Exhibit 10.1

 

EMPLOYMENT AGREEMENT

BETWEEN

MICHAEL THOMAS BENNETT AND SPIRIT FINANCE CORPORATION

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”), dated as of April 5, 2005
(“Effective Date”), is by and between SPIRIT FINANCE CORPORATION, a Maryland
corporation (the “Company”), and Michael Thomas Bennett (the “Executive”):

 

W I T N E S S E T H :

 

WHEREAS, the Company wishes to employ the Executive in the capacities and on the
terms and conditions set forth below, and the Executive has agreed to such
employment in the capacities and on the terms and conditions set forth below.

 

NOW, THEREFORE, the Company and the Executive, in consideration of the
respective covenants set forth below, hereby agree as follows:

 

Section 1.  Employment.

 

(a)                                  Positions.  The Executive shall be employed
by the Company during the Term (defined below) as its Senior Vice President -
Operations.

 

(b)                                 Duties.  The Executive’s principal
employment duties and responsibilities shall be those duties and
responsibilities customary for the position of Senior Vice President -
Operations and such other executive duties and responsibilities as the Chief
Operating Officer or Board of Directors of the Company (the “Board”) shall from
time to time reasonably assign to the Executive.  These duties and
responsibilities shall include, but are not limited to, supervising all business
and legal issues associated with financings provided or obtained by the Company,
working with the Company’s outside legal counsel, primary responsibility for
compliance matters pursuant to agreements of the Company and under federal and
state laws.  At the Company’s recommendation and upon approval of the Board, the
Executive shall also be a voting member of the Company’s investment committee
and a control person required to file reports under Section 16 of the Securities
Exchange Act of 1934, as amended.  The Executive shall report directly to
Christopher H. Volk, President and Chief Operating Officer of the Company or his
successor.

 

(c)                                  Extent of Services.  Except for illnesses
and vacation periods, the Executive shall devote substantially all of his
business time and attention and his best efforts to the performance of his
duties and responsibilities under this Agreement.  Notwithstanding the
foregoing, Executive (i) may make any investment where he is not obligated or
required to, and shall not in fact, devote any substantial managerial efforts;
(ii) may participate in charitable, academic or community activities, and in
trade or professional organizations; or (iii) may hold directorships in other
companies consistent with the Company’s conflict of interest policies and
corporate governance guidelines as in effect from time to time (the activities
in clauses (i) through (iii) above are collectively referred to herein as the
“Excluded Businesses”); provided that none of the Excluded

 

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Businesses individually or in the aggregate interfere with the performance of
the Executive’s duties under this Agreement.

 

Section 2.  Term.  This Agreement shall be effective as of the Effective Date
and the Executive shall commence employment on April 18, 2005 (the “Commencement
Date”).  This Agreement shall continue in full force and effect until December
15, 2006 and shall be automatically extended for an additional one-year period
thereafter, unless either party terminates this Agreement not later than 60 days
prior to December 15, 2006 by providing written notice to the other party of
such party’s intent not to renew, or it is sooner terminated pursuant to
Section 7.  For purposes of this Agreement, “Term” shall mean the actual
duration of the Executive’s employment hereunder, taking into account any
extensions pursuant to this Section 2 or early termination of employment
pursuant to Section 7.

 

Section 3.  Base Salary.  Commencing on the Commencement Date, the Company shall
pay the Executive a base salary annually (the “Base Salary”), which shall be
payable in periodic installments according to the Company’s normal payroll
practices.  The initial Base Salary shall be $225,000.  The Board or the
Compensation Committee of the Board (the “Compensation Committee”) shall review
the Base Salary at least once a year to determine whether the Base Salary should
be increased effective January 1 of any year during the Term; provided, however,
that on January 1 of each year during the Term the initial Base Salary shall be
increased by a minimum positive amount equal to the Base Salary in effect on
January 1 of the prior year multiplied by the percentage increase in the
Consumer Price Index for such year.  The amount of the increase shall be
determined before March 31 of each year and shall be retroactive to January 1. 
The Base Salary, including any increases, shall not be decreased during the
Term.  For purposes of this Agreement, the term “Base Salary” shall mean the
amount established and adjusted from time to time pursuant to this Section 3.

 

Section 4.  Annual Incentive Bonus.  The Executive shall be entitled to receive
an annual cash Incentive Bonus for each fiscal year during the Term of this
Agreement consistent with a bonus policy adopted by the Compensation Committee
(the “Bonus Policy”).  If the Executive or the Company, as the case may be,
satisfies the threshold performance criteria contained in such Bonus Policy for
a fiscal year, he shall receive an annual Incentive Bonus equal to at least 25%
of the Executive’s Base Salary.  If the Executive or the Company, as the case
may be, satisfies the target performance criteria contained in the Bonus Policy
for a fiscal year, he shall receive an annual Incentive Bonus equal to at least
50% of the Executive’s Base Salary.  If the Executive or the Company, as the
case may be, satisfies the maximum target performance criteria contained in the
Bonus Policy for a fiscal year, he shall receive an annual Incentive Bonus equal
to 90% of the Executive’s Base Salary (the “Maximum Target Bonus”).  If the
Executive or the Company, as the case may be, fails to satisfy the threshold
performance criteria contained in the Bonus Policy for a fiscal year, the
Compensation Committee may determine whether any Incentive Bonus shall be
payable to the Executive for that year.  The Bonus Policy shall contain both
individual and Company goals established by the Compensation Committee.  The
Board or the Compensation Committee shall review the Bonus Policy at least once
a year to determine whether the Maximum Target Bonus should be increased
effective January 1 of any year during the Term, or whether any additional
changes should be made to the Bonus Policy effective January 1 of any year.  The
annual Incentive Bonus, if any, shall be paid to the Executive no later than
30 days after the date the Compensation Committee determines

 

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whether the criteria in the Bonus Policy for such fiscal year were satisfied and
determined the amount of the actual bonus.  For purposes of this Agreement, the
term “Incentive Bonus” shall mean the amount established pursuant to this
Section 4.

