Document:

POLICY MANAGEMENT SYSTEMS CORPORATION
                         WORKING CAPITAL PROMISSORY NOTE
$30,000,000                                                     August  3,  2000
                                                        El  Segundo,  California

  PAYMENT WITH RESPECT TO THIS NOTE IS SUBJECT TO A SUBORDINATION AGREEMENT (THE
   "SUBORDINATION AGREEMENT"), DATED AS OF THE DATE HEREOF AMONG THE MAKER, THE
   LENDER, AND BANK OF AMERICA, N.A., AS AGENT, AND EACH HOLDER OF THIS NOTE, BY
    ITS ACCEPTANCE HEREOF SHALL BE BOUND BY THE PROVISIONS OF THE SUBORDINATION
                                   AGREEMENT.

     FOR VALUE RECEIVED, the undersigned, POLICY MANAGEMENT SYSTEMS CORPORATION,
a  South  Carolina corporation ("MAKER"), hereby promises to pay to the order of
Computer  Sciences Corporation, a Nevada corporation ("LENDER"), at such address
as  Lender  may specify and in accordance with the terms of this Working Capital
Promissory  Note  (this  "NOTE"),  the  sum  of  up  to  THIRTY  MILLION DOLLARS
($30,000,000)  (the  "COMMITTED  AMOUNT"),  or  so  much of said sum as has been
advanced and is then outstanding hereunder, together with all accrued and unpaid
interest.

     1.     REQUEST  FOR  ADVANCE.  This  Note is a note under which one or more
advances  may be made by the Lender to the Maker (each such advance an "Advance"
and  collectively,  the "Advances") from time to time until the Termination Date
(as  defined  in  Section  3  below) for general working capital purposes of the
Maker  in an aggregate principal amount at any time outstanding such that, after
giving  effect  to  the  application  of the proceeds of any Advance made by the
Lender  on  any  date,  the aggregate principal amount of all Advances hereunder
does  not  exceed  $30,000,000.  Each  Advance  hereunder  shall be in a minimum
aggregate  principal  amount of $1,000,000 and integral multiples of $100,000 in
excess  thereof  (or  the  remaining  amount  of the Committed Amount, if less).
Advances  hereunder  are  not  revolving  in  nature  and may not be reborrowed.

     Advances hereunder may be requested in the Maker's discretion by submission
to  the  Lender of a Request for Advance, in form annexed hereto as Exhibit "A",
at  least  three  (3)  business  days  prior  to  the  Advance  Date.

     The  Lender's  obligation  to  fund is subject to the Agreement and Plan of
Merger  dated  as  of  June  20,  2000  by  and  among Maker, Lender and Patriot
Acquisition  Corp,  as  the  same  may  be  amended  from  time  to  time.

     2.     INTEREST.  Each  Advance  outstanding  under  this  Note  shall bear
interest  from  the  date  of such Advance until such date that such Advance has
been  entirely  repaid  or  converted,  at  a simple rate per annum equal to the
lesser  of  (a)  the  London  Inter-Bank  Offered  Rate,  adjusted  for  reserve
requirements,  for  three  month  U.S.  Dollar  deposits,  as  quoted by Bank of
America, N.A., plus two and three quarters percent (275 basis points) or (b) the
maximum  rate permitted by applicable law. Interest shall not be due and payable
until  the  Termination  Date.

     3.     REPAYMENT OF ADVANCES. The entire aggregate principal balance of the
Advances  hereunder,  together  with  all  interest accrued thereon, will become
immediately  due  and  payable upon the earlier to occur of any of the following
(the  "Termination  Date"):

<PAGE>

          (i)     July  3,  2001;  or

          (ii)     Only  to  the  extent  permitted  by  the  terms  of  the
subordination agreement  by and among Lender, Maker and Bank of America, N.A. as
agent  for  the  Senior  Lenders  (as  defined  therein)  (the  "Subordination
Agreement"),  immediately  prior  to the occurrence of the "Event of Default" as
described  and  defined  in Section 6.1(k) of the Credit Agreements (as the term
"Credit  Agreements"  is  defined  in  the  Subordination  Agreement);  or

          (iii)     Subject  to  the  terms of the Subordination Agreement, upon
acceleration  of  this  Note  after  the  occurrence of any Event of Default (as
defined  below).

     4.     DEFAULT  AND  ACCELERATION.

          (a)     Event  of  Default. "EVENT OF DEFAULT" means the occurrence of
                  ------------------
any  of  the  following:

                  (i)     the  failure  of  Maker  to  punctually and faithfully
observe or perform any of the other covenants, conditions or obligations imposed
upon Maker by  this  Note, which failure is not remedied within 10 business days
following  written  notice  thereof  from  Lender;

                  (ii)    there  is  an assignment  by Maker  for the benefit of
creditors  or  a  composition  with  creditors;

                  (iii)   Maker  petitions  or  applies  to any tribunal for, or
consents  to  the  appointment  of,  or  the taking of possession by, a trustee,
receiver, custodian, liquidator or similar official  of  any  substantial amount
of  its  assets,  or  commences  any  proceedings  under  any  bankruptcy,
reorganization, arrangement, insolvency,  readjustment  of  debt, dissolution or
other  liquidation  law  of  any  jurisdiction;

