EXHIBIT
10.7


 


STANLEY,
INC.

CHANGE IN CONTROL SEVERANCE AGREEMENT


 


This CHANGE IN CONTROL SEVERANCE AGREEMENT (the “Agreement”)
is entered into on June 26, 2008, by and between Stanley, Inc. (the “Company”),
a Delaware corporation, and E. Patrick Flannery (the “Executive”).


 


RECITALS


 


WHEREAS, the Company considers
the establishment and maintenance of a sound and vital management to be
essential to protecting and enhancing the best interests of the Company and its
stockholders; and


 


WHEREAS, the Executive has made
and is expected to make a significant contribution to the profitability,
growth, and financial strength of the Company; and


 


WHEREAS, it is in the best
interests of the Company and its stockholders to reinforce and encourage the
continued attention and dedication of management personnel, including the
Executive, to their assigned duties without distraction and to ensure the
continued availability to the Company of the Executive in the event of a Change
in Control (as defined below);


 


NOW, THEREFORE,
in consideration of the Executive’s continued service to the Company and the
mutual agreements herein contained, and for other good and valuable
consideration, the receipt of which are hereby acknowledged, the Company and
the Executive hereby agree as follows:


 


ARTICLE I

Term of Agreement


 


This Agreement shall commence as of the date set forth
above (the “Effective Date”) and shall be for a term of two years.  Commencing on the second anniversary of the
Effective Date and on each subsequent anniversary thereof, the term of this
Agreement shall automatically be extended for successive one year terms (each a
“Renewal Term”) unless either the Company or the Executive shall have given
written notice to the other at least one year prior to the commencement of a Renewal
Term that the term of this Agreement shall not be so extended; provided,
however, that notwithstanding any such notice by the Company not to extend, the
term of this Agreement shall not expire during a Potential Change in Control
Period (as defined below) or prior to the expiration of 24 months after the
date of a Change in Control that occurs during the term hereof (including
during a Potential Change in Control Period).


 

















 


ARTICLE II

Definitions


 


Whenever used herein, the following terms shall have
their respective meanings set forth below.


 


2.1.          “Base Salary” means the annual base
salary in effect for the Executive immediately prior to a Change in Control, as
such salary may be increased from time to time during the Term (in which case
such increased amount shall be the Base Salary for purposes hereof), but
without giving effect to any reduction thereto.


 


2.2.          “Board” means the Board of Directors
of the Company.


 


2.3.          “Cause” for termination by the
Company of the Executive’s employment means:


 


(a)           the Executive’s
conviction of a felony (except for a motor vehicle violation) or entering into
a guilty plea or plea of nolo contendere
with respect to such crime;


 


(b)           the Executive’s willful
and continued failure to substantially perform the duties and responsibilities
of the Executive’s position with the Company after a written demand for
substantial performance is delivered to the Executive by the Board, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed such duties or responsibilities;


 


(c)           the Executive’s
engaging in fraud or dishonesty relating to Executive’s employment, or other
willful misconduct or gross negligence of the Executive, which conduct is
materially injurious to the Company or its reputation, monetarily or otherwise;
or


 


(d)           the Executive’s willful
violation of Company policies, which conduct is materially injurious to the
Company or its reputation, monetarily or otherwise.


 


2.4.          “Change in Control” means and shall
be deemed to have occurred as of the date of the first to occur of the
following events:


 


(a)           any
Person or Group (each term as defined below) acquires stock of the Company
that, together with stock held by such Person or Group, constitutes more than
50% of the total Fair Market Value (as defined below) or total voting power of
the stock of the Company.  However, if
any Person or Group is considered to own more than 50% of the total Fair Market
Value or total voting power of the stock of the Company, the acquisition of
additional stock by the same Person or Group is not considered to cause a
Change in Control of the Company.  An
increase in the percentage of stock owned by any Person or Group as a result of
a transaction in which the Company acquires its stock in exchange for property
will be treated as an acquisition of stock for purposes of this
subsection.  This subsection applies only
when there is a transfer of stock of the 


 

















 


Company (or issuance of stock of the Company) and stock in the Company
remains outstanding after the transaction;


 


(b)           any
Person or Group acquires (or has acquired during the 12-month period ending on
the date of the most recent acquisition by such Person or Group) ownership of
stock of the Company possessing 30% or more of the total voting power of the
stock of the Company;


 


(c)           a
majority of members of the Company’s Board is replaced during any 12-month
period by Directors whose appointment or election is not endorsed by a majority
of the members of the Company’s Board prior to the date of the appointment or
election; or


 


(d)           any
Person or Group acquires (or has acquired during the 12-month period ending on
the date of the most recent acquisition by such Person or Group) assets from
the Company that have a total gross fair market value equal to or more than 40%
of the total gross fair market value of all of the assets of the Company
immediately prior to such acquisition or acquisitions.  For this purpose, gross fair market value
means the value of the assets of the Company, or the value of the assets being
disposed of, determined without regard to any liabilities associated with such
assets.   However, no Change in Control
shall be deemed to occur under this subsection (d) as a result of a
transfer to:


 


(i)            A stockholder of the Company (immediately before the
asset transfer) in exchange for or with respect to its stock;


 


(ii)           An entity, 50% or more of the total value or voting power of which is
owned, directly or indirectly, by the Company;


 


(iii)          A Person or Group that owns, directly or indirectly, 50% or more of the
total value or voting power of all the outstanding stock of the Company; or


 


(iv)          An entity, at least 50% of the total value or voting power of which is
owned, directly or indirectly, by a person described in clause (iii) above.


