EXHIBIT 10.24
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is entered into by and between
Xxxxxx X. Xxxxxxxxx ("YOU") and Allied Capital Corporation, a Maryland
corporation (the "COMPANY") and will be effective as of June 15, 2000 (the
"EFFECTIVE DATE").
WHEREAS, you desire to continue your employment as a Managing Director
of the Company; and
WHEREAS, the Company has hired you and is willing to continue your
employment based on your particular qualifications, on the condition that you
shall enter into this Agreement and shall fully perform all the responsibilities
and duties and strictly observe all of your obligations hereunder;
NOW, THEREFORE, in consideration of your continued employment by the
Company and the compensation to be paid by the Company to you in connection
therewith and for other good and valuable consideration, you and the Company
hereby agree as follows:
1. Position and Responsibilities.
(a) Position. The Company agrees to continue your employment as a
Managing Director throughout the Term (defined below). You shall report to the
Chief Executive Officer.
(b) Responsibilities. You shall devote your full business efforts
and time to the Company and perform the responsibilities assigned to you in
accordance with the standards and policies that the Company may from time to
time establish. You shall not render services to any other person or entity
without the prior written consent of the Chief Executive Officer. The foregoing,
however, shall not preclude you from engaging in appropriate civic, charitable
or religious activities or from devoting a reasonable amount of time to private
investments that do not interfere or conflict with your responsibilities to the
Company. You and the Company agree that your position is essential to the
Company's success and that the highest level of performance is required from
you.
2. Term of Employment.
(a) Basic Rule. The Company agrees to continue your employment, and
you agree to remain in employment with the Company, from the Effective Date
until the third anniversary of such date (the "TERM"), unless your employment
terminates earlier pursuant to Section 5 below.
(b) Renewal of Term. On the third (3rd) anniversary and on each
subsequent anniversary of the Effective Date, the Term shall be renewable for
additional one-year periods upon the mutual written agreement of both parties.
3. Compensation.
(a) Base Compensation. You will be entitled to receive base
compensation during the Term ("BASE COMPENSATION"). Your Base Compensation for
the first year of the Term shall be at the annual rate of $200,000 per year and
your annual Base Compensation for the remainder of the Term shall not be less
than that amount. Base Compensation shall be paid in equal biweekly
installments, less deductions required by law. The Chief Executive Officer will
review and may adjust your Base Compensation periodically, usually annually on
or about February 1st. Such review shall be in accordance with performance
criteria to be determined by the Company in its sole discretion, and
(b) Bonus Compensation. During the Term, usually on an annual basis,
you shall be entitled to receive an additional cash payment (less deductions
required by law) ("BONUS COMPENSATION") which shall be determined with reference
to your performance in accordance with performance criteria to be determined by
the Chief Executive Officer in his sole discretion for each calendar year.
(c) Incentive Compensation. In addition to the annual cash
compensation described in Sections 3(a) and
(b) hereof, you and the Company have hereby agreed to the following
incentive compensation:
(i) The Company shall grant you during calendar year 2000 and
in subsequent years as the Board in its sole discretion
may decide, awards permitted to be granted under the
Allied Capital Corporation Stock Option Plan (the "PLAN")
(as amended effective May 9, 2000), subject to the
generally applicable terms and conditions of such Plan.
(ii) During the Term, the Company shall provide you with the
remaining compensation payable under the current Formula
Award and Cut-off Award as determined in accordance with
the provisions applicable to the December 31, 1997 merger
of the predecessor companies into Allied Capital
Corporation.
(iii) The terms and conditions of the Stock Option Plan and
Agreements relative to stock options granted prior to the
Effective Date shall remain effective during the Term of
your employment.
(d) 2001-2003 Long-Term Retention Award. You shall be eligible for a 2001-2003
Long-Term Retention Award ("RETENTION AWARD") equal to $2,515,000 ("TOTAL
AWARD"). The Total Award shall vest in four equal installments of $352,500 each
on June 30th and December 31st of each year from 2001 through 2002 and two
installments of $552,500 each on June 30, 2003 and December 31, 2003
("INSTALLMENT VESTING DATES"). Each installment will be paid through the payroll
system within fifteen (15) days after the vesting and subject to deductions
required by law ("INSTALLMENT PAYMENT DATE"). To receive an Installment Payment
under this Section 3(d) you must be actively employed on the Installment Payment
Date.
