Document:

Exhibit 10.2

 

AMENDMENT NO. 1 TO CHANGE IN CONTROL/

SEVERANCE
COMPENSATION AGREEMENT

 

This Amendment No.1 (the “Amendment”) to the
Change in Control Severance Compensation Agreement effective as of January 23,
2008 (the “Agreement”) is entered into on April 10, 2008, and is between
Polymer Group, Inc. (the “Company”) and Robert Kocourek (“Executive”).

 

In consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
the Agreement as follows:

 

	
  1.

  	
   

  	
  Insert the following new
  sub-section (vi) to Section 3(D) of the Agreement:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “; or (vi) Executive
  and the Company are unable to agree upon the proper reporting of any
  financial matter which Executive reasonably believes is appropriate in order
  to comply with the rules and regulations of the United States Securities
  and Exchange Commission or in order for the Company’s financial statements to
  be prepared in conformity with generally accepted accounting principles.”

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Delete sub-paragraph
  (A) of Section 4 of the Agreement and replace it with the
  following:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “(A) The Company
  shall pay to you in a lump sum payment within five (5) business days
  following the Date of Termination, an amount that is the sum of
  (i) twenty-four (24) times your monthly base salary at the rate in
  effect at the time a Notice of Termination is given and (ii) two times
  the greater of (x) your annual bonus earned for the most-recently completed
  fiscal year of the Company and (y) your annual target bonus for the year
  which includes the Date of Termination: provided, that you shall have
  executed a reasonable and customary release in favor of the Company and its
  subsidiaries releasing all claims related to or arising out of the
  termination of your employment.”

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Delete sub-paragraph
  (A) of Section 6 of the Agreement and replace it with the
  following:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “(A) In further
  consideration of the compensation to be paid to you hereunder, whether under
  Article 4 or Paragraph 6(E), you acknowledge that during the course of
  your employment with the Company and its Subsidiaries you shall become
  familiar with the Company’s trade secrets and with other Confidential
  Information concerning the Company and its predecessors and its Subsidiaries
  and that your services shall be of special, unique and extraordinary value to
  the Company and its Subsidiaries, and therefore, you agree that, during the
  time you are employed by the Company and for a period of time equal to twenty-four (24) months thereafter
  (the “Noncompete Period”), you shall not directly or indirectly own
  any interest in, manage, control, participate in, consult with, render
  services for, or in any manner engage in any business competing with the
  businesses of the Company or its Subsidiaries, as such businesses exist or
  are in process during your employment
  on the date of the termination or expiration of your employment, within any geographical area in which the
  Company or its Subsidiaries engage or plan to engage in such businesses.
  Nothing herein shall prohibit you from being a passive owner of not more than
  2% of the outstanding stock of any class of a corporation which is publicly
  traded, so long as you have no active participation in the business of such
  corporation.”

  

 

 

Except as modified by the foregoing, all
other provisions of the Agreement shall remain in full force and effect.

 

IN WITNESS WHEREOF, the
parties hereto have executed this Amendment as of the date written above.

 

	
  POLYMER GROUP, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Daniel
  L. Rikard

  	
   

  	
  /s/ Robert J. Kocourek

  
	
   

  	
   

  	
   

  	
  Robert Kocourek

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   V.P. General Counsel & SecretaryQuickLinks
 -- Click here to rapidly navigate through this document

 

 
 

  Exhibit 10.3    
    

 
    EXECUTIVE EMPLOYMENT AGREEMENT    
    
    Amended and Restated as of August 4, 2008    
    

        This Executive Employment Agreement ("Agreement") is made effective November 14, 2003 ("Effective Date"), by and between Kratos
Defense & Security Solutions, Inc. ("Company") and Eric DeMarco ("Executive"), and as amended and restated as of August 4, 2008. 

        The
parties agree as follows: 

        1.    Employment.    Company hereby employs Executive, and Executive hereby accepts such employment, upon the terms
and conditions set forth herein. 

