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EXHIBIT 10.4 SM&A Executive Severance and
Retention Agreement THIS
EXECUTIVE SEVERANCE AND RETENTION AGREEMENT (this "Agreement") by
and between SM&A, a Delaware corporation (the "Company"), and
Peter Pace (the "Executive"), is made and entered into as of
August 25, 2008. WHEREAS,
the Company has determined that the Executive will play a critical
role in the operations of the Company;
WHEREAS, the Board of Directors of
the Company (the "Board") has determined that appropriate steps
should be taken to reinforce and encourage the continued employment
and dedication of the Executive;
WHEREAS , the Executive
entered into that certain Employment Agreement, dated
January 17, 2008 ("Employment Agreement"), which shall be
superseded and replaced in part by this Agreement, as set forth
herein; and WHEREAS, the Executive entered into that certain
Proprietary Information and Invention Assignment Agreement dated,
February 12, 2008 ("Proprietary Information Agreement"), which
shall continue in full force and effect.
NOW, THEREFORE, as an inducement for
and in consideration of the Executive remaining in its employ, the
Company agrees that the Executive shall receive the severance
benefits set forth in this Agreement in the event the
Executive’s employment with the Company is terminated under
the circumstances described below.
1. Termination of
Employment .
1.1
Equity . The effect of a termination, whether in connection
with a Change in Control (as defined below) or not, on any of the
Executive’s stock options, restricted stock awards or other
equity awards shall be determined in accordance with the terms of
such options or awards and shall not be affected by this Agreement.
1.2
Termination Without Cause Or For Good Reason . The
Executive’s employment with the Company may be terminated at
any time by the Company without Cause (as defined below) by giving
the Executive thirty (30) days’ advance written notice
of such termination, or by the Executive for Good Reason (as
defined below) by giving the Company thirty (30) days’
advance written notice of such termination; provided, however, that
no condition shall constitute Good Reason unless the Executive
provides notice of such condition to the Company within ninety
(90) days of its initial existence, and the Company fails to
remedy the condition within thirty (30) days of its receipt of
such notice, and provided, further, that the Executive terminates
employment with the Company within two (2) years following the
initial existence of the Good Reason SM&A Confidential
Pace Executive Severance and Retention Agreement
condition. In the event of termination pursuant to this
Section 1.2, the Company shall pay to the Executive the
following amounts:
(a) On
the effective date of the Executive’s termination (the "Date
of Termination"), the sum of (i) the Executive’s base
salary through the Date of Termination, (ii) any earned but
unpaid bonus amounts with respect to periods ending prior to the
Date of Termination to which the Executive is entitled, and
(iii) any accrued but unused paid time off through the Date of
Termination (collectively, the "Accrued Obligations").
(b) If
(i) no Change in Control has occurred in the twenty-four
(24) months immediately preceding the Date of Termination,
then, on a monthly basis, in accordance with the Company’s
standard payroll practice prior to the Date of Termination, for a
period of three (3) months following the Date of Termination,
an amount equal to the sum of one-twelfth of the Executive’s
highest average annual base salary with the Company during the
three-year period prior to the Date of Termination; and
(ii) if a Change in Control has occurred in the twenty-four
(24) months immediately preceding the Date of Termination, or
if the Executive’s employment with the Company is terminated
prior to the date on which a Change in Control occurs, and it is
reasonably demonstrated by the Executive that such termination of
employment was at the request of a third party who had then taken
steps reasonably calculated to effect a future Change in Control or
otherwise arose in connection with or in anticipation of a future
Change in Control, then on a monthly basis, in accordance with the
Company’s standard payroll practice prior to the Date of
Termination, for a period of eighteen (18) months following
the Date of Termination, an amount equal to the sum of one-twelfth
of the Executive’s highest average annual base salary at the
Company during the three-year period prior to the Date of
Termination. In addition, the Company shall pay to Employee
(x) all incentive bonus payments to be made as set forth in
section 3.a. of Exhibit A of the Employment Agreement, and
(y) a pro-rata portion of any other incentive compensation
described in Exhibit A of the Employment Agreement to which
Employee was entitled for the fiscal year or quarter, as
applicable, in which the Employment was terminated (with such
pro-rata portion to be based on the ratio of the number of days
during such fiscal year or quarter that Employee was employed by
the Company to the total number of days in such fiscal year or
quarter).