 


For these purposes, the term “Person” shall
mean an individual, company, association, joint-stock company, business trust
or other similar organization, partnership, limited liability company, joint
venture, trust, unincorporated organization or government or agency,
instrumentality or political subdivision thereof.  The term “Group” shall have the
meaning set forth in Rule13d-5 of the
Securities and Exchange Commission (“SEC”), modified to the extent necessary to
comply with Treasury Regulation Section 1.409A-3(i)(5), or any successor
thereto in effect at the time a determination of whether a Change in Control
has occurred is being made.  If any one
Person, or Persons acting as a Group, is considered to effectively control the
Company as described in subsections (b) or (c) above, the acquisition
of additional control by the same Person or Persons is not considered to cause
a Change in Control.


 


2.5.          “Code” means the Internal Revenue
Code of 1986, as amended from time to time.


 

















 


2.6.          “Company” means Stanley, Inc.
and all of its wholly-owned subsidiaries. 
Except as provided in the following sentences, the term “Company” shall
include (a) Stanley, Inc. or any wholly-owned subsidiary of Stanley, Inc.
which may become employer of the Executive, and (b) any successor to the
business or assets of Stanley, Inc., Stanley Associates, Inc. or any
wholly-owned subsidiary of Stanley, Inc., which employs the Executive and
agrees in writing or by operation of law to be bound by this Agreement.  Notwithstanding the foregoing, in determining
whether a Change in Control has occurred, the term “Company” shall mean Stanley, Inc.
(without regard to whether a successor is bound by this Agreement).  Stanley, Inc. shall be jointly and
severally liable with Stanley Associates, Inc. or any wholly-owned
subsidiary of Stanley, Inc. which may become employer of the Executive for
any amounts that become payable to this Executive under this Agreement.


 


2.7.          “Date of Termination” has the
meaning set forth in Section 3.2.


 


2.8.          “Disability” means total and
permanent disability of the Executive as a result of bodily injury, disease or
mental disorder which results in the Executive’s entitlement to long-term
disability benefits under the Company’s long-term disability plan.


 


2.9.          “Executive” means the individual
named in the first paragraph of this Agreement.


 


2.10.        “Fair Market Value”. means the
arithmetic mean of the highest and lowest sales prices of the stock as reported
on the consolidated tape for securities listed on the New York Stock Exchange (“NYSE”)
on a particular date.  In the event that
there are no stock transactions on such date, the Fair Market Value shall be
determined by utilization of the above formula as of the immediately preceding
date on which there were stock transactions.


 


2.11.        “Good Reason” for termination by the
Executive of his employment means the occurrence (without the Executive’s
express written consent) after a Change in Control or during a Potential Change
in Control Period of any one of the following events, unless such event is
corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:


 


(a)           a material diminution
in the Executive’s Base Salary;


 


(b)           a material diminution
in the Executive’s authority, duties or responsibilities;


 


(c)           a material diminution
in the authority, duties or responsibilities of the supervisor to whom the
Executive is required to report, including a requirement that the Executive
report to a corporate officer or employee instead of directly to the Board (if
the Executive previously reported directly to the Board);


 


(d)           a material diminution
in the budget over which the Executive retains authority;


 


(e)           the Company requiring
the Executive to be based at an office that is both more than 50 miles from
where the Executive’s office is located immediately prior to the Change in
Control and also more than 50 miles from the Executive’s then-current 


 

















 


principal place of residence, except for
required travel on the Company’s business to an extent substantially consistent
with the business travel obligations which the Executive undertook on behalf of
the Company prior to the Change in Control; or


 


(f)            any other action or
inaction that constitutes a material breach by the Company of any written
agreement between the Company and the Executive pursuant to which the Executive
provides services.


 


In order for the Executive’s termination to be deemed
to be for Good Reason, the Executive must deliver Notice of Termination to the
Company describing the event(s) alleged to constitute Good Reason within
90 days of the occurrence of such event(s). 
Such Notice of Termination shall specify the Executive’s Date of
Termination, which date shall not be earlier than 30 days nor more than 60 days
after the date of the Notice of Termination. 
The Company may fully correct the event(s) constituting Good Reason
within a reasonable period of time (not less than 30 days) specified in the
Notice of Termination, in which case the Executive’s Notice of Termination for
Good Reason shall automatically be withdrawn and of no effect; provided,
however, that no opportunity to correct shall be available for any Good Reason
event which recurs after a prior correction by the Company.  The Executive’s continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder prior to 90 days after such
action or failure to act.


 


2.12.        “Notice of Termination” has the
meaning set forth in Section 3.2.