        2.    Duties.    

        2.1    Position.    Executive shall initially be employed as a non-officer regular, full-time
employee but will become Company's President and Chief Operating Officer ("COO") within two (2) weeks of the Effective Date. Immediately upon the announcement of Executive's assumption of the
President and COO roles, Company shall announce a 3 to 6 month
succession plan for Executive to transfer into Company's Chief Executive Officer ("CEO") role. Executive shall have the duties and responsibilities assigned by Company's Board of Directors ("Board of
Directors") both upon initial hire and as may be reasonably assigned from time to time. Executive will also be offered a seat on Company's Board of Directors. 

        2.2    Best Efforts/Full-time.    Executive will expend his best efforts on behalf of Company, and will
abide by all policies and decisions made by Company, as well as all applicable federal, state and local laws, regulations or ordinances. Executive will act in the best interest of Company at all
times. Executive shall devote his full business time and efforts to the performance of his assigned duties for Company, unless Executive notifies the Board of Directors in advance of his intent to
engage in other paid work and receives the Board of Directors' express written consent to do so. 

        3.    At-will Employment Relationship.    Executive's employment with Company is at-will and
not for any specified period and may be terminated by either Executive or Company at any time, with or without cause. In addition, Company reserves the right to modify Executive's position or duties
to meet business needs and to use discretion in deciding on appropriate discipline. No representative of Company, other than the Board of Directors, has the authority to alter the at-will
employment relationship between Executive and Company. Any change to the at-will employment relationship must be by specific, written agreement signed by Executive and the Board of
Directors. Nothing in this Agreement is intended to or should be construed to contradict, modify or alter this at-will relationship. 

        4.    Compensation.    

        4.1    Base Salary.    As compensation for Executive's performance of his duties hereunder, Company shall pay to
Executive an initial base salary of $275,000 per year (the "Base Salary"), payable in accordance with the normal payroll practices of Company, less required deductions for state and federal
withholding tax, social security and all other employment taxes and payroll deductions. In the event Executive's employment under this Agreement is terminated by either party, for any reason,
Executive will earn the Base Salary prorated to the date of termination. 

        4.2    Incentive Compensation.    Executive will be eligible to earn an annual performance bonus, up to a maximum
amount of 100% of his Base Salary, based upon the achievement of certain goals and objectives to be mutually determined by Executive and Company. 

        4.3    Stock Options.    Subject to the Board of Directors' approval, Executive will be granted a nonqualified stock
option to purchase 1,250,000 shares of Company's Common Stock under Company's 1999 Equity Incentive Plan (the "Plan") at an exercise price equal to $12.80 (the "Option"). The Option will vest in
accordance with the following schedule: 20% of the Option will vest on the first anniversary of the Effective Date and the remaining 80% will vest in equal 

monthly
increments over the following 48 months. The Option will be subject to the terms and conditions of the Plan and the standard stock option agreement provided pursuant to the Plan, which
Executive will be required to sign as a condition of receiving the Option. Executive will also be eligible to receive additional stock options based upon his performance as determined by Company in
its sole and absolute discretion. 

        4.4    Performance and Salary Review.    The Board of Directors will periodically review Executive's performance on no
less than an annual basis. Adjustments to Base Salary or other compensation, if any, will be made by the Board of Directors in its sole and absolute discretion. 

        5.    Customary Fringe Benefits.    Executive will be eligible for all customary and usual fringe benefits generally
available to executives of Company subject to the terms and conditions of Company's benefit plan documents. Company reserves the right to change or eliminate the fringe benefits on a prospective,
company-wide basis, at any time, effective upon notice to Executive. 

        6.    Business Expenses.    Executive will be reimbursed for all reasonable, out-of-pocket
business expenses incurred in the performance of his duties on behalf of Company. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation in accordance
with Company's policies. 

