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AMENDED AND RESTATED EMPLOYMENT AGREEMENT

(John A. Burchett)

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is by and between Hanover
Capital Mortgage Holdings, Inc., a Maryland corporation, with its offices located at 200 Metroplex
Drive, Suite 100, Edison, New Jersey 08817 (the “Company”), and John A. Burchett (the “Employee”),
an individual whose residence is 896 Highland Avenue, Westfield, New Jersey 07090. This Agreement
is an amendment and restatement of that certain employment agreement entered into between the
Company and the Employee as of July 1, 2002 (the “Prior Agreement”), and supersedes that Prior
Agreement in all respects. Except as otherwise specified in Section 17, this Agreement is
effective as of the 1st day of July, 2007 (the “Effective Date”).

     WHEREAS, the Employee is the Chairman of the Board of Directors, President and Chief
Executive Officer of the Company; and

     WHEREAS, the Company desires to ensure the continued availability to the Company of the
Employee’s services, and the Employee is willing to render such services, all upon and subject to
the terms and conditions contained in this Agreement;

     NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, the
Company and the Employee agree as follows:

     1. Employment and Acceptance of Employment: Term. Upon and subject to the terms and
conditions set forth in this Agreement, the Company hereby employs the Employee as its Chairman of
the Board of Directors, President and Chief Executive Officer or in such other management
position(s) as the Board of Directors of the Company (the “Board”) may determine from time to
time, and the Employee hereby agrees to accept such employment, for a period of three years
(unless sooner terminated as hereinafter set forth) (the “Term”) commencing on the Effective Date
and ending three years thereafter (the “Expiration Date”).

     2. Duties. It is the intention of the Company and the Employee that, subject to the
direction and supervision of the Board, the Employee shall have full discretionary authority to
control the day-to-day operations of the Company including, but not limited to: (a) planning,
developing, organizing, implementing, directing and evaluating the organization’s fiscal function
and performance; (b) directing and participating in the development of strategic plans; (c)
ensuring the development and implementation of policies and procedures that will improve the
overall operation and effectiveness of the Company; (d) effectively developing solutions to
business challenges; and (e) evaluating and advising on the impact of long range planning and the
introduction of new programs and initiatives. The Employee shall also have authority to incur
such obligations on behalf of the Company as may be necessary or appropriate in the ordinary
course of business as described in this Section. The Employee agrees, during the Term and any
extension of the Term, to devote the Employee’s entire business and professional

 

 

time, attention, and energies exclusively to the business of the Company and its subsidiaries
(including, without limitation, Hanover Capital Partners 2 Ltd., and Hanover Capital Securities,
Inc.) as shall be necessary, advisable or required to perform the duties of the Employee’s
positions specified in Section 1, and to conform to the rules, regulations, instructions,
personnel practices and policies of the Company, as existing and amended from time to time by the
Company or its Board. Notwithstanding the foregoing, during the Term and any extension of the
Term, the Employee may (i) serve as an officer, director, trustee or committee member of any
religious, professional, civic, charitable or educational organization, or as a director of any
corporation whose business is not competitive with the Company or any of its subsidiaries, and
(ii) engage in, and devote time and effort to, any and all personal investments or personal
business ventures (which shall in no event include being an officer or principal shareholder of
any public or private company) unrelated to the business or affairs of the Company and its
subsidiaries, in each case so long as such activities do not materially interfere with the
Employee’s obligations to the Company and its subsidiaries or conflict in any way with the
business of the Company or its subsidiaries; provided, however, that Employee must obtain the
Board’s written consent before entering into a personal business venture or accepting a board
position (other than with a subsidiary of the Company) and, when requesting such consent, must
provide the Company with any reasonably requested information concerning such venture or position.
The Company’s consent to permit Employee to serve on the board of another organization or to
enter into a business venture is not an endorsement of that other organization or venture, nor
would Employee’s subsequent activity in such other organization or venture constitute involvement
of the Company in the affairs or activities of that organization or venture.

     3. Compensation and Benefits.

     (a) Base Salary. In consideration of the Employee’s performance of services under
this Agreement, the Company will pay to the Employee, during the first year of the Term of the
Employee’s employment under this Agreement, and the Employee agrees to accept from the Company for
the Employee’s services under this Agreement, an annual salary equal to the sum of (x) $393,585.00
(the “Base Salary”), plus (y) the Disability Insurance Supplement described below, payable on a pro
rata basis in accordance with the Company’s normal payroll practices applicable to its executive
officers, but not less often than monthly. The Disability Insurance Supplement shall be
approximately equal to the smallest amount determined by the Company in its sole discretion to be
sufficient, after the payment of state, federal, and local income taxes on such amount, to permit
Employee to pay premiums for the disability insurance coverage referred to in Section 3(e)(ii)
below, provided, however, that if during the Term such disability insurance coverage shall ever be
insufficient to provide a benefit upon total disability equal to sixty-five percent (65%) of the
Base Salary then in effect, payable until the Employee is seventy (70) years old, Employee shall
also be eligible for the Additional Supplemental Benefit described in Section 3(e)(ii) below in the
event of Disability as defined in Section 3(e)(ii). The Employee’s Base Salary shall be subject to
annual review by the Compensation Committee of the Board (the “Committee”) and may be adjusted
(upwards but not downwards) in such amounts as the Committee may determine in its sole discretion.
To that end, the Employee shall receive a performance review at least once a year from the
Committee in connection with which the

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Employee shall be eligible for such merit increases and other salary adjustments as the
Committee may approve or not in its sole discretion.

     (b) Bonus. In addition to the Base Salary, the Employee shall be entitled during the
Term and any extension thereof to participate in any and all bonus plans adopted by the Board or
Committee for the executive officers of the Company and its subsidiaries.

     (c) Stock Options. The Employee shall be entitled to participate in the Company’s
1997 Executive and Non-Employee Director Stock Option Plan, 1999 Equity Incentive Plan, and any and
all other equity compensation plans adopted by the Board for the employees of the Company and its
subsidiaries.

     (d) Benefits. During the Term of this Agreement and any extension thereof, the
Employee shall be entitled to participate in any medical, dental and other health benefit plans,
and to participate in any pension, bonus, profit-sharing or similar plan or program that may be
established by the Company and made available to its executive officers generally, in accordance
with the terms of such plans.

     (e) Life and Disability Insurance. During the Term and any extension thereof, the
Company shall provide to the Employee (i) at the expense of the Company a term life insurance
policy with a death benefit equal to $2,000,000 and the proceeds of which shall be payable to such
beneficiary or beneficiaries as the Employee shall designate in writing; and (ii) an offer of
disability insurance coverage, at the Employee’s expense, which shall provide the Employee with a
benefit upon total disability equal to sixty-five percent (65%) of the Base Salary then in effect,
payable until the Employee is seventy (70) years old; provided, however, that if the Company
determines in its sole discretion that such a level of disability insurance coverage is not
reasonably commercially available, it shall provide the Employee, at the expense of the Company,
with an Additional Supplemental Benefit (as hereinafter defined) in the event of Disability (as
hereinafter defined) for each full calendar month during which the Employee has not attained the
age of seventy (70) years and, as a result of a Disability the Employee is unable to engage in any
gainful activity. The term “Additional Supplemental Benefit” means the smallest amount determined
by the Company in its sole discretion necessary to compensate the Employee, after the Employee’s
receipt of any offered insured disability benefits, and Employee’s payment of any state, federal,
and local income taxes on such Additional Supplemental Benefit, in an amount equal to one-twelfth
of sixty-five percent 65% of the Employee’s Base Salary as in effect on the date of the onset of
the Disability. The term “Disability” means any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, as a result of which the Employee is unable to engage in any
substantial gainful activity.

     (f) Paid Vacations. The Employee shall be entitled to annual paid vacations of six
(6) weeks in each year of the Term and any extension of the Term at such times and for such periods
as may be mutually acceptable to the Company and the Employee, in accordance with the Company’s
policies governing vacations for its executive officers generally. Unused

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vacation in any given year shall not accumulate from year to year and Employee shall not be
entitled to any cash payment for, or payment in lieu of, unused vacation time.

     (g) Paid Holidays and Personal Days. The Employee shall be entitled to all paid
holidays and personal days, in accordance with the Company’s policies governing holidays and
personal days for its executive officers generally.

     (h) Deductions. The Company shall have the right to deduct from the Base Salary and
all other cash amounts payable by the Company under the provisions of this Agreement to the
Employee or, if applicable, to the Employee’s estate, legal representatives or other beneficiary
designated in writing by the Employee (a “Designee”), all social security taxes, all federal, state
and municipal taxes and all other charges and deductions which now or hereafter are imposed by law
as charges on the compensation of the Employee or charges on cash benefits payable by the Company
under this Agreement to the Employee’s estate, legal representatives or Designee.

     (i) Retention. As an incentive to encourage Employee not to resign from employment
with the Company, and provided that Employee remains an active employee of the Company through and
including August 29, 2008, on August 29, 2008 the Company shall pay Employee the gross amount of
$300,000 (the “Retention Amount”). If Employee’s employment shall end at any time, for any reason,
before August 29, 2008, except as expressly provided in Sections 9(b) and 9(f) of this Agreement,
Employee shall not be entitled to the Retention Amount.

     4. Reimbursement of Certain Expenses. The Company shall reimburse the Employee, upon
production of accounts and vouchers or other reasonable evidence of payment by the Employee, all in
accordance with the Company’s regular procedures in effect from time to time and in form suitable
to establish the validity and deductibility of such expenses for tax purposes, all reasonable,
ordinary and necessary travel, automobile and other expenses as shall have been incurred by the
Employee in the performance of the Employee’s duties under this Agreement; provided, however, that
with respect to any such payments by the Employee on and after January 1, 2005, no such
reimbursement will be made after the last day of the calendar year following the year in which the
expense was incurred.

     5. Non-competition.

     (a) Non-competition. Through the date on which the Employee’s employment with the
Company is terminated (the “Termination Date”) and, in the event that the Employee’s employment
with the Company is terminated other than (i) by the Company pursuant to Section 9(b) (termination
by the Company without Good Cause) or (ii) by the Employee pursuant to Section 9(f) (termination by
the Employee following a Change of Control), for one year following the Termination Date, the
Employee will not directly or indirectly, engage in the business of, or own or control an interest
in (except as a passive investor owning less than one percent (1%) of the equity securities of a
publicly-owned company), or act as director, officer or employee of, or consultant to, any
individual, partnership, joint venture, corporation or other

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business entity directly or indirectly engaged anywhere in the United States in any Business
(as hereinafter defined) competing with the business then being carried on by the Company or its
subsidiaries or contemplated by the Company or its subsidiaries to the extent included within the
definition of “Business.” In the event any of the provisions of this Section 5(a) are
unenforceable by law, then the restrictions shall be for such period and such geographic area as a
court shall find is necessary to protect the Company. The provisions of this Section 5(a) shall no
longer be enforceable in the event the Company either files for bankruptcy or other protection from
creditors (which filing is not dismissed within 180 days) or advises its shareholders in a press
release and in a filing with the Securities and Exchange Commission that it is ceasing to operate
as an ongoing business.

     (b) Business. The term “Business” as used in this Section 5 shall mean (i) acquiring
and holding single family mortgage loans, (ii) originating, selling and servicing multifamily and
commercial real estate loans, (iii) offering due diligence services to buyers, sellers and holders
of mortgages, (iv) securitizing the mortgage loans and retaining interests therein, (v) purchasing
mortgage asset investments in the secondary mortgage market, (vi) managing such portfolios, (vii)
any other business in which the Company or any subsidiary is engaged on the Termination Date, and
(viii) any other business in which the Company or any subsidiary is actively planning to become
engaged on the Termination Date, and in connection with the planning of which the Employee has had
significant involvement.

