Exhibit 10.3
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of November 4th, 2004 (the "Agreement"),
by and between PARADIGM HOLDINGS INC., a Wyoming corporation having its
principal offices at 0000 Xxxxx Xxxx Xxxx., Xxx 000, Xxxxxxxxx, XX 00000 (the
"Company"), and XXXX X. SERWAY (the "Executive").
WHEREAS, the Company desires to employ and retain the Executive for the
term specified herein in order to advance the business and interests of the
Company on the terms and conditions set forth herein; and
WHEREAS, the Executive desires to provide his services to the Company
in such capacities, on and subject to the terms and conditions hereof;
WHEREAS, the Company desires to provide the Executive with certain
options to acquire stock in the Company in order that the Executive may have the
opportunity to participate in the growth and performance of the Company, as set
forth herein;
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. Employment and Term. Subject to all of the terms and conditions
hereof, the Company does hereby employ and agree to employ the Executive as its
Senior Vice President & Chief Financial Officer for and during the Employment
Term, as defined below, and the Executive does hereby accept such employment.
The term of employment shall commence on November 4, 2004 (the "Effective Date")
and shall continue until November 4, 2007 unless earlier terminated as herein
provided (the "Employment Term"), and thereafter shall be renewed for additional
terms of one (1) year, unless either party provides the other with notice, as
provided for herein, at least ninety (90) days prior to the date the Employment
Term would otherwise renew, of that party's intention not to so renew such term.
2. Duties of Executive. The Executive shall, during the Employment Term
hereunder, perform the executive and administrative duties, functions and
privileges incumbent with the position of Senior Vice President & Chief
Financial Officer and such other duties as reasonably determined by the Board of
Directors and the Chief Executive Officer of the Company, from time to time. The
Executive shall report to the Chief Executive Officer of the Company, and if so
elected, the Executive shall serve as a member of the Board of Directors without
additional compensation. The Executive agrees to serve the Company faithfully,
conscientiously and to the best of his ability, and to devote substantially all
of his business time to the business and affairs of the Company (and, if
requested by the Board of Directors, any subsidiary or affiliate of the Company)
so as to promote the profit, benefit and advantage of the Company and, if
applicable, any subsidiaries or affiliates of the Company. The Executive agrees
to accept the compensation to be made to him under this Agreement as full and
complete compensation for the services required to be performed by, and the
covenants of, the Executive under this Agreement.
3. Location and Travel. The Executive shall not be required to relocate
outside the greater Rockville, Maryland metropolitan area without his consent.
The Executive acknowledges, however, that significant domestic and international
travel may be required as part of his duties hereunder; and the Executive agrees
to undertake such travel as may be reasonably required by the business of the
Company from time to time.
4. Compensation.
4.1. Base Salary. The Executive shall be paid Base Salary (as
defined herein) at the annual rate of Three Hundred Fifteen Thousand, One
Hundred and Seventy-Five Dollars $315,175.00 per year. All compensation shall be
made in accordance with the standard payroll practices of the Company, and
whichever compensation rate is applicable at a particular time is referred to
herein as the "Base Salary."
4.2. Regular Benefits. The Executive shall be entitled to
participate in any health insurance, accident insurance, hospitalization
insurance, life insurance, pension, or any other similar plan or benefit
provided by the Company to its executives or employees generally, including, but
not limited to any stock option plan, if and to the extent that the Executive is
eligible to participate in accordance with the provisions of any such insurance,
plan or benefit generally (such benefits, collectively, the "Regular Benefits").
4.3. Vacation. The Executive shall be entitled to vacation as
provided in the Company's policies, such vacation to be taken at times mutually
agreeable to the Executive and the Company. The Executive shall further be
entitled to the number of paid holidays, and leaves for illness or temporary
disability in accordance with the policies of the Company for its senior
executives.
4.4. Term Life Insurance. The Company shall have the right
from time to time to purchase, modify or terminate insurance policies on the
life of the Executive for the benefit of the Company in such amount as the
Company shall determine in its sole discretion. In connection therewith the
Executive shall, at such time or times and at such place or places as the
Company may reasonably direct, submit himself to such physical examinations and
execute and deliver such documents as the Company may deem necessary or
desirable; provided, however, that the eligibility of the Executive for, or the
availability of, such insurance shall not be deemed to be a condition of
continued employment hereunder. The Executive makes no representation to the
Company as to his current or future eligibility for insurance.