 


2.13.        “Potential Change in Control” shall
be deemed to have occurred if any of the following events shall have occurred:


 


(a)           the Company enters into
an agreement, the consummation of which would result in the occurrence of a
Change in Control;


 


(b)           the Company publicly
announces an intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;


 


(c)           any Person becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 20% or more of either the then outstanding shares of common stock
of the Company or the combined voting power of the Company’s then outstanding
securities; or


 


(d)           the Board adopts a
resolution to the effect that, for purposes of this Agreement, a Potential Change
in Control has occurred.


 


2.14.        “Potential Change in Control Period”
shall commence upon the occurrence of a Potential Change in Control and shall
lapse upon the occurrence of a Change in Control or, if earlier (a) with
respect to a Potential Change in Control occurring pursuant to Section 2.13(a);
immediately upon the abandonment or termination of the applicable agreement; (b) with
respect to a Potential Change in Control occurring pursuant to Section 2.13(b),
immediately upon a public announcement by the Company that it has abandoned its
intention to take or consider taking actions which, if consummated, would
result in a Change in Control; or (iii) with respect to a Potential Change
in Control occurring pursuant to Section 2.13(c) or (d), upon the one
year 


 

















 


anniversary of
the occurrence of a Potential Change in Control (or, in the case of a Potential
Change in Control occurring pursuant to Section 2.13(d), such earlier date
as may be determined by the Board).  In
addition to the foregoing, any termination of an Executive by the Company at
the request of a third party in contemplation of a Change in Control or
Potential Change in Control shall be deemed to have occurred within a Potential
Change in Control Period.


 


2.15.        “Release Agreement” means the agreement
required to be signed by the Executive and returned to the Company, as set
forth in Exhibit A hereto, as a condition for receiving certain of
the payments and benefits under this Agreement. 
The form of Release Agreement may be amended by the Company at any time
and from time to time to reflect changes in the law or to reflect such terms of
this Agreement or any other agreement between the parties which survive the
Executive’s termination of employment.


 


2.16.        “Term” means the period of time
described in Article I (including any extension, continuation or
termination described therein).


 


ARTICLE III

Termination of Employment


 


3.1.          Qualifying Terminations.  If, during the Term of this Agreement and
either within 24 months after a Change in Control or within a Potential Change
in Control Period, (1) the Executive’s employment is terminated by the
Company or any successor to the Company for any reason other than Cause, or (2) the
Executive terminates his employment due to Good Reason, then the Executive will
be entitled to receive the severance payments and benefits set forth in Article IV
below; provided, however, that no severance payments shall be made, or
continuing benefits provided, under this Agreement, if any of the following
apply:


 


(a)           The Executive
voluntarily resigns or retires from employment other than timely resignation
for Good Reason;


 


(b)           The Executive is
terminated for Cause;


 


(c)           The Executive’s
employment terminates as a result of death or Disability; or


 


(d)           The Executive declines
to sign and return the Release Agreement set forth in Exhibit A
hereto, or revokes such Release Agreement within the time provided therein.


 


3.2.          Notice of Termination.  After a Change in Control or Potential Change
in Control, any purported termination of the Executive’s employment (other than
by reason of death) shall be communicated by written Notice of Termination from
one party hereto to the other party in accordance with Section 7.4.  For purposes of this Agreement, a “Notice of
Termination” shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail any facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so
indicated.  The “Date of Termination,”
with respect to any purported termination of the Executive’s employment under
this Agreement shall mean the date specified in the Notice of 


 

















 


Termination
for termination (which, in the case of a termination by the Company other than
for Cause, shall not be less than 30 days and, in the case of a termination by
the Executive, shall not be less than 30 days nor more than 60 days,
respectively, from the date such Notice of Termination is given).


 


3.3.          Exclusive Source of Severance Compensation and
Benefits.  If the
Executive becomes entitled to severance compensation and benefits under this
Agreement, he or she shall not be entitled to receive any severance
compensation or benefits under any other employment agreement to which the
Company is a party, or under any severance program or policy of the Company.


 


3.4.          Other Terminations.  This Agreement does not apply to terminations
of employment that occur prior to a Change in Control or after the expiration
of 24 months after a Change in Control and also outside of a Potential Change
in Control Period.


 


ARTICLE IV

Severance Benefits


 


4.1.          Severance Benefits.  If, during the term of this Agreement, the
Executive incurs a qualifying termination as described in Section 3.1
above, then, subject to the Executive timely executing and delivering the
Release Agreement to the Company (except in the case of payments under (a) below),
which Release Agreement has not been revoked in accordance with the terms
thereof, the Executive shall be entitled to the following compensation and
benefits, subject to applicable income and employment tax withholding:


 


(a)           Accrued Compensation.  An amount equal to the following amounts
earned or accrued through the Termination Date, but not paid as of the
Termination Date:  (i) Base Salary, (ii) reimbursement
for reasonable and necessary, properly-receipted expenses incurred by the
Executive on behalf of the Company during the period ending on the Termination
Date, and (iii) accrued but unused vacation pay.


 


(b)           Annual Bonus
Compensation.  An amount equal to the
highest annual bonus payment paid to the Executive for the prior three years
multiplied by a fraction, the numerator of which is the number of days in the
one year performance measurement period through the Date of Termination and the
denominator of which is 365.


