STARCRAFT CORP /IN/
KATONA EMPLOYMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>ex102_0811.txt
<DESCRIPTION>KATONA EMPLOYMENT AGREEMENT
<TEXT>
                                                                    EXHIBIT 10.2


                              EMPLOYMENT AGREEMENT

     This  Agreement is effective May 24, 2004 (the  "Effective  Date"),  by and
between Starcraft Corporation,  an Indiana corporation ("Employer"),  and Joseph
E. Katona, III ("Employee").

                               W I T N E S S E T H

     WHEREAS,  Employee desires to serve Employer and each of its affiliates and
subsidiaries as Chief Financial Officer ("Job Responsibilities");

     WHEREAS,  Employer  desires  to provide  fair and  reasonable  benefits  to
Employee on the terms and subject to the conditions set forth in this Agreement;

     WHEREAS,   Employer  desires  reasonable  protection  of  its  confidential
business and customer  information  and assurance that Employee will not compete
with  Employer  for a  reasonable  period  of  time  after  termination  of  his
employment with Employer, except as otherwise provided herein.

     NOW,  THEREFORE,  in consideration of the mutual covenants and undertakings
herein  contained  and the  continued  employment  of  Employee  to perform  Job
Responsibilities  for  Employer,  Employer and  Employee,  each  intending to be
legally bound, covenant and agree as follows:

     1.  Upon  the  terms  and  subject  to the  conditions  described  in  this
Agreement,  Employer  employs  Employee  to  perform  Job  Responsibilities  for
Employer,  its  subsidiaries,  and  affiliates (an  "affiliate"  means an entity
controlled  by Employer or 50% or more owned by Employer)  and Employee  accepts
such  employment.  Employee will devote best efforts to the service of Employer,
to  perform  his Job  Responsibilities,  and  Employee  will not engage in other
employment  that  conflicts  with, or impairs in any way, his ability to perform
his obligations as an employee of Employer.

     2. Employee agrees to serve as Chief Financial Officer,  in connection with
the Job  Responsibilities  and to  perform  such  duties  as may  reasonably  be
required of him by Employer's  President,  or any Chief  Executive  Officer,  or
Board of Directors,  from time to time. Employee shall devote  substantially all
his business time and efforts to Employer's business.

     3. The term of this Agreement shall begin on the "Effective Date" and shall
end on the date which is one (1) year  following such date,  provided,  however,
each one (1) year term shall  automatically renew and extend for consecutive one
(1) year terms  (the  expiration  of the  original  one (1) year  term,  and any
extension term,  being an  "Anniversary  Date") (the original one (1) year term,
including any  extension  thereof,  shall be referred to as the "Term"),  unless
either Employer or Employee gives a Notice of Termination as provided in Section
10 hereof,  at the time  described  in  paragraph  Section  7(B) or Section 7(D)
respectively.

     4.  Employee  shall  receive an annual  salary of not less than One Hundred
Twenty  Thousand  Dollars  ($120,000.00)  ("Base  Compensation")  for the  Term,
payable at regular  intervals  in  accordance  with  Employer's  normal  payroll
practices  now or  hereafter  in effect.  Employer may consider and declare from
time to time  increases in the salary it pays Employee and thereby  increases in
his Base  Compensation.  Base  Compensation  shall  not take  into  account  any
bonuses,  reimbursed expenses, credits or benefits (including benefits under any
plan  of  deferred  compensation),   or  any  additional  cash  compensation  or
compensation payable in a form other than cash.

     5. So  long as  Employee  is  employed  pursuant  to  this  Agreement,  and
effective  the first day of the month  following the  Effective  Date,  Employee
shall be included as a participant  in all present and


                                       1
<PAGE>

future  employee  benefit  plans  generally  available to employees of Employer,
consistent with his Base Compensation, and his Job Responsibilities,  subject to
applicable  plan  eligibility  requirements,  such as,  group  life  and  health
insurance program,  401(k) Plan, Stock Incentive Plan, Executive Bonus Plan, and
paid vacation (collectively, "Benefit Plans").

     6. So long as Employee is employed by Employer  pursuant to this Agreement,
Employee shall receive  reimbursement from Employer for all reasonable  business
expenses  approved by Employer,  upon submission to Employer of written vouchers
and statements for reimbursement.