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4. Employee Benefits.
(a) In General. During the Term, you shall be eligible to
participate in the employee benefit plans and executive compensation programs
that the Company may provide, including but not limited to the Company's health
and dental insurance plans, deferred compensation and 401(k) plan, subject in
each case to the generally applicable terms and conditions of the plan or
program in question and to the determinations of any person or committee
administering such plan or program. The Company reserves the right to modify or
terminate these plans.
` (b) Split Dollar Life Insurance. During the Term, the Company will
pay the premiums on split dollar life insurance in accordance with the Split
Dollar Life Insurance Agreement. The Company reserves the right to modify or
terminate the Split Dollar Life Insurance Agreement, except that if a Change in
Control occurs during the Term, the Split Dollar Life Insurance Agreement may
only be modified or terminated by mutual agreement.
(c) Paid Holidays. You shall be entitled to take paid holidays as
specified by Company policy from time to time for all of the Company's
employees.
(d) Vacation. You shall be entitled to take such vacation time as
specified from time to time by Company policy. Your Base Compensation shall be
paid during this vacation period.
5. Termination of Employment. Upon the effective date of termination of
your employment with the Company (the "TERMINATION DATE"), you will not be
eligible for further compensation, benefits or perquisites under Sections 3 and
4 of this Agreement, other than those that have already accrued. Termination of
your employment may occur under any of the following circumstances:
(a) Expiration of Term. Your employment will terminate if the Term
provided for under Section 2 expires without written agreement of both parties
to renew the term.
(b) Company's Termination of Employment. The Company has the right
to terminate your employment at any time, with
or without Cause. For all purposes under this Agreement,
("CAUSE") shall mean:
(i) a willful failure by you to substantially perform your
duties under this Agreement, other than a failure
resulting from your complete or partial incapacity due to
physical or mental illness or impairment;
(ii) a willful act by you, which constitutes gross misconduct
or fraud and which is materially injurious to the
Company;
(iii) conviction of, or a plea of "guilty" or "no contest" to,
a felony or a crime involving moral turpitude; or
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(iv) material breach of any duty owed to the Company,
including but not limited to the duty of loyalty and
confidentiality.
No act, or failure to act, by you shall be considered "willful" unless committed
without good faith and without a reasonable belief that the act or omission was
lawful and in the Company's best interest. If the Company terminates your
employment for any reason other than for Cause, you shall receive the Severance
Payments set forth in Section 7(a) below.
(c) Your Termination of Employment. You have the right to terminate
your employment with the Company at any time, with or without cause. If you
terminate your employment, you will not be entitled to any Severance Payments,
unless you terminated your employment after a Change in Control as defined in
Section 6 below. You agree to provide the Company thirty (30) days prior written
notice of termination. The Company may in its sole discretion select any date
prior to the end of such thirty (30) day notice period as the date your
employment will terminate. If you terminate your employment after a Change in
Control as defined in Section 6 below, you shall receive the payments set forth
in Section 7(b) below.
(d) Death or Disability. Your employment shall be deemed to have
been terminated by you upon your (i) death or (ii) inability to perform your
duties under this Agreement, even with reasonable accommodation, for more than
twenty-six (26) weeks, whether or not consecutive, in any twelve-month period
("DISABILITY"). Termination will be effective upon the occurrence of such event.
If your employment ends as a result of death or Disability, you or your estate
will receive the Installment Payments of the Retention Award on any Installment
Payment Date that occurs within twelve (12) months of the date your employment
ended under this Section 5(d).
6. Change in Control. Change in Control shall mean the occurrence of any
of the following events after the Effective Date of this Agreement:
(a) the sale of substantially all of the Company's assets,
(b) the acquisition, whether directly, indirectly, beneficially
(within the meaning of rule 13d-3 of the 1934 Act), or of record, of securities
of the Company representing twenty-five percent (25%) or more in the aggregate
voting power of the Company's then-outstanding Common Stock by any "person"
(within the meaning of Sections 13(d) and 14(d) of the 1934 Act), including any
corporation or group of associated persons acting in concert, other than (i) the
Company or its subsidiaries and/or (ii) any employee pension benefit plan
(within the meaning of Section 3(2) of the Employee Retirement Income Security
Act of 1974) of the Company or its subsidiaries, including a trust established
pursuant to any such plan, or
(c) a merger or consolidation of the Company with another entity
unless the Company is the surviving company in such merger or consolidation.
