Exhibit 10.3

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated this 19th day of January,
2005, between Falcon Financial Investment Trust, a Maryland Real Estate
Investment Trust (the “Trust”), and Vernon B. Schwartz (the “Executive”), to be
effective on the Control Date, as such term is defined in the Merger Agreement,
as defined below (the “Effective Date”).  Capitalized terms used but not defined
herein shall have the meanings given to them in the Merger Agreement.

 

WHEREAS, the Agreement and Plan of Merger, dated as of January 19, 2005, by and
among iStar Financial Inc. (“iStar”), Flash Acquisition Company LLC and the
Trust (the “Merger Agreement”)(1) contemplates that the Trust will enter into an
amended and restated employment agreement with the Executive;

 

WHEREAS, the Trust and Executive are parties to an Employment Agreement dated
November 14, 2003 (the “2003 Agreement”) which will remain in full force and
effect prior to the Effective Date;

 

WHEREAS, in connection with the Merger Agreement, Executive and the Trust have
agreed to amend and restate the 2003 Agreement, to be effective from and after
the Effective Date,  to reflect certain changes in the terms and provisions
thereof;

 

NOW, THEREFORE, in consideration of the premises and the respective covenants
and agreements of the parties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:

 

1.             Employment.  The Trust hereby agrees to continue to employ the
Executive, and the Executive hereby agrees to continue to serve the Trust, on
the terms and conditions set forth herein.   The Trust and the Executive agree
that, although this Agreement has been executed prior to the Effective Date, it
shall have no force and effect until the Effective Date.  This Agreement shall
automatically become effective and take full force and effect on the Effective
Date, and the 2003 Agreement shall automatically terminate at 11:59 p.m. on the
day prior to the Effective Date.

 

2.             Term.  The Trust hereby employs the Executive, and the Executive
hereby accepts such employment, for an initial term commencing as of the
Effective Date and ending on the second anniversary of such date, unless sooner
terminated in accordance with the provisions of Section 6; with such employment
to continue for successive one-year periods in accordance with the terms of this
Agreement (subject to termination as aforesaid) unless either party notifies the
other party in writing prior to sixty (60) days before the expiration of the
initial term and each annual renewal thereof (the period during which the
Executive is employed hereunder being hereinafter referred to as the “Term”).

 

3.             Position and Duties. During the Term, the Executive shall have
primary responsibility for executing the Trust’s business strategy of
originating financing and sale/leaseback transactions, under the direction of
the Trust’s Board of Trustees.  Prior to the Effective Time of the Merger (as
defined in the Merger Agreement), the Executive shall serve as the Trust’s
principal executive officer for purposes of executing all reports and financial
statement certifications required to be filed by the Trust pursuant to the
Securities Exchange Act of 1934, as amended.  The Executive shall also serve
without additional compensation in such other offices of the Trust or its
subsidiaries to which Executive may be elected or appointed by the Board of

 

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(1)   The Trust will survive the Merger as a wholly-owned subsidiary of iStar.

 

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Trustees with the consent of Executive.  The Executive shall devote
substantially all his working time, energy, skill and best efforts to the
performance of his duties hereunder in a manner that will faithfully and
diligently further the business and interests of the Trust; provided, that,
nothing in this Agreement shall preclude Executive from serving as a director or
trustee in any other firm that is not a competitor of the Trust and its
subsidiaries or from pursuing personal investments, as long as such activities
do not, in the reasonable judgment of the Board of Trustees with regard to
activities other than passive investments of less than five percent ownership,
interfere with Executive’s performance of his duties hereunder.

 

4.             Place of Performance.  In connection with the Executive’s
employment by the Trust, the Executive shall be based at the principal executive
offices of the Trust in Stamford, Connecticut or the greater metropolitan area
of New York City, encompassing the populated areas of New York, New Jersey and
Connecticut (generally known as the “Tri-State Area”), except for travel that is
reasonably necessary for the Executive to carry out his duties hereunder.