(c) If
(i) no Change in Control has occurred in the twenty-four
(24) months immediately preceding the Date of Termination,
then (A) provided the Executive is eligible to make and makes
a timely election for continuation coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA")
under any group health plan, continuation of coverage in effect for
the Executive at the Date of Termination shall be provided under
such plans of the Company, without a premium charge or cost to the
Executive for the three (3) month period commencing after the
Date of Termination, or, if earlier, until the date the Executive
is no longer eligible for COBRA (whether because the Executive is
covered by a new employer’s group health or otherwise);
provided, however, the Executive agrees to notify the Company
immediately if the Executive becomes covered by another group
health plan; and (B) reimbursement to the Executive under the
Company’s Executive Edge plan SM&A Confidential
Pace Executive Severance and Retention Agreement
for the three (3) month period commencing after the Date of
Termination, which reimbursement shall continue even if the
Executive commences new employment; provided, however, that any
reimbursements made to the Executive for Executive Edge shall not
exceed Ten Thousand Dollars ($10,000.00); and (ii) if a Change
in Control has occurred in the twenty-four (24) months
immediately preceding the Date of Termination, or if the
Executive’s employment with the Company is terminated prior
to the date on which a Change in Control occurs, and it is
reasonably demonstrated by the Executive that such termination of
employment was at the request of a third party who had taken steps
reasonably calculated to effect a future Change in Control or
otherwise arose in connection with or in anticipation of a future
Change in Control, then (A) provided the Executive is eligible
to make and makes a timely election for continuation coverage under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA") under any group health plan, continuation of
coverage in effect for the Executive at the Date of Termination
shall be provided under such plans of the Company, without a
premium charge or cost to the Executive for the eighteen
(18) month period commencing after the Date of Termination,
or, if earlier, until the date the Executive is no longer eligible
for COBRA (whether because the Executive is covered by a new
employer’s group health or otherwise); provided, however, the
Executive agrees to notify the Company immediately if the Executive
becomes covered by another group health plan; and (B) reimbursement
to the Executive under the Company’s Executive Edge plan for
the eighteen (18) month period commencing after the Date of
Termination, which reimbursement shall continue even if the
Executive commences new employment; provided, however, that any
reimbursements made to the Executive for Executive Edge shall not
exceed Ten Thousand Dollars ($10,000.00).
(d) The
Executive shall only be entitled to the severance, the COBRA
payments (if applicable) and the Executive Edge reimbursements
described in Sections 1.2(b)-(c) of this Agreement if
(i) the Executive executes (and then the Executive does not
rescind, as may be permitted by law) a general release of all
claims against the Company and its affiliates in the form required
by the Company, and (ii) the Executive continues to comply
with the Executive’s continuing obligations under the
Proprietary Information Agreement. The Company shall pay the
Executive the severance payments and commence payments of the
reimbursements described in Sections 1.2(b)-(c) on the first
regular payroll period following the effective date of the general
release as set forth in the general release.
1.3
Termination For Cause . The Company may terminate the
Executive’s employment for Cause at any time effective
immediately upon written notice. Except for payment of the Accrued
Obligations (or as otherwise required by law), upon termination for
Cause, regardless of whether any Change in Control has occurred
prior to, or occurs at or after, the Date of Termination, the
Company shall have no further obligation to the Executive under
this Agreement by way of compensation or otherwise.
1.4
Resignation Without Good Reason . The Executive may
terminate his employment without Good Reason at any time by giving
the Company thirty (30) days’ advance written notice of
such termination. Except for the payment of the Accrued Obligations
(or as otherwise required by law), upon such termination without
Good SM&A Confidential
Pace Executive Severance and Retention Agreement
Reason, regardless of whether any Change in Control has occurred
prior to, or occurs at or after, the Date of Termination, the
Company shall have no further obligation to the Executive under
this Agreement by way of compensation or otherwise.
1.5
Death . The Executive’s employment will terminate
immediately upon the Executive’s death. Except for payment of
the Accrued Obligations (or as otherwise required by law), upon
termination for death, regardless of whether any Change in Control
has occurred prior to, or occurs at or after, the Date of
Termination, the Company shall have no further obligation to the
Executive’s heirs, legatees or estate under this Agreement by
way of compensation or otherwise.
1.6
Disability . The Company may terminate the Executive’s
employment at any time upon the Executive’s Disability (as
defined below) by giving the Executive thirty (30) days’
advance written notice of such termination. Except for payment of
the Accrued Obligations (or as otherwise required by law), upon
termination for Disability, regardless of whether any Change in
Control has occurred prior to, or occurs at or after, the Date of
Termination, the Company shall have no further obligation to the
Executive under this Agreement by way of compensation or otherwise.
1.7
Continuing Obligations . Upon the Executive’s
termination for any reason set forth in this Section 1 (except
death), the Executive shall continue to be bound by the
Executive’s continuing obligations set forth in the
Proprietary Information Agreement, which agreement shall continue
in full force and effect.
1.8
Mitigation . The Executive shall not be required to mitigate
the amount of any payment or benefits provided for in this
Section 1 by seeking other employment or otherwise. The amount
of any payment or benefits provided for in this Section 1
shall not be reduced by any compensation earned by the Executive as
a result of employment by another employer or self employment, by
retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
2. Key Definitions . As
used in this Agreement, the following terms shall have the meanings
indicated:
2.1 "
Cause " shall mean an action or actions by the Executive
during the employment including:
(a) repeated
refusal or repeated failure to carry out any reasonable direction
from the Company or its Board;
(b) a
material breach of the terms or conditions of the Executive’s
employment;
(c) demonstrated
gross negligence or misconduct in the execution of the
Executive’s assigned duties; SM&A Confidential
Pace Executive Severance and Retention Agreement
(d) habitual
non-performance or incompetent performance of the Executive’s
duties and responsibilities;
(e) a
conviction for a felony or other serious crime involving moral
turpitude;
(f) engaging
in fraud, embezzlement or other illegal conduct;
(g) a
violation of the Executive’s Proprietary Information
Agreement; or
(h) a
material violation of any written policy or procedure of the
Company, including ethics guidelines adopted from time to time by
the Board.
2.2 "
Change in Control " means an event or occurrence set forth
in any one or more of subsections (a) through (c) below
(including an event or occurrence that constitutes a Change in
Control under one of such subsections but is specifically exempted
from another such subsection):
(a) the
acquisition by an individual,
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