Exhibit 10.1

 

UNITED INDUSTRIAL CORPORATION
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
FREDERICK M. STRADER

 

EMPLOYMENT AGREEMENT (this “Agreement”) originally made and entered into as of
August 16, 2006, by and between UNITED INDUSTRIAL CORPORATION, a Delaware
corporation having an address at 124 Industry Lane, Hunt Valley, Maryland 21030
(hereinafter called “Employer”), and FREDERICK M. STRADER, having an address at
501 Whithorn Court, Timonium, MD 21093 (hereinafter called “Employee”) is hereby
amended and restated effective as of the Effective Date (as defined below).

 

W I T N E S S E T H:

 

In consideration of the mutual covenants hereinafter contained, the parties
hereto agree as follows:

 

1.             EMPLOYMENT. EMPLOYER AGREES TO CONTINUE TO EMPLOY EMPLOYEE AND
EMPLOYEE AGREES TO CONTINUE TO SERVE EMPLOYER UPON THE TERMS AND CONDITIONS
HEREINAFTER SET FORTH.

 

2.             TERM. THE TERM OF EMPLOYEE’S EMPLOYMENT UNDER THIS AGREEMENT
COMMENCED ON AUGUST 1, 2006 (THE “EFFECTIVE DATE”) AND, SUBJECT TO THE
PROVISIONS OF SECTIONS 5 AND 6 HEREOF, WILL TERMINATE AS OF THE CLOSE OF
BUSINESS ON MARCH 31, 2010 (THE “SCHEDULED TERMINATION DATE,” AND SUCH YEAR, THE
“INITIAL TERM”); PROVIDED, THAT THE TERM OF THIS AGREEMENT SHALL AUTOMATICALLY
RENEW FOR SUCCESSIVE ONE (1) YEAR TERMS (EACH, A “RENEWAL TERM”, AND EACH OF THE
INITIAL TERM AND EACH RENEWAL TERM, A “COMPENSATION YEAR”) UNLESS EITHER PARTY
GIVES WRITTEN NOTICE OF NON-RENEWAL TO THE OTHER AT LEAST SIXTY (60) DAYS PRIOR
TO THE END OF THE INITIAL TERM OR RENEWAL TERM, AS APPLICABLE. THE PERIOD FROM
THE EFFECTIVE DATE THROUGH THE DATE OF TERMINATION OF EMPLOYEE’S EMPLOYMENT
HEREUNDER IS REFERRED TO AS THE TERM OF THIS AGREEMENT. THIS AGREEMENT SHALL BE
OF NO FORCE OR EFFECT IF EMPLOYEE’S CURRENT EMPLOYMENT BY AAI CORPORATION
(“AAI”), A SUBSIDIARY OF EMPLOYER, IS TERMINATED FOR ANY REASON WHATSOEVER PRIOR
TO THE EFFECTIVE DATE.

 

3.             DUTIES AND EXTENT OF SERVICES.

 

(A)           EMPLOYEE AGREES TO CONTINUE TO SERVE EMPLOYER AND, CONSISTENT WITH
HIS POSITION, ITS SUBSIDIARIES FAITHFULLY AND TO THE BEST OF HIS ABILITY UNDER
THE DIRECTION OF THE BOARD OF DIRECTORS OF EMPLOYER, DEVOTING HIS ENTIRE
BUSINESS TIME, ENERGY AND SKILL TO HIS FULL TIME EMPLOYMENT DUTIES HEREUNDER;
PROVIDED, THAT SUBJECT TO THE APPROVAL OF THE BOARD OF DIRECTORS OF EMPLOYER,
EMPLOYEE MAY SERVE ON THE BOARD OF DIRECTORS OF COMPANIES OTHER THAN EMPLOYER
AND ITS SUBSIDIARIES. THE PRINCIPAL PLACE OF EMPLOYMENT OF EMPLOYEE SHALL BE AT
THE OFFICES OF AAI, WHICH ARE CURRENTLY LOCATED IN HUNT VALLEY, MARYLAND.
EMPLOYEE UNDERSTANDS AND AGREES, HOWEVER, THAT IN CONNECTION WITH HIS EMPLOYMENT
HEREUNDER, HE MAY BE REQUIRED FROM TIME TO TIME TO TRAVEL ON BEHALF OF EMPLOYER.

 

(B)           THE PRINCIPAL DUTIES OF EMPLOYEE SHALL BE TO CONTINUE TO SERVE AS
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF EMPLOYER AND AAI AND, IN SUCH CAPACITY,
TO RENDER SUCH MANAGERIAL, ADMINISTRATIVE AND OTHER SERVICES TO EMPLOYER AND AAI
AND THEIR SUBSIDIARIES AS

 

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NORMALLY ARE ASSOCIATED WITH AND INCIDENT TO SUCH POSITIONS AS EMPLOYER FROM
TIME TO TIME MAY REQUIRE OF HIM. IF, DURING THE TERM OF THIS AGREEMENT, THE
BOARD OF DIRECTORS OF EMPLOYER SO DETERMINES, IN ITS ABSOLUTE DISCRETION, TO
ELECT EMPLOYEE TO ANY ADDITIONAL OFFICE OF EMPLOYER OR ITS SUBSIDIARIES
CONSISTENT WITH HIS POSITION, OR A DIRECTOR OF EMPLOYER OR ITS SUBSIDIARIES,
EMPLOYEE AGREES TO ACCEPT AND SERVE IN SUCH OFFICE OR CAPACITY, FOR NO
ADDITIONAL COMPENSATION OR REMUNERATION. EMPLOYEE HEREBY ACKNOWLEDGES THAT AS OF
THE EFFECTIVE DATE, EMPLOYEE CURRENTLY SERVES AS A DIRECTOR OF EMPLOYER AND
EMPLOYEE SHALL NOT BE ENTITLED TO ANY ADDITIONAL COMPENSATION FOR SUCH SERVICE.
IF EMPLOYEE IS ELECTED A DIRECTOR OF EMPLOYER, HE AGREES TO RESIGN AS A DIRECTOR
IF SO REQUESTED BY THE BOARD OF DIRECTORS OF EMPLOYER, FOLLOWING THE TERMINATION
OF HIS EMPLOYMENT BY EMPLOYER FOR ANY REASON.

 

4.             COMPENSATION.

 

(A)           BASE COMPENSATION. EMPLOYER AGREES TO PAY TO EMPLOYEE, AS
COMPENSATION FOR ALL OF THE SERVICES TO BE RENDERED BY EMPLOYEE UNDER OR
PURSUANT TO THIS AGREEMENT, A SALARY (“BASE COMPENSATION”) AT THE ANNUAL RATE OF
$550,000, WHICH AMOUNT SHALL BE PAYABLE IN ACCORDANCE WITH THE NORMAL PAYROLL
PRACTICES OF EMPLOYER. EMPLOYEE SHALL BE REVIEWED ANNUALLY (WITH THE FIRST SUCH
REVIEW TO BE IN MARCH 2007) AND SHALL BE ENTITLED TO SUCH INCREASES IN BASE
COMPENSATION AS THE BOARD OF DIRECTORS MAY DETERMINE IN ITS DISCRETION.

 

(B)           INCENTIVE COMPENSATION. EMPLOYEE SHALL ALSO BE ENTITLED TO
PARTICIPATE IN EMPLOYER’S PERFORMANCE SHARING PLAN (OR SUCH OTHER SIMILAR BONUS
OR INCENTIVE PLAN APPROVED BY EMPLOYER’S BOARD OF DIRECTORS AND ITS COMPENSATION
COMMITTEE), THAT WILL AFFORD EMPLOYEE AN OPPORTUNITY TO EARN INCENTIVE
COMPENSATION (“INCENTIVE COMPENSATION”) OF (X) UP TO 100% (WITH A TARGET OF 50%)
OF HIS BASE COMPENSATION, BASED UPON MEETING CERTAIN GOALS AND BENCHMARKS (THE
“BASE INCENTIVE COMPENSATION”), OR, IN LIEU THEREOF, (Y) SUCH GREATER AMOUNT AS
THE BOARD OF DIRECTORS MAY DETERMINE IN ITS DISCRETION (THE “INCREASED INCENTIVE
COMPENSATION”). IT IS THE INTENT OF EMPLOYER THAT ANY INCENTIVE COMPENSATION
AWARDED PURSUANT TO THIS SECTION 4(B) SHALL BE PAID UNDER A PLAN THAT COMPLIES
WITH THE REQUIREMENTS OF THE “PERFORMANCE-BASED COMPENSATION” EXCEPTION UNDER
SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”).

