as owner, partner, manager, shareholder, member, employee, director, officer,
agent, consultant, advisor or otherwise, directly or indirectly, with or without
compensation, any Competing Business Activities or assist any Competing Business
Activities.

For purposes of this Agreement, "Competing Business Activities" shall mean any
company that competes, either directly or indirectly, with Clarke American
Checks Inc. or any of its direct or indirect affiliates, parents or subsidiaries
in the business of designing, printing, marketing, selling or distributing
checks, check-related or payment-related products or services in the United
States, including, without limitation, the business of providing direct
marketing and business process solutions to financial institutions.

In the event any of the foregoing covenants shall be determined by any court of
competent jurisdiction to be unenforceable by reason of extending for too great
a period of time, over too great a geographical area or by reason of its being
too extensive in any other respect, it shall be interpreted to extend only over
the maximum period of time for which it may be enforceable, over the maximum
geographical area as to which it may be enforceable, and/or to the maximum
extent in all other respects as to which it may be enforceable, all as
determined by such court in such action. The invalidity or unenforceability of
any particular provision of this Non-Competition Agreement paragraph shall not
affect the other provisions hereof, which shall continue in full force and
effect.

You agree that the Company's remedies at law would be inadequate in the event of
a breach or threatened breach of this Non-Competition Agreement paragraph;
accordingly, the Company shall be entitled, in addition to its rights at law, to
seek an injunction or other equitable relief without the need to post a bond.

The terms of this Non-Competition Agreement paragraph are to be read consistent
with the terms of any other non-competition agreements that you have executed
with the Company; provided, however, to the extent there is a conflict
between/among such agreements, such agreements shall be construed as providing
the broadest possible protections to the Company, even if such construction
would require provisions of more than one such agreement to be given effect.

CONFIDENTIALITY

Subject to the covenants in Exhibit A, you agree not to disclose or cause any
other person to disclose to third parties, including employees of the Company,
the terms of this Agreement and Release; provided, however, that you have the
right to disclose the terms of this Agreement and Release to your spouse, your
financial/tax advisor and your attorney and in response to a governmental
inquiry, including a governmental tax audit or a judicial subpoena. You
understand that your breach of this confidentiality provision, to the extent the
Company can

                                     Page 6

show monetary harm, shall excuse the Company from performing further under this
Agreement and Release up to the amount of such monetary harm, and the Company
shall likewise be entitled to repayment of the Consideration provided hereunder
to the extent of any such monetary harm suffered by the Company as a result of
your breach of the Confidentiality provisions contained herein. You agree that
neither this Agreement and Release nor any version of this Agreement and Release
shall be admissible in any forum as evidence against the Company or you except
in a proceeding to enforce this Agreement and Release. This Agreement and
Release does not constitute an admission of wrongdoing by either party.

You acknowledge and agree that any agreements signed by you relating to
intellectual property and confidential information acquired by you as a result
of your employment with the Company remain in full force and effect and place
legal obligations upon you that continue beyond your employment with the
Company. In further exchange for the Consideration you receive under this
Agreement and Release, you agree to abide by the confidentiality and
intellectual property covenants set forth in Exhibit A attached hereto with
respect to knowledge acquired during your employment with the Company. You
hereby agree that the covenants appearing at Exhibit A are a material part of
this Agreement and Release.

COMPLIANCE WITH SARBANES-OXLEY ACT

Nothing in this Agreement and Release (or any exhibit or attachment thereto)
shall be construed to prohibit you from reporting any accounting, internal
accounting control, or auditing matter to any federal regulatory agency, any
federal law enforcement agency, or any Member of Congress or any committee or
subcommittee of Congress. Nor shall this Agreement and Release (or any exhibit
or attachment thereto) be construed to prohibit you from engaging in any
activity protected by 18 U.S.C. Section 1514A.

NON-DISPARAGEMENT

You agree that you will not engage in any conduct that is injurious to the
Company's reputation and interest, including, but not limited to, publicly
disparaging (or inducing others to publicly disparage) the Company. Nothing
contained herein shall be construed as prohibiting you from providing truthful
information regarding the Company to any government, regulatory or
self-regulatory agency.

COVENANT NOT TO SUE

You hereby covenant and agree not to file, commence or initiate any suits,
demands or causes of action against the Company based upon or relating to any of
the claims released and forever discharged pursuant to Release of Claims By You
paragraph of this Agreement and Release. If you breach this covenant not to sue,
you hereby agree to pay all the reasonable costs and attorneys' fees actually
incurred by the Company in defending against such claims, demands or causes of
action, together with such further damages as may result, directly or
indirectly, from such breach.

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SEVERABILITY; ENTIRE AGREEMENT; NO ORAL MODIFICATIONS; NO WAIVERS

Should any of the provisions of this Agreement and Release (other than the
Release of Claims By You provision) be determined to be invalid by a court of
competent jurisdiction, the parties agree that this shall not affect the
enforceability of the other provisions of the Agreement and Release. In such
case, the parties shall renegotiate the invalidated provision(s) in good faith
to effectuate its/their purpose and to conform the provision(s) to applicable
law. This Agreement and Release constitutes a single integrated contract
expressing the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous oral and written
agreements and discussions with respect to the subject matter hereof. This
Agreement and Release may be amended or modified only by an agreement in
writing. The failure by the Company to declare a breach or otherwise to assert
its rights under this Agreement and Release shall not be construed as a waiver
of any right the Company has under this Agreement and Release.

