Exhibit 10.10

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Mr. E.A. Kratzman, III

544 North Street

Greenwich, CT 06830

Dear Mr. Kratzman:

This letter will confirm the terms of your continuing employment with Katonah
Debt Advisors, LLC (the “Company”), under the terms and conditions that follow.
This letter supercedes the letter agreement dated November 28, 2006 in its
entirety and is effective as of January 1, 2008.

1. Term, Position and Duties.

(a) Subject to earlier termination as hereafter provided, your employment shall
continue through December 31, 2010, and will be automatically extended for one
year on January 1, 2011 and on each succeeding January 1 unless previously
terminated in writing by you or an expressly authorized representative of the
Company. The term of this agreement, as from time to time extended is hereafter
referred to as “the term of this agreement” or “the term hereof”. You will be
employed by the Company as its Managing Director. You will report to the
Management Committee of the Company (the “Committee”).

(b) You agree to perform the duties of your position and such other duties as
may reasonably be assigned to you from time to time including, but not limited
to: management of the entire KDA platform, structuring various types of
collateralized loan obligation (“CLO”) funds, synthetic collateralized debt
obligation (“CDO”) funds, and other credit-based funds (collectively “Funds”) as
directed by the Committee; implementing and investing “warehouse” lines;
negotiating, documenting, and selling debt and equity securities of Funds; and
purchasing and trading non-investment grade loans, high yield bonds, and other
permitted securities on behalf of Funds. Additionally, you will be responsible
for overseeing, but not the day-to-day management, of the Katonah Scott’s Cove
business. You will also be responsible for increasing assets under management
for all of the KDA platforms which may entail initiating and structuring
strategic acquisitions and other initiatives. You also agree that you will
devote your full business time and your best efforts, business judgment, skill
and knowledge exclusively to the advancement of the business and interests of
the Company and its Affiliates.

(c) From time to time, you may be employed by one or more Affiliates of the
Company in a similar capacity to your employment with the Company. The terms and
conditions of your employment by such Affiliates will be the same as the terms
and

 

 

295 Madison Avenue, 6th Floor • New York, NY 10017

Telephone (212) 455-8300 • Facsimile (212) 983-7654

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conditions of your employment with the Company, except that your aggregate
compensation and benefits will not exceed the amounts set forth in Section 2 of
this agreement. In that regard, that portion of the compensation and benefits
that are allocable to your services to an Affiliate shall be the responsibility
of the Affiliate, though we note the Company intends to provide benefits
provided to employees generally on a centralized basis among its Affiliates. To
the extent that you are employed by an Affiliate, references in this agreement
to the Company shall mean the Affiliate, where appropriate. To effectuate such
employment with any Affiliate, the Affiliate will provide to you a letter
confirming your employment status. The allocation of your working time between
duties for the Company and any of the Affiliates may be adjusted from time to
time by the Company as its determines appropriate. As a condition to your
employment with the Company and the Affiliates, it is required that you keep
complete and accurate records of the time you spend performing your duties under
this agreement and the nature thereof.

2. Compensation and Benefits. During your employment, as compensation for all
services performed by you for the Company and its Affiliates, the Company will
provide you the following pay and benefits:

(a) Base Salary. The Company will pay you a base salary at the rate of Three
Hundred Fifty Thousand Dollars ($350,000) per year, payable in accordance with
the regular payroll practices of the Company and subject to increase from time
to time by the Committee in its discretion; provided, however, that your base
salary will automatically increase to a rate of Four Hundred Thousand Dollars
($400,000) per year commencing July 1, 2008.