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7. Severance Payments.
(a) Termination Without Cause under Section 5(b). If during the Term
the Company terminates your employment for any reason other than Cause, you
shall be entitled to receive all of the payments and benefit coverage described
in this Section 7(a) (the "SEVERANCE PAYMENTS"), provided that you sign a
release of any and all claims in the form provided by the Company within
forty-five (45) days your Termination Date. Such payments shall begin at the
later of (a) the first pay period following your Termination Date or (b) ten
(10) days after you deliver a signed release to the Company. Such payments shall
end on the earlier of (a) twenty-four (24) months after your Termination Date or
(b) on the one-year anniversary of the date of your death or Disability (the
"CONTINUATION PERIOD"). You shall not be entitled to Severance Payments if the
Company terminates your employment within twelve (12) months after a Change in
Control or under any circumstances, except as provided in this Section 7(a). In
the event that the Continuation Perioed ends as a result of death, the remaining
payments will be made in a single sum to your estate.
(1) Compensation. During the Continuation Period, the Company
shall:
(A) continue to pay on a biweekly basis your Base
Compensation in accordance with the rate in effect on the
Termination Date, less deductions required by law;
(B) pay you Bonus Compensation on the same annual
schedule as if you continued to be employed and such
Bonus Compensation shall be equal to the greater of
either
i) the average of your annual bonuses for the
preceding three years or,
ii) the amount of the last annual bonus you
received prior to the Termination Date.
less deductions required by law.
If you become disabled during the Continuation Period, payments
under this Section 7(a)(1) will be reduced by an amount equal to
any group long-term disability benefits, or social security
disability income benefits. You agree to notify the Company
promptly of the receipt and amount of all such benefits or
payments.
(2) Retention Award. You will receive any Installment
Payments under the Retention Award on any Installment Payment Date that
occurs within the Continuation Period.
(3) Other Awards. With respect to the Formula Award, Cut Off
Award and awards of stock under the Stock Option Plan, the Continuation
Period shall not be counted as employment for vesting purposes.
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(4) Employee Benefits. To the extent permitted by law and the
applicable benefit plans, the Continuation Period shall be counted as
employment with respect to the continuation of coverage and
participation in the Company's 401(k) and health benefit plans.
(b) Termination After Change in Control. If within twelve (12)
months after a Change in Control that occurs during the Term you terminate your
employment under 5(c) or the Company terminates your employment for any reason
other than Cause under 5(b), you will not be eligible for Severance Payments
under Section 7(a), but you shall be entitled to:
(1) Compensation. A lump sum paid within 30
days after your Termination Date that is equal to the
total of:
(A) an amount equal to your Base Compensation for TWO (2)
years in accordance with the rate in effect on the
Termination Date, less deductions required by law; and
(B) an amount equal to TWO (2) times the greater of either
1) the average of your last three annual bonuses
prior to the Termination Date, or
2) the amount of the last annual bonus you received prior
to the Termination Date, and
(C) an amount equal to $2,350,000 less deductions required
by law, in a lump sum within 30 days after your Termination
Date. You agree to use the proceeds from this payment to pay
off or pay down any stock option loans within five (5)
business days of receiving the payment. Any remaining stock
option loan balance must be repaid within sixty (60) days of
the Termination Date.
less deductions required by law.
(2) Other Payments/Benefits. To the extent a vesting period
is required under the relevant plans and programs, a Change In Control
will result in immediate vesting of any Formula Award, Cut Off Award,
or Retention Award and all such awards will be paid within thirty (30)
days after your Termination Date. If amounts payable under the relevant
plans and programs have been deferred in accordance with the Deferred
Compensation Plan, such Awards will be distributed in accordance with
the Deferred Compensation Plan.
(3) Split Dollar Life Insurance. The Company will pay the
remaining premiums owed , if any, on the policy in accordance with the
Split Dollar Life Insurance Agreement.
(4) Employee Health Benefits. If you make a timely election
to continue your health insurance benefits under the Consolidated
Omnibus Budget Reconciliation Act
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("COBRA"), the Company will pay your COBRA premiums up to a maximum of
eighteen (18) months provided your eligibility under COBRA continues.
These payments will be made directly to the insurance carrier. If at
any time during that period you cease to be eligible for COBRA, the
Company will not continue to pay the premiums and your coverage will
end.