     7.  Subject  to the  respective  continuing  obligations  of  the  parties,
including  but not limited to those set forth in paragraph 9 hereof,  Employee's
employment by Employer may be terminated  prior to the expiration of the Term of
this Agreement as follows:

     (A) Employer,  upon written  notice to Employee,  may terminate  Employee's
employment  with  Employer  at any  time  "for  cause."  For  purposes  of  this
subsection  7(A),  "cause"  shall be defined as (i)  misconduct,  (ii) breach of
fiduciary  duty  involving  personal  profit,   (iii)  failure  to  perform  Job
Responsibilities,  (iv)  conviction or guilty plea or nolo  contendere plea to a
violation of any law, rule, or regulation (other than minor traffic violations),
or (v) any breach of any term, condition or covenant of this Agreement. Prior to
a termination  of  Employee's  employment  upon the  occurrence of any event set
forth in this section 7(A) above,  except  section  7(A)(ii) and (iv),  Employer
shall first provide  Employee with written  notice of his intended  termination,
setting forth with  specificity the reasons for such intended  termination,  and
shall give Employee opportunity to remedy any deficiencies.

     (B) Employer may fail to renew this  Agreement  effective  any  Anniversary
Date, or may terminate Employee's employment with Employer at any time, "without
cause," upon thirty (30) days prior written notice to Employee.

     (C) Employee,  by written notice to Employer,  may terminate his employment
with  Employer  at any time  prior to the  Anniversary  Date  "for  cause."  For
purposes of this subsection 7(C), "cause" shall be defined as breach by Employer
of a material  term,  condition or covenant of this  Agreement,  or a "Change of
Control."  For  purposes  of this  Agreement,  a "Change of Control" of Employer
shall be deemed to have occurred if during,  or following the consummation of, a
stock purchase program,  tender offer,  exchange offer,  merger,  consolidation,
sale of  substantially  all of Employer's  assets,  contested  election,  or any
combination  of the  foregoing  transactions,  any  person,  entity  or group of
persons acting in concert (other than the Employee, or Kelly L. Rose, Michael H.
Schoeffler,  Jeffrey P. Beitzel, Douglass C. Goad, or Richard C. Andersen, their
respective  spouses,  or their  trusts  directly  or  indirectly)  (collectively
"Excluded  Persons")  (i)  acquires  the power to vote in excess of  twenty-five
percent  (25%)  of the  voting  securities  of  Employer  and one or more of its
representatives  are  elected  to the  Employer's  Board of  Directors;  or (ii)
acquires  ownership  of the  power  to  vote  in  excess  of  50% of the  voting
securities of Employer;  or (iii) otherwise  acquires  effective  control of the
business and affairs of Employer;  provided,  however,  that a Change of Control
shall not be deemed to occur as a result of any  existing or future  acquisition
of shares of Employer capital stock by the Excluded Persons.

     (D)  Employee,  at any time and upon  thirty  (30) days  written  notice to
Employer, may terminate his employment with Employer "without cause."

     (E) Employee's  employment  with Employer  shall  terminate in the event of
Employee's death or permanent disability.  "Disability" means (i) if Employee is
covered by an individual or group long-term  disability  policy under Employer's
Benefit  Plans,  then as defined in such  policy  without  regard to any waiting
period, or (ii) if (i) is inapplicable,  then  "disability"  shall be defined as
Employee's  permanent inability by reason of illness or other physical or mental
incapacity  to perform  Job


                                       2
<PAGE>

Responsibilities  for any  consecutive  one  hundred  eighty  (180) day  period,
provided  that  Notice  of  Termination   by  Employer   because  of  Employee's
"disability"  shall have been give to Employee  prior to the full  resumption by
him of the performance of such duties.

     8. In the event of  termination  of  Employee's  employment  with  Employer
pursuant to section 7 hereof,  Base  Compensation  shall  continue to be paid by
Employer to Employee as follows:

     (A) In the event of termination  "for cause" by Employer or "without cause"
by Employee pursuant to subsection 7(A) or 7(D), respectively, Base Compensation
shall  continue to be paid,  and Employee  shall  continue to participate in the
Benefit  Plans and other  perquisites  as provided in paragraphs 4 and 5 hereof,
through the date of  termination  specified  in the notice of  termination.  Any
benefits   payable   under  such  Benefit   Plans  as  a  result  of  Employee's
participation in such plans through such date shall be paid when due under those
plans. The date of termination  specified in any notice of termination  pursuant
to  subsection  7(A) or 7(D) shall be no later than the last business day of the
next month  following  the month in which such notice is provided to Employee or
Employer, as the case may be.