 

Section 5.  Stock Based Awards.  The Company has established the 2003 Stock
Option and Incentive Plan (the “Stock Option Plan”).  Pursuant to the
recommendation of the President and senior management of the Company, the
Company shall grant the Executive Restricted Share Grants (the “Initial
Restricted Share Grant”) of 20,000 restricted shares in July 2005, subject to
formal approval by the Compensation Committee.  The Common Shares covered by the
Initial Restricted Share Grant shall vest in five equal annual installments of
4,000 shares commencing January 20, 2006 and each year thereafter; provided that
50% of such shares shall vest if the Executive is employed by the Company at the
time of vesting and the remaining shares shall vest based upon performance goals
of the Company as determined by the Compensation Committee; and provided
further, however, that the Executive will be 100% vested in the Initial
Restricted Share Grant upon (i) a Change of Control, as defined herein; (ii) a
termination by the Company without Cause, as defined herein; (iii) a termination
by the Executive for Good Reason, as defined herein; (iv) his death; or (v) his
becoming Permanently Disabled, as defined herein.  The Executive will forfeit
all unvested Initial Restricted Share Grant shares if he is terminated for Cause
or he terminates his employment hereunder for other than Good Reason.  The
Executive shall be eligible to receive future Restricted Share Grants as
determined by the Compensation Committee.

 

Section 6.  Benefits.

 

(a)                                  Vacation.  The Executive shall be entitled
to three weeks of vacation each full calendar year in accordance with the
Company’s policies and procedures related to vacation time.

 

(b)                                 Sick and Personal Days.  The Executive shall
be entitled to sick and personal days on an as needed basis in accordance with
the Company’s policies, procedures and limits related to sick and personal time.

 

(c)                                  Employee Benefits.

 

(i)                                     Participation in Employee Benefit
Plans.  The Executive and his spouse and eligible dependents, if any, and their
respective designated beneficiaries where applicable, will be eligible for and
entitled to participate in any Company sponsored employee benefit plans,
including but not limited to benefits such as group health, dental, accident,
disability insurance, group life insurance and a 401(k) plan, as such benefits
may be offered from time to time pursuant to the terms of such benefit plans, on
a basis no less favorable than that applicable to any other executive of the
Company.

 

(ii)                                  Disability Insurance.  The Company shall
maintain, at its cost, supplemental renewable long-term disability insurance
consistent with the policies of the Company unless determined in good faith by
the Compensation Committee to be unreasonable in cost.

 

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(d)                                 Other Benefits.

 

(i)                                     Annual Physical.  The Company shall
provide, at its cost, a medical examination for the Executive on an annual basis
by a licensed physician in the Scottsdale or Phoenix, Arizona area selected by
the Executive.

 

(ii)                                  Directors and Officers Insurance.  During
the Term and the period that begins on the effective date of termination under
Section 7 and ends on December 15, 2007, the Executive shall be entitled to
director and officer insurance coverage for his acts and omissions while an
officer and director of the Company on a basis no less favorable to him than the
coverage provided to any other current officers and directors during the time
the Executive is a director or officer, provided, however, that all insurance
policies providing such director and officer coverage shall provide coverage for
any claim made related to any time the Executive was a director or officer of
the Company or any subsidiary, except for any period prior to the date of this
Agreement for which no coverage need be provided or any period after which
customary tail coverage shall lapse.

 

(iii)                               Life Insurance.  The Company may purchase on
the life of the Executive key man life insurance with the Company as the
beneficiary of the death benefit as the Company deems appropriate.

 

(iv)                              Expenses, Office and Secretarial Support.  The
Executive shall be entitled to reimbursement of all reasonable expenses, in
accordance with the Company’s policy as in effect from time to time and on a
basis no less favorable than that applicable to any other executive of the
Company, including, without limitation, telephone, reasonable travel and
reasonable entertainment expenses incurred by the Executive in connection with
the business of the Company, promptly upon the presentation by the Executive of
appropriate documentation.  The Executive shall also be entitled to appropriate
office space, administrative support, and such other facilities and services as
are reasonably suitable to the Executive’s positions and adequate for the
performance of the Executive’s duties.

 

Section 7.  Termination.  The employment of the Executive by the Company
pursuant to this Agreement shall terminate upon the occurrence of any of the
following:

 

(a)                                  Death or Permanent Disability.  Immediately
upon death or Permanent Disability of the Executive.  As used in this Agreement,
“Permanent Disability” shall have the same meaning as such term has under any
Company Long Term Disability Plan.  If the Company has no Long Term Disability
Plan, “Permanent Disability” shall mean an inability due to a physical or mental
impairment to perform the material services contemplated under this Agreement
for a period of six months, whether or not consecutive, during any 365-day
period.  A determination of Permanent Disability shall be made by a physician
satisfactory to both the Executive and the Company; provided that if the
Executive and the Company do not agree on a physician, the Executive and the
Company shall each select a physician and these two together shall select a
third physician, whose determination as to Permanent Disability shall be binding
on all parties.