(b) Bonus Compensation. During employment, you will be considered for a
discretionary bonus of not less than Six Hundred Fifty Thousand Dollars
($650,000) and not more than One Million Dollars ($1,000,000) for the 2008
fiscal year, subject to increase in subsequent fiscal years during the term of
this agreement in the sole discretion of the Committee. Bonus awards will be
determined by the Committee, based on your performance and that of the Company
against goals established annually by the Committee after consultation with you
(and consistent with those set forth in the Company’s annual budget and/or
strategic plan) and will be paid not later than March 15 of the calendar year
following the year for which the bonus was earned. Your bonus for the 2007
fiscal year will be Six Hundred Thousand Dollars ($600,000), to be paid not
later than March 15, 2008. Except as otherwise provided in Section 5 hereof, you
must remain continuously employed by the Company through the end of the calendar
year in order to be eligible for a bonus for that calendar year. In addition to
your discretionary bonus described above, you will be entitled to receive a
one-time bonus of Two Hundred Fifty Thousand Dollars ($250,000) to be paid as
soon as practicable following completion by the Company of at least two of the
CLO funds contemplated pursuant to the engagement letter with Bear Stearns dated
October 12, 2007 or an initial closing of a Credit Opportunities Fund, but in no
event later than 75 days following completion by the Company of the second CLO
fund contemplated above, and provided further that you remain continuously
employed by the Company through the date of completion of such second CLO fund.

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(c) Purchased Equity. Subject to all policies (including any policies
implemented by the Company which restrict the ability of officers, directors and
other Affiliates to invest in the Funds), agreements, plans and conditions that
are generally applicable to such investments, as determined by the Company, you
will have the right, but not the obligation, to purchase equity of Funds on
terms equivalent to those received by other investors.

(d) Participation in Employee Benefit Plans. You will be entitled to participate
in all employee benefit plans from time to time in effect for employees of the
Company generally, except to the extent such plans are duplicative of benefits
otherwise provided you under this agreement. Your participation will be subject
to the terms of the applicable plan documents and generally applicable Company
policies.

3. Confidential Information and Restricted Activities.

(a) Confidential Information. During the course of your employment with the
Company or its Affiliates, you have learned and will learn of Confidential
Information, as defined below, and you may develop Confidential Information on
behalf of the Company or its Affiliates. You agree that you will not use or
disclose to any Person (except as required by applicable law or for the proper
performance of your regular duties and responsibilities for the Company) any
Confidential Information obtained by you incident to your employment or any
other association with the Company or any of its Affiliates, whether prior or
subsequent to effective date of this agreement . You understand that this
restriction shall continue to apply after your employment terminates, regardless
of the reason for such termination.

(b) Protection of Documents. All documents, records and files, in any media of
whatever kind and description, relating to the business, present or otherwise,
of the Company or any of its Affiliates, and any copies, in whole or in part,
thereof (the “Documents”), whether or not prepared by you shall be the sole and
exclusive property of the Company. You agree to safeguard all Documents and to
surrender to the Company, at the time your employment terminates or at such
earlier time or times as the Committee or its designee may specify, all
Documents then in your possession or control.

(c) Non-Competition. You acknowledge that in your employment with the Company
you have had access and will have access to Confidential Information which, if
disclosed, would assist in competition against the Company and its Affiliates
and that you also have generated and will generate goodwill for the Company and
its Affiliates in the course of your employment. Therefore, you agree that the
following restrictions on your activities during and after your employment are
necessary to protect the goodwill, Confidential Information and other legitimate
interests of the Company and its Affiliates:

(i) While you are employed by the Company or its Affiliates and for the greater
of (x) the remaining term of this agreement or (y) one (1) year after your
employment (or service with an Affiliate, if later) terminates (in the
aggregate, the “Non-Competition Period”), you agree that you will not, without
the prior written consent of the Company, directly or indirectly, own, manage,
operate, join, control, finance, or participate in the ownership, marketing,
management, operation, control, fundraising or financing of, or be connected as
an officer, director, employee, partner, principal, agent,

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representative, consultant, or otherwise use or permit your name to be used in
connection with any business or enterprise engaged in the United States in the
business of structuring CDO or CLO securitization vehicles or hedge funds or
other funds which invest in corporate debt instruments (such vehicles and funds,
collectively, “Investment Vehicles”), analyzing and acquiring loans and other
assets to be held by any Investment Vehicles, arranging for the issuance of debt
and preferred securities by any Investment Vehicles, acting as collateral
managers for such securitizations or funds, or performing similar functions.