                  (iv)    an  order  for  relief  is  entered  in an involuntary
case  under  the  bankruptcy laws of the United States, or an order, judgment or
decree  is  entered  appointing  a  trustee,  receiver, custodian, liquidator or
similar official or adjudicating Maker bankrupt  or  insolvent,  or  ordering or
approving Maker's liquidation or reorganization, or any significant modification
of the rights of its creditors or approving the petition in any such proceedings
and such order, judgment or decree remains in effect for 5 business days; or any
involuntary  petition  or  complaint is filed against Maker under the bankruptcy
laws  of  the  United  States seeking the appointment of  a  trustee,  receiver,
custodian,  liquidator  or  similar official, and such petition or complaint has
not  been  dismissed  within  10  business  days  of  the  filing  thereof;  or

                  (v)     there  is  levied  any  writ  of  execution  or  other
judicial process upon any material portion of the property of Maker not released
within  5  business  days  thereafter.

          (b)     Acceleration.  Subject  to  the  terms  of  the Subordination
                  ------------
Agreement, in  the  event  any  Event of Default has occurred and is continuing,
Lender  may  declare  the  unpaid  aggregate  balance  of the Advances hereunder
immediately due and payable,  whereupon  this  Note  will  forthwith  mature and
become due  and  payable  without  presentment, demand, protest or other notice,
all  of  which  are hereby waived, and Lender may proceed to protect and enforce
its rights by suit in equity, action at  law  or  other  appropriate proceeding,
whether for the specific performance of  any obligation herein contained, or for
an  injunction  against  a  violation  of  any  of
<PAGE>
the  terms  or provisions hereof, or in aid of the exercise of any power granted
hereby  or  by  equity or at law; provided, however, that upon the occurrence of
any  Event  of  Default  described  in Section 3(a)(ii), (iii), (iv) or (v), the
                                       ------------------------------------
unpaid aggregate balance of the Advances hereunder will automatically become due
and  payable  without  any  action  by  Lender.

(c)     Expenses.  In  the  event any Event of Default has occurred, Maker shall
        --------
pay  to  Lender such additional amount as will be sufficient to cover the actual
costs  and expenses of enforcement and collection, including without limitation,
actual  attorneys'  fees,  expenses  and  disbursements.

     5.     MISCELLANEOUS.

          (a)     Good  Faith  Best Efforts. Maker shall not take any action for
                  -------------------------
the purpose of avoiding or seeking to avoid the observance or performance of any
of the terms to be observed or performed hereunder by Maker.  Maker shall at all
times  in good faith use its best efforts in carrying out all such action as may
be  necessary  or  appropriate  in  order  to  make  effective  the transactions
contemplated  by  this  Note.

          (b)     Amendment  and  Waiver.  This  Note  may  not  be modified or
                  ----------------------
amended,  and  the observance of any term of this Note may not be waived (either
generally or in a particular instance and either retroactively or prospectively)
, without the prior written consent  of  the  Lender  and  the  Senior  Lenders.

          (c)     Rights, Powers, Privileges and Remedies.  No delay or omission
                  ---------------------------------------
on the part of Lender in exercising any right, power or privilege hereunder will
operate  as  a  waiver  thereof,  nor will any waiver or omission on the part of
Lender  of  any  right,  power or privilege hereunder operate as a waiver of any
other  right,  power  or  privilege  hereunder  nor  will  any single or partial
exercise  of  any  right,  power  or  privilege  hereunder preclude any other or
further  exercise thereof or the exercise of any other right, power or privilege
hereunder.  All remedies, either under this Note or at law or otherwise afforded
to  Lender,  will  be  cumulative.

          (d)     Governing Law. This Note will be construed in accordance with,
                  -------------
and  the  rights of the parties hereto will be governed by, the internal laws of
the  State  of  California.

          (e)     Successors  and  Assigns.  This  Note will be binding upon and
                  ------------------------
inure  to  the benefit of the parties hereto and their respective successors and
permitted  assigns.  Neither  this  Note  nor  any  of  the rights, interests or
obligations  hereunder  may  be  assigned,  by operation of law or otherwise, in
whole or in  part  by  Maker  to  any person or entity without the prior written
consent of Lender.

          (f)     Replacement  Notes.  Upon  receipt of evidence satisfactory to
                  ------------------
Maker  of  the  loss, theft, destruction or mutilation of this Note, Maker shall
issue  a  new  Note  of  like  tenor  in lieu of such lost, stolen, destroyed or
mutilated Note.

          (g)     Notices.  All  notices  and  other  communications required or
                  -------
permitted  hereunder  will  be  in  writing  and will be delivered by facsimile,
courier  or  nationally-recognized  overnight  delivery  service  addressed  as
follows:

<PAGE>

      if  to  Lender:                        with  copies  to:
      --------------                         -----------------
      Computer  Sciences  Corporation        Gibson,  Dunn  &  Crutcher
      2100  East  Grand  Avenue              333  South  Grand  Avenue
      El  Segundo,  CA  90245                Los  Angeles,  CA  90071
      Telecopy:  (310)  322-9767             Telecopy:  (213)  229-6236
      Attention:  Chief  Financial  Officer  Attention:  Brian  D.  Kilb

      if  to  Maker:                         with  copies  to:
      -------------                          ----------------
      Policy  Management  Systems            Dewey  Ballantine  LLP
      Corporation                            1301  Avenue  of  the  Americas
      One  PMSC  Center                      New  York,  New  York  10019-6092
      Columbia,  SC  29016                   Telecopy:  (212)  259-6333
      Telecopy:  (803)  333-4747             Attention:  Richard  D.  Pritz
      Attention:  President

     IN  WITNESS  WHEREOF,  this Note has been duly executed and delivered as of
the  date  first  above  written.