 

5.             Compensation and Related Matters.

 

(a)           Base Salary and Annual Bonus.  During the period of the
Executive’s employment hereunder, the Trust shall pay to the Executive an annual
base salary of $390,000 (“Base Salary”), such Base Salary to be paid in
accordance with the Trust’s standard payroll practices and subject to all
applicable withholdings.  The Base Salary may, subject to the approval of the
Board of Trustees, be increased from time to time and, if so increased, shall
become the new Base Salary for the calendar year and shall not thereafter during
the term of this Agreement be decreased.  The Executive shall be eligible for an
annual bonus (“Annual Bonus”), based solely on the level of satisfaction of the
asset origination target (the “Target”), set forth in Appendix A hereto.  Such
Annual Bonus shall be payable in cash to the Executive on or about January 31 of
the year following the last day of the fiscal year to which the bonus relates. 
For the 2005 calendar year, the Executive’s Base Salary, Annual Bonus and Target
calculations shall be prorated as of thirty (30) days after the Control Date
through the end of the calendar year.  The Annual Bonus and Target calculations
may be revised on an annual basis upon mutual agreement of the Trust and the
Executive.

 

(b)           Expenses.  During the Term, the Executive shall be entitled to
receive prompt reimbursement for all reasonable and customary out of pocket
expenses incurred by the Executive in performing his duties hereunder, including
all reasonable expenses of travel and reasonable living expenses while away from
home on business or at the request of and in the service of the Trust, provided
that such expenses are incurred and accounted for in accordance with the
policies and procedures established by iStar.

 

(c)           Other Benefits.  During the Term, the Trust shall provide at its
sole expense executive life insurance to the Executive with a death benefit of
no less than $1,500,000.  In addition, the Executive shall be eligible to
participate in or receive benefits under any employee benefit plan, arrangement
or perquisite made available by the Trust, prior to the Effective Time of the
Merger, and by iStar after such time, presently or in the future to its
executives and key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such plans,
arrangements and perquisites.

 

(d)           Vacations.  The executive shall be entitled to four (4) weeks’
vacation in each calendar year, or such greater amount of vacation as may be
determined in

 

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accordance with iStar’s vacation policy as in effect from time to time.  The
Executive shall also be entitled to all paid holidays given by the Trust to its
executives, and sick and personal days on an as needed basis.

 

(e)           Services Furnished.  The Trust shall furnish the Executive with
office space and such other facilities and services as shall be suitable to the
Executive’s position and adequate for the performance of his duties as set forth
in Section 3 hereof.

 

6.             Termination.  Each party shall have the right to terminate
Executive’s employment hereunder before the Term expires to the extent, and
subject to the provisions, set forth in this Section 6:

 

(a)           Death.  The Executive’s employment hereunder shall terminate upon
his death.

 

(b)           Disability.  If, in the written opinion of a qualified physician
reasonably agreed to by the Trust and the Executive, the Executive shall become
unable to perform his duties hereunder due to Disability, the Trust may
terminate the Executive’s employment hereunder.  As used in this Agreement, the
term “Disability” shall mean incapacity due to physical or mental illness which
has, in the reasonable judgment of the Board, caused the Executive to be unable
to perform his duties hereunder on a full-time basis for any period of 180
consecutive days and the return of the Executive to his duties hereunder for
periods of 15 days or less shall not interrupt such 180 day period.

 

(c)           Cause.  The Trust shall have the right to terminate Executive’s
employment at any time upon delivery of written notice of termination for Cause
(as defined below) to Executive (which notice shall specify in reasonable detail
the basis upon which such termination is made), such employment to terminate
immediately upon delivery of such notice unless otherwise specified by the Board
of Trustees of the Trust if a majority of the Board of Trustees determines that
Executive: (i) has misappropriated, stolen or embezzled funds or property from
the Trust or an affiliate of the Trust or secured or attempted to secure
personally any profit in connection with any transaction entered into on behalf
of the Trust or any affiliate of the Trust, (ii) has been convicted of a felony
or entered a plea of “nolo contendre” which in the reasonable opinion of the
Board brings Executive into disrepute or is likely to cause material harm to the
Trust’s (or any affiliate of the Trust) business, customer or supplier
relations, financial condition or prospects, (iii) has, notwithstanding not less
than 30 days’ prior written notice from the Board of Trustees, willfully and
persistently failed to perform (other than by reason of illness or temporary
disability, regardless of whether such temporary disability is or becomes total
Disability, or by reason of vacation or approved leave of absence) his material
duties hereunder, or (iv) has willfully violated or breached any provision of
this Agreement, any material law or regulation or any written policy or code of
business conduct or ethics of the Trust or iStar to the material detriment of
the Trust, iStar or any affiliate of the Trust or iStar or its business.  For
purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that his action
or omission was in the best interests of the Trust, prior to the Effective Time
of the Merger, and iStar thereafter.  Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for iStar shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best interests of
the Trust.  The cessation of