 

(C)           EMPLOYEE BENEFIT PLANS. DURING THE TERM OF THIS AGREEMENT,
EMPLOYEE SHALL BE ELIGIBLE TO PARTICIPATE IN ANY LIFE INSURANCE, MEDICAL,
RETIREMENT, PENSION, PROFIT SHARING, DISABILITY OR OTHER BENEFIT PLANS OR
ARRANGEMENTS NOW OR HEREAFTER GENERALLY MADE AVAILABLE BY EMPLOYER TO EXECUTIVE
EMPLOYEES OF EMPLOYER TO THE EXTENT EMPLOYEE QUALIFIES UNDER THE PROVISIONS OF
ANY SUCH PLANS; PROVIDED, THAT THE AMOUNT AND QUALITY OF EMPLOYEE BENEFITS SHALL
NOT, INDIVIDUALLY OR IN THE AGGREGATE, DECREASE TO AN AMOUNT AND QUALITY THAT IS
LESS THAN THOSE EXISTING FOR EMPLOYEE’S BENEFIT ON THE EFFECTIVE DATE. SUBJECT
TO THE FOREGOING, EMPLOYER SHALL HAVE THE RIGHT TO CHANGE INSURANCE COMPANIES
AND MODIFY INSURANCE POLICIES COVERING EMPLOYEES OF EMPLOYER.

 

(D)           STOCK OPTION GRANT. SIMULTANEOUSLY WITH THE APPROVAL AND
EFFECTIVENESS OF THIS AGREEMENT, EMPLOYEE SHALL, SUBJECT TO THE APPROVAL OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF EMPLOYER, BE ENTITLED TO
RECEIVE A GRANT OF A NONQUALIFIED STOCK OPTION TO PURCHASE 41,000 SHARES OF
EMPLOYER’S COMMON STOCK UNDER EMPLOYER’S 2006 LONG TERM INCENTIVE PLAN. SUCH
STOCK OPTION SHALL HAVE AN EXERCISE PRICE PER SHARE EQUAL TO THE FAIR MARKET

 

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VALUE OF A SHARE OF EMPLOYER’S COMMON STOCK ON THE DATE OF GRANT (AS DETERMINED
IN ACCORDANCE WITH THE TERMS OF EMPLOYER’S 2006 LONG TERM INCENTIVE PLAN) AND
SHALL BE SUBJECT TO SIMILAR VESTING PROVISIONS AND OTHER CONDITIONS AS PROVIDED
FOR THE INCENTIVE AWARDS DESCRIBED IN SECTION 4(E) HEREOF.

 

(E)           LONG TERM INCENTIVE PROGRAM. EMPLOYEE SHALL BE ELIGIBLE TO RECEIVE
LONG-TERM INCENTIVE AWARDS PREVIOUSLY APPROVED BY EMPLOYER’S BOARD OF DIRECTORS
UNDER EMPLOYER’S 2006 LONG TERM INCENTIVE PROGRAM, SUBJECT TO ITS TERMS AND
CONDITIONS. EMPLOYEE SHALL ALSO BE ELIGIBLE TO PARTICIPATE IN FUTURE LONG TERM
INCENTIVE PROGRAMS ADOPTED BY EMPLOYER FROM TIME TO TIME. THE LEVEL OF
EMPLOYEE’S PARTICIPATION IN ANY SUCH PLAN AND THE TERMS AND CONDITIONS OF SUCH
PARTICIPATION SHALL BE DETERMINED IN THE SOLE DISCRETION OF THE BOARD OF
DIRECTORS OF EMPLOYER OR A DULY APPOINTED COMMITTEE THEREOF.

 

(F)            AUTOMOBILE ALLOWANCE. EMPLOYER SHALL PAY TO EMPLOYEE AN
AUTOMOBILE ALLOWANCE OF TWELVE THOUSAND DOLLARS ($12,000) PER ANNUM, COMMENCING
AS OF THE EFFECTIVE DATE, PAYABLE IN ACCORDANCE WITH EMPLOYER’S NORMAL PAYROLL
PRACTICES.

 

(G)           VACATION. EMPLOYEE SHALL BE ENTITLED TO FOUR (4) WEEKS VACATION
WITH PAY PER YEAR.

 

(H)           TAXES. EMPLOYEE UNDERSTANDS THAT ANY AND ALL PAYMENTS DESCRIBED IN
THIS AGREEMENT WILL BE SUBJECT TO SUCH TAX TREATMENT AS APPLIES THERETO, AND TO
SUCH WITHHOLDING AS MAY BE REQUIRED UNDER APPLICABLE TAX LAWS.

 

5.             TERMINATION.

 

(A)           TERMINATION BY EMPLOYER FOR CAUSE. EMPLOYER SHALL HAVE THE RIGHT
TO TERMINATE THE EMPLOYMENT OF EMPLOYEE UNDER THIS AGREEMENT UNDER THE FOLLOWING
CIRCUMSTANCES (ANY SUCH TERMINATION, A TERMINATION FOR “CAUSE”), UPON WRITTEN
NOTICE TO EMPLOYEE DESCRIBING THE CAUSE:

 

(I)            EMPLOYEE SHALL HAVE COMMITTED ANY MATERIAL BREACH OF ANY OF THE
PROVISIONS OR COVENANTS SET FORTH HEREIN; PROVIDED, THAT, EXCEPT WHERE SUCH
BREACH IS WILLFUL, EMPLOYER SHALL PROVIDE WRITTEN NOTICE OF SUCH BREACH TO
EMPLOYEE, AND EMPLOYEE SHALL HAVE 10 DAYS AFTER RECEIPT OF SUCH NOTICE TO CURE
SUCH BREACH;

 

(II)           EMPLOYEE SHALL HAVE COMMITTED ANY ACT OF GROSS NEGLIGENCE IN THE
PERFORMANCE OF HIS DUTIES OR OBLIGATIONS HEREUNDER;

 

(III)          EMPLOYEE SHALL HAVE COMMITTED ANY MATERIAL ACT OF DISHONESTY OR
BREACH OF TRUST AGAINST EMPLOYER OR ANY OF ITS SUBSIDIARIES;

 

(IV)          EMPLOYEE’S CONVICTION OF, OR PLEA OF GUILTY OR NOLO CONTENDERE TO,
A FELONY; OR

 

(V)           EMPLOYEE SHALL HAVE COMMITTED ANY MATERIAL BREACH OF ANY OF THE
PROVISIONS OF EMPLOYER’S STANDARDS OF BUSINESS CONDUCT POLICY; PROVIDED, THAT,
EXCEPT WHERE SUCH BREACH IS WILLFUL, EMPLOYER SHALL PROVIDE WRITTEN NOTICE OF
SUCH BREACH TO

 

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EMPLOYEE, AND EMPLOYEE SHALL HAVE 10 DAYS AFTER RECEIPT OF SUCH NOTICE TO CURE
SUCH BREACH.

 

(B)           RESIGNATION BY EMPLOYEE FOR GOOD REASON. EMPLOYEE SHALL HAVE THE
RIGHT TO TERMINATE HIS EMPLOYMENT UNDER THIS AGREEMENT UNDER THE FOLLOWING
CIRCUMSTANCES (ANY SUCH TERMINATION, A TERMINATION FOR “GOOD REASON”); PROVIDED,
THAT EMPLOYEE SHALL PROVIDE WRITTEN NOTICE OF SUCH CIRCUMSTANCES TO EMPLOYER,
AND EMPLOYER SHALL HAVE 10 DAYS AFTER RECEIPT OF SUCH NOTICE TO CURE SUCH
CIRCUMSTANCES:

 

(I)            A CHANGE IN THE LOCATION OF THE PRIMARY WORKSITE OF EMPLOYEE THAT
IS MORE THAN 25 MILES FROM ITS PRESENT LOCATION, UNLESS THE CHANGED LOCATION IS
WITHIN THE GREATER BOSTON, MASSACHUSETTS AREA;

 

(II)           THE ASSIGNMENT TO EMPLOYEE OF ANY DUTIES OR RESPONSIBILITIES
MATERIALLY INCONSISTENT WITH EMPLOYEE’S POSITION AS SET FORTH IN SECTION 3
HEREOF, EMPLOYEE’S REMOVAL FROM SUCH POSITION OR A SUBSTANTIAL DIMINUTION IN
SUCH POSITION, DUTIES OR RESPONSIBILITIES; PROVIDED, HOWEVER, THAT SO LONG AS
EMPLOYEE REMAINS THE PRESIDENT OF AAI OR OCCUPIES A POSITION WITH COMPARABLE OR
GREATER DUTIES AND RESPONSIBILITIES, ANY SUCH ASSIGNMENT, REMOVAL OR DIMINUTION
THAT OCCURS MERELY AS A RESULT OF THE EMPLOYER’S CEASING TO BE AN INDEPENDENT
PUBLICLY HELD COMPANY (SPECIFICALLY INCLUDING THE SIGNING OF THE MERGER
AGREEMENT BY EMPLOYER WITH TEXTRON INC. AND ACQUISITION SUBSIDIARY AND THE
COMPLETION OF THE TRANSACTIONS CONTEMPLATED BY SUCH MERGER AGREEMENT) SHALL NOT
CONSTITUTE “GOOD REASON” UNDER THIS SECTION 5(B)(II); AND PROVIDED, FURTHER,
HOWEVER, THAT EMPLOYEE CEASING TO BE MEMBER OF EMPLOYER’S BOARD OF DIRECTORS FOR
ANY REASON SHALL NOT CONSTITUTE “GOOD REASON” UNDER THIS SECTION 5(B)(II);

 

(III)          A MATERIAL REDUCTION IN EMPLOYEE’S BASE COMPENSATION PURSUANT TO
SECTION 4(A) HEREOF OR IN EMPLOYEE’S TARGET PERCENTAGE FOR THE INCENTIVE
COMPENSATION UNDER SECTION 4(B) HEREOF AS IN EFFECT ON THE EFFECTIVE DATE OR AS
INCREASED FROM TIME TO TIME; OR

 

(IV)          A FAILURE OF EMPLOYER TO CONTINUE TO PROVIDE EMPLOYEE WITH
BENEFITS SUBSTANTIALLY AS CONTEMPLATED BY SECTION 4(C) HEREOF.