              MAKER:

              POLICY  MANAGEMENT  SYSTEMS
              CORPORATION
              a  South  Carolina  corporation

              By:     /S/  Stephen  G.  Morrison
                      --------------------------

              Name:     Stephen  G.  Morrison
                        ---------------------

              Title:     Exec.  Vice  President  and  General  Counsel
                         ---------------------------------------------

<PAGE>

                                   EXHIBIT "A'
                               REQUEST FOR ADVANCE
                               -------------------

TO:         __________________
     ___________,  __  _______
Attention:  _____________

     The  undersigned  hereby  requests  an  Advance  under  the Working Capital
Promissory  Note dated _________ ___, 2000 (the "Note"), in the principal amount
of  Thirty  Million  Dollars  ($30,000,000)  made  by  the  undersigned  to
______________________,  pursuant  to  the  following  terms:

Advance  Amount:               $
Advance  Date:                    ________,  2000

          Capitalized terms used but not otherwise defined herein shall have the
meanings  ascribed  to  them  in  the  Note.

     Dated  this  _____  day  of  _____________,  2000.

              POLICY  MANAGEMENT  SYSTEMS
              CORPORATION
              a  South  Carolina  corporation

              By:

              Name:

              Title:Exhibit 10(a)

                            MERRIMAC INDUSTRIES, INC.
                               41 Fairfield Place
                         West Caldwell, New Jersey 07006

                                  April 7, 2000

Ericsson Microelectronics, A.B.
675 Jarvis Drive
Morgan Hill, California  95037
Attention:        Mr. Thomas Moller
                        Vice President and General Manager

Ericsson Holding International, B.V.
Rijen, Netherlands
Attention:        Mr. Thomas Moller

Gentlemen:

     This letter sets forth the  agreement  between  Ericsson  Microelectronics,
A.B., a Swedish corporation ("Ericsson"),  Ericsson Holding International, B.V.,
a Netherlands  corporation ("EHI") and Merrimac  Industries,  Inc., a New Jersey
corporation  ("Merrimac"),  regarding  (i) the purchase by BHI from  Merrimac of
375,000 newly issued shares (the "Shares") of Merrimac's common stock, par value
$0.50 per share,  at a purchase price of $9.00 per share,  and (ii) the creation
of certain  exclusivity  arrangements for certain goods and services by Merrimac
in favor of  Ericsson,  as more fully  described  below.  Concurrently  with the
execution of this letter  agreement,  BHI and  Merrimac  are  entering  into the
Registration Rights Agreement dated as of the date hereof, which is incorporated
herein by this  reference as an integrated  part of this entire  agreement.  The
rights under all such  incorporated  agreements are cumulative as one integrated
agreement.

                           1. Exclusivity Arrangement.

     Effective from and after the Closing Date of this letter, the parties agree
as follows:

     (a) Consistent  with the scheduling  and other  requirements  stated below,
Merrimac shall design, develop and produce exclusively for Ericsson,  Multi-Mix"
products  (and similar  Multi-Mix"  type  products,  if developed or acquired by
Merrimac  during the term of this letter  agreement  and  designated by Ericsson
hereafter  as  "Products  For  Ericsson")  that  incorporate   active  RF  power
transistors   for  use  in  wireless  base  station   applications,   television
transmitters and other  applications  that would compete with any product now or
hereafter  sold or developed for sale by Ericsson  (collectively  called the "RF
Products For Ericsson" and, together with the "Bluetooth  Products For Ericsson"
defined below,  are  collectively  called the "Products For  Ericsson"),  on the
following basis:

                                       -1-

  <PAGE>

     i. The period of such exclusivity  shall be for five years from the Closing
Date of the transfer of the Shares  (herein,  as the same may be extended by the
parties  in writing  as  provided  in this  agreement,  called the  "Exclusivity
Period"), during which period Merrimac shall not directly or indirectly: design,
develop or  manufacture  for,  sell to, or otherwise  assist any third person in
designing, developing or manufacturing any RF Products For Ericsson. If Merrimac
is unclear about who and what competes with the applicable Ericsson products for
the purposes of this agreement  from time to time,  Merrimac may send Ericsson a
written inquiry asking whether a particular  Merrimac  contemplated  transaction
would raise competitive  concerns under the definition of Products For Ericsson,
in which case Ericsson shall respond on that issue within a reasonable time.

     ii. The Exclusivity Period may be extended by the parties on such terms and
with such  consideration  provided as may be mutually  agreed in writing between
the parties, if any, in their discretion.

     iii.  These RF Products For Ericsson shall never be produced for or sold to
any company  other than  Ericsson at any time in the future,  whether  before or
after the Exclusivity Period in Paragraph (i)  above, unless expressly permitted
by this letter  agreement or otherwise  authorized in writing by Ericsson in its
sole discretion.