(ii) You agree that during the Non-Competition Period, you will not, directly or
through any other Person, (i) hire any employee of the Company or any of its
Affiliates or seek to persuade any employee of the Company or any of its
Affiliates to discontinue employment, (ii) solicit or encourage any customer or
investor of the Company or any of its Affiliates or independent contractor
providing services to the Company or any of its Affiliates to terminate or
diminish its relationship with them or (iii) seek to persuade any customer or
investor or prospective customer or investor of the Company or any of its
Affiliates to conduct with anyone else any business or activity that such
customer or investor or prospective customer or investor conducts or could
conduct with the Company or any of its Affiliates.

(d) In signing this agreement, you give the Company assurance that you have
carefully read and considered all the terms and conditions of this agreement,
including the restraints imposed on you under this Section 3. You agree without
reservation that these restraints are necessary for the reasonable and proper
protection of the Company and its Affiliates and that each and every one of the
restraints is reasonable in respect to subject matter, length of time and
geographic area. You further agree that, were you to breach any of the covenants
contained in this Section 3, the damage to the Company and its Affiliates would
be irreparable. You therefore agree that the Company, in addition to any other
remedies available to it, shall be entitled to preliminary and permanent
injunctive relief against any breach or threatened breach by you of any of those
covenants, without having to post bond. You and the Company further agree that,
in the event that any provision of this Section 3 is determined by any court of
competent jurisdiction to be unenforceable by reason of its being extended over
too great a time, too large a geographic area or too great a range of
activities, that provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law. It is also agreed that each
of the Company’s Affiliates shall have the right to enforce all of your
obligations to that Affiliate under this agreement, including without limitation
pursuant to this Section 3.

4. Termination of Employment. Your employment under this agreement may be
terminated prior to the expiration of the term hereof pursuant to this
Section 4.

(a) The Company may terminate your employment for cause upon notice to you
setting forth in reasonable detail the nature of the cause. The following, as
determined by the Company in its reasonable judgment, shall constitute cause for
termination: (i) your material failure to perform (other than by reason of
disability), or material negligence in the performance of, your duties and
responsibilities to the Company or any of its Affiliates; (ii) your material
breach of this agreement or any other agreement between you and the Company or
any of its Affiliates; or (iii) other conduct by

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you that could be reasonably anticipated to be harmful to the business,
interests or reputation of the Company or any of its Affiliates. The Company
also may terminate your employment at any time without cause upon notice to you.

(b) This agreement shall automatically terminate in the event of your death
during employment. In the event of your death, any amounts owed to you under
this agreement will be paid to the beneficiary designated in writing by you or,
if no beneficiary has been so designated by you, to your estate. In the event
you become disabled during employment and, as a result, are unable to continue
to perform substantially all of your duties and responsibilities under this
agreement, the Company will continue to pay you your base salary and to provide
you benefits in accordance with Section 2(a) above, to the extent permitted by
plan terms, for up to twelve (12) weeks of disability during any period of three
hundred and sixty-five (365) consecutive calendar days. If you are unable to
return to work after twelve (12) weeks of disability, the Company may terminate
your employment, upon notice to you. If any question shall arise as to whether
you are disabled to the extent that you are unable to perform substantially all
of your duties and responsibilities for the Company and its Affiliates, you
shall, at the Company’s request, submit to a medical examination by a physician
selected by the Company to whom you or your guardian, if any, has no reasonable
objection to determine whether you are so disabled and such determination shall
for the purposes of this agreement be conclusive of the issue. If such a
question arises and you fail to submit to the requested medical examination, the
Company’s determination of the issue shall be binding on you.

(c) You may terminate your employment hereunder for “Good Reason” by providing
written notice to the Company of the condition giving rise to the Good Reason no
later than thirty (30) days following the occurrence of the condition; by giving
the Company thirty (30) days to remedy the condition; and, if the Company fails
to remedy the condition, by terminating your employment within ten (10) days
following the expiration of such thirty (30) day period. For purposes of this
letter agreement, the term “Good Reason” means, without your consent, the
occurrence of one or more of the following events: (i) material diminution in
the nature or scope of your responsibilities, duties or authority as
contemplated by this letter agreement; or (ii) your being required to relocate
to a principal place of employment outside of the New York metropolitan area;
provided, however, that a change in reporting relationships resulting from the
direct or indirect control of the Company (or a successor corporation) by
another entity and any diminution of the business of the Company or any of its
Affiliates or any sale or transfer of equity, property or other assets of the
Company or any of its Affiliates shall not constitute Good Reason.