4.5. Expense Reimbursement. The Company shall reimburse the
Executive for all expenses reasonably incurred by him in connection with the
performance of his duties hereunder and the business of the Company upon the
submission to the Company of appropriate receipts therefor, in accordance with
the expense reimbursement policy of the Company.
5. Termination and Severance Arrangements.
5.1. Termination by the Company. The Company may terminate
this Agreement at any time on or after November 4, 2004 by providing at least
thirty (30) days advance written notice to the Executive. In the event that the
Company terminates this Agreement (a) other than in connection with a Change of
Control, in which event Section 6 shall apply, and (b) other than for Cause, in
2
which event Section 5.3 shall apply, the Company shall, notwithstanding such
termination, in consideration for all of the undertakings and covenants of the
Executive contained herein, continue to pay to the Executive the Base Salary and
the Regular Benefits for a period that is the greater of (i) the remainder of
the initial Employment Term or (ii) twelve (12) months from the date of such
termination. In addition, in the event the Company terminates this Agreement as
described in the immediately preceding sentence, any and all options granted to
the Executive by the Company shall become automatically and immediately vested
and exercisable. In no event however, shall the continuation of such payments
during such post-termination period be deemed to be employment hereunder for
purposes of calculating any bonus due to the Executive or for purposes of
determining the vesting or exercise period of any stock options granted
hereunder, or otherwise.
5.2. Termination by Executive. The Executive may terminate his
employment for Good Reason and receive the payments and benefits specified in
Section 5.1 in the same manner as if the Company had terminated his employment
without Cause. For purposes of this Agreement, "Good Reason" will exist if any
one or more of the following occur:
5.2.1. Failure by the Company to honor any of its
material obligations under this Agreement, including, without limitation, its
obligations under Section 4 (Compensation), Section 10 (Indemnification) and
Section 12.5 (Successor Obligations).
5.3. Termination for Cause. Notwithstanding the Employment
Term, the Company may terminate the Executive for Cause, as defined below, upon
a resolution duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board of Directors (excluding the Executive, if a
director) and with majority stockholder concurrence. In the event that the
employment of the Executive is terminated by the Company for Cause, no severance
or other post-termination payment shall be due or payable by the Company to the
Executive (except solely such Base Salary or other payments as may have been
accrued but not yet paid prior to such termination). For purposes hereof,
"Cause" shall mean: (a) the conviction with respect to any felony or misdemeanor
involving theft, fraud, dishonesty or misrepresentation; (b) any material
misappropriation, embezzlement or conversion of the Company's or any of its
subsidiary's or affiliate's property by the Executive; (c) willful misconduct by
the Executive in respect of the material duties or obligations of the Executive
under this Agreement; or (d) a material breach by the Executive of any of his
material obligations hereunder, after written notice thereof and a reasonable
opportunity of thirty (30) days to cure the same, provided that the same is not
caused by the physical disability including mental disease or defect of the
Executive, in which event Section 5.4 shall apply.
5.4. Death or Disability. In the event that the employment of
the Executive by the Company is terminated by reason of the death of the
Executive or by reason of medical or psychiatric disability which prevents the
Executive from satisfactorily performing a material portion of his duties for
ninety (90) consecutive calendar days (a "Disability"), the Company shall,
promptly upon such termination, pay the Executive an amount equal to three (3)
months of Base Salary, in a single lump s in the event of death, (12) monthly
payments of Base Salary for long-term disability.
3
6. Parachute Provisions.
6.1. Change of Control. For purposes of this Agreement, a
"Change of Control" shall be deemed to have occurred upon the occurrence of any
one or more of the following events.