     iv.  Should  Merrimac be unable to produce (or have  produced for them) the
quantity or quality of RF Products For Ericsson that are forecast for Ericsson's
reasonable  needs from time to time during each six months  rolling  projections
delivered by Ericsson to Merrimac (as determined by Ericsson in its discretion),
then,  during  any  period  of such lack of full  capacity  by  Merrimac  plus a
commercially  reasonable period for transition and ramping up, Ericsson shall be

                                       -2-

  <PAGE>

and hereby is granted a nontransferable  (but  sublicensable for  subcontractors
producing such products), exclusive,  worldwide,  royalty-free license and right
to make (or have made) and sell the  additional  quantities  of RF Products  For
Ericsson in order to fulfill  Ericsson's needs in a reasonable  manner using any
and all intangible rights and intellectual property,  books, records of Merrimac
relating to any Products For Ericsson and consulting such Merrimac employees and
agents,  as  Ericsson  may  reasonably  request  to  enable  Ericsson  (and  its
subcontractors)  to do what  Merrimac  was unable to do.  Merrimac  and Ericsson
shall meet and confer with the goal of  developing  schedules  and protocols for
this design,  development  and  production  process,  which  documentation  when
executed  by  both  such  parties  shall  supplement  and  become  part  of this
agreement.

     v. To the extent that Merrimac  receives or uses any Ericsson  intellectual
property (as defined below) pursuant to this letter  agreement,  including in or
with respect to any RF Products For Ericsson,  Merrimac shall not be entitled to
license or otherwise permit or suffer the use, transfer or disposition of any of
such Ericsson intellectual  property,  including without limitation by licensing
or permitting a third person to produce or sell products  using or involving any
of such Ericsson intellectual  property. To the extent that Ericsson receives or
uses any  Merrimac  intellectual  property  pursuant  to this  letter  agreement
(exclusive  of the  license  for  Ericsson  to under  Section  1(a)(iv)  above),
Ericsson shall not be entitled to license or otherwise  permit or suffer the use
of such Merrimac  intellectual  property,  except pursuant to  Section 1(a)(iv),
including by licensing or  permitting a third person to produce or sell products
using or involving any of such Merrimac  intellectual property (besides pursuant
to  Section- 1(a)(iv).)  To the extent that the  collaboration  of  Ericsson and
Merrimac under this letter agreement results in the creation of new intellectual
property that was not legally  derivative of the foregoing  Ericsson or Merrimac
intellectual  property,  then such new  intellectual  property  shall be jointly
owned by Ericsson and Merrimac, and neither Ericsson nor Merrimac may license or
otherwise  permit or suffer the use,  transfer or  disposition of any such joint
intellectual  property without the prior written consent of such other co-owner,
including  regarding  the joint  sharing  of  appropriate  compensation.  In the
previous sentence  intellectual  property is deemed "legally  derivative" if the

                                       -3-

   <PAGE>

use of the intellectual property at issue resulting from the collaboration could
be legally prevented or legally punished by the collaborator/owner,  if such use
of the  intellectual  property  at issue had  arisen  without  the  consent  and
collaboration  of the owner.  Thus,  (without  limiting  the  generality  of the
foregoing),  for example, if the owner-collaborator of the original intellectual
property  could  have  sued  successfully  for  infringement  for the use of the
intellectual  property at issue (assuming that the  collaborators  acted without
its consent),  then that intellectual  property at issue shall be deemed legally
derivative.  From time to time,  Merrimac  and  Ericsson  may (but  shall not be
obligated  to) add  additional  products as  Products  For  Ericsson  under this
Agreement by written  supplements to this letter duly executed by each party. In
addition,  during the term of this letter  agreement,  any Products For Ericsson
(or other  subsequent  similar or related  products  designed  and  produced  by
Merrimac for or in  cooperation  with  Ericsson  that later become  Products For
Ericsson) shall be available,  used, marketed and sold exclusively for Ericsson,
unless  otherwise  authorized  in writing by  Ericsson  in its  discretion.  All
intellectual  property,  including  know-how,  contributed  by or on  behalf  of
Ericsson  or by  Merrimac,  respectively,  shall  remain the sole and  exclusive
property of Ericsson  or  Merrimac,  respectively,  and shall be  maintained  in
strict  confidence  by the other party  without any other use of the same by the
other party (or any  affiliate,  agent or  subcontractor  of such other  party),
except in accordance with this letter,  and without any disclosure by or through
such other party (or any affiliate, agent or subcontractor of such other party),
except as  permitted in writing by Ericsson or  Merrimac,  respectively,  in its
discretion as the owner of such original intellectual property or as required by
a valid order issued by a court or government  agency  (provided the  disclosing
party provides the other party notice of such  obligation and the opportunity to
oppose such disclosure.  Each party may label or otherwise designate  documents,
emails, studies, drawings,  software and other matter as confidential,  in which
case that  material  shall be treated as  confidential  unless and until (i)-the
same  becomes  public  record  matter  through no breach of any  confidentiality
obligation under this letter agreement or (ii) the same is proven by evidence to
have been  developed  by or for the other party  without use of any  information
that  should  be  treated  as  confidential  pursuant  to the terms  hereof.  In

                                       -4-

    <PAGE>

addition,  any party may offer to disclose more sensitive  confidential material
and request a more formal confidentiality agreement, in which case when executed
by the parties, such supplemental  confidentiality  agreements shall become part
of  this  letter   agreement.   As  used  throughout   this  letter   agreement,
"intellectual  property"  includes all present and future  patents,  trademarks,
service marks,  copyrights,  mask works, domain names, trade secrets,  know how,
and other  proprietary  rights of every kind either entitled to protection under
any  applicable  law  or by  reason  of  confidentiality  agreements  referenced
hereunder,  together with all applications at any time for any such intellectual
property filed with any governmental authority any where in the world.