 

(C)           DISABILITY. IF EMPLOYEE SHALL BE INCAPACITATED BY REASON OF MENTAL
OR PHYSICAL DISABILITY OR OTHERWISE DURING THE TERM OF THIS AGREEMENT SO THAT HE
IS PREVENTED FROM PERFORMING HIS PRINCIPAL DUTIES AND SERVICES HEREUNDER FOR A
PERIOD OF THREE (3) CONSECUTIVE MONTHS OR ONE OR MORE PERIODS AGGREGATING THREE
(3) MONTHS DURING ANY TWELVE (12) MONTH PERIOD, EMPLOYER SHALL HAVE THE RIGHT TO
TERMINATE THIS AGREEMENT BY SENDING WRITTEN NOTICE OF TERMINATION TO EMPLOYEE,
AND THEREUPON HIS EMPLOYMENT PURSUANT TO THIS AGREEMENT SHALL TERMINATE.

 

(D)           DEATH. IN THE EVENT OF THE DEATH OF EMPLOYEE DURING THE TERM
HEREOF, THIS AGREEMENT SHALL AUTOMATICALLY TERMINATE.

 

6.             EFFECT OF TERMINATION. UPON THE TERMINATION OF EMPLOYEE’S
EMPLOYMENT WITH EMPLOYER, PURSUANT TO SECTION 5 OR OTHERWISE (E.G., UPON THE
SCHEDULED TERMINATION DATE, BY EMPLOYER WITHOUT CAUSE, BY EMPLOYEE WITHOUT GOOD
REASON OR AT THE ELECTION OF EITHER EMPLOYER OR EMPLOYEE FOLLOWING THE TERM OF
THIS AGREEMENT), NO FURTHER PAYMENTS OR COMPENSATION OF ANY TYPE SHALL BE MADE
OR SHALL BE PAYABLE TO EMPLOYEE HEREUNDER

 

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NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, EXCEPT AS FOLLOWS,
SUBJECT TO THE PROVISIONS OF SECTION 6(1) HEREOF:

 

(A)           OUTSTANDING BASE COMPENSATION. IN THE CASE OF ANY TERMINATION,
EMPLOYEE SHALL BE ENTITLED TO ANY COMPENSATION DUE PURSUANT TO SECTION 4(A)
HEREOF THROUGH THE DATE OF TERMINATION.

 

(B)           OUTSTANDING EXPENSES. IN THE CASE OF ANY TERMINATION, EMPLOYEE
SHALL BE ENTITLED TO ANY REIMBURSEMENT, PURSUANT TO SECTION 12 HEREOF, OF
EXPENSES INCURRED BY EMPLOYEE THROUGH THE DATE OF TERMINATION.

 

(C)           OUTSTANDING INCENTIVE COMPENSATION. SUBJECT TO THE PROVISIONS OF
SECTION 6(G) HEREOF, UPON ANY TERMINATION OF EMPLOYMENT OF THE EMPLOYEE OTHER
THAN BY EMPLOYER FOR CAUSE, INCLUDING TERMINATION BY EMPLOYEE WITHOUT GOOD
REASON, PRIOR TO THE END OF ANY COMPENSATION YEAR, EMPLOYEE SHALL BE ENTITLED TO
RECEIVE A PRO RATA PORTION OF HIS INCENTIVE COMPENSATION FOR SUCH COMPENSATION
YEAR DUE PURSUANT TO SECTION 4(B) HEREOF, BASED ON THE NUMBER OF DAYS EMPLOYED
DURING SUCH COMPENSATION YEAR (“PRO-RATA INCENTIVE COMPENSATION PAYMENT”). THE
PRO-RATA INCENTIVE COMPENSATION PAYMENT SHALL BE PAID TO THE EMPLOYEE FOLLOWING
THE EXPIRATION OF THE 409A DELAY PERIOD, AS SET FORTH IN SECTION 6(G) BELOW.

 

(D)           SEVERANCE COMPENSATION. SUBJECT TO THE PROVISIONS OF SECTION 6(G)
HEREOF, UPON ANY TERMINATION OF EMPLOYMENT OF THE EMPLOYEE (WHETHER DURING THE
TERM OF THIS AGREEMENT OR THEREAFTER) OTHER THAN BY EMPLOYER FOR CAUSE, DEATH,
OR BY EMPLOYEE WITHOUT GOOD REASON, THE EMPLOYEE SHALL BE ENTITLED TO RECEIVE
SEVERANCE COMPENSATION (“SEVERANCE COMPENSATION”) EQUAL TO (X) TWO HUNDRED
PERCENT (200%) OF EMPLOYEE’S ANNUALIZED SALARY AT THE TIME OF TERMINATION (THE
“BASE SEVERANCE COMPENSATION”) PLUS (Y) FIFTY PERCENT (50%) OF THE AMOUNT
CALCULATED PURSUANT TO THE FOREGOING CLAUSE (X) (THE “INCENTIVE SEVERANCE
COMPENSATION”), PAYABLE IN EQUAL INSTALLMENTS AT SUCH TIMES AND IN ACCORDANCE
WITH THE NORMAL PAYROLL PRACTICES OF EMPLOYER OVER A PERIOD OF EIGHTEEN MONTHS
FOLLOWING THE DATE OF TERMINATION OR, IF THE EMPLOYEE’S EMPLOYMENT TERMINATION
OCCURS FOR THE REASONS SPECIFIED IN THIS SECTION 6(D) WITHIN TWO (2) YEARS AFTER
A CHANGE OF CONTROL, PAYMENT SHALL BE MADE IN A SINGLE SUM PAYMENT IN LIEU OF
INSTALLMENT PAYMENTS; PROVIDED, HOWEVER, THAT, IN THE CASE OF A TERMINATION FOR
DISABILITY, THE SEVERANCE COMPENSATION SHALL BE REDUCED BY AMOUNTS PAYABLE TO
EMPLOYEE UNDER EMPLOYER SPONSORED SHORT TERM AND LONG TERM DISABILITY INSURANCE
POLICIES IN RESPECT OF THE PERIOD OF EIGHTEEN (18) MONTHS FOLLOWING THE DATE OF
TERMINATION. NOTWITHSTANDING ANY CONTRARY PROVISION CONTAINED IN THIS SECTION
6(D), PAYMENT TO THE EMPLOYEE OF SEVERANCE COMPENSATION SHALL NOT BEGIN UNTIL
AFTER THE EXPIRATION OF THE 409A DELAY PERIOD, AS SET FORTH IN SECTION 6(G)
BELOW.

 

(E)           COMPLETION BONUS. SUBJECT TO THE PROVISIONS OF SECTION 6(G)
HEREOF, UPON THE TERMINATION OF EMPLOYMENT OF THE EMPLOYEE (WHETHER DURING THE
TERM OF THIS AGREEMENT OR THEREAFTER) OTHER THAN BY EMPLOYER FOR CAUSE OR BY
EMPLOYEE WITHOUT GOOD REASON, THE EMPLOYEE SHALL BE ENTITLED TO RECEIVE A SINGLE
SUM PAYMENT IN THE AMOUNT OF $200,000. THE SINGLE SUM PAYMENT SHALL BE MADE TO
THE EMPLOYEE FOLLOWING EXPIRATION OF THE 409A DELAY PERIOD, AS SET FORTH IN
SECTION 6(G) BELOW.

 

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(F)            BENEFITS. IN THE CASE OF ANY TERMINATION (WHETHER DURING THE TERM
OF THIS AGREEMENT OR THEREAFTER) OTHER THAN BY EMPLOYER FOR CAUSE, DEATH, OR BY
EMPLOYEE WITHOUT GOOD REASON, THEN EMPLOYEE SHALL BE ENTITLED TO CONTINUATION OF
THE SAME OR EQUIVALENT EMPLOYEE HEALTH BENEFITS AS IN EFFECT ON THE DATE OF
TERMINATION FOR A PERIOD OF EIGHTEEN MONTHS FOLLOWING TERMINATION. THE FOREGOING
EIGHTEEN-MONTH PERIOD SHALL BE DEEMED TO RUN CONCURRENTLY WITH THE APPLICABLE
POST-TERMINATION COVERAGE PERIOD REQUIRED UNDER COBRA. EMPLOYEE ACKNOWLEDGES
THAT IF EMPLOYER IS RESTRICTED FROM PROVIDING SUCH COVERAGE UNDER ANY OF ITS
HEALTH PLANS DUE TO TAX, UNDERWRITING OR OTHER ISSUES, EMPLOYER WILL USE
COMMERCIALLY REASONABLE EFFORTS TO PROVIDE OR FACILITATE COVERAGE THROUGH OTHER
MEANS, PROVIDED THAT IT DOES NOT COST MATERIALLY MORE TO EMPLOYER THAN THE COST
OF PROVIDING SUCH COVERAGE UNDER EMPLOYER’S THEN CURRENT HEALTH PLANS.

