-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I/vzZ2iSssBfodMPfd7gqUbk6yoPJ+ZGc5S3EJF+Ch5OwKk77n008X/8pDqmWpoC 7TRchLiDh48dbKPn43GvjQ== 0000002601-97-000015.txt : 19970523 0000002601-97-000015.hdr.sgml : 19970523 ACCESSION NUMBER: 0000002601-97-000015 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970517 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970522 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEROFLEX INC CENTRAL INDEX KEY: 0000002601 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 111974412 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08037 FILM NUMBER: 97612819 BUSINESS ADDRESS: STREET 1: 35 S SERVICE RD CITY: PLAINVIEW STATE: NY ZIP: 11803 BUSINESS PHONE: 516-752-23 MAIL ADDRESS: STREET 1: 35 S SERVICE ROAD CITY: PLAINVIEW STATE: NY ZIP: 11803 FORMER COMPANY: FORMER CONFORMED NAME: ARX INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AEROFLEX LABORATORIES INC DATE OF NAME CHANGE: 19851119 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: May 17, 1997 (Date of earliest event reported) Aeroflex Incorporated (Exact name of registrant as specified in its charter) Delaware 1-8037 11-1974412 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification incorporation) Number) 35 South Service Road, Plainview, New York 11803 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (516) 694-6700 (Former name of former address, if changed since last report.) Item 5. Other Events In May 1997, Registrant executed and delivered an amendment to the employment agreement between the Registrant and Harvey R. Blau, its Chairman of the Board, an amendment to the employment agreement between the Registrant and Michael Gorin, its President and an amendment to the employment agreement between the Registrant and Leonard Borow, its Executive Vice President. Each such amendment, among other things, extended to December 31, 2002 the term of each such employment agreement. In May 1997, Registrant also executed and delivered a Deferred Compensation Agreement between the Registrant and Harvey R. Blau. The Deferred Compensation Agreement is subject to the approval of the shareholders of the Registrant. In connection with the Deferred Compensation Agreement, Mr. Blau has elected to defer all bonus compensation for the Registrant's fiscal year commencing July 1, 1997 and ending June 30, 1998, and has further elected to receive such bonus compensation in the form of the Registrant's common stock, par value $.10 per share. In addition, in March 1997, Registrant executed and delivered an employment agreement between Registrant and Carl Caruso, its Vice President - Manufacturing. Item 7. Financial Statements and Exhibits (c) Exhibits 10.1 Amendment No. 1 to Employment Agreement between Aeroflex Incorporated and Harvey R. Blau 10.2 Amendment No. 1 to Employment Agreement between Aeroflex Incorporated and Michael Gorin 10.3 Amendment No. 1 to Employment Agreement between Aeroflex Incorporated and Leonard Borow 10.4 Deferred Compensation Agreement between Aeroflex Incorporated and Harvey R. Blau 10.5 Employment Agreement between Aeroflex Incorporated and Carl Caruso SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Aeroflex Incorporated By:__________________________ Michael Gorin President EX-10.1 2 Amendment No. 1 to Employment Agreement This Amendment No. 1 dated as of February 5, 1997 to the Employment Agreement (the "Employment Agreement") dated as of July 1, 1994 between Aeroflex Incorporated, a Delaware corporation , with its principal office located at 35 South Service Road, Plainview, NY 11803 (the "Company") and Harvey R. Blau, who resides at 125 Wheatley Road, Old Westbury, NY 11568 (the "Executive"). WHEREAS, the Company and the Executive entered into the Employment Agreement and now desire to modify certain of the terms and provisions thereof; NOW, THEREFORE, it is agreed as follows: 1. The Employment Agreement is hereby amended as follows: (a) Section 2(b) of the Employment Agreement is hereby amended and restated as follows: "(b) Term of Employment. The Term of Employment shall commence on the date above written and shall terminate on December 31, 2002, and, unless either Party gives written notice to the other that it does not want the Term to continue, the Term of Employment shall thereafter automatically extend for successive periods of one year." (b) Section 9(e)(iii) of the Employment Agreement is hereby amended and restated as follows: "(iii) In the event of Termination Without Cause, the Executive shall be entitled to, for the remainder of the Term of Employment at the time of termination: (A) Base Salary at the rate in effect on the date of his termination; (B) last previously awarded Annual Bonus, payable in accordance with Company's regular payroll practices; and (C) benefits under any employee benefit plans of the Company in which he participated or, as to any plans in which his continued participation is precluded, the after-tax cost to the Executive of equivalent benefits." (c) Section 9(f) of the Employment Agreement is hereby amended and restated as follows: "(f) Termination Following Change in Control. In the event there shall be a Change in Control of the Company or of any person directly or indirectly presently controlling the Company, the Executive may, within six months of his becoming aware of such event, terminate his employment with the Company. Upon such termination, the Executive shall receive immediately in a lump sum an amount equal to three times the sum of (i) his Base Salary at the rate in effect on the date of his termination plus (ii) the amount of last previously awarded Annual Bonus, but in no event an amount greater than is deductible under Section 280G of the Internal Revenue Code of 1986, as amended, such amount to be determined by the Company's independent auditors." 