Exhibit 10.3 EXECUTIVE EMPLOYMENT AGREEMENT THIS AGREEMENT, effective as of November 4th, 2004 (the "Agreement"), by and between PARADIGM HOLDINGS INC., a Wyoming corporation having its principal offices at 2600 Tower Oaks Blvd., Ste 500, Rockville, MD 20852 (the "Company"), and MARK A. SERWAY (the "Executive"). WHEREAS, the Company desires to employ and retain the Executive for the term specified herein in order to advance the business and interests of the Company on the terms and conditions set forth herein; and WHEREAS, the Executive desires to provide his services to the Company in such capacities, on and subject to the terms and conditions hereof; WHEREAS, the Company desires to provide the Executive with certain options to acquire stock in the Company in order that the Executive may have the opportunity to participate in the growth and performance of the Company, as set forth herein; NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows: 1. Employment and Term. Subject to all of the terms and conditions hereof, the Company does hereby employ and agree to employ the Executive as its Senior Vice President & Chief Financial Officer for and during the Employment Term, as defined below, and the Executive does hereby accept such employment. The term of employment shall commence on November 4, 2004 (the "Effective Date") and shall continue until November 4, 2007 unless earlier terminated as herein provided (the "Employment Term"), and thereafter shall be renewed for additional terms of one (1) year, unless either party provides the other with notice, as provided for herein, at least ninety (90) days prior to the date the Employment Term would otherwise renew, of that party's intention not to so renew such term. 2. Duties of Executive. The Executive shall, during the Employment Term hereunder, perform the executive and administrative duties, functions and privileges incumbent with the position of Senior Vice President & Chief Financial Officer and such other duties as reasonably determined by the Board of Directors and the Chief Executive Officer of the Company, from time to time. The Executive shall report to the Chief Executive Officer of the Company, and if so elected, the Executive shall serve as a member of the Board of Directors without additional compensation. The Executive agrees to serve the Company faithfully, conscientiously and to the best of his ability, and to devote substantially all of his business time to the business and affairs of the Company (and, if requested by the Board of Directors, any subsidiary or affiliate of the Company) so as to promote the profit, benefit and advantage of the Company and, if applicable, any subsidiaries or affiliates of the Company. The Executive agrees to accept the compensation to be made to him under this Agreement as full and complete compensation for the services required to be performed by, and the covenants of, the Executive under this Agreement.
3. Location and Travel. The Executive shall not be required to relocate outside the greater Rockville, Maryland metropolitan area without his consent. The Executive acknowledges, however, that significant domestic and international travel may be required as part of his duties hereunder; and the Executive agrees to undertake such travel as may be reasonably required by the business of the Company from time to time. 4. Compensation. 4.1. Base Salary. The Executive shall be paid Base Salary (as defined herein) at the annual rate of Three Hundred Fifteen Thousand, One Hundred and Seventy-Five Dollars $315,175.00 per year. All compensation shall be made in accordance with the standard payroll practices of the Company, and whichever compensation rate is applicable at a particular time is referred to herein as the "Base Salary." 4.2. Regular Benefits. The Executive shall be entitled to participate in any health insurance, accident insurance, hospitalization insurance, life insurance, pension, or any other similar plan or benefit provided by the Company to its executives or employees generally, including, but not limited to any stock option plan, if and to the extent that the Executive is eligible to participate in accordance with the provisions of any such insurance, plan or benefit generally (such benefits, collectively, the "Regular Benefits"). 4.3. Vacation. The Executive shall be entitled to vacation as provided in the Company's policies, such vacation to be taken at times mutually agreeable to the Executive and the Company. The Executive shall further be entitled to the number of paid holidays, and leaves for illness or temporary disability in accordance with the policies of the Company for its senior executives. 4.4. Term Life Insurance. The Company shall have the right from time to time to purchase, modify or terminate insurance policies on the life of the Executive for the benefit of the Company in such amount as the Company shall determine in its sole discretion. In connection therewith the Executive shall, at such time or times and at such place or places as the Company may reasonably direct, submit himself to such physical examinations and execute and deliver such documents as the Company may deem necessary or desirable; provided, however, that the eligibility of the Executive for, or the availability of, such insurance shall not be deemed to be a condition of continued employment hereunder. The Executive makes no representation to the Company as to his current or future eligibility for insurance. 4.5. Expense Reimbursement. The Company shall reimburse the Executive for all expenses reasonably incurred by him in connection with the performance of his duties hereunder and the business of the Company upon the submission to the Company of appropriate receipts therefor, in accordance with the expense reimbursement policy of the Company. 5. Termination and Severance Arrangements. 5.1. Termination by the Company. The Company may terminate this Agreement at any time on or after November 4, 2004 by providing at least thirty (30) days advance written notice to the Executive. In the event that the Company terminates this Agreement (a) other than in connection with a Change of Control, in which event Section 6 shall apply, and (b) other than for Cause, in 2