 

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employment of the Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the membership of
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Executive was guilty of the conduct
set forth in clause (i), (ii), (iii) or (iv) hereof, and specifying the
particulars thereof in detail.

 

(d)           Without Cause.  The Trust may at any time terminate the
Executive’s employment hereunder without Cause.

 

(e)           Termination by the Executive.

 

(i)                                     The Executive may terminate his
employment hereunder (A) for Good Reason, or (B) without Good Reason at any time
after the date hereof by giving thirty (30) days prior notice of his intention
to terminate.

 

(ii)                                  For purposes of this Agreement, “Good
Reason” shall mean (A) a failure by the Trust to comply with any material
provision of this Agreement which has not been cured within thirty (30) days
after notice of such noncompliance has been given by the Executive to the Trust,
(B) the assignment to the Executive of any duties materially inconsistent with
the Executive’s duties as they arise under Section 3 of this Agreement, or a
substantial adverse alteration in the nature of the Executive’s responsibilities
without the consent of the Executive, (C) without the consent of the Executive,
a material reduction in employee benefits other than a reduction generally
applicable to all eligible employees of the Trust, (D) without the consent of
the Executive, relocation of the Trust’s principal place of business outside the
Tri-State Area; or (E) any purported termination of the Executive’s employment
which is not effected pursuant to (1) Section 2 or (2) a Notice of Termination
satisfying the requirements of paragraph (f) hereof (and for purposes of this
Agreement no such purported termination shall be effective).

 

(f)            Any termination of the Executive’s employment by the Trust or by
the Executive (other than termination pursuant to subsection (a) or (b) hereof)
shall be communicated by written Notice of Termination to the other party hereto
in accordance with Section 12.  For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated.

 

(g)           “Date of Termination” shall mean (i) if the Executive’s employment
is terminated by his death, the date of his death, (ii) if the Executive’s
employment is terminated pursuant to subsection (b) above, the date as of which
the physician’s written opinion is received by the Trust, (iii) if the
Executive’s employment is terminated

 

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pursuant to subsection (c) above, the date specified in the Notice of
Termination, and (iv) if the Executive’s employment is terminated for any other
reason, the date thirty (30) days following the date on which a Notice of
Termination is given.

 

7.             Compensation Upon Termination, Death or During Disability.

 

(a)           Disability.  During any period that the Executive fails to perform
his duties hereunder as a result of his incapacity due to a physical or mental
illness (“disability period”), the Executive shall continue to receive his full
Base Salary at the rate then in effect for such period (and shall not be
eligible for payments under the disability plans, programs and policies
maintained by the Trust or in connection with employment by the Trust
(“Disability Plans”)) until his employment is terminated pursuant to Section
6(b) hereof, and upon such termination, the Executive shall, within ten (10)
days of such termination, be entitled to all amounts to which the Executive is
entitled pursuant to short-term Disability Plans.  The Executive’s rights under
any long-term Disability Plan shall be determined in accordance with the
provisions of such plan.  In addition, upon the Executive’s termination in
accordance with Section 6(b) hereof, the Executive shall be paid a pro rata
portion of his Annual Bonus, based upon Executive’s satisfaction of the Target
as of the Date of Termination, to be calculated by the number of days he was
employed in the calendar year in which the Date of Termination occurs (the
“Prorated Bonus”).