CHOICE OF LAW

This Agreement and Release shall be governed by, and construed in accordance
with, the laws of the State of Texas, without reference to principles of
conflict of laws. The parties agree that any actions brought to enforce the
terms of this Agreement and Release shall be brought in the United States
District Court for the Western District of Texas, San Antonio Division.

SECTION 409A COMPLIANCE

Notwithstanding anything contained herein to the contrary, the parties hereto
shall cooperate to the extent necessary to comply with the provisions of Section
409A of the Internal Revenue Code of 1986, as amended.

ACKNOWLEDGMENTS AND CERTIFICATIONS

YOU ACKNOWLEDGE AND CERTIFY THAT YOU:

(A)   HAVE READ AND UNDERSTAND ALL OF THE TERMS OF THIS AGREEMENT AND RELEASE
      AND DO NOT RELY ON ANY REPRESENTATION OR STATEMENT, WRITTEN OR ORAL, NOT
      SET FORTH IN THIS AGREEMENT AND RELEASE;

(B)   HAVE HAD A REASONABLE PERIOD OF TIME TO CONSIDER THIS AGREEMENT AND
      RELEASE;

(C)   ARE SIGNING THIS AGREEMENT AND RELEASE KNOWINGLY AND VOLUNTARILY;

(D)   HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS
      AGREEMENT AND RELEASE;

(E)   HAVE THE RIGHT TO CONSIDER THE TERMS OF THIS AGREEMENT AND RELEASE FOR 21
      DAYS AND IF YOU TAKE FEWER THAN 21 DAYS TO REVIEW THIS AGREEMENT AND
      RELEASE, YOU HEREBY WAIVE ANY AND ALL RIGHTS TO THE BALANCE OF THE 21 DAY
      REVIEW PERIOD; AND

                                     Page 8

(F)   HAVE THE RIGHT TO REVOKE THIS AGREEMENT AND RELEASE WITHIN 7 DAYS AFTER
      SIGNING IT, BY PROVIDING WRITTEN NOTICE OF REVOCATION TO ME. IF YOU REVOKE
      THIS AGREEMENT AND RELEASE DURING THIS 7-DAY PERIOD, IT BECOMES NULL AND
      VOID IN ITS ENTIRETY.

THIS IS A LEGALLY ENFORCEABLE DOCUMENT.

Dated:           5-13-05                 /s/ Charles L. Korbell, Jr.
       -----------------------------     ------------------------------
                                             CHARLES L. KORBELL, JR.

                                       HONEYWELL INTERNATIONAL INC.

Dated:           5/17/05               By: /s/ Tom Weidenkopf
       -----------------------------       -----------------------------
                                           TOM WEIDENKOPF
                                           SENIOR VICE PRESIDENT
                                           HUMAN RESOURCES AND COMMUNICATIONS

                                       CLARKE AMERICAN CHECKS INC.

Dated:           5/18/05               By: /s/ Charles Dawson
       -----------------------------       -----------------------------
                                            CHARLES DAWSON
                                            PRESIDENT AND CEO

                                       SECURITY PRINTING, INC.

Dated:           5/16/05               By:  /s/ Larry Kittelberger
       -----------------------------        ----------------------------
                                            LARRY KITTELBERGER
                                            PRESIDENT AND CEO

                                     Page 9

                                    EXHIBIT A

                AGREEMENT RELATING TO HONEYWELL'S TRADE SECRETS,
                    PROPRIETARY AND CONFIDENTIAL INFORMATION

IN CONSIDERATION OF THE RECEIPT OF MY SEVERANCE PAY, I UNDERSTAND AND AGREE
THAT:

1.    RECORDS OF INVENTIONS. I have kept complete and current written records of
all Inventions I Made during the period of time I was employed by Honeywell and
promptly disclosed all such Inventions in writing to Honeywell for the purpose
of adequately determining Honeywell's rights in each such Invention. I will
supplement any such disclosures to the extent Honeywell may request that I do
so. If I have any doubt as to whether or not to disclose an Invention to
Honeywell, I will disclose it.

2.    DISCLOSURE OF INVENTIONS AFTER TERMINATION. I will promptly and completely
disclose in writing to Honeywell's Law Department all Inventions that I Make
during the one year immediately following the end of my employment by Honeywell
which relate either to my work assignment at Honeywell or to Honeywell's Trade
Secrets, Proprietary and Confidential Information for the purpose of determining
Honeywell's rights in each such Invention. I will not file any patent
application relating to any such Invention without the prior written consent of
Honeywell's Law Department. If I do not prove that I Made the Invention entirely
after leaving Honeywell's employment, the Invention is presumed to have been
Made during the period of time I was employed by Honeywell. I acknowledge that
the conditions of this paragraph are no greater than is necessary for protecting
Honeywell's interests in Honeywell's Trade Secrets, Proprietary and Confidential
Information and in Inventions to which it is rightfully entitled.

3.    OWNERSHIP OF INVENTIONS. Each and every Invention I Made during the period
of time I was employed by Honeywell (a) which relates directly to the business
of Honeywell or to Honeywell's actual or demonstrably anticipated research or
development, or (b) which resulted from any work I performed for Honeywell is
the sole and exclusive property of Honeywell and I agree to assign and hereby
assign my entire right, title and interest in each such Invention to Honeywell.
Each Invention I Made during the period of time I was employed by Honeywell for
which no equipment, supplies, facility or trade secret information of Honeywell
was used and which was developed entirely on my own time is my property, unless
(a) the Invention relates directly to the business of Honeywell or to
Honeywell's actual or demonstrably anticipated research or development, or (b)
the Invention results from any work performed by me for Honeywell. If I assert
any property right in an Invention I Made during the period of time I was
employed by Honeywell, I will promptly notify Honeywell's Law Department in
writing.

