<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the six months ended July 4, 1998 Commission file No. 0-11201
------------ -------
MERRIMAC INDUSTRIES, INC.
- -----------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
New Jersey 22-1642321
- ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
41 Fairfield Place West Caldwell, New Jersey 07006
- -------------------------------------------- -------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (973) 575-1300
--------------
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock American Stock Exchange
Securities registered pursuant to Section 12(g) of the Exchange Act: None
----
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at July 30, 1998
- ----------------------------- -------------------------------
Common Stock ($.50 par value) 1,785,859
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
---------------------------
(Unaudited)
July 4,
1998
-----------
ASSETS
Current assets:
Cash and cash equivalents........................... $2,058,721
Accounts receivable................................. 4,252,318
Inventories:
Finished goods.................................... 519,276
Work in process................................... 2,145,721
Parts and raw materials........................... 768,000
-----------
Total inventories.............................. 3,432,997
Other current assets................................ 255,970
Deferred tax assets................................. 893,300
-----------
Total current assets......................... 10,893,306
Property, plant and equipment........................ 15,295,487
Less accumulated depreciation..................... 9,956,621
-----------
Net property, plant and equipment............. 5,338,866
Deferred income taxes................................ 65,000
Other assets......................................... 91,824
-----------
Total Assets................................ $16,388,996
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................. $1,060,421
Accrued liabilities............................... 1,022,504
Income taxes payable.............................. 233,982
-----------
Total current liabilities.................... 2,316,907
Deferred compensation............................. 466,811
-----------
Total liabilities.......................... 2,783,718
Stockholders' equity:
Common stock, par value $.50 per share:
Authorized: 5,000,000 shares
Issued: 2,658,408 shares................ 1,329,204
Additional paid-in capital..................... 10,905,006
Retained earnings.............................. 9,446,149
Translation adjustment......................... (35,735)
----------
21,644,624
Less treasury stock, at cost: 894,549 shares... (7,679,346)
Less loan to officer-stockholder............... (360,000)
-----------
Total stockholders' equity................ 13,605,278
-----------
Total Liabilities and Stockholders' Equity.......... $16,388,996
===========
See accompanying notes to consolidated financial statements.
- 1 -
<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Thirteen Weeks Six Months Ended
---------------------- ------------------------
July 4 June 28 July 4 June 28
1998 1997 1998 1997
---------- ---------- ----------- -----------
Net sales .................... $5,573,659 $4,986,288 $11,366,266 $9,261,443
---------- ---------- ----------- -----------
Cost and expenses:
Cost of sales .............. 3,031,727 2,601,083 6,249,579 4,976,190
Selling, general and
administrative ........... 1,661,518 1,672,155 3,358,213 3,103,833
Research and development.... 252,145 124,890 463,401 182,218
---------- ---------- ----------- -----------
4,945,390 4,398,128 10,071,193 8,262,241
---------- ---------- ----------- -----------
Operating income ............. 628,269 588,160 1,295,073 999,202
Interest and other
income, net................. 16,573 20,940 29,315 47,644
---------- ---------- ----------- -----------
Income before income taxes ... 644,842 609,100 1,324,388 1,046,846
Provision for income taxes ... 236,000 231,000 488,000 391,000
---------- ---------- ----------- -----------
Net income ................... $ 408,842 $ 378,100 $ 836,388 $ 655,846
========== ========== =========== ===========
Net income per
common share-basic ......... $.23 $ .22 $.48 $ .39
Net income per
common share-diluted ....... $.22 $ .22 $.46 $ .38
Cash dividend per share of
common stock ............... $ - $.09 $ - $.18
==== ==== ==== =====
Weighted average number of
shares outstanding:
Basic ...................... 1,756,350 1,681,938 1,746,816 1,673,306
Diluted .................... 1,845,263 1,711,840 1,834,423 1,705,680
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Six Months Ended
-------------------------
July 4, June 28,
1998 1997
---------- ----------
Cash flows from operating activities:
Net income ....................................... $836,388 $ 655,846
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................... 401,663 428,831
Deferred compensation .......................... 116,659 78,291
Stock-based compensation expense ............... 67,300 -
Changes in operating assets and liabilities:
Accounts receivable...........................(1,186,031) (794,349)
Inventories................................... 1,075,572 (309,370)
Other current assets.......................... (134,767) 12,452
Deferred tax assets........................... 26,200 -
Other assets.................................. 21,952 (96,845)
Accounts payable.............................. (81,358) 462,246
Accrued liabilities........................... (177,365) 336,223
Income taxes payable.......................... 188,155 189,827
Deferred compensation......................... (25,547) (15,000)
---------- ----------
Net cash provided by operating activities........... 1,128,821 948,152
---------- ----------
Cash flows from investing activities:
Purchase of capital assets....................... (1,595,299) (911,756)
Proceeds from sales of capital assets............ 12,775 750
Purchases of available-for-sale securities....... - (125,371)
----------- ----------
Net cash used in investing activities.............. (1,582,524) (1,036,377)
----------- ----------
Cash flows from financing activities:
Proceeds from the issuance of common stock....... 98,708 205,658
Payment of dividends............................. (1,009) (304,848)
----------- ----------
Net cash provided by (used) in financing activities 97,699 (99,190)
----------- ----------
Net decrease in cash and cash equivalents.......... (356,004) (187,415)
Cash and cash equivalents at beginning of year..... 2,414,725 1,265,581
----------- ----------
Cash and cash equivalents at end of period......... $2,058,721 $1,078,166
=========== ==========
Supplemental disclosures of cash flows information:
Cash paid during the period for:
Income taxes................................... $ 300,000 325,000
========== ==========
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and therefore, do
not include all information and footnote disclosures otherwise required by
Regulation S-B. The financial statements do, however, reflect all adjustments
which are, in the opinion of the management, necessary for a fair presentation
of the financial position of the Company as of July 4, 1998 and its results of
operations and cash flows for the periods presented.
B. Net income per common share
Effective January 3, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 128, "Earnings per Share," which
establishes the new standard for computation and presentation of net income per
common share. Under the new requirements both basic and diluted net income per
common share are presented. All prior period net income per common share
information has been restated.
Basic net income per common share is calculated by dividing net income,
less dividends on preferred stock, if any, by the weighted average common shares
outstanding during the period.
The calculation of diluted net income per common share is similar to that
of basic net income per common share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if all potentially dilutive common shares, principally those
issuable under stock options, were issued during the reporting period.
C. Accounting period
The Company's fiscal year is the 52-53 week period ending on the Saturday
closest to December 31. The Company has quarterly dates that correspond with the
Saturday closest to the last day of each calendar quarter and each quarter
consists of 13 weeks in a 52-week year. Every fifth year, the additional week to
make a 53-week year (fiscal year 1997 was the latest and fiscal year 2002 will
be the next) is added to the fourth quarter, making such quarter consist of 14
weeks.
D. Dividends
During fiscal 1997, the Company paid a $.091 per share dividend (previously
$.10 per share, adjusted for the 10% stock dividend in May 1998) in each of the
first three quarters. The dividend was eliminated by a decision of the Company's
Board of Directors (the "Board") on August 28, 1997.
The Board announced on May 5, 1998, the declaration of a 10% stock dividend
payable on June 5, 1998 to stockholders of record on May 15, 1998. Fractional
shares were cashed-out and payments were made to stockholders in lieu of
fractional shares on June 5, 1998. The basic and diluted weighted average number
of shares outstanding and net income per share information for all prior
reporting periods have been restated to reflect the effects of the stock
dividend.
-4-
<PAGE>
MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. Purchase of common stock by Officer and Director
The Company sold 20,000 shares of Common Stock from its treasury to the
Company's Chairman, President and Chief Executive Officer, Mason N. Carter, on
May 4, 1998 at a price of $12.75 per share, which approximated the average
closing price of the Company's Common Stock during the first quarter of 1998.
The Company extended a loan of $255,000 in connection with the purchase of these
shares and amended a prior loan to Mr. Carter of $105,000. Mr. Carter has
contractually agreed to restrictions on the resale of these shares.
The new promissory note for a total of $360,000 is due May 4, 2003 and
interest payments are due quarterly, calculated at a variable interest rate
based on the prime rate of the Company's lending bank. Payment of the loan is
secured by the pledge of the shares of Common Stock purchased by Mr. Carter with
the proceeds of the loan.
As a result of the amendment to the terms of principal amortization of the
prior loan, the amount of $360,000 is reflected as a reduction of stockholders'
equity in the balance sheet. The Company will record compensation expense of
approximately $52,000 by charging to operations over a one-year period
commencing the date of the transaction, as Mr. Carter is expected to perform
services throughout this time period.
F. Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"), and Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information ("SFAS 131"), which
could require the Company to make additional disclosures in its financial
statements no later than for the year ending January 2, 1999. SFAS 130 defines
comprehensive income, which includes items in addition to those reported in the
statement of operations, and requires disclosures about the components of
comprehensive income. SFAS 131 requires disclosures for each segment of a
business and the determination of segments based on a company's internal
management structure. The Company's management believes that the provisions of
SFAS 130 are not material to the disclosures made by the Company and a statement
of comprehensive income has not been included in the consolidated financial
statements. The Company's management is still evaluating whether SFAS 131 will
require the Company to make any additional disclosures.
