Document:

Exhibit 10.12

 

EMPLOYMENT AGREEMENT

 

THIS  EMPLOYMENT AGREEMENT, dated as of September
8, 2003, is made by and between Dotronix, Inc., a Minnesota corporation
(hereinafter “Dotronix”) and Robert V. Kling, a resident of the State of
Minnesota (hereinafter “Kling”).

 

WITNESSETH THAT:

 

WHEREAS,
Dotronix desires to employ the services of Kling by reason of his ability and
experience in the business of Dotronix; and

 

WHEREAS, Kling
desires to continue to be employed by Dotronix and is willing to accept
employment in accordance with the provisions hereinafter set forth.

 

NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto agree as follows:

 

1.             Duties.  Dotronix hereby employs Kling as Chief
Financial Officer, Treasurer, and Secretary of Dotronix to supervise and direct
various operations of the business conducted and to be conducted by Dotronix,
subject to the direction and control of the  
Board of Directors of Dotronix, and 
Kling does hereby accept such employment.

 

2.             Term.  This Agreement and Kling’s employment shall
commence on the date hereof and expire on June 30, 2006, unless sooner
terminated as provided for herein.

 

3.             Base Compensation.  Dotronix shall pay, and Kling shall accept,
as base compensation for the services to be performed by Kling hereunder, a
monthly salary of

 

1

 

six thousand five hundred
dollars ($6,500) adjusted annually at the same rate as the average annual
salary adjustment of all Dotronix employees; provided, however, that such
salary shall at no time be less than of six thousand five hundred dollars
($6,500) per month.

 

4.             Bonus Compensation.

 

In addition to the base compensation described in Section 3, Kling
shall be paid a cash incentive payment within 30 days of the end of each
reporting quarter in accordance with the details set  forth below. The calculation of pre-tax earnings or loss for such
fiscal years shall not take into account the accrual or payment of any bonuses
payable to Kling under this Section 4. or to Kurt T. Sadler under an employment
agreement.

 

	
  Quarterly pre-tax earnings

  	
   

  	
  % of
  quarterly pre-tax earnings to

  
	
   

  	
   

  	
   

  
	
  $50,000 to $89,999

  	
   

  	
  3%

  
	
   

  	
   

  	
   

  
	
  $90,000 or greater

  	
   

  	
  5%

  

 

 

5.                                       Stock option
grants

 

Dotronix agrees to issue stock options for
50,000 shares of common stock to Kling under the 1999 Stock Incentive Plan, in
increments of 12,500 shares, starting October 1, 2003, and continuing every six
months thereafter until options for 50,000 has been granted.  The option price for each increment of
12,500 shares shall be the closing price of the stock on the grant date. Each
stock option shall be for 10 years. Once a grant has been made it will remain
in effect until it expires 10 years after issuance.

 

6.             Severance
Benefit.

 

(a)                              In the event Kling’s
employment terminates following a Change of Control as defined in Section 11
below, he shall be paid a severance benefit equal to one year of the base
compensation which would be due under Section 3 (as adjusted, if applicable,
pursuant to Section 3) through the expiration date set forth in Section 2.  This severance benefit shall be due and
payable immediately upon such termination of employment.

 

(b)                             In the event Kling’s
employment terminates following a Change of Control as defined in Section 11
below, he shall be issued the balance of the un-issued stock options pursuant
to section 5.  This severance benefit
shall be due and payable immediately upon such termination of employment.

 

(c)                                  Kling shall not be
entitled to a severance benefit pursuant to this Section 6 in the event of his
termination for “cause” as defined in Section 10 below

 

2

 

or in the event of his resignation (other than a resignation following
a Change of Control, as contemplated by the last sentence of Section 11).

 

7.                                       Activities
During Employment.  Kling does
hereby warrant and represent to Dotronix that he is not subject to any
agreement or arrangement which would preclude him from carrying out the terms
of this Agreement.

 

8.                                       Benefits.  Kling shall be entitled to participate in
any insurance, pension and other benefits which may be afforded by Dotronix to
its employees engaged in a supervisory or management position.