 


(c)           Cash Severance.  An amount equal to two  multiplied
by the sum of the following amounts:


 


(i)            The Executive’s Base Salary; plus


 


(ii)           The highest annual bonus payment paid to the
Executive for the prior three years.


 


(d)           Continuation of
Welfare Benefits.  Continuation of
medical and dental insurance coverage in which the Executive (or his
dependents) was participating as of the 


 

















 


Date of Termination (subject to such modifications
as shall be established for all employees of the Company) until the earliest
of:


 


(i)            the second anniversary of the Date of
Termination;


 


(ii)           the date the Executive first breaches the
Release Agreement or any restrictive covenant hereunder or in any employment or
other agreement with the Company which survives termination of the Executive’s
employment; or


 


(iii)          the date the Executive becomes eligible under
a similar welfare benefit plan of a successor employer.


 


If such coverage cannot be provided on a tax-advantaged basis under the
Company’s program, the Company will make a supplemental payment to the
Executive such that his after-tax cost of coverage will be no greater than the
cost for such coverage to a similarly-situated employee under the program.  Any increase in premium cost resulting from a
change in the Executive’s coverage election shall be borne by the
Executive.  In order to receive such
continued medical and dental coverage, the Executive must be eligible for and
elect continuation coverage under “COBRA” under the terms of the applicable
programs for the first 18 months of such coverage.


 


(e)           Outstanding Equity
Awards.  Any and all outstanding
unvested equity awards held by the Executive as of the Date of Termination
shall automatically vest  and be deemed
exercisable and/or vested, as the case may be. 
Notwithstanding the foregoing, any performance-based equity awards held
by the Executive as of the Date of Termination shall vest and be exercisable
and/or paid to the Executive as and to the extent provided in the applicable
award agreement or plan document.  For
the avoidance of doubt, this Agreement shall be deemed to be an “Employment
Agreement” as defined under the Company’s equity incentive plan(s) and the
applicable award agreements thereunder.


 


(f)            Perquisites.  Continuation of all perquisites and other
personal benefits in effect as of the Date of Termination (subject to such
modifications as shall be established for all employees and/or executives of
the Company) until the earliest of:


 


(i)            the second anniversary of the Date of
Termination;


 


(ii)           the date the Executive first breaches the
Release Agreement or any restrictive covenant hereunder or in any employment or
other agreement with the Company which survives termination of the Executive’s
employment; or


 


(iii)          the date the Executive becomes eligible for
similar perquisites or other personal benefits of a successor employer.


 


4.2.          Payment of Severance Compensation.  Except as provided in Section 4.3 below,
the cash payments described in Section 4.1(a) shall be made within
the time provided by law.   


 

















 


No
reimbursement of expenses under Section 4.1(a) shall be made after
the last day of the year following the year in which the expense was
incurred.  The payments described in Section 4.1(b) and
(c) shall be made in a lump sum within five business days after the later
of the Date of Termination or the execution and return of the Release Agreement
and expiration of revocation period provided for therein.


 


4.3.          Compliance with Code Section 409A.  Each of the payments under Section 4.1(b),
(c), (d) and (f) above are designated as separate payments for
purposes of the short-term deferral rules under Treasury Regulation Section 1.409A-1(b)(4)(i)(F),
the exemption for involuntary terminations under separation pay plans under
Treasury Regulation Section 1.409A-1(b)(9)(iii), and the exemption for
medical expense reimbursements under Treasury Regulation Section 1.409A-1(b)(9)(v)(B).  As a result, (a) any payments that
become vested as a result of the qualifying termination under Section 3.1
that are made on or before the 15th day of the third month of the calendar year
following the calendar year of the Executive’s termination, (b) any
additional payments that are made on or before the last day of the second
calendar year following the year of the Executive’s termination and do not
exceed the lesser of two times Base Salary or two times the limit under Code Section 401(a)(17)
then in effect, and (c) the payment of medical expenses within the applicable
COBRA period, are exempt from the requirements of Code Section 409A.  As Executive is designated as a “specified
employee” within the meaning of Code Section 409A, to the extent that any
deferred compensation payments to be made during the first six month period
following Executive’s termination of employment exceed such exempt amounts, the
payments shall be withheld and the 
amount of the payments withheld will be paid in a lump sum, without
interest, during the seventh month after Executive’s termination.  The Company shall identify in writing
delivered to the Executive any payments it reasonably determines are subject to
delay under this Section 4.3.  In no
event shall the Company have any liability or obligation with respect to taxes
for which the Executive may become liable as a result of the application of
Code Section 409A.


 


4.4.          No Mitigation Required.  The Executive is not required to seek other
employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company hereunder. 
Except as set forth in Section 4.1(d) and (f), the amount of
any payment or benefit provided for in this Agreement shall not be reduced by
any compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company,  or otherwise.