     (B) In the event of termination "without cause" by Employer or "with cause"
by Employee  prior to the  Anniversary  Date and pursuant to subsection  7(B) or
7(C),  respectively,  Base Compensation  shall continue to be paid, and Employee
shall  continue to  participate  in the Benefit Plans and other  perquisites  as
provided in paragraphs 4 and 5 hereof, through the date of termination specified
in the notice of termination. Any benefits payable under such Benefit Plans as a
result of Employee's participation in such plans through such date shall be paid
when due under those plans. In addition,  Employee shall be entitled to continue
to receive  from  Employer his Base  Compensation  at the rates in effect at the
time of termination  and benefits under any health and life insurance  plans for
not less  than an  additional  six (6)  month  period,  provided,  however  that
Employer will not maintain any other  Benefit Plan for the continued  benefit of
Employee  and his  dependents  during  such  period.  The  date  of  termination
specified in any notice of termination pursuant to subsection 7(B) or 7(C) shall
be no later than the last business day of the next month  following the month in
which such notice is provided to Employee or Employer, as the case may be.

     (C) In the event Employee's employment with Employer shall terminate in the
event of Employee's  disability  or death,  pursuant to  subsection  7(E),  Base
Compensation  shall  continue to be paid through the date of  disability  or the
date of death,  and Employee  shall continue to participate in the Benefit Plans
through such date.

     (D)  Employer  will permit  Employee or his personal  representative(s)  or
heirs,  during a period of three  months  following  termination  of  Employee's
employment by Employer for any reason,  including  Reasonable  Cause, to require
Employer,   upon   written   request   and  at   Employee's   or  his   personal
representative's  or his  heirs'  option,  to  purchase  all or less than all of
outstanding  warrants or stock options  previously granted to Employee under any
Employer  warrant  or stock  option  plan then in  effect,  whether  or not such
warrants or options are then exercisable or have terminated,  at a cash purchase
price  equal to the amount by which the  aggregate  "fair  market  value" of the
shares  subject to such  options or warrants  exceeds the  aggregate  warrant or
option or warrant  price for such shares.  For purposes of this  Agreement,  the
term "fair market value" shall mean the higher of (i) the average of the highest
asked prices for Employer shares in the  over-the-counter  market as reported on
the NASDAQ  system or other  national  exchange if the shares are traded on such
system for the thirty (30) business days preceding such termination, or (ii) the
average per share  price  actually  paid for the most highly  priced one percent
(1%) of the Employer shares acquired in connection with any Change of Control of
the Employer by any person or group acquiring such control.

                                       3
<PAGE>

     9. In order to  induce  Employer  to enter  into this  Agreement,  Employee
agrees as follows:

     (A) Unless  otherwise  required to do so by law,  including  the order of a
court or government agency,  Employee shall not divulge or furnish trade secrets
(as  defined  in IND.  CODE  Sec.  24-2-3-2)  of  Employer  or any  confidential
information  acquired by him while employed by Employer concerning the policies,
plans,  procedures or customers of Employer to any person,  firm or corporation,
other than Employer or upon its written request, or use any such trade secret or
confidential  information  directly or indirectly  for Employee's own benefit or
for the benefit of any person,  firm or corporation  other than Employer,  since
such trade secrets and  confidential  information are  confidential and shall at
all times remain property of Employer. To that end, Employee agrees as follows:

          (i)  That  all  drawings,   blueprints,   manuals,   letters,  reports
     memoranda,  notes,  notebooks,  customer  lists and all other  documents or
     materials whether or not of a secret or confidential nature (and all copies
     thereof) relating to Employer or any of its affiliates  business in any way
     obtained  by  Employee  while  employed  by  Employer  shall be  Employer's
     property and shall be delivered by Employee to Employer on  termination  of
     Employee's  employment or at any time at Employer's  request  together with
     Employee's  written  certification of compliance.  This includes but is not
     limited to  documents or other  materials  concerning  customers,  pricing,
     marketing, and method or process, product or apparatus manufactured,  used,
     developed,  or investigated  by Employer or any of its  affiliates,  all of
     which are CONFIDENTIAL;

          (ii) To  disclose  to  Employer  promptly  and  fully  any  invention,
     discovery  or  improvement  ("invention(s)"),  whether  patentable  or not,
     hereafter made or conceived solely or jointly by Employee while employed by
     Employer and which  relates in any manner to the business or  activities of
     Employer or any of its  affiliates  or is  suggested by or results from any
     duties  assigned to Employee or work performed by Employee for or on behalf
     of Employer;