     (c) Employee Representation. The Employee represents to the Company (i) that the
Employee is not subject to any employment agreement as of the Effective Date, nor has the Employee
previously, at any time, entered into any written agreement with any person, firm or corporation,
which would or could preclude or prevent the Employee from entering into this Agreement or which
requires the consent of any other party, and (ii) that as of the Effective Date, neither the
Company nor any of its subsidiaries has any financial or other obligation to the Employee except
as set forth on Exhibit A. The Employee agrees to indemnify the Company and each of its
officers, directors and controlling persons against any claim, loss, liability or expense
(including reasonable counsel’s fees and costs) incurred by the Company or its officers, directors
and controlling persons arising out of or in connection with any misrepresentation made by the
Employee under this Agreement.

     6. Confidentiality.

     (a) Obligation to Keep Confidential. The Employee acknowledges that the Employee’s
employment by the Company brings the Employee into close contact with many confidential affairs of
the Company, its subsidiaries and its customers, including, without limitation, information about
costs, profits, markets, sales, key personnel, pricing policies, operational methods, concepts,
and other business affairs and methods of the Company, its subsidiaries and its customers and
other information not readily available to the public, as well as plans for future developments
(collectively referred to hereinafter as “Proprietary Information”). The Employee further
acknowledges that the relationships between the Company, its subsidiaries and its officers,
employees, agents, and customers constitute a

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valuable asset of the Company (the “Other Proprietary Assets”). In recognition of the
foregoing, the Employee covenants and agrees:

               (i) That all Proprietary Information and Other Proprietary Assets shall be the exclusive
property of the Company and that the Employee will keep secret all Proprietary Information and
Other Proprietary Assets and will not use the same for the Employee’s own benefit or disclose the
same to, or use the same for the benefit of, anyone outside of the Company, either during or after
the Employee’s employment by the Company; and

               (ii) That Employee will deliver promptly to the Company on termination of Employee’s
employment by the Company, or at any time the Board may so request, all Proprietary Information
and Other Proprietary Assets, including, without limitation, all memoranda, notes, documentation,
data, records, reports and other tangible manifestations of the Proprietary Information and Other
Proprietary Assets (and all copies thereof), that Employee may then (or thereafter) possess or
have under the Employee’s control.

     (b) Exceptions. The Employee’s undertakings and obligations under this Section 6
will not apply to any Proprietary Information or Other Proprietary Asset which (i) is or becomes
generally known to the public through no action on the part of the Employee, (ii) is generally
disclosed to third parties by the Company without restriction on such third parties, (iii) is
approved for release by written authorization of the Board, or (iv) is the subject matter of a
lawful request or subpoena by and within the authority of a court or governmental agency or other
body, provided, however, no such information shall be released by Employee without Employee
providing to the Company thirty (30) days prior written notice to the Company and providing the
Company the right to seek a protective order or injunctive relief preventing the release of such
information.

     7. Non-Solicitation. The Employee hereby covenants and agrees that, if the Employee’s
employment with the Company is terminated other than (i) by the Company pursuant to Section 9(b) or
(ii) by the Employee pursuant to Section 9(f), the Employee will not, for one year following the
Termination Date, induce or attempt to induce any officer, employee, agent, consultant or customers
of the Company or its subsidiaries to discontinue such affiliation with the Company or its
subsidiaries or to refrain from entering into new business relationships with the Company or its
subsidiaries.

     8. Specific Performance. Without intending to limit the remedies available to the
Company, the Employee agrees that damages at law will be an insufficient remedy to the Company in
the event that the Employee violates the terms of Section 5, 6 or 7 of this Agreement and that the
Company may apply for and obtain immediate injunctive relief in any court of competent jurisdiction
or restrain the breach or threatened breach of, or otherwise to specifically enforce, any of the
agreements and covenants contained in such Sections. The parties hereto understand that each of
the agreements and covenants of the Employee contained in Sections 5, 6 and 7 of this Agreement is
an essential element of this Agreement and agree that the obligations of the Employee thereunder
will survive the termination of this Agreement.

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     9. Termination.

     (a) Termination by the Company for Good Cause. The Company may terminate this
Agreement and its obligations to the Employee under this Agreement, and thereby terminate
Employee’s employment, at any time for “Good Cause”, which shall mean only: (i) the conviction of
the Employee of (or the plea by the Employee of nolo contendere to) a felony or any
crime which involves moral turpitude; (ii) the good faith determination by the Board that the
Employee has failed to perform a material amount of Employee’s duties under this Agreement (other
than a failure to perform duties resulting from the Employee’s incapacity due to physical or mental
illness), which failure to perform duties shall not have been cured within thirty (30) days after
the receipt by the Employee of written notice thereof from the Board specifying with reasonable
particularity such alleged failure; (iii) any absence from the Company’s regular full-time
employment in excess of three consecutive days that is not due to a vacation, participation in a
permitted activity, bona fide illness, disability, death or other reason expressly authorized by
the Board in advance; (iv) any act or acts of personal dishonesty (including, without limitation,
any insider trading or unauthorized trading in the Company’s securities) by the Employee; (v) the
violation of Employee’s fiduciary duties to the Company, or the violation of any law, statute or
regulation relating to the operation of the Company’s business; or (vi) misconduct that impairs
Employee’s ability effectively to perform the duties or responsibilities of Employee’s position.
In the event of such termination, the Employee shall only be entitled to receive any unreimbursed
expenses payable pursuant to Section 4 above that were properly incurred prior to Employee’s
termination of employment. In addition, if the Company terminates this Agreement due to the
conviction of the Employee of (or the plea by the Employee of nolo contendere to) a
felony as a result of (iv) above, then Employee will pay all costs and expenses (including
reasonable attorney’s fees) incurred by the Company in connection therewith.

     (b) Termination by the Company Without Good Cause. In the event the Company
terminates this Agreement prior to the Expiration Date, and thereby terminates the Employee’s
employment, without Good Cause, then subject to the conditions set forth in Section 9(h), the
Employee shall be entitled to the following benefits:

          (i) If the termination of Employee’s employment is an “Involuntary Termination” as defined in
Section 9(b)(v):

               (A) If the effective date of the termination is before August 29, 2008, the Company shall pay
the Employee (I) a payment (“the Separation Payment”), in a single lump sum on or before the
sixtieth day next following the date of Employee’s “separation from service” (as defined in Section
9(h) below), equal to the lesser of: (a) the Severance Limit, or (b) the greater of either: (x) the
Retention Amount plus the Base Salary Amount (as defined in Section 9(b)(vi) below) or (y) the
Retention Amount plus Employee’s Base Salary at the rate then in effect through the Expiration
Date; and, if Employee’s Severance Compensation is not fully paid out pursuant to clause (I), then
(II), as a separate payment from the Separation Payment, payment, in the form of salary
continuation, beginning on the first regular payroll date next following the first day that is six
months after the date of Employee’s separation from

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service, of the greater of either: (x) the Retention Amount plus the Base Salary Amount, minus the
amount paid pursuant to clause (I) above; or (y) the Retention Amount plus Employee’s Base Salary
at the rate then in effect through the Expiration Date minus the amount paid pursuant to clause (I)
above; or

               (B) If the effective date of the termination is on or after August 29, 2008, the Company shall
pay the Employee (I) a payment (“the Separation Payment”), in a single lump sum on or before the
sixtieth day next following the date of Employee’s “separation from service” (as defined in Section
9(h) below), equal to the lesser of: (a) the Severance Limit, or (b) the greater of either: (x) the
Base Salary Amount; or (y) Employee’s Base Salary at the rate then in effect through the Expiration
Date; and, if Employee’s Severance Compensation is not fully paid out pursuant to clause (I), then
(II), as a separate payment from the Separation Payment, payment, in the form of salary
continuation, beginning on the first regular payroll date next following the first day that is six
months after the date of Employee’s separation from service, of the greater of either: (x) the Base
Salary Amount, minus the amount paid pursuant to clause (I) above; or (y) Employee’s Base Salary at
the rate then in effect through the Expiration Date minus the amount paid pursuant to clause (I)
above; or

          (ii) If the termination of the Employee’s employment is not an Involuntary Termination,
beginning on the first regular payroll date next following the first day that is six months after
the date of Employee’s separation from service and in the manner provided in Section 9(i), the
Company shall pay the Employee: in a lump sum, the Retention Amount (only if the effective date of
the termination is before August 29, 2008); and in the form of salary continuation, the greater of
either: (x) the Base Salary Amount; or (y) Employee’s Base Salary at the rate then in effect
through the Expiration Date.

          (iii) In any of the circumstances described in Sections 9(b)(i) or 9(b)(ii), the Company
shall pay the Employee for any unreimbursed expenses payable pursuant to Section 4 above that were
properly incurred prior to the Employee’s termination of employment, to the extent such expenses
would have been reimbursable pursuant to Section 4 above.

          (iv) As used in this Agreement, the term “Severance Limit” means the lesser of twice the
lesser of: (A) the sum of the Employee’s annualized compensation based upon the annual rate of pay
for services provided to the Company for the taxable year of the Employee’s preceding the taxable
year of the Employee in which the Employee has a separation from service with the Company
(adjusted for any increase during that year that was expected to continue indefinitely if the
Employee had not separated from service); or (B) the maximum amount that may be taken into account
under a qualified plan pursuant to Code § 401(a)(17) for the year in which the Employee has a
separation from service.

          (v) As used in this Agreement, the term “Involuntary Termination” means a separation from
service that satisfies one of the following sets of criteria: (I) it results from a Termination by
the Company Without Good Cause pursuant to Section 9(b) or a Termination Upon or Following
Expiration of This Agreement pursuant to Section 9(g), and the termination is due to the
independent exercise of the Company’s unilateral authority to terminate the

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Employee’s services, other than due to the Employee’s implicit or explicit request, where the
Employee was willing and able to continue performing services; provided, however, that in the case
of a Termination Upon or Following Expiration of This Agreement pursuant to Section 9(g), the
separation from service is an Involuntary Termination only if it satisfies the additional condition
that the Executive was willing and able to execute a new contract providing terms and conditions
substantially similar to those in the expiring Agreement and to continue providing services as
described in the expiring Agreement; or (II) the separation from service results from a Termination
By Employee Following Change in Control as described in Section 9(f) that satisfies all the
criteria for the payment of the benefits described in 
9(f).

          (vi) As used in this Section 9(b) of the Agreement, the term “Base Salary Amount” means one
times Employee’s Base Salary at the rate then in effect. Provided, however, that if Employee’s
Termination by the Company Without Good Cause occurs within 90 days following a Change in Control
(as defined in Section 9(f)(iv) below), the Base Salary Amount shall mean two times Employee’s
Base Salary at the rate then in effect.

          (vii) In the event that the Employee shall obtain other full-time or part-time employment or
consulting work during the one year period following the Termination Date, unless the termination
occurred within 90 days following a Change in Control, the amount of payments Employee receives
from such employment or work shall be credited against the amount that the Company is obligated to
pay Employee during such period pursuant to this Section 9(b). The Employee shall be under no
obligation to obtain such other employment or work, but if the Employee shall, the Employee shall
promptly give written notice to the Company of the salary and fringe benefits provided to the
Employee in connection with such other employment or work, in order that the amount of such credit
may be determined.