-5-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INCOME STATEMENT SUMMARY
------------------------
(Unaudited)
The following table displays line items in the Consolidated Statements of
Income as a percentage of net sales.
Percentage of Net Sales
-------------------------------------------
Second Quarter Year-to-date
-------------------- ----------------------
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
July 4 June 28 July 4 June 28
1998 1997 1998 1997
------- ------- ------- -------
Net sales......................... 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Costs and expenses:
Cost of sales................... 54.4 52.2 55.0 53.7
Selling, general and
administrative................ 29.8 33.5 29.5 33.5
Research and development ....... 4.5 2.5 4.1 2.0
----- ----- ----- -----
88.7 88.2 88.6 89.2
----- ----- ----- -----
Operating income ................. 11.3 11.8 11.4 10.8
Other income, net ................ 0.3 0.4 0.3 0.5
----- ----- ----- -----
Income before income taxes ....... 11.6 12.2 11.7 11.3
Provision for income taxes ....... 4.2 4.6 4.3 4.2
----- ----- ----- -----
Net income ....................... 7.4% 7.6% 7.4% 7.1%
===== ===== ===== =====
-6-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Quarter and six months ended July 4, 1998 compared to the quarter and six
months ended June 28, 1997
Results of operations for the quarter reflect increases in: net sales of
$588,000 or 11.8%; operating income of $40,000 or 6.8%; net income of $31,000 or
8.2%; and diluted net income per share was unchanged at $.22. Six months results
of operations reflect increases in: net sales of $2,105,000 or 22.7%; operating
income of $296,000 or 29.6%; net income of $180,000 or 27.4%; and diluted net
income per share of $.08 or 21.1%.
The net sales increase was partially attributable to delivering shipments
against a larger firm order backlog than in comparable periods in 1997 and
customers' order release dates that coincided with the Company's production and
shipment schedules. In adddition, a customer service focus initiative caused a
reduction of manufacturing cycle-time.
Orders received for the second quarter of 1998 of $3,583,000 decreased
$1,692,000 or 32.1% compared to that of the second quarter of 1997, and the
backlog of firm unfilled orders at July 4, 1998 decreased $1,790,000 or 18.4% to
$7,952,000 for the same end of quarter comparisons. Orders received for the
first six months of 1998 were $9,560,000 and for comparable six months time
periods decreased $1,212,000 or 11.3%. Compared to year-end 1997, backlog
decreased $1,806,000 or 18.5%. The majority of this differential is attributable
to delays in certain new satellite constellation programs, satellite
manufacturers working down inventories, and the timing of certain non-satellite
business. This trend in orders is not expected to be long-term. It is
anticipated that for the remainder of 1998 many of the satellite programs that
have been delayed may translate into orders.
As a result of the increases in the quarter and six month net sales, cost
of sales increased $431,000 or 16.6% for the quarter and $1,273,000 or 25.6% for
six months. The primary reason for the increase was the effect of the increase
in sales revenue on cost of sales. Cost of sales as a percentage of net sales
increased 2.2% to 54.4% for the quarter and 1.3% to 55.0% for six months. These
increases are due to a compensation increase to the hourly workforce which
became effective mid-year 1997, and additional manufacturing personnel that were
hired for the Costa Rica manufacturing facility to concentrate on improving
delivery performance by reducing the number of late ship days in the backlog.
Selling, general and administrative expenses decreased $10,000 or 0.6% for
the quarter and increased $254,000 or 8.2% for six months, although these
expenses when expressed as a percentage of net sales decreased 3.7% to 29.8% for
the quarter and 4.0% to 29.5% for six months. Increases in selling costs were
related to additional sales commissions due to the increase in sales revenue.
The opening, support and staffing of a European sales office also added to
higher selling costs. General and administrative expenses partially increased
due to compensation costs related to the hiring of additional administrative and
marketing personnel and higher compensation expense resulting from last year's
mid-year merit increases to certain employees.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Research and development expenses for new products were $252,000 for the
second quarter and $463,000 for the six months, increases of $127,000 or 102%
and $281,000 or 154% compared to $125,000 and $182,000 reported for comparable
1997 periods. Research and development expenses in the prior year have been
reclassified to conform to the current presentation.
Net income increased $31,000 or 8.1% to $409,000 for the second quarter of
1998 compared to $378,000 reported in 1997. Diluted net income per share was
$.22, on a 7.8% increase in the number of weighted average diluted common shares
outstanding, compared to the per share amount of $.22 reported for the second
quarter of the prior year. The diluted weighted average number of common shares
outstanding increased by 133,000 shares or 7.8% for the second quarter, and
increased by 129,000 shares or 7.5% for the first six months, compared to the
second quarter and first six months of the prior year. These increases resulted
from common stock issued during the second half of 1997 from the exercise of
stock options, common stock issued in 1998 from the exercise of stock options
and sale of stock from the treasury, and the increase in dilutive securities
arising from higher average stock prices during the second quarter and the first
six months of 1998.
Liquidity and Capital Resources
The Company's financial condition remained strong throughout the first six
months of 1998. The Company had liquid resources comprised of cash and cash
equivalents (including investments in available-for-sale securities in 1997)
totaling approximately $2,100,000 compared to approximately $2,400,000 in 1997.
The Company's working capital was approximately $8,600,000 and its current ratio
was 4.7 at the end of the first six months 1998 compared to $8,000,000 and 4.0,
respectively, in 1997.
The Company's operating activities generated cash flows of $1,129,000 in
the first six months of 1998 compared to $948,000 in 1997. Primary reasons for
the increase in operating cash flows in 1998 are higher first six months net
income and a decrease in inventories of $1,076,000 which was partially offset by
an increase in accounts receivable of $1,186,000 as a result of higher first six
months 1998 net sales. The Company made net investments in property, plant and
equipment of $1,583,000 in the first six months of 1998 compared to $911,000 in
1997.
The Company paid cash dividends of $305,000 in 1997 at the quarterly rate
of $.091 per share (previously $.10 per share, adjusted for the 10% stock
dividend). The cash dividend was eliminated by a decision of the Board of
Directors (the "Board") on August 28, 1997. The Board approved the declaration
of a 10% stock dividend to stockholders of record on May 15, 1998 which was
distributed and payments made for fractional shares made on June 5, 1998.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (continued)
The Company has entered into a $7,000,000 revolving credit and term loan
agreement with Summit Bank, at one-half percent below the bank's floating prime
rate. Up to $2,500,000 of borrowings may be used for capital expenditures under
the term loan. The full line is available for future borrowing needs of the
Company for working capital and general corporate purposes.
Management believes that with the liquid resources and the unused line of
credit available, along with cash flows expected to be generated from
operations, the Company will have sufficient resources for currently
contemplated operations in 1998.
The Company's manufacturing subsidiary in Costa Rica began operations in
the second half of 1996. In January 1998, the subsidiary moved to a larger
17,000 square-foot facility and has recently obtained ISO 9002 certification.
The Company's capital expenditures for new projects and production
equipment are anticipated to exceed its depreciation and amortization expenses
in 1998. The Company has issued purchase order commitments to processing
equipment manufacturing vendors for approximately $600,000 of capital equipment
and building improvements. The Company anticipates that such equipment will be
purchased and become operational and building improvements completed during the
second half of 1998.
The Company was authorized by the Board on November 1, 1996 to purchase up
to 100,000 shares of its common stock, depending on market conditions, and has
purchased 4,100 shares to date under such authorization. There have been no
repurchases of common stock during 1997 or 1998.
Periodically, the Company explores the possibility of acquiring similar
manufacturers of electronic devices or companies in related fields, although it
currently has no definitive plans or agreements. Management believes that any
such acquisitions and business operation expansion could be financed through its
liquid and capital resources currently available as previously discussed and/or
through additional borrowing or issuance of equity or debt securities. The
additional debt from any acquisitions, if consummated, would increase the
Company's debt-to-equity ratio and such debt or equity securities might, at
least in the near term, have a dilutive effect on net income per share.
-9-
<PAGE>
Year 2000
The Company recognizes the need to assure that its operations will not be
adversely impacted by Year 2000 software failures. The impact on operations has
been evaluated and plans have been formulated to ensure Year 2000 compliance
before the end of 1998. Beginning in 1998, existing mission-critical software is
being revised to process dates for 1999 and beyond without any disruption to the
business. Software revisions are being performed by Company employees and the
total estimated cost for achieving Year 2000 compliance has not been, and is not
anticipated to be, material to the Company's financial position or results of
operations.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"), and Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information ("SFAS 131"), which
could require the Company to make additional disclosures in its financial
statements no later than for the year ending January 2, 1999. SFAS 130 defines
comprehensive income, which includes items in addition to those reported in the
statement of operations, and requires disclosures about the components of
comprehensive income. SFAS 131 requires disclosures for each segment of a
business and the determination of segments based on a company's internal
management structure. The Company's management believes that the provisions of
SFAS 130 are not material to the disclosures made by the Company and a statement
of comprehensive income has not been included in the consolidated financial
statements. The Company's management is still evaluating whether SFAS 131 will
require the Company to make any additional disclosures.