 

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The appointment of one or more individuals to carry out the offices or duties of
the Executive during a period of the Executive’s inability to perform such
duties pending a determination of Permanent Disability shall not be considered a
breach of this Agreement by the Company.

 

(b)                                 For Cause.  At the election of the Company
and subject to the provisions of this Section 7(b), immediately upon written
notice by the Company to the Executive of his termination for Cause.  For
purposes of this Agreement, “Cause” for termination shall be deemed to exist
solely in the event of (i) the conviction of the Executive of, or the entry of a
plea of guilty or nolo contendere by the Executive to, a felony (not including a
conviction, plea of guilty or nolo contendere arising solely under a statutory
provision imposing criminal liability upon the Executive on a strict liability
basis due to the position held by the Executive, so long as any act or omission
of the Executive with respect to such matter was not taken or omitted in
contravention of any applicable policy or directive of the Board); (ii) a breach
of his duty of loyalty which has a material adverse effect upon the Company;
(iii) a failure to perform or adhere to duties that are consistent with the
terms of this Agreement, or the Company’s reasonable and customary guidelines of
employment or reasonable and customary corporate governance guidelines or
policies, including, without limitation, any business code of ethics adopted by
the Board, or to follow the lawful directives of the Board (provided such
directives are consistent with the terms of this Agreement), which, in any such
case, continues for 30 days after written notice from the Board to the
Executive; (iv) negligence or misconduct in the performance of the Executive’s
duties which has a material adverse effect upon the Company; or (v) a material
breach of this Agreement by the Executive that continues for 30 days after
written notice from the Board to the Executive.  For purposes of this
Section 7(b), no act, or failure to act, on the Executive’s part will be deemed
“negligence” or “misconduct” unless done, or omitted to be done, by the
Executive not in good faith and without a reasonable belief that the Executive’s
act, or failure to act, was in the best interest of the Company.  The parties
agree that in order to terminate the Executive pursuant to clauses (ii), (iv)
and (v) hereof, a determination shall be made by a majority of the independent
members of the Board.

 

(c)                                  Without Cause; Without Good Reason.  At the
election of the Company, without Cause, and at the election of the Executive,
without Good Reason, in either case upon 30 days’ prior written notice to the
Executive or the Company, as the case may be.

 

(d)                                 For Good Reason.  At the election of the
Executive, for Good Reason.  For purposes of this Agreement, “Good Reason” shall
mean any of the following actions or omissions, provided the Executive notifies
the Company of his determination that Good Reason exists within 60 days of the
action or omission on which such determination is based:

 

(i)                                     a material reduction of or adverse
change in the Executive’s duties, titles, responsibilities or reporting
requirements, or the assignment to the Executive of any duties, responsibilities
or reporting requirements that are materially inconsistent with his position as
Senior Vice President - Operations, as the case may be;

 

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(ii)                                  a reduction by the Company in the
Executive’s annual Base Salary or Maximum Target Bonus;

 

(iii)                               Executive not being offered employee
benefits or material fringe benefits, both in terms of the amount of the benefit
and the level of the Executive’s participation therein, enjoyed by the Executive
under the employee benefit and welfare plans of the Company, including, without
limitation, such benefits as group health, dental, 401(k), accident, disability
insurance or group life insurance, on the same terms and conditions as other
similar executives of the Company except as is required by applicable law;

 

(iv)                              absent the Executive’s prior written consent,
the requirement by the Company that the principal place of business at which the
Executive performs his duties be changed to a location that is outside of a
35-mile radius of Scottsdale, Arizona (or a substantial increase in the amount
of travel that the Executive is required to do because of a relocation of the
Company’s headquarters from Scottsdale, Arizona).  The parties acknowledge that
for these purposes, Executive’s principal place of business will be Scottsdale,
Arizona;

 

(v)                                 any failure by the Company to obtain from
any successor to the Company an agreement reasonably satisfactory to Executive
to assume and perform this Agreement, as contemplated by Section 17(e); or

 

(vi)                              a breach by the Company of any provision of
this Agreement that continues for a period of 30 days after Executive provides
written notice to the Company of such breach.

 

Notwithstanding the foregoing, in the event that Executive provides the Company
with a notice of termination stating Good Reason, the Company shall have 30 days
thereafter in which to cure or resolve the behavior otherwise constituting Good
Reason.

 

Section 8.  Effects of Termination.

 

(a)                                  Termination By the Company Without Cause;
By the Executive for Good Reason.  If the employment of the Executive should
terminate by reason of termination by the Company for any reason other than
Cause, or by the Executive for Good Reason, then the Company shall pay all
compensation and benefits for the Executive as follows:

 

(i)                                     any Base Salary, Incentive Bonus,
expense reimbursements and all other compensation related payments that are
payable as of the date of his termination of employment that are related to his
period of employment preceding his termination date, including pay in lieu of
accrued, but unused, vacation;

 

(ii)                                  the prorated amount of the Maximum Target
Bonus for the year in which the termination of employment occurs, pro rated for
the portion of such year during which the Executive was employed prior to the
effective date of his

 

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termination and subtracting all Incentive Bonus payments received by Executive
during such year that relate only to such year;

 

(iii)                               the amount equal to one and one-half (1.5)
times the sum of (A) Base Salary, plus (B) his Maximum Target Bonus, at the
rates in effect on the effective date of his termination of employment.

 

The sum of the amount payable under clauses (ii) and (iii) hereof is referred to
herein as his “Severance Payment”;

 

(iv)                              the Severance Payment shall be made in a
single, lump sum cash payment no later than 30 days after the effective date of
the Executive’s termination of employment.