(c) No Mitigation. You shall not be required to mitigate the amount
of any payment contemplated by this Section 7, nor shall any such payment be
reduced by any earnings that you may receive from any other source, other than
as described in Section 7(a)(1) regarding disability.
8. Tax Equalization Payment.
In addition to the amounts payable under Section 7(b) , the Company
shall pay you a tax equalization payment ("TAX EQUALIZATION PAYMENT") in
accordance with this Section 8. The Tax Equalization Payment shall be in an
amount that when added to the other amounts payable to you under Section 7(b)
will place you in the same after-tax position as if the excise tax penalty of
Section 4999 of the Internal Revenue Code of 1986, as amended (the "CODE"), or
any successor statute of similar import, did not apply to any of the amounts
payable under Section 7(b) including any amounts paid under this Section 8. The
amount of this Tax Equalization Payment shall be determined by the Company's
independent accountants and shall be remitted to the applicable United States
federal, state and local tax jurisdictions.
9. Other Obligations.
You warrant that you are not subject to any other obligations that
would conflict with or inhibit your ability to perform your duties under this
Agreement. You further warrant that you have not and will not bring to the
Company or use in the performance of your responsibilities at the Company any
equipment, supplies, facility or trade secret information (that is not generally
available to the public) of any current or former employer or organization to
which you provided services, unless you have obtained written authorization for
their possession and use.
10. Confidential Information.
You shall not disclose or use at any time, either during or after the
Termination Date, any confidential information ("CONFIDENTIAL INFORMATION")
(defined below) of the Company, whether patentable or not, which you learn as a
result of your employment with the Company, whether or not you developed such
information. Confidential Information shall include, without limitation,
information regarding Allied Capital's, it customers' or its business partners'
trade secrets and:
- any information about existing and prospective investments;
- financing information and sources;
- patent applications, developmental or experimental work, formulas,
test data, prototypes, models, and product specifications;
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- financial information;
- financial projections and pro forma financial information;
- sales and marketing strategies, plans and programs and product
development information;
- employees' and consultants' benefits, perquisites, salaries, stock
options, compensation, formulas or bonuses, and their non-business
addresses and telephone numbers;
- organizational structure and reporting relationships; and
- business plans.
Information that is or later becomes publicly available in a manner wholly
unrelated to any breach of this Agreement by you will not be considered
Confidential Information as of the date it enters the public domain. If you are
uncertain whether something is Confidential Information you should treat it as
Confidential Information until you receive clarification from the Company that
it is not Confidential Information. Confidential Information shall remain at all
times the property of the Company. You may use or disclose Confidential
Information only:
(a) as authorized and necessary in performing your responsibilities
under this Agreement during your employment with the Company; or
(b) with the Chief Executive Officer's prior written consent; or
(c) in a legal proceeding between you and the Company to establish
the rights of either party under this Agreement, provided that you stipulate to
a protective order to prevent any unnecessary use or disclosure; or
(d) subject to a compulsory legal process that requires disclosure
of such information, provided that you have complied with the following
procedures to ensure that the Company has an adequate opportunity to protect its
legal interests in preventing disclosure.
Upon receipt of a subpoena that could possibly require disclosure of
Confidential Information, you shall provide a copy of the compulsory process and
complete information regarding the circumstances under which you received it to
the Company by hand delivery within twenty-four (24) hours. You will not make
any disclosure until the latest possible date for making such disclosure in
accordance with the compulsory process ("LATEST POSSIBLE DATE"). If the Company
seeks to prevent disclosure in accordance with the applicable legal procedures,
and provides you with notice before the Latest Possible Date that it has
initiated such procedures, you will not make disclosures of any Confidential
Information that is the subject of such procedures, until such objections are
withdrawn or ruled on.
You hereby acknowledge that any breach of this Section 10 would cause
the Company irreparable harm.
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11. Non-Solicitation.
For two (2) years from the Termination Date, you will not, directly or
indirectly, individually or as part of or on behalf of any other person,
company, employer or other entity, hire or attempt to solicit for hire, any
persons who are employed by the Company within six months of the Termination
Date until at least six (6) months after the person's employment with the
Company ends ("COVERED EMPLOYEE"). If any Covered Employee accepts employment
with any person, company, employer or other entity of which you are an officer,
director, employee, partner, shareholder (other than of less than 5% of the
stock in a publicly traded company) or joint venture, it will be presumed that
the Covered Employee was hired in violation of this provision ("PRESUMPTION").