     (b)  Merrimac  shall also  exclusively  design,  develop  and  produce  for
Ericsson  Multi-Mix(TM)  products  (and similar  Multi-Mix(TM)  type products if
developed or acquired by Merrimac  during the term of this letter  agreement and
designated by Ericsson  hereafter as "Products For Ericsson") which are intended
for any  Bluetooth  transceiver  applications  (collectively  called  "Bluetooth
Products For  Ericsson"  and are part of the  "Products  For  Ericsson"  defined
herein), on the following basis:

     i.  During  the  Exclusivity   Period,   Merrimac  shall  not  directly  or
indirectly: design, develop or manufacture for, sell to, or otherwise assist any
third person in designing,  developing or manufacturing  any Bluetooth  Products
For  Ericsson.  If  Merrimac  is unclear  about who and what  competes  with the
applicable  Ericsson  products for the purposes of this  agreement  from time to
time,  Merrimac may send Ericsson a written  inquiry asking whether a particular
Merrimac  contemplated  transaction would raise  competitive  concerns under the
definition  of Products For Ericsson,  in which case  Ericsson  shall respond on
that issue within a reasonable time.

     ii. The Exclusivity Period may be extended by the parties on such terms and
with such  consideration  provided as may be mutually  agreed in writing between
the parties, if any, in their discretion.

     iii. These  Bluetooth  Products For Ericsson shall never be produced for or
sold to any  company  other than  Ericsson  at any time in the  future,  whether
before or after the Exclusivity Period in Paragraph (i)  above, unless expressly
permitted  by this  letter  agreement  or  otherwise  authorized  in  writing by
Ericsson in its sole discretion.

                                       -5-

    <PAGE>

     iv.  Should  Merrimac be unable to produce (or have  produced for them) the
quantity or quality of Bluetooth  Products  For  Ericsson  that are forecast for
Ericsson's  reasonable  needs from time to time during  each six months  rolling
projections  delivered by Ericsson to Merrimac (as determined by Ericsson in its
discretion),  then,  during any period of such lack of full capacity by Merrimac
plus a commercially  reasonable  period for transition and ramping up,  Ericsson
shall  be and  hereby  is  granted  a  nontransferable  (but  sublicensable  for
subcontractors  producing such  products),  exclusive,  worldwide,  royalty-free
license and right to make (or have made) and sell the  additional  quantities of
Bluetooth  Products  For  Ericsson  in order to  fulfill  Ericsson's  needs in a
reasonable manner using any and all intangible rights and intellectual property,
books, records of Merrimac relating to any Products For Ericsson, and consulting
such Merrimac employees and agents, as Ericsson may reasonably request to enable
Ericsson (and its subcontractors) to do what Merrimac was unable to do. Merrimac
and Ericsson  shall meet and confer with the goal of  developing  schedules  and
protocols  for  this  design,   development   and  production   process,   which
documentation  when  executed by both such parties shall  supplement  and become
part of this agreement.

     v. To the extent that Merrimac  receives or uses any Ericsson  intellectual
property pursuant to this letter agreement,  including in or with respect to any
BlueTooth  Products For Ericsson,  Merrimac  shall not be entitled to license or
otherwise  permit or suffer  any use,  transfer  or  disposition  of any of such
Ericsson  intellectual  property,  including without  limitation by licensing or
permitting a third person to produce or sell products  using or involving any of
such Ericsson  intellectual  property.  To the extent that Ericsson  receives or
uses any  Merrimac  intellectual  property  pursuant  to this  letter  agreement
(exclusive  of the  license  for  Ericsson  to under  Section  1(b)(iv)  above),
Ericsson shall not be entitled to license or otherwise permit or suffer the use,
transfer or  disposition  of any such  Merrimac  intellectual  property,  except