which event Section 5.3 shall apply, the Company shall, notwithstanding such termination, in consideration for all of the undertakings and covenants of the Executive contained herein, continue to pay to the Executive the Base Salary and the Regular Benefits for a period that is the greater of (i) the remainder of the initial Employment Term or (ii) twelve (12) months from the date of such termination. In addition, in the event the Company terminates this Agreement as described in the immediately preceding sentence, any and all options granted to the Executive by the Company shall become automatically and immediately vested and exercisable. In no event however, shall the continuation of such payments during such post-termination period be deemed to be employment hereunder for purposes of calculating any bonus due to the Executive or for purposes of determining the vesting or exercise period of any stock options granted hereunder, or otherwise. 5.2. Termination by Executive. The Executive may terminate his employment for Good Reason and receive the payments and benefits specified in Section 5.1 in the same manner as if the Company had terminated his employment without Cause. For purposes of this Agreement, "Good Reason" will exist if any one or more of the following occur: 5.2.1. Failure by the Company to honor any of its material obligations under this Agreement, including, without limitation, its obligations under Section 4 (Compensation), Section 10 (Indemnification) and Section 12.5 (Successor Obligations). 5.3. Termination for Cause. Notwithstanding the Employment Term, the Company may terminate the Executive for Cause, as defined below, upon a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board of Directors (excluding the Executive, if a director) and with majority stockholder concurrence. In the event that the employment of the Executive is terminated by the Company for Cause, no severance or other post-termination payment shall be due or payable by the Company to the Executive (except solely such Base Salary or other payments as may have been accrued but not yet paid prior to such termination). For purposes hereof, "Cause" shall mean: (a) the conviction with respect to any felony or misdemeanor involving theft, fraud, dishonesty or misrepresentation; (b) any material misappropriation, embezzlement or conversion of the Company's or any of its subsidiary's or affiliate's property by the Executive; (c) willful misconduct by the Executive in respect of the material duties or obligations of the Executive under this Agreement; or (d) a material breach by the Executive of any of his material obligations hereunder, after written notice thereof and a reasonable opportunity of thirty (30) days to cure the same, provided that the same is not caused by the physical disability including mental disease or defect of the Executive, in which event Section 5.4 shall apply. 5.4. Death or Disability. In the event that the employment of the Executive by the Company is terminated by reason of the death of the Executive or by reason of medical or psychiatric disability which prevents the Executive from satisfactorily performing a material portion of his duties for ninety (90) consecutive calendar days (a "Disability"), the Company shall, promptly upon such termination, pay the Executive an amount equal to three (3) months of Base Salary, in a single lump s in the event of death, (12) monthly payments of Base Salary for longterm disability. 3
6. Parachute Provisions. 6.1. Change of Control. For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred upon the occurrence of any one or more of the following events. 6.1.1. Any "person" or "group" (as such terms are used in connection with Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act")) but excluding the Executive or any employee benefit plan of the Company (a) is or becomes the "beneficial owner" (as defined in Rule l3d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's outstanding securities then entitled to vote for the election of directors, or (b) acquires by proxy or otherwise fifty percent (50%) or more of the combined voting securities of the Company having the right to vote for the election of directors of the Company, for any merger or consolidation of the Company, or for any other matter; provided, however, that a Change of Control shall not be deemed to have occurred solely by reason of the public ownership of fifty percent (50%) or more of the Common Stock of the Company; 6.1.2. There shall be consummated without the consent of the Executive (a) any consolidation, merger or recapitalization of the Company or any similar transaction involving the Company, whether or not the Company is the continuing or surviving corporation, (b) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all of the assets of the Company or (c) the adoption of a plan of complete liquidation of the Company (whether or not in connection with the sale of all or substantially all of the Company's assets) or a series of partial liquidations of the Company that is de jure or de facto part of a plan of complete liquidation of the Company; provided that the divestiture of less than substantially all of the assets of the Company in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spinoff, sale of the stock or merger of a Subsidiary or otherwise, or a transaction solely for the purpose of reincorporating the Company in another jurisdiction, shall not constitute a Change in Control. 6.2. Rights on Change in Control. If within one year after, or ninety (90) days prior to, a Change in Control of the Company, the Company shall terminate the Executive's employment other than by reason of the Executive's death or Disability or for Cause, the Company shall pay to the Executive as compensation for services rendered, not later than the fifth business day after the date of termination: 6.2.1. The Executive's Base Salary through the date of termination, any Regular Benefits and incentive compensation for the fiscal year in which the termination occurs in accordance with any arrangements then existing with the Executive and proportionate to the period of the fiscal year which has expired prior to the termination; and 6.2.2. A lump sum severance payment equal to the Base Salary. 6.2.3. Any and all options granted to the Executive shall become automatically and immediately vested and exercisable. 4