 

(v)                                 the Company shall allow the Executive to
continue to participate during the 18 month period following termination (the
“Severance Period”) in any and all of the employee benefit and welfare plans and
programs of the Company, excluding any 401(k) plan, in which the Executive was
entitled to participate immediately prior to his termination, to the same extent
and upon the same terms as the Executive participated in such plans prior to his
termination; provided that the Executive’s continued participation is
permissible pursuant to the terms of such plans and otherwise practicable under
the general terms and provisions of such benefit plans and programs.  During the
Severance Period, the Company shall pay for the Executive’s continued
participation in said employee benefit and welfare plans, including, but not
limited to, premiums for group health, dental, accident, directors and officers
insurance and group life insurance, but excluding any 401(k) plan or disability
insurance.  To the extent that continued participation is neither permissible
nor practicable, the Company shall take such actions as may be necessary to
provide the Executive with substantially comparable benefits (without additional
cost to the Executive, including any additional taxes) outside the scope of such
plans including, without limitation, reimbursing the Executive for his costs in
obtaining such coverage, such as COBRA premiums paid by the Executive and/or his
eligible dependents, provided such costs are consistent with the policies of the
Company unless such costs are determined in good faith to be unreasonable by the
Compensation Committee.  If the Executive engages in regular employment after
his termination of employment (whether as an executive or as a self-employed
person but excluding his management or operation of the Excluded Businesses),
any employee benefit and welfare benefits received by the Executive in
consideration of such employment which are the same type as the employee benefit
and welfare benefits provided by the Company will relieve the Company of its
obligation under this Section 8(a)(v) to provide such type of benefits;

 

(vi)                              the Executive’s stock options awarded under
the Stock Option Plan (or any other or successor plan) shall immediately become
100% vested and he shall have a two-year period following the effective date of
his termination of

 

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employment in which to exercise his vested stock options, including those stock
options that vested upon his termination of employment; and

 

(vii)                           the Executive’s restricted Common Shares awarded
under the Stock Option Plan (or any other or successor plan) shall immediately
become 100% vested and all restrictions shall lapse.

 

(b)                                 Termination on Death.  Upon a termination of
employment due to the Executive’s death, the Executive shall become 100% vested
in his stock options and restricted Common Shares awarded under the Stock Option
Plan.  The Executive’s personal representative shall have a one-year period
following the Executive’s death in which to exercise his vested stock options,
including those stock options that vested on death.  The Company shall pay to
the Executive’s personal representative any Base Salary, Incentive Bonus,
expense reimbursements and all other compensation related payments that are
payable as of his date of death and that are related to his period of employment
preceding his date of death.  Within 60 days after the Executive’s death, the
Company shall pay to the Executive’s personal representative the prorated amount
of the Maximum Target Bonus for the year in which the Executive’s death occurs,
prorated for the portion of the year during which the Executive was employed
prior to his death, and subtracting out all Incentive Bonus payments related to
that year received by the Executive during such year.

 

(c)                                  Termination on Permanent Disability.  Upon
a termination of employment due to the Executive’s Permanent Disability, the
Executive shall become 100% vested in his stock options and restricted Common
Shares awarded under the Stock Option Plan.  The Executive or his representative
shall have a one-year period following the Executive becoming Permanently
Disabled in which to exercise his vested stock options, including those stock
options that vested on Permanent Disability.  The Company shall pay to the
Executive any Base Salary, Incentive Bonus, expense reimbursements and all other
compensation related payments that are payable as of his date of Permanent
Disability and that are related to his period of employment preceding his date
of Permanent Disability.  Within 60 days after the Executive’s Permanent
Disability, the Company shall pay to the Executive the prorated amount of the
Maximum Target Bonus for the year in which the Executive’s Permanent Disability
occurs, prorated for the portion of the year during which the Executive was
employed prior to his Permanent Disability, and subtracting out all Incentive
Bonus payments related to that year received by the Executive during such year.

 

(d)                                 By the Company for Cause or By the Executive
Without Good Reason.  In the event that the Executive’s employment is terminated
by the Company for Cause or by the Executive without Good Reason, the Company
shall pay the Executive his Base Salary, Incentive Bonus, expense reimbursements
and all other compensation related payments that are payable as of his
termination of employment date and that are related to his period of employment
preceding his termination date.  The Executive shall be entitled to exercise his
vested stock options, determined as of his termination date, pursuant to the
terms of the option grant.  All unvested options and unvested restricted Common
Shares shall be forfeited on his termination date.

 

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(e)                                  Termination of Authority.  Immediately upon
the Executive terminating or being terminated from his employment with the
Company for any reason, notwithstanding anything else appearing in this
Agreement or otherwise, the Executive will stop serving the functions of his
terminated or expired positions, and shall be without any of the authority or
responsibility for such positions.  On request of the Board at any time
following his termination of employment for any reason, the Executive shall
resign from the Board if then a member.  Upon termination of employment, the
Executive shall also be entitled to all benefits accrued and vested under any
employee benefit plan of the Company.

 

(f)                                    Release.  Prior to the payment by the
Company of the Executive’s Severance Payment, the Company, as a condition to
such payments, shall request a customary release from the Executive with respect
to all potential claims the Executive may have against the Company related to
the Executive’s employment with the Company prior to the date of payment by the
Company of the Executive’s Severance Payment.  If the Executive does not deliver
such release, the Company shall not be required to pay the Executive all or any
portion of the Severance Payment; provided, however, if the Executive shall
bring legal action related to his Employment, nothing in this subsection (f)
shall prevent the Executive from receiving the Severance Payment as an award in
such legal action provided the Executive gives such release at the time of
payment of the award.