2. All capitalized terms used herein, unless otherwise defined herein, are used herein as defined in the Employment Agreement. Except as expressly provided herein, all terms and provisions of the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the date first above written. AEROFLEX INCORPORATED By: /s/ Charles Badlato Name: Charles Badlato Title:Treausrer /s Harvey R. Blau Harvey R. Blau EX-10.2 3 Amendment No. 1 to Employment Agreement This Amendment No. 1 dated as of February 5, 1997 to the Employment Agreement (the "Employment Agreement") dated as of July 1, 1994 between Aeroflex Incorporated, a Delaware corporation , with its principal office located at 35 South Service Road, Plainview, NY 11803 (the "Company") and Michael Gorin, who resides at 112B East Long Beach Road, Nissequogue, NY 11780 (the "Executive"). WHEREAS, the Company and the Executive entered into the Employment Agreement and now desire to modify certain of the terms and provisions thereof; NOW, THEREFORE, it is agreed as follows: 1. The Employment Agreement is hereby amended as follows: (a) Section 2(b) of the Employment Agreement is hereby amended and restated as follows: "(b) Term of Employment. The Term of Employment shall commence on the date above written and shall terminate on December 31, 2002, and, unless either Party gives written notice to the other that it does not want the Term to continue, the Term of Employment shall thereafter automatically extend for successive periods of one year." (b) Pursuant to Section 3 of the Employment Agreement, the Base Salary for the Executive is hereby increased to $288,806 effective as of January 1, 1997, payable in accordance with the regular payroll practices of the Company. (c) Section 9(e)(iii) of the Employment Agreement is hereby amended and restated as follows: "(iii) In the event of Termination Without Cause, the Executive shall be entitled to, for the remainder of the Term of Employment at the time of termination: (A) Base Salary at the rate in effect on the date of his termination; (B) last previously awarded Annual Bonus, payable in accordance with Company's regular payroll practices; and (C) benefits under any employee benefit plans of the Company in which he participated or, as to any plans in which his continued participation is precluded, the after-tax cost to the Executive of equivalent benefits." (d) Section 9(f) of the Employment Agreement is hereby amended and restated as follows: "(f) Termination Following Change in Control. In the event there shall be a Change in Control of the Company or of any person directly or indirectly presently controlling the Company, the Executive may, within six months of his becoming aware of such event, terminate his employment with the Company. Upon such termination, the Executive shall receive immediately in a lump sum an amount equal to three times the sum of (i) his Base Salary at the rate in effect on the date of his termination plus (ii) the amount of last previously awarded Annual Bonus, but in no event an amount greater than is deductible under Section 280G of the Internal Revenue Code of 1986, as amended, such amount to be determined by the Company's independent auditors." 2. All capitalized terms used herein, unless otherwise defined herein, are used herein as defined in the Employment Agreement. Except as expressly provided herein, all terms and provisions of the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the date first above written. AEROFLEX INCORPORATED By: /s/ Charles Badlato Name: Charles Badlato Title:Treausrer /s/ Michael Gorin Michael Gorin EX-10.3 4 Amendment No. 1 to Employment Agreement This Amendment No. 1 dated as of February 5, 1997 to the Employment Agreement (the "Employment Agreement") dated as of July 1, 1994 between Aeroflex Incorporated, a Delaware corporation , with its principal office located at 35 South Service Road, Plainview, NY 11803 (the "Company") and Leonard Borow, who resides at 125 Rodeo Drive, Oyster Bay Cove, NY 11791 (the "Executive"). WHEREAS, the Company and the Executive entered into the Employment Agreement and now desire to modify certain of the terms and provisions thereof; NOW, THEREFORE, it is agreed as follows: 1. The Employment Agreement is hereby amended as follows: (a) Section 2(b) of the Employment Agreement is hereby amended and restated as follows: "(b) Term of Employment. The Term of Employment shall commence on the date above written and shall terminate on December 31, 2002, and, unless either Party gives written notice to the other that it does not want the Term to continue, the Term of Employment shall thereafter automatically extend for successive periods of one year." (b) Pursuant to Section 3 of the Employment Agreement, the Base Salary for the Executive is hereby increased to $288,806 effective as of January 1, 1997, payable in accordance with the regular payroll practices of the Company. (c) Section 9(e)(iii) of the Employment Agreement is hereby amended and restated as follows: "(iii) In the event of Termination Without Cause, the Executive shall be entitled to, for the remainder of the Term of Employment at the time of termination: (A) Base Salary at the rate in effect on the date of his termination; (B) last previously awarded Annual Bonus, payable in accordance with Company's regular payroll practices; and (C) benefits under any employee benefit plans of the Company in which he participated or, as to any plans in which his continued participation is precluded, the after-tax cost to the Executive of equivalent benefits." (d) Section 9(f) of the Employment Agreement is hereby amended and restated as follows: "(f) Termination Following Change in Control. In the event there shall be a Change in Control of the Company or of any person directly or indirectly presently controlling the Company, the Executive may, within six months of his becoming aware of such event, terminate his employment with the Company. Upon such termination, the Executive shall receive immediately in a lump sum an amount equal to three times the sum of (i) his Base Salary at the rate in effect on the date of his termination plus (ii) the amount of last previously awarded Annual Bonus, but in no event an amount greater than is deductible under Section 280G of the Internal Revenue Code of 1986, as amended, such amount to be determined by the Company's independent auditors." 