     (B) That when  requested  by  Employer,  whether  during or  subsequent  to
Employee's  employment,  to execute patent  applications  and other  instruments
considered  necessary by Employer to apply for and obtain  Letters Patent of the
United States and foreign  countries with respect to inventions  covered by this
Agreement and to make  assignments  and execute other  instruments  necessary to
convey to Employer  ownership and exclusive  rights in such  inventions,  patent
applications  and  patents;  provided,  however,  that  Employer  shall bear all
expenses  connected with such patents,  patent  applications  and maintenance of
patent  protection,  and if services in  connection  therewith  are performed by
Employee at the request of Employer after termination of Employee's  employment,
Employer shall pay reasonable compensation for such post-employment services;

     (C) That during the Term of his employment  with  Employer,  and during any
period for which  Employee  is  receiving  Benefit  Plan  benefits  or any other
payments from Employer,  and for a period of one (1) year  thereafter,  Employee
shall not: (a) compete,  directly or  indirectly,  with the Business of Employer
(which for purposes of this paragraph 9 is defined as, engineering,  consulting,
product development of upfit customization of specialized  packages,  and second
stage vehicle  manufacturing to General Motors, and also including such business
as being  conducted  by any of its  subsidiaries  or  affiliates),  as conducted
during the Term of this Agreement,  or have any interest (including any interest
or  association,  including  but not  limited  to,  that of owner,  part  owner,
partner, shareholder,  director, officer, employee, agent, consultant, lender or
advisor) in any person,  firm or entity which  competes with the Business in the
geographic area described on the attached  Exhibit A (each such person,  firm or
entity is referred to as "Competitor")  other than the investment by Employee in
a  publicly  traded  company  in such  form or manner  as will not  require  any
services on Employee's part in the operation of the affairs of the businesses in
which such investments are made; (b) solicit or accept business for or on behalf
of any  Competitor;  (c)  solicit,  induce or  persuade,  or attempt to solicit,
induce or  persuade,  any person to work


                                       4
<PAGE>

for or provide services to or provide  financial  assistance to, any Competitor;
(d) solicit or accept for or on behalf of or for the benefit of any  Competitor,
any  business  from any  person,  firm or entity  which  during the term of this
Agreement  was a vendor or supplier  to, or  subcontractor  for,  or  commercial
purchaser from, Employer;  or (e) engage in any business,  either as an owner or
representative  or employee or otherwise,  that is competitive with any business
engaged in by Employer or any of its  affiliates  other than the  investment  by
Employee in a publicly traded company in such form or manner as will not require
any  services  on  Employee's  part  in  the  operation  of the  affairs  of the
businesses in which such investments are made. Employee recognizes that Employer
and its affiliates market products worldwide and, therefore,  performance of the
same  or  substantially  similar  duties  in  any  geographic  region  would  be
detrimental  to  Employer's  legitimate  interests;  Employer  has a  legitimate
interest  which these  provisions  are  reasonably  necessary  to  protect;  the
restrictions  on  competition  contained  herein  are  reasonable  in  time  and
geographic scope; and Employee is, and shall not be, unreasonably  restricted in
gainful employment by these provisions.

     (D) If Employee's  employment  by Employer is terminated  for any reason by
either Employee or Employer,  Employee will turn over immediately  thereafter to
Employer all  business  correspondence,  letters,  papers,  reports,  customers'
lists,  financial  statements,   records,  drawings,  credit  reports  or  other
confidential  information  or  documents  of Employer or its  affiliates  in the
possession or control of Employee,  all of which  writings are and will continue
to be the sole and exclusive property of Employer or its affiliates.

     (E) If Employee's  employment by Employer is terminated  during the Term of
this Agreement for any of the reasons set forth in section 7 of this  Agreement,
and if Employee and Employer in writing  agree prior to the end of the Term that
Employee disclaims any rights to any continuing  payments from Employer (whether
by way of Base Compensation,  Benefit Plans, or otherwise) after the termination
date,  then  Employee  shall have no  obligations  to Employer  with  respect to
noncompetition under subsection 9(C) hereof.

     (F) Anything in this Employment Agreement to the contrary  notwithstanding,
prior to Employer  seeking  relief for a breach by Employee of this paragraph 9,
Employer  shall first  provide  Employee with written  notice  setting forth the
nature of such breach with specificity,  and shall give Employee  opportunity to
remedy any deficiencies or to provide evidence that no breach has occurred.

     10. Any termination of Employee's  employment with Employer as contemplated
by paragraph 3 and paragraph 7 hereof, except in the circumstances of Employee's
death,  shall  be  communicated  by  written  "Notice  of  Termination"  by  the
terminating  party to the other party hereto.  Any "Notice of Termination"  must
refer to one or more of subsections 7(A), 7(B), 7(C), or 7(D) and shall indicate
the specific provisions of this Agreement and one or more of such subsections of
paragraph 7 relied upon, and shall set forth in reasonable  detail the facts and
circumstances  claimed to provide a basis for such termination under one or more
of such subsections of paragraph 7.

