Document:

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AGREEMENT (this “Agreement”) originally made and entered into as of August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

 

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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

 

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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

 

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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

 

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;

 

11

 

(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

 

12

 

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

 

13

 

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

  	
   

  

 

14Exhibit
10.2

 

 AMENDMENT TO EMPLOYMENT AGREEMENT

 

AMENDMENT
(this “Amendment”) dated as of October 7, 2007, by and between United
Industrial Corporation, a Delaware corporation (“Employer”) and James H. Perry
(“Employee”).

 

W I T N E S S E T H :

 

WHEREAS, the
parties hereto are parties to that certain Employment Agreement dated March 3,
2000 (the “Employment Agreement”) and they desire to amend those provisions of the
Employment Agreement that survived its termination effective February 28, 2004,
as provided herein.

 

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

 

1.             Section 4(v) of the
Employment Agreement, which by its express terms survived the termination of
said agreement, shall be amended by adding the following new provision at the
end thereof:

 

“In the event that the Employee is deemed to
be a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of
the Internal Revenue Code of 1986, as amended (“Code”)) in accordance with
procedures set by the Employer at the time of Employee’s termination hereunder,
payment of the severance described in this Section 4(v) shall be delayed for a
period of six months immediately following the Employee’s termination of employment
(the “409A Delay Period”). Payment of any severance 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.
Employee shall not be entitled to any interest on or in respect of any amounts
under Section 4(v) hereof not paid 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 4(v) hereof upon the Employee’s “separation
from service” within the meaning of the regulations issued under Code Section
409A.

 

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.”

 

2.             Except as amended
hereby, the surviving provisions of the Employment Agreement shall remain in
full force and effect.

 

 

3.             This Amendment may be
executed in one or more counterparts, each of which shall constitute an
original and all of which together shall constitute one agreement.

 

IN WITNESS
WHEREOF, this Amendment has been duly executed by the parties hereto 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/ JAMES H. PERRY

  	
   

  
	
   

  	
  JAMES H. PERRY

  	
   

  
					

 

2

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