        7.    Termination of Executive's Employment.    

        7.1    Termination for Cause by Company.    Although Company anticipates a mutually rewarding employment relationship
with Executive, Company may terminate Executive's employment immediately at any time for Cause. For purposes of this Agreement, "Cause" is defined as: (a) acts or omissions constituting gross
negligence, recklessness or willful misconduct on the part of Executive with respect to Executive's obligations or otherwise relating to the business of Company; (b) Executive's material breach
of this Agreement or Company's standard form of confidentiality agreement; (c) Executive's conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any
felony or crime of moral turpitude; or (d) Executive's willful neglect of duties or poor performance. Notwithstanding the foregoing, a termination under subsection 7.1(d) above shall not
constitute a termination for "Cause" unless Company has first given Executive written notice of the offending conduct (such notice shall include a description of remedial actions that Company
reasonably deems appropriate to cure such offending conduct) and a thirty (30) opportunity to cure such offending conduct. In the event Company
terminates Executive's employment under subsection 7.1(d) above, Company agrees to participate in binding arbitration, if requested by Executive, to determine whether the cause for termination
was willful neglect of duties or poor performance as opposed to some other reason that does not constitute Cause under this Agreement. In the event Executive's employment is terminated in accordance
with this subsection 7.1, Executive shall be entitled to receive only the Base Salary then in effect, prorated to the date of termination and any accrued but unpaid vacation (the "Standard
Entitlements"). All other Company obligations to Executive pursuant to this Agreement will become automatically terminated and completely extinguished. In addition, Executive will not be entitled to
receive the Severance Package described in subsection 7.2 below. 

        7.2    Termination Without Cause by Company/Severance.    Company may terminate Executive's employment under this
Agreement without Cause at any time on thirty (30) days' advance written notice to Executive. In the event of such termination, Executive will receive the Standard Entitlements and the
"Severance Package" described in subsection 7.2(a) below, provided that Executive agrees to comply with all of the conditions set forth in subsection 7.2(b) below. All other Company
obligations to Executive pursuant to this Agreement will be automatically terminated and completely extinguished. 

        (a)    Severance Package.    The Severance Package will consist of the following: 

        (i)    a
"Severance Payment" equivalent to the sum of three (3) years of Executive's Base Salary then in effect on the date of termination plus three (3) times
Executive's bonus potential for the year in which Executive was terminated, less any bonus amounts 

already
received and applicable taxes and withholdings, payable in a lump sum within thirty (30) days of such termination; 

        (ii)   accelerated
vesting of any and all of Executive's stock options, restricted stock units and any other outstanding equity awards that remain unvested as of the date of
termination; and 

        (iii)  continuation
of Executive's group health insurance benefits on the same terms as during his employment until the sooner of one (1) year following the Separation
Date or Executive's procurement of health care coverage through another employer (the "Benefits Continuation Period"), provided Company's insurance carrier allows for such benefits continuation. In
the event Company's insurance carrier does not allow for such coverage continuation, Company agrees to pay the premiums required to continue Executive's group health care coverage during the Benefits
Continuation Period, under the applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), provided that Executive elects to continue and remains eligible for these
benefits under COBRA. 

        (b)    Conditions to Receive Severance Package.    Executive will receive the Severance Package described above only
if he meets all of the following conditions: 

        (i)    complies
with all surviving provisions of this Agreement as specified in subsection 13.8 below; and 

        (ii)   executes
a full general release, in a form acceptable to Company, releasing all claims, known or unknown, that Executive may have against Company, and any parent,
subsidiary or related entity, their officers, directors, employees and agents, arising out of or any way related to Employee's employment or termination of employment with Company. 