Forward-looking statements
Certain statements in this quarterly report are forward-looking statements
based on current management expectations and are subject to risks and
uncertainties. Factors that could cause future results to differ from these
expectations include general economic and industry conditions, competitive
products and pricing pressures, risks relating to governmental regulatory
actions in communications and defense programs, and inventory risks due to
technological innovation. Additional factors to which the Company's performance
is subject are described in the Company's reports filed from time to time with
the Securities and Exchange Commission.
-10-
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On May 4, 1998, the Company sold 20,000 shares of Common Stock from its
treasury to Mr. Mason N. Carter, Chairman, President and Chief Executive Officer
of the Company, at a price of $12.75 per share (the approximate average closing
price of the Company's Common Stock during the first quarter of 1998). In
connection with the sale of these shares, the Company extended Mr. Carter a loan
of $255,000 and amended a prior loan of $105,000 to Mr. Carter. A new promissory
note for a total of $360,000, due May 4, 2003 was executed by Mr. Carter in
favor of the Company and the loan is secured by a pledge of the 20,000 shares of
Common Stock purchased by Mr. Carter with the proceeds of the loan. The sale of
these shares of Common Stock was exempt from registration under the Securities
Act of 1933, as amended, as a transaction not involving a public offering under
Section 4(2) of the Act. See Note E of the notes to consolidated financial
statements.
Item 4. Submission of Matters to a Vote of Security Holders
(a) Date of Meeting: May 20, 1998 Annual Stockholders Meeting
(b) Election of six (6) Directors
Elected
-------------------------------
For Withheld
------------ ----------
Mason N. Carter 1,496,688 19,000
Albert H. Cohen 1,491,522 24,166
Joel H. Goldberg 1,492,372 23,316
Frederick J. Gumm (*) 1,492,372 23,316
Eugene W. Niemiec 1,496,181 19,507
Arthur A. Oliner 1,496,181 19,507
For Against Abstain
-------- ------- -------
(c) Approve appointment of
independent auditors 1,492,428 20,460 2,800
Proposition was approved
(*) Note: Mr. Frederick J. Gumm passed away in July 1998.
-11-
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit No.
-----------
10 (a) Amended and Restated Employment Agreement between the Company
and Mason N. Carter dated as of January 1, 1998.*
10 (b) Stock Purchase Agreement dated as of May 4, 1998 between the
Company and Mason N. Carter.*
10 (c) Amended and Restated Pledge Agreement dated as of May 4, 1998
between the Company and Mason N. Carter.*
10 (d) Promissory Note dated as of May 4, 1998 executed by Mason N.
Carter in favor of the Company.*
10 (e) Registration Rights Agreement dated as of May 4, 1998 between the
Company and Mason N. Carter.*
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule for the Six Months Ended July 4, 1998.
(b) Reports on Form 8-K.
A Current Report on Form 8-K was filed on April 20, 1998
reporting the Company's Amendment to its By-laws.
A Current Report on Form 8-K was filed on May 5, 1998 reporting
the Company's results of operations for the first quarter 1998,
and the declaration of a 10% stock dividend.
A Current Report on Form 8-K was filed on June 10, 1998 reporting
the Company's introduction of its Multi-Mix[TM] Microtechnology.
An Amended Current Report on Form 8-K/A was filed on June 11, 1998
correcting the press release which was attached as Exhibit 20 to
the Current Report on Form 8-K filed on June 10, 1998.
A Current Report on Form 8-K was filed on August 6, 1998 reporting
the Company's results of operations for the second quarter and six
months 1998.
* Indicates that exhibit is a management contract or compensatory
plan or arrangement.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
MERRIMAC INDUSTRIES, INC.
-------------------------
(Registrant)
Date: August 14, 1998 By: /s/ Mason N. Carter
-------------------------------------
Mason N. Carter
Chairman, President and
Chief Executive Officer
Date: August 14, 1998 By: /s/ Robert V. Condon
-------------------------------------
Robert V. Condon
Vice President, Finance, Treasurer,
Secretary and Chief Financial Officer
-13-
Exhibit 10 (a)
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement"), entered
into as of January 1, 1998, is by and between MERRIMAC INDUSTRIES, INC. (the
"Company") and MASON N. CARTER (the "Executive").
This Agreement amends and restates the EMPLOYMENT AGREEMENT, dated as of
December 19, 1996, by and between the Company and the Executive (the "Original
Agreement").
In consideration of the promises in this Agreement, the mutuality and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Employment. The Company hereby employs the Executive and the Executive
hereby accepts employment by the Company under the terms and conditions set
forth in this Agreement. The Executive shall be based at the principal executive
offices of the Company in West Caldwell, New Jersey, except for reasonable
required travel on Company business.
2. Term. Subject to the provisions of Paragraph 6 herein, the initial term
of the Executive's employment under this Agreement will commence on the date
hereof and will end on December 31, 2002 (the "Initial Term"), and will
automatically renew for successive twelve month periods commencing January 1,
2003, unless:
(i) either party gives written notice of termination of this Agreement to
the other party at least six (6) months prior to the end of the then present
term, in which case the Executive's employment will terminate at the end of the
then present term; or
-1-
<PAGE>
(ii) the Executive's employment is terminated under Paragraph 6, in which
event the Agreement will terminate on the date set forth in Paragraph 6.
3. Title and Duties.
(a) The Executive will serve as the President and Chief Executive Officer
of the Company. The Executive shall be responsible for performing such duties
and responsibilities that are consistent with his position or that may be
assigned to him from time to time by the Board of Directors of the Company
consistent therewith. The Executive agrees to devote substantially all of his
working time, attention, skill and energy to the duties set forth herein and to
the operations of the Company, to use his efforts to promote the success of the
Company, and to cooperate fully with the Board of Directors in the advancement
of the best interests of the Company. Nothing in this Agreement prevents
Executive from engaging in additional activities in connection with personal
investments and community affairs, or serving as a director for one or more
other corporations, as are consistent with the Executive's duties hereunder.
(b)The Executive currently serves as a director of the Company. During
theperiod of Executive's service as a director of the Company, the Executive
shall not be entitled to receive any additional compensation as a director, but
shall be entitled to reimbursement of expenses reasonably incurred as a
director, in accordance with the Company's policies for such reimbursement as
are in effect from time to time. The Company will indemnify the Executive as an
officer and director, to the same extent as it indemnifies other officers and
directors, consistent with the Company's By-laws.
4. Compensation and Related Matters. In consideration for Executive's
services during the Company's 1998 fiscal year, Executive shall receive a base
salary at the annual rate of Two Hundred Forty Thousand Dollars (U.S. $240,000)
("Base Salary"). The Base Salary shall be payable in accordance with the
Company's regular payroll schedule, from which the Company shall withhold and
deduct all federal and state income, social security and disability taxes and
other deductions as required by applicable laws.
-2-
<PAGE>
The Base Salary will be reviewed by the Board of Directors on an annual
basis and may be adjusted to reflect the Executive's performance and the scope
and success of the Company; provided, however, that during the Initial Term of
this Agreement, the Executive's Base Salary shall not be less than $240,000.
5.Employment Benefits. During the term of this Agreement, the Executive
shall be eligible for the following benefits:
(a) Employee Benefits. The Executive shall be entitled to participate in
the Company's employee benefit plans, including but not limited to medical
benefits, life insurance, employee stock purchase plans, stock option plans,
long-term incentive plans, 401(k) plan and profit sharing plans, as may be in
effect from time to time, on terms and conditions at least as favorable as those
provided to any other executive officer of the Company.
(b) Vacation and Holidays. The Executive shall be entitled to four (4)
weeks paid vacation per year, plus those paid holidays to which other similarly
situated employees of the Company shall be entitled.
(c) Bonuses and Stock Options. The Executive shall be eligible to receive
bonuses and stock options, to the extent bonuses and stock options are awarded
by the Company as determined within the sole discretion of the appropriate
committee of the Board of Directors and/or the Board of Directors.
(d) Automobile. The Executive shall be entitled to the use of an automobile
at the Company's expense, up to $700 per month, for the Executive's performance
of his duties under this Agreement; provided, however, that such $700 amount
shall be adjusted from year to year, commencing on January 1, 1999, to reflect
any percentage increases in the Consumer Price Index that have occurred during
the preceding year. For the purpose of this Agreement, "Consumer Price Index"
means the Consumer Price Index published by the Bureau of Labor Statistics of
the United States Department of Labor. The automobile allowance shall be
provided, at the Executive's option, either through a Company car, either owned
or leased by the Company, or through prompt reimbursement by the Company for the
costs of an automobile owned or leased by the Executive.