4.    COOPERATION WITH HONEYWELL. I will assist and fully cooperate with
Honeywell in obtaining, maintaining, and asserting the fullest measure of legal
protection, which Honeywell elects to obtain, maintain or assert for Inventions
in which it has a property right. I will also assist and fully cooperate with
Honeywell in defending Honeywell against claims of violation of the intellectual
property rights of others. I will be paid my reasonable expenses in assisting,
and cooperating with, Honeywell. I will execute any lawful document Honeywell
requests me to

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execute relating to obtaining, maintaining or asserting legal protection for any
said Invention or in defending against claims of the violation of the
intellectual property rights of others (including, but not limited to, executing
applications, assignments, oaths, declarations, and affidavits) and I will make
myself available for interviews, depositions and testimony. In the event that
Honeywell is unable, after reasonable effort, to secure my signature on any
document or documents needed to apply for or prosecute any patent, copyright, or
other right or protection relating to an Invention, for any other reason
whatsoever, I hereby irrevocably designate and appoint Honeywell and its duly
authorized officers and agents as my agent and attorney-in-fact, to act for and
on my behalf to execute and file any such application or applications, and to do
all other lawfully permitted acts to further the prosecution and issuance of
patents, copyrights, or similar protections thereon with the same legal force
and effect as if executed by me.

5.    PREEMPLOYMENT INVENTIONS. On Schedule A, which is an integral part of this
Exhibit A, I have completely identified (without disclosing any trade secret,
proprietary or other confidential information) every Invention I Made before my
employment by Honeywell in which I have any ownership interest and which is not
now the subject master of an issued patent or a printed publication. If I become
aware of any projected or actual use of any such Invention by Honeywell, I will
promptly notify Honeywell in writing of said use. Except as to the Inventions
listed on Schedule A or those which are now the subject matter of an issued
patent or a printed publication, I will not assert any rights against Honeywell
with respect to any Invention Made before my employment by Honeywell.

6.    HONEYWELL'S TRADE SECRETS, PROPRIETARY AND CONFIDENTIAL INFORMATION. I
will never, directly or indirectly, use Honeywell's Trade Secrets, Proprietary
and Confidential Information (as hereinafter defined) except in furthering
Honeywell's business nor will I disclose or disseminate Honeywell's Trade
Secrets, Proprietary and Confidential Information to anyone who is not an
officer, director, employee, attorney or authorized agent of Honeywell without
the prior written consent of Honeywell's Law Department unless the specific item
of Honeywell's Trade Secrets, Proprietary and Confidential Information: (a) is
now in, or hereafter becomes (through no breach of these covenants) general
public knowledge, or (b) prior to my disclosure, dissemination or use, was
lawfully acquired by me without any obligation to retain the information in
confidence. In this connection, I will not publish any of Honeywell's Trade
Secrets, Proprietary and Confidential Information for dissemination outside
Honeywell or file any patent application relating to any Invention I Make during
the period of time I was employed by Honeywell without the prior written
approval of Honeywell's Law Department. I will execute any agreement relating to
the protection of Honeywell's Trade Secrets, Proprietary and Confidential
Information or such information of any third party whose intellectual property
Honeywell is under a legal obligation to protect if Honeywell requests that I do
so. I will not engage without the prior written consent of Honeywell's Law
Department, either during the period of time I was employed by Honeywell or for
a period of two years after that employment, in any activity or employment in
the faithful performance of which it could be reasonably anticipated that I
would use or disclose Honeywell's Trade Secrets, Proprietary and Confidential
Information. All documents and tangible things embodying or containing
Honeywell's Trade Secrets, Proprietary and Confidential Information are
Honeywell's exclusive property. I had access to them solely for the performance
of my duties during my employment with Honeywell. I will protect the
confidentiality of their content and comply with all security policies and

                                     Page 11

execute relating to obtaining, maintaining or asserting legal protection for any
said Invention or procedures that may, from time to time, have been established
by Honeywell. I have returned all of them, along with all copies, facsimiles and
specimens of them and any other tangible forms of Honeywell's Trade Secrets,
Proprietary and Confidential Information in my possession, custody or control to
Honeywell before leaving the employment of Honeywell.

I understand that I have the right to use or practice any skill or expertise
generally associated with my employment but not special or unique to Honeywell,
but I do not have the right to use, practice or disclose Honeywell's Trade
Secrets, Proprietary and Confidential information for my own benefit or for the
benefit of any third party.

7.    TRADE SECRETS, PROPRIETARY OR CONFIDENTIAL INFORMATION FROM PREVIOUS
EMPLOYMENT. I certify that I have not disclosed or used, during my employment by
Honeywell, any trade secrets, proprietary or confidential information that I
acquired as a result of any previous employment or under a contractual
obligation of confidentiality before my employment by Honeywell. I understand
that Honeywell has no interest in, and will not accept disclosure by me of, any
confidential information that belongs to a third party.