This Presumption may only be overcome by your showing by a preponderance of the
evidence that you were not directly or indirectly involved in soliciting or
encouraging the Covered Employee to leave employment with the Company. You agree
to notify any person or entity to which you provide services within one year of
the Termination Date of the terms of your obligations under this Section 11. The
parties agree that any breach of this Section 11 will entitle the Company to
injunctive relief enforcing this Section 11 and to damages equal to the greater
of the actual damages proven or liquidated damages of three times the amount of
the annual total compensation of any person solicited or hired in breach of this
Section 11. The parties are agreeing to liquidated damages as an option to
actual damages in recognition that the Company's employees are its most valuable
asset, but it is often difficult to prove the actual damages resulting from such
a breach.
12. Indemnification.
During the Term and at all times thereafter, you shall be eligible to
be indemnified by the Company in accordance with the Company's by-laws from any
claims or actions based upon any acts or omissions, or alleged acts or
omissions, by you which arise out of or are related to your employment with the
Company. You shall be a beneficiary of any directors' and officers' liability
insurance policy maintained by the Company as long as you remain an officer or
director.
13. Return of Property.
Upon termination of your employment with the Company for any reason,
you agree to immediately return to the Company all property belonging to the
Company. This includes all documents and other information prepared by you or on
your behalf or provided to you in connection with your duties under this
Agreement, regardless of the form in which such document or information are
maintained or stored, including computer, typed, written, imaged, audio, video,
micro-fiche, electronic or any other means of recording or storing documents or
other information. You hereby warrant that you will not retain in any form any
such document or other information or copies thereof. You may retain a copy of
this Agreement and information describing any rights you may have after the
Termination Date under any employee benefit plan.
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14. Miscellaneous Provisions.
(a) Notices. Unless otherwise provided herein, any notice or other
information to be provided to the Company will be sent by overnight delivery
with acknowledgement of receipt requested, to:
Chief Executive Officer
Allied Capital Corporation
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
cc: Xxxxx X. Xxxx, Esq.
Xxxxxx Xxxxx LLP
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Any notice or other information to be provided to you will be sent by overnight
delivery with acknowledgement of receipt requested, to:
Xxxxxx X. Xxxxxxxxx
0000 Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
(b) Dispute Resolution. You and the Company agree that any dispute
between you and the Company will be finally resolved by binding arbitration in
accordance with the Federal Arbitration Act ("FAA") and the laws of the state of
Maryland. You and the Company agree to follow the Dispute Resolution Procedures
set forth in Attachment A to this Agreement.
(c) Nature of Agreement. This Agreement and the attachments hereto
constitute the entire agreement between you and the Company and supercede all
prior agreements and understandings between you and the Company, except for the
Stock Option Agreement(s), the Deferred Compensation Plan Agreement(s) and the
Split Dollar Life Insurance Agreement. In making this Agreement, the parties
warrant that they did not rely on any representations or statements other than
those contained in this Agreement. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by you and by the Chief Executive Officer for
the Company. No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time. Regardless of the choice of law provisions of the
District of Columbia, the State of Maryland or any other jurisdiction, the
parties agree that this Agreement shall be otherwise interpreted, enforced and
governed by the laws of the State of Maryland. This Agreement shall be binding
on the Company's successors and assigns and on you, your heirs and personal
representatives. This Agreement will continue in effect until all obligations
under it are fulfilled. You may not assign this Agreement, either voluntarily or
involuntarily. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision hereof, which
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shall remain in full force and effect and this Agreement shall be interpreted as
if the unenforceable provision had not been included in it. This Agreement may
be executed in any number of counterparts each of which shall be an original,
but all of which together shall constitute one instrument. The headings in this
Agreement are for convenience only and shall not effect the interpretation of
this Agreement. You further certify that you fully understand the terms of this
Agreement and have entered into it knowingly and voluntarily.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its authorized officer, as of the day and year set
forth under their signatures below.
ALLIED CAPITAL CORPORATION
/s/ Xxxxxx X. Xxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxx
--------------------------- --------------------------------
EMPLOYEE Chief Executive Officer
Date: 3/10/03 Date: 3/10/03
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