-3-
<PAGE>
The Company shall be responsible for the costs of maintenance and repair
and applicable insurance and gasoline costs incurred by the Executive for
business purposes in connection with the Executive's use of such automobile,
provided that the Executive submits in a timely manner appropriate documentation
supporting each such cost. If the Company leases the car, the Executive shall
have the option to purchase the car at the end of the lease term.
(e) Expenses. During his employment hereunder, the Executive shall be
entitled to receive prompt reimbursement for all reasonable and necessary
expenses incurred by him in performing services hereunder (including as a
director, if appropriate), provided that the Executive properly accounts for
such expenses in accordance with the Company's policy as then in effect.
(f) Term Life Insurance. During the term of this Agreement, the Company
shall pay the cost of establishing and maintaining term life insurance on the
Executive at standard premium rates in an amount of $500,000 payable to such
beneficiaries as the Executive may from time to time designate; provided, that
(i) if such term life insurance cannot be purchased at standard premium rates,
the Executive may elect to pay to the Company the difference between the cost of
such life insurance at non-standard rates and the cost which would have been
incurred by the Company if it obtained term life insurance at standard rates or
to relieve the Company of its obligation to establish and pay for such term life
insurance, and (ii) the Executive consents to the Company's purchase of "key
man" life insurance in such amount as the Company reasonably deems necessary and
appropriate and agrees to cooperate with the Company in establishing such key
man and other life insurance, including, but not limited to, undergoing
reasonably requested medical exams and/or tests.
6. Termination of Employment.
(a) Death. The Executive's employment under this Agreement shall terminate
immediately upon his death. In such event, the Company shall pay to the
Executive's estate all salary and benefits accrued but unpaid through the date
of death, and the Company shall not have
-4-
<PAGE>
any further obligations under this Agreement, except for any accrued or
vested benefits under this Agreement or any benefits provided to the Executive
under the Company's 1993 Stock Option Plan (the "1993 Stock Option Plan"), the
Company's Long-Term Incentive Plan (the "Long-Term Incentive Plan") or
otherwise, or as may be required by law.
(b) Disability. The Executive's employment under this Agreement shall
terminate if the Executive has a "Disability" (as defined herein) as reasonably
determined by the Board of Directors. For purposes of this Agreement, the term
"Disability" means that (i) as a result of physical or mental illness or injury,
the Executive is unable to perform the essential duties of his position or poses
a direct threat to the safety and health of Executive or others and there is no
reasonable accommodation that can be provided by the Company that would allow
Executive to perform the essential functions of his position as determined under
applicable law; or (ii) the Executive is absent from his position for a period
of ninety (90) consecutive work days or for a period of 120 non-consecutive work
days in a twelve-month period. In such event, the Company shall pay to the
Executive all salary and benefits accrued but unpaid through the date the Board
of Directors reasonably determines that the Executive has a Disability, and the
Company shall not have any further obligations under this Agreement, except for
any accrued or vested benefits under this Agreement or any benefits provided to
the Executive under the 1993 Stock Option Plan, the Long-Term Incentive Plan or
otherwise, or as may be required by law.
(c) For Cause. Notwithstanding any of the foregoing provisions of this
Agreement, the Company may, at any time during the term of this Agreement
without prior notice, discharge the Executive for "Cause" (as hereinafter
defined). For the purposes of this Agreement, the Company shall be deemed to
have Cause to terminate the Executive's employment hereunder for: (i) the
willful failure of the Executive to perform his normal and customary duties for
an extended period for any reason other than death or total disability; (ii) the
Executive's gross negligence if such gross negligence is not cured by the
Executive within ten days after receipt of written notice thereof, or willful
misconduct, including but not limited to, fraud, embezzlement or intentional
misrepresentation; (iii) the Executive's
-5-
<PAGE>
commission of, or indictment or conviction for, a felony; (iv) the willful
engagement of the Executive in competitive activities against the Company which
includes, without limitation, purposely aiding a competitor of the Company; (v)
the Executive's misappropriation of a material opportunity of the Company; or
(vi) the violation of any material term of this Agreement by the Executive and
failure to cure within ten days after receipt of written notice of such
violation or, if reasonable under the circumstances, such additional period of
time during which the Executive is using his best efforts to so cure, not to
exceed thirty (30) days in total. If the Executive is dismissed for Cause, the
Company shall pay to Executive all salary and benefits accrued but unpaid
through the date of termination, and the Company shall not have any further
obligations under this Agreement, except for any accrued or vested benefits
under this Agreement, the 1993 Stock Option Plan, the Long-Term Incentive Plan
or otherwise, or as may be required by law.
(d) Notice of Termination. Any termination of employment by the Company
shall be communicated by a written notice of termination to the Executive.
(e) Certain Payments Upon Termination. Subject to Section 7 of this
Agreement, if the Executive's employment is terminated by the Company before the
end of the term of this Agreement other than by death, Disability or for Cause,
the Company shall provide the following to the Executive: (i) payment on a
monthly basis of Base Salary (less applicable withholdings) as in effect on the
date of termination, from the date of termination to the later of (A) the end of
the then present term or (B) the date which is 12 months after the date of
termination, (ii) continued group medical coverage, under the Company's group
medical plan in effect from time to time, under the same terms and conditions as
provided to comparable employees, for the same period as payment of the Base
Salary above, (iii) payment of an amount representing annual bonuses (calculated
and paid as set forth herein), (iv) payment of the car allowance as set forth in
Paragraph 5(d) for the lesser of one year from the date of termination or for
the period from the date of termination to the end of the Agreement and (v) the
option to assume the lease payments of the automobile provided to the Executive
pursuant to Paragraph
-6-
<PAGE>
5(d) of this Agreement, assuming the leased automobile is a Company car, or
to purchase such automobile in accordance with the terms of its lease; and,
further, all unvested stock options that have been granted as of the date hereof
under the 1993 Stock Option Plan and the Long-Term Incentive Plan held by the
Executive shall immediately vest, and be exercisable in accordance with their
terms. In the event that the Executive's employment is terminated by the Company
before the end of the term of the Agreement other than as by contemplated by
Paragraph 6(a), (b) or (c), including any termination of employment under
Paragraph 7 upon a Change in Control, the annual bonus to which the Executive
might otherwise be entitled shall be an amount equal to 20% of the Executive's
Base Salary in effect on the date of termination, which amount shall be paid in
respect of each period of twelve months remaining during the then present term
of this Agreement, and a pro-rated amount shall be paid in respect of any period
of less than twelve months. Any such payments for bonus shall be made at the
time that other annual bonuses are paid to other executive officers of the
Company (or if no annual bonus is paid during a particular year, in December of
the applicable year).
7. Change in Control.
(a) Payments. Within twelve (12) months following the date of a Change in
Control (as defined herein), if the Executive resigns from his employment with
the Company for Good Reason (as defined herein) or is dismissed without Cause,
the Company agrees to pay Executive the greater of (a) 24 months salary and
benefits (including bonus as calculated in Paragraph 6(e)) or (b) salary and
benefits from the date of resignation or dismissal to the end of the then
present term of the Agreement, such amounts to be annualized and paid over a
period of 12 months in accordance with the Company's regular salary payment
procedures. In the event of a Change in Control, all unvested options to
purchase shares of common stock, par value $.50 per share, of the Company that
were granted by the Company and are held by the Executive on the date hereof
("Executive Options") shall become immediately exercisable and all rights
-7-
<PAGE>
and benefits relating to such Executive Options may be exercised and shall
become fixed and not subject to change or revocation by the Company.
(b) Excise Tax. To the extent that any payment made under this Agreement
may be subject to the excise tax imposed under Section 4999 of the Internal
Revenue Code of 1986, as amended from time to time, the Company shall reduce the
amount of such payments by the minimum amount necessary to avoid being subject
to such excise tax.
(c) Definitions. "Good Reason" is defined as a material diminution of the
Executive's duties and responsibilities or a substantial reduction in the
Executive's compensation and benefits. A "Change in Control" will be deemed to
have occurred if (a) the Company is merged or consolidated with, or, in any
transaction or series of transactions, all or substantially all of the business
or assets of the Company shall be sold or otherwise acquired by, another
corporation or entity and, as a result thereof, the stockholders of the Company
immediately prior thereto shall not have at least 50% or more of the combined
voting power of the surviving, resulting or transferee corporation or entity;
(b) any person (as that term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended,) who is not now a current affiliate
or a 5% or more holder, is or becomes the beneficial owner (as that term is used
in Section 13(d) of the Exchange Act and the applicable rules and regulations)
of stock of the Company entitled to cast more than (25%) of the votes at the
time entitled to be cast generally for the election of directors; or (c) more
than more than 50% of the members of the Board of Directors of the Company shall
not be Continuing Directors (which term, as used herein, means the directors of
the Company (i) who were members of the Board of Directors of the Company on
December 1, 1997 or (ii) who subsequently became directors of the Company and
who were elected or designated to be candidates for election as nominees of the
Board of Directors, or whose election or nomination for election by the
Company's stockholders was otherwise approved, by a vote of a majority of the
Continuing Directors then on the Board of Directors).