8.    NON-SOLICITATION OF HONEYWELL EMPLOYEES. I acknowledge that Honeywell has
invested significant time and money to recruit and retain its employees.
Therefore, recognizing that in the course of my employment I have obtained
valuable information about Honeywell employees, their respective talents and
areas of expertise, I agree that for a period of two (2) years following my
termination of employment from Honeywell for any reason, I will not, directly or
indirectly, (i) cause any individual previously employed by Honeywell to be
employed by any person or entity other than Honeywell unless such individual has
not been employed by Honeywell for at least 12 months, (ii) participate in any
manner in the employment of any such individual by any person or entity other
than Honeywell unless such individual has not been employed by Honeywell for at
least 12 months, or (iii) in any way induce or attempt to induce such individual
to leave the employment of Honeywell.

9.    NON-SOLICITATION OF HONEYWELL CUSTOMERS. I acknowledge that Honeywell has
invested significant time and money to develop valuable, continuing
relationships with existing and prospective clients and customers. Therefore,
recognizing that in the course of my employment I have obtained valuable
information about Honeywell customers and their requirements, I agree that, for
a period of two years following my termination of employment from Honeywell for
any reason, I will not solicit or attempt to solicit, directly or indirectly,
for my own account or for others, any existing clients or customers of Honeywell
with whom I had contact or of whom I became aware while employed by Honeywell
during the two year period prior to my termination, or any prospective clients
or customers of Honeywell with whom I had contact and with whom Honeywell took
significant steps to do business during the two year period prior to my
termination, for the purpose of inducing such clients or customers to cease
doing business with Honeywell or to purchase, lease or utilize products or
services which are competitive with, are similar to, or which may be used as
substitutes for any products or services offered by Honeywell.

10.   NOTICE TO FUTURE EMPLOYERS. For the period of two years immediately
following the end of my employment by Honeywell, I will inform each new
employer, prior to accepting employment, of the existence of this Exhibit A and
provide that employer with a copy of it.

                                     Page 12

Honeywell has the right to inform any future employer of the existence of this
Exhibit A and to provide any future employers with a copy of it.

11.   COPYRIGHT. As to all works prepared by me which were: (i) within the scope
of my employment; or (ii) based upon information I acquired from Honeywell which
is not normally made available to the public; or (iii) commissioned by
Honeywell, but not within my scope of employment, I hereby agree to:

      (a)   submit to Honeywell's Law Department for approval prior to
            publication or oral dissemination;

      (b)   assign all right, title and interest in and to the copyright in all
            such works to Honeywell; and

      (c)   waive any claim of moral rights, author's rights, droit moral, or
            any equivalent rights to the extent necessary or permitted by law.

I hereby release and allow Honeywell to use, for any lawful purpose, any voice
reproduction, photograph, or other video likeness of me made in the course of my
employment.

12.   IDENTITY OF FUTURE EMPLOYER. Upon termination of employment, whether
termination be voluntary or involuntary, if reasonably requested by Honeywell, I
shall advise Honeywell of the name and address of my intended future employer.

13.   SUCCESSORS; BINDING AGREEMENT. This Exhibit A binds my heirs, executors,
administrators, legal representatives and assigns and inures to the benefit of
Honeywell and its successors and assigns. Only a written amendment executed by
both Honeywell and myself can modify this Exhibit A.

14.   SURVIVAL OF COVENANTS. These obligations will continue after, and survive,
the end of my employment by Honeywell.

15.   REMEDIES. I acknowledge that a remedy at law for any breach or threatened
breach of the provisions of this Exhibit A would be inadequate and therefore
agree that Honeywell shall be entitled to injunctive relief in addition to any
other available rights and remedies in case of any such breach or threatened
breach. In the event a court determines that I have breached or threatened to
breach the covenants in this Exhibit A, I agree to reimburse Honeywell for all
attorneys' fees and costs incurred in enforcing the terms hereof. Nothing
contained herein shall be construed as prohibiting Honeywell from pursuing any
other remedies available for any such breach or threatened breach against me or
my then-current employer which may include, but shall not be limited to,
contract damages, lost profits and punitive damages.

16.   VALIDITY. It is the desire and intent of the parties hereto that the
provisions of this Exhibit A shall be enforced to the fullest extent
permissible. Accordingly, if any particular provision of this Exhibit A shall be
adjudicated to be invalid or unenforceable, the court may modify or sever such
provision, with such modification or deletion to apply only with respect to the
operation of

                                     Page 13

such provision in the particular jurisdiction in which such adjudication is
made. In addition, if any one or more of the provisions contained in this
Exhibit A shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear. The remaining provisions of this Exhibit
A shall remain in full force and effect.

17.   GOVERNING LAW. The terms of this Exhibit A shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
principles of conflicts of law.

18.   DESCRIPTIVE HEADINGS. The headings and captions in this Exhibit A are
inserted for convenience only and shall not in any way affect the meaning or
construction of its terms.

19.   DEFINITIONS.

      (a)   "Honeywell" collectively identifies Honeywell International Inc. (a
            Delaware corporation having a place of business at Columbia Road and
            Park Avenue, Morris Township, Morris County, New Jersey), its
            predecessors, successors and its past, present and future operating
            companies, divisions, subsidiaries, affiliates and business units,
            including businesses acquired by the purchase of assets or stock,
            merger or otherwise.