 

(G)           SECTION 409A COMPLIANCE.

 

(I)            IN THE EVENT THAT EMPLOYEE IS DEEMED TO BE A “SPECIFIED EMPLOYEE”
(WITHIN THE MEANING OF SECTION 409A(A)(2)(B)(I) OF THE CODE) IN ACCORDANCE WITH
PROCEDURES SET BY THE EMPLOYER AT THE TIME OF EMPLOYEE’S TERMINATION HEREUNDER,
PAYMENT OF THE AMOUNTS DESCRIBED IN SECTIONS 6(C) THROUGH 6(E) HEREOF SHALL BE
DELAYED FOR A PERIOD OF SIX MONTHS IMMEDIATELY FOLLOWING THE EMPLOYEE’S
TERMINATION OF EMPLOYMENT (THE “409A DELAY PERIOD”). IF THE SEVERANCE
COMPENSATION DUE TO THE EMPLOYEE UNDER SECTION 6(D) IS PAYABLE IN INSTALLMENTS,
PAYMENT OF ANY AMOUNTS RELATING TO THE 409A DELAY PERIOD SHALL BE MADE TO THE
EMPLOYEE IN A SINGLE SUM PAYMENT ON THE DAY IMMEDIATELY FOLLOWING THE EXPIRATION
OF THE 409A DELAY PERIOD AND ANY REMAINING PAYMENTS SHALL BE MADE IN ACCORDANCE
WITH THE TERMS SPECIFIED HEREIN. IF THE SEVERANCE COMPENSATION DUE TO THE
EMPLOYEE UNDER SECTION 6(D) IS PAYABLE IN A SINGLE SUM PAYMENT, SUCH PAYMENT
SHALL BE MADE TO THE EMPLOYEE ON THE DAY IMMEDIATELY FOLLOWING THE EXPIRATION OF
THE 409A DELAY PERIOD. THE PRO-RATA INCENTIVE COMPENSATION PAYMENT DESCRIBED IN
SECTION 6(C) ABOVE AND THE SEPARATE BONUS PAYMENT DESCRIBED IN SECTION 6(E)
ABOVE SHALL ALSO BE PAID TO THE EMPLOYEE ON THE DAY IMMEDIATELY FOLLOWING
EXPIRATION OF THE 409A DELAY PERIOD. ANY HEALTH BENEFITS TO WHICH EMPLOYEE SHALL
BECOME ENTITLED FOLLOWING TERMINATION PURSUANT TO SECTION 6(F) HEREOF THAT ARE
TREATED AS NONQUALIFIED DEFERRED COMPENSATION UNDER SECTION 409A OF THE CODE
SHALL BE PROVIDED TO EMPLOYEE DURING THE 409A DELAY PERIOD ONLY TO THE EXTENT
THAT EMPLOYEE PAYS THE FULL COST FOR SUCH BENEFITS DURING THE 409A DELAY PERIOD.
AT THE END OF THE 409A DELAY PERIOD, EMPLOYER SHALL PROMPTLY REIMBURSE EMPLOYEE
FOR SUCH PAID COSTS. EMPLOYEE SHALL NOT BE ENTITLED TO ANY INTEREST ON OR IN
RESPECT OF ANY AMOUNTS UNDER SECTIONS 6(C) THROUGH 6(E) HEREOF NOT PAID DURING
THE 409A DELAY PERIOD OR ANY COSTS ADVANCED BY EMPLOYEE FOR BENEFITS UNDER
SECTION 6(F) HEREOF DURING THE 409A DELAY PERIOD. NOTWITHSTANDING ANYTHING
HEREIN TO THE CONTRARY, THE EMPLOYEE SHALL ONLY BE ENTITLED TO RECEIVE THE
AMOUNTS SET FORTH UNDER SECTION 6(C) THROUGH 6(E) ABOVE IF THE EMPLOYEE’S
TERMINATION OF EMPLOYMENT CONSTITUTES A “SEPARATION FROM SERVICE” WITHIN THE
MEANING OF THE REGULATIONS ISSUED UNDER CODE SECTION 409A.

 

(II)           TO THE EXTENT APPLICABLE, IT IS INTENDED THAT THIS AGREEMENT
COMPLY WITH THE PROVISIONS OF SECTION 409A OF THE CODE AND THIS AGREEMENT SHALL
BE LIMITED, CONSTRUED AND INTERPRETED IN A MANNER CONSISTENT WITH THIS INTENT.

 

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(H)           STOCK OPTIONS. IN THE CASE OF ANY TERMINATION (WHETHER DURING THE
TERM OF THIS AGREEMENT OR THEREAFTER) OTHER THAN BY EMPLOYER FOR CAUSE, DEATH,
OR BY EMPLOYEE WITHOUT GOOD REASON, THEN ANY AND ALL UNEXERCISED AND UNEXPIRED
STOCK OPTIONS AWARDED TO EMPLOYEE SHALL FULLY VEST.

 

(I)            SUCCESS BONUS. IF SO PROVIDED BY SECTION 7, EMPLOYEE SHALL BE
ENTITLED TO RECEIVE THE SUCCESS BONUS IN ACCORDANCE WITH SECTION 7.

 

(J)            VACATION. IN THE CASE OF ANY TERMINATION, EMPLOYEE SHALL BE
ENTITLED TO BE PAID FOR ANY ACCRUED AND UNUSED VACATION TIME AT THE RATE OF BASE
COMPENSATION THEN IN EFFECT.

 

(K)           DEATH BENEFITS. IN THE CASE OF EMPLOYEE’S TERMINATION AS A RESULT
OF DEATH, EMPLOYER SHALL PAY TO EMPLOYEE’S SPOUSE (IF SHE IS THEN LIVING) OR
EMPLOYEE’S ESTATE EMPLOYEE’S THEN-BASE COMPENSATION FOR A PERIOD OF EIGHTEEN
(18) MONTHS FOLLOWING SUCH TERMINATION.

 

(L)            GENERAL RELEASE. THE RECEIPT OF THE BENEFITS DESCRIBED IN THIS
SECTION 6 (OTHER THAN THE BENEFITS UNDER SECTIONS 6(A), (B), (I) AND (J) HEREOF)
SHALL BE CONDITIONED UPON THE EXECUTION AND NON-REVOCATION BY EMPLOYEE OF A
RELEASE AGREEMENT BASED ON EMPLOYER’S STANDARD FORM OF RELEASE AGREEMENT FOR
TERMINATING EMPLOYEES.

 

7.             CHANGE OF CONTROL.

 

(A)           SUCCESS BONUS. IN ADDITION TO ANY OTHER COMPENSATION PAYABLE TO
EMPLOYEE HEREUNDER, EMPLOYER SHALL PAY TO EMPLOYEE UPON THE CLOSING DATE OF A
CHANGE OF CONTROL OF EMPLOYER (AS DEFINED BELOW) OR UPON EARLIER TERMINATION OF
EMPLOYMENT AS PROVIDED BELOW, AN AMOUNT EQUAL TO 50% OF THE ANNUAL BASE
COMPENSATION IN EFFECT ON THE CLOSING DATE OF THE CHANGE OF CONTROL (OR, IF
EMPLOYEE’S EMPLOYMENT HEREUNDER IS THEN TERMINATED (OTHER THAN AS SPECIFIED IN
THE FOLLOWING PROVISO), THE BASE COMPENSATION IN EFFECT ON THE DATE OF SUCH
TERMINATION), NET OF REDUCTION FOR ANY APPLICABLE WITHHOLDING TAXES (THE
“SUCCESS BONUS”); PROVIDED, HOWEVER, THAT, THE SUCCESS BONUS SHALL NOT BE PAID
IF, PRIOR TO THE CLOSING DATE OF THE CHANGE OF CONTROL, EMPLOYEE’S EMPLOYMENT
HEREUNDER HAS BEEN TERMINATED BY EMPLOYER FOR CAUSE OR BY EMPLOYEE WITHOUT GOOD
REASON; PROVIDED, FURTHER, HOWEVER, THAT, IF THE EMPLOYEE’S EMPLOYMENT IS
TERMINATED BY THE EMPLOYER WITHOUT CAUSE OR BY THE EMPLOYEE FOR GOOD REASON, THE
SUCCESS BONUS SHALL NOT BE PAID TO THE EMPLOYEE UNTIL AFTER THE 409A DELAY
PERIOD HAS EXPIRED, AS SET FORTH IN SECTION 6(G) ABOVE AND IN NO EVENT SHALL
SUCH PAYMENT BE MADE TO THE EMPLOYEE UNLESS THE EMPLOYEE’S TERMINATION OF
EMPLOYMENT CONSTITUTES A “SEPARATION FROM SERVICE” WITHIN THE MEANING OF THE
REGULATIONS UNDER SECTION 409A OF THE CODE. “CHANGE OF CONTROL” SHALL MEAN (I)
ANY PERSON OR OTHER ENTITY (OTHER THAN ANY OF THE EMPLOYER’S SUBSIDIARIES),
INCLUDING ANY PERSON AS DEFINED IN SECTION 13(D)(3) OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, BECOMES THE BENEFICIAL OWNER, AS DEFINED IN RULE 13D-3
OF SUCH ACT, DIRECTLY OR INDIRECTLY, OF MORE THAN FIFTY PERCENT (50%) OF THE
TOTAL COMBINED VOTING POWER OF ALL CLASSES OF CAPITAL STOCK OF EMPLOYER NORMALLY
ENTITLED TO VOTE FOR THE ELECTION OF DIRECTORS OF EMPLOYER (THE “VOTING STOCK”),
(II) THE SALE OF ALL OR SUBSTANTIALLY ALL OF THE PROPERTY OR ASSETS OF EMPLOYER,
(III) THE CONSOLIDATION OR MERGER OF EMPLOYER WITH ANOTHER CORPORATION OR OTHER
ENTITY (OTHER THAN WITH ANY OF EMPLOYER’S SUBSIDIARIES), THE CONSUMMATION OF
WHICH WOULD RESULT IN THE STOCKHOLDERS OF EMPLOYER IMMEDIATELY BEFORE THE
OCCURRENCE OF THE CONSOLIDATION OR MERGER