 

(b)           Death.  If the Executive’s employment is terminated by his death,
the Trust shall within ten (10) days following the date of the Executive’s
death, pay any amounts due to the Executive under Section 5 through the date of
his death, an amount equal to the Executive’s annual Base Salary for the year in
which the termination took place, and an amount equal to the Prorated Bonus,
together with any other amounts to which the Executive is entitled pursuant to
death benefit plans, programs and policies.

 

(c)           Cause or other than Good Reason.  If the Executive’s employment
shall be terminated by the Trust for Cause or by the Executive for other than
Good Reason, the Trust shall pay the Executive his full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given and reimburse the Executive for all reasonable and customary expenses
incurred by the Executive in performing services hereunder prior to the Date of
Termination in accordance with Section 5(b), and the Trust shall have no further
obligations to the Executive under this Agreement.

 

(d)           Termination by the Trust without Cause (other than for death or
Disability) or Termination by the Executive for Good Reason.  Other than as
provided in Section 2, if the Trust shall terminate the Executive’s employment
other than for death, Disability pursuant to Section 6(b) or Cause, or the
Executive shall terminate his employment for Good Reason, then:

 

(i)                                     the Trust shall pay the Executive any
earned and accrued but unpaid installment of Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given and
all other unpaid and accrued amounts to which the Executive is entitled as of
the Date of Termination under any compensation plan or program of the Trust,
such payments to be made in a lump sum on or before the fifth day following the
Date of Termination;

 

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(ii)                                  in lieu of any further salary payments to
the Executive for periods subsequent to the Date of Termination, the Trust shall
pay as liquidated damages to the Executive an amount equal to (i) in the event
the Date of Termination occurs on or before the first anniversary of the
Effective Date, the product of (A) the sum of (1) the Executive’s Base Salary in
effect as of the Date of Termination and (2) the Prorated Bonus, and (B) 2 or
(ii) in the event the Date of Termination occurs after the first anniversary of
the Effective Date, the sum of (1) the Executive’s Base Salary in effect as of
the Date of Termination and (2) the Prorated Bonus(2); such payment to be made
in a lump sum on or before the fifth day following the Date of Termination;

 

(e)           In the case of a termination of the Executive’s employment by the
Trust without Cause or for Disability, or by the Executive for Good Reason, the
Trust shall pay the full cost for the Executive to participate in the health
insurance plan in which the Executive was enrolled immediately prior to the Date
of Termination for a period of twelve (12) months, provided that the Executive’s
continued participation is possible under the general terms and provisions of
such plans and programs.  In the event that the Executive’s participation in any
such plan or program is barred, the Trust shall arrange to provide the Executive
with benefits substantially similar to those which the Executive would otherwise
have been entitled to receive under such plan from which his continued
participation is barred.

 

(f)            Any payment by the Trust required hereunder following termination
of the Executive’s employment for any reason, other than pursuant to Section
6(b), shall be conditioned on and shall not be payable until receipt of a
written release in form and substance reasonably acceptable to iStar of any and
all past and present claims that the Executive may have against the Trust or
iStar or any of their affiliates and any of their respective officers,
directors, members, managers or trustees arising out of his employment
relationship with the Trust or iStar or any of their affiliates.

 

8.             Nondisclosure.  The Executive shall hold in a fiduciary capacity
for the benefit of the Trust and iStar all Confidential Information relating to
the Trust, iStar or any of their affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive’s employment by the Trust, iStar or any of their affiliated
companies.  For the purposes of this Agreement, “Confidential Information” means
any data or information with respect to the business conducted by the Trust,
iStar or their affiliates, that is material to the Trust’s or iStar’s business
operations and is not generally known by the public, including business and
trade secrets.  To the extent consistent with the foregoing definition,
Confidential Information includes without limitation: (a) reports, pricing,
underwriting and pricing procedures, and financing methods of the Company,
together with any specific and proprietary techniques utilized by the Company in
designing, developing, and marketing its loan products or in performing services
for customers and accounts of the Company; (b) the business plans and financial
statements, reports, data and projections of the Company; (c) identities and
addresses of consultants, borrowers or customers or any other confidential
information relating to or dealing with the business operations or activities of
the Trust, iStar and their affiliates; and (d) information concerning trade
secrets of the Trust, iStar and their affiliates.  After termination of the
Executive’s employment with the Trust, the Executive shall not, without the
prior written

 

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(2)  Examples of the above calculation are set forth in Appendix B of this
Agreement.