     (c) Termination by the Employee Without Cause. Notwithstanding the provisions of
Section 1, the Employee may resign from the Company at any time upon ninety (90) days prior
written notice to the Company. In the event of resignation by the Employee under this Section
9(c), the Board in its sole discretion may elect to waive the period of notice, or any portion
thereof, and, in such event, the Company will pay the Employee’s salary for the notice period (or
for any remaining portion of the period) provided the Employee continues to be employed during
that period. From and after the effective date of such termination by the Employee of Employee’s
employment under this Agreement, the Company shall have no further liability to the Employee for
salary or other compensation, except for any unreimbursed expenses payable pursuant to Section 4
above that were properly incurred prior to the Employee’s termination of employment, to the extent
such expenses would have been reimbursable pursuant to Section 4 above, and as provided pursuant
to the terms of any compensation or benefit plan of the Company in which the Employee is a
participant.

     (d) Termination upon Disability of Employee. The Company may terminate this
Agreement, and thereby terminate Employee’s employment, upon the Disability (as defined below) of
the Employee, in which event the Employee shall be entitled to receive, in full satisfaction of
all obligations due to the Employee by the Company under this Agreement, (i) the Employee’s Base
Salary then in effect while such Disability continues until the date upon

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which any disability benefits pursuant to the disability insurance policy provided for in
Section 3(e)(ii) or any Additional Supplemental Benefits provided for in Section 3(e)(ii)
commence (but in no event more than two (2) months); and (ii) any properly incurred
unreimbursed expenses incurred prior to the Employee’s termination of employment, to the extent
such expenses would have been reimbursable pursuant to Section 4 above. For purposes of this
Section 9(d), from and after January 1, 2005, the Employee will be considered to have a
“Disability” only if the Employee meets one of the following requirements: (A) the Employee is
unable to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months; or (B) the Employee is, by reason of any
medically determinable physical or mental impairment that can be expected to result in death or
can be expected to last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an accident and health plan
covering employees of the Company.

     (e) Termination upon Death of Employee. This Agreement shall terminate upon the
death of the Employee, in which event the Employee’s estate, legal representatives or Designee
shall be entitled to receive, in full satisfaction of all obligations due to the Employee by the
Company hereunder, (i) the Employee’s Base Salary through the last day of the month of death; (ii)
the proceeds of the insurance policy or policies maintained on the Employee’s life, pursuant to
Section 3(e) hereof; and (iii) any unreimbursed expenses payable pursuant to Section 4 above that
were properly incurred prior to the Employee’s termination of employment, to the extent such
expenses would have been reimbursable pursuant to Section 4 above.

     (f) Termination By Employee Following Change of Control. Notwithstanding Section
9(c) above, in the event that Employee experiences a Significant Adverse Action (as hereafter
defined) at any time within 90 days following a Change of Control (as hereinafter defined), and
Employee notifies the Company in writing within 30 days of the date on which the Significant
Adverse Action first occurred, and the Company fails to cure the Significant Adverse Action within
30 days of receipt of such notice, then the Employee may terminate the Employee’s employment on
or within 15 days after the thirtieth day of the Company’s failure to cure the Significant Adverse
Action of which the Employee gave such written notice. In the event Employee terminates the
Employee’s employment with the Company under the conditions described in this Section 9(f), and
the conditions of Section 9(h) are met, such termination shall be treated as a termination
pursuant to this Section 9(f) rather than Section 9(c), and:

          (i) if the effective date of the termination is before August 29, 2008, the Company shall pay
the Employee (A) a payment (“the Separation Payment”), in a single lump sum on or before the
sixtieth day next following the date of Employee’s “separation from service” (as defined in Section
9(h) below), equal to the lesser of: (I) the Severance Limit, or (II) the greater of either: (x)
the Retention Amount plus two times Employee’s Base Salary at the rate then in effect or (y) the
Retention Amount plus Employee’s Base Salary at the rate then in effect through the Expiration
Date; and, if Employee’s Severance Compensation is not fully paid out pursuant to clause (A), then
(B), as a separate payment from the Separation Payment, payment,

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in the form of salary continuation, beginning on the first regular payroll date next following
the first day that is six months after the date of Employee’s separation from service, of the
greater of either: (x) the Retention Amount plus two times Employee’s Base Salary at the rate then
in effect, minus the amount paid pursuant to clause (A) above; or (y) the Retention Amount plus
Employee’s Base Salary at the rate then in effect through the Expiration Date minus the amount paid
pursuant to clause (A) above;

          (ii) if the effective date of the termination is on or after August 29, 2008, the Company
shall pay the Employee (A) a payment (“the Separation Payment”), in a single lump sum on or before
the sixtieth day next following the date of Employee’s “separation from service” (as defined in
Section 9(h) below), equal to the lesser of: (I) the Severance Limit, or (II) the greater of
either: (x) two times Employee’s Base Salary at the rate then in effect; or (y) Employee’s Base
Salary at the rate then in effect through the Expiration Date; and, if Employee’s Severance
Compensation is not fully paid out pursuant to clause (A), then (B), as a separate payment from
the Separation Payment, payment, in the form of salary continuation, beginning on the first
regular payroll date next following the first day that is six months after the date of Employee’s
separation from service, of the greater of either: (x) two times Employee’s Base Salary at the
rate then in effect, minus the amount paid pursuant to clause (A) above; or (y) Employee’s Base
Salary at the rate then in effect through the Expiration Date minus the amount paid pursuant to
clause (A) above.

          (iii) The Employee shall also be paid for any unreimbursed expenses payable pursuant to
Section 4 above that were properly incurred prior to the Employee’s termination of employment, to
the extent such expenses would have been reimbursable pursuant to Section 4 above.

          (iv) For purposes of this Agreement, a “Change of Control” shall mean and include any of the
following:

          (A) a merger or consolidation of the Company with or into any other corporation or other
business entity (except one in which the holders of capital stock of the Company immediately prior
to such merger or consolidation continue to hold at least a majority of the outstanding securities
having the right to vote in an election of the Board of Directors (“Voting Stock”) of the
surviving corporation);

          (B) a sale, lease, exchange or other transfer (in one transaction or a related series of
transactions) of all or substantially all of the Company’s assets except in a transaction where
the Employee, an Affiliate of the Employee, or an Affiliate of the Company is the transferee. For
purposes of this Agreement, an “Affiliate” shall mean: with respect to the Employee, any other
person that directly or indirectly controls, or is controlled by, or is under common control with
the Employee; and with respect to the Company, any other corporation or business entity that
directly or indirectly controls, or is controlled by, or is under common control with, the
Company;

11

 

          (C) the acquisition by any person or any group of persons (other than the Company, any of its
direct or indirect subsidiaries, or any director, trustee, fiduciary or other person or entity
holding securities under any employee benefit plan or trust of the Company or any of its direct or
indirect subsidiaries) acting together in any transaction or related series of transactions, of
such number of shares of the Company’s Voting Stock as causes such person, or group of persons, to
own beneficially, directly or indirectly, as of the time immediately after such transaction or
series of transactions, 50% or more of the combined voting power of the Voting Stock of the
Company other than as a result of an acquisition of securities directly from the Company, or
solely as a result of an acquisition of securities by the Company
which by reducing the number of shares of the Voting Stock outstanding increases the proportionate voting power represented by the
Voting Stock owned by any such person to 50% or more of the combined voting power of such Voting
Stock; and

          (D) a change in the composition of the Company’s Board of Directors following a tender offer
or proxy contest as a result of which persons who, immediately prior to such tender offer or proxy
contest, constituted the Company’s Board of Directors shall cease to constitute at least a
majority of the members of the Board of Directors (other than by their voluntary resignations),
but only in the event that the persons elected to the Board were not supported by the Employee as
a director or shareholder.

          (v) For purposes of this Agreement, a “Significant Adverse Action” shall mean and include only
any of the following: (A) a material and substantial reduction in the Employee’s duties and
responsibilities; (B) a material reduction in Employee’s Base Salary; or (C) a relocation of
Employee’s worksite to a location more than 50 miles from that immediately before the Change in
Control.

     (g) Termination Upon or Following Expiration of this Agreement. In the event the
Employee’s employment continues through the Expiration Date, and is thereafter terminated by the
Company without Good Cause, then subject to the conditions set forth in Section 9(h), the Employee
shall be entitled to the following benefits:

          (i) If the termination of Employee’s employment is an “Involuntary Termination” as defined in
Section 9(b)(v), the Company shall pay the Employee (A) a payment (“the Separation Payment”), in a
single lump sum on or before the sixtieth day next following the date of Employee’s “separation
from service” (as defined in Section 9(h)), equal to the lesser of the Severance Limit or one times
the Employee’s Base Salary at the rate then in effect; and, if Employee’s Severance Compensation is
not fully paid out pursuant to clause (A), then (B), as a separate payment from the Separation
Payment, payment in the form of salary continuation, beginning on the first regular payroll date
next following the first day that is six months after the date of Employee’s separation from
service, of one times the Employee’s Base Salary at the rate then in effect, minus the amount paid
pursuant to clause (A) above (“the Remainder Amount”) until the Remainder Amount is fully paid; or

          (ii) If the termination of the Employee’s employment is not an Involuntary Termination, the
Company shall pay the Employee, in the form of salary continuation, beginning

12

 

on the first regular payroll date next following the first day that is six months after the
date of Employee’s separation from service, one times the Employee’s Base Salary at the rate then
in effect in the manner provided in Section 9(i); and, in either of the circumstances described in
Sections 9(g)(i) or 9(g)(ii);

          (iii) The Company shall pay the Employee for any unreimbursed expenses payable pursuant to
Section 4 above that were properly incurred prior to the Employee’s termination of employment, to
the extent such expenses would have been reimbursable pursuant to Section 4 above.

               (h) Further Conditions of Severance. From and after January 1, 2005, no compensation shall be
payable under Section 9 of this Agreement as the result of the Employee’s termination of employment
with the Company (“Severance Compensation”) unless such termination (standing alone or in
conjunction with the cessation of the Employee’s membership on the Board of Directors of the
Company) constitutes a “separation from service” (within the meaning of that phrase in Treas. Reg.
§ 1.409A-1(h)) from the Company and all persons with whom the Company would be considered a single
employer under Section 414(b) of the Internal Revenue Code of 1986, as amended (“the Code”), and
all persons with whom the Company would be considered a single employer under Code Section 414(c).
The receipt by Employee of any payment of Severance Compensation under this Agreement payable on or
after the sixtieth day following the Employee’s termination of employment shall be conditioned upon
all of the following, and any such payment shall be forfeited if such conditions are not met on or
before the due date for such payment: (i) Employee tendering a resignation for all positions held
by Employee as a member of the Board or of the board of directors of any Affiliate; (ii) Employee’s
having been in compliance with all the material terms of this Agreement; (iii) the execution by
Employee, after the date of Employee’s termination from employment and within 21 days of its first
presentation to the Employee by the Company, of a confidential Separation Agreement and General
Release(which will be substantially in the form attached hereto as Exhibit B); and (iv) the
confidential Separation Agreement and General Release becoming effective in accordance with its
terms; provided, however, that the condition specified in this Section 9(h)(iii) and in Section
9(h)(iv) shall not apply unless such Separation Agreement and General Release has been provided to
the Employee by the Company after and within 30 days of Employee’s termination of employment.

     (i) Delay in Commencement of Payments of Severance Compensation. Effective January 1, 2005,
if on the date of the Employee’s separation from service, as defined above, the Employee is a
“specified employee” (as defined below) of the Company or of any person with whom the Company would
be considered a single employer under Section 414(b) of the Code, and all persons with whom the
Company would be considered a single employer under Code Section 414(c), then no amount other than
a Separation Payment shall be paid as Severance Compensation under this Agreement until the first
regular payroll date of the Company that is at least six months after the Employee’s separation
from service, as so defined (the “Specified Employee Payment Date”), whereupon all payments of
Severance Compensation that would have become due prior to the Specified Employee Payment Date but
for the operation of this Section 9(i) shall be paid on the Specified Employee Payment Date. An
amount of Severance

13

 

Compensation, the payment of which has been delayed under this Section 9(i), will not be payable on
the Specified Employee Payment Date unless the conditions precedent set forth in Section 9(h) have
been satisfied as of the Specified Employee Payment Date. The term “specified employee” means a
“specified employee” as defined in Treas. Reg. § 1.409A-1(i).