 

9.             Covenant Not to
Compete.  Kling agrees that, during
the term of this Agreement he will not, directly or indirectly, on his own
behalf or as a partner, officer, employee, consultant, stockholder, director,
or trustee of any person, firm or corporation solicit, accept or service any
customers of Dotronix, nor engage in any business which would compete with, or
be of a similar nature to, the business being carried on by Dotronix.  The parties hereto hereby recognize that
money damages would not be an adequate remedy for the breach of this covenant
and Kling hereby agrees to the grant of specific performance of this covenant
or other appropriate equitable relief by a court of competent jurisdiction in
the event of its breach.

 

10.           Termination.  Notwithstanding any other provision
contained herein, this Agreement may be terminated by (a) the mutual agreement
of the parties hereto; (b) the death of Kling, or the disability of Kling which
prevents him from performing his normal duties for a period of six consecutive
months or more; or (c) Dotronix for cause. 
For purposes of this Agreement, the term “cause” shall mean deliberate
misconduct on the part of Kling which is seriously injurious to the interests
of Dotronix, which misconduct shall be specified in a written notice of
termination delivered to Kling by the Board of Directors of Dotronix.

 

11.           Change of Control.  A “Change of Control” shall have occurred if

 

(i)             Kling’s employment with Dotronix
thereafter is terminated (other than (A) for “cause” as defined in Section 10
above, or (B) by virtue of the death or disability of Kling, or (C) by means of
the resignation of Kling), or

 

(ii)            Kling’s responsibilities with Dotronix
thereafter are materially reduced without his agreement, or Kling is required
to relocate without his agreement.

 

A resignation by Kling following the occurrence of an event specified
in (ii) above shall not be deemed a resignation by Kling for purposes of (i)(C)
above or for purposes of Section 6(b).

 

12.           Entire
Agreement and Governing Law.  This
Agreement contains the entire agreement between the parties hereto and it shall
be amended or modified only by written instruments signed by both parties
hereto.  This Agreement shall in all
respects be governed, enforced and interpreted in accordance with the laws of
the State of Minnesota.

 

3

 

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

 

	
   

  	
  DOTRONIX, INC.

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Kurt T. Sadler

  	
   

  
	
   

  	
   

  	
  Kurt T. Sadler

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Robert V. Kling

  	
   

  

 

4Exhibit 10.7.1

 

AMENDMENT ONE

TO THE EMPLOYMENT AGREEMENT

DATED DECEMBER 31, 1998

BETWEEN STUART R. LLOYD AND

PERFORMANCE ENGINEERING CORPORATION

 

The Agreement is hereby modified as follows:

 

Paragraph 5, subparagraph (b): delete the second paragraph of subparagraph
(b) and insert the following:

 

“If Lloyd leaves his employment as a result of PEC’s breach of this
Agreement, or if PEC terminates Lloyd’s employment in breach of this Agreement,
or if Lloyd’s employment terminates for Good Reason as a result of a Change in
Control, both as defined under Paragraph 6, below, Lloyd shall be under no
restriction whatsoever as to the nature of the business or employment
activities in which he may engage after termination of his employment.”

 

Paragraph 5, subparagraph (d): add the following to the end of the
subparagraph:

 

“In addition, if Lloyd’s employment terminates for Good Reason as a
result of a Change in Control, both as defined under Paragraph 6, below, Lloyd
shall not receive a  lump sum payment
but shall instead receive payments on an equal monthly basis for the term of
the period covered.”

 

Both parties being in accord, and in consideration of Lloyd’s continued
employment and the other mutual covenants and obligations as first set forth in
the Agreement, the parties have hereto set their hands this 30th day
of September, 2003:

 

	
  /s/ STUART R. LLOYD

  	
   

  	
  /S/ DAVID C. KARLGAARD

  	
   

  
	
  Stuart R. Lloyd

  	
   

  	
  PEC Solutions, Inc. (Successor in Interest to Performance Engineering

  Corporation)

  
	
   

  	
   

  	
  By: David C. Karlgaard

  
	
   

  	
   

  
	
  /s/ SHARON M. OWLETT

  	
   

  	
  /s/ SHARON M. OWLETT

  	
   

  
	
  Witness

  	
  WitnessExhibit 10.30

 

PEC SOLUTIONS, INC.

 

KEY EXECUTIVE SEVERANCE PLAN

 

I.  Preamble
and Statement of Purpose.

 

The purpose of this Plan is to assure PEC Solutions, Inc. (“PEC”) and
its subsidiaries (PEC, together with its subsidiaries, the “Corporation”) of
the continued dedication, loyalty, and service of, and the availability of
objective advice and counsel from, key employees of the Corporation
notwithstanding the possibility, threat or occurrence of a bid or other action
to take over control of the Corporation.