6.1.1. Any "person" or "group" (as such terms are
used in connection with Section 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act")) but excluding the Executive or any employee
benefit plan of the Company (a) is or becomes the "beneficial owner" (as defined
in Rule l3d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the combined voting
power of the Company's outstanding securities then entitled to vote for the
election of directors, or (b) acquires by proxy or otherwise fifty percent (50%)
or more of the combined voting securities of the Company having the right to
vote for the election of directors of the Company, for any merger or
consolidation of the Company, or for any other matter; provided, however, that a
Change of Control shall not be deemed to have occurred solely by reason of the
public ownership of fifty percent (50%) or more of the Common Stock of the
Company;
6.1.2. There shall be consummated without the consent
of the Executive (a) any consolidation, merger or recapitalization of the
Company or any similar transaction involving the Company, whether or not the
Company is the continuing or surviving corporation, (b) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all of the assets of the Company or (c)
the adoption of a plan of complete liquidation of the Company (whether or not in
connection with the sale of all or substantially all of the Company's assets) or
a series of partial liquidations of the Company that is de jure or de facto part
of a plan of complete liquidation of the Company; provided that the divestiture
of less than substantially all of the assets of the Company in one transaction
or a series of related transactions, whether effected by sale, lease, exchange,
spin-off, sale of the stock or merger of a Subsidiary or otherwise, or a
transaction solely for the purpose of reincorporating the Company in another
jurisdiction, shall not constitute a Change in Control.
6.2. Rights on Change in Control. If within one year after, or
ninety (90) days prior to, a Change in Control of the Company, the Company shall
terminate the Executive's employment other than by reason of the Executive's
death or Disability or for Cause, the Company shall pay to the Executive as
compensation for services rendered, not later than the fifth business day after
the date of termination:
6.2.1. The Executive's Base Salary through the date
of termination, any Regular Benefits and incentive compensation for the fiscal
year in which the termination occurs in accordance with any arrangements then
existing with the Executive and proportionate to the period of the fiscal year
which has expired prior to the termination; and
6.2.2. A lump sum severance payment equal to the Base
Salary.
6.2.3. Any and all options granted to the Executive
shall become automatically and immediately vested and exercisable.
4
7. Proprietary Rights.
7.1. Non Competition. The Executive covenants and agrees that
for so long as he shall be employed by the Company and for a period of eighteen
(18) months from the date of the termination of such employment for any reason
(such period of time the "Restricted Period") the Executive shall not directly
or indirectly, own, manage, control, operate invest in or become principal of
employee of, director of, or consultant to, any business, entity or venture
which is competitive with the business of the Company as conducted at such time;
provided, however, that it shall not be a violation of this Agreement for the
Executive to have beneficial ownership of less than five percent (5%) of the
outstanding amount of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if such securities
are listed on a national securities exchange or quoted on an inter-dealer
quotation system.
7.2. Confidentiality. The Executive recognizes and
acknowledges that certain confidential business and technical information used
by the Employee in connection with his duties hereunder that includes, without
limitation, certain confidential and proprietary information relating to the
designing, development, construction and marketing of computer hardware, is a
valuable and unique asset of the Company. Executive agrees that he shall at all
times maintain the confidentiality of the proprietary information and trade
secrets of the Company, and that he shall during the Restricted Period refrain
from disclosing any such information to the disadvantage of the Company.
7.2.1. During the Restricted Period the Executive
shall not, directly or indirectly (a) solicit, in competition with the Company,
any person who is a customer of any business conducted by the Company, or (b) in
any manner whatsoever induce, or assist others to induce, any supplier of the
Company to terminate its association with such entity or do anything, directly
or indirectly, to interfere with the business relationship between the Company,
and any of their respective current or prospective suppliers.
7.2.2. During the Restricted Period the Executive
shall not, directly or indirectly, solicit or induce any employee of the Company
to terminate his or her employment for any purpose, including without
limitation, in order to enter into employment with any entity which competes
with any business conducted by the Company
7.3. Ownership by Company. The Executive acknowledges and
agrees that any of his work product created, produced or conceived in connection
with his association with the Company shall be deemed work for hire and shall be
deemed owned exclusively by the Company. The Executive agrees to execute and
deliver all documents required by the Company to document or perfect the
Company's proprietary rights in and to the Executive's work product.
7.4. Remedies. It is expressly understood and agreed that the
services to be rendered hereunder by the Executive are special, unique, and of
extraordinary character, and in the event of the breach by the Executive of any
of the terms and conditions of this Agreement on his part to be performed
hereunder, or in the event of the breach or threatened breach by the Executive
of the terms and provisions of this Section 7 of this Agreement, then the
Company shall be entitled, if it so elects, to institute and prosecute any
proceedings in any court of competent jurisdiction, either in law or equity, for
5
such relief as it deems appropriate, including without limiting the generality
of the foregoing, any proceedings, to obtain damages for any breach of this
Agreement, or to enforce the specific performance thereof by the Executive.