     10. Indemnification. To the fullest extent permitted by law and in addition to any
other rights permitted or granted under the Company’s articles of incorporation, by-laws, or any
policy of insurance, or by law, the Company shall indemnify the Employee if the Employee is made a
party, or threatened to be made a party, to any threatened, pending or contemplated action, suit
or proceeding, whether civil, administrative or investigative, by reason of the fact that the
Employee is or was an employee, officer or director of the Company or any subsidiary of the
Company, in which capacity the Employee is or was serving at the Company’s request in accordance
with the terms of this Agreement, against any and all costs, losses, damages, judgments,
liabilities and expenses (including reasonable attorneys’ fees) which may be suffered or incurred
by him in connection with any such action, suit or proceeding; provided, however,
that, there shall be no indemnification in relation to matters as to which the Employee is
adjudged to have been guilty of fraud, bad faith, gross negligence, breach of fiduciary duty or as
a result of the Employee’s material breach of this Agreement; provided, however,
that all of such costs shall be paid by insurance, to the extent such coverage exists.

     11. Entire Agreement; Amendment and Waiver. This Agreement is the entire agreement
between the parties with respect to the subject matter hereof and supersedes any and all prior or
contemporaneous oral and prior written agreements and understandings. There are no oral promises,
conditions, representations, understandings, interpretations or terms of any kind as conditions or
inducements to the execution of this Agreement or in effect among the parties. No custom or trade
usage, nor course of conduct among the parties, shall be relied upon to vary the terms of this
Agreement. This Agreement may not be amended, and no provision of this Agreement shall be waived,
except by writing signed by all the parties to this Agreement, which states that it is intended to
amend or waive a specifically identified provision of this Agreement. Any waiver of any rights or
failure to act in a specific instance shall relate only to such instance and shall not be
construed as an agreement to waive any rights or failure to act in any other instance, whether or
not similar. All amendments or waivers on behalf of the Company shall have first been approved by
the non-employee members of the Board.

     12. Severability. Should any provision of this Agreement be unenforceable or
prohibited by any applicable law, this Agreement shall be considered divisible as to such
provision which shall be inoperative, and the remainder of this Agreement shall be valid and
binding as though such provision were not included in this Agreement.

     13. Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original. It shall not be necessary when making proof of this
Agreement to account for more than one counterpart.

     14. Headings. All headings in this Agreement are for convenience only
and shall not

14

 

affect the meaning of any provision in this Agreement.

     15. Successors and Assigns. This Agreement shall inure to the benefit of, and be
binding upon, the Company and any corporation with which the Company merges or consolidates or to
which the Company sells all or substantially all of its assets, and upon the Employee and the
Employee’s executors, administrators, heirs and legal representatives. This Agreement may not be
assigned by the Employee, and from and after January 1, 2005, the Employee may not assign, pledge,
hypothecate, transfer, give as collateral or encumber any right to payments of any Severance
Compensation hereunder, and any attempt to do so shall be wholly void.

     16. Governing Law and Venue. This Agreement shall be construed and enforced in
accordance with the laws of the State of New Jersey, without reference to the conflict of laws
principles thereof. To the extent that either party is permitted to file any action in court that
involves any aspect of this Agreement, or arises out of, or is related to or connected with
Employee’s employment, compensation or benefits, or the termination thereof, the parties agree
that such action must be brought in either federal court in the State of New Jersey, or in the
Superior Court of New Jersey, Middlesex County, and the parties irrevocably consent to
jurisdiction and venue in such courts.

     17. Section 409A. This Agreement shall be interpreted and applied to the full extent
possible to comply with Code Section 409A(a)(2)-(4) and any Treasury Regulations or other guidance
of general applicability issued pursuant thereto. Without limiting the generality of the
immediately preceding sentence: (a) every provision of this Agreement that by its terms is made
effective from and after January 1, 2005, shall be deemed to have amended the Prior Agreement,
effective as of January 1, 2005, to the full extent necessary to cause the Prior Agreement to have
complied in form with the requirements of Code Section 409A(a)(2)-(4) and any Treasury Regulations
or other guidance of general applicability issued pursuant thereto; (b) Section 9(d) of the Prior
Agreement (relating to termination by the Employee following loss of Board seat) is hereby stricken
effective January 1, 2005; (c) the provisions of Section 9(f) of the Agreement (relating to
termination in the event of a Significant Adverse Action following a change in control) shall be
deemed to have been substituted for the provisions of Section 9(g) of the Prior Agreement (relating
to termination following a change in control), effective as of January 1, 2005; and (d) the
provisions of Section 3(h) of the Prior Agreement (relating to club dues) shall be deemed to have
been amended, effective as of January 1, 2005, to provide as follows.

     “(h) Club Dues. The Company shall pay all membership dues owed
to clubs (as selected by the Employee), not to exceed $2,500 per
year, provided, however, that with respect to any such payments by
the Employee on and after January 1, 2005, no such reimbursement
will be made after the last day of the calendar year following the
year in which the expense was incurred;”

and Section 3(h) of the Prior Agreement, as so amended, is stricken effective as of the Effective
Date.

15

 

     18. Notices. All notices under this Agreement shall be in writing and shall be sent
to the parties at the following addresses:

	 	 	 
	If to the Employee, to:

	 	John A. Burchett
	 

	 	896 Highland Avenue
	 

	 	Westfield, New Jersey 07090
	 
	 	 
	If to the Company, to:

	 	Hanover Capital Mortgage Holdings, Inc.
	 

	 	200 Metroplex Drive, Suite 100
	 

	 	Edison, New Jersey 08817
	 
	 	 
	 

	 	Attn:   Chairman of Compensation Committee of the Board of Directors

All notices shall be delivered in person or given by registered or certified mail postage prepaid,
and shall be deemed to have been given when delivered in person or deposited in the United States
mail. Either party may designate any other address to which notice shall be given, by giving
written notice to the other of such change of address in the manner herein provided.

{Signatures appear on next page}

16

 

IN WITNESS WHEREOF, the Employee has executed this Agreement and the Company has caused this
Agreement to be executed by a duly authorized officer as of the 26th day of November,
2007.

	 	 	 	 	 	 	 
	 	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	HANOVER CAPITAL MORTGAGE HOLDINGS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Suzette Berrios
 

	 	 
	 

	 	 	 	     Name: Suzette Berrios	 	 
	 

	 	 	 	     Title: General Counsel	 	 
	 
	 	 	 	 	 	 
	 	 	EMPLOYEE:	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ John A. Burchett	 	 
	 	 	 	 	 
	 

	 	 	 	      John A. Burchett	 	 

17

 

EXHIBIT A

Financial and Other Obligations to the Employee

by the Company or any of its Subsidiaries as of the Effective Date

None

John A. Burchett

 

 

EXHIBIT B

Separation Agreement and General Release

By mutual agreement John A. Burchett (“Employee”) and Hanover Capital Mortgage Holdings, Inc.
(“Company”) (collectively the “Parties”) have agreed to enter into this Separation Agreement and
General Release (“General Release”) in connection with Employee’s Amended and Restated Employment
Agreement effective July 1, 2007 (the “Employment Agreement”) and the receipt by Employee of any
severance payments after Employee’s termination of employment.

	1.	 	Employee and the Company have entered into this General Release as a way of amicably settling
any potential dispute that has developed or may in the future develop concerning Employee’s
employment with the Company, Employee’s termination therefrom or from any corporation or other
business entity that directly or indirectly controls, or is controlled by, or is under common
control with, the Company (“Affiliate”), and any claim that the Company or any Affiliate has
acted unlawfully, fraudulently, negligently, recklessly, maliciously or breached the terms of
any contract, including but not limited to the Employment Agreement, or any other promise,
obligation, duty, policy, practice, law or regulation. The execution date of this General
Release shall be after Employee’s termination of employment and prior to Employee’s receipt of
any severance payments from the Company.

	2.	 	In consideration for the Company entering into the Employment Agreement and for the severance
payments which Employee shall receive following Employee’s termination of employment and
execution of this General Release, Employee on behalf of Employee, Employee’s heirs and
assignees, hereby irrevocably and unconditionally releases and forever discharges,
individually and collectively, the Company, its Affiliates, and each of their respective
officers, directors, employees, shareholders, representatives, agents, predecessors,
successors, assigns, and all persons acting by, through or in concert with them (hereinafter
the “Released Parties”) of and from any and all charges, claims, complaints, demands,
liabilities, causes of action, losses, costs and expenses of any kind whatsoever (including
any attorneys’ fees and costs) known or unknown, suspected or unsuspected, that Employee may
now have or has ever had against any of the Released Parties by reason of any act, omission,
transaction, or event occurring up to the date of Employee’s execution of this General
Release. Such release and discharge includes, without limitation, any wrongful, unlawful or
constructive termination or discipline claim, any claims relating to any contracts of
employment, whether express or implied, any claims related to compensation, including short
term, long term, or Employee incentive plans, retention plans, equity or stock option plans,
401(k) plans, and any other compensation or benefit plans in which Employee participated or
was entitled to participate. Such release and discharge further includes, without limitation,
any claims for defamation, slander, libel, invasion of privacy, misrepresentation, fraud or
breach of any covenant of good faith and fair dealing, infliction of emotional distress, or
any other claims related to Employee’s employment with the Company or its Affiliate and the
termination thereof. Such release and discharge further applies to, but is not limited to,

 

 

	 	 	any claims based on Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991,
the Age Discrimination in Employment Act of 1967, the Older Workers’ Benefit Protection Act,
the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of
1974, Employee Order 11246, the U.S. Constitution, the New Jersey Law Against
Discrimination, the New Jersey Conscientious Employee Protection Act, the New Jersey Family
Leave Act, and any other applicable federal, state or local laws, ordinances and regulations
to the fullest extent permitted by law. Employee has not filed any complaints, claims or
actions against any of the Released Parties with any federal, state or local court or agency
or any arbitration or mediation entity. Employee further agrees not to bring, continue or
maintain any claim or legal or arbitration proceeding against any of the Released Parties
before any court, agency, arbitration or mediation entity or in any other forum by reason of
any of the matters hereby released and discharged. If any court, agency or arbitration or
mediation entity assumes jurisdiction of any complaint or claim against any of the Released
Parties, Employee shall direct the withdrawal or dismissal of the case or claim with
prejudice. However, this General Release shall not be construed to prohibit Employee from
filing a charge or complaint with the Equal Employment Opportunity Commission or state or
local human rights agency charged with enforcing workplace discrimination laws, except that
Employee agrees to waive any right to monetary recovery should any federal, state or local
administrative agency pursue any claims on Employee’s behalf arising out of or relating to
Employee’s employment with and/or separation from employment with the Company.