 

In the event PEC receives any proposals from a third party concerning a
possible business combination with PEC, or acquisition of PEC’s equity
securities, the Board of Directors of PEC (the “Board”) believes that it would
be imperative that the Board, the Corporation and its senior management be able
to rely on the Corporation’s key employees to continue in their positions and
be available for advice, if requested, without concern that those individuals
might be distracted by the personal uncertainties and risks created by such a
proposal, or be influenced to consider other employment opportunities or
prospects because of such uncertainties or risks.

 

Should PEC receive any such proposals, in addition to their regular
duties, such key employees, in light of their experience and knowledge gained
within that portion of the business in which they are principally engaged, may
be called upon to assist in the assessment of proposals, advise senior
management and the Board as to whether such proposals would be in the best
interest of PEC and its shareholders, and take such other actions as the Board
might determine to be appropriate.

 

II.  Eligible
Executives.

 

The following individuals are eligible to participate in this Plan: (i)
the executives of PEC (Grade Level 11 and above), and (ii) those key employees
of the Corporation who are from time to time designated by the Compensation
Committee of the Board (the “Compensation Committee”) as eligible to
participate in this Plan.

 

 

Each eligible employee shall become a Participant in the Plan upon his
or her execution of a letter agreement in the form, or substantially in the
form, of Exhibit A, attached to and incorporated in this Plan (the “Letter
Agreement”).  The executed Letter
Agreement shall constitute the Participant’s agreement to the terms and
conditions of participation in this Plan and shall set forth the amount of the
Lump Sum Cash Payment under Section 3.2.2, the length of the Coverage
Period for welfare benefit continuation under Section 3.2.3, and such
other terms and conditions as the Compensation Committee may determine
applicable to the Participant.

 

A Participant who is no longer employed by the Corporation shall cease
to be a Participant in the Plan, unless the Participant’s employment ceases (i)
within six (6) months after the Effective Date (as defined in
Section 3.1.3) or (ii) during any period of time when the Board has
knowledge that any third person has taken steps reasonably calculated to effect
a Change of Control (as defined in Section 3.1.2) until, in the opinion of
the Board, the third party has abandoned or terminated its efforts to effect a
Change of Control.  Any decision by the
Board that, in its opinion, a third party has or has not taken steps reasonably
calculated to effect a Change of Control, or that, in its opinion, the third
person has abandoned or terminated its efforts to effect a Change of Control,
shall be conclusive and binding on the Participants.

 

III.  Plan
Provisions.

 

3.1                                 Definitions.  The following terms, as used in this Plan
with capitalized first letters, shall have the meanings as provided in this
Section 3.1:

 

3.1.1.                     “Cause”.  “Cause” means (i) the Participant’s willful
and continued failure substantially to perform the duties of his or her
position (other than as a result of disability, as defined in
Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the
“Code”), or as a result of termination by the Participant for Good Reason)
after written notice to the Participant by the Board specifying such failure,
provided that such “Cause” shall have been found by a majority vote of the
Board after at least ten (10) days’ written notice to the Participant
specifying the failure on the part of the Participant and after an opportunity
for the Participant to be heard at a meeting of the Board; (ii) any willful act
or omission by the Participant constituting dishonesty, fraud or other
malfeasance, and any act or omission by the Participant constituting immoral
conduct, which in any such case is injurious to the financial condition or
business reputation of the Corporation; or (iii) the Participant’s indictment
of a felony under the laws of

 

 

 

the United States or any state thereof or any other jurisdiction in
which the Corporation conducts business. 
For purposes of this definition, no act or failure to act shall be
deemed “willful” unless effected by the Participant not in good faith and
without a reasonable belief that such action or failure to act was in or not
opposed to the best interests of the Corporation.

 

3.1.2.                     “Change
of Control”.  “Change of Control”
means the occurrence of any of the following:

 

(i)                                     Any
“person” (as defined in this Section 3.1.2) is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)), directly or indirectly, of securities of PEC
(not including in the securities beneficially owned by such person any
securities acquired directly from PEC other than in connection with PEC’s
acquisition of a business) representing more than fifty percent (50%) of the
combined voting power of PEC’s then outstanding securities; or

 

(ii)                                  As
a result of, or in connection with, any cash tender or exchange offer, merger
or other business combination, sale of assets, or contested election, or any
combination of the foregoing transactions, the individuals who were directors
of PEC prior thereto shall cease to constitute a majority of the Board of
Directors of PEC or any successor thereto.