2. All capitalized terms used herein, unless otherwise defined herein, are used herein as defined in the Employment Agreement. Except as expressly provided herein, all terms and provisions of the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the date first above written. AEROFLEX INCORPORATED By: /s/ Charles Badlato Name: Charles Badlato Title:Treausrer /s/ Leonard Borow Leonard Borow EX-10.4 5 DEFERRED COMPENSATION AGREEMENT Deferred Compensation Agreement dated as of May __, 1997 between Aeroflex Incorporated, a Delaware corporation, with its principal office located at 35 South Service Road, Plainview, NY 11803 (the "Company") and Harvey R. Blau, who resides at 125 Wheatley Road, Old Westbury, NY 11568 (the "Executive"). WHEREAS, the Company and the Executive entered into an Employment Agreement dated as of July 1, 1994 (the "Employment Agreement"), pursuant to which the Executive receives compensation from the Company; WHEREAS, the Company and the Executive wish to provide that the Executive may, at his election, defer certain of the compensation payable to Executive pursuant to the terms of the Employment Agreement. NOW, THEREFORE, it is agreed as follows: 1. DEFINITIONS. All capitalized terms not otherwise defined herein shall have the meanings provided in the Employment Agreement. 2. DEFERRED COMPENSATION. (a) Not later than the later of (i) the last day of each Fiscal Year of the Company prior to a Fiscal Year with respect to which an Annual Bonus is payable to Executive in accordance with Section 4 of the Employment Agreement and (ii) five (5) days from the date of this Agreement, Executive may elect in writing to defer all or any portion of such Annual Bonus for such Fiscal Year, as Executive desires. (b) At the same time as the Executive elects to defer compensation under this Agreement, the Executive shall elect whether such deferred compensation shall be payable in cash or in the Company's common stock, par value $.10 per share ("Common Stock"), or a combination thereof. In the event that the Executive determines that all or a portion of his deferred compensation shall be paid in Common Stock of the Company, the Common Stock shall be valued at its Fair Market Value on 31st trading day of the Fiscal Year next succeeding the Fiscal Year for which such Annual Bonus was deferred (each such 31st day, a "Valuation Date"). For the purposes of the foregoing, "Fair Market Value" shall mean the average market price of the Common Stock on the New York Stock Exchange consolidated reporting system for the 30 consecutive trading days immediately preceding the applicable Valuation Date. If no sales shall have been reported on the New York Stock Exchange consolidated reporting system on such dates, Fair Market Value shall be determined by the Committee in accordance with the Treasury Regulations applicable to incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended. (c) All amounts deferred under this Agreement above shall be one hundred percent (100%) vested and non-forfeitable at all times. Payments of said deferred compensation shall begin upon the earliest to occur of (i) the failure to the stockholders of the Company to approve this Agreement by the affirmative vote of a majority of such stockholders at the annual or special meeting of the stockholders next succeeding the date of this Agreement, (ii) termination of the Executive's employment in accordance with Section 9 of the Employment Agreement, (iii) in the event of any emergency or necessity as shall be solely determined by the Board of Directors or (iv) an adverse change of financial condition of the Company deemed to be perceived inability to pay the amounts deferred pursuant to this Agreement. Amounts payable to the Executive pursuant to this Agreement shall be in addition to any amounts payable to the Executive pursuant to Section 9 of the Employment Agreement. (d) In order to meet its contingent deferred obligation hereunder, the Company may (i) each year set aside or earmark funds in an amount equal to the total cash amount allocated and deferred for such year and (ii) purchase or otherwise allocate shares of Common Stock in an amount equal to the amount designated by the Executive pursuant to Section 2(b) hereof. (e) Funds set aside or earmarked to meet the Company's contingent cash deferred obligation hereunder may be kept in cash, or invested and reinvested in the discretion of the Company. To the extent that such funds are kept in cash, they shall be deemed to accrue interest at the rate of five (5%) percent per annum. (f) Investments of funds set aside or earmarked for the Company's contingent deferred obligation hereunder may be made in stock, bonds or other securities; provided, however, that except as provided in Section 2(d), no portion of such funds shall be invested in any securities of the Company. (g) In the event that amounts become