      (b)   "Trade Secrets, Proprietary and Confidential Information" means
            information which is not generally known in the industries in which
            Honeywell is engaged, which may be disclosed to me or which I may
            learn, observe, discover or otherwise acquire during, or as a result
            of, my employment by Honeywell, and which includes, without
            limitation, any information, whether patentable, patented or not,
            relating to any existing or contemplated products, inventions,
            services, technology, concepts, designs, patterns, processes,
            compounds, formulae, programs, devices, tools, compilations of
            information, methods, techniques, and including information relating
            to any research, development, manufacture, purchasing, engineering,
            know-how, business plans, sales or market methods, methods of doing
            business, customer lists, customer usages or requirements, or
            supplier information, which is owned or licensed by Honeywell or
            held by Honeywell in confidence.

      (c)   "Invention" includes not only inventions (whether or not
            patentable), but also innovations, improvements, discoveries, ideas
            and all other forms of intellectual property (including, but not
            limited to, copyright works and mask works), whether or not any of
            the foregoing constitutes trade secret or other confidential
            information.

      (d)   "Make" or "Made", when used in relation to Inventions, includes any
            one or any combination of (i) conception, (ii) reduction to practice
            or (iii) development of an Invention, and is applicable without
            regard to whether the individual is a sole or joint inventor.

                                     Page 14

                                   SCHEDULE A

INVENTIONS I MADE BEFORE THE TERM OF MY EMPLOYMENT BY HONEYWELL IN WHICH I HAVE
AN OWNERSHIP INTEREST WHICH ARE NOT THE SUBJECT MATTER OF ISSUED PATENTS OR
PRINTED PUBLICATIONS:

(If there are none, please enter the word "NONE")

NOTE: Please describe each such Invention without disclosing confidential
information.

  NONE
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[Attach additional sheets if more space is needed.]

                                     Page 15EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT (this "Agreement") entered into as of April 11,
2006, by and between MERRIMAC INDUSTRIES, INC. (the "Company") and MASON N.
CARTER (the "Executive"), which supercedes and replaces in its entirety the
employment agreement, dated as of December 19, 1996, as amended on January 1,
1998, by and between the Company and the Executive.

         The Company and the Executive hereby agree as follows:

         1. Employment. The Company hereby employs the Executive and the
Executive hereby accepts employment by the Company on the terms and subject to
the 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. The term of the Executive's employment hereunder shall begin
on the date hereof and shall continue until December 31, 2010 (the "Initial
Term"), and shall automatically renew for successive 12-month periods commencing
January 1, 2011 (each, a "Subsequent Term" and together with the Initial Term,
the "Term"), unless:

              (i) either party gives written notice of termination of this
Agreement to the other party at least six months prior to the end of the then
applicable Initial Term or Subsequent Term, in which case the Executive's
employment shall terminate at the end of such Term; or

              (ii) the Executive's employment is terminated under Paragraph 6,
in which case this Agreement shall terminate on the date set forth in Paragraph
6.

         3. Title and Duties.

            (a) The Executive shall 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 (the
"Board"). The Executive shall 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 promote the success of the Company, and shall cooperate fully
with the Board in the advancement of the best interests of the Company.
Notwithstanding the foregoing, nothing in this Agreement prevents the 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 long as such activities are not inconsistent with the
Executive's duties hereunder.

            (b) The Executive currently serves as a director of the Company.
During the period of the Executive's service as a director of the Company, the
Executive shall not be entitled to receive any additional compensation as a
director, but shall be entitled to reimbursement of expenses reasonably incurred
by him as a director, in accordance with the Company's policies for such
reimbursement as are in effect from time to time.

            (c) The Company shall indemnify the Executive as an officer and
director, to the same extent as it indemnifies other officers and directors,
consistent with the laws of the State of Delaware, the Company's certificate of
incorporation and its by-laws.

                                       -2-

         4. Compensation. During the Term, the Executive shall receive an annual
base salary of $332,000 (the "Base Salary"). The Base Salary shall be reviewed
by the Compensation Committee of the Board on an annual basis and may be
adjusted upward or downward to reflect the Executive's performance and the scope
and success of the Company; provided, however, that during the Term, the Base
Salary shall not be less than $332,000. 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 law.

         5. Employment Benefits. During the Term, the Executive shall be
eligible for the following benefits:

            (a) Bonuses and Stock Options. The Executive shall be 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
Compensation Committee of the Board.

            (b) Employee Benefits. The Executive shall be entitled to
participate in the Company's employee benefit plans, including, without
limitation, medical benefits, life insurance, employee stock purchase plans,
long-term incentive plans, 401(k) plans and profit sharing plans, as may be in
effect from time to time, on terms at least as favorable as those provided to
other executives of the Company.

            (c) Vacation. The Executive shall be entitled to four weeks vacation
per year.

            (d) Automobile. The Executive shall be entitled to the use of an
automobile at the Company's expense, up to $1,053 per month (the "Car
Allowance"), for the Executive's

                                      -3-

performance of his duties hereunder; provided, however, that such amount shall
be adjusted from year to year, commencing after fiscal 2006, to reflect any
percentage increases in the Consumer Price Index (as published by the Bureau of
Labor Statistics of the United States Department of Labor) that have occurred
during the preceding year. The Car Allowance shall be provided, at the
Executive's option, either through a Company automobile, 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. If the Company leases the
automobile, the Executive shall have the option to purchase the automobile at
the end of the lease term. The Company shall be responsible for the costs of
maintenance and repair and 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 submits in a timely manner
appropriate documentation supporting each such cost.

            (e) Expenses. The Executive shall be entitled to receive prompt
reimbursement for all reasonable and necessary expenses incurred by him in
performing services hereunder, in accordance with the Company's policies for
such reimbursement as are in effect from time to time.