 

As used in this Section, the term “person” has the meaning ascribed
thereto in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d)(3) and 14(d)(2) thereof, except that such term shall not
include (A) the Corporation, (B) any trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation, (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (D) any corporation owned, directly or indirectly, by the
stockholders of PEC in substantially the same proportions as their ownership of
common stock of PEC.

 

3.1.3.                     “Effective
Date”.  “Effective Date” means the
date on which a Change of Control occurs. 
In the event of a Change of Control occurring within six (6) months
after a prior Change of Control, “Effective Date” shall mean the date on which
the subsequent Change of Control occurs. 
Notwithstanding anything in this Plan to the contrary, if a
Participant’s employment with the Corporation had terminated prior to the date
on which the Change of Control occurred, and if it is reasonably demonstrated
by the Participant to the Board that such termination of employment either was
at the request of a third party who had taken steps reasonably calculated

 

 

 

to effect the Change of Control or otherwise arose in connection with
or in anticipation of the Change of Control, then, for all purposes of this
Plan, “Effective Date” shall mean, with respect to such Participant only, the
date immediately prior to the date of such termination of employment.

 

3.1.4.                     “Good
Reason”.  “Good Reason” means (i)
removal from, or failure to be reappointed or reelected to, the Participant’s
principal positions in existence immediately prior to Change of Control (other
than as a result of a promotion); (ii) diminution in the Participant’s title,
position, duties or responsibilities, or the assignment to the Participant of
duties that are inconsistent, in a material respect, with the scope of duties
and responsibilities associated with the Participant’s position in existence
immediately prior to the Change of Control; (iii) reduction in the
Participant’s compensation as in effect immediately preceding the Effective
Date; (iv) relocation of the Participant’s principal workplace without his or
her consent to a location which is more than fifty (50) miles from the
Participant’s principal workplace in existence on the Effective Date; or (v)
any failure by PEC to comply with and satisfy the requirements of
Section 3.5.7, provided that the successor shall have received at least
ten (10) days’ prior written notice from PEC or the Participant of the
requirements of Section 3.5.7.  For
purposes of clauses (i), (ii) or (iii) of the preceding sentence, an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by PEC promptly after receipt of notice thereof given by the
Participant shall be excluded.  For
purposes of clause (ii), no diminution of title, position, duties or
responsibilities shall be deemed to occur solely because PEC becomes a
subsidiary of another corporation or change in the reporting hierarchy incident
thereto.

 

3.2                                 Benefits.

 

3.2.1.                     Triggering
Event.  In the event the
Participant’s employment with the Corporation is terminated without Cause by
the Corporation, or for Good Reason by the Participant, on or within six (6)
months after the Effective Date, PEC shall (in addition to any compensation or
benefits to which the Participant may otherwise be entitled under any other
agreement, plan or arrangement with the Corporation, other than amounts
excluded by Section 3.5.2) make the payments and provide the benefits to
the Participant as specified under Sections 3.2.2 and 3.2.3.  For purposes of this Section 3.2.1, a
Participant’s employment with the Corporation will be deemed to have terminated
on the earlier of the date the Participant’s employment with the Corporation
ceases or the date that written notice of any such termination is received by
the Participant or by the Corporation, as the case may be, even though the
parties may agree in

 

 

 

connection therewith that the Participant’s employment with the
Corporation will continue for a specified period thereafter.  The failure by the Participant or the
Corporation to set forth in any such notice sufficient facts or circumstances
showing Good Reason or Cause, as the case may be, shall not waive any right of
the Participant or the Corporation or preclude either party from asserting such
facts or circumstances in the enforcement of any such right.

 

3.2.2.                     Lump
Sum Cash Payment.  On or before the
Participant’s last day of employment with the Corporation, PEC shall pay to the
Participant as compensation for services rendered to the Corporation a Lump Sum
Cash Payment (subject to any applicable payroll or other taxes required to be
withheld) in the amount determined in accordance with the Letter Agreement,
subject to Section 3.4.