        (c)   Notwithstanding
any other provision of this Agreement to the contrary, if Executive is a "specified employee" within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended (the "Code") and the related guidance ("Section 409A") at the time of Executive's separation from service, then only that portion of the Severance Package,
together with any other severance payments or benefits, that may be considered deferred compensation under Section 409A, which (when considered together) do not exceed the Section 409A
Limit (as defined below) and which qualify as separation pay under Treasury Regulation Section 1.409A-1(b)(9)(iii), may be paid within the first six (6) months following
Executive's separation from service in accordance with Section 7.2(a) above or (for payments or benefits not provided under this Agreement) with the payment schedule applicable to each such
other payment or benefit. Otherwise, the portion of the Severance Package, together with any other severance payments or benefits that may be considered deferred compensation under
Section 409A, that would otherwise be payable within the six (6) month period following Executive's separation from service will be paid in a lump sum on the date six (6) months
and one (1) day following the date of Executive's separation from service (or the next business day if such date is not business day). For purposes of this Agreement, "Section 409A
Limit" means the lesser of two (2) times: (i) the sum of Executive's annualized compensation based upon the annual rate of pay for services provided to Company for the taxable year of
Executive preceding the taxable year of Executive's separation from service from Company as determined under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)(1) and any related
Internal Revenue Service guidance; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which such
separation from service occurs.. 

        7.3    Resignation by Executive Without Good Reason.    Executive may resign Executive's position with Company for any
reason, at any time on thirty (30) days' advance written notice. In the event of Executive's resignation, Executive will be entitled to receive only the Standard 

Entitlements
and no other amount. All other Company obligations to Executive pursuant to this Agreement will become automatically terminated and completely extinguished. In addition, Executive will
not be entitled to receive the Severance Package described in subsection 7.2 above. 

        7.4    Termination Upon A Change Of Control.    

        (a)    Accelerated Vesting Upon A Change Of Control.    Upon the close of a transaction that constitutes a Change of
Control (as that term is defined below), Company shall immediately accelerate vesting of 50% of any portion of the Option and 50% of the portion of any other outstanding equity awards that remain
unvested. On the one (1)-year anniversary of such Change of Control or upon a "Triggering Event" (as defined below), whichever occurs sooner, the remaining unvested portion of the Option
and any other outstanding equity awards shall immediately vest. For purposes of this subsection 7.4(a), a "Triggering Event" shall mean: (i) Executive's termination from employment by
the Company without Cause; (ii) a material change in the nature of Executive's role or job responsibilities so that Executive's job duties and responsibilities after the Change of Control, when
considered in their totality as a whole, are substantially different in nature from the job duties Executive performed immediately prior to the Change of Control; or (iii) the relocation of
Executive' s principal place of work to a location more than thirty (30) miles from the location Executive was assigned to immediately prior to the Change of Control  provided, however, in the case of a Triggering Event described in clause (ii) or
(iii) hereof, such condition shall not exist unless Executive provides written notice to Company within ninety (90) days of its initial existence and Company does not cure such condition
within thirty (30) days from the date it receives such notice from Executive. In addition, no Triggering Event will be deemed to have occurred unless Executive separates from service within
twelve (12) months from the date such Triggering Event initially occurs. 

        (b)    Continued Validity of Severance Package After A Change Of Control.    In the event of a Change of Control, the
termination provisions described in section 7 above shall remain in full force and effect and Executive shall continue to be entitled to receive the Severance Package described in
subsection 7.2(a) above, provided Executive complies with all of the conditions described in subsection 7.2(b) above. 

        (c)    Change of Control.    A "Change of Control" is defined as any one of the following occurrences: (i) the
acquisition by an individual person or entity or a group of individuals or entities acting in concert, directly or indirectly, through one transaction or a series of related transaction, of more than
50% of the outstanding voting securities of Company; (ii) a merger or consolidation of Company with or into another entity after which the stockholders of Company immediately prior to such
transaction hold less than 50% of the voting securities of the surviving entity; (iii) a sale of all or substantially all of the assets of Company; or (iv) the change in the majority of
the Board of Directors pursuant to a successful hostile proxy contest. 

        7.5    Termination Due to Death or Disability.    This Agreement will immediately terminate upon Executive's death or
Disability (as defined below). In the event of Executive's death or Disability, Executive, or Executive's heirs, personal representatives or estate, as the case may be, will be entitled to receive
only the Standard Entitlements and those benefits available under any applicable Company plan or insurance policy, subject to such plan or policy requirements. All other Company obligations to
Executive pursuant to this Agreement will become automatically terminated and completely extinguished. In addition, neither Executive nor Executive's heirs, personal representatives or estate will be
entitled to receive the Severance Package described in subsection 7.2. For purposes of this Agreement, "Disability" shall be defined as Executive's inability to perform the essential functions
of his job, with or without reasonable accommodation, due to a mental or physical impairment. 