7. Proprietary Rights. 7.1. Non Competition. The Executive covenants and agrees that for so long as he shall be employed by the Company and for a period of eighteen (18) months from the date of the termination of such employment for any reason (such period of time the "Restricted Period") the Executive shall not directly or indirectly, own, manage, control, operate invest in or become principal of employee of, director of, or consultant to, any business, entity or venture which is competitive with the business of the Company as conducted at such time; provided, however, that it shall not be a violation of this Agreement for the Executive to have beneficial ownership of less than five percent (5%) of the outstanding amount of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on a national securities exchange or quoted on an inter-dealer quotation system. 7.2. Confidentiality. The Executive recognizes and acknowledges that certain confidential business and technical information used by the Employee in connection with his duties hereunder that includes, without limitation, certain confidential and proprietary information relating to the designing, development, construction and marketing of computer hardware, is a valuable and unique asset of the Company. Executive agrees that he shall at all times maintain the confidentiality of the proprietary information and trade secrets of the Company, and that he shall during the Restricted Period refrain from disclosing any such information to the disadvantage of the Company. 7.2.1. During the Restricted Period the Executive shall not, directly or indirectly (a) solicit, in competition with the Company, any person who is a customer of any business conducted by the Company, or (b) in any manner whatsoever induce, or assist others to induce, any supplier of the Company to terminate its association with such entity or do anything, directly or indirectly, to interfere with the business relationship between the Company, and any of their respective current or prospective suppliers. 7.2.2. During the Restricted Period the Executive shall not, directly or indirectly, solicit or induce any employee of the Company to terminate his or her employment for any purpose, including without limitation, in order to enter into employment with any entity which competes with any business conducted by the Company 7.3. Ownership by Company. The Executive acknowledges and agrees that any of his work product created, produced or conceived in connection with his association with the Company shall be deemed work for hire and shall be deemed owned exclusively by the Company. The Executive agrees to execute and deliver all documents required by the Company to document or perfect the Company's proprietary rights in and to the Executive's work product. 7.4. Remedies. It is expressly understood and agreed that the services to be rendered hereunder by the Executive are special, unique, and of extraordinary character, and in the event of the breach by the Executive of any of the terms and conditions of this Agreement on his part to be performed hereunder, or in the event of the breach or threatened breach by the Executive of the terms and provisions of this Section 7 of this Agreement, then the Company shall be entitled, if it so elects, to institute and prosecute any proceedings in any court of competent jurisdiction, either in law or equity, for 5
such relief as it deems appropriate, including without limiting the generality of the foregoing, any proceedings, to obtain damages for any breach of this Agreement, or to enforce the specific performance thereof by the Executive. 8. Market Standoff Agreement. The Executive hereby agrees that if so requested by the Company or by any representative of any underwriters in connection with any registration of the offering of any securities of the Company under the Securities Act, the Executive shall not sell or otherwise transfer any securities of the Company during the ninety-day period following the effective date of a registration statement of the Company filed under the Securities Act. 9. Director's and Officer's Liability Insurance. To protect Executive from any liability, loss, claims, damages, or costs, including legal fees and costs, prior to any public offering of any securities of the Company, the Company shall purchase and maintain director's and officer's liability insurance (the "D&O Insurance") in an amount not less than Two Million Dollars ($2,000,000), or in such amount as is later agreed upon by Executive and Company. 10. Indemnification. As an employee, officer and director of the Company, the Executive shall be indemnified against all liabilities, damages, fines, costs and expenses by the Company in accordance with the indemnification provisions of the Company's Certificate of Incorporation as in effect on the date hereof, and otherwise to the fullest extent to which employees, officers and directors of a corporation organized under the laws of the state of incorporation of the Company may be indemnified pursuant to the laws of such state, as the same may be amended from time to time (or any subsequent statute of similar tenor and effect), subject to the terms and conditions of such statute. 11. Independent Representation. The Executive acknowledges that he has had the opportunity to seek independent counsel and tax advice in connection with the execution of this Agreement, and the Executive represents and warrants to the Company (a) that he has sought such independent counsel and advice as he has deemed appropriate in connection with the execution hereof and the transactions contemplated hereby, and (b) that he has not relied on any representation of the Company as to tax matters, or as to the consequences of the execution hereof. 11.1. Neutral Construction. No party may rely on any drafts of this Agreement in any interpretation of the Agreement. Each party to this Agreement has reviewed this Agreement and has participated in its drafting and, accordingly, no party shall attempt to invoke the normal rule of construction to the effect that ambiguities are to be resolved against the drafting party in any interpretation of this Agreement. 11.2. Attorney's Fees. In the event that either party hereto commences litigation against the other to enforce such party's rights hereunder, the prevailing party shall be entitled to recover all costs, expenses and fees, including reasonable attorneys' fees (including in-house counsel), paralegals, fees, and legal assistants' fees through all appeals. 12. General. 12.1. No Brokers. Each of the parties to this Agreement represents and warrants to the other that it has not utilized the services of any finder, broker or agent. Each of the parties agrees to indemnify the other 6