            (f) Term Life Insurance. The Company shall pay the cost of
establishing and maintaining term life insurance on the Executive in an amount
of $500,000 payable to such beneficiaries as the Executive may from time to time
designate.

            (g) Special Retirement Benefit. If, at the time of (i) the
Executive's retirement from his employment with the Company at age 65 or older,
(ii) the Executive's termination of employment with the Company as a result of a
Disability (as defined in Paragraph

                                      -4-

6b)), (iii) the Executive's termination of employment by the Company without
Cause (as defined in Paragraph 6(c)) or (iv) the Executive's termination of
employment for Good Reason (as defined in Paragraph 6(d)), subject to the
Executive's compliance with Section 9, the Company shall have achieved the
Performance Target (as defined below), then the Executive shall be entitled to
receive a special retirement benefit of $75,000 per year (the "Special
Retirement Benefit"), payable in monthly installments beginning six months plus
one day after such retirement or termination and otherwise in accordance with
the Company's regular payroll schedule, such payments to end on the Executive's
death plus six months and one day or upon the Executive's election pursuant to
Paragraph 9(d) plus six months and one day. "Performance Target" means the
Company having achieved pre-tax earnings (as presented in the Company's audited
financial statements) of an aggregate of at least $9,000,000 during the three
fiscal years of the Company ending immediately prior to such retirement or
termination.

         6. Termination of Employment.

            (a) Death. The Executive's employment hereunder 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 the Executive's death, which shall not include the portion of the Special
Retirement Benefit accrued by the Company, if any. The Company shall not have
any further obligations under this Agreement, except for such accrued salary and
benefits and any benefits provided to the Executive under any stock option plans
of the Company (the "Option Plans"), any incentive plans of the Company (the
"Incentive Plans"), or as may be required by law.

                                      -5-

            (b) Disability. The Executive's employment hereunder shall terminate
if the Executive has a Disability as reasonably determined by the Board.
"Disability" means that if, as a result of physical or mental illness or injury,
the Executive is unable to perform the essential duties of his position for a
period of 90 consecutive work days or for a period of 120 non-consecutive work
days in a 12-month period, or poses a direct threat to the safety and health of
the Executive or others and there is no reasonable accommodation that can be
provided by the Company that would allow the Executive to perform the essential
functions of his position as determined under applicable law. In such event, the
Company shall pay to the Executive all salary and benefits accrued but unpaid
through the date the Board reasonably determines that the Executive has a
Disability (which date shall constitute the date of termination) and, if
applicable, make the Special Retirement Benefit payments, payable in accordance
with Paragraph 5(g). The Company shall not have any further obligations under
this Agreement, except for any such accrued salary and benefits, if applicable,
the Special Retirement Benefit payments and any benefits provided to the
Executive under the Option Plans, Incentive Plans, or as may be required by law.

            (c) For Cause. The Company may, at any time during the Term, upon
written notice to the Executive, terminate the Executive for Cause. "Cause"
means: (i) the willful failure of the Executive to perform his normal and
customary duties for an extended period for any reason, other than due to
Disability; (ii) the Executive's gross negligence or willful misconduct,
including, without limitation, fraud, embezzlement or intentional
misrepresentation; (iii) the Executive's commission of, or indictment or
conviction for, a felony; (iv) the willful engagement of the Executive in
competitive activities against the Company, including, without limitation,
purposely aiding a competitor of the Company; (v) the Executive's
misappropriation of a

                                      -6-

material opportunity of the Company; or (vi) the violation by the Executive of
any material provision of this Agreement, and in each case the Executive has
failed to cure such act (if curable as determined by the Board) within ten days
after receipt of written notice from the Company of such act 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 30 days in the
aggregate. If the Executive is terminated for Cause, the Company shall pay to
the Executive all salary and benefits accrued but unpaid through the date of
termination, which shall not include the portion of the Special Retirement
Benefit accrued by the Company, if any. The Company shall not have any further
obligations under this Agreement, except for any such accrued salary and
benefits and any benefits provided to the Executive under the Option Plans, the
Incentive Plans, or as may be required by law.

            (d) Termination by the Executive for Good Reason. The Executive may,
at any time during the Term, upon written notice to the Company, terminate his
employment for Good Reason (the date such notice is received by the Company
constituting the date of termination). "Good Reason" means a material diminution
of the Executive's duties and responsibilities or a substantial reduction in the
Executive's compensation and benefits. Unless Paragraph 7 shall apply, if the
Executive's employment hereunder is terminated prior to the end of the Term by
the Executive for Good Reason, the Company shall provide the following to the
Executive: (i) the then applicable Base Salary in accordance with Paragraph 4,
payable beginning six months plus one day after the date of termination until
the later of (A) the end of the Term plus six months and one day and (B) the
date which is 12 months after the date of termination plus six months and one
day, (ii) continued group medical coverage, under the Company's group medical
plan in effect from time to time, on the same terms as provided to other
executives of the