 

Section 9.  Change of Control.

 

(a)                                  Change of Control.  For purposes of this
Agreement, a “Change of Control” will be deemed to have taken place upon the
occurrence of any of the following events:

 

(i)                                     any person, entity or affiliated group,
excluding any employee benefit plan of the Company, acquiring more than 50% of
the then outstanding voting shares of the Company;

 

(ii)                                  the consummation of any merger or
consolidation of the Company into another company, such that the holders of the
voting shares of the Company immediately prior to such merger or consolidation
represent less than 50% of the combined voting power of the securities of the
surviving company or the parent of such surviving company;

 

(iii)                               the complete liquidation of the Company or
the sale or disposition of all or substantially all of the Company’s assets,
such that after the transaction, the holders of the voting shares of the Company
immediately prior to the transaction is less than 50% of the voting securities
of the acquiror or the parent of the acquiror; or

 

(iv)                              a majority of the independent members of the
Board of the Company votes in favor of a decision that a Change of Control has
occurred.

 

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(b)                                 Certain Benefits Upon a Change of Control. 
In the event of a Change of Control, the Executive shall become 100% vested in
the stock options and restricted Common Shares awarded under the Stock Option
Plan (or any other or successor plan) and if the Executive voluntarily
terminates his employment without Good Reason after the Change of Control, then
the Executive shall have a one-year period following the Change of Control in
which to exercise his vested stock options, including those stock options that
vested upon the Change of Control.

 

Section 10.  Excess Parachute Excise Tax.

 

(a)                                  If it is determined (as hereafter provided)
that any payment or distribution by the Company to or for the benefit of
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without limitation
any stock option, stock appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or exercisability of any of the
foregoing (a “Payment”), would be subject to the excise tax imposed by
Section 4999 of the Code by reason of being “contingent on a change in ownership
or control” of the Company, within the meaning of Section 280G of the Code (or
any successor provision thereto) or to any similar tax imposed by state or local
law, or any interest or penalties with respect to such excise tax (such tax or
taxes, together with any such interest and penalties, are hereafter collectively
referred to as the “Excise Tax”), then Executive shall be entitled to receive an
additional payment or payments (a “Gross-Up Payment”) in an amount such that,
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed upon the
Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.

 

(i)                                     Subject to the provisions of this
Section 10 hereof, all determinations required to be made under this Section 10,
including whether an Excise Tax is payable by Executive and the amount of such
Excise Tax and whether a Gross-Up Payment is required and the amount of such
Gross-Up Payment, shall be made by the nationally recognized firm of certified
public accountants (the “Accounting Firm”) used by the Company prior to the
Change of Control (or, if such Accounting Firm shall be a nationally recognized
firm of certified public accountants, as selected by Executive).  The Accounting
Firm shall be directed by the Company or Executive to submit its preliminary
determination and detailed supporting calculations to both the Company and
Executive within 15 calendar days after the date of termination of employment,
if applicable, and any other such time or times as may be requested by the
Company or Executive.  If the Accounting Firm determines that any Excise Tax is
payable by Executive, the Company shall pay the required Gross-Up Payment to, or
for the benefit of, Executive within five business days after receipt of such
determination and calculations.  If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall, at the same time as it makes such
determination, furnish Executive with an opinion that he has substantial
authority not to report any Excise Tax on his/her federal, state, local income
or other tax

 

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return.  Any determination by the Accounting Firm as to the amount of the
Gross-Up Payment shall be binding upon the Company and Executive absent a
contrary determination by the Internal Revenue Service or a court of competent
jurisdiction; provided, however, that no such determination shall eliminate or
reduce the Company’s obligation to provide any Gross-Up Payment that shall be
due as a result of such contrary determination or the Executive’s obligation to
repay any amounts as a result of such contrary determination.

 

(ii)                                  The federal, state and local income or
other tax returns filed by Executive (or any filing made by a consolidated tax
group which includes the Company) shall be prepared and filed on a consistent
basis with the determination of the Accounting Firm with respect to the Excise
Tax payable by Executive.  Executive shall make proper payment of the amount of
any Excise Tax, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his/her federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment.

 

(b)                                 In the event that the Internal Revenue
Service claims that any payment or benefit received under this Agreement
constitutes as “excess parachute payment”, within the meaning of
Section 280G(b)(1) of the Code, Executive shall notify the Company in writing of
such claim.  Such notification shall be given as soon as practicable but no
later than 10 business days after Executive is informed in writing of such claim
and shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid.  Executive shall not pay such claim prior to
the expiration of the 30 day period following the date on which Executive gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due).  If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall (1) give the Company any information
reasonably requested by the Company relating to such claim; (2) take such action
in connection with contesting such claim as the Company shall reasonably request
in writing from time to time, including without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company and reasonably satisfactory to Executive; (3) cooperate with the
Company in good faith in order to effectively contest such claim; and (4) permit
the Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including, but not limited to, additional interest and penalties and related
legal, consulting or other similar fees) incurred in connection with such
contest and shall indemnify and hold Executive harmless, on an after-tax basis,
for and against any Excise Tax or other tax (including interest and penalties
with respect thereto) imposed as a result of such representation and any payment
of costs and expenses.