 


ARTICLE V

Parachute Tax Payments


 


5.1.          Gross-Up for Parachute
Payments.  If any payment
or distribution by the Company (or any of its affiliates) to or for the benefit
of the Executive, whether paid or payable or distributed or distributable under
this Agreement or under any other agreement, policy, plan, program or
arrangement, or the lapse or termination of any restriction under any
agreement, policy, plan, program or arrangement (a “Payment”), would be subject
to the excise tax imposed by Section 4999 of the Code by reason of being
considered “contingent on a change in ownership or control” of the Company
within the meaning of Section 280G of the Code, or to any similar tax
imposed by state or local law, or any interest or penalties with respect to
such tax 


 

















 


(such tax or taxes, together with any such
interest and penalties, being hereafter collectively referred to as the “Parachute
Tax”), then Executive will be entitled to receive an additional payment or
payments (collectively, a “Gross-Up Payment”). 
The Gross-Up Payment will be in an amount such that, after payment by
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Parachute Tax imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Parachute Tax
imposed on the Payment.  The following
provisions shall apply in determining whether a Gross-Up Payment shall apply:


 


(a)           Notwithstanding any
other provision of this Section 5.1, if no Parachute Tax would apply if
the aggregate Payments were reduced by 10%, then the aggregate Payments shall
be reduced by the amount necessary to avoid application of the Parachute Tax,
and no Gross-Up Payment will be made. 
Such reduction shall apply to cash Payments in the order that such
Payment would otherwise be made soonest after the Date of Termination, to the
extent necessary to avoid application of the Parachute Tax.


 


(b)           Unless the Company and
the Executive otherwise agree in writing, any determination required under this
Article V shall be made in writing by nationally recognized independent
public accountants agreed to by the Company and Executive (the “Accounting Firm”),
whose determination shall be conclusive and binding upon Executive and the
Company for all purposes.  For purposes
of making the calculations required by this Article V, the Accounting Firm
may make reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the
application of Sections 280G and 4999 of the Code.  The Company and the Executive shall furnish
to the Accounting Firm such information and documents as the Accounting Firm
may reasonably request in order to make a determination hereunder. The Company
shall bear all costs the Accounting Firm may reasonably incur in connection
with any calculations contemplated hereunder. 
The Accounting Firm shall be required to provide its determination
within 60 days after the date of the Executive’s Date of Termination, and the
Company shall be responsible for any income tax, penalty or interest liability
incurred as a result of delay by the Accounting Firm.


 


(c)           If the Accounting Firm
determines that no Parachute Tax is payable by the Executive, it will, at the
same time as it makes such determination, furnish the Company and the Executive
a non-reliance opinion that the Executive has a reasonable basis not to report
any Parachute Tax on his federal, state or local income or other tax
return.  If the Accounting Firm
determines that a Parachute Tax will (or would, but for reduction in the
Payment) be payable by the Executive, it will, at the same time as it makes
such determination, furnish the Company and Executive the detailed basis for
such opinion.  The Company will make the
Gross-Up payment within five business days thereafter.


 


5.2.          Adjustment of Gross-Up Payment.  The federal tax returns filed by the
Executive (and any filing made by a consolidated tax group which includes the
Company) shall be prepared and filed on a basis consistent with the
determination of the Accounting Firm with respect to the Parachute Tax payable
by the Executive.  The Executive shall
make proper payment of the amount of any Parachute Tax based on the
determination of the Accounting Firm 


 

















 


under Section 5.1,
and at the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed with the
Internal Revenue Service and such other documents reasonably requested by the
Company evidencing such payment, provided that any information unrelated to the
Parachute Tax may be deleted from the copies of the returns and documents
delivered to the Company.  If, after the
Company’s payment to the Executive of the Gross-Up Payment, the Accounting Firm
determines in good faith that the amount of the Gross-Up Payment should be
reduced or increased, or a determination is made by the Internal Revenue
Service that would make the prior Gross-Up Payment amount inaccurate, then,
within ten business days of such determination, the Executive shall pay to the
Company the amount of any such reduction, or the Company shall pay to the
Executive the amount of any such increase. 
The following provisions apply for purposes of this Section 5.2:


 


(a)           In no event shall the
Executive have any such refund obligation if it is determined by the Company
that to do so would be a violation of the Sarbanes-Oxley Act of 2002, as it may
be amended from time to time.


 


(b)           If the Executive has
paid Parachute Tax to the Internal Revenue Service prior to any redetermination
by the Accounting Firm reducing the amount of Gross-up Payment otherwise due,
refund by the Executive shall be due only to the extent that a refund of such
amount is received by the Executive from the Internal Revenue Service.


 


(c)           The Executive shall
provide the Company prompt notice of any claim by or other correspondence from
the Internal Revenue Service relating to the amount of Parachute Tax and will
provide the Company with a reasonable opportunity to contest any claim for
Parachute Tax.  The Executive will take
such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including without limitation
accepting legal representation with respect to such claim by an attorney
competent in respect of the subject matter and reasonably selected by the
Company; provided, however, that the Company will bear and pay directly all
costs and expenses (including interest and penalties) incurred in connection
with such contest and will indemnify and hold harmless the Executive, on an
after-tax basis, for and against any Parachute Tax or income tax, including interest
and penalties with respect thereto, imposed as a result of such contest and any
such payments.  If the Company directs
Executive to pay the tax claimed, or otherwise fails to contest the claim as
described above, the Company will immediately pay to Executive the amount of
the required deficiency payment, including any Parachute Tax or income tax, and
interest and penalties with respect thereto. 
All reimbursements hereunder shall be made as soon as possible after
Executive incurs the expense and presents evidence of such expense reasonably
acceptable to the Company, but in no event later than the end of the calendar
year following the year in which the expense is incurred.