5. Severance Payments and Other Matters Related to Termination.

(a) In the event of termination of your employment by the Company without cause
or a termination by you for Good Reason, for the remainder of the then current
term of this agreement, the Company will continue to pay you your base salary
(“severance payments”) and will continue to contribute to the premium cost of
your health insurance on the same terms and conditions as it contributes for
active employees provided that you make a timely election under the federal law
known as “COBRA” and provided further that you are entitled to continue
participation in the Company’s group

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health plan under applicable law and plan terms. The Company may, in its sole
discretion, elect to cease the continuation of base salary and contributions
toward health insurance premiums at any point after you have received one
(1) year of base salary continuation and health insurance contributions provided
that it also releases you from your remaining obligation under Section 3(c)(i)
above. The Company will also pay you on the date of termination any base salary
earned but not paid through the date of termination and pay for any vacation
time accrued but not used to that date. In addition, the Company will pay you
any discretionary bonus compensation to which you are entitled in accordance
with Section 2(b) above, but in no case less than $650,000, prorated to the date
of termination and payable at the time such monies are payable to Company
executives generally. Any obligation of the Company to provide you severance
payments or other payments or benefits under this Section 5(a) is conditioned,
however, upon your signing and not revoking a release of claims in the form
provided by the Company (the “Employee Release”), which shall be delivered to
you not later than ten (10) business days following the date of termination and
you shall be required to execute the Employee Release and return it to the
Company, if at all, not later than the date determined by the Company to be the
last day of the period it must provide to you by law to consider the Employee
Release. All severance payments will be in the form of salary continuation,
payable in accordance with the normal payroll practices of the Company, and will
begin at the Company’s next regular payroll period following the effective date
of the Employee Release (as specified in the Employee Release), but shall be
retroactive to the date of termination. Notwithstanding anything else contained
in this agreement, no bonus or severance payments or other payments or benefits
will be due and payable under any provision of this Section 5(a) until the next
regular Company payday following the effective date of the Employee Release.

(b) In the event of termination of your employment by the Company for cause or
by you for any reason, the Company will pay you any base salary earned but not
paid through the date of termination and pay for any vacation time accrued but
not used to that date. The Company shall have no obligation to you for any bonus
compensation, benefits continuation or severance payments.

(c) In the event of termination of your employment by expiration of the term
hereof or non-renewal of this agreement, by death, or by disability, the Company
will pay you (or your estate) any base salary earned but not paid through the
date of termination, pay for any vacation time accrued but not used to that
date, and any discretionary bonus compensation to which you are entitled in
accordance with Section 2(b) above, prorated to the date of termination and
payable at the time such bonuses are payable to Company executives generally.
The Company shall have no obligation to you (or your estate) for any severance
payments or benefits continuation.

(d) Except for any rights you may have under Section 5(a) above or under the
federal law known as “COBRA” to continue participation in the Company’s group
health and dental plans at your cost, benefits shall terminate in accordance
with the terms of the applicable benefit plans based on the date of termination
of your employment, without regard to any continuation of base salary or other
payment to you following termination.

(e) Provisions of this agreement shall survive any termination if so provided in
this agreement or if necessary or desirable to accomplish the purposes of other

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surviving provisions, including without limitation your obligations under
Section 3 of this agreement. The obligation of the Company to make payments to
you under this Section 5 is expressly conditioned upon your continued full
performance of obligations under Section 3 hereof. Upon termination by either
you or the Company, all rights, duties and obligations of you and the Company to
each other shall cease, except as otherwise expressly provided in this
agreement.

6. Definitions. For purposes of this agreement, the following definitions apply:

“Affiliates” means all persons and entities directly or indirectly controlling,
controlled by or under common control with the Company, where control may be by
management authority, equity interest or otherwise.

“Confidential Information” means any and all information of the Company and its
Affiliates that is not generally available to the public. Confidential
Information also includes any information received by the Company or any of its
Affiliates from any Person with any understanding, express or implied, that it
will not be disclosed. Confidential Information does not include information
that enters the public domain, other than through your breach of your
obligations under this agreement.