 

(i)                                     The Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the tax

 

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authority in respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such contest before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however, that
if the Company directs Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to Executive on an
interest-free basis, and shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax or other tax (including interest and
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and provided,
further, that if Executive is required to extend the statute of limitations to
enable the Company to contest such claim, Executive may limit this extension
solely to such contested amount.  The Company’s control of the contest shall be
limited to issues with respect to which a corporate deduction would be
disallowed pursuant to Section 280G of the Code and Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.  In addition, no position may be
taken nor any final resolution be agreed to by the Company without Executive’s
consent if such position or resolution could reasonably be expected to adversely
affect Executive (including adversely affecting any other tax position of
Executive unrelated to matters covered hereby).

 

(ii)                                  If, after the receipt by Executive of any
amount advanced by the Company in connection with the contest of the Excise Tax
claim, Executive becomes entitled to receive any refund with respect to such
claim, Executive shall promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto).

 

(c)                                  The Company and Executive shall each
provide the Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or Executive, as the case may be,
reasonably requested by the Accounting Firm, and otherwise cooperate with the
Accounting Firm in connection with the preparation and issuance of the
determination contemplated by this Section 10.

 

(d)                                 The fees and expenses of the Accounting Firm
for its services in connection with the determinations and calculations
contemplated by this Section 10 hereof shall be borne by the Company.  If such
fees and expenses are initially advanced by Executive, the Company shall
reimburse Executive the full amount of such fees and expenses within five
business days after receipt from Executive of a statement therefor and
reasonable evidence of his payment thereof.

 

Section 11.  Confidential Information.  At any time during or after Executive’s
employment with the Company, Executive shall not, without the prior written
consent of the Company, use, divulge, disclose or make accessible to any other
person, firm, partnership, corporation or other entity any confidential or
proprietary information pertaining to the business of the Company or any of its
subsidiaries (“Confidential Information”), pursuant to the policies set forth in
the Company’s employee handbook and compliance manual, as amended from time

 

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to time.  The Company acknowledges that prior to his employment with the
Company, the Executive has lawfully acquired extensive knowledge of the
industries and businesses in which the Company engages in business and the
Company’s customers, and that the provisions of this Section 11 are not intended
to restrict the Executive’s use of such previously acquired knowledge.  Upon
termination of the Executive’s employment with the Company for any reason, the
Executive shall return to the Company all Company property and all written
Confidential Information in the possession of the Executive.

 

In the event that the Executive receives a request or is required (by
deposition, interrogatory, request for documents, subpoena, civil investigative
demand or similar process) to disclose all or any part of the Confidential
Information, the Executive agrees to (a) promptly notify the Company in writing
of the existence, terms and circumstances surrounding such request or
requirement; (b) consult with the Company on the advisability of taking legally
available steps to resist or narrow such request or requirement; and (c) assist
the Company in seeking a protective order or other appropriate remedy.  In the
event that such protective order or other remedy is not obtained or that the
Company waives compliance with the provisions hereof, the Executive shall not be
liable for such disclosure unless disclosure to any such tribunal was caused by
or resulted from a previous disclosure by the Executive not permitted by this
Agreement.

 

Section 12.  Noncompetition and Nonsolicitation.  During the Term and for a
period of 12 calendar months after the termination of the Executive’s employment
(the “Non-compete Period”), the Executive shall not, directly or indirectly,
either as a principal, agent, employee, employer, stockholder, partner or in any
other capacity whatsoever: (a) engage or assist others engaged, in whole or in
part, in any business which is engaged in a business or enterprise that is
substantially similar to and in competition with the business of the Company
that the Company was engaged in, or a planned business of the Company that had
been proposed in writing to senior officers of the Company or the Board and had
not been rejected by the Company or the Board, during the period of the
Executive’s employment with the Company; or (b) without the prior consent of the
Board, employ or solicit the employment of, or assist others in employing or
soliciting the employment of, any individual employed by the Company (other than
the Executive’s personal assistant or Executive’s secretary) at any time while
the Executive was also so employed; provided, however, that the provisions of
this Section 12 shall not apply in the event the Company materially breaches
this Agreement.  For purposes of this Section 12, a business shall be in
competition with the Company only if a significant portion of its business is to
originate mortgage loans to or purchase real estate from and lease such real
estate back to operators of single-tenant retail, distribution or service
companies in the United States.  Notwithstanding any other provision of this
Agreement, in the event the Executive’s employment is terminated “For Cause,”
the Non-Compete Period shall be 12 calendar months.

 

Nothing in this Section 12 shall impede, restrict or otherwise interfere with
the Executive’s management and operation of the Excluded Businesses.  Further,
nothing in this Section 12 shall prohibit Executive from making any passive
investment in a public company, or where he is the owner of 5% or less of the
issued and outstanding voting securities of any entity, provided such ownership
does not result in his being obligated or required to devote any managerial
efforts.

 

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The Executive agrees that the restraints imposed upon him pursuant to this
Section 12 are necessary for the reasonable and proper protection of the Company
and its subsidiaries and affiliates, and that each and every one of the
restraints is reasonable in respect to subject matter, length of time and
geographic area.  The parties further agree that, in the event that any
provision of this Section 12 shall be 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, such
provision shall be deemed to be modified to permit its enforcement to the
maximum extent permitted by law.