 


(d)           Notwithstanding
anything to the contrary herein, the Executive’s rights under this Article V
shall survive the termination of his employment for any reason and the
termination or expiration of this Agreement for any reason.


 
















 


ARTICLE VI

Executive’s Restrictive Covenants


 


6.1.          Cooperation.  The Executive shall reasonably cooperate with
and assist the Company and its counsel at any time and in any manner reasonably
required by the Company or its counsel (with due regard for the Executive’s
other commitments if he is not employed by the Company) in connection with any
litigation or other legal process affecting the Company of which the Executive
has knowledge as a result of his employment with the Company (other than any
litigation with respect to this Agreement). 
In the event of such requested cooperation, the Company shall reimburse
the Executive’s reasonable out of pocket expenses.


 


6.2.          Return of
Company Property.  Upon
demand by the Company and/or upon termination of his employment with the
Company for any reason, the Executive shall promptly deliver to the Company all
property and materials, whether written, descriptive, or maintained in some
other form belonging to or relating to the Company or its business affairs,
including correspondence, manuals, notes, notebooks, reports, programs, plans,
proposals, financial documents, or any other documents concerning the Company’s
customers, suppliers, business plans, designs, marketing or other business
strategies, products or processes, but excluding materials distributed to
employees of the Company generally and relating to the Executive’s rights and
obligations as an employee or former employee of the Company.  The Executive shall also return any
automobile, computers and peripherals, cellular telephones, pagers and other
physical property or equipment provided by the Company to the Executive in
connection with his employment with the Company.


 


6.3.          Non-Disparagement.  The Executive will not criticize, defame, be
derogatory toward or otherwise disparage the Company (or the Company’s past,
present and future officers, directors, stockholders, attorneys, agents,
representatives, employees or affiliates), or its or their business plans or
actions, to any third party, either orally or in writing; provided, however,
that this provision will not preclude the Executive from giving testimony in
response to a lawful subpoena or preclude any conduct protected under 18 U.S.C.
Section 1514A(a) or any similar state or federal law providing “whistleblower”
protection to the Executive.


 


6.4.          Non-Competition.  In consideration for the severance
compensation and continued benefits provided in Section 4.1(c), (d) and
(f) above, and at the option of any potential acquirer at the time of a
Change in Control, the Executive agrees to be subject to the Noncompetition Agreement attached hereto as Exhibit B
for a period of two years following a qualifying termination as
described in Section 3.1 above.


 


ARTICLE VII

Miscellaneous


 


7.1.          Litigation
Expenses.  In the event of
any litigation or other dispute between the Company and the Executive with
respect to the subject matter of this Agreement, the Executive shall be
entitled to recover his attorney fees and expenses, unless the Executive does
not substantially prevail in such matter.


 

















 


7.2.          Entire
Understanding.  This
Agreement contains the entire understanding between the Company and the
Executive with respect to the subject matter hereof and supersedes any prior
severance or change in control agreement and amendment thereto between the
Company and the Executive; except that this Agreement shall not affect or
operate to reduce any benefit or compensation inuring to the Executive of a
kind elsewhere provided and not expressly provided in this Agreement.


 


7.3.          Severability.  If, for any reason, any one or more of the
provisions or part of a provision contained in this Agreement shall be held to
be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of
a provision of this Agreement not held so invalid, illegal or unenforceable,
and each other provision or part of a provision shall, to the full extent
consistent with law, continue in full force and effect.  If this Agreement is held invalid or cannot
be enforced, then to the full extent permitted by law, any prior agreement
between the Company and the Executive shall be deemed reinstated as if this
Agreement had not been executed.


 


7.4.          Notices.  All notices, requests, demands and other
communications required or permitted hereunder shall be given in writing and
shall be deemed to have been duly given if delivered or mailed, postage
prepaid, first class as follows:


 


To the Company:


 


Stanley, Inc.


3101 Wilson Boulevard


Arlington, VA  22201


Attention:  General Counsel


 


To the Executive:


 


The Executive’s address
on file with the Company


 


or to
such other address as either party shall have previously specified in writing
to the other.


 


7.5.          No
Attachment.  Except as
required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation or to execution, attachment,
levy, or similar process or assignment by operation of law, or any attempt,
voluntary or involuntary, to effect any such action shall be null, void and of
no effect.


 


7.6.          Binding
Agreement.  This Agreement
shall be binding upon, and shall inure to the benefit of, the Executive and the
Company and their respective permitted successors and assigns.


 


7.7.          Modification
and Waiver.  This
Agreement may be modified or amended only by an instrument in writing signed by
each of the parties.  Except as otherwise
provided in Section 2.11, no term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except 


 

















 


by written
instrument signed by the party charged with such waiver or estoppel.  No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and any waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.