 

7

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OWNING, IN THE AGGREGATE, LESS THAN 50% OF THE VOTING STOCK OF THE SURVIVING
ENTITY, OR (IV) A CHANGE IN THE BOARD OF DIRECTORS OCCURS WITH THE RESULT THAT
THE MEMBERS OF THE BOARD OF DIRECTORS ON THE EFFECTIVE DATE (THE “INCUMBENT
DIRECTORS”) ARE REPLACED DURING ANY 12-MONTH PERIOD BY DIRECTORS WHOSE
APPOINTMENT OR ELECTION IS NOT ENDORSED BY A MAJORITY OF THE INCUMBENT DIRECTORS
PRIOR TO THE DATE OF SUCH APPOINTMENT OR ELECTION, PROVIDED THAT ANY PERSON
BECOMING A DIRECTOR WHOSE ELECTION OR NOMINATION FOR ELECTION WAS SUPPORTED BY A
MAJORITY OF THE INCUMBENT DIRECTORS SHALL BE CONSIDERED AN INCUMBENT DIRECTOR
FOR PURPOSES HEREOF.

 

(B)           STOCK OPTIONS. ON THE CLOSING DATE OF A CHANGE OF CONTROL, ANY AND
ALL UNEXERCISED AND UNEXPIRED STOCK OPTIONS AWARDED TO EMPLOYEE SHALL FULLY VEST
(EXCEPT IF EMPLOYEE HAD THERETOFORE BEEN TERMINATED BY EMPLOYER FOR CAUSE, DUE
TO HIS DEATH OR BY EMPLOYEE WITHOUT GOOD REASON).

 

(C)           GROSS-UP. EMPLOYEE SHALL ALSO BE ENTITLED TO RECEIVE THE
PAYMENT(S) PROVIDED IN SECTION 8 BELOW.

 

8.             IRC 280G GROSS-UP.

 

(A)           IF ANY PAYMENT OR BENEFIT (WITHIN THE MEANING OF SECTION
280G(B)(2) OF THE CODE), TO THE EMPLOYEE OR FOR THE EMPLOYEE’S BENEFIT PAID OR
PAYABLE OR DISTRIBUTED OR DISTRIBUTABLE PURSUANT TO THE TERMS OF THIS AGREEMENT
OR OTHERWISE IN CONNECTION WITH, OR ARISING OUT OF, THE EMPLOYEE’S EMPLOYMENT
WITH THE EMPLOYER OR A CHANGE IN OWNERSHIP OR EFFECTIVE CONTROL OF THE EMPLOYER
OR OF A SUBSTANTIAL PORTION OF ITS ASSETS (ANY SUCH PAYMENT OR BENEFIT, A
“PARACHUTE PAYMENT”), WOULD BE SUBJECT TO THE EXCISE TAX IMPOSED BY SECTION 4999
OF THE CODE, OR IF ANY INTEREST OR PENALTIES ARE INCURRED BY THE EMPLOYEE WITH
RESPECT TO SUCH EXCISE TAX (SUCH EXCISE TAX, TOGETHER WITH ANY SUCH INTEREST AND
PENALTIES, ARE HEREINAFTER COLLECTIVELY REFERRED TO AS THE “EXCISE TAX”), THEN
THE EMPLOYEE WILL BE ENTITLED TO RECEIVE ADDITIONAL PAYMENTS (A “GROSS-UP
PAYMENT”) IN AN AMOUNT EQUAL TO THE EXCISE TAXES IMPOSED UPON THE PARACHUTE
PAYMENT AND THE GROSS-UP PAYMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION
8(A), THE EMPLOYEE SHALL NOT BE ENTITLED TO ANY ADDITIONAL PAYMENTS IN
CONNECTION WITH ANY PARACHUTE PAYMENTS OR GROSS-UP PAYMENTS, INCLUDING ANY
REIMBURSEMENT FOR THE INCOME TAX THEREON.

 

(B)           IF THE EMPLOYEE SHALL BECOME ENTITLED TO A PARACHUTE PAYMENT,
WHICH PARACHUTE PAYMENT WILL BE SUBJECT TO THE EXCISE TAX, SUBJECT TO SECTION
8(E) BELOW, THEN THE EMPLOYER SHALL PAY TO THE EMPLOYEE AT THE TIME SPECIFIED
BELOW (I) A GROSS-UP PAYMENT SUCH THAT THE NET AMOUNT RETAINED BY THE EMPLOYEE,
AFTER DEDUCTION OF ANY EXCISE TAX ON THE PARACHUTE PAYMENT AND ANY U.S. FEDERAL,
STATE, AND LOCAL INCOME OR PAYROLL TAX UPON THE GROSS-UP PAYMENT PROVIDED FOR BY
THIS PARAGRAPH, BUT BEFORE DEDUCTION FOR ANY U.S. FEDERAL, STATE, AND LOCAL
INCOME OR PAYROLL TAX ON THE PARACHUTE PAYMENT, SHALL BE EQUAL TO THE PARACHUTE
PAYMENT, AND (II) AN AMOUNT EQUAL TO THE PRODUCT OF ANY DEDUCTIONS DISALLOWED
FOR FEDERAL, STATE OR LOCAL INCOME TAX PURPOSES BECAUSE OF THE INCLUSION OF THE
GROSS-UP PAYMENT IN THE EMPLOYEE’S ADJUSTED GROSS INCOME MULTIPLIED BY THE
HIGHEST APPLICABLE MARGINAL RATE OF FEDERAL, STATE OR LOCAL INCOME TAXATION,
RESPECTIVELY, FOR THE CALENDAR YEAR IN WHICH THE GROSS-UP PAYMENT IS TO BE MADE.

 

(C)           IN THE EVENT THAT THE INTERNAL REVENUE SERVICE OR COURT ULTIMATELY
MAKES A DETERMINATION THAT THE EXCESS PARACHUTE PAYMENTS PLUS THE BASE AMOUNT IS
AN AMOUNT OTHER THAN

 

8

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AS DETERMINED INITIALLY, AN APPROPRIATE ADJUSTMENT SHALL BE MADE WITH REGARD TO
THE GROSS-UP PAYMENT TO REFLECT THE FINAL DETERMINATION.

 

(D)           FOR PURPOSES OF DETERMINING WHETHER ANY OF THE PARACHUTE PAYMENTS
AND GROSS-UP PAYMENTS (COLLECTIVELY THE “TOTAL PAYMENTS”) WILL BE SUBJECT TO THE
EXCISE TAX AND THE AMOUNT OF SUCH EXCISE TAX, (I) THE TOTAL PAYMENTS SHALL BE
TREATED AS “PARACHUTE PAYMENTS” WITHIN THE MEANING OF SECTION 280G(B)(2) OF THE
CODE, AND ALL “PARACHUTE PAYMENTS” IN EXCESS OF THE “BASE AMOUNT” (AS DEFINED
UNDER SECTION 280G(B)(3) OF THE CODE) SHALL BE TREATED AS SUBJECT TO THE EXCISE
TAX, UNLESS AND EXCEPT TO THE EXTENT THAT, IN THE OPINION OF THE EMPLOYER’S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS APPOINTED PRIOR TO ANY CHANGE IN
OWNERSHIP (AS DEFINED UNDER SECTION 280G(B)(2) OF THE CODE) OR TAX COUNSEL
SELECTED BY SUCH ACCOUNTANTS OR THE EMPLOYER (THE “ACCOUNTANTS”), THERE IS A
REASONABLE REPORTING POSITION THAT SUCH TOTAL PAYMENTS (IN WHOLE OR IN PART)
EITHER DO NOT CONSTITUTE “PARACHUTE PAYMENTS,” INCLUDING GIVING EFFECT TO THE
RECALCULATION OF STOCK OPTIONS IN ACCORDANCE WITH TREASURY REGULATION SECTION
1.280G-1, Q&A 33, REPRESENT REASONABLE COMPENSATION FOR SERVICES ACTUALLY
RENDERED WITHIN THE MEANING OF SECTION 280G(B)(4) OF THE CODE IN EXCESS OF THE
“BASE AMOUNT” OR ARE OTHERWISE NOT SUBJECT TO THE EXCISE TAX, AND (II) THE VALUE
OF ANY NON-CASH BENEFITS OR ANY DEFERRED PAYMENT OR BENEFIT SHALL BE DETERMINED
BY THE ACCOUNTANTS IN ACCORDANCE WITH THE PRINCIPLES OF SECTION 280G OF THE
CODE. TO THE EXTENT PERMITTED UNDER REVENUE PROCEDURE 2003-68, THE VALUE
DETERMINATION SHALL BE RECALCULATED TO THE EXTENT IT WOULD BE BENEFICIAL TO THE
EMPLOYEE. ALL DETERMINATIONS HEREUNDER SHALL BE MADE BY THE ACCOUNTANTS WHICH
SHALL PROVIDE DETAILED SUPPORTING CALCULATIONS BOTH TO THE EMPLOYER AND THE
EMPLOYEE AT SUCH TIME AS THEY ARE REQUESTED BY THE EMPLOYER OR THE EMPLOYEE. IF
THE ACCOUNTANTS DETERMINE THAT PAYMENTS UNDER THIS AGREEMENT MUST BE REDUCED
PURSUANT TO THIS PARAGRAPH, THEY SHALL FURNISH THE EMPLOYEE WITH A WRITTEN
OPINION TO SUCH EFFECT. THE DETERMINATION OF THE ACCOUNTANTS SHALL BE FINAL AND
BINDING UPON THE EMPLOYER AND THE EMPLOYEE.

