Exhibit 10.9

 

FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

 

THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (“First Amendment”) is entered into
by and between Kratos Defense Engineering Solutions, Inc., a Delaware
corporation formerly known as Kratos Government Solutions, Inc. (the “Company”)
and David Carter, an individual (“Executive”), effective as of August 4, 2011
(“Effective Date”).  For purposes of this Agreement, the defined term “Company”
is intended to include DTI Associates, Inc. (“DTI”).  Certain terms used in this
Agreement denoted by initial capital letters are defined in Section 17.

 

RECITALS

 

A.                                   Executive is an officer of the Company and
in such capacities has obtained extensive and valuable knowledge and
confidential information concerning the Company’s and its Defense Engineering
Services Division’s (“DES”) business and confidential customer relationships.

 

B.                                     Executive and the Company entered into an
Employment Agreement made effective as of July 22, 2010 (the “Original
Agreement”).

 

C.                                     As consideration for Executive’s
agreement to continue his duties and responsibilities as described herein,
Executive and the Company desire to amend the Original Agreement to afford
Executive additional protection in the event of a change in control of the
Company, as set forth more particularly herein.

 

NOW, THEREFORE, in the consideration of the mutual covenants and agreements set
forth herein, the Company and Executive, intending to be legally bound, hereby
agree as follows:

 

AMENDMENT

 

1.               Effect of First Amendment.  This First Amendment supplements,
but does not replace, the Original Agreement.  The Original Agreement shall
remain in full force and effect, except as modified specifically herein. 
Certain terms used in this First Amendment denoted by capital letters are
defined in Section 17 of the Original Agreement, except as such defined terms
are modified herein.

 

2.               Amended Terms.  Section 17.3 of the Original Agreement is
hereby amended by deleting Section 17.3 in its entirety and replacing it with
the following:

 

 

17.3                        Change of Control.  “Change of Control”  means the
occurrence of one of the following after the date of this Agreement, with
respect to the Company’s parent company, Kratos Defense & Security
Solutions, Inc. (“Kratos”):

 

17.3.1                  Acquisition of Controlling Interest.  Any person (other
than persons who are employed by Kratos or its affiliates at any time more than
one year before a transaction) (“Buyer”) becomes the “beneficial owner” within
the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended,
directly or indirectly, of Kratos

 

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securities representing 50% or more of the combined voting power of Kratos’
then-outstanding securities, but only to the extent that such ownership
constitutes a “change in the ownership” of Kratos within the meaning of U.S.
Treasury Regulation Section 1.409A-3(i)(5)(v).

 

17.3.2                  Change in Board Control.  During any consecutive
one-year period commencing after the date of this Agreement, individuals who
constituted Kratos’ Board of Directors (“Board”) at the beginning of such period
or their approved replacements, as defined in the next sentence (“Beginning
Board”) cease for any reason to constitute a majority of the Board. An
individual is an “approved replacement” Board member if the Board members then
in office who are Beginning Board members approved his or her election (or
nomination for election) by majority votes, but in either case excluding any
Board member whose initial assumption of office occurred as a result of an
actual or threatened solicitation of proxies or consents by or on behalf of any
person other than the Board, but only to the extent that such acquisition
constitutes a “change in the effective control” of Kratos within the meaning of
Treasury Regulation Section 1.409A-3(i)(5)(vi).

 

17.3.3                  Merger.  Kratos consummates a merger or consolidation of
Kratos with any other corporation unless: (a) the voting securities of Kratos
outstanding immediately before the merger or consolidation would continue to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 50% of the combined voting power of
the voting securities of Kratos or such surviving entity outstanding immediately
after such merger or consolidation; and (b) no Buyer becomes the “beneficial
owner,” directly or indirectly, of Kratos securities representing 50% or more of
the combined voting power of Kratos’ then outstanding securities, but only to
the extent that such ownership constitutes a “change in the ownership” of Kratos
within the meaning of U.S. Treasury Regulation Section 1.409A-3(i)(5)(v).

 

17.3.4                  Sale of Assets.  Any Buyer acquires all, or
substantially all, of Kratos’ assets, but only to the extent that such
acquisition results in a “change in the ownership of a substantial portion” of
Kratos’ assets within the meaning of U.S. Treasury Regulation
Section 1.409A-3(i)(5)(vii).

 

3.               Certain Elections upon Certain Changes of Control.  Section 18
is hereby added to the Original Agreement as follows:

 

Additional Election Upon Certain Changes of Control.  If Kratos enters into a
definitive agreement (“Definitive Agreement”) that would result in a Change of
Control as defined herein, Executive shall have the following options in
connection with the consummation of the Change of Control, but only to the
extent that the Definitive Agreement so provides:  (a) to the extent that Kratos
is the surviving entity in the Change of Control, Executive may elect to retain,

 

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immediately after the consummation of the Change of Control, ownership of Kratos
equity with a fair market value immediately after the consummation of the Change
of Control that is equal to no less than 50% of the fair market value of his
equity interests in Kratos (including stock options and restricted stock)
immediately prior to the consummation of the Change of Control, or (b) in the
event that Kratos is not the surviving entity in a Change of Control, Executive
may elect to require that no less than 50% of his equity interests in Kratos
(including stock options and restricted stock) be converted into the same form
of equity interest (i.e., common stock, stock options, restricted stock, etc.)
of the surviving entity or its parent such that the fair market value of his
ownership in the surviving entity immediately following the Change of Control is
no less than the fair market value of his converted ownership interest in Kratos
immediately prior to the consummation of the Change of Control. A Definitive
Agreement may contain other or no options and Kratos shall have no obligation to
ensure that a Definitive Agreement provides for any of the foregoing options and
shall not be responsible for ensuring any particular tax treatment.  Kratos’
compliance with the foregoing shall be determined without regard to the tax
effect of the transaction resulting in a Change of Control.

 

IN WITNESS WHEREOF, the parties have executed this First Amendment to Employment
Agreement as of the Effective Date.

 

THE COMPANY:

EXECUTIVE:

Kratos Defense Engineering Solutions, Inc.

 

 

 

By:

/s/ Eric DeMarco

 

/s/ David Carter

Name: Eric DeMarco

David Carter

Title: President and CEO

Title: Division President, DES

 

Date: August 4, 2011

 

 

Address for Notice:

Address for Notice:

 

 

 

 

4820 Eastgate Mall

 

San Diego, CA 92121

 

Attn:

President and CEO

 

 

Law Department

 

 

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