 


7.8.          Headings.  The headings contained in this Agreement are
included solely for convenience and shall not in any way affect the meaning or
interpretation of any of the provisions of this Agreement.


 


7.9.          Governing
Law.  This Agreement and
its validity, interpretation, performance, and enforcement shall be governed by
the laws of the Commonwealth of Virginia, without regard to the choice of law
provisions thereof.


 


IN
WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officers thereunto duly authorized, and the Executive has
signed this Agreement, all as of the date first above written.


 


	
   

  	
  STANLEY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Scott D. Chaplin

  
	
   

  	
  By:  Scott D. Chaplin

  
	
   

  	
  Its:  General
  Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  E. Patrick Flannery

  
	
   

  	
  E. Patrick Flannery

  



 

















 


EXHIBIT A


 


Date


 


Re: Separation and
Release Agreement


 


Dear :


 


This letter sets forth
certain terms and conditions relative to your separation from your employment
with Stanley, Inc., including its subsidiaries and affiliated companies,
and their respective current and former directors, officers, employees, agents
and assigns (“STANLEY” or the “Company”).


 


Your resignation from
STANLEY’s employ will be effective
                
    ,
        .  After you execute and return this Agreement
to the Company, which you acknowledge may not be executed prior to your last
day of actual work, the Company will provide you with severance payments and
benefits to the extent provided by that certain Change in Control Severance Agreement
between you and the Company dated as of June 26, 2008.


 


In exchange for the
Company providing you with the aforementioned severance payments and benefits,
you hereby waive all claims against the Company and unconditionally and
irrevocably release and discharge the Company from liability for any claims or
damages that you have or may have against it, its current and former directors,
officers, employees, agents and assigns up to the moment this Agreement becomes
fully executed, regardless of whether those claims are known or unknown
including, but not limited to, any claims for wages, severance (except as
specifically provided for herein), bonuses or benefits (except as specifically
provided for herein), or any other claims whatsoever arising during or, in
whole or in part, out of your employment relationship with the Company, or
violations of any federal, state or local fair employment statute, executive
order, ordinance, law or regulation, including Title VII of the Civil Rights
Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the
Age Discrimination in Employment Act, as amended by the Older Workers’ Benefit
Protection Act, the Employee Retirement Income Security Act of 1974, as
amended, or any other potentially applicable employment or labor law, or any
other rule of law or common law including, but not limited to those
concerning possible torts, express or implied contract, the implied covenant of
good faith and fair dealing, public policy, or other obligations. Other than
with respect to any rights which cannot be waived by law, including but not
limited to the right to file certain charges with, or participate in, an
investigation conducted by any governmental agency that expressly prohibits
waiver relative to same, you also agree not to initiate any administrative or
legal action against the Company to assert such claims.  Moreover, to the extent any such action is
brought by you or on your behalf by any third party, you agree to waive all
claims to monetary relief or damages of any kind, including attorneys’ fees and
costs. You understand that the fact of this agreement and/or the agreement to
pay or the payment of the consideration described herein does not constitute an
admission by the Company that it has violated any such law or legal obligation.


 


You acknowledge that you
may take up to [21/45] days to consider the terms of this Agreement.  You also acknowledge that you were advised by
STANLEY to discuss the terms of this Agreement with your attorneys prior to
signing this Agreement.  You further
acknowledge that 


 

















 


you are entering into
this Agreement, freely, knowingly, and voluntarily, with a full understanding
of its terms and that you will have seven days to revoke this Agreement after
executing the same by notifying the undersigned in writing during this
seven-day period.  Except as set forth
herein, this constitutes the entire agreement between us regarding the subject
matter hereof.  This Agreement may not be
changed or altered, except by a writing signed by you and the Company.  This Agreement is entered into in the
Commonwealth of Virginia and the laws of the Commonwealth of Virginia will
apply to any dispute concerning it, without regard to its conflicts of law
provisions.  If any clause of this
Agreement should ever be determined to be unenforceable, it is agreed that this
will not affect the enforceability of any other clause or the remainder of this
Agreement.


 


Sincerely,


 


 


	
  STANLEY, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  AGREED AND ACCEPTED:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
					



 


 


On this
           day of
                  ,
20     before me personally came                                 ,
to me known to be the individual described in and who executed the foregoing
Change in Control Severance Agreement, and duly acknowledged to me that he
executed the same.


 


 


Notary Public


 

















 


EXHIBIT B


 


FORM OF
NONCOMPETITION AGREEMENT


 


                THIS NONCOMPETITION
AGREEMENT (this “Agreement”) is dated as of
                    ,
20    , by and between Stanley, Inc., a Delaware
corporation (the “Company”), and
                                
(the “Executive”). Capitalized terms used herein but not otherwise defined
herein shall have the meaning ascribed to them in the Change in Control
Agreement (as defined below).