                                      -7-

Company, until the later of (A) the end of the Term plus six months and one day
and (B) the date which is 12 months after the date of termination plus six
months and one day, (iii) if applicable, the Special Retirement Benefit, payable
in accordance with Paragraph 5(g), (iv) in the case of an automobile owned or
leased by the Executive, the Car Allowance as provided in Paragraph 5(d),
payable beginning six months plus one day after the date of termination until
the earlier of (A) 12 months after the date of termination plus six months and
one day and (B) the end of the Term plus six months and one day, or, in the case
of an automobile owned or leased by the Company, use of such automobile from the
date of termination until the earlier of (A) 12 months after the date of
termination and (B) the end of the Term, (v) the option to assume any remaining
lease payments of the automobile provided to the Executive pursuant to Paragraph
5(d), assuming the leased automobile is a Company automobile, or to purchase
such automobile in accordance with the terms of its lease, (vi) a payment in
lieu of any bonus (the "In-Lieu Bonus") in an amount equal to the average of the
Executive's annual bonuses, if any, for the two fiscal years ended immediately
prior to the termination, which payment shall be made in respect of each period
of 12 months remaining during the Term, and a pro-rated amount shall be paid in
respect of any period of less than 12 months, payable at the time that other
annual bonuses are paid to other executives of the Company (or if no annual
bonus is paid during a particular year, in December of the applicable year) and
in accordance with Section 409A of the Code, and (vii) notwithstanding the terms
of any Option Plans, all unvested stock options to purchase shares of the
Company's common stock granted by the Company and held by the Executive as of
the date of termination (the "Executive Options") under any Option Plans shall
immediately vest and be exercisable in accordance with their terms and,
notwithstanding the terms of any Incentive Plans,

                                      -8-

all restricted stock of the Company awarded under any Incentive Plans held by
the Executive (the "Executive Stock") shall be vested and free of restrictions.

            (e) Certain Payments Upon Termination. Unless Paragraph 7 shall
apply, if the Executive's employment hereunder is terminated prior to the end of
the Term by the Company, other than by Disability or for Cause, the Company
shall provide to the Executive the payments and benefits set forth in Paragraph
6(d)(i) through (vii) in accordance therewith.

         7. Change in Control.

            (a) Payments. If, within 12 months following the date of a Change in
Control (as defined below), the Executive terminates his employment for Good
Reason or is terminated without Cause, the Company shall provide (in lieu of the
payments and benefits set forth in Paragraph 6 and in lieu of any benefits
provided for under any severance plan of the Company) the following to the
Executive: (i) the greater of (x) three times the then applicable Base Salary
and (y) the Base Salary from the date of termination to the end of the Term, in
accordance with Paragraph 4, payable over a 12-month period beginning six months
plus one day after the date of termination, (ii) continued group medical
coverage, under the Company's group medical plan in effect from time to time, on
the same terms as provided to other executives of the Company until the later of
(A) the third anniversary of the date of termination and (B) the end of the
Term, (iii) if applicable, the Special Retirement Benefit, payable in accordance
with Paragraph 5(g), (iv) in the case of an automobile owned or leased by the
Executive, the Car Allowance as provided in Paragraph 5(d), payable beginning
six months plus one day after the date of termination until the later of (A) the
third anniversary of the date of termination plus six months and one day and (B)
the end of the Term plus six months and one day, or, in the case of an
automobile owned or

                                      -9-

leased by the Company, use of such automobile from the date of termination until
the later of (A) the third anniversary of the date of termination and (B) the
end of the Term, (v) the option to assume any remaining lease payments of the
automobile provided to the Executive pursuant to Paragraph 5(d), assuming the
leased automobile is a Company automobile, or to purchase such automobile in
accordance with the terms of its lease, and (vi) three times the In-Lieu Bonus,
payable over a 12-month period beginning six months plus one day after the date
of termination. In the event of a Change in Control, all Executive Options shall
immediately vest and be exercisable in accordance with their terms and the
Executive Stock shall be vested and free of restrictions. "Change in Control"
means (i) 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; (ii) any person
(as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended from time to time) who is not an affiliate of the Company or
a 5% or more holder, in each case as of the date of this Agreement, is or
becomes the beneficial owner (as that term is used in Section 13(d) of said Act
and the applicable rules and regulations thereof) 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; or (iii) more than 50% of the members
of the Board shall not be Continuing Directors. "Continuing Directors" mean the
directors of the Company (A) who were members of the Board on January 1, 2006 or
(B) who subsequently became directors of the Company and who were elected or
designated to be candidates for election as nominees of the Board, or whose
election or nomination for election by the

                                      -10-

Company's stockholders was otherwise approved, by a vote of a majority of the
Continuing Directors then on the Board).

            (b) Excise Tax. To the extent that any payment made under this
Agreement would otherwise be subject to the excise tax imposed under Section
4999 of the Internal Revenue Code of 1986, as amended from time to time (the
"Code"), the Company shall reduce the amount of such payments by the minimum
amount necessary to avoid being subject to such excise tax.

            (c) No Mitigation. If, within 12 months following the date of a
Change in Control, the Executive terminates his employment for Good Reason or is
terminated without Cause, the Executive shall not be required to seek other
employment or attempt in any way to reduce any amounts payable to the Executive
by the Company pursuant to this Paragraph 7. Further, the amount of any payment
or benefits to be received by the Executive pursuant to this Paragraph 7 shall
not be reduced by any compensation earned or benefits received by the Executive
as a result of employment by another employer or offset against any amount
claimed to be owed by the Executive to the Company or any of its subsidiaries or
otherwise; provided, however, that if the Executive receives medical coverage by
another employer, the Company shall not be obligated to continue such coverage
hereunder to the same extent covered by such other employer.

            (d) Assumption. In the event of any Change in Control contemplated
by clause (a) of the definition thereof set forth in Paragraph 7(a), it shall be
a condition of any such transaction that the surviving, resulting or transferee
corporation or entity expressly assume the Company's obligations hereunder and
confirm same in writing to the Executive.