8. Market Standoff Agreement. The Executive hereby agrees that if so
requested by the Company or by any representative of any underwriters in
connection with any registration of the offering of any securities of the
Company under the Securities Act, the Executive shall not sell or otherwise
transfer any securities of the Company during the ninety-day period following
the effective date of a registration statement of the Company filed under the
Securities Act.
9. Director's and Officer's Liability Insurance. To protect Executive
from any liability, loss, claims, damages, or costs, including legal fees and
costs, prior to any public offering of any securities of the Company, the
Company shall purchase and maintain director's and officer's liability insurance
(the "D&O Insurance") in an amount not less than Two Million Dollars
($2,000,000), or in such amount as is later agreed upon by Executive and
Company.
10. Indemnification. As an employee, officer and director of the
Company, the Executive shall be indemnified against all liabilities, damages,
fines, costs and expenses by the Company in accordance with the indemnification
provisions of the Company's Certificate of Incorporation as in effect on the
date hereof, and otherwise to the fullest extent to which employees, officers
and directors of a corporation organized under the laws of the state of
incorporation of the Company may be indemnified pursuant to the laws of such
state, as the same may be amended from time to time (or any subsequent statute
of similar tenor and effect), subject to the terms and conditions of such
statute.
11. Independent Representation. The Executive acknowledges that he has
had the opportunity to seek independent counsel and tax advice in connection
with the execution of this Agreement, and the Executive represents and warrants
to the Company (a) that he has sought such independent counsel and advice as he
has deemed appropriate in connection with the execution hereof and the
transactions contemplated hereby, and (b) that he has not relied on any
representation of the Company as to tax matters, or as to the consequences of
the execution hereof.
11.1. Neutral Construction. No party may rely on any drafts of
this Agreement in any interpretation of the Agreement. Each party to this
Agreement has reviewed this Agreement and has participated in its drafting and,
accordingly, no party shall attempt to invoke the normal rule of construction to
the effect that ambiguities are to be resolved against the drafting party in any
interpretation of this Agreement.
11.2. Attorney's Fees. In the event that either party hereto
commences litigation against the other to enforce such party's rights hereunder,
the prevailing party shall be entitled to recover all costs, expenses and fees,
including reasonable attorneys' fees (including in-house counsel), paralegals,
fees, and legal assistants' fees through all appeals.
12. General.
12.1. No Brokers. Each of the parties to this Agreement
represents and warrants to the other that it has not utilized the services of
any finder, broker or agent. Each of the parties agrees to indemnify the other
6
against any and all liabilities to any person, firm or corporation claiming any
fee or commission of any kind on account of services rendered on behalf of such
party in connection with the transactions contemplated by this Agreement.
12.2. Applicable Law. This document shall in all respects be
governed by the laws of the State of Maryland. The parties acknowledge that
substantially all of the negotiations relating to this Agreement were conducted
in Maryland, and that this Agreement has been executed by both parties in
Maryland. Any legal suit, action or proceeding against any party hereto arising
out of or relating to this Agreement shall be instituted in a federal or state
court in Xxxxxxxxxx County, Maryland, and each party hereto waives any objection
which it may now or hereafter have to the laying of venue of any such suit,
action or proceeding and each party hereto irrevocably submits to the
jurisdiction of any such court in any suit, action or proceeding.
12.3. Rights Absolute. The Company's obligation to pay the
Executive the compensation specified herein shall be absolute and unconditional
and shall not be affected by any circumstance, including, without limitation,
any setoff, counterclaim, defense or other right which the Company may have
against the Executive or anyone else. All amounts payable by the Company
hereunder shall be paid without notice or demand.
12.4. No Offset. Except as expressly provided herein, the
Company waives all rights it my now have or may hereafter have conferred upon
it, by statute or otherwise, to terminate, cancel or rescind this Agreement in
whole or in part. The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment, and if
Executive obtains such other employment, any compensation earned by Executive
pursuant thereto shall not be applied to mitigate any payment made to Executive
pursuant to this Agreement.