 

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consent of the Trust or as may otherwise be required by law or legal process,
communicate or divulge any such Confidential Information to anyone other than
the Trust and those designated by it.  The agreement made in this Section 8
shall be in addition to, and not in limitation or derogation of, any obligations
otherwise imposed by law or by separate agreement upon the Executive in respect
of Confidential Information of the Trust and iStar.

 

9.             Non-Competition and Non-Solicitation.  During the Executive’s
employment with the Trust and for a period of twelve (12) months following the
Executive’s Date of Termination, the Executive shall not, without the prior
written consent of the Trust, for himself or on behalf of or in conjunction with
any other person, persons, company, firm, partnership, corporation, business,
group or other entity (each, a “Person”), engage in the financing of
participants in the automotive industry.  The Executive’s passive ownership of
less than five percent (5%) of the securities of a company shall not be treated
as an action in competition with the Trust.

 

(a)           During the term of Executive’s employment by the Trust, and for
the eighteen (18) months following the Date of Termination, the Executive shall
not, for any reason whatsoever, directly or indirectly, for himself or on behalf
of or in conjunction with any other Person:

 

(i)                                   solicit and/or hire any Person who is on
the Date of Termination, or has been within twelve (12) months prior to the Date
of Termination, an officer or manager level employee of the Trust or its
affiliates, for the purpose or with the intent of enticing such Person away from
or out of the employ of the Trust or its affiliates;

 

(ii)                                in order to protect the Confidential
Information and proprietary rights of the Trust, solicit, induce or attempt to
induce any Person who is, at the Date of Termination, or has been within twelve
(12) months prior to the Date of Termination, an actual customer, borrower,
client, business partner, or a prospective customer, borrower, client, business
partner (i.e., a customer, borrower, client or business partner who is party to
a written proposal or letter of intent with Trust, in each case written less
than six (6) months prior to the Date of Termination) of the Trust or its
affiliates, for the purpose or with the intent of (A) inducing or attempting to
induce such Person to cease doing business with Trust or its affiliates, (B)
enticing or attempting to entice such Person to do business with Executive or
any affiliate of Executive, or (C) in any way interfering with the relationship
between such Person and Trust or its affiliates; or

 

(iii)                             solicit, induce or attempt to induce any
Person who is or that is, at the time of the Date of Termination, or has been
within twelve (12) months prior to the Date of Termination, a supplier, licensee
or consultant of, or provider of goods or services to Trust or its affiliates,
for the purpose or with the intent of (A) inducing or attempting to induce such
Person to cease doing business with Trust or its affiliates or (B) in any way
interfering with the relationship between such Person and Trust or its
affiliates.

 

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(b)           Because of the difficulty of measuring economic losses to Trust as
a result of a breach of the foregoing covenants, and because of the immediate
and irreparable damage that could be caused to the Trust and its affiliates for
which it would have no other adequate remedy, Executive agrees that the
foregoing covenants in this Section 9, in addition to and not in limitation of
any other rights, remedies or damages available to the Trust at law, in equity
or under this Agreement, may be enforced by the Trust in the event of the breach
or threatened breach by Executive, by injunctions and/or restraining orders.

 

(c)           It is agreed by the parties that the covenants contained in this
Section 9 impose a fair and reasonable restraint on Executive in light of the
activities and business of the Trust on the date of the execution of this
Agreement and the current plans of the Trust, including the Merger; but it is
also the intent of the Trust and Executive that such covenants be construed and
enforced in accordance with the changing activities, business and locations of
the Trust and its affiliates throughout the term of these covenants.