        7.6    Parachute Payment Excise Tax.    

        (a)   In
the event that any payment or benefit (within the meaning of Section 280G(b)(2) of the Code) to Executive for Executive's benefit, paid or payable or
distributed or distributable pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, the Executive's employment with Company or a Change of Control (a "Payment" or
"Payments"), would be subject to the excise tax imposed by Code Section 4999, or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive will be entitled to receive an additional payment (a "Gross-Up Payment")
in an amount such that after payment by Executive of all taxes (including any interest or penalties (other than interest and penalties imposed by reason of Executive's failure to file timely a tax
return or pay taxes shown due on Executive's return) imposed with respect to such taxes and the Excise Tax), including any Excise Tax imposed upon the Gross-Up Payment, Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. 

        (b)   An
initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be
made by Company. Company shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation, to Executive within fifteen (15) days of the
date of Executive's termination, if applicable, or such other time as requested by Executive (provided Executive reasonably believes that any of the Payments may be subject to the Excise Tax). If
requested by the Executive, Company shall furnish Executive, at Company's expense, with an opinion reasonably acceptable to Executive from Company's accounting firm (or an accounting firm of
equivalent stature reasonably acceptable to Executive) that there is a reasonable basis for the Determination. Any Gross-Up Payment determined pursuant to this paragraph 6 shall be
paid by Company to Executive within five (5) days of receipt of the Determination. 

        (c)   As
a result of the uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a portion thereof)
will be paid which should not have been paid (an "Excess Payment") or a Gross-Up Payment (or a portion thereof) which should have been paid will not have been paid (an "Underpayment"). 

        (d)   An
Underpayment shall be deemed to have occurred (A) upon notice (formal or informal) to Executive from any governmental taxing authority that Executive's tax
liability (whether in respect of Executive's current taxable year or in respect of any prior taxable year) may be increased by reason of the imposition of the Excise Tax on a Payment or Payments with
respect to which Company has failed to make a sufficient Gross-Up Payment, (B) upon a determination by a court, or (C) by
reason of determination by Company (which shall include the position taken by Company, together with its consolidated group, on its federal income tax return). If an Underpayment occurs, Executive
shall promptly notify Company and Company shall promptly, but in any event at least five (5) days prior to the date on which the applicable government taxing authority has requested payment,
pay to Executive an additional Gross-Up Payment equal to the amount of the Underpayment plus any interest and penalties (other than interest and penalties imposed by reason of Executive's
failure to file timely a tax return or pay taxes shown due on Executive's return) imposed on the Underpayment. 

        (e)   An
Excess Payment shall be deemed to have occurred upon a Final Determination (as hereinafter defined) that the Excise Tax shall not be imposed upon a Payment or
Payments (or portion thereof) with respect to which Executive had previously received a Gross-Up Payment. A "Final Determination" shall be deemed to have occurred when Executive has
received from the applicable government taxing authority a refund of taxes or other reduction in Executive's tax liability by reason of the Excise Payment and upon either (A) the date a
determination is made by, or an agreement is entered into with, the applicable governmental taxing authority which finally and conclusively binds Executive and such taxing authority, or in 

the
event that a claim is brought before a court of competent jurisdiction, the date upon which a final determination has been made by such court and either all appeals have been taken and finally
resolved or the time for all appeals has expired or (B) the statute of limitations with respect to Executive's applicable tax return has expired. If an Excess Payment is determined to have been
made, the amount of the Excess Payment shall be repaid by Executive to Company unless, and only to the extent that, the repayment would either reduce the amount on which Executive is subject to tax
under Code Section 4999 or generate a refund of tax imposed under Code Section 4999. 