	3.	 	Employee understands and agrees that Employee is waiving all actions, claims, and grievances,
whether actual or potential, known or unknown, against the Released Parties recited in
Paragraph 2 hereof or otherwise arising from Employee’s employment with the Company or its
Affiliates, the termination thereof or any other conduct occurring on or prior to the date of
Employee’s execution of this General Release. All such claims are forever barred by this
General Release whether they arise in contract, tort or upon a statute, law, regulation, or
order. Employee hereby waives Employee’s rights under any law that limits a general release
to claims that are known to exist at the date of this General Release. The final release of
all claims by Employee against the Released Parties constitutes a material part of the
consideration flowing from Employee under the Employment Agreement, and the Released Parties
as well as their officers, directors, employees, shareholders, representatives, agents,
predecessors, successors, assigns, and all persons acting by, through or in concert with them
are the intended beneficiaries of this consideration. It is expressly understood and agreed
by the parties that this General Release is in full accord, satisfaction and discharge of any
and all doubtful and disputed claims by Employee against any of the Released Parties and that
this General Release has been signed with the express intent of extinguishing all obligations
as herein described. Provided, however, that notwithstanding anything herein to the contrary,
Employee is not releasing or waiving any right to severance pay under the Employment
Agreement.
	 
	4.	 	Employee agrees that Employee will keep the terms of this General Release completely
confidential and that, except as provided herein, Employee will not hereafter disclose or
publish any information concerning this General Release, any severance payments, or

 

 

	 	 	any of the matters related thereto. Employee represents that Employee has not discussed and
shall not discuss or publish any items related to this General Release, any severance
payments or any of the matters related thereto to any person, group of persons, agency,
body, commission, hearing or news or other media, including the Internet. Employee may make
such disclosures as are finally compelled by laws, provided Employee gives the Company
prompt notice of such legal process in order for the Company to have the opportunity to
object to the disclosure of such information.
	 
	5.	 	Employee agrees reasonably to cooperate with the Company in connection with any dispute,
claim, litigation or investigation by any person or entity against or involving the Company,
any Affiliate, or any of their officers, employees, agents or representatives. As part of
this agreement reasonably to cooperate, Employee agrees to speak and/or meet with the Company
and/or its representatives or counsel at and for reasonable times upon reasonable notice,
without the need for any legal proceeding or compulsory process. Employee also agrees to make
Employee available at and for reasonable times upon reasonable notice for such things as
interviews, depositions and trials. The Company agrees, to the extent permitted by legal and
ethical obligations, to reimburse Employee for reasonable expenses incurred with respect to
such cooperation, and for Employee’s time incurred in such cooperation during any period for
which Employee is not receiving severance payments. Employee further acknowledges and agrees
that the Employee shall continue to be bound by the terms of Sections 5, 6 and 7 of the
Employment Agreement and shall fully comply with the terms of that agreement.
	 
	6.	 	Employee covenants and agrees that Employee will not make any statement, written or oral, in
disparagement of the Company or any Affiliate, or any of their officers, shareholders,
directors, employees, agents or associates (including, but not limited to, negative references
to each or any of their products, services or corporate policies), to the general public
and/or to the employees, potential employees, customers, potential customers, suppliers,
potential suppliers, business partners, and/or potential business partners of the Company or
any Affiliate.
	 
	7.	 	Employee understands and agrees that Employee:

	 	a.	 	Has carefully read and fully understands all of the provisions of this General
Release;
	 
	 	b.	 	Knowingly and voluntarily agrees to all of the terms set forth in this General
Release;
	 
	 	c.	 	Knowingly and voluntarily intends to be legally bound by the same;
	 
	 	d.	 	Has been advised to consult with an attorney of Employee’s choice prior to
executing this General Release;

 

 

	 	e.	 	Waives any and all rights and claims arising under the Age Discrimination in
Employment Act, and any and all other federal, state, and local laws and regulations;
	 
	 	f.	 	Has been offered at least 21 days from Employee’s receipt of this General
Release to consider its terms;
	 
	 	g.	 	Has a full 7 days following the execution of this General Release to revoke
this General Release and has been and hereby is advised that this General Release shall
not become effective until this revocation period has expired; and
	 
	 	h.	 	Is not waiving rights or claims under the Age Discrimination in Employment Act
that may arise after the date Employee executes this General Release.

	8.	 	In the event of a breach by Employee of Employee’s obligations under the Employment
Agreement, the Company shall have the right to cease the severance payments as a partial
remedy for such breach. The cessation of such payments shall not act as a rescission of this
General Release, and shall not affect the validity of the general release of claims by
Employee, or any other obligation Employee may owe under the Employment Agreement.
	 
	9.	 	This General Release results from negotiations and compromises and shall not be deemed or
construed at any time or for any purpose as an admission of liability by the Released Parties.
	 
	10.	 	This General Release shall be governed by the laws of the State of New Jersey (without giving
effect to its conflict of laws principles) and shall inure to the benefit of the Company and
its successors and assigns. To the extent that either party is permitted to file any action
in court that involves any aspect of this General Release, the parties agree that such action
must be brought in either federal court in the State of New Jersey, or in the Superior Court
of New Jersey, Middlesex County, and the parties irrevocably consent to jurisdiction and venue
in such courts. 
	 
	11.	 	In the event any provision of this General Release is determined by a court of competent
jurisdiction to be unenforceable for any reason, the remaining provisions hereof shall remain
in full force and effect and the unenforceable provisions shall be interpreted and rewritten
to give effect to the Parties’ intentions.
	 
	12.	 	No modifications of this General Release can be made except in writing signed by Employee and
the Company’s authorized representative.

 

 

	13.	 	This General Release shall be interpreted in accordance with the plain meaning of its terms
and not strictly for or against either of the parties hereto.
	 
	14.	 	EMPLOYEE ACKNOWLEDGES AND AGREES THAT EMPLOYEE HAS BEEN ADVISED THAT THIS GENERAL RELEASE IS
A BINDING LEGAL DOCUMENT. EMPLOYEE FURTHER AGREES THAT EMPLOYEE HAS HAD ADEQUATE TIME AND A
REASONABLE OPPORTUNITY TO REVIEW THE PROVISIONS OF THIS GENERAL RELEASE, HAS BEEN ADVISED TO
SEEK LEGAL ADVICE REGARDING ALL OF ITS ASPECTS AND THAT IN EXECUTING THIS GENERAL RELEASE
EMPLOYEE HAS ACTED VOLUNTARILY AND HAS NOT RELIED UPON ANY REPRESENTATION MADE BY ANY OF THE
RELEASED PARTIES REGARDING THIS GENERAL RELEASE’S SUBJECT MATTER AND EFFECT. EMPLOYEE HAS
READ AND FULLY UNDERSTANDS THIS GENERAL RELEASE AND VOLUNTARILY AGREES TO ITS TERMS.

AGREED, UNDERSTOOD, AND INTENDING TO BE LEGALLY BOUND:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	EMPLOYEE:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	Dated:	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	ON BEHALF OF THE BOARD OF THE COMPANY:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 	 	Dated:	 	 
	 

	 	 	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	Title:exv10w9w2

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

(Irma N. Tavares)

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is by and between Hanover
Capital Mortgage Holdings, Inc., a Maryland corporation, with its offices located at 200 Metroplex
Drive, Suite 100, Edison, New Jersey 08817 (the “Company”), and Irma N. Tavares (the “Employee”),
an individual whose residence is 1260 Lenape Way, Scotch Plains, New Jersey 07076. This Agreement
is an amendment and restatement of that certain employment agreement entered into between the
Company and the Employee as of July 1, 2002 (the “Prior Agreement”), and supersedes that Prior
Agreement in all respects. Except as otherwise specified in Section 17, this Agreement is
effective as of the 1st day of July, 2007 (the “Effective Date”).

     WHEREAS, the Employee is a Member of the Board of Directors, and the Chief Operating Officer
of the Company; and

     WHEREAS, the Company desires to ensure the continued availability to the Company of the
Employee’s services, and the Employee is willing to render such services, all upon and subject to
the terms and conditions contained in this Agreement;

     NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, the
Company and the Employee agree as follows:

     1. Employment and Acceptance of Employment: Term. Upon and subject to the terms and
conditions set forth in this Agreement, the Company hereby employs the Employee as its Chief
Operating Officer or in such other management position(s) as the Board of Directors of the Company
(the “Board”) may determine from time to time, and the Employee hereby agrees to accept such
employment, for a period of three years (unless sooner terminated as hereinafter set forth) (the
“Term”) commencing on the Effective Date and ending three years thereafter (the “Expiration
Date”).

     2. Duties. It is the intention of the Company and the Employee that, subject to the
direction and supervision of the President and Chief Executive Officer, the Employee shall perform
such duties or exercise such functions as are reasonable and customary for a Chief Operating
Officer; and shall perform such other duties and have such other powers as are from time to time
assigned to Employee by the President and Chief Executive Officer or the Board. The Employee
shall also have authority to incur such obligations on behalf of the Company as may be necessary
or appropriate in the ordinary course of business as described in this Section. The Employee
agrees, during the Term and any extension of the Term, to devote the Employee’s entire business
and professional time, attention, and energies exclusively to the business of the Company and its
subsidiaries (including, without limitation, Hanover Capital Partners 2 Ltd., and Hanover Capital
Securities, Inc.) as shall be necessary, advisable or required to perform the duties of the
Employee’s positions specified in Section 1, and to

 

 

conform to the rules, regulations, instructions, personnel practices and policies of the
Company, as existing and amended from time to time by the Company or its Board. Notwithstanding
the foregoing, during the Term and any extension of the Term, the Employee may (i) serve as an
officer, director, trustee or committee member of any religious, professional, civic, charitable
or educational organization, or as a director of any corporation whose business is not competitive
with the Company or any of its subsidiaries, and (ii) engage in, and devote time and effort to,
any and all personal investments or personal business ventures (which shall in no event include
being an officer or principal shareholder of any public or private company) unrelated to the
business or affairs of the Company and its subsidiaries, in each case so long as such activities
do not materially interfere with the Employee’s obligations to the Company and its subsidiaries or
conflict in any way with the business of the Company or its subsidiaries; provided, however, that
Employee must obtain the Board’s written consent before entering into a personal business venture
or accepting a board position (other than with a subsidiary of the Company) and, when requesting
such consent, must provide the Company with any reasonably requested information concerning such
venture or position. The Company’s consent to permit Employee to serve on the board of another
organization or to enter into a business venture is not an endorsement of that other organization
or venture, nor would Employee’s subsequent activity in such other organization or venture
constitute involvement of the Company in the affairs or activities of that organization or
venture.

     3. Compensation and Benefits.

     (a) Base Salary. In consideration of the Employee’s performance of services under
this Agreement, the Company will pay to the Employee, during the first year of the Term of the
Employee’s employment under this Agreement, and the Employee agrees to accept from the Company for
the Employee’s services under this Agreement, an annual salary equal to the sum of (x) $319,625.52
(the “Base Salary”), plus (y) the Disability Insurance Supplement described below, payable on a pro
rata basis in accordance with the Company’s normal payroll practices applicable to its executive
officers, but not less often than monthly. The Disability Insurance Supplement shall be
approximately equal to the smallest amount determined by the Company in its sole discretion to be
sufficient, after the payment of state, federal, and local income taxes on such amount, to permit
Employee to pay premiums for the disability insurance coverage referred to in Section 3(e)(ii)
below, provided, however, that if during the Term such disability insurance coverage shall ever be
insufficient to provide a benefit upon total disability equal to sixty-five percent (65%) of the
Base Salary then in effect, payable until the Employee is seventy (70) years old, Employee shall
also be eligible for the Additional Supplemental Benefit described in Section 3(e)(ii) below in the
event of Disability as defined in Section 3(e)(ii). The Employee’s Base Salary shall be subject to
annual review by the Compensation Committee of the Board (the “Committee”) and may be adjusted
(upwards but not downwards) in such amounts as the Committee may determine in its sole discretion.
To that end, the Employee shall receive a performance review at least once a year from the
Committee in connection with which the Employee shall be eligible for such merit increases and
other salary adjustments as the Committee may approve or not in its sole discretion.