     11. Anything in this Agreement to the contrary notwithstanding,  payment of
Base  Compensation  by the  Employer or to or for the  benefit of the  Employee,
including such as may be made pursuant to paragraph 8 hereof, shall be inclusive
of payments attributable to the confidentiality and noncompetition  covenants of
paragraph  9 hereof  and  shall be  payable  whether  or not  deductible  by the
Employer for federal income tax purposes.

     12. The validity,  interpretation,  and performance of this Agreement shall
be  governed  by  the  laws  of  the  State  of  Indiana.   The   invalidity  or
unenforceability  of any  provisions  of this  Agreement  shall not  affect  the
validity or enforceability of any other provisions of this Agreement which shall
remain in full force and effect.  If a dispute  arises  regarding  provisions of
this Agreement,  including enforcement of


                                       5
<PAGE>

the  confidentiality  and noncompetition  provisions hereof,  then such shall be
heard only by the judge and not by a jury, in any court of general  jurisdiction
in Elkhart County,  Indiana, to which sole and exclusive jurisdiction each party
irrevocably  consents.  The  prevailing  party  shall be  entitled to its costs,
expenses and reasonable attorney's fees. No attempt will be made to consolidate,
by  counterclaim  or  otherwise,  any such action or  proceeding  with any other
action or  proceeding in which there is a trial by jury or in which a jury trial
cannot be or has not been waived.

     13. For purposes of this  Agreement,  notices and all other  communications
provided  for herein  shall be in writing and shall be deemed to have been given
when personally  delivered,  or mailed by United States  registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:

     If to Employee: Joseph E. Katona, III
                     16330 Elmwood Avenue
                     Mishawaka, IN  46544

     If to Employer: Starcraft Corporation
                     1123 South Indiana Avenue
                     Post Office Box 1903
                     Goshen, IN  46527-1903
                     Attention: Michael H. Schoeffler, Chief Executive Officer

     14. No provision of this  Agreement  may be modified,  waived or discharged
unless such waiver,  modification or discharge is agreed to in writing signed by
Employee  and  Employer.  No waiver by  either  party  hereto at any time of any
breach by the other  party  hereto  of, or  compliance  with ,any  condition  or
provision of this  Agreement to be performed by such other party shall be deemed
a waiver of  dissimilar  provisions  or  conditions  at the same or any prior or
subsequent time. No agreements or representation,  oral or otherwise, express or
implied,  with  respect to the  subject  matter  hereof have been made by either
party which are not set forth expressly in this Agreement.

     15. No benefit payable at any time under this Agreement shall be subject in
any manner to alienation, sale, transfer,  assignment, pledge, attachment, levy,
garnishment, or encumbrance of any kind.

     16. Employer shall withhold any applicable  income or employment taxes that
are required to be withheld from the benefits provided under this Agreement.

     17.  Employer  does not  guarantee  payment of benefits  payable  under any
insurance coverage described or referred to herein, and any benefits  thereunder
shall be the exclusive responsibility of the insurer that is required to provide
such benefits under such policy.

     18. Commencing upon the termination date in the Notice of Termination,  the
Employee shall cease to be an employee of the Employer for any purpose,  and any
payments  to Employee  thereafter  under this  Agreement  shall be payments to a
former employee. The right of Employee to receive any Base Compensation,  Bonus,
or Benefit Plan payments from Employer  ceases upon  termination  of employment,
except to the limited extent otherwise and expressly described in paragraph 8 of
this Agreement.

     19.  This  Agreement  is  binding  upon and  inures to the  benefit of each
party's personal representatives, heirs, successors and assigns.

                                       6
<PAGE>

     IN WITNESS  WHEREOF,  the parties have caused the  Agreement to be executed
and delivered this 24th day of May, 2004.

"Employee"                                  "Employer"

                                            STARCRAFT CORPORATION

/s/ Joseh E. Katona, III                    By: /s/ Michael H. Schoeffler
-------------------------                      --------------------------------
Joseph E. Katona, III                             Michael H. Schoeffler
                                            Its:  Chief Executive Officer


                                       7
<PAGE>

                                    EXHIBIT A

     In Japan,  Europe,  Canada,  Mexico, and any of the 48 contiguous States of
the United States of America; it being acknowledged by Employee that the Company
presently conducts a substantial amount of its business in each of the following
States: Indiana,  Michigan,  Texas, New Jersey, and Louisiana, and, the Province
of Ontario, Canada.






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</DOCUMENT>