-8-
<PAGE>
(d) No Mitigation. The Company agrees that, if the Executive resigns from
his employment with the Company for Good Reason or is dismissed without Cause
within twelve (12) months following the date of a Change in Control, the
Executive is not required to seek other employment or attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to this
Section 7. Further, the amount of any payment or benefit to be received by the
Executive pursuant to this Section 7 (other than health insurance benefits)
shall not be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, or offset against any
amount claimed to be owed by the Executive to the Company or any of its
subsidiaries or otherwise.
8. Confidential Information. The Executive agrees not to disclose, either
while in the Company's employ or at any time thereafter, to any person not
employed by the Company, or not engaged to render services to the Company, any
confidential information obtained by him while in the employ of the Company,
including, without limitation, any of the Company's inventions, software, data
lists, client lists, trading policies, pricing policies, business plans, or
customer or trade secrets; provided, however, that this provision shall not
preclude the Executive from use or disclosure of information which is in the
public domain or from disclosure required by law or court order. The Executive
also agrees that upon leaving the Company's employ he will not take with him,
without the prior written consent of the Board of Directors, any document of the
Company, which is of a confidential nature relating to the Company or its
affiliates, or, without limitation, relating to its or their customers or trade
secrets.
9. Non-Competition. (a) The Executive agrees that if his employment with
the Company terminates for Cause, or he leaves the Company voluntarily without
Good Reason, he will not, without the prior written consent of the Company, for
a period of twelve (12) months thereafter, alone or with or for others, in
whatever capacity, directly or indirectly, solicit or attempt to solicit for
business in competition with the Company clients or customers of the Company
with whom he
-9-
<PAGE>
did business during his employment with the Company, or solicit or
attempt to solicit employees of the Company to leave the Company's employ.
(b)The Executive expressly acknowledges and understands that the remedy of
law for any breach by him of this Section 9 will be inadequate, and that the
damages flowing from any such breach are not readily susceptible to being
measured in monetary terms. Accordingly, it is acknowledged that upon the
Executive's violation of any provision of this Section 9, the Company shall be
entitled to immediate injunctive relief and may obtain a temporary order
restraining any threatened or further breach. Nothing in this Section 9 shall be
deemed to limit the Company's remedies at law or in equity for any breach by the
Executive of any of the provisions of this Section 9 which may be pursued or
availed of by the Company.
(c) If following termination of the Executive's employment any of the
restrictions pursuant to this Section 9 shall for any reason be held by to be
excessively broad as to duration, geographical scope, activity or subject, such
restrictions shall be construed so as to thereafter be limited or reduced to the
extent required to be enforceable in accordance with applicable law; it being
understood and agreed that by execution of this Agreement the parties hereto
regard such restrictions as reasonable and compatible with their respective
rights.
10. Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the subject matter of this Agreement and supersedes
all prior agreements and understandings, oral or written, between the parties
with respect to the subject matter of this Agreement. This Agreement may be
amended only by an agreement in writing signed by both parties.
11. Governing Law; Arbitration. This Agreement will be governed by and
construed in accordance with the laws of the State of New Jersey, without giving
effect to the principles of conflicts of laws. All disputes concerning the
Executive's employment with the Company, the termination thereof, the breach by
either party of the terms of this Agreement or any other
-10-
<PAGE>
matters relating to or arising from Executive's employment with the Company
shall be resolved in binding arbitration in a proceeding administered by and
under the rules and regulations of the American Arbitration Association, in the
AAA office located in Newark, New Jersey. The arbitrator shall not have
authority to modify or change any of the terms of this Agreement. Both parties
and the arbitrator will treat the arbitration process and the activities which
occur in the proceedings as confidential. If the Executive brings a claim
against the Company to enforce the terms of this Agreement and achieves a
successful result, other than as a result of a negotiated settlement, the
Company shall be liable to pay reasonable attorneys' fees and expenses incurred
by the Executive.
12. Binding Effect; Delegation of Duties Prohibited. This Agreement will
inure to the benefit of and will be binding upon the parties and their
respective successors, heirs and legal representatives. Neither the Company nor
the Executive may assign or delegate their respective performance of this
Agreement.
13. Notices. All notices and other communications that are required or may
be given under this Agreement must be in writing and will be deemed to have been
duly given when delivered in person, when received by telecopy (provided that
the sender has retained a copy of the notice showing the date and time of
receipt), upon delivery by a nationally recognized overnight courier service, or
three days after being mailed by registered or certified second class mail,
postage prepaid, return receipt requested, to the party to whom the notice is
being given, as follows:
If to the Company:
Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, New Jersey 07006
Facsimile: (973) 575-0531
Attention: Chairman of the
Compensation Committee
-11-
<PAGE>
With a Copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Facsimile: (212) 541-5369
Attention: Thomas C. Meriam, Esq.
If to the Executive:
Mason N. Carter
Box 7
75 Old Farm Road
Bedminster, New Jersey 07921
With a copy to:
Mail To:
Gibbons, Del Deo, Dolan, Griffinger & Vecchione
1 Riverfront Plaza
Newark, New Jersey 07102-5497
Attn: John M. Elias, Esq.
Facsimile No.: (973) 540-7300
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year second above written.
MERRIMAC INDUSTRIES, INC.
By: /s/ Robert V. Condon
--------------------
Name: Robert V. Condon
Title: Vice President, Finance and
Chief Financial Officer
/s/ Mason N. Carter
-------------------
Mason N. Carter
-12-
<PAGE>
Exhibit 10 (b)
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of May 4, 1998 (the "Agreement"), by and
between MERRIMAC INDUSTRIES, INC. (the "Company") and MASON N. CARTER ("Buyer").
WHEREAS, the Company desires to sell and deliver to Buyer and Buyer desires
to purchase and receive from the Company, upon the terms and conditions herein
set forth, 20,000 shares (the "Shares") of Common Stock, par value $.50 per
share, of the Company; and
WHEREAS, the Company and Buyer had previously entered into an agreement
dated as of May 4, 1998 providing for the purchase by Buyer of the Shares from
the Company, which agreement is superseded by this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Purchase and Sale; Purchase Price.
(a) Subject to the conditions set forth in this Agreement, on the Closing
Date (as defined below) the Company shall sell, assign, transfer, convey and
deliver to Buyer the Shares and Buyer shall purchase the Shares from the Company
for a purchase price as set forth below. On the Closing Date, (i) the Company
shall deliver to Buyer certificates representing the Shares in the name of Buyer
and (ii) the Company and Buyer shall execute and deliver to the other party an
Amended and Restated Pledge Agreement (the "Pledge Agreement") in the form
attached hereto as Exhibit A.
(b) The purchase price for the Shares shall be $12.75 per Share, for a
total purchase price of $255,000 (the "Purchase Price"). The Purchase Price
shall be paid on the Closing Date by Buyer to the Company by delivery of Buyer's
promissory note (the "Note") in the form attached hereto as Exhibit B.
2. Required Deliveries. The Company's obligations hereunder are subject to
the satisfaction (or waiver by the Company) of the following condition on or
before the Closing Date: the execution and delivery by Buyer of the Pledge
Agreement and the Note.
3. Closing Date. The Closing Date shall be May 4, 1998. The Closing shall
be held at the offices of Merrimac Industries, Inc., 41 Fairfield Place, West
Caldwell, New Jersey at 10:00 a.m. on the Closing Date.
4. Representations, Warranties and Covenants.
(a) Authority. The Company represents and warrants that the execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary and proper action, and this Agreement is the valid and binding
obligation of the Company enforceable in accordance with its terms, except
insofar as enforcement may be affected by
-1-
<PAGE>
bankruptcy, reorganization or similar laws relating to creditors' rights in
general and general principles of equity. Buyer represents and warrants that he
has all requisite power and authority to execute, deliver and perform his
obligations under this Agreement, the Pledge Agreement and the Note. Buyer
represents and warrants that the execution, delivery and performance by Buyer of
this Agreement, the Pledge Agreement and the Note and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary and proper action, and each of this Agreement, the Pledge Agreement
and the Note is the valid and binding obligation of Buyer enforceable in
accordance with its terms, except insofar as enforcement may be affected by
bankruptcy, reorganization or similar laws relating to creditors' rights in
general and general principles of equity.
(b) Shares. The Company represents and warrants that the Shares, when
delivered to Buyer in accordance with the terms and conditions hereof, will be
duly authorized and validly issued, will be fully paid and nonassessable and
will be free and clear of any liens, pledges, encumbrances, charges, agreements,
claims, security interests, equities, options, proxies, voting restrictions,
rights of first refusal or other limitations on disposition or encumbrances of
any kind (other than restrictions on the subsequent transfer of securities
imposed generally on sales of securities in non-registered transactions under
federal and state securities laws and the restrictions imposed by this Agreement
and the Pledge Agreement). On the Closing Date, the Company will deliver to
Buyer good and valid title to the Shares.