 

(E)           FOR PURPOSES OF DETERMINING THE AMOUNT OF THE GROSS-UP PAYMENT,
THE ACTUAL U.S. FEDERAL, STATE AND LOCAL INCOME TAX RATES APPLICABLE TO THE
EMPLOYEE WITH RESPECT TO THE CALENDAR YEAR IN WHICH THE GROSS-UP PAYMENT IS TO
BE MADE, NET OF ANY APPLICABLE REDUCTION IN U.S. FEDERAL INCOME TAXES OBTAINED
FROM DEDUCTION OF SUCH STATE AND LOCAL TAXES PAID IN SUCH YEAR, SHALL BE USED.
IN THE EVENT THAT THE EXCISE TAX IS SUBSEQUENTLY DETERMINED BY THE ACCOUNTANTS
TO BE LESS THAN THE AMOUNT TAKEN INTO ACCOUNT HEREUNDER AT THE TIME THE GROSS-UP
PAYMENT IS MADE, THE EMPLOYEE SHALL REPAY TO THE EMPLOYER, AT THE TIME THAT THE
AMOUNT OF SUCH REDUCTION IN EXCISE TAX IS FINALLY DETERMINED, THE PORTION OF THE
PRIOR GROSS-UP PAYMENT ATTRIBUTABLE TO SUCH REDUCTION (PLUS THE PORTION OF THE
GROSS-UP PAYMENT ATTRIBUTABLE TO THE EXCISE TAX AND U.S. FEDERAL, STATE AND
LOCAL INCOME TAX IMPOSED ON THE PORTION OF THE GROSS-UP PAYMENT BEING REPAID BY
THE EMPLOYEE IF SUCH REPAYMENT RESULTS IN A REDUCTION IN EXCISE TAX OR A U.S.
FEDERAL, STATE AND LOCAL INCOME TAX DEDUCTION), PLUS INTEREST ON THE AMOUNT OF
SUCH REPAYMENT AT THE RATE PROVIDED IN SECTION 1274(B)(2)(B) OF THE CODE.
NOTWITHSTANDING THE FOREGOING, IN THE EVENT ANY PORTION OF THE GROSS-UP PAYMENT
TO BE REFUNDED TO THE EMPLOYER HAS BEEN PAID TO ANY U.S. FEDERAL, STATE AND
LOCAL TAX AUTHORITY, REPAYMENT THEREOF (AND RELATED AMOUNTS) SHALL NOT BE
REQUIRED UNTIL ACTUAL REFUND OR CREDIT OF SUCH PORTION HAS BEEN MADE TO THE
EMPLOYEE, AND INTEREST PAYABLE TO THE EMPLOYER SHALL NOT EXCEED THE INTEREST
RECEIVED OR CREDITED TO THE EMPLOYEE BY SUCH TAX AUTHORITY FOR THE PERIOD IT
HELD SUCH PORTION. THE EMPLOYEE AND THE EMPLOYER SHALL MUTUALLY AGREE UPON THE
COURSE OF ACTION TO BE PURSUED (AND THE METHOD OF

 

9

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ALLOCATING THE EXPENSE THEREOF) IF THE EMPLOYEE’S CLAIM FOR REFUND OR CREDIT
FROM SUCH TAX AUTHORITY IS DENIED.

 

(F)            IN THE EVENT THAT THE EXCISE TAX IS LATER DETERMINED BY THE
ACCOUNTANT OR THE INTERNAL REVENUE SERVICE TO EXCEED THE AMOUNT TAKEN INTO
ACCOUNT HEREUNDER AT THE TIME THE GROSS-UP PAYMENT IS MADE (INCLUDING BY REASON
OF ANY PAYMENT THE EXISTENCE OR AMOUNT OF WHICH CANNOT BE DETERMINED AT THE TIME
OF THE GROSS-UP PAYMENT), THE EMPLOYER SHALL MAKE AN ADDITIONAL GROSS-UP PAYMENT
IN RESPECT OF SUCH EXCESS (PLUS ANY INTEREST OR PENALTIES PAYABLE WITH RESPECT
TO SUCH EXCESS) AT THE TIME THAT THE AMOUNT OF SUCH EXCESS IS FINALLY
DETERMINED.

 

(G)           THE GROSS-UP PAYMENT SHALL BE PAID NOT LATER THAN THE LAST DAY OF
THE CALENDAR YEAR FOLLOWING THE CALENDAR YEAR IN WHICH THE EMPLOYEE REMITS THE
EXCISE TAXES.

 

(H)           IN THE EVENT OF ANY CONTROVERSY WITH THE INTERNAL REVENUE SERVICE
(OR OTHER TAXING AUTHORITY) WITH REGARD TO THE EXCISE TAX, THE EMPLOYEE SHALL
PERMIT THE EMPLOYER TO CONTROL ISSUES RELATED TO THE EXCISE TAX (AT ITS
EXPENSE), BUT THE EMPLOYEE SHALL CONTROL ANY OTHER ISSUES UNRELATED TO THE
EXCISE TAX. IN THE EVENT THAT THE ISSUES ARE INTERRELATED, THE EMPLOYEE AND THE
EMPLOYER SHALL IN GOOD FAITH COOPERATE. IN THE EVENT OF ANY CONFERENCE WITH ANY
TAXING AUTHORITY AS TO THE EXCISE TAX OR ASSOCIATED INCOME TAXES, THE EMPLOYEE
SHALL PERMIT THE REPRESENTATIVE OF THE EMPLOYER TO ACCOMPANY THE EMPLOYEE, AND
THE EMPLOYEE AND HIS REPRESENTATIVE SHALL COOPERATE WITH THE EMPLOYER AND ITS
REPRESENTATIVE.

 

(I)            THE EMPLOYER SHALL BE RESPONSIBLE FOR ALL CHARGES OF THE
ACCOUNTANT.

 

(J)            THE EMPLOYER AND THE EMPLOYEE SHALL PROMPTLY DELIVER TO EACH
OTHER COPIES OF ANY WRITTEN COMMUNICATIONS, AND SUMMARIES OF ANY VERBAL
COMMUNICATIONS, WITH ANY TAXING AUTHORITY REGARDING THE EXCISE TAX COVERED BY
THIS PROVISION.

 

(K)           NOTHING IN THIS SECTION 8 IS INTENDED TO VIOLATE THE
SARBANES-OXLEY ACT AND TO THE EXTENT THAT ANY ADVANCE OR REPAYMENT OBLIGATION
HEREUNDER WOULD DO SO, SUCH OBLIGATION SHALL BE MODIFIED SO AS TO MAKE THE
ADVANCE A NONREFUNDABLE PAYMENT TO THE EMPLOYEE AND THE REPAYMENT OBLIGATION
NULL AND VOID.

 

9.             NO COMPETITION. EMPLOYEE AGREES THAT, DURING THE PERIOD OF
EMPLOYEE’S EMPLOYMENT WITH EMPLOYER AND FOR A PERIOD OF EIGHTEEN (18) MONTHS
FOLLOWING TERMINATION OF EMPLOYMENT FOR ANY REASON, HE WILL NOT, WITHIN THE
CONTINENTAL UNITED STATES, DIRECTLY OR INDIRECTLY, ENGAGE OR PARTICIPATE OR MAKE
ANY FINANCIAL INVESTMENTS IN OR BECOME EMPLOYED BY OR RENDER ADVISORY OR OTHER
SERVICES TO OR FOR ANY PERSON, FIRM OR CORPORATION, OR IN CONNECTION WITH ANY
BUSINESS ACTIVITY, OTHER THAN THAT OF EMPLOYER AND ITS SUBSIDIARIES, DIRECTLY OR
INDIRECTLY IN COMPETITION WITH ANY OF THE BUSINESS OPERATIONS OR ACTIVITIES OF
EMPLOYER AND ITS SUBSIDIARIES. NOTHING HEREIN CONTAINED, HOWEVER, SHALL RESTRICT
EMPLOYEE FROM MAKING ANY INVESTMENTS IN ANY COMPANY WHOSE STOCK IS LISTED ON A
NATIONAL SECURITIES EXCHANGE OR ACTIVELY TRADED IN THE OVER THE COUNTER MARKET,
SO LONG AS SUCH INVESTMENT DOES NOT GIVE HIM THE RIGHT TO CONTROL OR INFLUENCE
THE POLICY DECISIONS OF ANY SUCH BUSINESS OR ENTERPRISE WHICH IS OR MIGHT BE
DIRECTLY OR INDIRECTLY IN COMPETITION WITH ANY OF SUCH BUSINESS OPERATIONS OR
ACTIVITIES OF EMPLOYER OR ANY OF ITS SUBSIDIARIES.