 


                WHEREAS, the
Company and the Executive have entered into a Change in Control Severance
Agreement, effective as of June 26, 2008 (the “Change in Control Agreement”);
and


 


                WHEREAS, the
Company and the Executive agree that, in connection with the execution of the
Change in Control Agreement and the Executive’s continued employment, the
Executive will not engage in competition with the Company pursuant to the terms
and conditions hereof;


 


                NOW, THEREFORE,
in furtherance of the foregoing and in exchange for good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties hereto
hereby agree as follows:


 


                1.   Noncompetition.  (a) If the Executive incurs a qualifying
termination as described in Section 3.1 of the Change in Control
Agreement, for two years following the qualifying termination, the Executive
shall be prohibited from engaging in Competition (as defined below) with the
Company or any of its subsidiaries.


 


                (b)  The term “Competition” for purposes of this
Agreement shall mean the Executive agrees that for the period described in
section 1(a) above, Executive will not, directly or indirectly, privately
or as an employee, partner, officer, director, stockholder or agent in any
capacity of any other entity: (i) render any services on the specific
contracts, task orders, or other business arrangements that Executive is or was
involved in for the Company, or acquired knowledge through access to
confidential information of the Company, e.g., pricing, pricing strategies,
business pursuits, strategic objectives, and the like, on behalf of any other
person or entity; (ii) actively solicit, divert or take away, or attempt
to divert or to take away, the business of any of the clients, customers or
accounts, or prospective clients with identified active new business targets,
customers or accounts, of the Company or any Company affiliate in which
Executive is or was involved or acquired knowledge through access to such
confidential information; or (iii) directly or indirectly recruit, train,
supervise, or assist others to engage in any activities described in this
paragraph.


 


                2.  Specific Performance; Waiver of Jury Trial.  The Executive acknowledges that in the event
of breach by the Executive of the terms of Section 1 hereof, the Company’s
remedies at law may be inadequate and the Company shall be entitled to
institute legal proceedings to enforce the specific performance of this
Agreement by the Executive and to enjoin the Executive from any further
violation of Section 1 hereof and to exercise such remedies cumulatively
or in conjunction with all other rights and remedies provided by law and not
otherwise limited by this Agreement.  The
Executive and the Company agree to waive their rights to a jury trial for any 


 

















 


claim or cause of action
based upon or arising out of this Agreement or any dealings between them
relating to the subject matter of this Agreement.


 


                3.  Attorneys Fees.  If any legal action, arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach or default in connection with any of the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys’ fees and other costs incurred in that action or proceeding,
including any appeal of such action or proceeding, in addition to any other
relief to which that party may be entitled.


 


                4.   Survival.  This Agreement shall survive the termination
of Executive’s employment and the assignment of this Agreement by the Company
to any successor to their respective business.


 


                5.   Severability.  Any provision of this Agreement which is
deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction and subject to this paragraph, be ineffective to the extent of
such invalidity, illegality or unenforceability, without affecting in any way
the remaining provisions hereof in such jurisdiction or rendering that any
other provisions of this Agreement invalid, illegal or unenforceable in any
other jurisdiction. If any covenant should be deemed invalid, illegal or
unenforceable because its scope is considered excessive, such covenant shall be
modified so that the scope of the covenant is reduced only to the minimum
extent necessary to render the modified covenant valid, legal and enforceable.


 


                6.  Governing Law and Venue.  This Agreement shall be governed, construed,
interpreted and enforced in accordance with the laws of the Commonwealth of
Virginia, without regard to the conflict of laws principles thereof.  Executive expressly consents to personal
jurisdiction and venue in the state and federal courts for the county in which
the Company’s principal place of business is located for any lawsuit filed
there against Executive by the Company arising from or related to this
Agreement.


 


                7.  Entire Agreement.  This Agreement contains the entire agreement
and understanding between the Company and the Executive with respect to the
subject matter hereof, and supersedes all prior agreements and understandings
with respect to the subject matter hereof, and the parties hereto have made no
representations, promises, agreements or understandings, written or oral,
relating to the subject matter of this Agreement which are not set forth
herein. This Agreement shall not be changed unless in writing and signed by
both the Executive and the Company.


 


                8.  Assignment.  This Agreement may not be assigned by the
Executive, but may be assigned by the Company to any successor to their
respective business and will inure to the benefit of and be binding upon any
such successor.


 


                9.  Notice.   Each party hereto must deliver all notices
or other communications required or permitted under this Agreement in writing
to the other parties in accordance with the notice provisions set forth in Section 7.4
of the Change in Control Agreement.


 


                10.  Waiver.  Any waiver or failure to enforce any
provision of this Agreement on one occasion will not be deemed a waiver of that
provision or any other provision on any other occasion.


 

















 


                11.   Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.


 


                12.   The Executive’s Acknowledgment.  The Executive acknowledges (a) that he
has had the opportunity to consult with independent counsel of his own choice
concerning this Agreement, and (b) that he has read and understands the
Agreement, is fully aware of its legal effect, has not acted in reliance upon
any representations or promises made by the Company other than those contained
in writing herein, and has entered into it freely based on his own judgment.


 


                IN WITNESS WHEREOF,
the parties have executed this Agreement as of the date and year first above
written.


 


 


	
   

  	
  STANLEY,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE