EXHIBIT (k)(5)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT entered into as of this ________ day of July,
2005, by and between Patriot Capital Funding, Inc. (the "Company"), a Delaware
corporation, and Xxxxxxx X. Xxxxxxx, an individual (the "Executive")
(hereinafter collectively referred to as the "Parties").
WHEREAS, the Executive has heretofore been employed by the Company as
its Managing Director, the Company recognizes the Executive's experience and
relationships in the Company's industry, and the Company desires to retain the
services and employment of the Executive on the terms set forth herein;
WHEREAS, the Executive and the Company have entered into an employment
agreement dated November 8, 2002 (the "Prior Agreement"); and
WHEREAS, the Company and the Executive desire to enter into this
agreement (the "Agreement") which will replace the Prior Agreement and will
provide for the continued employment of the Executive by the Company upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the respective agreements of the
Parties contained herein, it is agreed as follows:
1. Term. The term of employment (the "Term") under this Agreement
shall be the period commencing on the date of the consummation of the first
public offering of the Common Stock of the Company pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission (the "IPO Date"), and shall continue in effect until the third
anniversary of the IPO Date unless terminated earlier by either Party pursuant
to Section 7, provided, however, that if the IPO Date does not occur by December
31, 2005, then the Prior Agreement shall continue in effect and this Agreement
shall be automatically terminated and superseded by the Prior Agreement.
2. Employment.
(a) During the Term, the Executive shall be employed as
the Chief Operating Officer and Chief Compliance Officer of the Company or such
other position as may be mutually agreed upon in writing by the Parties. The
Executive shall perform the duties, undertake the responsibilities and exercise
the authority customarily performed, undertaken and exercised by persons
situated in a similar executive capacity in a company the size and nature of the
Company.
(b) The Executive shall devote his full working time,
attention and skill to the performance of such duties, services and
responsibilities, and will use his best efforts to promote the interests of the
Company. The Executive will not, without prior written approval of the Board of
Directors of the Company (the "Board"), engage in any other activities that
would interfere with the performance of his duties as an employee of the
Company, are in violation of written
policies of the Company, are in violation of applicable law, or would create a
conflict of interest with respect to the Executive's obligations as an employee
of the Company. The Executive may (i) serve on corporate (subject to the prior
approval of the Board) or charitable boards or committees, (ii) deliver lectures
and teach at educational institutions, (iii) manage his personal affairs,
including financial and legal aspects thereto, and (iv) invest personally in any
business where no conflict of interest exists between such investment and the
business of the Company, as long as the foregoing activities are consistent with
the Executive's commitments in the preceding sentence and Section 9 hereof and
do not interfere with the Executive's performance of his duties and
responsibilities for the Company or any affiliate.
3. Base Salary. The Company agrees to pay or cause to be paid to
the Executive during the Term a base salary at the annual rate of $300,000 (as
adjusted from time to time in accordance with this Section, the "Base Salary").
Such Base Salary shall be payable in accordance with the Company's customary
practices applicable to its executives. Such Base Salary shall be reviewed at
least annually on or about each March 31 during the Term and may be increased by
the Board or an authorized committee of the Board in its sole discretion. Such
Base Salary may be reduced only if such reduction is implemented by the Company
as part of an overall general salary reduction affecting all of its employees
and such reduction to the Base Salary on a percentage basis is equal to or less
than the percentage reduction otherwise implemented.
4. Annual Bonus. During the Term, the Executive shall be eligible
to receive an annual bonus (the "Annual Bonus") as set forth in this Section.
For each calendar year beginning with 2005, the Executive shall be eligible for
an Annual Bonus based on an award range of 50% of the Executive's then-current
Base Salary for achieving base performance objectives and 175% of the
Executive's then-current Base Salary for achieving the highest level of
performance objectives. For the avoidance of doubt, if the base performance
objectives are not achieved, the Executive shall not be entitled to an Annual
Bonus under the preceding sentence, although the Board or an authorized
committee of the Board may choose to award the Executive a discretionary Annual
Bonus despite not achieving base performance objectives. The objectives for the
Annual Bonus, which may include quantitative and qualitative objectives, shall
be determined by the Board or an authorized committee of the Board no later than
60 days after the beginning of the applicable measurement period (for 2005,
however, such objectives shall be determined no later than 60 days after the IPO
Date), and the amount of any Annual Bonus shall be determined by the Board or an
authorized committee of the Board and paid no later than March 15 of the
following year. Notwithstanding the foregoing, the Executive's Annual Bonus for
2005 shall in no event be less than $225,000.
5. Options. As soon as practicable following the commencement of
the Term, the Company commits to granting the Executive stock options for 2005
that shall constitute no fewer than 37.5% of the options available to be granted
under the management option pool for 2005. If the Company makes a secondary
public offering of its common stock, the Company will, subject to the
requirements and limitations of the Investment Company Act of 1940, as amended,
grant the Executive stock options that shall constitute no fewer than 20% of the
options available to be granted under the management option pool that relates to
such offering. If the Company makes a third public offering of its common stock,
the Company will, subject to the requirements and
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limitations of the Investment Company Act of 1940, as amended, grant the
Executive stock options that shall constitute no fewer than 20% of the options
available to be granted under the management option pool that relates to such
offering. All such options shall become vested in accordance with the following
schedule: 1/3 upon the first anniversary of grant, 1/3 upon the second
anniversary of grant, and 1/3 upon the third anniversary of grant. The options
shall have such other terms as are provided under the applicable option plan and
grant agreement.
6. Employee Benefits.
(a) During the Term, subject to the Company's right to
amend, modify, or terminate any plan or program, the Executive shall be entitled
to participate in all employee benefit plans, practices and programs maintained
by the Company and made available to employees generally including, without
limitation, all pension, retirement, savings, medical, hospitalization,
disability, dental, life or travel accident insurance benefit plans, vacation
and sick leave. The Executive's participation in such plans, practices and
programs shall be on a basis and subject to terms no less favorable than
applicable to employees of the Company generally (subject to applicable tax code
and other legal restrictions), provided, however, that such participation may be
on a basis and subject to terms more favorable than applicable to employees of
the Company generally.
(b) During the Term, subject to the Company's right to
amend, modify or terminate any such plans or benefits, the Executive shall be
entitled to participate in all executive benefit plans, and fringe benefit and
perquisite arrangements now maintained or hereafter established by the Company
for the purpose of providing compensation and/or benefits generally to
executives of the Company. Unless otherwise provided herein, the Executive's
participation in such plans shall be on a basis and subject to terms no less
favorable than applicable to other similarly situated executives of the Company
generally, provided, however, that such participation may be on a basis and
subject to terms more favorable than applicable to similarly situated executives
of the Company generally.
(c) During the Term, the Company agrees to pay all
reasonable business expenses, subject to reasonable documentation, incurred by
the Executive in furtherance of the Company's business, including, without
limitation, continuing education, obtaining professional licenses, traveling,
and entertainment expenses, in accordance with the Company's policies.
(d) During the Term, if the Executive agrees to relocate
his residence at the Company's request, the Company shall pay all reasonable
relocation expenses, subject to reasonable documentation, including, but not
limited to, the costs of moving the Executive's household goods and real estate
commission costs related to selling the Executive's home, provided, however,
that such relocation expenses shall not include any loss on the sale of the
Executive's home. The Company will also make a payment to the Executive in the
amount necessary to ensure that the Executive, after all applicable federal,
state, and local taxes, and taking into account any tax deductions available to
the Executive, is in the same economic position as if the Executive had not been
subject to tax on the Company's payment or reimbursement of relocation expenses.
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7. Termination of Employment. The Executive's employment by the
Company may be terminated by either the Executive or the Company at any time
and, except as expressly set forth in this Section 7, with no requirement of
notice or explanation from either Party. Upon the Executive's termination of
employment during the Term, the Executive shall be entitled to the payments and
benefits described below.
(a) Termination by the Executive Without Good Reason or
Due to Death or Disability. If during the Term the Executive voluntarily
terminates employment with the Company without Good Reason (as defined below) or
due to death or Disability (as defined below), the Company shall pay the
Executive any earned but unpaid Base Salary, any Annual Bonus payment with
respect to a completed measurement period that is fully earned and vested at
separation or death but not yet paid, and any amounts to which the Executive is
legally entitled under the generally applicable terms of pension, savings,
disability, life insurance, or other programs. In addition, if the Executive
terminates employment with the Company due to death or Disability, then with
respect to any Annual Bonus measurement period during which the Executive
terminates employment, the Company shall pay the Executive (or, in the case of
death, the Executive's beneficiary) a lump sum cash amount equal to a pro rata
portion, based on the length of the Executive's service with the Company during
such period, of the Average Annual Bonus (as defined below). Furthermore, if the
Executive terminates employment with the Company due to death, then the Company
shall pay the Executive's beneficiary in a lump sum payment the sum of (i) the
Executive's annual Base Salary for the year in which he terminates employment
and (ii) his Average Annual Bonus, multiplied by a fraction, the numerator of
which is the longer of 12 months or the number of full and partial calendar
months remaining in the term of this Agreement determined immediately before
such termination, up to 18 months, and the denominator of which is 12. Other
than the payments and benefits described in this Section 7(a), the Company will
be under no obligation to make additional severance or similar payments to the
Executive or his estate, as the case may be.
(b) Termination by the Company Without Cause or by the
Executive With Good Reason. If during the Term the Company terminates the
Executive's employment without Cause (as defined below) or the Executive
terminates employment with Good Reason (as defined below), subject to the
Executive's compliance with Section 7(d), Section 7(e), and Section 9 hereof,
the Company shall provide the payments and benefits described in this Section
7(b). The Company shall pay the Executive the sum of (i) his annual Base Salary
for the year in which he terminates employment and (ii) his Average Annual
Bonus, multiplied by a fraction, the numerator of which is the number of months
in the Severance Period and the denominator of which is 12. The "Severance
Period" is the longer of 12 months or the number of full and partial calendar
months remaining in the term of this Agreement determined immediately before
such termination, up to 18 months. Such amount shall be paid in equal monthly
installments, with the first six months of installments paid in a single lump
sum six months after the Executive's termination of employment, and the
remaining installments paid monthly for the remainder of the Severance Period,
provided, however, that the first six months of installments shall be paid on a
monthly basis rather than in a lump sum following the Executive's termination of
employment if such monthly payments can be made without adverse tax consequences
under section 409A of the Internal Revenue Code. With respect to any Annual
Bonus measurement period during which the Executive is terminated, the Company
shall also pay the Executive
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a lump sum cash amount equal to a pro rata portion, based on the length of the
Executive's service during such measurement period, of the Average Annual Bonus,
payable at the same time as the severance amount described in the preceding
sentences. In addition, the Executive's stock options shall become 100% vested
and exercisable for their full term.
The Company shall provide continued medical and dental insurance
coverage during the Severance Period (or until the Executive becomes eligible
for such coverage under another employer's program, if sooner), which coverage
shall be deemed to satisfy COBRA health coverage requirements, at a cost to the
Executive that does not exceed the amount the Executive would have paid had the
Executive continued in employment during the period. Should the Executive's
continued participation under the Company's medical and dental insurance
programs described above become impermissible under the Internal Revenue Code,
ERISA, or other applicable law, or likely to result in adverse tax consequences
to the Company or other participants covered by such programs, the Company may,
in its sole discretion, satisfy any of its obligations to the Executive under
this paragraph by providing the Executive with economically equivalent coverage
through alternative arrangements, or the cash value of such coverage, in a
manner that places the Executive in a net economic position that is at least
equivalent to the position in which the Executive would have been had such
alternative arrangements not been used by the Company.
The Company shall also pay the Executive any earned but unpaid Base
Salary, any Annual Bonus awards with respect to a completed measurement period
that are fully earned and vested at separation but not yet paid, and any amounts
to which the Executive is entitled under the generally applicable terms of
pension, savings, disability, life insurance, or other programs. Other than the
payments and benefits described in this Section 7(b), the Company will make no
additional severance or similar payments.
(c) Termination by the Company With Cause. If the Company
terminates the Executive's employment with Cause, the Company shall pay the
Executive only any earned but unpaid Base Salary and any amounts to which the
Executive is legally entitled under the generally applicable terms of pension,
savings, disability or other programs.
(d) Release of Claims. As a condition to receiving the
severance, benefits and entitlements pursuant to Section 7(a) (other than
benefits payable upon death), Section 7(b) or Section 8 hereof, the Executive
shall be required to deliver to the Company and not revoke a general release of
claims against the Company, its affiliates, and their officers, directors,
employees and agents in substantially the form attached hereto as Exhibit A. The
Executive shall be afforded seven days after execution and delivery of such
release to revoke it, in which event the Executive shall not be entitled to the
payments, rights or other entitlements hereunder other than as required by
applicable law.
(e) Resignation. Notwithstanding any other provision of
this Agreement, upon the termination of the Executive's employment for any
reason, unless otherwise requested by the Company, the Executive shall
immediately resign from the board of directors of the Company, if applicable,
and from the boards of directors of any affiliates of the Company and as a
trustee of, or fiduciary to, any employee benefit plans of the Company or any of
its affiliates.
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The Executive agrees to execute any and all documentation of such resignations
upon request by the Company, but he shall be treated for all purposes as having
so resigned upon termination of his employment regardless of when or whether he
executes any such documentation.
(f) Definitions. The following terms shall have the
following meanings for purposes of this Agreement.
"Cause" means (i) the Executive's willful and continued failure to
perform substantially his or her duties with the Company (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness or any such failure subsequent to the Executive being delivered a notice
of termination without Cause by the Company or delivering a notice of
termination for Good Reason to the Company that results in the Executive's
termination of employment) after a written demand for substantial performance is
delivered to the Executive by the Company which specifically identifies the
manner in which the Company believes that the Executive has failed to perform
substantially his or her duties; (ii) the Executive's willfully engaging in
illegal conduct or gross misconduct which is demonstrably and materially
injurious to the Company or its affiliates, (iii) the Executive's ineligibility
to serve as an employee, officer, or director of the Company pursuant to Section
9 of the Investment Company Act of 1940, as amended, or (iv) the Executive's
conviction of a felony or crime involving moral turpitude; provided, however,
that a failure on the part of the Executive to achieve performance objectives
set by the Company shall not in and of itself constitute Cause pursuant to
clause (i) hereof. Prior to terminating the Executive's employment for Cause,
the Company must notify the Executive in writing of any event purporting to
constitute Cause within 45 days of the Board's knowledge of its existence and,
if curable, must provide the Executive with at least 20 days to cure such event.
If such event is not cured by the Executive in such time period, or is
incurable, then the Executive's employment shall be terminated for Cause if 2/3
of the independent members of the Board determine in writing to so terminate his
employment.
"Disability" means a physical or mental infirmity which impairs the
Executive's ability to substantially perform his duties under this Agreement for
at least one hundred eighty (180) days (which need not be consecutive) during
any 365-consecutive-day period. The Executive shall be entitled to the
compensation and benefits provided for under this Agreement for any period
during the Term and prior to the establishment of the Executive's Disability
during which the Executive is unable to work due to a physical or mental
infirmity.
"Good Reason" means, without the Executive's express written consent,
the occurrence of any of the following events:
(i) any material change in the duties or responsibilities
(including reporting responsibilities) of the Executive that is inconsistent in
any material and adverse respect with the Executive's position, duties,
responsibilities or status with the Company (including any material and adverse
diminution of such duties or responsibilities); or
(ii) a material and adverse change in the Executive's
titles or offices (including, if applicable, membership on the Company's Board
of Directors) with the Company set forth in Section 2(a) hereof;
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(iii) a reduction by the Company in the Executive's rate of
annual Base Salary or an adverse change in the Executive's Annual Bonus
opportunity as a percentage of his Base Salary, provided, however, that the
Executive's rate of annual Base Salary may be reduced without being considered
Good Reason if such reduction is implemented by the Company as part of an
overall general salary reduction affecting all of its employees and such
reduction to the Base Salary on a percentage basis is equal to or less than the
percentage reduction otherwise implemented;
(iv) any requirement of the Company that the Executive be
based anywhere more than 50 miles from the office where the Executive is located
at the commencement of the Term or, if the Executive subsequently agrees to a
change in such location, 50 miles from such new office location; or
(v) the failure of any purchaser of or successor to all
or substantially all of the Company's assets to assume the obligations of the
Company contained in this Agreement, either in writing or as a matter of law.
The Executive must notify the Company of any event purporting
to constitute Good Reason within 45 days following the Executive's knowledge of
its existence, and the Company shall have 20 days in which to correct or remove
such Good Reason, or such event shall not constitute Good Reason.
"Average Annual Bonus" means the average of the Annual Bonuses paid to
the Executive during the Term, provided, however, that if the Executive's
employment is terminated before December 31, 2005, the Average Annual Bonus
shall be $225,000.
8. Change in Control.
(a) Upon a Change in Control during the Term, the options
granted pursuant to Section 5 shall become 100% vested and exercisable for their
full term (subject to earlier termination thereafter in accordance with the
applicable plan and/or award agreement). In addition, if during the Term the
Executive voluntarily terminates employment without Good Reason at any time
during the 30-day period following the six-month anniversary of the Change in
Control, the Executive shall be entitled to receive the payments and benefits
described in Section 7(b) (for clarification, upon such a voluntary termination
without Good Reason, the Executive shall not be entitled to the thirty-six month
Severance Period provided by the following sentence of this Section 8). If,
during the Term, the Executive's employment is terminated by the Company without
Cause or by the Executive with Good Reason within one year following a Change in
Control, the Severance Period under Section 7(b) shall be thirty-six months,
notwithstanding anything to the contrary in Section 7(b). Solely for purposes of
this Section 8(a), "Good Reason" shall mean Good Reason as defined in Section
7(f), but taking into account only clauses (iii), (iv), and (v).
(b) "Change in Control" means the occurrence of any of
the following events:
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(i) An acquisition in one or more transactions
(other than directly from the Company) of any voting securities of the Company
by any Person (as defined below) immediately after which such Person has
Beneficial Ownership (as defined below) of fifty percent or more of the combined
voting power of the Company's then outstanding voting securities; provided,
however, in determining whether a Change in Control has occurred, voting
securities which are acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an acquisition by (A) an
employee benefit plan (or a trust forming a part thereof) maintained by (I) the
Company or (II) any corporation or other Person of which a majority of its
voting power or its voting equity securities or equity interest is owned,
directly or indirectly, by the Company (for purposes of this definition, a
"Subsidiary"), (B) the Company or its Subsidiaries, or (C) any Person in
connection with a "Non-Control Transaction" (as hereinafter defined);
(ii) The individuals who, as of the IPO Date are
members of the Board (the "Incumbent Board"), cease for any reason to constitute
at least a majority of the members of the Board or, following a Merger (as
defined below), the board of directors of the ultimate Parent Corporation (as
defined below); provided, however, that if the election, or nomination for
election by the Company's common stockholders, of any new director was approved
by a vote of at least a majority of the Incumbent Board (or, with respect to the
directors who are not "interested persons" as defined in the Investment Company
Act of 1940, by a majority of the directors who are not "interested persons"
serving on the Incumbent Board), such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board; provided further,
however, that no individual shall be considered a member of the Incumbent Board
if such individual initially assumed office as a result of an actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Proxy Contest; or
(iii) The consummation of:
(A) A merger, consolidation or
reorganization involving the Company (a "Merger") or an indirect or direct
subsidiary of the Company, or to which securities of the Company are issued,
unless:
(I) the stockholders of the
Company, immediately before a Merger, own, directly or indirectly immediately
following the Merger, more than fifty percent of the combined voting power of
the outstanding voting securities of (1) the corporation resulting from the
Merger (the "Surviving Corporation") if fifty percent or more of the combined
voting power of the then outstanding voting securities of the Surviving
Corporation is not Beneficially Owned, directly or indirectly, by another Person
or group of Persons (a "Parent Corporation"), or (2) if there is one or more
Parent Corporations, the ultimate Parent Corporation,
(II) the individuals who were
members of the Incumbent Board immediately prior to the execution of the
agreement providing for a Merger constitute at least a majority of the members
of the board of directors of (1) the Surviving
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Corporation or (2) the ultimate Parent Corporation, if the ultimate Parent
Corporation, directly or indirectly, owns fifty percent or more of the combined
voting power of the then outstanding voting securities of the Surviving
Corporation, and
(III) no Person other than (1)
the Company, (2) any Subsidiary, (3) any employee benefit plan (or any trust
forming a part thereof) maintained by the Company, the Surviving Corporation,
any Subsidiary, or the ultimate Parent Corporation, or (4) any Person who,
together with its Affiliates (as defined below), immediately prior to a Merger
had Beneficial Ownership of fifty percent or more of the then outstanding voting
securities, owns, together with its Affiliates, Beneficial Ownership of fifty
percent or more of the combined voting power of the then outstanding voting
securities of (1) the Surviving Corporation or (2) the ultimate Parent
Corporation.
Each transaction described in
clauses (I) through (III) above shall herein be referred to as a "Non-Control
Transaction."
(B) A complete liquidation or dissolution of the
Company (other than where assets of the Company are transferred to or remain
with a Subsidiary or Subsidiaries of the Company).
(C) The direct or indirect sale or other
disposition of all or substantially all of the assets of the Company to any
Person (other than (1) a transfer to a Subsidiary, (2) under conditions that
would constitute a Non-Control Transaction with the disposition of assets being
regarded as a Merger for this purpose, or (3) the distribution to the Company's
stockholders of the stock of a Subsidiary or any other assets).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to have occurred in connection with any action or event relating to
any public offering of the Company's common stock or solely because any Person
(the "Subject Person") acquired Beneficial Ownership of more than the permitted
amount of the then outstanding voting securities as a result of the acquisition
of voting securities by the Company which, by reducing the number of voting
securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Persons, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of voting securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner of
any additional voting securities which increases the percentage of the then
outstanding voting securities Beneficially Owned by the Subject Person, then a
Change in Control shall occur.
"Affiliate" means, with respect to any Person, any other
Person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person.
"Beneficial Ownership" means ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act. "Person" means "person" as such term is used
for purposes of Section 13(d) or 14(d) of the Exchange Act, including without
limitation, any individual, corporation, limited liability company, partnership,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity or any group of Persons.
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9. Restrictive Covenants. In consideration of the Base Salary,
Annual Bonus, options, employee benefits, and severance promises contained in
this Agreement, the sufficiency of which is hereby acknowledged, the Executive
enters into the following covenants.
(a) Confidentiality. The Executive shall not, without the
prior express written consent of the Company, directly or indirectly, use for
any purpose any Confidential Information (as defined below) in any way, or
divulge, disclose or make available or accessible any Confidential Information
to any person, firm, partnership, corporation, trust or any other entity or
third party unless (i) such disclosure is reasonably necessary or appropriate in
connection with the performance by the Executive of his duties as an executive
of the Company or (ii) such disclosure is required by applicable law or (iii)
the Executive is requested or required by a judicial or arbitration body or
governmental agency (by oral question, interrogatories, requests for information
or documents, subpoena, civil investigative demand or similar process) to
disclose any such information, in which case the Executive will (A) promptly
notify the Company of such request or requirement, so that the Company may seek
an appropriate protective order and (B) cooperate with the Company, at its
expense, in seeking such an order. "Confidential Information" means all
information respecting the business and activities of the Company and any of its
affiliates, including, without limitation, respecting the clients, customers,
suppliers, employees, consultants, prospects, computer or other files, projects,
products, computer disks or other media, computer hardware or computer software
programs, underwriting, lending or investment standards, marketing plans,
financial information, methodologies, know-how, processes, trade secrets,
policies, practices, projections, forecasts, formats, operational methods,
product development techniques, research, strategies or information agreed to
with third-parties to be kept confidential by the Company and any of its
affiliates. Notwithstanding the immediately preceding sentence, Confidential
Information shall not include any information that is, or becomes, a part of the
public domain or generally available to the public (unless such availability
occurs as a result of any breach by the Executive of this Agreement) or any
business knowledge and experience of the type usually acquired by persons
engaged in positions similar to the Executive's position with the Company, to
the extent such knowledge and experience is non-Company specific and not
proprietary to the Company or any of its affiliates.
(b) Non-Competition. During the Term and ending upon the
later of (i) one year after the Executive's termination of employment with the
Company or (ii) the end of any Severance Period, the Executive shall not,
without the prior written consent of the Company, engage in any business or
activity, whether as an employee, consultant, partner, principal, agent,
representative, stockholder (other than as the holder of an interest of two
percent or less in the equity of a publicly traded corporation) or other
individual, corporate or representative capacity, or render any services or
provide any advice or assistance to any business, person or entity, if such
business, activity, person or entity competes anywhere in the same geographic
area with the Company or any of its affiliates in respect of (x) any
then-current product, service or business of the Company or any of its
affiliates on the date the Executive terminates employment with the Company or
(y) any product, service or business as to which the Company or any of its
affiliates has actively begun preparing to develop or offer as of the date the
Executive terminates employment with the Company.
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(c) Non-Solicitation. During the Term and ending upon the
later of (i) one year after the Executive's termination of employment with the
Company or (ii) the end of any Severance Period, the Executive shall not divert,
solicit or lure away the patronage of (x) any client or business of the Company
or any of its affiliates as of or within the two-year period prior to such
termination of employment or (y) any prospective client or business of the
Company or any of its affiliates. As used herein, "prospective client" means any
client that the Company or any of its affiliates (i) is soliciting as of such
termination and (ii) with whom the Company or any of its affiliates has provided
a written proposal that has not been rejected by such prospective client.
Furthermore, the Executive shall not, during the Term and ending upon the later
of (x) one year after the Executive's termination of employment with the Company
or (y) the end of any Severance Period, (i) directly or indirectly, solicit or
induce any employee, consultant, or other service provider of the Company or any
of its affiliates to terminate his or her employment or other relationship with
the Company or any of its affiliates or (ii) solicit, directly or indirectly,
any person who was an employee of the Company or any of its affiliates during
the six-month period prior to the Executive's termination of employment (other
than a former employee of the Company who was involuntarily terminated by the
Company) to work for the Executive or any other person or entity.
(d) Return of Materials. Upon termination of employment,
the Executive will leave with the Company all memoranda, notes, records,
manuals, or other documents and media (in whatever form maintained, whether
documentary, computer storage or otherwise) pertaining to the Company's
business, including all copies thereof; other than such documents and items that
are personal to the employee (e.g., pay stubs, personal tax documentation and
other compensation or employment related materials).
(e) Non-Disparagement. Following the termination of his
employment for any reason, whether during or after the Term, the Executive
agrees to refrain from making any statement or comment, whether oral or written,
of a defamatory or disparaging nature to third parties regarding the Company,
its affiliates, or their directors and officers, and the Company agrees to
refrain, and to use its best efforts to cause its directors and officers to
refrain, from making any statement or comment, whether oral or written, of a
defamatory or disparaging nature to third parties regarding the Executive.
(f) Cooperation. Following the termination of his
employment for any reason, whether during or after the Term, upon reasonable
request by the Company, the Executive shall cooperate with the Company or any of
its affiliates with respect to any legal or investigatory proceeding, including
any government or regulatory investigation, or any litigation or other dispute
relating to any matter in which the Executive was involved or had knowledge
during his employment with the Company, subject to the reasonable demands of the
Executive business endeavors and schedule. The Company shall reimburse the
Executive for all reasonable out-of-pocket costs, such as travel, hotel and meal
expenses, incurred by the Executive in providing any cooperation pursuant to
this Section 9(f).
(g) Ownership of Executive Developments. All copyrights,
patents, trade secrets, or other intellectual property rights associated with
any ideas, concepts, techniques,
11
inventions, processes, or works of authorship developed or created by the
Executive during the course of performing work for the Company, or its clients,
including, but not limited to, software programs, manuals, publications and
reports (collectively, the "Work Product") belongs and shall belong exclusively
to the Company and shall, to the extent possible, be considered a work made by
the Executive for hire for the Company within the meaning of Title 17 of the
United States Code. To the extent the Work Product may not be considered work
made by the Executive for hire for the Company, the Executive agrees to assign,
and automatically assign at the time of creation of the Work Product, without
any requirement of further consideration, any right, title, or interest he may
have in such Work Product. Upon request of the Company, the Executive shall take
such further actions, including execution and delivery of instruments of
conveyance, as may be appropriate to give full and proper effect to such
assignment. Notwithstanding anything else in this Agreement, any ideas,
concepts, techniques, inventions, processes or works of authorship developed or
created by the Executive on the Executive's own time, and which have no
application in the business of the Company ("Executive Work Product"), shall not
be considered Work Product, and the Company shall have no interest in any such
Executive Work Product.
(h) Interpretation. The Executive agrees that due to the
uniqueness of his skills, abilities, and relationships and the uniqueness of the
confidential information and knowledge of financing structures that he will
possess in the course of his employment with the Company, the covenants set
forth above are reasonable and necessary for the protection of the Company. It
is the intention of the Parties that the provisions of this Section 9 be
enforced to the fullest extent permissible under the laws and policies of each
jurisdiction in which enforcement may be sought, and that in the event that any
provision of this Section 9 shall, for any reason, be held invalid or
unenforceable in any respect, it shall not invalidate, render unenforceable or
otherwise affect any other provision hereof, and such invalid or unenforceable
provision shall be construed by limiting it so as to be valid and enforceable to
the fullest extent permissible under applicable law. If applicable law does not
permit an invalid or unenforceable provision to be so construed, then the
invalid or unenforceable provision shall be stricken and the remaining portions
of this Section 9 shall be enforced to the fullest extent permitted by law. In
addition, if any provision of this Sections 9 shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall be deemed to apply
only with respect to the operation of such provision in the particular
jurisdiction in which such determination is made and not with respect to any
other provision or jurisdiction.
(i) Remedies. The Executive agrees that any breach of the
terms of this Section 9 would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy at law; the
Executive therefore also agrees that in the event of said breach or any threat
of breach, the Company shall be entitled to an immediate injunction and
restraining order from a court of competent jurisdiction, without posting a
bond, to prevent such breach and/or threatened breach and/or continued breach by
the Executive and/or any and all persons and/or entities acting for and/or with
the Executive, without having to prove damages. The availability of injunctive
relief shall be in addition to any other remedies to which the Company may be
entitled at law or in equity but remedies other than injunctive relief may only
be pursued in an arbitration brought in accordance with Section 11 of this
Agreement. The terms of this paragraph shall not prevent the Company from
pursuing in an arbitration any other available remedies for any breach or
threatened breach of this Section 9, including but not
12
limited to the recovery of damages from the Executive. In addition, if the
Company defers or withholds any payment, benefit or entitlement due to the
Executive pursuant to this Agreement or otherwise based on the Executive's
violation of any provision of this Agreement and it is subsequently determined
that the Executive did not commit such breach, the Company shall promptly pay
all such unpaid amounts, and shall extend such rights or other entitlements, to
the Executive as of the date that it is so determined that the Executive did not
commit such breach.
The provisions of this Section 9 shall survive any termination of this
Agreement, and the existence of any claim or cause of action by the Executive
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of the covenants and
agreements of this Section 9; provided, however, that this paragraph shall not,
in and of itself, preclude the Executive from defending himself against the
enforceability of the covenants and agreements of this Section 9.
10. Tax Matters.
(a) If any amount, entitlement, or benefit paid or
payable to the Executive or provided for his benefit under this Agreement and
under any other agreement, plan or program of the Company or any of its
affiliates (such payments, entitlements and benefits referred to as a "Payment")
is subject to the excise tax imposed under Section 4999 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), or any similar federal
or state law (an "Excise Tax"), then notwithstanding anything contained in this
Agreement to the contrary, to the extent that any or all Payments would be
subject to the imposition of an Excise Tax, the Payments shall be reduced (but
not below zero) if and to the extent that such reduction would result in the
Executive retaining a larger amount, on an after-tax basis (taking into account
federal, state and local income taxes and the imposition of the Excise Tax),
than if the Executive received all of the Payments (such reduced amount is
hereinafter referred to as the "Limited Payment Amount"). Unless the Executive
shall have given prior written notice specifying a different order to the
Company to effectuate the limitations described in the preceding sentence, the
Company shall reduce or eliminate the Payments, by first reducing or eliminating
those payments or benefits which are not payable in cash and then by reducing or
eliminating cash payments, in each case in reverse order beginning with payments
or benefits which are to be paid the farthest in time from the Determination (as
defined below). Any notice given by the Executive pursuant to the preceding
sentence shall take precedence over the provisions of any other plan,
arrangement or agreement, including, but not limited to, the other provisions of
this Agreement, governing the Executive's rights and entitlements to any
compensation, entitlement or benefit.
(b) All calculations under this Section 10 shall be made
by a nationally recognized accounting firm designated by the Company and
reasonably acceptable to the Executive (other than the accounting firm that is
regularly engaged by any party who has effectuated a Change in Control) (the
"Accounting Firm"). The Company shall pay all fees and expenses of such
Accounting Firm. The Accounting Firm shall provide its calculations, together
with detailed supporting documentation, both to the Company and the Executive
within 45 days after the Change in Control or the Date of Termination, whichever
is later (or such earlier time as is requested by the Company) and, with respect
to the Limited Payment Amount, shall deliver its
13
opinion to the Executive that he is not required to report any Excise Tax on his
federal income tax return with respect to the Limited Payment Amount
(collectively, the "Determination"). Within 5 days of the Executive's receipt of
the Determination, the Executive shall have the right to dispute the
Determination (the "Dispute"). The existence of the Dispute shall not in any way
affect the right of the Executive to receive the Payments in accordance with the
Determination. If there is no Dispute, the Determination by the Accounting Firm
shall be final binding and conclusive upon the Company and the Executive (except
as provided in subsection (c) below).
(c) If, after the Payments have been made to the
Executive, it is established that the Payments made to, or provided for the
benefit of, the Executive exceed the limitations provided in subsection (a)
above (an "Excess Payment") or are less than such limitations (an
"Underpayment"), as the case may be, then the provisions of this subsection (c)
shall apply. If it is established pursuant to a final determination of a court
or an Internal Revenue Service (the "IRS") proceeding which has been finally and
conclusively resolved, that an Excess Payment has been made, the Executive shall
repay the Excess Payment to the Company on demand. In the event that it is
determined by (i) the Accounting Firm, the Company (which shall include the
position taken by the Company, or together with its consolidated group, on its
federal income tax return) or the IRS, (ii) pursuant to a determination by a
court, or (iii) upon the resolution to the satisfaction of the Executive of the
Dispute, that an Underpayment has occurred, the Company shall pay an amount
equal to the Underpayment to the Executive within 10 days of such determination
or resolution together with interest on such amount at the applicable federal
short-term rate, as defined under Section 1274(d) of the Code and as in effect
on the first date that such amount should have been paid to the Executive under
this Agreement, from such date until the date that such Underpayment is made to
the Executive.
11. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the Company, its successors and assigns,
provided, however, that neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, his
beneficiaries or legal representatives, except by will or by the laws of descent
and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal personal representative.
12. Arbitration. Except as set forth in Section 9(g) hereof, any
and all disputes, claims and controversies between the Company or any of its
affiliates and the Executive arising out of or relating to this Agreement, or
the breach thereof, or otherwise arising out of or relating to the Executive's
employment or the termination thereof shall be resolved by binding arbitration
before a single arbitrator in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. The arbitration shall take place in
Westport, Connecticut. The arbitrator shall have no authority to award punitive
damages. The award of the arbitrator shall be final and judgment thereon may be
entered in any court having jurisdiction. The Parties shall share the costs of
the arbitrator equally, but the Parties shall pay their own legal and other
expenses.
13. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when personally delivered (provided written
acknowledgement of receipt is obtained) or three
14
days after being sent by certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Company:
President and Chief Executive Officer
Patriot Capital Funding, Inc.
00 Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, XX 00000
with a copy to:
Chairman of the Board of Directors
Patriot Capital Funding, Inc.
00 Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, XX 00000
and
Xxxxxxx Xxxx, Esq.
Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxxxxxxx, X.X. 00000
If to the Executive:
Xxxxxxx X. Xxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
or to such other address given by each Party to the other in accordance
with the foregoing procedures.
14. Miscellaneous. No provision of this Agreement may be modified
or discharged unless such modification or discharge is agreed to in writing and
signed by the Executive and the Company. No waiver of any provision of this
Agreement shall be deemed effective unless in writing and signed by the Party
against whom it is being enforced. 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 similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either Party which are not expressly set forth in this Agreement.
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15. Withholding. The Company may withhold from any amounts or
payments under this Agreement such Federal, state, local or other taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
16. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Connecticut
without giving effect to the conflict of law principles thereof.
17. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
18. Entire Agreement. This Agreement constitutes the entire
agreement between the Parties hereto and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the Parties
hereto with respect to the subject matter hereof.
19. Counterparts. This Agreement may be executed in two or more
counterparts.
20. Voluntary Agreement. The Executive acknowledges that he has
been advised that he may consult with counsel of his choosing in considering
this Agreement, that he has had an adequate opportunity to do so, and that he is
entering into this Agreement voluntarily.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
Patriot Capital Funding, Inc.
By:
------------------- ------------------
I. Xxxxxx Xxxxxxx Date
Chairman of the
Board of Directors
---------------------- ------------------
Xxxxxxx X. Xxxxxxx Date
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