EX-10.3






Exhibit 10.3




CHANGE OF CONTROL AGREEMENT




This Agreement is made this 19th day of January, 2009, by and between Argon ST,
Inc., a Delaware corporation (the “Company”), and Aaron Daniels, (the “Executive”).



WHEREAS, the Board of Directors of the Company (the “Board”) recognizes that the possibility
of a Change of Control (as defined below) exists and that the threat or the occurrence of a Change
of Control can result in significant distraction of the Company’s key management personnel because
of the uncertainties inherent in such a situation;



WHEREAS, the Board has determined that it is essential, and in the best interest of the
Company and its stockholders, for the Company to retain the services of the Executive in the event
of the threat or the occurrence of a Change of Control, and to ensure the Executive’s continued
dedication and efforts in such event without undue concern by the Executive for the Executive’s
personal financial and employment security; and



WHEREAS, in order to induce the Executive to remain in the employ of the Company in the event
of the threat or the occurrence of a Change of Control, the Company desires to enter into this
Agreement with the Executive to provide the Executive with certain benefits in the event of the
threat or the occurrence of a Change of Control.



NOW, THEREFORE, the parties hereto, in consideration of their respective promises herein, and
intending to be legally bound, agree as follows:



1. Term of Agreement. This Agreement shall commence as of January 19, 2009 (the
“Effective Date”), and shall continue in effect for five (5) years until January 19, 2014 (the
“Term”); provided, however, that on the first expiration of the Term, the Term shall automatically
be extended for another five (5) years; provided, however, that following the occurrence of a
Change of Control, the Term (either initial or as extended) shall not expire prior to the
expiration of at least twenty-four (24) months after such event.



2. Payments. (a) If, during the Term, the Executive’s employment with the Company or
its Affiliates shall be terminated by the Company, or by the Executive for Good Reason, within
twenty-four (24) months following a Change of Control, the Executive shall be entitled to the
following compensation and benefits:



i. within 60 days of the termination of his employment, he shall be paid an amount equal to
two (2) years of his base salary at the date of the Change of Control. Notwithstanding the
foregoing, however, payment of one year of salary committed to by the Company in the promotion
offer letter to Executive dated November 28, 2007 (“Promotion Offer”) shall, if the obligation to
make it is triggered under the terms of the Promotion Offer, be subsumed by, and not be in addition
to, the payment under this Section 2(a)i and



ii. for the next eighteen (18) months, the Company shall, at its expense, continue on behalf
of the Executive and his dependents and beneficiaries, the life insurance, disability, medical,
dental and hospitalization coverage and benefits provided to the Executive immediately prior to the
Change of Control. Notwithstanding the foregoing, however, the twelve (12) months of COBRA payments
committed to by the Company in the Promotion Offer shall, if the obligation to make them is
triggered under the terms of the Promotion Offer, run concurrently with, and not be in addition to,
the eighteen (18) months’ medical, dental and/or hospitalization coverage or benefits within this
Section 2(a)ii; and to the extent that the benefits within this Section 2(a)ii encompass COBRA
payments or take the place of COBRA payments, the COBRA payments committed to in the Promotion
Offer shall be superseded by such payments under this Section 2(a)ii. The Company’s obligation
hereunder with respect to this subparagraph ii shall be reduced to the extent that the Executive
obtains coverage and benefits pursuant to a subsequent employer’s benefit plans, provided that the
aggregate coverage and benefits of the combined benefit plans is no less favorable to the Executive
than the coverage and benefits required to be provided hereunder. In the event such coverage and
benefits may be barred under applicable law or regulations or by the terms of the plans themselves
(or where such continuation would adversely affect the tax status of the benefit plan pursuant to
which the coverage and benefits are provided), the Company shall pay to the Executive the
reasonable cash equivalent of such coverage and benefits, as determined by the Company’s
independent auditors, in lieu of such coverage and benefits.



iii. The Executive shall not be required to mitigate the amount of any payment provided for in
this Agreement by seeking other employment or otherwise. No payment under this Agreement shall be
offset or reduced by the amount of any compensation or benefits provided to the Executive in any
subsequent employment except as provided in subparagraph ii above.



(b) This Agreement is not intended to constitute a “nonqualified deferred compensation plan”
within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). 
Notwithstanding the foregoing, if the Company determines that (i) this Agreement or any benefit
paid to the Executive hereunder is subject to Section 409A of the Code, and (ii) the Executive is a
“specified employee” within the meaning of Section 409A of the Code, then to the extent necessary
to avoid the imposition of additional income taxes or penalties or interest on the Executive under
Section 409A of the Code, payments due under Section 2(a) shall be accumulated and paid to the
Executive in a lump-sum payment on the first day of the seventh month following the date of the
termination of his employment.