against any and all liabilities to any person, firm or corporation claiming any fee or commission of any kind on account of services rendered on behalf of such party in connection with the transactions contemplated by this Agreement. 12.2. Applicable Law. This document shall in all respects be governed by the laws of the State of Maryland. The parties acknowledge that substantially all of the negotiations relating to this Agreement were conducted in Maryland, and that this Agreement has been executed by both parties in Maryland. Any legal suit, action or proceeding against any party hereto arising out of or relating to this Agreement shall be instituted in a federal or state court in Montgomery County, Maryland, and each party hereto waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding and each party hereto irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding. 12.3. Rights Absolute. The Company's obligation to pay the Executive the compensation specified herein shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, any setoff, counterclaim, defense or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. 12.4. No Offset. Except as expressly provided herein, the Company waives all rights it my now have or may hereafter have conferred upon it, by statute or otherwise, to terminate, cancel or rescind this Agreement in whole or in part. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment, and if Executive obtains such other employment, any compensation earned by Executive pursuant thereto shall not be applied to mitigate any payment made to Executive pursuant to this Agreement. 12.5. Successor Obligations. The Company shall 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 the Company to expressly assume by written agreement and to agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. 12.6. Survival. The parties hereto agree that the covenants contained in Section 7 hereof shall survive any termination of employment by the Executive and any termination of this Agreement. In addition, the parties hereto agree that any compensation or right which shall have accrued to the Executive as of the date of any termination of employment or termination hereof shall survive any such termination and shall be paid when due to the extent accrued on the date of such termination. 12.7. Assignability. All of the terms and provisions contained herein shall inure to the benefit of and shall be binding upon the parties hereto and their respective heirs, personal representatives, successors and assigns. The obligations of the Executive however, may not be assigned, and the Executive may not, without the Company's written consent, assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this Agreement or any interest therein. Any such attempted assignment or disposition shall be null and void and without effect. The Company and the Executive agree that this 7
Agreement and all of the Company's rights and obligations hereunder may be assigned or transferred by the Company to and may be assumed by and become binding upon and may inure to the benefit of any affiliate of or successor to the Company. The term "successor" shall mean, with respect to the Company or any of its subsidiaries, and any other corporation or other business entity which, by merger, consolidation, purchase of the assets, or otherwise, acquires all or a material part of the assets of the Company. Any assignment by the Company of its rights and obligations hereunder to any affiliate of or successor shall not be considered a termination of employment for purposes of this Agreement. 12.8. Notices. Any and all notices required or desired to be given hereunder by any party shall be in writing and shall be validly given or made to another party if delivered either personally, by telex, facsimile transmission, same-day delivery service, overnight expedited delivery service, or if deposited in the United States Mail, certified or registered, postage prepaid, return receipt requested. If notice is served personally, notice shall be deemed effective upon receipt. If notice is served by telex or by facsimile transmission, notice shall be deemed effective upon transmission, provided that such notice is confirmed in writing by the sender within one day after transmission. If notice is served by same day delivery service or overnight expedited delivery service, notice shall be deemed effective the day after it is sent, and if notice is given by United States mail, notice shall be deemed effective five days after it is sent. In all instances, notice shall be sent to the parties at the following addresses:
If to the Company: Paradigm Holdings, Inc. 2600 Tower Oaks Blvd., Suite 500 Rockville, Maryland 20852 Fax: (301) 468-1201 Attention: Ms. Lori Ermi, VP Human Resources Mark A. Serway 47512 Compton Circle Sterling, VA 20165 Fax: (703) 406-0127
If to the Executive:
Any party may change its address for the purpose of receiving notices by a written notice given to the other party. 12.9. Modifications or Amendments. No amendment, change or modification of this document shall be valid unless in writing and signed by all of the parties hereto. 12.10. Waiver. No reliance upon or waiver of one or more provisions of this Agreement shall constitute a waiver of any other provisions hereof. 12.11. Severability. If any provision of this Agreement as applied to either party or to any circumstances shall be adjudged by a court of competent jurisdiction to be void or unenforceable, the same shall in no way affect any other provision of this Agreement or the validity or enforceability of this Agreement. If any court construes any of the provisions to be unreasonable because of the duration of such provision or the geographic or other scope thereof, such court may reduce the duration or restrict the geographic or other scope of such provision and enforce such provision as so reduced or restricted. 8