payable in accordance with this Agreement, (i) to the extent that the Executive has elected that such amounts shall be paid in cash, said payment shall be in an amount equal to the value, determined as of the date of such event, of all deferred amounts plus all amounts earned or deemed earned thereon, and shall be made as soon as feasible in one lump sum and (ii) to the extent that the Executive has elected that any such amounts shall be paid in Common Stock, the Company shall deliver to the Executive the total number of shares of Common Stock determined by dividing the amount of Annual Bonus which the Executive deferred and elected to have paid in Common Stock in respect of any Fiscal Year by the Fair Market Value of the Common Stock on the Valuation Date for each respective Fiscal Year calculated in accordance with Section 2(b) hereof, and shall be delivered as soon as feasible after such number of shares of Common Stock have been determined. (h) Nothing contained herein shall be deemed to create a trust relationship. Funds invested hereunder shall continue for all purposes to be part of the general funds of the Company, subject to the claims of creditors of the Company, and no entity or person other than the Company shall, by virtue of the provisions of this Agreement, have any interest in such funds. To the extent that Executive acquires a right to receive payments from the Company under this Agreement, such right shall be non-forfeitable and secured to the full extent that the law will allow. (i) Subject to the approval of this Agreement by the affirmative vote of a majority of such stockholders at the annual or special meeting of the stockholders next succeeding the date of this Agreement, Executive hereby elects (i) to defer all of the Annual Bonus payable to him in respect of the Fiscal Year ending June 30, 1998 and (ii) that such deferred compensation shall be payable to Executive in Common Stock. 3. EFFECT OF AGREEMENT ON OTHER BENEFITS. The existence of this Agreement shall not prohibit or restrict the Executive's entitlement to participate fully in the executive compensation, employee benefit and other plans or programs of the Company in which senior executives are eligible to participate. 4. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Executive) and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to (a) a merger or consolidation in which the Company is not the continuing entity or (b) sale or liquidation of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in the Employment Agreement and this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale of assets or liquidation as described in the preceding sentence, it will use its best efforts to cause such assignee or transferee expressly to assume the liabilities, obligations and duties of the Company hereunder. 5. ENTIRE AGREEMENT. Except to the extent otherwise provided herein, this Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof and supersedes any prior agreements, whether written or oral, between the Parties concerning the subject matter hereof. 6. AMENDMENT OR WAIVER. No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by both the Executive and an authorized officer of the Company other than the Executive. No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Executive or an authorized officer of the Company other than the Executive, as the case may be. 7. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 8. SURVIVORSHIP. The respective rights and obligations of the Parties hereunder shall survive any termination of the Executive's employment with the Company to the extent necessary to the intended preservation of such rights and obligations as described in this Agreement. 9. BENEFICIARIES/REFERENCES. The Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following the Executive's death by giving the Company written notice thereof. In the event of the Executive's death or of a judicial determination of his incompetence, reference in this Agreement to the Executive shall be deemed to refer to his beneficiary, and if the Executive shall not have designated a beneficiary, his Spouse. 10. GOVERNING LAW/JURISDICTION. This Agreement shall be governed by and construed and interpreted in accordance with the laws of New York, without reference to principles of conflict of laws. 11. NOTICES. Any notice given to either Party shall be in writing and shall be deemed to have been given when delivered either personally, by fax, by overnight delivery service (such as Federal Express) or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of. If to the Company or the Board: Aeroflex Incorporated 35 South Service Road Plainview, NY 11803 Attention: Michael Gorin FAX: (516) 694-4823 If to the Executive: Harvey R. Blau 125 Wheatley Road Old Westbury, NY 11568 12. HEADINGS. The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. 13. COUNTERPARTS. This Agreement may be executed in two or more counterparts. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. AEROFLEX INCORPORATED By: /s/ Charles Badlato Name: Charles Badlato Title:Treausrer /s/ Harvey R. Blau Harvey R. Blau EX-10.5 6 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, made and entered into as of February 5, 1997, between Aeroflex Incorporated, a Delaware corporation, with its principal office located at 35 South Service Road, Plainview, NY 11803 (together with its successors and assigns permitted under this Agreement, the "Company"), and Carl Caruso, who resides at 5 Flamingo Drive, Smithtown, NY 11787 (the "Employee"). W I T N E S S E T H WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders to enter into an employment agreement setting forth the obligations and duties of both the Company and the Employee (this "Agreement"); and WHEREAS, the Company wishes to assure itself of the continued services of the Employee for the period hereinafter provided, and the Employee is willing to be employed by the Company for said period, upon the terms and conditions provided in this Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Employee (individually a "Party" and together the "Parties") agree as follows: 1. DEFINITIONS. (a) "Base Salary" shall mean the annual salary to which the Employee is entitled pursuant to Section 3 below. (b) "Beneficiary" shall mean the person or persons named by the Employee pursuant to Section 21 below or, in the event that no such person is named or survives the Employee, his estate. (c) "Board" shall mean the Board of Directors of the Company. (d) "Bonus" shall mean any bonus to which the Employee is entitled pursuant to Section 4 below. (e) "Cause" shall mean: (i) the Employee's conviction of a felony involving moral turpitude, (ii) the Employee's willful gross misconduct in carrying out his duties under this Agreement, or (iii) a breach by the Employee of the provisions of Section 9 or Section 10 below. (f) "Change in Control" shall mean: (i) a change in control as such term is presently defined in Regulation 240.12b-2 under the Securities Exchange Act of 1934 ("Exchange Act"); (ii) if during the Term of Employment any "person" (as such term is used in Section 13(d) and 14(d) of the Exchange Act) other than the Company or any person who on the date of this Agreement is a director or officer of the Company, becomes the "beneficial owner" (as defined in Rule 13(d)-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% of the voting power of the Company's then outstanding securities; or (iii) if during the Term of Employment individuals who at the beginning of such period constitute the Board cease for any reason other than death, disability or retirement to constitute at least a majority thereof. (g) "Compensation Committee" shall mean the Compensation Committee of the Board. (h) "Disability" shall mean the illness or other mental or physical disability of the Employee resulting in his failure to perform substantially his duties under this Agreement for a period of six or more consecutive months or an aggregate of nine months in any 12-month period. (i) "Fiscal Year" shall mean the fiscal year of the Company, which is the 12-month period beginning each July 1 and ending on the next succeeding June 30. (j) "Good Reason" shall mean: (i) reduction in the Employee's Base Salary, (ii) the loss by the Employee of his position, (iii) a significant diminution of the Employee's duties or responsibilities or the assignment to him of duties or responsibilities inconsistent with his position, (iv) a material reduction in any plan or program of the Company in which the Employee participates unless such reduction affects the senior management of the Company generally, or (v) the Employee must, in carrying out his duties and responsibilities under this Agreement, spend significant time outside Long Island or New York City. (k) "Spouse" shall mean, during the Term of Employment, the woman who as of the relevant date is legally married to the Employee. (l) "Term of Employment" or "Term" shall mean the period specified in Section 2(b) below. 2. TERM OF EMPLOYMENT, POSITIONS AND DUTIES. (a) Employment of Employee. The Company hereby employs the Employee, and the Employee hereby accepts employment with the Company, in the position and with the duties and responsibilities set forth below, and upon such other terms and conditions as are hereinafter stated. (b) Term of Employment. The Term of Employment shall commence on the date above written, and shall terminate on the third anniversary subsequent to said date and, unless either Party gives written notice to the other that it does not want the Term to continue, the Term of Employment shall thereafter automatically extend for successive periods of one year. (c) Title and Duties. Until the date of termination of his employment hereunder, the Employee shall be employed as an executive officer of the Company. If the Board so requests, the Employee shall serve as a member of the board of a subsidiary or affiliate of the Company. (d) Time and Effort. The Employee agrees to devote his full business time and attention and his best efforts and abilities to the affairs of the Company. Nothing shall preclude the Employee from (i) serving on the boards of a reasonable number of other corporations, trade associations and/or charitable organizations, (ii) engaging in charitable activities and community affairs or (iii) managing his personal investments and affairs; provided, however, that such activities do not materially interfere with the proper performance of his duties and responsibilities specified in Section 2(c) above. 3. BASE SALARY. (a) The Employee shall receive from the Company an initial annual Base Salary, payable in accordance with the regular payroll practices of the Company, of $180,000. During the Term of Employment, the Compensation Committee shall review the Base Salary no less often than annually for increase as of each July 1 beginning with July 1, 1997; provided, however, that increases shall not be less than the increases in the Consumer Price Index for the New York and Northeastern New Jersey Region, as published by the United States Department of Labor, Bureau of Labor Statistics using June 1996 as the basedate, determined and payable as provided in Section 3(b) below. (b) The cost-of-living adjustment (COLA) with respect to the Employee's Base Salary shall be made annually as follows: The first calculation shall be made on or before August 1, 1997, with respect to the period January 1, 1997 through June 30, 1997 with a lump-sum payment for the COLA being made as soon as practicable. The same procedure shall be followed each year thereafter with respect to the period commencing the July 1 of the preceding year through June 30 of the year in which the calculation is being made. If the Employee's employment shall terminate during any annual period referred to in this Section 3(b), then the cost-of-living increment provided for herein shall be prorated accordingly. 