        (f)    Notwithstanding
anything contained in this Agreement to the contrary, in the event that, according to the Determination, an Excise Tax will be imposed on any Payment or
Payments, Company shall pay to the applicable government taxing authorities, as Excise Tax withholding, the amount of the Excise Tax that Company has actually withheld from the Payment or Payments. 

        8.    No Conflict of Interest.    During Executive's employment with Company and during any period Executive is
receiving payments from Company pursuant to this Agreement, Executive must not engage in any work, paid or unpaid, that creates an actual conflict of interest with Company. Such work shall include,
but is not limited to, directly or indirectly competing with Company in any way, or acting as an officer, director, employee, consultant, stockholder, volunteer, lender, or agent of any business
enterprise of the same nature as, or which is in direct competition with, the business in which Company is now engaged or in which Company becomes engaged during Executive's employment with Company,
as may be determined by the Board of Directors in its sole discretion. If the Board of Directors believes such a conflict exists during Executive's employment, the Board of Directors may ask Executive
to choose to discontinue the other work or resign employment with Company. If the Board of Directors believes such a conflict exists during any period in which Executive is receiving payments pursuant
to this Agreement, the Board of Directors may ask Executive to choose to discontinue the other work or forfeit the remaining severance payments. In addition, Executive agrees not to refer any client
or
potential client of Company to competitors of Company, without obtaining Company's prior written consent, during Executive's employment and during any period in which Executive is receiving payments
from Company pursuant to this Agreement. 

        9.    Confidentiality and Proprietary Rights.    Executive agrees to read, sign and abide by Company's standard form
of confidentiality agreement, which is provided with this Agreement and incorporated herein by reference. 

        10.    Nonsolicitation.    Executive understands and agrees that Company's employees and customers and any information
regarding Company employees and/or customers is confidential and constitutes trade secrets. Accordingly, Executive agrees that during his employment and for a period of one (1) year after the
termination of his employment, Executive will not, either directly or indirectly, separately or in association with others: (a) interfere with, impair, disrupt or damage Company's relationship
with any of its customers or customer prospects by soliciting or encouraging others to solicit any of them for the purpose of diverting or taking away business from Company; or (b) directly or
indirectly, separately or in association with others, interfere with, impair, disrupt or damage Company's business by soliciting, encouraging or attempting to hire any of Company's employees or
causing others to solicit or encourage any of Company's employees to discontinue their employment with Company. 

        11.    Injunctive Relief.    Executive acknowledges that his breach of the covenants contained in
sections 8-10 would cause irreparable injury to Company and agrees that in the event of any such breach, Company shall be entitled to seek temporary, preliminary and permanent
injunctive relief, to the extent allowed under the California Arbitration Act, without the necessity of proving actual damages or posting any bond or other security. 

        12.    Agreement to Arbitrate.    

        12.1    Scope.    To the fullest extent permitted by law, Executive and Company agree to arbitrate any controversy,
claim or dispute between them arising out of or in any way related to this Agreement, the employment relationship between Company and Executive and any disputes upon termination of employment,
including but not limited to breach of contract, tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, family and medical leave, compensation or
benefits claims, constitutional claims; and any claims for violation of any local, state or federal law, statute, regulation or ordinance or common law. For the purpose of this agreement to arbitrate,
references to "Company" include all parent, subsidiary or related entities and their employees, supervisors, officers, directors, agents, pension or benefit plans, pension or benefit plan sponsors,
fiduciaries, administrators, affiliates and all successors and assigns of any of them, and this agreement
to arbitrate shall apply to them to the extent Executive's claims arise out of or relate to their actions on behalf of Company. 