 

3.2.3.                     Welfare
Benefit Continuation.  The
Participant’s (and, where applicable, members of the Participant’s family’s)
participation in the group medical, dental, life (including split dollar, if
any) and disability plans maintained by the Corporation shall be continued on
substantially the same basis as if the Participant were an employee of the
Corporation until the end of the Coverage Period as set forth in the Letter
Agreement.  In the event that PEC is
unable for any reason to provide for the Participant’s (and, where applicable,
the Participant’s family’s) continued participation in one or more of such
plans during the Coverage Period, PEC shall pay or provide at its expense
equivalent benefit coverage for the remainder of the Coverage Period.  The Coverage Period shall, to the extent
allowed by law, be taken into account as a period of continuation coverage for
purposes of Part 6 of Title I of the Employee Retirement Income Security Act of
1974, as amended, and for purposes of any other obligation of the Corporation
to provide any continued coverage to the Participant (and, where applicable,
members of the Participant’s family) under any group medical, dental, life or
disability plan.  The Corporation shall
also pay to the Participant at least annually an amount which shall be
sufficient on an after tax basis to compensate the Participant for all
additional taxes incurred by reason of any income realized as a result of the
continued coverage under this Section, to the extent such taxes result from the
Participant’s status as a non-employee and would not be incurred if Participant
was an employee of the Corporation, on a grossed-up basis, at the highest
marginal income tax rate for individuals.

 

3.2.4.                     Accelerated
Vesting of Options.  All options
granted to a Participant to purchase common stock of PEC under any plan,
program or arrangement maintained by PEC, shall become fully vested and
exercisable as of the Effective Date of a Change of Control as defined in

 

 

Section 3.1.2(ii), to the extent such options are then
outstanding.  The preceding sentence
shall not apply with respect to any option if: (i) in connection with the
Change of Control, another entity (a) shall have assumed or will assume the
obligations of PEC with respect to such option, or (b) shall have issued or
will issue one or more options of equivalent economic value with equivalent
vesting conditions to replace such option; and (ii) the assumed or replacement
option as set forth in clause (i), pursuant to its terms, shall vest as of the
date the Participant’s employment with the Corporation is terminated without
Cause by the Corporation, or for Good Reason by the Participant, on or within
six (6) months after the Effective Date. 
The Board shall have sole discretion in the determination of whether a
replacement option is of equivalent economic value to the replaced option.

 

3.2.5                        Exercisability
of Options After Termination.  If
any accounting requirements  with
respect to a Change of Control restrict a Participant’s sale or transfer of
stock subject to an option described in Section 3.2.4 which is not an
“incentive stock option” within the meaning of Section 422 of the Code,
then the period during which the Participant may exercise such option following
his or her termination of employment with the Corporation shall be determined
by excluding the period during which the Participant is subject to that
restriction.

 

3.3                                 Adjustment
of Lump Sum Cash Payment.

 

3.3.1.                     Adjustment.
 Notwithstanding anything in this Plan
or any Letter Agreement to the contrary, in the event the Law or Accounting
Firm (as defined in Section 3.3.2) shall determine that the Lump Sum Cash
Payment and any other payment or distribution in the nature of compensation by
the Corporation to or for the benefit of the Participant, whether paid or
payable or distributed or distributable pursuant to the terms of this Plan or
otherwise (the Lump Sum Cash Payment, together with such other payments and
distributions, the “Payments”), would cause any portion of such Payments to be
subject to the excise tax imposed by Section 4999 (or any successor
provision) of the Code (the “Parachute Payments”), the Participant’s Lump Sum
Cash Payment shall be reduced to an amount (not less than zero) which shall not
cause any portion of the Payments to constitute Parachute Payments, provided
that no such reduction shall be made if the Participant’s Payments, after the
reduction and after the application of Federal income tax at the highest rate
applicable to individual taxpayers, shall not be greater than the present value
(determined in accordance with Section 280G of the Code) of the Payments
before the reduction but after the application of (i) excise tax under
Section 4999 of the Code and (ii) Federal income tax at the highest rate
applicable to individual taxpayers.