12.5. Successor Obligations. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume by written agreement and to agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
12.6. Survival. The parties hereto agree that the covenants
contained in Section 7 hereof shall survive any termination of employment by the
Executive and any termination of this Agreement. In addition, the parties hereto
agree that any compensation or right which shall have accrued to the Executive
as of the date of any termination of employment or termination hereof shall
survive any such termination and shall be paid when due to the extent accrued on
the date of such termination.
12.7. Assignability. All of the terms and provisions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns. The obligations of the Executive however, may not be assigned, and the
Executive may not, without the Company's written consent, assign, transfer,
convey, pledge, encumber, hypothecate or otherwise dispose of this Agreement or
any interest therein. Any such attempted assignment or disposition shall be null
and void and without effect. The Company and the Executive agree that this
7
Agreement and all of the Company's rights and obligations hereunder may be
assigned or transferred by the Company to and may be assumed by and become
binding upon and may inure to the benefit of any affiliate of or successor to
the Company. The term "successor" shall mean, with respect to the Company or any
of its subsidiaries, and any other corporation or other business entity which,
by merger, consolidation, purchase of the assets, or otherwise, acquires all or
a material part of the assets of the Company. Any assignment by the Company of
its rights and obligations hereunder to any affiliate of or successor shall not
be considered a termination of employment for purposes of this Agreement.
12.8. Notices. Any and all notices required or desired to be
given hereunder by any party shall be in writing and shall be validly given or
made to another party if delivered either personally, by telex, facsimile
transmission, same-day delivery service, overnight expedited delivery service,
or if deposited in the United States Mail, certified or registered, postage
prepaid, return receipt requested. If notice is served personally, notice shall
be deemed effective upon receipt. If notice is served by telex or by facsimile
transmission, notice shall be deemed effective upon transmission, provided that
such notice is confirmed in writing by the sender within one day after
transmission. If notice is served by same day delivery service or overnight
expedited delivery service, notice shall be deemed effective the day after it is
sent, and if notice is given by United States mail, notice shall be deemed
effective five days after it is sent. In all instances, notice shall be sent to
the parties at the following addresses:
If to the Company: Paradigm Holdings, Inc.
0000 Xxxxx Xxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xx. Xxxx Xxxx, VP Human Resources
If to the Executive: Xxxx X. Serway
00000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Any party may change its address for the purpose of receiving notices by a
written notice given to the other party.
12.9. Modifications or Amendments. No amendment, change or
modification of this document shall be valid unless in writing and signed by all
of the parties hereto.
12.10. Waiver. No reliance upon or waiver of one or more
provisions of this Agreement shall constitute a waiver of any other provisions
hereof.
12.11. Severability. If any provision of this Agreement as
applied to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement. If any court construes any of the provisions to be
unreasonable because of the duration of such provision or the geographic or
other scope thereof, such court may reduce the duration or restrict the
geographic or other scope of such provision and enforce such provision as so
reduced or restricted.
8
12.12. Separate Counterparts. This document may be executed in
one or more separate counterparts, each of which, when so executed, shall be
deemed to be an original. Such counterparts shall, together, constitute and
shall be one and the same instrument.
12.13. Headings. The captions appearing at the commencement of
the sections hereof are descriptive only and are for convenience of reference.
Should there be any conflict between any such caption and the section at the
head of which it appears, the substantive provisions of such section and not
such caption shall control and govern in the construction of this document.
12.14. Specific Performance. It is agreed that the rights
granted to the parties hereunder are of a special and unique kind and character
and that, if there is a breach by any party of any material provision of this
Agreement, the other party would not have any adequate remedy at law. It is
expressly agreed, therefore, that the rights of the parties hereunder may be
enforced by an action for specific performance and other equitable relief.
12.15. Further Assurances. Each of the parties hereto shall
execute and deliver any and all additional papers, documents and other
assurances, and shall do any and all acts and things reasonably necessary in
connection with the performance of their obligations hereunder and to carry out
the intent of the parties hereto.
12.16. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter of
this Agreement, and any and all prior agreements or representations are hereby
terminated and canceled in their entirety.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed this 30th day of December 2004, effective as of the date first
above written.
PARADIGM HOLDINGS, INC., a Wyoming corporation
By: /s/ Xxxx X. Serway
----------------------------
Name: XXXX X. SERWAY
Title: Sr. Vice President & CFO
/s/ Xxxxxxx X. Xxxxx
--------------------------------
XXXXXXX X. XXXXX, Chairman & CEO
9