        12.2    Arbitration Procedure.    Either party may exercise the right to arbitrate by providing the other party with
written notice of any and all claims forming the basis of such right in sufficient detail to inform the other party of the substance of such claims. In no event shall the request for arbitration be
made after the date when institution of legal or equitable proceedings based on such claims would be barred by the applicable statute of limitations. The arbitration will be conducted in San Diego,
California by a single neutral arbitrator and in accordance with the then current rules for resolution of employment disputes of the American Arbitration Association ("AAA"). The parties are entitled
to representation by an attorney or other representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the State of
California, and only such power, and shall follow the law. The parties agree to abide by and perform any award rendered by the arbitrator. The arbitrator shall issue the award in writing and therein
state the essential findings and conclusions on which the award is based. Judgment on the award may be entered in any court having jurisdiction thereof. Company shall bear the costs of the arbitration
filing and hearing fees and the cost of the arbitrator. 

        13.    General Provisions.    

        13.1    Successors and Assigns.    The rights and obligations of Company under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of Company. Executive shall not be entitled to assign any of Executive's rights or obligations under this Agreement. 

        13.2    Waiver.    Either party's failure to enforce any provision of this Agreement shall not in any way be construed
as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement. 

        13.3    Attorneys' Fees.    Each side will bear its own attorneys' fees in any dispute unless a statutory section at
issue, if any, authorizes the award of attorneys' fees to the prevailing party. 

        13.4    Severability.    In the event any provision of this Agreement is found to be unenforceable by an arbitrator or
court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall
receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision
shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby. 

        13.5    Interpretation; Construction.    The headings set forth in this Agreement are for convenience only and shall
not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing Company, but Executive has participated in the negotiation of its terms. Furthermore,
Executive acknowledges that Executive has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the 

normal
rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. 

        13.6    Governing Law.    This Agreement will be governed by and construed in accordance with the laws of the United
States and the State of California. Each party consents to the jurisdiction and venue of the state or federal courts in San Diego, California, if applicable, in any action, suit, or proceeding arising
out of or relating to this Agreement. 

        13.7    Notices.    Any notice required or permitted by this Agreement shall be in writing and shall be delivered as
follows with notice deemed given as indicated: (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by telecopy
or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall
be sent to the addresses set forth below, or such other address as either party may specify in writing. 

        13.8    Survival.    Sections 8 ("No Conflict of Interest"), 9 ("Confidentiality and Proprietary
Rights"), 10 ("Nonsolicitation"), 11 ("Injunctive Relief"), 12 ("Agreement to Arbitrate"), 13 ("General Provisions") and 14 ("Entire Agreement") of this Agreement
shall survive Executive's employment by Company. 

        13.9    Code Section 409A.    This Agreement is intended to comply with Code Section 409A (as amplified
by any Internal Revenue Service or U.S. Treasury Department guidance), and shall be construed and interpreted in accordance with such intent. Executive and Company acknowledge that Executive and
Company intend that the compensation arrangements set forth in this Agreement are in compliance with Section 409A, and Executive and Company agree to cooperate with one another, to the extent
reasonably requested by the other party, to restructure any compensation set forth in this Agreement in a manner, if possible and without any increase in cost to Company, such that no earlier and/or
additional taxes to Executive or Company will arise under Section 409A. Any provision of this Agreement that would cause the payment of any benefit to fail to satisfy Section 409A of the
Code shall have no force and effect until amended to comply with Code Section 409A (which amendment may be retroactive to the extent permitted by the Code or any regulations or rulings
thereunder). 

        14.    Entire Agreement.    This Agreement, including Company's standard form of confidentiality agreement
incorporated herein by reference and Company's 1999 Equity Incentive Plan and related option documents described in subsection 4.3 of this Agreement, constitutes the entire agreement between
the
parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. This Agreement may be amended or
modified only with the written consent of Executive and the Board of Directors of Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever. 

THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS
AGREEMENT ON THE DATES SHOWN BELOW.

					
	 	 	Eric DeMarco
	

Dated:	
 	

  

	

 	
 	
Kratos Defense & Security Solutions, Inc.
	

Dated:	
 	

By:	
 	

  

QuickLinks

Exhibit 10.3

EXECUTIVE EMPLOYMENT AGREEMENT Amended and Restated as of August 4, 2008

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