                                      -11-

         8. Confidential Information. During the Term and for three years
thereafter (the "Restrictive Period"), subject to Paragraph 9(d), the Executive
shall not use or disclose to any individual or entity any Confidential
Information (as defined below) except (i) in the performance of the Executive's
duties for the Company, (ii) as authorized in writing by the Company, or (iii)
as required by law or legal process; provided, however, that prior written
notice of such required disclosure is provided to the Company and, provided,
further, that all reasonable efforts to preserve the confidentiality of such
information shall be made. "Confidential Information" means information that (i)
is used or is potentially useful in the Company's business, (ii) the Company
treats as proprietary, private or confidential, and (iii) is not generally known
to the public. "Confidential Information" includes, without limitation,
information relating to the Company's products or services, processing,
manufacturing, marketing, selling, customer lists, call lists, customer data,
memoranda, notes, records, technical data, sketches, plans, drawings, chemical
formulae, trade secrets, composition of products, research and development data,
sources of supply and material, operating and cost data, financial information,
personal information and information contained in manuals or memoranda.
"Confidential Information" also includes proprietary and/or confidential
information of the Company's customers, suppliers and trading partners who may
share such information with the Company pursuant to a confidentiality agreement
or otherwise.

         9. Non-Competition/Non-Solicitation.

            (a) During the Restrictive Period, subject to Paragraph 9(d), the
Executive shall not engage or assist others in organizing or engaging in any
place in the world in any business which develops, manufactures, promotes or
distributes a business, product or service that is competitive with the
business, products or services which are actively marketed and/or

                                      -12-

under active development by the Company at the time of termination of the
Executive's employment with the Company (collectively, "Competing Business"),
whether such engagement shall be as a director, officer, employee, consultant,
advisor, agent, lender, guarantor, surety, investor, promoter, stockholder,
shareholder, partner, member or other owner, affiliate or other participant in,
or otherwise exercising control over, any Competing Business or assist others in
organizing or engaging in any Competing Business in any capacity or manner, nor
will the Executive, in any capacity, accept employment with business entities in
any Competing Business.

            (b) During the Restrictive Period, subject to Paragraph 9(d), the
Executive shall not, in any capacity, on behalf of himself, or any other person,
firm, corporation or entity, employ or solicit for employment any person who is
then, or was at any time during the six months immediately preceding the
termination of the Executive's employment, an associate, sales representative,
agent or employee of the Company, or any subsidiary or affiliate of the Company.

            (c) During the Restrictive Period, subject to Paragraph 9(d), the
Executive shall not, in any capacity, on behalf of himself, or any other person,
firm, corporation or entity, solicit any of the customers of the Company, or any
subsidiary or affiliate of the Company; nor will the Executive in any way,
directly or indirectly, on behalf of himself, or any other person, firm,
corporation or entity, divert, or take away any customers of the Company, or any
subsidiary or affiliate of the Company.

            (d) In addition to the Restrictive Period, the Executive shall
continue to be subject to the provisions set forth in Paragraphs 9(a), 9(b) and
9(c) for so long as the Executive is

                                      -13-

receiving the Special Retirement Benefit; provided, however, that after the
Restrictive Period, the Executive may choose to forfeit, waive and release any
and all Special Retirement Benefit payments not yet made by providing the
Company with written notice to that effect, and following receipt of such
written notice, the Executive shall be released from the covenants and
restrictions set forth in Paragraphs 9(a), 9(b) and 9(c) and the Company shall
have no obligation to make any additional Special Retirement Benefit payments to
the Executive.

            (e) The Executive expressly acknowledges and understands that the
remedy of law for any breach by him of this Paragraph 9 will be inadequate, and
that the damages flowing from any 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 Paragraph 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 Paragraph 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 Paragraph 9 which may be pursued
or availed of by the Company.

            (f) If following termination of the Executive's employment any of
the restrictions pursuant to this Paragraph 9 shall for any reason 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.

                                      -14-

         10. Key Man Life Insurance. The Executive consents to the Company's
purchase of "key man" life insurance in such amount as the Company reasonably
deems necessary and appropriate and shall cooperate with the Company in
establishing such key man and other life insurance, including, without
limitation, undergoing reasonably requested medical examinations and/or tests.

         11. 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.

         12. 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 Newark, New Jersey. The arbitrator shall not have authority to modify or
change any of the terms of this Agreement (other than to the extent provided for
in Paragraph 9(f)). 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.

                                      -15-

         13. 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.

         14. Notices. All notices and other communications that are required or
may be given under this Agreement shall be in writing and will be deemed to have
been duly given when delivered in person, when received by facsimile (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 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:  (973) 575-0531
         Attention:  Chairman of the
         Compensation Committee

         with a copy to:

         Katten Muchin Rosenman LLP
         575 Madison Avenue
         New York, New York 10022
         Facsimile: (212) 940-6455
         Attention: Eric M. Lerner, Esq.

         if to the Executive:

         Mason N. Carter
         Box 7
         75 Old Farm Road
         Bedminster, New Jersey 07921

                           **Signature Page Follows**

                                      -16-

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

                                          MERRIMAC INDUSTRIES, INC.

                                          By: /s/ Robert V. Condon
                                              ---------------------------------
                                              Name:  Robert V. Condon
                                              Title: Vice President, Finance and
                                                      Chief Financial Officer

                                              /s/ Mason N. Carter
                                              ---------------------------------
                                                       Mason N. Carter

                                      -17-

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