 

10

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10.           CONFIDENTIALITY; ETC.

 

(A)           EMPLOYEE, DURING THE TERM OF THIS AGREEMENT AND THEREAFTER, WILL
NOT DIVULGE, FURNISH OR MAKE ACCESSIBLE TO ANYONE (OTHER THAN IN THE REGULAR
COURSE OF BUSINESS OF EMPLOYER OR ANY OF ITS SUBSIDIARIES) ANY KNOWLEDGE OR
INFORMATION WITH RESPECT TO CONFIDENTIAL OR SECRET METHODS, PROCESSES, PLANS OR
MATERIALS OF EMPLOYER OR ANY OF ITS SUBSIDIARIES, OR WITH RESPECT TO ANY OTHER
CONFIDENTIAL OR SECRET ASPECTS OF THE BUSINESS OF EMPLOYER OR ANY OF ITS
SUBSIDIARIES (THE “CONFIDENTIAL INFORMATION”). THE TERM “CONFIDENTIAL
INFORMATION” DOES NOT, HOWEVER, INCLUDE INFORMATION WHICH WAS OR BECOMES
GENERALLY AVAILABLE TO THE PUBLIC OTHER THAN AS A RESULT OF AN UNAUTHORIZED
DISCLOSURE BY EMPLOYEE.

 

(B)           EMPLOYEE AGREES TO COMMUNICATE AND TO MAKE KNOWN TO EMPLOYER ALL
KNOWLEDGE POSSESSED BY HIM RELATING TO ANY METHODS, DEVELOPMENTS, INVENTIONS
AND/OR IMPROVEMENTS, WHETHER PATENTED, PATENTABLE OR UNPATENTABLE WHICH CONCERNS
IN ANY WAY THE BUSINESS OF EMPLOYER OR ANY OF ITS SUBSIDIARIES OR THE GENERAL
INDUSTRY OF WHICH THEY ARE A PART, FROM THE TIME OF ENTERING UPON EMPLOYMENT
UNTIL THE TERMINATION THEREOF, AND WHETHER ACQUIRED BY EMPLOYEE BEFORE OR DURING
THE TERM OF HIS EMPLOYMENT; PROVIDED, THAT NOTHING HEREIN SHALL BE CONSTRUED AS
REQUIRING ANY SUCH COMMUNICATION WHERE THE METHOD, DEVELOPMENT, INVENTION AND/OR
IMPROVEMENT IS LAWFULLY PROTECTED FROM DISCLOSURE AS THE TRADE SECRET OF A THIRD
PARTY, INCLUDING, WITHOUT LIMITATION, ANY FORMER EMPLOYER OF EMPLOYEE OR BY ANY
OTHER LAWFUL BAR TO SUCH COMMUNICATION.

 

(C)           ANY METHODS, DEVELOPMENTS, INVENTIONS AND/OR IMPROVEMENTS, WHETHER
PATENTABLE OR UNPATENTABLE, ALONG THE LINES OF THE BUSINESS OF EMPLOYER OR ANY
OF ITS SUBSIDIARIES, WHICH EMPLOYEE MAY CONCEIVE OF OR MAKE WHILE IN THE EMPLOY
OF EMPLOYER, SHALL BE AND REMAIN THE PROPERTY OF EMPLOYER. EMPLOYEE AGREES
PROMPTLY TO COMMUNICATE AND DISCLOSE ALL SUCH METHODS, DEVELOPMENTS, INVENTIONS
AND/OR IMPROVEMENTS TO EMPLOYER AND TO EXECUTE AND DELIVER TO EMPLOYER ANY
INSTRUMENTS DEEMED NECESSARY BY EMPLOYER TO EFFECT DISCLOSURE AND ASSIGNMENT
THEREOF TO IT. EMPLOYEE FURTHER AGREES, ON REQUEST OF EMPLOYER, TO EXECUTE
PATENT APPLICATIONS BASED ON SUCH METHODS, DEVELOPMENTS, INVENTIONS AND/OR
IMPROVEMENTS, INCLUDING ANY OTHER INSTRUMENTS DEEMED NECESSARY BY EMPLOYER FOR
THE PROSECUTION OF SUCH PATENT APPLICATIONS OR THE ACQUISITION OF LETTERS PATENT
IN THE UNITED STATES AND/OR ANY FOREIGN COUNTRIES.

 

(D)           EMPLOYEE AGREES THAT FOR A PERIOD OF TWO (2) YEARS FROM AND AFTER
THE TERMINATION OF HIS EMPLOYMENT WITH EMPLOYER, WHETHER PURSUANT TO THE TERMS
OF THIS AGREEMENT OR OTHERWISE, HE WILL NOT:

 

(I)            DIRECTLY OR INDIRECTLY SOLICIT, RAID, ENTICE OR INDUCE ANY
EMPLOYEE OF EMPLOYER OR OF ANY OF ITS SUBSIDIARIES TO BE EMPLOYED BY ANY PERSON,
FIRM OR CORPORATION WHICH IS, DIRECTLY OR INDIRECTLY, IN COMPETITION WITH THE
BUSINESS OR ACTIVITIES OF EMPLOYER OR ANY OF ITS SUBSIDIARIES;

 

(II)           DIRECTLY OR INDIRECTLY APPROACH ANY SUCH EMPLOYEE FOR THESE
PURPOSES;

 

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(III)          AUTHORIZE OR KNOWINGLY APPROVE THE TAKING OF SUCH ACTIONS BY
OTHER PERSONS ON BEHALF OF ANY SUCH PERSON, FIRM OR CORPORATION, OR ASSIST ANY
SUCH PERSON, FIRM OR CORPORATION IN TAKING SUCH ACTION;

 

(IV)          DIRECTLY OR INDIRECTLY SOLICIT, RAID, ENTICE OR INDUCE ANY PERSON,
FIRM OR CORPORATION (OTHER THAN THE U.S. GOVERNMENT OR ITS AGENCIES) WHO OR
WHICH ON THE DATE HEREOF IS, OR AT ANY TIME DURING THE PERIOD OF EMPLOYMENT
HEREUNDER SHALL BE, A CUSTOMER OF EMPLOYER OR OF ANY OF ITS SUBSIDIARIES TO
BECOME A CUSTOMER FOR THE SAME OR SIMILAR PRODUCTS WHICH IT PURCHASED FROM
EMPLOYER OR ANY OF ITS SUBSIDIARIES, OF ANY OTHER PERSON, FIRM OR CORPORATION,
AND EMPLOYEE SHALL, NOT APPROACH ANY SUCH CUSTOMER FOR SUCH PURPOSE OR AUTHORIZE
OR KNOWINGLY APPROVE THE TAKING OF SUCH ACTIONS BY ANY OTHER PERSON.

 

(E)           EMPLOYEE AGREES THAT DURING THE TERM OF HIS EMPLOYMENT BY
EMPLOYER, WHETHER UNDER THIS AGREEMENT OR OTHERWISE, HE WILL NOT, UNLESS
AUTHORIZED BY EMPLOYER, AT ANY TIME ENTER INTO, ON BEHALF OF EMPLOYER OR ANY OF
ITS SUBSIDIARIES, OR CAUSE EMPLOYER OR ANY OF ITS SUBSIDIARIES TO ENTER INTO,
DIRECTLY OR INDIRECTLY, ANY TRANSACTIONS WITH ANY BUSINESS ORGANIZATION IN WHICH
HE OR ANY MEMBER OF HIS IMMEDIATE FAMILY MAY BE INTERESTED AS A PARTNER,
TRUSTEE, DIRECTOR, OFFICER, EMPLOYEE, SHAREHOLDER, LENDER OF MONEY OR GUARANTOR
(OTHER THAN INTERESTS, SOLELY AS AN INVESTMENT, IN PUBLICLY REGISTERED
SECURITIES OF ANY BUSINESS ORGANIZATION, WHICH INTERESTS ARE (I) NOT AS A
CONTROLLING PERSON OF SUCH BUSINESS ORGANIZATION, (II) NOT AS A MEMBER OF A
GROUP THAT CONTROLS SUCH BUSINESS ORGANIZATION, AND (III) NOT AS A DIRECT OR
INDIRECT OWNER OF 5% OR MORE OF ANY CLASS OF SECURITIES OF SUCH BUSINESS
ORGANIZATION).