3. Fees and Expenses. The Company shall pay all reasonable legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the Executive as they
become due as a result of the Executive seeking to obtain or enforce any right or benefit provided
by this Agreement or any other plan or arrangement maintained by the Company under which Executive
is or may be entitled to receive benefits.



4. Notices. For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing, shall be signed by the Executive, if to the
Company, or by a duly authorized officer of the Company, if to the Executive, and shall be deemed
to have been duly given when personally delivered or sent by certified mail, return receipt
requested, postage paid, addressed to the respective addresses given by each party to the other,
provided that all notices to the Company shall be directed to the attention of the Board with a
copy to the General Counsel of the Company. All notices and communications shall be deemed to have
been received on the date of delivery thereof or on the third business day after the mailing
thereof, except that notice of change of address shall be effective only upon receipt.



5. Nature of Rights. (a) Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any benefit, bonus, incentive, other plan or
program provided by the Company or any Affiliate of the Company and for which the Executive may
qualify, nor shall anything herein limit or reduce such rights or benefits the Executive may have
under any other agreements with the Company or any Affiliate of the Company. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under any plan or program
of the Company or any Affiliate of the Company shall be payable in accordance with such plan or
program. The payment of one year’s salary and payment of COBRA premiums referred to in the
Promotion Offer, as qualified under Section 2(a) above, are specifically intended to be benefits to
which Executive is otherwise entitled under this Section 5(a), subject to the terms of the
Promotion Offer; except that, the intent of the parties is that Executive’s rights under the
Promotion Offer shall survive expiration of this Agreement but shall not be in addition to any
payment provided to Executive under this Agreement. Therefore, if the Company’s obligation to
provide salary and COBRA payments under the Promotion Offer is triggered at the same time that the
obligation to make payments under Sections 2(a)i and ii herein is triggered, the Company’s
obligations under the Promotion Offer shall be deemed satisfied by the payments under Sections
2(a)i and ii.



(b) Nothing in this Agreement shall be construed to create any right to employment on behalf
of the Executive that the Executive does not otherwise possess, nor to affect any rights of the
Company to terminate Executive at will.



6. Settlement of Claims. The Company’s obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be affected by any
circumstances, including without limitation, any set-off, counterclaim, defense, recoupment, or
other right which the Company may have against the Executive or others. Notwithstanding the
foregoing, the Company need not make the payments provided for in this Agreement if the Executive
is terminated as a result of (a) conviction of a felony; (b) a material violation of the Company’s
Code of Business Ethics and Conduct; (c) a criminal conviction involving a violation of the federal
securities laws; (d) an adverse judgment by a court of competent jurisdiction in a case brought by
the Securities and Exchange Commission involving a violation of the federal securities laws; or (e)
actions by the Executive which demonstrate moral turpitude on his part.



7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed by the Executive
and the Company. No waiver by either party hereto at any time of any breach by the other party
hereto of, or of an obligation to comply with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have been made by any
party which is not expressly set fourth in this Agreement.



8. Successors; Binding Agreement.



(a) This Agreement shall be binding upon and inure to the benefit of the Company and its
successors and assigns. The Company shall require its successors and assigns to expressly assume
and agree to perform this Agreement in the same manner and to the same extent that it would be
required to perform this Agreement if no such succession or assignment had taken place.



(b) Neither this Agreement nor any right or interest hereunder shall be assignable or
transferable by the Executive, his beneficiaries or legal representatives.



9. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Virginia, without regard to conflicts of laws
provisions, and the parties hereto consent to venue and jurisdiction in the courts of the
Commonwealth.



10. Severability. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereof.



11. Entire Agreement. This Agreement constitutes the entire agreement of the parties
with regard to the subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to the Executive’s
benefits in the event of a Change of Control..



12. Definitions.



(a)Affiliate. For purposes of this Agreement, “Affiliate” means, with respect to any person,
any entity, directly or indirectly, controlled by, controlling or under common control with such
person.



(b) “Beneficial Owner,” “Beneficially Owned,” and “Beneficially Owning” shall have the save
meanings as under Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended.