12.12. Separate Counterparts. This document may be executed in one or more separate counterparts, each of which, when so executed, shall be deemed to be an original. Such counterparts shall, together, constitute and shall be one and the same instrument. 12.13. Headings. The captions appearing at the commencement of the sections hereof are descriptive only and are for convenience of reference. Should there be any conflict between any such caption and the section at the head of which it appears, the substantive provisions of such section and not such caption shall control and govern in the construction of this document. 12.14. Specific Performance. It is agreed that the rights granted to the parties hereunder are of a special and unique kind and character and that, if there is a breach by any party of any material provision of this Agreement, the other party would not have any adequate remedy at law. It is expressly agreed, therefore, that the rights of the parties hereunder may be enforced by an action for specific performance and other equitable relief. 12.15. Further Assurances. Each of the parties hereto shall execute and deliver any and all additional papers, documents and other assurances, and shall do any and all acts and things reasonably necessary in connection with the performance of their obligations hereunder and to carry out the intent of the parties hereto. 12.16. Entire Agreement. This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter of this Agreement, and any and all prior agreements or representations are hereby terminated and canceled in their entirety. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed this 30th day of December 2004, effective as of the date first above written. PARADIGM HOLDINGS, INC., a Wyoming corporation
By: /s/ Mark A. Serway ---------------------------Name: MARK A. SERWAY Title: Sr. Vice President & CFO /s/ Raymond A. Huger -------------------------------RAYMOND A. HUGER, Chairman & CEO
PARADIGM HOLDINGS Inc. CODE OF ETHICS: GENERAL STATEMENT Respect is the foundation of Paradigm Holdings Inc . business philosophy. The purpose of this Code of Ethics (the “Code”) is to provide a framework for identifying ethical issues, to establish the importance of exercising sound judgment and making ethical business decisions in activities of Paradigm Holdings Inc. , and to recognize the shared values we have with our customers, stockholders, employees, and suppliers. “Our mission is to build superior customer and shareholder confidence in our products, services and people by delivering exceptional quality, backed by strong management practices and implemented by a highly motivated, results-oriented workforce.” Our Customers - They are our business. We will consistently provide superior solutions and services they want and need. Our Employees - They are the company. Our customers know them as the company. We will provide them with ongoing training, a supportive work environment and the recognition that encourages and promotes professional growth. Our Shareholders - They are the owners, and as shareholders of the corporation they are entitled to a fair return on their investment. Our Suppliers , we are committed to an ethical business relationship based upon competition and establishing mutually beneficial long-term relationships. As part of this commitment and in accordance with this General Statement, members of Paradigm Holdings Inc. ’s Board of Directors are expected to act in accordance with their fiduciary duties under Wyoming law; to promptly disclose all conflicts of interests to the fellow directors of Paradigm Holdings Inc. as required by Wyoming law; offer to remove themselves from participation in any decision in which there is a conflict between their personal interests and the interests of Paradigm Holdings Inc. ; and to refrain from taking advantage of corporate opportunities that come to their attention as a result of service as a Paradigm Holdings Inc. director absent approval of the Board of Directors. Waivers of application of the Code for executive officers or directors must be approved by the Board of Directors or its designated committee and be disclosed to the extent required by law or regulation. References to “ Paradigm Holdings Inc. ” are intended to include Paradigm Solutions Corp. , Paradigm Holdings Inc., and Paradigm Solutions International. I. POLICIES AND PRACTICES* A. Compliance with Laws You must obey the laws of the jurisdictions in which Paradigm Holdings Inc. operates. 1
If necessary, seek guidance from your supervisor, CFO or the Human Resources department. No person has authority to violate any law or to direct others to violate any law on behalf Paradigm Holdings Inc. B. Conflicts of Interest A conflict of interest may arise where your loyalties are divided, or appear to be divided, between your business interests and those of Paradigm Holdings Inc. Paradigm Holdings Inc. expects that you will not knowingly place yourself in a position that would have the appearance of being, or could be construed to be, in conflict with Paradigm Holdings Inc. ’s interests. The following is not exhaustive, but identifies potential areas of conflicted interests: 1. Accepting Gifts and Entertainment Accepting any gift of more than nominal value or entertainment that is more than a routine social amenity can appear to be an attempt to gain favorable treatment from the recipient. a. Gifts, Entertainment and other Gratuities to Paradigm Holdings Inc. Representatives You are urged to give careful consideration to the acceptance of any gift of more than nominal value. The key is to keep an arm’s length relationship, to avoid excessive or lavish gifts, and that the gift is reasonable and appropriate under the circumstance. Gifts of any amount may never be solicited, and gifts of cash or securities may never be accepted. In the case of entertainment, it must be of a reasonable nature and in the course of a meeting or another occasion for the purpose of bona fide business discussions or to foster better business relations. In some international business transactions, it is customary and lawful for foreign business leaders in a host country to give gifts to Paradigm Holdings Inc. representatives. In cases where the gift is of more than nominal value, you should consult your Executive Team on proper handling. * The Code is not an expressed or implied contract of employment and does not create any contractual rights of any kind between Paradigm Holdings Inc. and you . b. Gift and Business Courtesies to Federal, State and Local Government Employees It is Paradigm Holdings Inc. ’s policy to comply strictly with laws governing the offering of gratuities and other items of value to federal, state and local government employees. The following is a guide: Federal Executive Branch Employees. Employees are prohibited from giving anything, except as follows: • Paradigm Holdings Inc. advertising or promotional items of limited intrinsic value. • Modest refreshments, such as soft drinks, coffee, and donuts in connection with business. • Business-related meals and local transportation with an aggregate value of $20 or less per occasion and not exceeding $50, in the aggregate, in any calendar year. • Other exceptions as approved by the responsible ethics official.