 

 

 

3.3.2.                     Determination.  All determinations required to be made under
this Section 3.3, including the assumptions to be utilized in arriving at
such determination, shall be made by Piper Rudnick L.L.P. or other nationally
recognized law or accounting firm (the “Law or Accounting Firm”), which shall
provide detailed supporting calculations both to PEC and the Participant (i)
within fifteen (15) business days after the receipt of a notice from the
Participant that he or she may have a Parachute Payment, or (ii) at such
earlier time as may be requested by PEC. 
The Law or Accounting Firm may employ and rely upon the opinions of actuarial
or accounting professionals to the extent it deems necessary or advisable.  In the event that the Law or Accounting Firm
determines, for any reason, that it is unable to perform such services, or
declines to do so, PEC shall select another nationally recognized law or
accounting firm to make the determinations required under this
Section (which law or accounting firm shall then be referred to as the Law
or Accounting Firm hereunder). Any Accounting Firm providing services to the
Corporation or to any person (within the meaning of 3.1.2., above) with respect
to the Change in Control shall not serve as the Accounting Firm under this
Section 3.3. All fees and expenses of the Law or Accounting Firm shall be
borne solely by PEC.  Any determination
by the Law or Accounting Firm shall be binding upon PEC and the Participant.

 

3.4                                 Terms
and Conditions of Participation

 

3.4.1.                     Conditions
of Participation.  As a condition to
being covered by the Plan, each Participant, by executing the Letter Agreement,
shall acknowledge and agree that (i) except as may otherwise be expressly
provided under any other executed agreement between the Participant and the
Corporation, nothing contained in this Plan (including, but not limited to,
using the term “Cause” to determine benefits under this Plan) is intended to change
the fact that the employment of the Participant by the Corporation is “at will”
and, prior to the Effective Date, may be terminated by either the Participant
or the Corporation at any time, (ii) the Participant shall be bound by, and
comply with, the requirements of Sections 3.5.3 and 3.5.4, and (iii) the
Participant consents to the modifications to the options as provided in
Sections 3.2.4 and 3.2.5.  Moreover, if
prior to the Effective Date, the Participant’s employment with the Corporation
terminates, then the Participant shall have no further rights under this Plan.

 

 

 

3.4.2.                     Non-Duplication.  As a
condition to being covered by this Plan, and notwithstanding any other prior
agreement to the contrary, each Participant, by executing the Letter Agreement,
shall agree that, if Participant is eligible to receive salary continuation,
severance or similar cash payments from the Corporation under any other plan,
program, policy or agreement, then Participant shall be entitled to receive the
severance payable under Section 3.2.2 of this Agreement (the “Severance
Payment”) only if (a) the Severance Payment results in a greater financial
benefit to Participant than the aggregate net present value of the payments
payable under such other plans, programs, policies and agreements and
(b) Participant waives in writing all rights to receive the salary
continuation, severance or similar cash payments under such other plans,
programs, policies and agreements.  For
purposes of the immediately preceding sentence, the net present value of a
payment shall be determined by the Law or Accounting Firm as defined in 3.3.2,
above, measured as of the date that the Severance Payment would otherwise be
payable and based upon a discount factor determined to be reasonable by the Law
or Accounting Firm in good faith.  If
Participant is eligible to continue participation in the welfare benefit plans
of the Corporation after termination of employment pursuant to the provisions
of any plan, program, policy or agreement on terms that are different from the
terms for continued participation provided under Section 3.2.3 of this
Agreement, Participant shall be entitled to select whether the terms of this
Agreement or the terms of such other plan, program, policy or agreement shall
govern Participant’s continued participation in such welfare benefit plans;
provided, however, that no participation in or receipt of benefits under this
Plan or any other plan, program, policy or agreement shall be deemed to waive
or diminish any right that Participant or Participant’s eligible dependents has
under the Consolidated Omnibus Budget Reconciliation Act of 1985.

 

3.4.3.                     Amendment
and Termination.  The Plan may not
be amended or terminated after the Effective Date.  Prior to the Effective Date, the Board may, in its sole
discretion, modify or amend this Plan in any respect, or terminate the Plan
(including with respect to individuals then participating in the Plan),
provided (i) such action is taken and becomes effective at least one (1) year
prior to the Effective Date and such action is communicated to the Participants
prior to the Effective Date, (ii) the Board, in its sole discretion, determines
that such actions are necessary, in its opinion, to permit any business
combination that is authorized by the Board to comply with requirements for
treatment as a pooling of interests transaction for accounting purposes under
generally accepted accounting principles, if such transaction is intended to
meet, and is conditioned upon compliance with, such requirements, or (iii) such
actions do not reduce the amount or defer the receipt of any payment or benefit
provided under this Plan.