 

(d)           It is further agreed by the parties hereto that, in the event that
Executive shall cease to be employed hereunder, and enters into a business or
pursues other activities within twelve (12) months from such Date of Termination
that, at such time, are not in competition with the Trust or its affiliates or
with any business or activity which the Trust or its affiliates contemplated
pursuing, as of the Date of Termination, or similar activities or business in
locations the operation of which, under such circumstances, does not violate
this Section 9 or any of Executive’s obligations under this Section 9, Executive
shall not be chargeable with a violation of this Section 9 if the Trust or its
affiliates subsequently enter the same (or a similar) competitive business,
course of activities or location, as applicable (except as to business or
activities actively contemplated by the Trust at the Date of Termination).

 

(e)           The covenants in this Section 9 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant.  Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth
herein are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent that such court deems reasonable,
and the Agreement shall thereby be reformed to reflect the same.

 

(f)            All of the covenants in this Section 9 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against Trust whether
predicated on this Agreement or otherwise shall not constitute a defense to the
enforcement by Trust of such covenants.  It is specifically agreed that the
duration of the period during which the agreements and covenants of Executive
made in this Section 9 shall be effective shall be computed by excluding from
such computation any time during which Executive is in violation of any
provision of this Section 9.

 

(g)           Notwithstanding any of the foregoing, if any applicable law,
judicial ruling or order shall reduce the time period during which Executive
shall be prohibited from engaging in any competitive activity described in
Section 9 hereof, the period of time for which Executive shall be prohibited
pursuant to Section 9 hereof shall be the maximum time permitted by law.

 

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10.           Successors; Binding Agreement.  The rights and obligations of the
parties to this Agreement shall not be assignable or delegable, except that (i)
in the event of the Executive’s death, the personal representative or legatees
or distributees of the Executive’s estate, as the case may be, shall have the
right to receive any amount owing and unpaid to the Executive hereunder and (ii)
the rights and obligations of the Trust hereunder shall be assignable and
delegable in connection with any subsequent merger, consolidation, sale of all
or substantially all of the assets or stock of the Trust or similar transaction
involving the Trust or a successor corporation.

 

11.           Continued Performance.  Provisions of this Agreement shall survive
any termination of this Agreement if so provided herein or if necessary or
desirable fully to accomplish the purposes of such provisions, including,
without limitation, the obligations of the Executive under the terms and
conditions of Sections 8 and 9.  Any obligation of the Trust to make payments to
or on behalf of the Executive under Section 7 is expressly conditioned upon the
Executive’s continued performance of the Executive’s obligations under Sections
8 and 9 for the time periods stated in Sections 8 and 9.  The Executive
recognizes that, except to the extent, if any, provided in Section 7, the
Executive will earn no compensation from the Trust after the Date of
Termination.

 

12.           Notice.  For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:

 

If to the Executive:

 

Vernon B. Schwartz

51 Glendale Road

Rye, NY 10580

 

If to the Trust:

 

Falcon Financial Investment Trust
c/o iStar Financial Inc.

1114 Avenue of the Americas, 27th Floor

New York, NY 10036

 

Attn: Compensation Committee

 

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

 

13.           Miscellaneous.  No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Trust as may be
specifically designated by the Board.  No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.  No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement.  The validity, interpretation, construction and performance

 

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of this Agreement shall be governed by the laws of the State of New York without
regard to its conflicts of law principles.

 

14.           Validity.  The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

 

15.           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.

 

16.           Disputes.  Any dispute or controversy arising under or in
connection with this Agreement shall, at the Executive’s sole discretion, be
settled exclusively by such judicial remedies as the Executive may seek to
pursue or by arbitration conducted before a panel of three arbitrators in the
Borough of Manhattan in accordance with the rules of the American Arbitration
Association then in effect.  Judgment may be entered on the arbitrator’s award
in any court having jurisdiction; provided, however, that the Trust shall be
entitled to seek a restraining order or injunction in any court of competent
jurisdiction to prevent any continuation of any violation of the provisions of
Sections 8 or 9 of this Agreement and the Executive hereby consents that such
restraining order or injunction may be granted without the necessity of the
Trust’s posting any bond, and provided further that the Executive shall be
entitled to seek specific performance of his right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.  The expense of such arbitration shall be
borne by the Trust.