(c) Knowledgeable Investor; Investment Intent. Buyer represents and
warrants that (i) he is an "accredited" investor as defined in Rule 501(a) of
the Securities Act of 1933, as amended (the "Securities Act"), (ii) he has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and uses of his investment in the Company, (iii) he
understands and is able to bear the economic risks associated with the purchase
of the Shares, (iv) he has, on the date hereof, sufficient financial resources
to carry out the purchase of the Shares as contemplated by this Agreement and
(v) he is acquiring the Shares for investment purposes only and not with a view
to, or for sale or resale in connection with, any public distribution thereof
within the meaning of the Securities Act.
(d) Restricted Shares. Buyer represents and warrants that he is aware that
the Shares will not be registered under the Securities Act or any applicable
state securities laws, and agrees that the Shares will not be offered or sold in
the absence of registration under the Securities Act or any applicable state
securities laws or an exemption from the registration requirements of the
Securities Act and any applicable state securities laws. Buyer covenants and
agrees that he will not transfer any Shares in violation of the provisions of
any federal or state securities laws. In this connection, Buyer represents and
warrants that he 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. Each certificate evidencing the Shares shall bear a legend in
substantially the following form:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the Securities and
Exchange Commission of
-2-
<PAGE>
the United States and the securities regulatory authorities of applicable
states or unless an exemption from such registration is available. The
availability of such exemption from registration is to be established to the
satisfaction of Merrimac Industries, Inc."
(e) Resale Restriction. Notwithstanding anything to the contrary contained
in this Agreement, Buyer covenants and agrees that he will not (i) sell or
otherwise transfer for one year from the date hereof (the "Restricted Period")
any Shares or (ii) sell or otherwise transfer for one year following the
Restricted Period any Shares unless all of the proceeds to be received by Buyer
as a result of such a sale or transfer of Shares after the Restricted Period
will be applied to the payment of outstanding principal and interest due under
the Note.
(f) Registration and Listing of Shares. Pursuant to the Registration Rights
Agreement dated as of the date hereof between the Company and Buyer (the
"Registration Rights Agreement") and subject to the terms and conditions
thereof, the Company will grant Buyer "piggy-back" registration rights to
register the Shares under the Securities Act, exercisable only after the
expiration of the Restricted Period. The Company shall use its reasonable best
efforts to cause the Shares to be approved for listing on the American Stock
Exchange (or any successor stock exchange thereof).
2. Entire Agreement; Binding Effect; Governing Law. This Agreement (a)
shall be binding upon and shall inure to the benefit of each of the parties and
their respective successors and assigns, provided, however, that Buyer shall not
assign this Agreement or any of his obligations hereunder without the prior
written consent of the Company, and (b) shall be governed by and interpreted in
accordance with the laws of the State of New Jersey (without giving effect to
principles of conflicts of laws) and (c) shall, together with the Pledge
Agreement, the Note and the Registration Rights Agreement, constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and will supersede all prior negotiations, agreements and understandings
of the parties of any nature, whether oral or written, with respect to such
subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MERRIMAC INDUSTRIES, INC.
By: /s/ Robert V. Condon
----------------------
Name: Robert V. Condon
Title: Vice President, Finance
and Chief Financial Officer
/s/ Mason N. Carter
-------------------
Mason N. Carter
-3-
<PAGE>
Exhibit 10 (c)
AMENDED AND RESTATED PLEDGE AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AGREEMENT (this "Agreement") dated as of
May 4, 1998 by MASON N. CARTER ("Pledgor"), for the benefit of MERRIMAC
INDUSTRIES, INC., a New Jersey corporation ("Holder"),
W I T N E S S E T H:
WHEREAS, Pledgor has purchased 30,000 shares of common stock, par value
$.50 per share, of Holder (the "Pledged Shares"); and
WHEREAS, in connection with the purchase of the Pledged Shares, Pledgor is
executing and delivering to Holder, and Holder is accepting, an amended and
restated promissory note dated May 4, 1998 (the "Promissory Note") in the total
principal amount of Three Hundred Sixty Thousand Dollars (US $360,000), bearing
interest as set forth in the Promissory Note (such principal and interest being
hereinafter referred to as the "Note Amount"), with interest and principal
payments due and payable on the dates set forth in the Promissory Note (each, a
"Due Date").
NOW, THEREFORE, in consideration of the premises, and in order to induce
Holder to accept the Promissory Note, Pledgor does hereby agree as follows:
SECTION 1. Pledge. Pledgor hereby irrevocably and unconditionally pledges
to Holder, and grants to Holder a security interest in, the following (the
"Pledged Collateral"):
(i) the Pledged Shares and the certificates representing the Pledged Shares
and all dividends from time to time received, receivable or otherwise
distributed in respect of any or all of the Pledged Shares subject to Section
6(c); and
(ii) to the extent not covered above, all proceeds of any or all of the
foregoing Pledged Collateral.
SECTION 2. Security for Obligations. This Agreement secures the obligations
of Pledgor to pay to Holder the applicable portions of the Note Amount on or
before each Due Date in accordance with the Promissory Note and all obligations
of Pledgor now or hereafter existing under this Agreement (all such obligations
of Pledgor being the "Obligations").
SECTION 3. Delivery of Pledged Collateral. Pledgor shall take all necessary
actions to ensure that all certificates or instruments representing or
evidencing the Pledged Collateral shall be delivered to and held by or on behalf
of Holder pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed, notarized instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Holder. Holder shall have the right, effective immediately upon failure by
Pledgor to pay the applicable portion of the Note Amount on the respective Due
Date, in its discretion and without notice to Pledgor, to transfer to or to
register in the name of Holder or any of its nominees any or all of the Pledged
Collateral. In addition, Holder shall have the right at any time to exchange
certificates or instruments representing or evidencing the Pledged Collateral
for certificates or instruments of smaller or larger denominations.
-1-
<PAGE>
SECTION 4. Representations and Warranties. Pledgor represents and warrants
as follows:
(a) The pledge of the Pledged Collateral pursuant to this Agreement and
delivery of certificates for the Pledged Shares creates a valid and perfected
first priority security interest in the Pledged Collateral, securing the
Obligations.
(b) No authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either
(i) for the pledge by Pledgor of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by
Pledgor or (ii) for the exercise by Holder of the voting or other rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement. The execution, delivery and performance
of this Agreement do not contravene any legal or contractual restriction binding
on or affecting Pledgor or the Pledged Collateral.
(c) This Agreement has been duly executed and delivered by Pledgor and
constitutes the legal, valid and binding obligation of Pledgor, enforceable
against Pledgor in accordance with its terms, subject to the qualification,
however, that the enforcement of the rights and remedies herein is subject to
bankruptcy and other similar laws of general application affecting rights and
remedies of creditors and that the remedy of specific performance or of
injunctive relief is subject to the discretion of the court before which any
proceedings therefor may be brought.
SECTION 5. Further Assurances. Pledgor agrees that at any time and from
time to time, at the expense of Pledgor, Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that Holder may request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable Holder to exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral.
SECTION 6. Voting Rights, Dividends, etc. (a) Unless Pledgor has failed to
pay the applicable portion of the Note Amount on or before the respective Due
Date or has failed to perform any of the other Obligations:
(i) Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof for
any purpose not inconsistent with this Agreement; provided, however, that
Pledgor shall not exercise or refrain from exercising any such right if, in
Holder's judgment, such action would have an adverse effect on the value of the
Pledged Collateral or any part thereof or would be inconsistent with or violate
any provisions of this Agreement; and, provided, further, that Pledgor shall
give Holder at least two days' written notice of the manner in which it intends
to exercise, or the reasons for refraining from exercising, any such right.
(ii) Holder shall exercise and deliver (or cause to be executed or
delivered) to Pledgor all such proxies and other instruments as Pledgor may
reasonably request for the purpose of enabling Pledgor to exercise the voting
and other rights which it is entitled to exercise pursuant to paragraph (i)
above.
(b) Upon the failure of Pledgor to pay the applicable portion of the Note
Amount on the respective Due Date or the failure of Pledgor to perform any of
the other Obligations, all rights of Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
Section 6(a)(i) shall become vested in Holder who shall thereupon have the sole
right to exercise such voting and other consensual rights.
-2-
<PAGE>
(c) Pledgor shall not be entitled to receive and retain dividends,
distributions or any other payments in respect of the Pledged Collateral, all of
which shall be and become part of the Pledged Collateral and shall, if received
by the Pledgor, be received in trust for the benefit of Holder, shall be
segregated from other funds of Pledgor and shall be forthwith paid over by
Pledgor to Holder as Pledged Collateral in the same form as so received (with
any necessary endorsement). Notwithstanding the foregoing, cash dividends in
respect of the Pledged Shares shall be immediately paid by Pledgor to Holder and
applied in accordance with the terms of the Promissory Note; provided, that the
excess of any such cash dividends over the amount of interest then due under the
Promissory Note shall be paid to Pledgor.
SECTION 7. Transfers and Other Liens. Without concurrently satisfying all
the Obligations, Pledgor agrees that it will not (a) sell or otherwise dispose
of, or grant any option with respect to, any of the Pledged Collateral, or (b)
create or permit to exist any lien, security interest, or other charge or
encumbrance upon or with respect to any of the Pledged Collateral except for the
security interest under this Agreement.