 

Section 13.  Intellectual Property.  During the Term, the Executive shall
promptly disclose to the Company or any successor or assign, and grant to the
Company and its successors and assigns without any separate remuneration or
compensation other than that received by him in the course of his employment,
his entire right, title and interest in and to any and all inventions,
developments, discoveries, models, or any other intellectual property of any
type or nature whatsoever developed solely during the Term (“Intellectual
Property”), whether developed by him during or after business hours, or alone or
in connection with others, that is in any way related to the business of the
Company, its successors or assigns.  This provision shall not apply to books or
articles authored by the Executive during non-work hours, consistent with his
obligations under this Agreement, so long as such books or articles (a) are not
funded in whole or in part by the Company, (b) do not interfere with the
performance of the Executive’s duties under this Agreement, and (c) do not
contain any Confidential Information or Intellectual Property of the Company. 
The Executive agrees, at the Company’s expense, to take all steps necessary or
proper to vest title to all such Intellectual Property in the Company, and
cooperate fully and assist the Company in any litigation or other proceedings
involving any such Intellectual Property.

 

Section 14.  Disputes.

 

(a)                                  Equitable Relief.  The Executive
acknowledges and agrees that upon any breach by the Executive of his obligations
under Section 11, 12 or 13 hereof, the Company will have no adequate remedy at
law, and accordingly will be entitled to specific performance and other
appropriate injunctive and equitable relief.

 

(b)                                 Arbitration.  Excluding only requests for
equitable relief by the Company under Section 14(a), in the event that there is
any claim or dispute arising out of or relating to this Agreement or the breach
hereof, and the parties hereto shall not have resolved such claim or  dispute
within 60 days after written notice from one party to the other setting forth
the nature of such claim or dispute, then such claim or dispute shall be settled
if mutually agreed by binding arbitration in Maricopa County, Arizona, in
accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association (“Rules”), by an arbitrator mutually agreed upon by the
parties hereto or, in the absence of such agreement, by an arbitrator selected
according to such Rules.  Notwithstanding the foregoing, if either the Company
or the Executive shall request, such mutually agreeable arbitration shall be
conducted by a panel of three arbitrators, one selected by the Company, one
selected by the Executive and the third selected by agreement of the first two
arbitrators, or, in the absence of such agreement, in accordance with such
Rules.  Judgment upon the award rendered by such arbitrator(s) shall be

 

14

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entered in any Court having jurisdiction thereof upon the application of either
party.  The parties agree to use their reasonable best efforts to have such
arbitration completed as soon as is reasonably practicable.  Notwithstanding
anything herein to the contrary, except as provided in paragraph (c) below the
losing party shall pay the reasonable costs and expenses (including reasonable
attorney fees and expenses) of the prevailing party with respect to such
arbitration, except the Executive, if he is the losing party, shall not be
required to pay such expenses and costs if the claim relates to statutory
discrimination claims that he would not otherwise be required to pay if such
claim had been brought in a court of competent jurisdiction.

 

(c)                                  Legal Fees.  The Company shall pay or
promptly reimburse the Executive for the reasonable legal fees and expenses
incurred by the Executive in successfully enforcing or defending any right of
the Executive pursuant to this Agreement even if the Executive does not prevail
on all issues; provided, however, the Company shall have no obligation to
reimburse the Executive unless the amount recovered by the Executive from the
Company is the greater of (a) $10,000 or (b) 25% of the amount claimed by the
Executive in any demand letter, arbitration or judicial proceeding.

 

Section 15.  Indemnification.  The Company shall indemnify the Executive, to the
maximum extent permitted by applicable law and the governing instruments of the
Company, against all costs, charges and expenses incurred or sustained by the
Executive, including the cost of legal counsel selected and retained by the
Executive in connection with any action, suit or proceeding to which the
Executive may be made a party by reason of the Executive being or having been an
officer, director or employee of the Company.

 

Section 16.  Cooperation in Future Matters.  The Executive hereby agrees that
for a period of 12 months following his termination of employment he shall
cooperate with the Company’s reasonable requests relating to matters that
pertain to the Executive’s employment by the Company, including, without
limitation, providing information or limited consultation as to such matters,
participating in legal proceedings, investigations or audits on behalf of the
Company, or otherwise making himself reasonably available to the Company for
other related purposes.  Any such cooperation shall be performed at scheduled
times taking into consideration the Executive’s other commitments, and the
Executive shall be compensated at a reasonable hourly or per diem rate to be
agreed upon by the parties to the extent such cooperation is required on more
than an occasional and limited basis.  The Executive shall not be required to
perform such cooperation to the extent it conflicts with any requirements of
exclusivity of services for another employer or otherwise, nor in any manner
that in the good faith belief of the Executive would conflict with his rights
under or ability to enforce this Agreement.

 

Section 17.  General.

 

(a)                                  Notices.  All notices and other
communications hereunder shall be in writing or by written telecommunication,
and shall be deemed to have been duly given if delivered personally or if sent
by overnight courier or by certified mail, return receipt requested, postage
prepaid or sent by written telecommunication or facsimile, to the relevant
address set forth below, or to such other address as the recipient of such
notice or

 

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communication shall have specified in writing to the other party hereto, in
accordance with this Section 17(a).

 

to the Company:

 

Spirit Finance Corporation

14631 N. Scottsdale Road

Suite 200

Scottsdale, AZ  85254 Facsimile:  (480) 606-0826

Attention:  President

 

to Executive, at his last residence shown on the records of the Company.

 

Any such notice shall be effective (i) if delivered personally, when received;
(ii) if sent by overnight courier, when receipted for; (iii) if mailed,
five days after being mailed; and (iv) on confirmed receipt if sent by written
telecommunication or facsimile; provided a copy of such communication is sent by
regular mail, as described above.