                                       -6-

   <PAGE>

pursuant to Section 1(b)(iv) above, including by licensing or permitting a third
person to produce  or sell  products  using or  involving  any of such  Merrimac
intellectual property (besides pursuant to Section 1(b)(iv).) To the extent that
the  collaboration of Ericsson and Merrimac under this letter agreement  results
in the creation of new intellectual  property that was not legally derivative of
the  foregoing  Ericsson  or  Merrimac  intellectual  property,  then  such  new
intellectual  property  shall be jointly  owned by Ericsson  and  Merrimac,  and
neither Ericsson nor Merrimac may license or otherwise permit or suffer any use,
transfer or  disposition  of any such joint  intellectual  property  without the
prior  written  consent of such other  co-owner,  including  regarding the joint
sharing of  appropriate  compensation.  In the  previous  sentence  intellectual
property is deemed"legally derivative" if the use of the intellectual  property
at issue resulting from the collaboration  could be legally prevented or legally
punished by the collaborator/owner,  if such use of the intellectual property at
issue had arisen  without  the  consent and  collaboration  of the owner.  Thus,
(without  limiting  the  generality  of  the  foregoing),  for  example,  if the
owner-collaborator  of  the  original  intellectual  property  could  have  sued
successfully for infringement for the use of the intellectual  property at issue
(assuming  that  the  collaborators  acted  without  its  consent),   then  that
intellectual property at issue shall be deemed legally derivative.  From time to
time,  Merrimac and Ericsson may (but shall not be obligated to) add  additional
products as Products For Ericsson under this Agreement by written supplements to
this letter duly  executed by each party.  In addition,  during the term of this
letter  agreement,  any Products For  Ericsson (or other  subsequent  similar or
related  products  designed and produced by Merrimac for or in cooperation  with
Ericsson  that later become  Products For Ericsson)  shall be  available,  used,
marketed and sold  exclusively  for  Ericsson,  unless  otherwise  authorized in
writing by Ericsson in its  discretion.  All  intellectual  property,  including
know-how, contributed by or on behalf of Ericsson or by Merrimac,  respectively,
shall  remain  the  sole  and  exclusive   property  of  Ericsson  or  Merrimac,
respectively,  and shall be maintained  in strict  confidence by the other party
without any other use of the same by the other party (or any affiliate, agent or
subcontractor of such other party),  except in accordance with this letter,  and
without any disclosure by or through such other party (or any  affiliate,  agent
or  subcontractor  of such  other  party),  except as  permitted  in  writing by
Ericsson  or  Merrimac,  respectively,  in its  discretion  as the owner of such

                                       -7-

     <PAGE>

original intellectual property or as required by a valid order issued by a court
or government  agency  (provided the  disclosing  party provides the other party
notice of such  obligation and the opportunity to oppose such  disclosure.  Each
party may label or otherwise designate  documents,  emails,  studies,  drawings,
software and other matter as confidential,  in which case that material shall be
treated as  confidential  unless and until  (i) the same becomes  public  record
matter  through no breach of any  confidentiality  obligation  under this letter
agreement  or (ii) the  same is proven by evidence to have been  developed by or
for the other  party  without use of any  information  that should be treated as
confidential  pursuant to the terms hereof. In addition,  any party may offer to
disclose  more  sensitive  confidential  material  and  request  a  more  formal
confidentiality  agreement,  in which case when  executed by the  parties,  such
supplemental  confidentiality  agreements  shall  become  part  of  this  letter
agreement.

     (c) Ericsson shall at all times have  comprehensive,  reasonable  access to
all books, records and information of or available to Merrimac that Ericsson may
reasonably  request as  reasonably  necessary  or  desirable  to  determine  all
relevant costs  applicable to the  performance of Merrimac's  obligations  under
this letter agreement,  including those costs useful for forecasting,  planning,
and predicting the design,  development and production of Products For Ericsson.
Merrimac and  Ericsson  intend this  information  to enable both such parties to
make informed  decisions  regarding  the pricing of Products For  Ericsson.  Any
right of Merrimac  under this letter  agreement to be entitled to be  Ericsson's
priority  supplier of any Product For  Ericsson,  is  conditioned  (among  other
things) upon Merrimac's  being ready,  willing and able to sell such Product for
Ericsson at a price which is reasonable,  both in terms of Merrimac's applicable
cost and the price at which  Ericsson  expects to sell its  related  products in
which such Merrimac Products For Ericsson are components.

     (d) To the extent  that  Merrimac  has the  capacity to timely sell (at the
reasonable  price required  hereunder) such quantity and quality of Products For
Ericsson as Ericsson in its  discretion  may require from  Merrimac,  consistent
with such samples as Merrimac has  supplied to Ericsson and such  protocols  and
schedules as the parties may develop  hereunder,  Merrimac shall be the priority
supplier  for  such  Products  For  Ericsson  in  accordance  with  this  letter
agreement.   However,   there  shall  be  no  minimum  volume  of  purchases  or
requirements for which Ericsson shall be obligated hereunder, and, at Ericsson's

                                       -8-

 <PAGE>

option,  including without limitation because Ericsson then considers Merrimac's
pricing to be incompatible  with Ericsson's price targets for Ericsson  products
in which Products For Ericsson are  components,  Ericsson  reserves the right to
shift to  acquiring  other  third  party  components  in place of  Products  For
Ericsson  from  Merrimac.  Nothing in this letter  agreement or otherwise  shall
create any  obligation  by  Ericsson  (whether  exclusive  or  nonexclusive)  to
purchase any of its  requirements  for any other goods or services from Merrimac
(besides  Products  For  Ericsson  developed  under and  required by this letter
agreement),  which  Ericsson  purchase  decisions  shall be solely at Ericsson's
discretion  from time to time,  and  Ericsson  may buy any such  other  goods or
services from any supplier  that it chooses from time to time.  Any purchases by
Ericsson from  Merrimac of any goods or services  shall be  consummated  on such
written  purchase  orders and forms (and  containing  such  customary  terms and
conditions) as Ericsson then  customarily  uses to purchase  comparable goods or
services,  which agreements shall supplement and become integrated with and into
this letter agreement.

     (e) Merrimac shall provide Ericsson at all applicable times with guaranteed
priority access (e.g.,  dedicated seats) to proprietary  On-Line  Co-Design(TM),
which will enable Ericsson and Merrimac's Multi-Mix(TM) engineers (to the extent
desired by Ericsson or required of Merrimac) to co-design and work together over
the  Internet.  However,  nothing  in this  letter  shall be deemed  to  provide
Merrimac with any access or right to use any of the Ericsson  intranets or other
internal  systems or (except as  provided in this  letter  agreement)  any other
proprietary rights or intellectual property of Ericsson.