SECTION 8. Holder Appointed Attorney-in-Fact. Pledgor hereby appoints
Holder as Pledgor's attorney-in-fact, with full authority in the place and stead
of Pledgor and in the name of Pledgor or otherwise, and with full power of
substitution, from time to time to take any action and to execute any instrument
which Holder may deem necessary or advisable to give effect to this Agreement,
including, without limitation, to receive, endorse and collect all instruments
made payable to Pledgor representing any dividend, distribution or other payment
in respect of the Pledged Collateral or any part thereof and to give full
discharge for the same.
SECTION 9. Holder May Perform. If Pledgor fails to perform any agreement
contained herein, Holder may itself perform, or cause performance of, such
agreement and the expenses of Holder incurred in connection therewith shall be
payable by Pledgor under Section 11.
Holder shall have no responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, tenders or other matters relative
to any Pledged Collateral, whether or not Holder has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral.
SECTION 10. Remedies upon Failure to Pay the Note Amount on a Due Date. If
the applicable portion of the Note Amount has not been paid on or before the
respective Due Date or if Pledgor shall have failed to perform any of the other
Obligations:
(a) Holder may exercise in respect of the Pledged Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party upon default under the Uniform
Commercial Code in effect at that time, and Holder may also, without notice
except as specified below, sell the Pledged Collateral at public or private
sale, at any exchange, broker's board or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as Holder may deem commercially
reasonable. Pledgor agrees that, to the extent notice of sale shall be required
by law, at least ten days' notice to Pledgor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. Holder shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. Holder may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
-3-
<PAGE>
(b) Pledgor acknowledges that Holder may be unable to effect a public sale
of some or all the Pledged Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act") and
applicable state securities laws, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers who will be obliged to
agree, among other things, to acquire such securities for their own account for
investment and not with a view to the distribution and resale thereof. Pledgor
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable to the seller than if such sale were a public sale
and, notwithstanding such circumstances, agrees that any such private sale shall
be deemed to have been made in a commercially reasonable manner. Holder shall be
under no obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit the issuer of such securities to register
such securities for public sale under the Securities Act, or under applicable
state securities laws, even if the issuer would agree to do so.
(c) Any cash held by Holder as Pledged Collateral and all cash proceeds
received by Holder in respect of any sale of, collection from, or other
realization upon all or any part of the Pledged Collateral may, in the
discretion of Holder, be held by Holder as collateral for, and/or then or at any
time thereafter applied (after payment of any amounts payable to Holder pursuant
to Section 11) in whole or in part by Holder to the payment of the Note Amount.
Any surplus of such cash or cash proceeds held by Holder and remaining after
payment in full of the Note Amount shall be paid over to Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 11. Expenses. Pledgor shall indemnify and hold harmless Holder from
and against all claims, damages, liabilities and expenses, and will upon demand
pay to Holder the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
Holder may incur in connection with (i) the administration or enforcement of
this Agreement, (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Pledged Collateral, (iii) the
exercise or enforcement of any of the rights of Holder hereunder, or (iv) the
failure by Pledgor to perform or observe any of the provisions hereof.
SECTION 12. (a) Addresses for Notices. All notices and other communications
provided for hereunder shall be made by either party in the following manner:
If to Holder as follows:
Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, New Jersey 07006-6287
Attention: Chief Financial Officer
If to Pledgor as follows:
Mr. Mason N. Carter
c/o Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, New Jersey 07006-6287
(b) Assignment. Pledgor shall not assign this Agreement or any of his
obligations hereunder without the prior written consent of Holder.
SECTION 13. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (i) remain in
full force and effect until payment in full of the Note Amount and any amounts
required under Section 11, (ii) be binding upon Pledgor and his permitted
assigns and (iii) inure, together with the rights and
-4-
<PAGE>
remedies of Holder hereunder, to the benefit of Holder and its successors,
transferees and assigns.
SECTION 14. Security Interest Absolute. All rights of Holder and security
interests hereunder, and all obligations of Pledgor hereunder, shall be absolute
and unconditional irrespective of:
(i) any lack of validity or enforceability of the Promissory Note or any
other agreement or instrument relating thereto; or
(ii) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Note Amount; or any other amendment or waiver of or
any consent to any departure from the Promissory Note or any other agreement or
instrument relating thereto; or
(iii) any exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to departure from any guaranty,
for all or any of the Note Amount; or
(iv) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, a surety, a guarantor or a third party pledgor.
SECTION 15. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New Jersey
without giving effect to any conflicts of laws provisions of such State.
SECTION 16. Waiver. No failure or delay on the part of Holder in exercising
any right, power or privilege under this Agreement and no course of dealing
between Pledgor and Holder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of Holder to any other or further action in any
circumstances without notice or demand.
SECTION 17. Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly executed
by its officer thereunto duly authorized as of the date first above written.
/s/ Mason N. Carter
-------------------
Mason N. Carter
-5-
<PAGE>
Exhibit 10 (d)
AMENDED AND RESTATED PROMISSORY NOTE
US $360,000 West Caldwell, New Jersey
May 4, 1998
FOR VALUE RECEIVED, MASON N. CARTER ("Payor"), hereby unconditionally
promises to pay, in accordance with the terms of this promissory note (as the
same may be amended from time to time, this "Promissory Note"), to the order of
MERRIMAC INDUSTRIES, INC., a New Jersey corporation, or its successors and
assigns ("Note Holder"), in lawful money of the United States of America in
immediately available funds, on May 4, 2003 and in such account, at such place,
or to such party as Note Holder may designate in writing, the principal amount
of Three Hundred Sixty Thousand Dollars (US $360,000). Payor also
unconditionally promises to pay interest quarterly in arrears from the date
hereof (as specified below) on the unpaid principal amount of this Promissory
Note outstanding from time to time at a rate calculated each 12-month period
beginning on the date hereof, which rate is based upon the weighted average of
the rates announced publicly from time to time during such period by Note
Holder's primary lending bank (currently, Summit Bancorp) as its prime rate.
Payment of this Promissory Note is secured by the Pledged Collateral (as
defined in the Amended and Restated Pledge Agreement dated as of the date hereof
by Payor for the benefit of Note Holder (the "Pledge Agreement")), including,
without limitation, the Pledged Shares (as defined in the Pledge Agreement) and
any property or interest provided in addition to or in substitution for any of
the foregoing.
Interest on the unpaid principal amount of this Promissory Note outstanding
from time to time shall accrue quarterly in arrears from the date hereof and
shall be paid on the 4th day of August, November, February and May of each of
1998, 1999, 2000, 2001, 2002 and 2003. Interest shall be paid from dividends
declared in respect of the Pledged Shares. To the extent that in a given quarter
such dividends are insufficient to pay interest on the date when due, then Payor
shall be liable for the remainder of the interest payment then due.
Payor may, at its option, prepay all or, from time to time, any part of the
unpaid principal balance of this Promissory Note, together with interest accrued
thereon, without payment of any premium or penalty.
Payor hereby waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Promissory Note.
If Payor's employment with Note Holder is terminated pursuant to Section
6(c) of the Amended and Restated Employment Agreement, dated January 1, 1998,
between Payor and Note Holder, then Note Holder, at its option, by written
notice to Payor, may declare the entire principal amount of this Promissory Note
to be due and payable, together with accrued interest thereon, without other
notice, demand, presentment or protest, all of which are hereby waived by Payor.
-1-
<PAGE>
Payor shall not assign this Promissory Note or its obligations hereunder
without the prior written consent of Note Holder. This Promissory Note shall be
binding upon Payor and its permitted assigns and shall inure to the benefit of
Note Holder and its successors and assigns.
This Promissory Note has been executed and delivered in the State of New
Jersey and shall be governed by, and construed and interpreted in accordance
with, the internal laws of the State of New Jersey without giving effect to any
conflicts of laws provisions of such State. Payor hereby expressly and
irrevocably agrees and consents that any suit, action, or proceeding arising out
of or relating to this Promissory Note may be instituted in any State.
/s/ Mason N. Carter
-------------------
Mason N. Carter
-2-
<PAGE>
Exhibit 10 (e)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of May 4, 1998 (the "Agreement"),
by and between MERRIMAC INDUSTRIES, INC. (the "Company") and MASON N. CARTER
("Carter").