 

 

 

3.5                                 General.

 

3.5.1.                     Indemnification.  If litigation or arbitration shall be
brought to enforce or interpret any provision of this Plan which relates to
PEC’s obligation to make payments hereunder, then PEC, to the extent permitted
by applicable law and PEC’s Charter, shall indemnify the Participant for his or
her reasonable attorneys’ fees and disbursements incurred in such proceedings,
and shall pay pre-judgment interest on any money judgment obtained by the
Participant calculated at the prime rate of interest published from time to
time by The Wall Street Journal (“Prime Rate”) from the date that payment(s) to
him or her should have been made under this Plan.

 

3.5.2.                     Payment
Obligations; Overdue Payments.  The
Corporation’s obligations to make the payments and provide the benefits to the
Participant under this Plan shall be absolute and unconditional and shall not
be affected in any way by any circumstances, including, without limitation, any
offset, counterclaim, recoupment, defense or other right which PEC may have
against the Participant or anyone else, provided, however, that
as a condition to payment of amounts under this Plan, the Participant shall
execute a general release and waiver (the “Waiver”), in form and substance
reasonably satisfactory to PEC, of all claims relating to the Participant’s
employment by the Corporation and the termination of such employment, including,
but not limited to, discrimination claims, employment-related tort claims,
contract claims and claims under this Plan (other than claims with respect to
benefits under the Corporation’s tax-qualified retirement plans, continuation
of coverage or benefits solely as required by Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, or any obligation of PEC to provide
future performance under Section 3.2.3). 
All amounts payable by PEC hereunder shall be paid without notice or
demand, except as may be required with respect to the Waiver.  Each and every payment made hereunder by PEC
shall be final.  The Corporation shall
not seek to recover all or any part of such payment from the Participant or
from whosoever may be entitled thereto, for any reason whatsoever.  The Participant shall not be obligated to
seek other employment in mitigation of the amounts payable or arrangements made
under any provision of this Plan, and the obtaining of any such other employment
shall in no event effect any reduction of PEC’s obligations to pay the Lump Sum
Cash Payment.  The Participant shall be
entitled to receive interest at the Prime Rate on any payments under this Plan
that are overdue, provided, however, that no payments shall be
deemed to be overdue until the Participant executes the Waiver and any
rescission period with respect to such Waiver has expired.

 

 

 

3.5.3.                     Confidential
Information.  The Participant shall
at all times hold in a fiduciary capacity for the benefit of the Corporation
all secret, confidential or proprietary information, knowledge or data relating
to the Corporation, and its respective businesses, which shall have been
obtained by the Participant during the Participant’s employment by the
Corporation and which shall not be or become public knowledge (other than by
acts by the Participant or representatives of the Participant in violation of
this Plan) including, but not limited to, information regarding the technology,
proprietary methodologies and products, software, other trade secrets, clients,
customers, consultants and agents of the Corporation (the “Confidential
Information”).  During the Participant’s
employment with the Corporation and after termination of such employment at any
time or for any reason, and regardless of whether any payments are made to the
Participant under this Plan as a result of such termination, the Participant
shall not, without the prior written consent of the Corporation or as may
otherwise be required by law or legal process, communicate or divulge any
Confidential Information to any person other than the Corporation and those
designated by it or use any Confidential Information except for the benefit of
the Corporation.  Immediately upon
termination of the Participant’s employment with the Corporation at any time or
for any reason, the Participant shall return to the Corporation all
Confidential Information, including, but not limited to, any and all copies,
reproductions, notes or extracts of Confidential Information. The terms of this
Section shall be in addition to, and not a replacement of, the provisions
of the Corporations’s “Employee Confidentiality and Inventions Agreement”.

 

3.5.4.                     Solicitation
of Employees.  During the
Participant’s employment with the Corporation and for a period of twelve (12)
months after termination of such employment at any time and for any reason, and
regardless of whether any payments are made to the Participant under this Plan
as a result of such termination, the Participant shall not solicit, participate
in or promote the solicitation of any person who was employed by the
Corporation at the time of the Participant’s termination of employment with the
Corporation to leave the employ of the Corporation, or, on behalf of himself or
any other person, hire, employ or engage any such person.  The Participant further agrees that, during
such time, if an employee of the Corporation contacts the Participant about
prospective employment, the Participant will inform such employee that he or she
cannot discuss the matter further without informing the Corporation.