     (f) Within a  reasonable  time after the initial  scheduling  and  protocol
discussions  referenced  above,  Merrimac  shall  provide  Ericsson at all times
thereafter  during the term of this letter  agreement  with a dedicated  team of
qualified and sufficient Merrimac employees to accomplish the timely performance
of the  obligations  of Merrimac and goals of the parties  stated in this letter
agreement, including on the following basis:

     i. Merrimac shall provide Ericsson with dedicated and sufficient  resources
in all relevant business aspects (e.g.,  sales,  engineering,  process,  program
management); and

     ii.   Merrimac  shall  provide   Ericsson  with  dedicated  and  sufficient
manufacturing cells.

     (g) Within a  reasonable  time after the initial  scheduling  and  protocol
discussions  referenced  above,  Merrimac  shall  dedicate for Ericsson  certain
priority  rights  (collectively  called  "Resource  Priority")  on the following
basis:

     i. Ericsson shall receive first priority on all Multi-Mix(TM)  resources of
Merrimac,  and,  Merrimac  shall use  reasonable  efforts to provide  sufficient
manufacturing  capacity  by  Merrimac  that is fully  capable of  matching  such
Ericsson  purchases of Products For Ericsson as Ericsson may elect to make under
this letter; and

                                       -9-

   <PAGE>
     ii. Currently,  Merrimac  represents and warrants that as of the Closing it
has the sufficient  production capacity of up to 750,000  Multi-Mix(TM) quad and
coupler  type units per month.  The next level of  capacity  to be  provided  by
Merrimac to Ericsson after the Closing for  performance  under this letter shall
be 750,000  Multi-Mix(TM)  (quad and coupler  type) units per week by the end of
the  calendar  year  2000.  If  necessitated  by  the  level  of  production  or
development of Products For Ericsson, Merrimac shall take all reasonable actions
to increase production capacity in its existing and other locations.

     (h) Within a reasonable time after the Closing, at Ericsson's option at any
time for all Products For Ericsson,  Ericsson shall also receive priority access
to  Filtran  Microcircuits'  (which  Merrimac  represents  to be a wholly  owned
Merrimac subsidiary) proprietary technology and manufacturing capabilities at no
less than its current performance capabilities, including:

     i. Circuit techniques

     ii. Thick metal backed circuits

     iii. Sputtered blind vias

     iv. Gold plating on aluminum; and

     v. Laser machining

     (i) Within a reasonable time after the Closing, Ericsson shall also receive
priority on assembly  resources in Merrimac  Costa Rica (wholly  owned  Merrimac
subsidiary) at no less than its reasonable current potential .

                             2. Purchase of Shares.

     (a) In  consideration of the agreements set forth herein and as a condition
of the parties entering into the  arrangements set forth in Section 1,  Merrimac
shall sell to EHI on the Closing Date, and EHI shall purchase from Merrimac, the
Shares,  representing approximately 17.5% of Merrimac's outstanding common stock
at the Closing after giving effect to the sale of the Shares to Ericsson. At the
Closing,  Merrimac shall deliver to EHI a stock certificate  representing all of
the Shares, and EHI will deliver to Merrimac $3,375,000 in cash by wire transfer
of immediately available funds to an account designated by Merrimac two business
days prior to the Closing.

                                      -10-

   <PAGE>

     (b) The "Closing Date" shall be the date of this letter, or such other date
as mutually  agreed to by the parties.  The Closing shall be held at the offices
of Chadbourne & Parke LLP, 30  Rockefeller  Plaza,  New York,  New York at 10:00
a.m. on the Closing Date.

     (c) Except as required by  applicable  law,  regulation  or stock  exchange
requirement,  any and all press  releases  and  other  public  announcements  by
Merrimac regarding this agreement and any transaction  referenced in this letter
shall be approved in advance by EHI, which  approval  shall not be  unreasonably
withheld.

                  3. Representations, Warranties and Covenants.

     (a) No Liens,  Etc.  Merrimac  represents  and warrants that on the Closing
Date (i) it will deliver to EHI good and valid title to the Shares  constituting
at least 17.4% of the issued and outstanding shares (including these EHI shares)
and outstanding options,  warrants,  convertible  securities and other rights to
acquire  Merrimac  common  stock,   free  and  clear  of  any  liens,   pledges,
encumbrances,  charges or security  interests of any kind; and  (ii) nothing  in
this  agreement  shall violate or contravene any contract,  obligation,  charter
document or order of any court or  governmental  authority by which  Merrimac is
bound or a party.

     (b)  Securities Law  Compliance.  EHI has been advised that the Shares have
not  been  registered  under  the  Securities  Act  of  1933,  as  amended  (the
"Securities Act"), or any state securities laws and, therefore, cannot be resold
unless  they are  registered  under  the  Securities  Act and  applicable  state
securities  laws or unless an exemption from such  registration  requirements is
available. Except as provided in the Registration Rights Agreement, EHI is aware
that  Merrimac  is under no  obligation  to effect  any such  registration  with
respect  to the  Shares,  or to file  for or  comply  with  any  exemption  from
registration.  EHI is purchasing the Shares for its own account for  investment,
not as a  nominee  or  agent,  and not with a view to,  or for sale or resale in
connection  with, any public  distribution  thereof.  EHI has such knowledge and
experience in financial  and business  matters that EHI is capable of evaluating
the merits  and risks of such  investment,  is able to incur a complete  loss of
such  investment and is able to bear the economic risk of such investment for an
indefinite period of time. EHI is an accredited investor as such term is defined
in Rule 501 of Regulation D under the Securities Act.