2

 

     (b) Bonus. In addition to the Base Salary, the Employee shall be entitled during the
Term and any extension thereof to participate in any and all bonus plans adopted by the Board or
Committee for the executive officers of the Company and its subsidiaries.

     (c) Stock Options. The Employee shall be entitled to participate in the Company’s
1997 Executive and Non-Employee Director Stock Option Plan, 1999 Equity Incentive Plan, and any and
all other equity compensation plans adopted by the Board for the employees of the Company and its
subsidiaries.

     (d) Benefits. During the Term of this Agreement and any extension thereof, the
Employee shall be entitled to participate in any medical, dental and other health benefit plans,
and to participate in any pension, bonus, profit-sharing or similar plan or program that may be
established by the Company and made available to its executive officers generally, in accordance
with the terms of such plans.

     (e) Life and Disability Insurance. During the Term and any extension thereof, the
Company shall provide to the Employee (i) at the expense of the Company a term life insurance
policy with a death benefit equal to $1,500,000 and the proceeds of which shall be payable to such
beneficiary or beneficiaries as the Employee shall designate in writing; and (ii) an offer of
disability insurance coverage, at the Employee’s expense, which shall provide the Employee with a
benefit upon total disability equal to sixty-five percent (65%) of the Base Salary then in effect,
payable until the Employee is seventy (70) years old; provided, however, that if the Company
determines in its sole discretion that such a level of disability insurance coverage is not
reasonably commercially available, it shall provide the Employee, at the expense of the Company,
with an Additional Supplemental Benefit (as hereinafter defined) in the event of Disability (as
hereinafter defined) for each full calendar month during which the Employee has not attained the
age of seventy (70) years and, as a result of a Disability the Employee is unable to engage in any
gainful activity. The term “Additional Supplemental Benefit” means the smallest amount determined
by the Company in its sole discretion necessary to compensate the Employee, after the Employee’s
receipt of any offered insured disability benefits, and Employee’s payment of any state, federal,
and local income taxes on such Additional Supplemental Benefit, in an amount equal to one-twelfth
of sixty-five percent 65% of the Employee’s Base Salary as in effect on the date of the onset of
the Disability. The term “Disability” means any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, as a result of which the Employee is unable to engage in any
substantial gainful activity.

     (f) Paid Vacations. The Employee shall be entitled to annual paid vacations of six
(6) weeks in each year of the Term and any extension of the Term at such times and for such periods
as may be mutually acceptable to the Company and the Employee, in accordance with the Company’s
policies governing vacations for its executive officers generally. Unused vacation in any given
year shall not accumulate from year to year and Employee shall not be entitled to any cash payment
for, or payment in lieu of, unused vacation time.

3

 

     (g) Paid Holidays and Personal Days. The Employee shall be entitled to all paid
holidays and personal days, in accordance with the Company’s policies governing holidays and
personal days for its executive officers generally.

     (h) Deductions. The Company shall have the right to deduct from the Base Salary and
all other cash amounts payable by the Company under the provisions of this Agreement to the
Employee or, if applicable, to the Employee’s estate, legal representatives or other beneficiary
designated in writing by the Employee (a “Designee”), all social security taxes, all federal, state
and municipal taxes and all other charges and deductions which now or hereafter are imposed by law
as charges on the compensation of the Employee or charges on cash benefits payable by the Company
under this Agreement to the Employee’s estate, legal representatives or Designee.

     (i) Retention. As an incentive to encourage Employee not to resign from employment
with the Company, and provided that Employee remains an active employee of the Company through and
including August 29, 2008, on that date the Company shall pay Employee the gross amount of $200,000
(the “Retention Amount”). If Employee’s employment shall end at any time, for any reason, before
August 29, 2008, except as expressly provided in Sections 9(b) and 9(f) of this Agreement, Employee
shall not be entitled to the Retention Amount.

     4. Reimbursement of Certain Expenses. The Company shall reimburse the Employee, upon
production of accounts and vouchers or other reasonable evidence of payment by the Employee, all in
accordance with the Company’s regular procedures in effect from time to time and in form suitable
to establish the validity and deductibility of such expenses for tax purposes, all reasonable,
ordinary and necessary travel, automobile and other expenses as shall have been incurred by the
Employee in the performance of the Employee’s duties under this Agreement; provided, however, that
with respect to any such payments by the Employee on and after January 1, 2005, no such
reimbursement will be made after the last day of the calendar year following the year in which the
expense was incurred.

     5. Non-competition.

     (a) Non-competition. Through the date on which the Employee’s employment with the
Company is terminated (the “Termination Date”) and, in the event that the Employee’s employment
with the Company is terminated other than (i) by the Company pursuant to Section 9(b) (termination
by the Company without Good Cause) or (ii) by the Employee pursuant to Section 9(f) (termination by
the Employee following a Change of Control), for one year following the Termination Date, the
Employee will not directly or indirectly, engage in the business of, or own or control an interest
in (except as a passive investor owning less than one percent (1%) of the equity securities of a
publicly-owned company), or act as director, officer or employee of, or consultant to, any
individual, partnership, joint venture, corporation or other business entity directly or indirectly
engaged anywhere in the United States in any Business (as hereinafter defined) competing with the
business then being carried on by the Company or its subsidiaries or contemplated by the Company or
its subsidiaries to the extent included within the definition of “Business.” In the event any of
the provisions of this Section 5(a) are

4

 

unenforceable by law, then the restrictions shall be for such period and such geographic area
as a court shall find is necessary to protect the Company. The provisions of this Section 5(a)
shall no longer be enforceable in the event the Company either files for bankruptcy or other
protection from creditors (which filing is not dismissed within 180 days) or advises its
shareholders in a press release and in a filing with the Securities and Exchange Commission that it
is ceasing to operate as an ongoing business.

     (b) Business. The term “Business” as used in this Section 5 shall mean (i) acquiring
and holding single family mortgage loans, (ii) originating, selling and servicing multifamily and
commercial real estate loans, (iii) offering due diligence services to buyers, sellers and holders
of mortgages, (iv) securitizing the mortgage loans and retaining interests therein, (v) purchasing
mortgage asset investments in the secondary mortgage market, (vi) managing such portfolios, (vii)
any other business in which the Company or any subsidiary is engaged on the Termination Date, and
(viii) any other business in which the Company or any subsidiary is actively planning to become
engaged on the Termination Date, and in connection with the planning of which the Employee has had
significant involvement.

     (c) Employee Representation. The Employee represents to the Company (i) that the
Employee is not subject to any employment agreement as of the Effective Date, nor has the Employee
previously, at any time, entered into any written agreement with any person, firm or corporation,
which would or could preclude or prevent the Employee from entering into this Agreement or which
requires the consent of any other party, and (ii) that as of the Effective Date, neither the
Company nor any of its subsidiaries has any financial or other obligation to the Employee except
as set forth on Exhibit A. The Employee agrees to indemnify the Company and each of its
officers, directors and controlling persons against any claim, loss, liability or expense
(including reasonable counsel’s fees and costs) incurred by the Company or its officers, directors
and controlling persons arising out of or in connection with any misrepresentation made by the
Employee under this Agreement.

     6. Confidentiality.

     (a) Obligation to Keep Confidential. The Employee acknowledges that the Employee’s
employment by the Company brings the Employee into close contact with many confidential affairs of
the Company, its subsidiaries and its customers, including, without limitation, information about
costs, profits, markets, sales, key personnel, pricing policies, operational methods, concepts,
and other business affairs and methods of the Company, its subsidiaries and its customers and
other information not readily available to the public, as well as plans for future developments
(collectively referred to hereinafter as “Proprietary Information”). The Employee further
acknowledges that the relationships between the Company, its subsidiaries and its officers,
employees, agents, and customers constitute a valuable asset of the Company (the “Other
Proprietary Assets”). In recognition of the foregoing, the Employee covenants and agrees:

               (i) That all Proprietary Information and Other Proprietary Assets shall be the exclusive
property of the Company and that the Employee will keep secret all

5

 

Proprietary Information and Other Proprietary Assets and will not use the same for the
Employee’s own benefit or disclose the same to, or use the same for the benefit of, anyone outside
of the Company, either during or after the Employee’s employment by the Company; and

               (ii) That Employee will deliver promptly to the Company on termination of Employee’s
employment by the Company, or at any time the Board may so request, all Proprietary Information
and Other Proprietary Assets, including, without limitation, all memoranda, notes, documentation,
data, records, reports and other tangible manifestations of the Proprietary Information and Other
Proprietary Assets (and all copies thereof), that Employee may then (or thereafter) possess or
have under the Employee’s control.

     (b) Exceptions. The Employee’s undertakings and obligations under this Section 6
will not apply to any Proprietary Information or Other Proprietary Asset which (i) is or becomes
generally known to the public through no action on the part of the Employee, (ii) is generally
disclosed to third parties by the Company without restriction on such third parties, (iii) is
approved for release by written authorization of the Board, or (iv) is the subject matter of a
lawful request or subpoena by and within the authority of a court or governmental agency or other
body, provided, however, no such information shall be released by Employee without Employee
providing to the Company thirty (30) days prior written notice to the Company and providing the
Company the right to seek a protective order or injunctive relief preventing the release of such
information.

     7. Non-Solicitation. The Employee hereby covenants and agrees that, if the Employee’s
employment with the Company is terminated other than (i) by the Company pursuant to Section 9(b) or
(ii) by the Employee pursuant to Section 9(f), the Employee will not, for one year following the
Termination Date, induce or attempt to induce any officer, employee, agent, consultant or customers
of the Company or its subsidiaries to discontinue such affiliation with the Company or its
subsidiaries or to refrain from entering into new business relationships with the Company or its
subsidiaries.

     8. Specific Performance. Without intending to limit the remedies available to the
Company, the Employee agrees that damages at law will be an insufficient remedy to the Company in
the event that the Employee violates the terms of Section 5, 6 or 7 of this Agreement and that the
Company may apply for and obtain immediate injunctive relief in any court of competent jurisdiction
or restrain the breach or threatened breach of, or otherwise to specifically enforce, any of the
agreements and covenants contained in such Sections. The parties hereto understand that each of
the agreements and covenants of the Employee contained in Sections 5, 6 and 7 of this Agreement is
an essential element of this Agreement and agree that the obligations of the Employee thereunder
will survive the termination of this Agreement.

     9. Termination.

     (a) Termination by the Company for Good Cause. The Company may terminate this
Agreement and its obligations to the Employee under this Agreement, and thereby terminate

6

 

Employee’s employment, at any time for “Good Cause”, which shall mean only: (i) the conviction
of the Employee of (or the plea by the Employee of nolo contendere to) a felony or
any crime which involves moral turpitude; (ii) the good faith determination by the Board that the
Employee has failed to perform a material amount of Employee’s duties under this Agreement (other
than a failure to perform duties resulting from the Employee’s incapacity due to physical or mental
illness), which failure to perform duties shall not have been cured within thirty (30) days after
the receipt by the Employee of written notice thereof from the Board specifying with reasonable
particularity such alleged failure; (iii) any absence from the Company’s regular full-time
employment in excess of three consecutive days that is not due to a vacation, participation in a
permitted activity, bona fide illness, disability, death or other reason expressly authorized by
the Board in advance; (iv) any act or acts of personal dishonesty (including, without limitation,
any insider trading or unauthorized trading in the Company’s securities) by the Employee; (v) the
violation of Employee’s fiduciary duties to the Company, or the violation of any law, statute or
regulation relating to the operation of the Company’s business; or (vi) misconduct that impairs
Employee’s ability effectively to perform the duties or responsibilities of Employee’s position.
In the event of such termination, the Employee shall only be entitled to receive any unreimbursed
expenses payable pursuant to Section 4 above that were properly incurred prior to Employee’s
termination of employment. In addition, if the Company terminates this Agreement due to the
conviction of the Employee of (or the plea by the Employee of nolo contendere to) a
felony as a result of (iv) above, then Employee will pay all costs and expenses (including
reasonable attorney’s fees) incurred by the Company in connection therewith.