 

3.5.5.                     Application
of Restrictions Respecting Confidential Information and Solicitation of
Employees.  The requirements and
obligations of the Participant under Sections 3.5.3 and 3.5.4 shall be in
addition to, and not a limitation under, any other requirements and obligations
of

 

 

 

the Participant, at law or otherwise. 
The term “person” for purposes of Sections 3.5.3 and 3.5.4 shall include
any individual or entity, including any corporation, trust or partnership.

 

3.5.7.                     Successors.  All right under this Plan are personal to
the Participant and without the prior written consent of PEC shall not be
assignable by the Participant otherwise than by will or the laws of descent and
distribution.  This Plan shall inure to
the benefit of and be enforceable by the Participant’s legal
representative.  This Plan shall inure
to the benefit of and be binding upon PEC and its successors and assigns.  PEC will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of PEC to assume expressly and
agree to perform this Plan in the same manner and to the same extent that PEC
would be required to perform it if no such event resulting in a successor had
taken place.

 

3.5.8.                     Controlling
Law; Jurisdiction.  This Plan shall
in all respects be governed by, and construed in accordance with, the laws of
the Commonwealth of Virginia (without regard to the principles of conflicts of
laws).  The Corporation and the
Participants irrevocably consent and submit to the jurisdiction of Fairfax
County Circuit Court, or in any Federal court sitting in the Commonwealth of
Virginia, for the purposes of any controversy, claim, dispute or action arising
out of or related to this Plan, and hereby waive any defense of an inconvenient
forum and any right of jurisdiction on account of the parties’ place of
residence or domicile.

 

3.5.9.                     Severability.  Any provision in this Plan which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating or affecting the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

 

Date:  July 23, 2003

 

 

 

EXHIBIT A

 

KEY EXECUTIVE SEVERANCE PLAN

 

July 23, 2003

 

Dear Chuck:

 

On July 14, 2003, the Compensation Committee of the Board of
Director of PEC, Inc. approved the enclosed PEC, Inc. Key Executive Severance
Plan (the “Plan”).  You are eligible to
participate in the Plan and will become a Participant therein upon signing this
letter agreement.  As used in this
letter, each capitalized term, if not defined herein, has the meaning ascribed
to it under the Plan.

 

For purposes of Section 3.2.2 of the Plan, the amount of the Lump
Sum Cash Payment, in the event you become entitled to benefits under the Plan,
will be equal to the product of (a) 0.5
and (b) the sum of (i) your actual annual rate of base salary as in effect
immediately prior to either the date of your termination of employment with the
Corporation or the Effective Date, whichever is higher, and (ii) the average of
your annual bonus payments under the Corporation’s annual bonus plan for the
last three (3) years ending before either the Effective Date or the date your
employment with the Corporation terminates, whichever is higher.

 

If you will not have been eligible to participate in the annual bonus
plan for all three (3) years ending before either the Effective Date or the
date of your termination, your average annual bonus payment (with respect to
the years ending before the Effective Date or the date of termination, as
applicable) shall be determined only for the years with respect to which you
shall have been eligible to participate. 
For purposes of the Plan, your base salary will include (i) your cash
allowances reportable as wages in Form W-2, and (ii) the dollar value of any
compensation that would have been paid to you but was deferred or excluded for
Federal income tax purposes under a deferred compensation plan, program or
arrangement.

 

For purposes of Section 3.2.3, the Coverage Period, in the event
you become entitled to benefits under the Plan, will begin on the date
immediately following the termination of your employment with the Corporation
and shall end on the date six (6)
months thereafter.

 

Please review the provisions of the Plan and its stated purposes
carefully, including particularly the terms and conditions stated in Sections
3.4 (Terms and Conditions of Participation), 3.5.3 (Confidential Information),
and 3.5.4 (Solicitation of Employees), to which you will agree by executing
this letter agreement.  In order to be
entitled to the benefits and agree to your obligations provided in the Plan,
please execute the enclosed copy of this letter and return it to Alan
Harbitter, Secretary of PEC, whereupon the Plan and this letter will become a
legally binding agreement between you and PEC.

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  PEC SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David C. Karlgaard

  	
   

  
	
   

  	
   

  
	
  I hereby confirm my agreement with the foregoing:

  	
   

  
	
   

  	
   

  
	
  /s/ Charles E. Owlett

  	
   

  	
   

  
	
  Date:  8/19/03

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