4. BONUSES. During the Term of Employment, the Company may pay the Employee bonuses as determined by the Board. 5. STOCK OPTIONS. During the Term of Employment, the Employee shall be eligible to receive stock option grants and similar awards under existing and future plans or programs of the Company adopted and administered by the Compensation Committee and approved by shareholders. 6. EXPENSES AND EXPENSE REIMBURSEMENT. During the Term of Employment, the Employee shall be entitled to prompt reimbursement by the Company for all reasonable out-of-pocket expenses incurred by him in performing services under this Agreement, upon his submission of such accounts and records as may be required by Company policy. 7. EMPLOYEE BENEFIT PLANS AND PROGRAMS. The Employee shall participate in all employee benefit plans and programs for which he is eligible and which are made available to the Company's employees generally, as such plans or programs may be in effect from time to time, including, without limitation, pension and other retirement plans (excluding the Company's Supplemental Executive Retirement Plan), profit-sharing plans, savings and similar plans, group life insurance, accidental death and dismemberment insurance, travel accident insurance, hospitalization insurance, surgical insurance, medical insurance, dental insurance, short-term and long-term disability insurance, sick leave (including salary continuation arrangements), vacations, holidays and any other employee benefit plans or programs that may be sponsored by the Company from time to time, including any plans that supplement the foregoing types of plans, whether funded or unfunded. 8. TERMINATION OF EMPLOYMENT. (a) General. Except as otherwise provided in this Agreement, in the event of termination of the Employee's employment under this Agreement, he, his dependents or his Beneficiary, as may be the case, shall be entitled to receive benefits under the Company's employee benefit plans described in Section 7 above, in accordance with the applicable terms and conditions of each plan, and reimbursement of any business expenses incurred by the Employee but not yet paid to him. (b) Termination Due to Death. In the event that the Employee's employment is terminated due to his death, for each year (and prorated for any portion of a year) to the end of the Term then in effect, his Beneficiary shall be entitled to the sum of (A) 50% of the Employee's Base Salary, at the rate in effect on the date of his death, and (B) any Bonus previously awarded but not yet paid to him, payable in accordance with the Company's regular payroll practices. (c) Termination Due to Disability. In the event of Disability, the Company or the Employee may terminate the Employee's employment. If the Employee's employment is terminated due to Disability, he shall be entitled to the benefits described in 8(b) above. (d) Termination by the Company for Cause. In the event that the Employee's employment is terminated for Cause, he shall be entitled to: (i) his Base Salary through the date of termination of his employment for Cause, and (ii) any Bonus awarded but not yet paid to him. The Employee shall be permitted to respond and defend himself before the Board or a committee thereof within a reasonable time after written notification of any proposed termination of his employment for Cause under clauses (ii) and (iii) of Section 1(e) above. (e) Termination Without Cause. (i) Termination Without Cause shall mean: (A) termination of the Employee's employment by the Company other than due to death or Disability or for Cause, or (B) termination by the Employee for Good Reason. (ii) The Employee may not terminate his employment for Good Reason unless: (A) he has delivered a written notice to the Board within 12 months of his having actual knowledge of one of the events, described in Section 1(j) above, providing a basis for Good Reason, stating which one of those events has occurred; (B) within 30 days of the delivery of the notice, the Company has not remedied such event and provided him with a written notice of such remedy, and (C) in the event the Company has not remedied such event as provided in clause (B) above, the Employee notifies the Company in writing that he is terminating his employment. The failure of the Employee to terminate for Good Reason as to any one event described in Section 1(j) above shall not affect his entitlement to terminate for Good Reason as to any other such event. (iii) In the event of Termination Without Cause, the Employee shall be entitled to receive any Bonus awarded but not yet paid to him, and, for the remainder of the Term of Employment at the time of termination: (A) Base Salary at the rate in effect on the date of his termination, and (B) benefits under any employee benefit plans of the Company in which he participated or, as to any plans in which his continued participation is precluded, the after-tax cost to the Employee of equivalent benefits. (f) Termination Following Change in Control. In the event there shall be a Change in Control of the Company or of any person directly or indirectly presently controlling the