Federal Legislative and Judicial Branch, and State and Local, Employees. Since these employees are governed by a wide variety of laws and regulations, please consult with the responsible ethics official prior to offering anything of value. c. Gifts and Business Courtesies to Non-Government Persons Employees are permitted to provide meals, refreshments, entertainment, and other business courtesies of reasonable value to non-government persons in support of Paradigm Holdings Inc. business activities, so long as this practice (i) does not violate any law or regulation, or the standards of the recipient’s organization, and (ii) is consistent with industry practices, infrequent in nature, and not lavish or extravagant. While the latter is difficult to define with specificity, use common sense and good judgment. It is illegal for Paradigm Holdings Inc. or its representatives to pay to or receive anything of value from any labor organization. 2. Outside Employment/Conflicting Outside Activities Employees are not to engage in outside work or conflicting outside activities that have, or could have a material affect on the employee’s duties for Paradigm Holdings Inc. ; imply sponsorship or support by Paradigm Holdings Inc. ; adversely affect the reputation of Paradigm Holdings Inc. , or otherwise compete with Paradigm Holdings Inc. . This prohibition also extends to the unauthorized use or application of resources and of any proprietary, confidential, or trade secret information or intellectual property. If you wish to accept outside employment or engage in a conflicting outside activity (or have any questions about whether an outside activity conflicts with your employment by Paradigm Holdings Inc. ), you must submit a request containing pertinent information about the outside employment or activity and obtain the prior written approval of your supervisor and Human Resources. Employees who have been authorized to engage in, and have accepted, outside work or an outside activity may not use Paid Time Off to pursue that effort. 3. Interests in Other Businesses Unless approved in advance by an employee's supervisor, neither an employee nor his or her spouse or any other member of the employee's immediate family, may directly or indirectly have a significant financial interest in a competitor, or in a customer or supplier if that employee or his or her subordinates deal directly or indirectly with that customer or supplier in the course of his or her job with Paradigm Holdings Inc. A “significant financial interest” is defined as ownership of more than five percent (5%) of your personally controlled assets in the outstanding capital stock of a public company or any ownership interest in a company that is not publicly traded. In addition, if you are a director, officer, partner or have an ownership is doing business, or contemplates doing business (even indirectly, by way of example, through a family member), that interest must be approved by the Audit Committee of the Board of Directors of Paradigm Holdings Inc. prior to the transaction. Furthermore, if you wish to serve as an officer or director to an outside business on your own time, you must receive prior approval in writing from the Chief Executive Officer. If the circumstances of the outside business change substantially, you must seek re-approval. (Employees are permitted, however, to serve on charity boards or in family businesses that have no relationship to Paradigm Holdings Inc. ).
4. Paradigm Holdings Inc. Political Involvement Employees are advised that their participation in the political process, including any donations, must be for themselves individually, on their own time, and at their own expense. Paradigm Holdings Inc. will not reimburse any employee for such contributions and employees should not request such reimbursements. C. Use and Protection of Information, Property, Systems and Other Resources The facilities and other resources provided by Paradigm Holdings Inc. are to be used in support of its business. Any personal use permitted by Paradigm Holdings Inc. policy must be incidental, not interfere with work requirements, and not be excessive. 1. Offensive and Inappropriate Material; Illegal Activities Paradigm Holdings Inc. policies prohibit using these resources to send, distribute or receive illegal, sexually explicit, abusive, offensive, profane, defamatory or other inappropriate content. 2. Solicitation on Work Premises Solicitation not related to the business of Paradigm Holdings Inc. in its workplace is prohibited without the prior written consent of Paradigm Holdings Inc. ’s President or Vice President of Human Resources. Use of these resources are authorized when related to charitable or like efforts, are limited to the designated bulletin boards or other areas, and result in no personal solicitation (i.e., posting of a sign-up sheet). Consult with your supervisor or facility manager for local bulletin board and e-mail procedures. 3. Theft and Misuse of Paradigm Holdings Inc. Resources Actual or attempted theft or misuse of Paradigm Holdings Inc. resources, including documents, equipment, intellectual property, personal property of other employees, cash or any other items of value is subject to immediate termination and possible criminal proceedings against them. Employees have a responsibility to report any actual or attempted theft or misuse to Paradigm Holdings Inc . management . 4. Paradigm Holdings Inc. Proprietary and Other Confidential Information Every employee must safeguard and hold in strict confidence proprietary, confidential and/or trade secret information, including information of Paradigm Holdings Inc. or any of its business partners. Employees shall exercise reasonable prudence and care in dealing with such information. Your use of the information is strictly limited to your work for Paradigm Holdings Inc. and the relevant project on which the information was disclosed to you. Any such information must be returned when requested or upon the termination of your employment. Refer questions to your contracts representative or the Legal Department.
