Exhibit 10.2

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FIELDSTONE INVESTMENT CORPORATION

 

RE:         EXTENDED SEVERANCE BENEFIT

Dear Cynthia:

Fieldstone Investment Corporation (“Fieldstone” or “the Company”) greatly values
your contributions as a senior manager of Fieldstone and the quality of the
services that you provide the Company.

Because of the importance of your role and in order to reduce any uncertainty
you may feel regarding your future with the Company, we are very pleased to
offer to you an extended severance benefit. It is our expectation that you and
Fieldstone will have a positive long term relationship. However, because
Fieldstone is a publicly traded company, no one can predict whether there ever
will be a “change in control” regarding Fieldstone.

The Company wishes to minimize the uncertainties that may arise in connection
with a Change in Control (as defined in Exhibit A to this letter) by providing
you with an extended severance benefit payable in connection with a Change in
Control, subject to the terms and conditions of this letter as set forth in the
attachment entitled “Terms and Conditions” (the “Extended Severance Benefit”) as
follows:

If a Change in Control occurs while you are employed by the Company and you
undergo or are subject to a Qualifying Termination during the one year period
following the Change in Control, you will be eligible for a single, “lump sum”
severance payment in an amount equal to twelve (12) months of your then current
base salary.

In the event of a Change in Control, this Extended Severance Benefit will apply
in lieu of any other severance pay to which you may be entitled under any
Company severance plan, program, practice or arrangement.

Sincerely,

/s/ Michael J. Sonnenfeld

Michael J. Sonnenfeld, President and Chief Executive Officer

Accepted and Agreed:

/s/ Cynthia L. Harkness

Date: February 27, 2006

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Terms & Conditions

You must be in the employ of the Company at the time of the Change in Control to
be eligible for the Extended Severance Benefit. Your Extended Severance Benefit
will be paid in a single lump sum payment within thirty (30) days following your
Qualifying Termination, subject to any delay in payment required to avoid the
additional tax imposed by Section 409A of the Internal Revenue Code.

For the purpose of your Extended Severance Benefit, a “Qualifying Termination”
means: (i) you terminate your employment with the Company or its successor for
Good Reason (as defined in herein) or (ii) your employment with the Company or
its successor is terminated by the Company or its successor for a reason other
than for Cause (as defined in the Company’s Equity Incentive Plan as of the date
of this letter). Your termination of employment must occur within one year
following a Change in Control to be a Qualifying Termination. Further, you will
not be considered to have undergone a Qualifying Termination if upon your
termination of employment you are immediately thereafter reemployed by the
Company’s successor (or a parent or affiliate of the Company or its successor).
For the purpose of this letter agreement and your Extended Severance Benefit
hereunder, “Good Reason” means, without your consent, a material reduction in
your base salary or responsibilities, or a required relocation of your principal
place of employment immediately preceding the Change in Control by more than 25
miles.

If a Change in Control occurs and you do not undergo a Qualifying Termination
within the one year period following the closing of the Change in Control, you
will not be entitled to the Extended Severance Benefit.

The Company’s Compensation Committee will make all decisions and interpretations
regarding your Extended Severance Benefit, and the decisions and interpretations
of the Compensation Committee are final, binding and conclusive.

Your Extended Severance Benefit will be reduced by any taxes or other amounts
required to be withheld by the Company under applicable law. You remain an
employee-at-will of the Company. Nothing in this letter constitutes, and shall
not be construed to provide, any assurance of your continuing employment with
the Company, its affiliates or successors.

Prior to the occurrence of a Change in Control, the Company has the right, in
its sole control and discretion, to amend or terminate this letter agreement and
your Severance Benefit at any time and for any reason and without consideration
to you, upon sixty (60) days written notice to you.

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Exhibit A

For purposes of your Severance Benefit, a “Change in Control” means:

(1)           The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50%
of either (i) the then outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the “Outstanding Company Voting Securities”);
provided, however, that for purposes of this Section 1, the following
acquisitions shall not constitute a Change in Control: (i) any acquisition by
the Company; (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company; and (iii) any acquisition by any entity pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of Section (3) of this
Exhibit A; or

(2)           Individuals who, as of the date hereof, constitute the Company’s
Board of Directors (the “Incumbent Board”) cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

(3)           Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock

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and the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
entity resulting from such Business Combination (including, without limitation,
a corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, and (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 35% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or

(4)           Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

(5)           This letter agreement shall apply only to the first Change in
Control that occurs following the date of this letter.

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