 

11.           INJUNCTIVE RELIEF. EMPLOYEE ACKNOWLEDGES THAT THE SERVICES TO BE
RENDERED BY HIM HEREUNDER ARE OF A SPECIAL, UNIQUE AND EXTRAORDINARY CHARACTER
AND THAT IT WOULD BE VERY DIFFICULT OR IMPOSSIBLE TO REPLACE SUCH SERVICES AND
FURTHER THAT IRREPARABLE INJURY WOULD BE SUSTAINED BY EMPLOYER AND ITS
SUBSIDIARIES IN THE EVENT OF A VIOLATION BY EMPLOYEE OF ANY OF THE PROVISIONS OF
THIS AGREEMENT, AND BY REASON THEREOF EMPLOYEE CONSENTS AND AGREES THAT IF HE
VIOLATES ANY OF THE PROVISIONS OF THIS AGREEMENT, EMPLOYER SHALL BE ENTITLED TO
AN INJUNCTION TO BE ISSUED BY ANY COURT OF COMPETENT JURISDICTION RESTRAINING
HIM FROM COMMITTING OR CONTINUING ANY VIOLATION OF THIS AGREEMENT.

 

12.           EXPENSES. EMPLOYER SHALL REIMBURSE EMPLOYEE FOR ALL REASONABLE
EXPENSES INCURRED BY HIM ON BEHALF OF EMPLOYER IN THE PERFORMANCE OF HIS DUTIES
HEREUNDER, PROVIDED THAT PROPER VOUCHERS ARE SUBMITTED TO EMPLOYER BY EMPLOYEE
EVIDENCING SUCH EXPENSES AND THE PURPOSES FOR WHICH THE SAME WERE INCURRED.

 

13.           NO CONFLICTING AGREEMENTS. EMPLOYEE REPRESENTS AND WARRANTS THAT
HE IS NOT A PARTY TO ANY AGREEMENT, CONTRACT OR UNDERSTANDING, WHETHER
EMPLOYMENT OR OTHERWISE, WHICH WOULD IN ANY WAY RESTRICT OR PROHIBIT HIM FROM
UNDERTAKING OR PERFORMING EMPLOYMENT IN ACCORDANCE WITH THE TERMS AND CONDITIONS
OF THIS AGREEMENT.

 

14.           ENTIRE AGREEMENT. THIS AGREEMENT SETS FORTH THE ENTIRE
UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND NO
STATEMENT, REPRESENTATION, WARRANTY OR COVENANT HAS BEEN MADE BY EITHER PARTY
EXCEPT AS EXPRESSLY SET FORTH HEREIN. THIS AGREEMENT SHALL NOT BE CHANGED OR
TERMINATED ORALLY. AS OF THE EFFECTIVE DATE, THIS AGREEMENT SUPERSEDES

 

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AND CANCELS ALL PRIOR AGREEMENTS BETWEEN THE PARTIES OR ANY SUBSIDIARY OF
EMPLOYER WHETHER WRITTEN OR ORAL, RELATING TO THE EMPLOYMENT OF EMPLOYEE,
INCLUDING, WITHOUT LIMITATION, THAT CERTAIN EMPLOYMENT AGREEMENT BY AND BETWEEN
EMPLOYER AND EMPLOYEE DATED JUNE 18, 2003.

 

15.           APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO
ITS CONFLICT OF LAWS PRINCIPLES, AND ALL DISPUTES HEREUNDER SHALL BE RESOLVED IN
THE FEDERAL OR STATE COURTS LOCATED IN MARYLAND. IN ANY DISPUTE RELATING TO THIS
AGREEMENT, THE PREVAILING PARTY SHALL BE ENTITLED TO BE REIMBURSED ITS
REASONABLE ATTORNEYS FEES AND COSTS FROM THE NONPREVAILING PARTY.

 

16.           NOTICES. ALL NOTICES, REQUESTS, DEMANDS AND OTHER COMMUNICATIONS
HEREUNDER SHALL BE IN WRITING AND SHALL BE DEEMED TO HAVE BEEN DULY GIVEN IF
PERSONALLY DELIVERED, TELECOPIED OR MAILED, FIRST CLASS, POSTAGE PREPAID,
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO EACH OF THE PARTIES AT ITS OR HIS
ADDRESS OR TELECOPY NUMBER ABOVE WRITTEN OR AS SET FORTH BENEATH THEIR
SIGNATURES BELOW OR AT SUCH OTHER ADDRESS OR TELECOPY NUMBER AS EITHER OF THE
PARTIES MAY DESIGNATE IN CONFORMITY WITH THE FOREGOING.

 

17.           SECTION HEADINGS. THE SECTION HEADINGS SET FORTH IN THIS AGREEMENT
ARE FOR CONVENIENCE ONLY AND SHALL NOT BE CONSIDERED AS PART OF THIS AGREEMENT
IN ANY RESPECT NOR SHALL THEY IN ANY WAY AFFECT THE SUBSTANCE OF ANY PROVISIONS
CONTAINED IN THIS AGREEMENT.

 

18.           SUCCESSORS AND ASSIGNS. THIS AGREEMENT SHALL NOT BE ASSIGNABLE BY
EMPLOYEE. ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT SHALL BE BINDING
UPON AND INURE TO THE BENEFIT OF AND BE ENFORCEABLE BY THE RESPECTIVE HEIRS AND
PERSONAL REPRESENTATIVES OF EMPLOYEE AND THE SUCCESSORS AND ASSIGNS OF EMPLOYER.

 

19.           SEVERABILITY. IF, AT ANY TIME SUBSEQUENT TO THE DATE HEREOF, ANY
PROVISION OF THIS AGREEMENT SHALL BE HELD BY ANY COURT OF COMPETENT JURISDICTION
TO BE ILLEGAL, VOID OR UNENFORCEABLE, SUCH PROVISION SHALL BE OF NO FORCE AND
EFFECT, BUT THE ILLEGALITY OR UNENFORCEABILITY OF SUCH PROVISION SHALL HAVE NO
EFFECT UPON AND SHALL NOT IMPAIR THE ENFORCEABILITY OF ANY OTHER PROVISIONS OF
THIS AGREEMENT.

 

20.           INDEMNIFICATION. EMPLOYER SHALL INDEMNIFY EMPLOYEE TO THE FULLEST
EXTENT PROVIDED FOR BY THE INDEMNIFICATION STATUTES OF THE GENERAL CORPORATE LAW
OF DELAWARE, 8 DEL. C. § 145 (2002) (THE “INDEMNIFICATION SECTION”) AND, IN
ADDITION, IN ACCORDANCE WITH ANY OTHER RIGHTS SUCH PERSONS MAY HAVE UNDER A
RESOLUTION OF THE STOCKHOLDERS OF THE CORPORATION, A RESOLUTION OF ITS BOARD OF
DIRECTORS OR UNDER EMPLOYER’S CERTIFICATE OF INCORPORATION OR BY-LAWS, AS
AMENDED AND RESTATED FROM TIME TO TIME, OR PURSUANT TO ANY INSURANCE POLICY, ANY
AGREEMENT OR OTHERWISE. DURING THE TERM OF THIS AGREEMENT, EMPLOYER SHALL
CONTINUE TO MAINTAIN IN FULL FORCE AND EFFECT DIRECTORS AND OFFICERS LIABILITY
INSURANCE IN AMOUNTS DEEMED REASONABLE BY THE BOARD OF DIRECTORS, PROVIDED THAT
SUCH COVERAGE REMAINS AVAILABLE AT PREMIUM COSTS DEEMED REASONABLE BY THE BOARD
OF DIRECTORS.

 

21.           SECURITIES LAW FILINGS. EMPLOYER SHALL REIMBURSE EMPLOYEE FOR THE
REASONABLE EXPENSES, INCLUDING ATTORNEYS FEES, ASSOCIATED WITH THE FILINGS
EMPLOYEE IS REQUIRED TO MAKE WITH THE SECURITIES AND EXCHANGE COMMISSION FROM
TIME TO TIME IN CONNECTION WITH HIS PURCHASE, SALE

 

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AND HOLDING OF EMPLOYER’S STOCK IN THE PUBLIC TRADING MARKET, BUT ONLY IF
EMPLOYER DOES NOT OFFER TO HAVE ITS ATTORNEYS PREPARE SUCH FILINGS FOR EMPLOYEE.

 

22.           SURVIVAL. FOR THE AVOIDANCE OF DOUBT, IT IS UNDERSTOOD THAT THE
PROVISIONS OF SECTIONS 6, 7, 8, 9, 10(A), (C) AND (D) AND 11 THROUGH 22 (OTHER
THAN THE SECOND SENTENCE OF SECTION 20) SHALL REMAIN IN EFFECT FOLLOWING AND
SURVIVE THE TERMINATION OF THIS AGREEMENT AND EMPLOYEE’S EMPLOYMENT HEREUNDER.

 

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

 

 

 

UNITED INDUSTRIAL CORPORATION

 

 

 

 

 

 

 

By:

/s/ Anna-Maria G. Palmer

 

 

 

Name:  Anna-Maria G. Palmer

 

 

Title:   Vice President Human Resources

 

 

 

 

 

 

 

/s/ Frederick M. Strader

 

 

Frederick M. Strader

 

 

14

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