5. Other Competitive Information Paradigm Holdings Inc. will not condone obtaining information concerning competitors through illegal means or other ill elicit or non-industry standard means, the propriety of which could be questioned under any conceivable circumstance. 6. Third Party Intellectual Property Unauthorized use of third party intellectual property, including copyrighted materials, trademarks, and patented items, by employees is strictly prohibited. You should be aware that unauthorized use can result in both civil and criminal penalties and sanctions. Employees are to comply with guidelines established by the Information Systems Department, to report violations to the Chief Technology Officer, and to consult the Information Systems and/or Legal departments for questions regarding appropriate usage and authorization. D. Securities Laws and Insider Trading It is your obligation to safeguard Paradigm Solution’ s non-public information and not to share this information with anyone except as required by your work responsibilities. Non-public information is information that has not been disclosed or made available to the general public. Such information may include financial data, significant wins or losses, plans for acquisitions, material contracts, or the hiring, firing or resignation of a member of the Board of Directors or an officer of Paradigm Holdings Inc . Trading in stocks or securities based on non-public information, or providing non-public information to others so that they may trade, is illegal and may result in prosecution. The trading of stock by directors, officers and employees of Paradigm Holdings Inc. is subject to compliance with applicable laws and the Paradigm Holdings Inc. Insider Trading Policy. Employees having questions about the sale or purchase of a security that might involve non-public information or securities laws should first review the Insider Trading and Tipping Policy. Just as Paradigm Holdings Inc. values and protects its own non-public information, we respect the non-public information of other companies. E. Bribery, Kickback and Fraud No funds or assets shall be paid, loaned or otherwise given as bribes, kickbacks, or other payments designed to influence or compromise the conduct of the recipient; and no employee of Paradigm Holdings Inc. shall accept any funds or other assets for assisting in obtaining business or for securing special concessions from Paradigm Holdings Inc. You should conduct Paradigm Holdings Inc. business in such a manner that our reputation and integrity will not be impugned if the details of their dealings should become a matter of public discussion. To illustrate the standard that Paradigm Holdings Inc. expects every employee to maintain, the following conduct is expressly prohibited: • Payment or receipt of money, gifts, loans or other favors that may tend to influence business decisions or compromise independent judgment; • Payment or receipt of rebates or kickbacks for obtaining business for or from Paradigm Holdings Inc. ; • Payment of bribes to government officials to obtain favorable rulings; and • Any other activity that would similarly degrade the reputation or integrity of Paradigm Holdings Inc . Employees have a responsibility to report any actual or attempted bribery, kickback or fraud. 5
F. Workplace Health and Safety Paradigm Holdings Inc. is committed to providing a drug-free, safe, and healthy workplace in accordance with applicable laws and regulations. Therefore, you are required to follow carefully all safety instructions and procedures that Paradigm Holdings Inc. implements. Employees should promptly report accidents, injuries, or other health and safety concerns, and refer related questions, to their supervisor or the responsible facility manager. G. Employment Matters Paradigm Holdings Inc. is committed to fostering a business-like atmosphere that promotes equal employment opportunities and prohibits discriminatory practices, including harassment. Paradigm Holdings Inc. expects that relationships among persons in the workplace will likewise be business-like and free of unlawful bias, prejudice and harassment. You are expected to be conscientious, reliable, and honest; to perform assigned responsibilities and duties in accord with acceptable standards; to be courteous and cooperative with co-workers, management, clients, and suppliers; and to ensure the integrity and ethical standards of Paradigm Holdings Inc. . You will not engage in activities that interfere with the performance of their duties or those of others, or with the operating procedures of Paradigm Holdings Inc. or those of our clients. 1. Non-Discrimination/Anti-Harassment Paradigm Solution’ s policy is to ensure equal employment opportunity without discrimination or harassment on the basis of age, color, disability, national origin, race, religion, sex, sexual orientation, or other status protected by applicable law.
3. Workplace Relationships Employees are not permitted to maintain close personal or private relationships where their employment relationship is of a supervisor/subordinate nature, involves financial or audit oversight or control, or constitutes a possible conflict of interest. Employees are expected to disclose the existence of such a relationship when it arises immediately to Human Resources. Paradigm Holdings Inc. will endeavor to exercise discretion in its review of the matter, and Paradigm Holdings Inc. may elect to arrange for a suitable change in the working relationship, subject to the approval of Paradigm Holdings Inc . management and the Vice President of Human Resources. In the event that efforts to arrange for a suitable change in the working relationship cannot be implemented within a period of time acceptable to Paradigm Holdings Inc. Paradigm Holdings Inc. reserves the right to require resignation of one or both of the employees from Paradigm Holdings Inc . 4. Substance Abuse No employee may use, possess, distribute, sell, or be under the influence of alcohol or illegal drugs; use over-thecounter or prescription drugs used in a manner inconsistent with the legally prescribed amount and accompanying instructions; or improperly or illegally use any inhalant or perception-altering substance in the performance of work for Paradigm Holdings Inc. , or while using resources or on the premises of Paradigm Holdings Inc.