Company, the Employee may, within six months of his becoming aware of such event, terminate his employment with the Company. Upon such termination, the Employee shall receive immediately in a lump sum the benefit described in Section 8(e) above but in no event an amount greater than is deductible under Section 280G of the Internal Revenue Code of 1986, as amended, such amount to be determined by the Company's independent auditors. (g) Voluntary Termination by the Employee. The Employee shall have the right, upon 90 days' written notice to the Company, voluntarily to terminate his employment, in which event the Employee's entitlements shall be the same as if he had been terminated by the Company for Cause, as provided in Section 8(d) above. (h) No Mitigation; No Offset. In the event of termination of the Employee's employment under this Section 8, he shall be under no obligation to seek other employment or to offset or repay any amounts that he receives under this Agreement by any payments that he receives from a subsequent employer. (i) Nature of Payments. Any amounts due under this Section 8 are in the nature of severance payments or liquidated damages or both, and shall fully compensate the Employee and his dependents or Beneficiary, as the case may be, for any and all direct damages and consequential damages that any of them may suffer as a result of termination of the Employee's employment, and they are not in the nature of a penalty. 9. CONFIDENTIAL INFORMATION. (a) The Employee understands and hereby acknowledges that as a result of his employment with the Company he will necessarily become informed of and have access to certain valuable and confidential information of the Company and any of its subsidiaries, joint ventures or affiliates, including without limitation inventions, trade secrets, technical information, know-how, plans, specifications, and identity of customers and suppliers, and that such information even though it may be developed or otherwise acquired by the Employee is the exclusive property of the Company to be held by the Employee in trust and solely for the Company's benefit. Accordingly, the Employee hereby agrees that he shall not at any time either during or subsequent to his employment hereunder use, reveal, report, publish, transfer or otherwise disclose to any person, corporation or other entity any of the Company's confidential information without the prior written consent of the Company, except to responsible officers and employees of the Company and other responsible persons who are in a contractual or fiduciary relationship with the Company or who have a need for such information for purposes in the interest of the Company and except for such information that legally and legitimately is or becomes of general public knowledge from authorized sources other than the Employee. (b) Upon the termination of his employment with the Company for any reason whatsoever, the Employee shall promptly deliver to the Company all drawings, manuals, letters, notes, notebooks, reports and copies thereof and all other materials including without limitation those of a secret or confidential nature relating to the Company's business that are in the Employee's possession or control. 10. COVENANT NOT TO COMPETE. The Employee agrees that during the Term and for a period of two (2) years after termination of his employment with the Company for any reason, he shall not, within 50 miles of any location at which the Company, at the time of his termination of employment, is conducting its business (or in such smaller area or for such lesser period as may be determined by a court of competent jurisdiction to be a reasonable limitation on the competitive activity of the Employee), directly or indirectly: (a) engage in a competitive line of business to that carried on by the Company either for his own account or with or for anyone else, (b) solicit or attempt to solicit business of any customers of the Company or products or services the same or similar to those offered, sold, produced or under development by the Company, (c) otherwise divert or attempt to divert from the Company any business whatsoever, (d) solicit or attempt to solicit for any business endeavor any employee of the Company, (e) interfere with any business relationship between the Company and any other person, or (f) render any services as an officer, director, employee, partner, consultant or otherwise to, or have any interest as a stockholder, partner, lender or otherwise in, any person that is so engaged. Notwithstanding anything to the contrary in this Section 10, the provisions hereof shall not prevent the Employee from purchasing or owning up to 5% of the voting securities of any corporation the stock of which is publicly traded. 11. INJUNCTIVE RELIEF. The Parties specifically agree that any breach of any of the provisions of Section 9 or Section 10 above shall constitute a material breach of this Agreement. In the event of a breach or threatened breach by the Employee of any of the provisions of Section 9 or Section 10 of this Agreement, the Company shall be entitled to pursue any remedies available to the Company at law or in equity, including, but not limited to, injunctive relief. 12. WITHHOLDING TAXES. All payments to the Employee or his Beneficiary shall be subject to withholding on account of federal, state and local taxes as required by law. If any payment hereunder is insufficient to provide the amount of such taxes required to be withheld, the Company may withhold such taxes from any other payment due the Employee or his Beneficiary. In the event that all cash payments due the Employee are insufficient to provide the required amount of such withholding taxes, the Employee or his Beneficiary, within five (5) days after written notice from the Company, shall pay to the Company the amount of such withholding taxes in excess of all cash payments due the Employee or his Beneficiary. 