                                      -11-

    <PAGE>

     (c)   Restricted   Securities.   EHI   understands   that  the  Shares  are
characterized  as "restricted  securities"  under the Securities Act inasmuch as
they are being  acquired from  Merrimac in a transaction  not involving a public
offering and that under the Securities Act and applicable regulations thereunder
such securities may be resold without registration under the Securities Act only
in  certain  limited  circumstances.  EHI  is  familiar  with  Rule  144  of the
Securities Act, as presently in effect,  and understands the resale  limitations
imposed thereby and by the Securities Act.

     (d)  Access  to  Information;  Known  Information.  EHI  acknowledges  that
Merrimac has given EHI access to the  facilities,  personnel,  books,  corporate
records and accounts of Merrimac and its  subsidiaries and to all information in
their  possession  relating to Merrimac and its  subsidiaries  as EHI has deemed
necessary and  appropriate in order for EHI to  investigate to its  satisfaction
the business and  properties of Merrimac and its  subsidiaries  sufficiently  to
make an informed  investment  decision to purchase  the Shares and to enter into
this   Agreement.   EHI  agrees  to  accept  the  Shares   based  upon  its  own
investigation,  examination  and  determination  with respect  thereto as to all
matters and without  reliance  upon any  express or implied  representations  or
warranties of any nature made by or on behalf of or imputed to Merrimac,  except
as expressly set forth or incorporated by reference in this agreement.

                          4. Board Observation Rights.

     As a major  shareholder  of  Merrimac  and so long as EHI  holds  at  least
250,000  shares of Merrimac  common stock,  EHI will have the right to appoint a
representative  who will be  invited  to  attend  Merrimac  Board  of  Directors
meetings  in an  observer  role.  Such  observation  rights  shall be limited in
connection with the Board's  consideration in matters  pertaining to competitors
of EHI or in respect of which EHI may be an interested party.

                             5. Further Assurances.

     From  time  to  time,  each  of  the  parties  hereto  will  duly  execute,
acknowledge  and deliver  such  further  instruments,  documents,  certificates,
agreements and other writings and perform such further acts consistent with this
agreement as may be reasonably  requested by the other party to more effectively
carry out the intent of this agreement.

                                      -12-

   <PAGE>

                                  6. Expenses.

     Each  party  shall  be  responsible  for  its own  costs  and  expenses  in
connection  with  the  consummation  of the  transactions  contemplated  hereby,
including  any  broker's  or  finder's  fee  due as a  result  of  each  party's
respective undertakings.

                  7. Board Approval and other Corporate Action.

     Each of Merrimac,  EHI and Ericsson has obtained the required authorization
of its  respective  Board of  Directors,  and  Merrimac  has  amended its Rights
Agreement dated as of March 9, 1999, as amended,  to account for the sale of the
Shares  to  EHI.  When  so  authorized  as  evidenced  by the  execution  by the
authorized officers,  each party represents that this agreement shall be a valid
and binding  obligation of such party that is enforceable in accordance with its
express terms.

                                      -13-

    <PAGE>

               8. Entire Agreement; Binding Effect; Governing Law.

     (a) This Agreement and all of the  provisions  hereof shall be binding upon
and inure to the benefit of the parties hereto and their  respective  successors
and  permitted  assigns,  but  neither  this  Agreement  nor any of the  rights,
interests or obligations  hereunder  shall be assigned or delegated  (whether by
operation of law of  otherwise) by any of the parties  hereto  without the prior
written  consent of the other party.  Neither  Ericsson's nor EHI's  affiliates,
respectively, are benefited nor obligated by this letter agreement.

     (b) This Agreement  (i) contains  or  incorporates  by reference the entire
agreement  of  the  parties  with  respect  to the  subject  matter  hereof  and
supersedes any prior agreement or understanding,  oral and written, between them
respecting the subject matter of this Agreement and the incorporated  agreement,
(ii) requires  that  any  waivers  must  be  in  writing  to be  effective,  and
(iii) shall be governed by and  interpreted  in accordance  with the laws of the
State of New York  (without  giving  effect to principles of conflicts of laws).
There are no third party beneficiaries to this agreement.

     (c) In the event of any dispute,  the prevailing  party in any legal action
shall be entitled to recover its reasonable  attorneys'  fees and costs from the
other, nonprevailing party.

     Please  indicate your acceptance of the terms and conditions of this letter
Agreement by countersigning one copy of the letter and returning it to me at the
above address.

Sincerely yours,

MERRIMAC INDUSTRIES, INC.

By:      /s/  Mason N. Carter
      Name:  Mason N. Carter
      Title:    Chairman and Chief Executive Officer

Agreed and Accepted:

ERICSSON MICROELECTRONICS, A.B.

By:      /s/  Thomas Moller
      Name:  Thomas Moller
      Title:    Vice President and General Manager

ERICSSON HOLDING INTERNATIONAL, B.V.

By:      /s/  Thomas Moller
      Name:  Thomas Moller

                                      -14-

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