H. International Operations Employees must be sensitive to foreign legal requirements and United States laws that apply to foreign operations. The U.S. Foreign Corrupt Practices Act ("FCPA") prohibits certain payments or gifts to foreign government officials, foreign political parties, party officials, or candidates for public office for the purposes of obtaining or retaining business. FCPA also prohibits falsifying Paradigm Holdings Inc.’s books and records or circumventing or failing to implement accounting controls. U.S. Export Controls laws, and the International Traffic in Arms Regulations (ITAR), govern transfers of equipment or technology, either to a foreign country or to a foreign citizen. In certain cases, approvals, licensing and/or reporting requirements may apply. Employees should refer to specific FCPA or other company bulletins, and contact a member of the board of directors if they have any further questions concerning a specific situation. I. Books and Records Paradigm Holdings Inc. ’s internal accounting controls are intended to safeguard the assets of Paradigm Holdings Inc. and to ensure the accuracy of its financial records and reports, which form the basis for managing our business and fulfilling our obligations to stockholders, employees, and regulatory authorities. These records, including financial records, must properly, accurately, and completely reflect all components of transactions in accordance with the law and be promptly entered on our books. No person may interfere with or seek to improperly influence, directly or indirectly, the accuracy, completeness, or auditing, of such records. All reports made to regulatory authorities must be full, fair, accurate, timely and understandable. If an employee becomes aware of any improper transaction or accounting practice, he or she should report the matter immediately to his or her supervisor. Employees may also file a complaint (including an anonymous complaint) if they have information regarding questionable accounting or auditing matters in accordance with the Paradigm Holdings Inc. Audit Complaint Policy and Procedure. J. Document Retention There are legal requirements that certain records be retained for specific periods of time. Before disposing of documents, employees should follow the Paradigm Holdings Inc. Records Retention Policy. Whenever it becomes apparent that documents of any type will be required in connection with a lawsuit or government investigation, all possibly relevant documents should be preserved, and ordinary destruction of documents pertaining to the subjects of the litigation or investigation should be immediately suspended. If an employee is uncertain whether documents under his or her control should be preserved because they might relate to a lawsuit or investigation, he or she should contact the responsible records official or the Human Resources Department. II. COMPLIANCE WITH THE CODE OF ETHICS A violation of the Code may result in appropriate disciplinary action, including termination from employment. Violations of this Code are not the only basis for disciplinary action, as Paradigm Holdings Inc. has additional policies and procedures governing conduct and certain civil and criminal laws and regulations may result in external sanctions. Paradigm Holdings Inc. further reserves the right to take disciplinary action on any matters pertaining to employee conduct, whether or not they are expressly discussed in this document. 7
III. REPORTING SUSPECTED NON-COMPLIANCE A. General Policy As described in the Code, certain persons at Paradigm Holdings Inc. must review and approve in writing any circumstance requiring special permission. Copies of these approvals should be maintained by Paradigm Holdings Inc. in accordance with its Records Retention policy. As part of the commitment to ethical and legal conduct, we expect employees to report to Paradigm Holdings Inc. information about suspected violations of the Code. Failure to report known wrongdoing may result in disciplinary action against those who fail to report. B. Complaint Procedure 1. Notification of Complaint Known or suspected violations of the Code should be reported promptly, in writing where Practical to the Ethics Officer or VP of Human Resources, Paradigm Solutions Corp. 2600 Tower Oaks Blvd. Suite 500, Rockville MD 20852. 2. Investigation Employees are expected to cooperate in investigations of any suspected violation. 3. Confidentiality Investigations will be conducted discreetly, as appropriate under the circumstances. Those investigating do not act as personal representatives or lawyers for employees. Parties to an investigation shall not discuss the matter with other employees. 4. Protection against Retaliation Retaliation in any form against an individual who reports a violation, or assists in the investigation, of the Code or of law, even if the report is mistaken, is itself a serious violation of this Code and will not be tolerated. Acts of retaliation should be reported immediately and will be disciplined appropriately. Employees who submit a complaint in bad faith may face disciplinary action, including termination. 8
EXHIBIT 23.1 Independent Auditor's Consent Board of Directors Paradigm Holdings, Inc. Rockville, Maryland We hereby consent to the inclusion of our report dated December 2, 2004 except for Note 10 as to which the date is February 11, 2005 on the audited financial statements of Paradigm Holdings, Inc. (formerly Paradigm Solutions Corporation) as of December 31, 2003 and 2002 and for the years then ended in the SEC Form SB-2 to be filed by Paradigm Holdings, Inc. ARONSON & COMPANY
/s/ ARONSON & COMPANY Rockville, Maryland February 11, 2005