(b) Change of Control. “Change of Control” shall mean any of the following:



(i) The acquisition by any person of Beneficial Ownership of voting securities of the Company,
which when added to the voting securities of the Company then Beneficially Owned by such person,
would result in such person beneficially Owning 33% or more of the combined voting power of the
Company’s then outstanding voting securities; provided, however that for purposes of this paragraph
a person shall not be deemed to have an acquisition of voting securities if such person: (A)
acquires voting securities as a result of a stock split, stock dividend or other corporate
restructuring in which all stockholders of the class of such voting securities are treated the same
on a pro rata basis; (B) acquires the voting securities directly from the Company; (C) is the
company or any corporation of other person of which a majority of its voting power or its equity
securities or equity interest is owned directly or indirectly by the Company (a “Controlled
Entity’); or (D) acquires voting securities in connection with a “Non-control Transaction” (as
defined in paragraph (c) below; or



(ii) the individuals who, as of the Effective Date, are members of the Board (the “Incumbent
Board”) cease for any reason to constitute at least two-thirds of the Board; provided, however,
that if either the election of any new director or the nomination for election of any new director
by the Company’s stockholders was approved by a vote of at least two-thirds of the Incumbent Board
prior to such election or nomination, such new director shall be considered as a member of the
Incumbent Board; provided further, however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result of either an actual or
threatened ”Election Contest” (as described in Rule 14a-11 promulgated under the 1934 Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a person other than the
Board (a “Proxy Contest”), including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or



(iii) approval, as required by the Delaware General Corporation Law, by the stockholders of
the Company of:



(A) a merger, consolidation or reorganization involving the Company (a “Business
Combination”), unless



(1) the stockholders of the Company immediately before the Business Combination own, directly
or indirectly, immediately following the Business Combination, at least a majority of the combined
voting power of the outstanding voting securities of the Corporation resulting from the Business
Combination (the “Surviving Corporation”) in substantially the same proportion as their ownership
of the voting securities of the Company immediately before the business Combination, and



(2) the individuals who were members of the Incumbent Board immediately prior to the execution
of the agreement providing for the Business Combination constitute at least a majority of the Board
of Directors of the Surviving Corporation, and



(3) no person (other than the Company or any Controlled Entity, a trustee or other fiduciary
holding securities under one or more employee benefit plans or arrangements (or any trust forming a
part thereof) maintained by the Company, the Surviving Corporation or any Controlled Entity, or any
person who immediately prior to the Business Combination had Beneficial Ownership of 33% or more of
the then outstanding voting securities) has Beneficial Ownership of 33% or more of the combined
voting power of the Surviving Corporation’s then outstanding voting securities (a Business
Combination satisfying the conditions of clauses (1), (2) and (3) of this subparagraph (A) shall be
referred to as a “Non-control Transaction”);



(B) a complete liquidation or dissolution of the Company; or



(C) the sale or other disposition of all or substantially all of the assets of the Company
(other than a transfer to a Controlled Entity).



Notwithstanding the foregoing, a Change of Control shall not be deemed to occur solely because
33% or more of the outstanding voting securities of the Company is Beneficially Owned by (x) a
trustee or other fiduciary holding securities under one or more employee benefit plans or
arrangements (or any trust forming a part thereof) maintained by the Company or any Controlled
Entity or (y) any corporation which, immediately prior to its acquisition of such interest, is
owned, directly or indirectly, by the stockholders of the Company in the same proportion as their
ownership of stock in the Company immediately prior to such acquisition.



(c) Good Reason. The Executive’s termination of employment hereunder shall not be treated as
a termination for Good Reason unless (i) the Executive’s termination occurs no later than two years
following the initial existence of the Good Reason (such two year period however not to extend
beyond two years from the event of the Change of Control), (ii) the Executive provides notice to
the Company of the existence of the Good Reason no later than 90 days after the initial existence
of the Good Reason, and (iii) the Company fails to remedy the Good Reason within 30 days after
receipt of notice from the Executive of the existence of the Good Reason. For purposes of this
Agreement, “Good Reason” shall mean any of the following should they occur without the
Executive’s prior written consent:



(A) (i) the assignment to the Executive of any duties or responsibilities inconsistent in any
material adverse respect with the Executive’s position(s), duties, responsibilities or status with
the Company or (ii) a material adverse change in the Executive’s reporting responsibilities, titles
or offices with the Company;



(B) a material reduction by the Company in the Executive’s rate of base salary or annual
target bonus opportunity (including any material adverse change in the formula for such annual
bonus target);



(C) any requirement of the Company that the Executive be based anywhere more than 50 miles
from the facility where the Executive is located; or



(D) the failure of the Company to continue in effect any employee benefit plan or
compensation plan in which the Executive is participating, unless the Executive is permitted to
participate in other plans providing the Executive with substantially comparable benefits, or
unless such action by the Company affects the benefits or compensation of employees as a whole; or
the taking of any action by the Company which would have a materially adverse effect on the
Executive’s participation in or materially reduce the Executive’s benefits under any such plan.



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



	 	 	 	 	 
	ARGON ST, Inc.

	 	 	 	EXECUTIVE
	By: _________________________
	 	_____________________
	Terry L. Collins

	 	 	 	Aaron Daniels
	Title

	 	CEO and President
	 	Chief Financial Officer