 

17.           Indemnification.  The Trust shall indemnify and hold Executive
harmless to the maximum extent permitted by the laws of the State of Maryland
(and the law of any other appropriate jurisdiction after an a reincorporation)
against judgments, fines, amounts paid in settlement and reasonable expenses,
including attorneys’ fees incurred by Executive, in connection with the defense
of, or as a result of any action or proceeding (or any appeal from any action or
proceeding) in which Executive is made or is threatened to be made a party by
reason of the fact that he is or was an officer or trustee of the Trust,
regardless of whether such action or proceeding is one brought by or in the
right of the Trust to procure a judgment in its favor (or other than by or in
the right of the Trust).  Notwithstanding the foregoing, the Executive shall not
be entitled to be indemnified to the extent he has acted in bad faith or in
manner that constitutes gross negligence or willful or intentional misconduct.

 

18.           Entire Agreement.  This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements (including, without limitation, the 2003
Agreement), promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein.

 

10

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year first above written.

 

 

FALCON FINANCIAL INVESTMENT TRUST

 

 

 

 

Attest:

 

 

 

By:

 

/s/ Allison W. Berman

 

By:

/s/ David A. Karp

 

 

Name:

David A. Karp

 

 

Title:

President and Chief Financial Officer

 

 

Attest:

 

 

 

By:

 

/s/ Allison W. Berman

 

/s/ Vernon B. Schwartz

 

Vernon B. Schwartz

 

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Appendix A

 

For the 2005 calendar year, the Target for the Trust’s asset origination is
$360,000,000.  The following table shows the calculations for the Executive’s
Annual Bonus.

 

Percentage of Target Satisfied

 

Annual Bonus

 

 

 

75%

 

50% of Base Salary

100%

 

100% of Base Salary

125%

 

125% of Base Salary

150%

 

150% of Base Salary

 

App. A-1

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Appendix B

 

Example 1

 

Assumptions:

 

•                                          30 days after the Control Date is
January 1, 2005 (Please note application of the next to last sentence of Section
5(a) of this Agreement)

•                                          Base Salary of $390,000

•                                          Termination without Cause, June 30,
2005

•                                          As of the Date of Termination, total
asset originations of $180,000,000 ($360,000,000 on an annualized basis)

 

Calculation of Prorated Bonus:

 

Percentage of Target Satisfied as of the Date of Termination:  100% (See
Appendix A)

Annual Bonus payable upon satisfaction of 100% of Target:  $390,000 (See
Appendix A).

Percentage of days worked in calendar year:  50% (50% is rounded up from 49.58%
(181 days divided by 365 days))

 

Prorated Bonus = $390,000 x 50% = $195,000

 

Calculation of Liquidated Damages

 

Base Salary + Prorated Bonus x 2 =

 

($390,000 + $195,000) x 2 = $1,170,000

 

Example 2*

 

Assumptions:

 

•                                          Effective Date of January 1, 2005

•                                          Base Salary of $390,000

•                                          Termination without Cause, June 30,
2006

•                                          As of the Date of Termination, total
asset originations of $225,000,000 ($450,000,000 on an annualized basis)

 

Calculation of Prorated Bonus:

 

Percentage of Target Satisfied as of the Date of Termination:  125% (See
Appendix A)

Annual Bonus payable upon satisfaction of 125% of Target:  $487,500 (See
Appendix A).

Percentage of days worked in calendar year:  50% (50% is rounded up from 49.58%
(181 days divided by 365 days))

 

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*                 For purposes of this example, we have assumed that the
origination and bonus targets set forth in Annex A remain in effect, although
such targets are subject to revision on an annual basis pursuant to Section 5(a)
of the Agreement.

 

App. B-1

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Prorated Bonus = $487,500 x 50% = $243,750

 

Calculation of Liquidated Damages

 

Base Salary + Prorated Bonus x 1 =

 

($390,000 + $243,750) x 1 = $633,750

 

App. B-2

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