 

(b)                                 Severability.  If any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect under
any law, the validity, legality and enforceability of the remaining provisions
hereof shall not in any way be affected or impaired.

 

(c)                                  Waivers.  No delay or omission by either
party hereto in exercising any right, power or privilege hereunder shall impair
such right, power or privilege, nor shall any single or partial exercise of any
such right, power or privilege preclude any further exercise thereof or the
exercise of any other right, power or privilege.

 

(d)                                 Counterparts.  This Agreement may be
executed in multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.  In
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart.

 

(e)                                  Assigns.  This Agreement shall be binding
upon and inure to the benefit of the Company’s successors and the Executive’s
personal or legal representatives, executors, administrators, heirs,
distributees, devisees and legatees.  This Agreement shall not be assignable by
the Executive, it being understood and agreed that this is a contract for the
Executive’s personal services.  This Agreement shall not be assignable by the
Company except that the Company shall assign it in connection with a transaction
involving the succession by a third party to all or substantially all of the
Company’s business and/or assets (whether direct or indirect and whether by
purchase, merger, consolidation, liquidation or otherwise).  When assigned to a
successor, the assignee shall assume this Agreement and expressly agree to
perform this Agreement in the same manner and to the same extent as the Company
would be required to perform it in the absence of such an assignment.  For all
purposes under this Agreement, the term “Company” shall include any successor to
the Company’s business and/or assets that

 

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executes and delivers the assumption agreement described in the immediately
preceding sentence or that becomes bound by this Agreement by operation of law.

 

(f)                                    Entire Agreement.  This Agreement
contains the entire understanding of the parties, supersedes all prior
agreements and understandings, whether written or oral, relating to the subject
matter hereof and may not be amended except by a written instrument hereafter
signed by the Executive and a duly authorized representative of the Board (other
than the Executive); provided, however, the parties acknowledge a letter dated
March 30, 2005 to the Executive from the President of the Company regarding
transitional expenses and parking.

 

(g)                                 Governing Law.  This Agreement and the
performance hereof shall be construed and governed in accordance with the laws
of the State of Arizona, without giving effect to principles of conflicts of
law. Each of the parties hereto hereby irrevocably submits to the jurisdiction
of any state or federal court located in Phoenix or Scottsdale, Arizona in
respect of any suit, action or proceeding arising out of or relating to this
Agreement, and irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts.  Each
of the parties hereto irrevocably waives, to the fullest extent it may
effectively do so under applicable law, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.

 

(h)                                 Construction.  The language used in this
Agreement shall be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction shall be applied against
any party.  The headings of sections of this Agreement are for convenience of
reference only and shall not affect its meaning or construction.  Whenever any
word is used herein in one gender, it shall be construed to include the other
gender, and any word used in the singular shall be construed to include the
plural in any case in which it would apply and vice versa.

 

(i)                                     Payments and Exercise of Rights After
Death.  Any amounts payable hereunder after the Executive’s death shall be paid
to the Executive’s designated beneficiary or beneficiaries, whether received as
a designated beneficiary or by will or the laws of descent and distribution. 
The Executive may designate a beneficiary or beneficiaries for all purposes of
this Agreement, and may change at any time such designation, by notice to the
Company making specific reference to this Agreement.  If no designated
beneficiary survives the Executive or the Executive fails to designate a
beneficiary for purposes of this Agreement prior to his death, all amounts
thereafter due hereunder shall be paid, as and when payable, to his spouse, if
he survives the Executive, and otherwise to his estate.

 

(j)                                     Consultation With Counsel.  The
Executive acknowledges that he has had a full and complete opportunity to
consult with counsel or other advisers of his own choosing concerning the terms,
enforceability and implications of this Agreement, and that the Company has not
made any representations or warranties to the Executive

 

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concerning the terms, enforceability and implications of this Agreement other
than as are reflected in this Agreement.

 

(k)                                  Withholding.  Any payments provided for in
this Agreement shall be paid after deduction for any applicable income tax
withholding required under federal, state or local law.

 

(l)                                     No Mitigation of Damages.  Executive
shall not be required to mitigate damages or the amount of any payment provided
for under this Agreement by seeking other employment or otherwise after the
termination of his employment hereunder.

 

(m)                               Consumer Price Index.  For purposes of this
Agreement, the term “CPI” refers to the Consumer Price Index as published by the
Bureau of Labor Statistics of the United States Department of Labor, U.S. City
Average, All Items for Urban Wage Earners and Clerical Workers (1982-1984=100). 
If the CPI is hereafter converted to a different standard reference base or
otherwise revised, the determination of the CPI adjustment shall be made with
the use of such conversion factor, formula or table for converting the CPI, as
may be published by the Bureau of Labor Statistics, or, if the bureau shall no
longer publish the same, then with the use of such conversion factor, formula or
table as may be published by an agency of the United States, or failing such
publication, by a nationally recognized publisher of similar statistical
information.

 

(n)                                 Survival.  The provisions of Sections 8, 9,
10, 11, 12, 13, 14, 15 and 16 shall survive the termination of this Agreement.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

 

 

 

 

SPIRIT FINANCE CORPORATION

 

 

 

 

 

 

 

 

By

 /s/ Christopher H. Volk

 

 

 

 

Christopher H. Volk, President and Chief
Operating Officer

 

 

 

 

 

 

 

 

MICHAEL THOMAS BENNETT

 

 

 

 

 

 

 

 

/s/ Michael Thomas Bennett

 

 

 

Michael Thomas Bennett

 

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