WHEREAS, the Company and Carter have entered into a Stock Purchase
Agreement dated as of the date hereof (the "Stock Purchase Agreement") pursuant
to which the Company has sold and delivered to Carter and Carter has purchased
and received from the Company, upon the terms and conditions set forth therein,
20,000 shares (the "Shares") of Common Stock, par value $.50 per share, of the
Company (the "Common Stock");
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. "Piggyback" Registration Rights. (a) If, at any time after one year from
the date hereof, the Company proposes to register any shares of Common Stock
under the Securities Act of 1933, as amended (the "Securities Act") on any
registration form (other than Form S-4 and Form S-8 or any successor form
thereof) the Company shall promptly give prior written notice of such proposed
registration to Carter at least twenty (20) days before the anticipated filing
date of the registration statement. Such notice shall describe the proposed
registration and distribution, including those jurisdictions where registration
or qualification under the securities or blue sky laws is intended. Carter may
elect to participate in such proposed registration by giving the Company, within
ten (10) days after such notice has been given by the Company, a written request
to include in such registration all or a portion of the Shares. Any such request
by Carter shall state the number of Shares to be included in such registration
and any other information that the Company reasonably requests in its notice to
Carter. The Company shall use its reasonable best efforts to cause any and all
Shares identified by Carter to be registered under the Securities Act and
qualified under the securities or blue sky laws of any jurisdiction requested by
Carter to the extent necessary to permit the sale or other disposition thereof;
provided, however, that the Company shall not be obligated to qualify as a
foreign corporation to do business under the laws of any jurisdiction in which
it is not then qualified or submit to the service of process in any
jurisdiction.
(b) If, at any time after giving such notice of its intention to register
any of its Common Stock and prior to the effective date of any registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register such Common Stock, the Company may, at
its election, give notice of such determination to Carter and thereupon shall be
relieved of its obligation to register any Shares in connection with such
registration. The Company shall not be obligated to effect any registration of
any Shares under Section 1(a): (i) incidental to a registration of any of its
Common Stock in connection with (A) any merger or consolidation with another
company or acquisition subject to Rule 145 under the Securities Act, or (B) any
dividend reinvestment plans or stock option or other employee benefit plans of
the Company or (ii) if Carter is eligible to resell any of the Shares pursuant
to an exemption from registration provided by Rule 144 under the Securities Act.
2. Underwritten Offers. (a) If an offering is underwritten and Carter
chooses to sell all or any portion of his Shares pursuant to Section 1, Carter
shall sell through the underwriters selected by the Company and shall become a
party to any underwriting agreement between the Company and such underwriter and
-1-
<PAGE>
shall be subject to the terms and conditions thereof. If such underwriter
selected by the Company to manage the distribution of the shares being
registered advises the Company in writing that, in its opinion, the inclusion of
the Shares proposed to be sold by Carter would have a material adverse effect on
the distribution of all such shares of Common Stock, then the number of Shares
which Carter will be permitted to include in such registration statement will be
reduced to an amount acceptable to the underwriter or underwriters. The Company
has no obligation to reduce the number of shares of Common Stock proposed to be
registered by it. The Company has no obligation to reduce the number of shares
of Common Stock proposed to be registered by it. The Company has the right to
delay, suspend, abandon or withdraw any offering prior to the effective date
thereof without liability to Carter, provided such withdrawal is due to adverse
market conditions as determined by the Company after consultation with its
underwriters, if any.
(b) In connection with any such underwritten offering, the Company shall
agree to provide Carter and any underwriter participating in the registration
and distribution of such shares of Common Stock with such customary
indemnification with respect to any liabilities arising out of or resulting from
any registration statement, prospectus or any amendment or supplement thereto
relating to any Shares; provided, that Carter shall agree to indemnify the
Company as provided in Section 5(b).
3. Holdback. Carter agrees not to effect any public sale or distribution of
any shares of Common Stock, including a sale pursuant to Rule 144 of the
Securities Act, during a period up to 180-days following the effective date of
any registration statement covering Common Stock (except pursuant to such
registration statement), if and to the extent the managing underwriter so
requests.
4. Expenses. (a) "Registration Expenses" means all expenses, except Selling
Expenses (as defined below), incident to the Company's performance of or
compliance with its obligations pursuant to this Agreement and the completion of
transactions relating thereto including, without limitation, all registration
and filing fees, all fees and expenses of complying with securities or "blue
sky" laws, all printing expenses, the fees and disbursements of the Company's
independent public accountants, including the expenses of any special audits,
reviews, compilations or other reports or information required by or incident to
such performance and compliance, and any fees or expenses of counsel for the
Company.
(b) All Registration Expenses incurred in connection with or otherwise
incident to all registrations pursuant to Section 1 shall be borne by the
Company and Carter pro rata on the basis of the number of shares of Common Stock
so registered by each of them, whether or not any registration statement filed
in connection therewith ever becomes effective or any such sale or distribution
ever is consummated.
(c) Carter will be solely responsible for (i) any fees or expenses of his
own counsel, (ii) any expenses for the preparation of financial statements or
other data, other than financial statements or other data normally prepared by
the Company in the ordinary course of its business, and (iii) any underwriting
discounts and commissions relating to the Shares being sold by Carter
(collectively, "Selling Expenses").
5. Preparation; Reasonable Investigation and Further Actions. (a) In
connection with the preparation and filing of such registration statement
registering Shares under the Securities Act, the Company will give Carter and
his counsel and accountant, the opportunity to review and comment upon such
registration statement, each prospectus included therein or filed with the
Securities and Exchange Commission (the "Commission"), and each amendment
thereof or supplement thereto, and will give him such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the reasonable opinion of the Company's
-2-
<PAGE>
counsel and such underwriters, to conduct a reasonable investigation within the
meaning of the Securities Act.
(b) Carter will furnish the Company with such information regarding himself
and the distribution of his Shares as the Company may from time to time
reasonably request and as shall be required by law or by the Commission in
connection with such distribution. In connection with the registration of the
shares of Common Stock as contemplated hereby, Carter will take all actions
which are reasonably necessary or which may be reasonably requested by the
Company or any underwriter participating in the registration and distribution of
such shares of Common Stock to effect the registration of such shares and to
facilitate the disposition thereof in accordance with the plans of distribution
of the Company or any such underwriter. Carter will indemnify the Company for
any liabilities arising out of or resulting from all such furnished information
contained in, and actions taken with respect to, any registration statement,
prospectus or any amendment or supplement thereto relating to any Shares.
6. Entire Agreement; Binding Effect; Governing Law. This Agreement (a)
shall be binding upon and shall inure to the benefit of each of the parties and
their respective successors and assigns, provided, however, that Carter shall
not assign this Agreement or any of his obligations hereunder without the prior
written consent of the Company, and (b) shall be governed by and interpreted in
accordance with the laws of the State of New Jersey (without giving effect to
principles of conflicts of laws) and (c) shall, together with the Pledge
Agreement dated as of the date hereof between the Company and Carter, the Note
dated as of the date hereof between the Company and Carter and the Stock
Purchase Agreement, constitute the entire agreement between the parties with
respect to the subject matter hereof and thereof and will supersede all prior
negotiations, agreements and understandings of the parties of any nature,
whether oral or written, with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MERRIMAC INDUSTRIES, INC.
By: /s/ Robert V. Condon
--------------------
Name: Robert V. Condon
Title: Vice President, Finance and
Chief Financial Officer
/s/ Mason N. Carter
-------------------
Mason N. Carter
-3-
Exhibit 11
MERRIMAC INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Number of Weeks Ended
----------------------------
Thirteen Twenty-six
July 4, July 4,
1998 1998
---- ----
Numerator:
Net income available to common stockholders.... $ 408,842 $ 836,388
========= =========
Basic earnings per share
- ------------------------
Weighted average number of shares outstanding
for basic net income per share
Common stock.................................... 1,756,350 1,746,816
========= =========
Net income per common share - basic............. $.23 $.48
==== ====
Diluted earnings per share
- --------------------------
Weighted average number of shares outstanding
for diluted net income per share
Common stock .................................... 1,756,350 1,746,816
Effect of dilutive securities - stock options (1) 88,913 87,607
--------- ---------
Weighted average number of shares outstanding for
diluted net income per share..................... 1,845,263 1,834,423
========= =========
Net income per common share - diluted............ $.22 $.46
==== ====
(1) Represents additional shares resulting from
assumed conversion of stock options less shares
purchased with the proceeds therefrom.
-1-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-2-1999
<PERIOD-END> Jul-4-1998
<CASH> 2,058,721
<SECURITIES> 0
<RECEIVABLES> 4,252,318
<ALLOWANCES> 0
<INVENTORY> 3,432,997
<CURRENT-ASSETS> 10,893,306
<PP&E> 15,295,487
<DEPRECIATION> 9,956,621
<TOTAL-ASSETS> 16,388,996
<CURRENT-LIABILITIES> 2,316,907
<BONDS> 0
0
0
<COMMON> 1,329,204
<OTHER-SE> 12,276,074
<TOTAL-LIABILITY-AND-EQUITY> 16,388,996
<SALES> 11,366,266
<TOTAL-REVENUES> 11,366,266
<CGS> 6,249,579
<TOTAL-COSTS> 6,249,579
<OTHER-EXPENSES> 463,401
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,324,388
<INCOME-TAX> 488,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 836,388
<EPS-PRIMARY> .48
<EPS-DILUTED> .46
<FN>
(1) Adjusted to give retroactive effect to a 10% stock dividend payable in
June 1998. Prior Financial Data Schedules have not been restated for this stock
dividend.
</FN>
</TABLE>