“Person” means an individual, a corporation, a limited liability company, an
association, a partnership, an estate, a trust or any other entity or
organization, other than the Company or any of its Affiliates.

7. Conflicting Agreements. You hereby represent and warrant that your signing of
this agreement and the performance of your obligations under it will not breach
or be in conflict with any other agreement to which you are a party or are bound
and that you are not now subject to any covenants against competition or similar
covenants or any court order that could affect the performance of your
obligations under this agreement. You agree that you will not disclose to or use
on behalf of the Company any proprietary information of a third party without
that party’s consent.

8. Withholding. All payments made by the Company under this agreement shall be
reduced by any tax or other amounts required to be withheld by the Company under
applicable law.

9. Applicability of Section 409A. If at the time of your separation from
service, you are a “specified employee,” as hereinafter defined, any and all
amounts payable under this agreement in connection with such separation from
service that constitute deferred compensation subject to Section 409A of the
Internal Revenue Code of 1986, as amended (“Section 409A”), including without
limitation by reason of the safe harbor set forth in Treasury Regulations
1.409A-1(b)(9)(iii) and 1.409A-1(b)(4), as determined by the Company in its sole
discretion, and that would (but for this sentence) be payable within six months
following such separation from service, shall instead be paid on the date that
follows the date of such separation from service by six (6) months. For purposes
of the preceding sentence, “separation from service” shall be determined in a
manner consistent with subsection (a)(2)(A)(i) of Section 409A and the term
“specified employee” shall mean an individual determined by the Company to be a
specified employee as defined in subsection (a)(2)(B)(i) of Section 409A. For
the avoidance of

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doubt, the payments and benefits described in this agreement are intended either
to comply with Section 409A (to the extent they are subject to such section) or
to be exempt from the requirements of such section (where an exemption is
available), and shall be construed accordingly.

10. Assignment. Neither you nor the Company may make any assignment of this
agreement or any interest in it, by operation of law or otherwise, without the
prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this agreement without your consent to
one of its Affiliates or to any Person with whom the Company shall hereafter
affect a reorganization, consolidate with, or merge into or to whom it transfers
all or substantially all of its properties or assets. This agreement shall inure
to the benefit of and be binding upon you and the Company, and each of your and
its respective successors, executors, administrators, heirs and permitted
assigns.

11. Severability. If any portion or provision of this agreement shall to any
extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this agreement shall be valid and enforceable to the
fullest extent permitted by law.

12. Miscellaneous. This agreement sets forth the entire agreement between you
and the Company and replaces all prior and contemporaneous communications,
agreements and understandings, written or oral, with respect to the terms and
conditions of your employment; provided, however, that this agreement shall not
shall not constitute a waiver by the Company or any of its Affiliates of any
existing right any of them now has or might now have under any agreement
imposing obligations on you with respect to confidentiality, non-competition,
non-solicitation or similar obligations with respect to conduct or events prior
to the effective date of this agreement. This agreement may not be modified or
amended, and no breach shall be deemed to be waived, unless agreed to in writing
by you and an expressly authorized representative of the Committee. The headings
and captions in this agreement are for convenience only and in no way define or
describe the scope or content of any provision of this agreement. This agreement
may be executed in two or more counterparts, each of which shall be an original
and all of which together shall constitute one and the same instrument. This is
a Delaware contract and shall be governed and construed in accordance with the
laws of the State of Delaware, without regard to the conflict of laws principles
thereof.

13. Notices. Any notices provided for in this agreement shall be in writing and
shall be effective when delivered in person or deposited in the United States
mail, postage prepaid, and addressed to you at your last known address on the
books of the Company or, in the case of the Company, to it at its principal
place of business, attention of the Committee, or to such other address as
either party may specify by notice to the other actually received.

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If the foregoing is acceptable to you, please sign this letter in the space
provided and return it to me. We will provide a countersigned copy for your
records.

 

Sincerely yours, Christopher Lacovara Vice President

 

Accepted and Agreed:

 

E.A. Kratzman, III

 

Date

cc: Michael I. Wirth, Kohlberg Capital Corporation