13. INDEMNIFICATION. The Company agrees to indemnify the Employee to the fullest extent permitted by applicable law consistent with the Company's Certificate of Incorporation and By-Laws as in effect on the effective date of this Agreement with respect to any action or failure to act on his part while he was an officer, director and/or employee (a) of the Company or any subsidiary thereof or (b) of any other entity if his service with such entity was at the request of the Company. This provision shall survive the termination of this Agreement. 14. EFFECT OF AGREEMENT ON OTHER BENEFITS. The existence of this Agreement shall not prohibit or restrict the Employee's entitlement to participate fully in the Employee compensation, employee benefit and other plans or programs of the Company in which senior Employees are eligible to participate. 15. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Employee) and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to (a) a merger or consolidation in which the Company is not the continuing entity or (b) sale or liquidation of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale of assets or liquidation as described in the preceding sentence, it will use its best efforts to cause such assignee or transferee expressly to assume the liabilities, obligations and duties of the Company hereunder. No obligations of the Employee under this Agreement may be assigned or transferred by the Employee. 16. REPRESENTATIONS. The Parties respectively represent and warrant that each is fully authorized and empowered to enter into this Agreement and that the performance of its or his, as the case may be, obligations under this Agreement will not violate any agreement between such Party and any other person, firm or organization. 17. ENTIRE AGREEMENT. Except to the extent otherwise provided herein, this Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof and supersedes any prior agreements, whether written or oral, between the Parties concerning the subject matter hereof. 18. AMENDMENT OR WAIVER. No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by both the Employee and an authorized officer of the Company other than the Employee. No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Employee or an authorized officer of the Company other than the Employee, as the case may be. 19. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 20. SURVIVORSHIP. The respective rights and obligations of the Parties hereunder shall survive any termination of the Employee's employment with the Company to the extent necessary to the intended preservation of such rights and obligations as described in this Agreement. 21. BENEFICIARIES/REFERENCES. The Employee shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following the Employee's death by giving the Company written notice thereof. In the event of the Employee's death or of a judicial determination of his incompetence, reference in this Agreement to the Employee shall be deemed to refer to his beneficiary, and if the Employee shall not have designated a beneficiary, his Spouse. 22. GOVERNING LAW/JURISDICTION. This Agreement shall be governed by and construed and interpreted in accordance with the laws of New York, without reference to principles of conflict of laws. 23. RESOLUTION OF DISPUTES. (a) Arbitration/Litigation. Any disputes arising under or in connection with this Agreement shall be resolved, in the Employee's discretion, either: (i) by arbitration, to be held in New York City, in accordance with the commercial rules and procedures of the American Arbitration Association, or (ii) by litigation; provided, however, that the venue of such litigation shall be in the state of New York. (b) Costs. All costs, fees and expenses, including attorneys' fees, of any arbitration or litigation in connection with this Agreement, including, without limitation, attorney's fees of both the Employee and the Company, shall be borne by, and be the obligation of, the Company unless the Company shall substantially prevail, in which event the Employee shall be required to pay the costs and expenses incurred by him relating to such arbitration or litigation. The obligation of the Company under this Section 23 shall survive the termination for any reason of this Agreement (whether such termination is by the Company, by the Employee, upon the expiration of this Agreement or otherwise). (c) Continuation of Payments. Pending the outcome or resolution of any arbitration or litigation, the Company shall continue payment of all amounts due the Employee under this Agreement without regard to any dispute. 24. NOTICES. Any notice given to either Party shall be in writing and shall be deemed to have been given when delivered either personally, by fax, by overnight delivery service (such as Federal Express) or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of. If to the Company or the Board: Aeroflex Incorporated 35 South Service Road Plainview, NY 11803 Attention: Michael Gorin FAX: (516) 694-4823 If to the Employee: Carl Caruso 5 Flamingo Drive Smithtown, NY 11787 (516) 724-1810 25. HEADINGS. The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. 26. COUNTERPARTS. This Agreement may be executed in two or more counterparts. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. Aeroflex Incorporated Attest:/s/ Francesca Barilla By: /s/ Charles Badlato /s/ Carl Caruso Carl Caruso -----END PRIVACY-ENHANCED MESSAGE-----