     (b) Termination by the Company Without Good Cause. In the event the Company
terminates this Agreement prior to the Expiration Date, and thereby terminates the Employee’s
employment, without Good Cause, then subject to the conditions set forth in Section 9(h), the
Employee shall be entitled to the following benefits:

          (i) If the termination of Employee’s employment is an “Involuntary Termination” as defined in
Section 9(b)(v):

               (A) If the effective date of the termination is before August 29, 2008, the Company shall pay
the Employee (I) a payment (“the Separation Payment”), in a single lump sum on or before the
sixtieth day next following the date of Employee’s “separation from service” (as defined in Section
9(h) below), equal to the lesser of: (a) the Severance Limit, or (b) the greater of either: (x) the
Retention Amount plus the Base Salary Amount (as defined in Section 9(b)(vi) below) or (y) the
Retention Amount plus Employee’s Base Salary at the rate then in effect through the Expiration
Date; and, if Employee’s Severance Compensation is not fully paid out pursuant to clause (I), then
(II), as a separate payment from the Separation Payment, payment, in the form of salary
continuation, beginning on the first regular payroll date next following the first day that is six
months after the date of Employee’s separation from service, of the greater of either: (x) the
Retention Amount plus the Base Salary Amount, minus the amount paid pursuant to clause (I) above;
or (y) the Retention Amount plus Employee’s Base Salary at the rate then in effect through the
Expiration Date minus the amount paid pursuant to clause (I) above; or

7

 

               (B) If the effective date of the termination is on or after August 29, 2008, the Company shall
pay the Employee (I) a payment (“the Separation Payment”), in a single lump sum on or before the
sixtieth day next following the date of Employee’s “separation from service” (as defined in Section
9(h) below), equal to the lesser of: (a) the Severance Limit, or (b) the greater of either: (x) the
Base Salary Amount; or (y) Employee’s Base Salary at the rate then in effect through the Expiration
Date; and, if Employee’s Severance Compensation is not fully paid out pursuant to clause (I), then
(II), as a separate payment from the Separation Payment, payment, in the form of salary
continuation, beginning on the first regular payroll date next following the first day that is six
months after the date of Employee’s separation from service, of the greater of either: (x) the Base
Salary Amount, minus the amount paid pursuant to clause (I) above; or (y) Employee’s Base Salary at
the rate then in effect through the Expiration Date minus the amount paid pursuant to clause (I)
above; or

     (ii) If the termination of the Employee’s employment is not an Involuntary Termination,
beginning on the first regular payroll date next following the first day that is six months after
the date of Employee’s separation from service and in the manner provided in Section 9(i), the
Company shall pay the Employee: in a lump sum, the Retention Amount (only if the effective date of
the termination is before August 29, 2008); and in the form of salary continuation, the greater of
either: (x) the Base Salary Amount; or (y) Employee’s Base Salary at the rate then in effect
through the Expiration Date.

     (iii) In any of the circumstances described in Sections 9(b)(i) or 9(b)(ii), the Company
shall pay the Employee for any unreimbursed expenses payable pursuant to Section 4 above that were
properly incurred prior to the Employee’s termination of employment, to the extent such expenses
would have been reimbursable pursuant to Section 4 above.

     (iv) As used in this Agreement, the term “Severance Limit” means the lesser of twice the
lesser of: (A) the sum of the Employee’s annualized compensation based upon the annual rate of pay
for services provided to the Company for the taxable year of the Employee’s preceding the taxable
year of the Employee in which the Employee has a separation from service with the Company
(adjusted for any increase during that year that was expected to continue indefinitely if the
Employee had not separated from service); or (B) the maximum amount that may be taken into account
under a qualified plan pursuant to Code § 401(a)(17) for the year in which the Employee has a
separation from service.

     (v) As used in this Agreement, the term “Involuntary Termination” means a separation from
service that satisfies one of the following sets of criteria: (I) it results from a Termination by
the Company Without Good Cause pursuant to Section 9(b) or a Termination Upon or Following
Expiration of This Agreement pursuant to Section 9(g), and the termination is due to the
independent exercise of the Company’s unilateral authority to terminate the Employee’s services,
other than due to the Employee’s implicit or explicit request, where the Employee was willing and
able to continue performing services; provided, however, that in the case of a Termination Upon or
Following Expiration of This Agreement pursuant to Section 9(g), the separation from service is an
Involuntary Termination only if it satisfies the additional condition that the Executive was
willing and able to execute a new contract providing terms and

8

 

conditions substantially similar to those in the expiring Agreement and to continue providing
services as described in the expiring Agreement; or (II) the separation from service results from a
Termination By Employee Following Change in Control as described in Section 9(f) that satisfies all
the criteria for the payment of the benefits described in 9(f).

          (vi) As used in this Section 9(b) of the Agreement, the term “Base Salary Amount” means one
times Employee’s Base Salary at the rate then in effect. Provided, however, that if Employee’s
Termination by the Company Without Good Cause occurs within 90 days following a Change in Control
(as defined in Section 9(f)(iv) below), the Base Salary Amount shall mean two times Employee’s
Base Salary at the rate then in effect.

          (vii) In the event that the Employee shall obtain other full-time or part-time employment or
consulting work during the one year period following the Termination Date, unless the termination
occurred within 90 days following a Change in Control, the amount of payments Employee receives
from such employment or work shall be credited against the amount that the Company is obligated to
pay Employee during such period pursuant to this Section 9(b). The Employee shall be under no
obligation to obtain such other employment or work, but if the Employee shall, the Employee shall
promptly give written notice to the Company of the salary and fringe benefits provided to the
Employee in connection with such other employment or work, in order that the amount of such credit
may be determined.

     (c) Termination by the Employee Without Cause. Notwithstanding the provisions of
Section 1, the Employee may resign from the Company at any time upon ninety (90) days prior
written notice to the Company. In the event of resignation by the Employee under this Section
9(c), the Board in its sole discretion may elect to waive the period of notice, or any portion
thereof, and, in such event, the Company will pay the Employee’s salary for the notice period (or
for any remaining portion of the period) provided the Employee continues to be employed during
that period. From and after the effective date of such termination by the Employee of Employee’s
employment under this Agreement, the Company shall have no further liability to the Employee for
salary or other compensation, except for any unreimbursed expenses payable pursuant to Section 4
above that were properly incurred prior to the Employee’s termination of employment, to the extent
such expenses would have been reimbursable pursuant to Section 4 above, and as provided pursuant
to the terms of any compensation or benefit plan of the Company in which the Employee is a
participant.

     (d) Termination upon Disability of Employee. The Company may terminate this
Agreement, and thereby terminate Employee’s employment, upon the Disability (as defined below) of
the Employee, in which event the Employee shall be entitled to receive, in full satisfaction of
all obligations due to the Employee by the Company under this Agreement, (i) the Employee’s Base
Salary then in effect while such Disability continues until the date upon which any disability
benefits pursuant to the disability insurance policy provided for in Section 3(e)(ii) or any
Additional Supplemental Benefits provided for in Section 3(e)(ii) commence (but in no
event more than two (2) months); and (ii) any properly incurred unreimbursed expenses incurred
prior to the Employee’s termination of employment, to the extent such expenses would have been
reimbursable pursuant to Section 4 above. For purposes of this

9

 

Section 9(d), from and after January 1, 2005, the Employee will be considered to have a
“Disability” only if the Employee meets one of the following requirements: (A) the Employee is
unable to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months; or (B) the Employee is, by reason of any
medically determinable physical or mental impairment that can be expected to result in death or
can be expected to last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an accident and health plan
covering employees of the Company.

     (e) Termination upon Death of Employee. This Agreement shall terminate upon the
death of the Employee, in which event the Employee’s estate, legal representatives or Designee
shall be entitled to receive, in full satisfaction of all obligations due to the Employee by the
Company hereunder, (i) the Employee’s Base Salary through the last day of the month of death; (ii)
the proceeds of the insurance policy or policies maintained on the Employee’s life, pursuant to
Section 3(e) hereof; and (iii) any unreimbursed expenses payable pursuant to Section 4 above that
were properly incurred prior to the Employee’s termination of employment, to the extent such
expenses would have been reimbursable pursuant to Section 4 above.

     (f) Termination By Employee Following Change of Control. Notwithstanding Section
9(c) above, in the event that Employee experiences a Significant Adverse Action (as hereafter
defined) at any time within 90 days following a Change of Control (as hereinafter defined), and
Employee notifies the Company in writing within 30 days of the date on which the Significant
Adverse Action first occurred, and the Company fails to cure the Significant Adverse Action within
30 days of receipt of such notice, then the Employee may terminate the Employee’s employment on
or within 15 days after the thirtieth day of the Company’s failure to cure the Significant Adverse
Action of which the Employee gave such written notice. In the event Employee terminates the
Employee’s employment with the Company under the conditions described in this Section 9(f), and
the conditions of Section 9(h) are met, such termination shall be treated as a termination
pursuant to this Section 9(f) rather than Section 9(c), and:

          (i) if the effective date of the termination is before August 29, 2008, the Company shall pay
the Employee (A) a payment (“the Separation Payment”), in a single lump sum on or before the
sixtieth day next following the date of Employee’s “separation from service” (as defined in Section
9(h) below), equal to the lesser of: (I) the Severance Limit, or (II) the greater of either: (x)
the Retention Amount plus two times Employee’s Base Salary at the rate then in effect or (y) the
Retention Amount plus Employee’s Base Salary at the rate then in effect through the Expiration
Date; and, if Employee’s Severance Compensation is not fully paid out pursuant to clause (A), then
(B), as a separate payment from the Separation Payment, payment, in the form of salary
continuation, beginning on the first regular payroll date next following the first day that is six
months after the date of Employee’s separation from service, of the greater of either: (x) the
Retention Amount plus two times Employee’s Base Salary at the rate then in effect, minus the amount
paid pursuant to clause (A) above; or (y) the Retention Amount plus the

10

 

Employee’s Base Salary at the rate then in effect through the Expiration Date, minus the
amount paid pursuant to clause (A) above;

          (ii) if the effective date of the termination is on or after August 29, 2008, the Company
shall pay the Employee (A) a payment (“the Separation Payment”), in a single lump sum on or before
the sixtieth day next following the date of Employee’s “separation from service” (as defined in
Section 9(h) below), equal to the lesser of: (I) the Severance Limit, or (II) the greater of
either (x) two times Employee’s Base Salary at the rate then in effect; or (y) Employee’s Base
Salary at the rate then in effect through the Expiration Date; and, if Employee’s Severance
Compensation is not fully paid out pursuant to clause (A), then (B), as a separate payment from
the Separation Payment, payment, in the form of salary continuation, beginning on the first
regular payroll date next following the first day that is six months after the date of Employee’s
separation from service, of the greater of either: (x) two times Employee’s Base Salary at the
rate then in effect, minus the amount paid pursuant to clause (A) above; or (y) Employee’s Base
Salary at the rate then in effect through the Expiration Date, minus the amount paid pursuant to
clause (A) above.

          (iii) The Employee shall also be paid for any unreimbursed expenses payable pursuant to
Section 4 above that were properly incurred prior to the Employee’s termination of employment, to
the extent such expenses would have been reimbursable pursuant to Section 4 above.

          (iv) For purposes of this Agreement, a “Change of Control” shall mean and include any of the
following:

          (A) a merger or consolidation of the Company with or into any other corporation or other
business entity (except one in which the holders of capital stock of the Company immediately prior
to such merger or consolidation continue to hold at least a majority of the outstanding securities
having the right to vote in an election of the Board of Directors (“Voting Stock”) of the
surviving corporation);

          (B) a sale, lease, exchange or other transfer (in one transaction or a related series of
transactions) of all or substantially all of the Company’s assets except in a transaction where
the Employee, an Affiliate of the Employee, or an Affiliate of the Company is the transferee. For
purposes of this Agreement, an “Affiliate” shall mean: with respect to the Employee, any other
person that directly or indirectly controls, or is controlled by, or is under common control with
the Employee; and with respect to the Company, any other corporation or business entity that
directly or indirectly controls, or is controlled by, or is under common control with, the
Company;

          (C) the acquisition by any person or any group of persons (other than the Company, any of its
direct or indirect subsidiaries, or any director, trustee, fiduciary or other person or entity
holding securities under any employee benefit plan or trust of the Company or any of its direct or
indirect subsidiaries) acting together in any transaction or related series of transactions, of
such number of shares of the Company’s Voting Stock as causes such person,

11

 

or group of persons, to own beneficially, directly or indirectly, as of the time immediately
after such transaction or series of transactions, 50% or more of the combined voting power of the
Voting Stock of the Company other than as a result of an acquisition of securities directly from
the Company, or solely as a result of an acquisition of securities by the Company which by
reducing the number of shares of the Voting Stock outstanding increases the proportionate voting
power represented by the Voting Stock owned by any such person to 50% or more of the combined
voting power of such Voting Stock; and

          (D) a change in the composition of the Company’s Board of Directors following a tender offer
or proxy contest as a result of which persons who, immediately prior to such tender offer or proxy
contest, constituted the Company’s Board of Directors shall cease to constitute at least a
majority of the members of the Board of Directors (other than by their voluntary resignations),
but only in the event that the persons elected to the Board were not supported by the Employee as
a director or shareholder.

          (v) For purposes of this Agreement, a “Significant Adverse Action” shall mean and include only
any of the following: (A) a material and substantial reduction in the Employee’s duties and
responsibilities; (B) a material reduction in Employee’s Base Salary; or (C) a relocation of
Employee’s worksite to a location more than 50 miles from that immediately before the Change in
Control.

     (g) Termination Upon or Following Expiration of this Agreement. In the event the
Employee’s employment continues through the Expiration Date, and is thereafter terminated by the
Company without Good Cause, then subject to the conditions set forth in Section 9(h), the Employee
shall be entitled to the following benefits:

          (i) If the termination of Employee’s employment is an “Involuntary Termination” as defined in
Section 9(b)(v), the Company shall pay the Employee (A) a payment (“the Separation Payment”), in a
single lump sum on or before the sixtieth day next following the date of Employee’s “separation
from service” (as defined in Section 9(h)), equal to the lesser of the Severance Limit or one times
the Employee’s Base Salary at the rate then in effect; and, if Employee’s Severance Compensation is
not fully paid out pursuant to clause (A), then (B), as a separate payment from the Separation
Payment, payment in the form of salary continuation, beginning on the first regular payroll date
next following the first day that is six months after the date of Employee’s separation from
service, of one times the Employee’s Base Salary at the rate then in effect, minus the amount paid
pursuant to clause (A) above (“the Remainder Amount”) until the Remainder Amount is fully paid; or

          (ii) If the termination of the Employee’s employment is not an Involuntary Termination, the
Company shall pay the Employee, in the form of salary continuation, beginning on the first regular
payroll date next following the first day that is six months after the date of Employee’s
separation from service, one times the Employee’s Base Salary at the rate then in effect in the
manner provided in Section 9(i); and, in either of the circumstances described in Sections 9(g)(i)
or 9(g)(ii);

12

 

          (iii) The Company shall pay the Employee for any unreimbursed expenses payable pursuant to
Section 4 above that were properly incurred prior to the Employee’s termination of employment, to
the extent such expenses would have been reimbursable pursuant to Section 4 above.

               (h) Further Conditions of Severance. From and after January 1, 2005, no compensation shall be
payable under Section 9 of this Agreement as the result of the Employee’s termination of employment
with the Company (“Severance Compensation”) unless such termination (standing alone or in
conjunction with the cessation of the Employee’s membership on the Board of Directors of the
Company) constitutes a “separation from service” (within the meaning of that phrase in Treas. Reg.
§ 1.409A-1(h)) from the Company and all persons with whom the Company would be considered a single
employer under Section 414(b) of the Internal Revenue Code of 1986, as amended (“the Code”), and
all persons with whom the Company would be considered a single employer under Code Section 414(c).
The receipt by Employee of any payment of Severance Compensation under this Agreement payable on or
after the sixtieth day following the Employee’s termination of employment shall be conditioned upon
all of the following, and any such payment shall be forfeited if such conditions are not met on or
before the due date for such payment: (i) Employee tendering a resignation for all positions held
by Employee as a member of the Board or of the board of directors of any Affiliate; (ii) Employee’s
having been in compliance with all the material terms of this Agreement; (iii) the execution by
Employee, after the date of Employee’s termination from employment and within 21 days of its first
presentation to the Employee by the Company, of a confidential Separation Agreement and General
Release(which will be substantially in the form attached hereto as Exhibit B); and (iv) the
confidential Separation Agreement and General Release becoming effective in accordance with its
terms; provided, however, that the condition specified in this Section 9(h)(iii) and in Section
9(h)(iv) shall not apply unless such Separation Agreement and General Release has been provided to
the Employee by the Company after and within 30 days of Employee’s termination of employment.

     (i) Delay in Commencement of Payments of Severance Compensation. Effective January 1, 2005,
if on the date of the Employee’s separation from service, as defined above, the Employee is a
“specified employee” (as defined below) of the Company or of any person with whom the Company would
be considered a single employer under Section 414(b) of the Code, and all persons with whom the
Company would be considered a single employer under Code Section 414(c), then no amount other than
a Separation Payment shall be paid as Severance Compensation under this Agreement until the first
regular payroll date of the Company that is at least six months after the Employee’s separation
from service, as so defined (the “Specified Employee Payment Date”), whereupon all payments of
Severance Compensation that would have become due prior to the Specified Employee Payment Date but
for the operation of this Section 9(i) shall be paid on the Specified Employee Payment Date. An
amount of Severance Compensation, the payment of which has been delayed under this Section 9(i),
will not be payable on the Specified Employee Payment Date unless the conditions precedent set
forth in Section 9(h) have been satisfied as of the Specified Employee Payment Date. The term
“specified employee” means a “specified employee” as defined in Treas. Reg. § 1.409A-1(i).

13

 

     10. Indemnification. To the fullest extent permitted by law and in addition to any
other rights permitted or granted under the Company’s articles of incorporation, by-laws, or any
policy of insurance, or by law, the Company shall indemnify the Employee if the Employee is made a
party, or threatened to be made a party, to any threatened, pending or contemplated action, suit
or proceeding, whether civil, administrative or investigative, by reason of the fact that the
Employee is or was an employee, officer or director of the Company or any subsidiary of the
Company, in which capacity the Employee is or was serving at the Company’s request in accordance
with the terms of this Agreement, against any and all costs, losses, damages, judgments,
liabilities and expenses (including reasonable attorneys’ fees) which may be suffered or incurred
by him in connection with any such action, suit or proceeding; provided, however,
that, there shall be no indemnification in relation to matters as to which the Employee is
adjudged to have been guilty of fraud, bad faith, gross negligence, breach of fiduciary duty or as
a result of the Employee’s material breach of this Agreement; provided, however,
that all of such costs shall be paid by insurance, to the extent such coverage exists.

     11. Entire Agreement; Amendment and Waiver. This Agreement is the entire agreement
between the parties with respect to the subject matter hereof and supersedes any and all prior or
contemporaneous oral and prior written agreements and understandings. There are no oral promises,
conditions, representations, understandings, interpretations or terms of any kind as conditions or
inducements to the execution of this Agreement or in effect among the parties. No custom or trade
usage, nor course of conduct among the parties, shall be relied upon to vary the terms of this
Agreement. This Agreement may not be amended, and no provision of this Agreement shall be waived,
except by writing signed by all the parties to this Agreement, which states that it is intended to
amend or waive a specifically identified provision of this Agreement. Any waiver of any rights or
failure to act in a specific instance shall relate only to such instance and shall not be
construed as an agreement to waive any rights or failure to act in any other instance, whether or
not similar. All amendments or waivers on behalf of the Company shall have first been approved by
the non-employee members of the Board.

     12. Severability. Should any provision of this Agreement be unenforceable or
prohibited by any applicable law, this Agreement shall be considered divisible as to such
provision which shall be inoperative, and the remainder of this Agreement shall be valid and
binding as though such provision were not included in this Agreement.

     13. Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original. It shall not be necessary when making proof of this
Agreement to account for more than one counterpart.

     14. Headings. All headings in this Agreement are for convenience only
and shall not affect the meaning of any provision in this
Agreement.

     15. Successors and Assigns. This Agreement shall inure to the benefit of, and be
binding upon, the Company and any corporation with which the Company merges or consolidates or to
which the Company sells all or substantially all of its assets, and upon the

14

 

Employee and the Employee’s executors, administrators, heirs and legal representatives. This
Agreement may not be assigned by the Employee, and from and after January 1, 2005, the Employee
may not assign, pledge, hypothecate, transfer, give as collateral or encumber any right to
payments of any Severance Compensation hereunder, and any attempt to do so shall be wholly void.

     16. Governing Law and Venue. This Agreement shall be construed and enforced in
accordance with the laws of the State of New Jersey, without reference to the conflict of laws
principles thereof. To the extent that either party is permitted to file any action in court that
involves any aspect of this Agreement, or arises out of, or is related to or connected with
Employee’s employment, compensation or benefits, or the termination thereof, the parties agree
that such action must be brought in either federal court in the State of New Jersey, or in the
Superior Court of New Jersey, Middlesex County, and the parties irrevocably consent to
jurisdiction and venue in such courts.

     17. Section 409A. This Agreement shall be interpreted and applied to the full extent
possible to comply with Code Section 409A(a)(2)-(4) and any Treasury Regulations or other guidance
of general applicability issued pursuant thereto. Without limiting the generality of the
immediately preceding sentence: (a) every provision of this Agreement that by its terms is made
effective from and after January 1, 2005, shall be deemed to have amended the Prior Agreement,
effective as of January 1, 2005, to the full extent necessary to cause the Prior Agreement to have
complied in form with the requirements of Code Section 409A(a)(2)-(4) and any Treasury Regulations
or other guidance of general applicability issued pursuant thereto; (b) Section 9(d) of the Prior
Agreement (relating to termination by the Employee following loss of Board seat) is hereby stricken
effective January 1, 2005; (c) the provisions of Section 9(f) of the Agreement (relating to
termination in the event of a Significant Adverse Action following a change in control) shall be
deemed to have been substituted for the provisions of Section 9(g) of the Prior Agreement (relating
to termination following a change in control), effective as of January 1, 2005; and (d) the
provisions of Section 3(h) of the Prior Agreement (relating to club dues) shall be deemed to have
been amended, effective as of January 1, 2005, to provide as follows.

          “(h) Club Dues. The Company shall pay all membership dues owed
to clubs (as selected by the Employee), not to exceed $2,000 per
year, provided, however, that with respect to any such payments by
the Employee on and after January 1, 2005, no such reimbursement
will be made after the last day of the calendar year following the
year in which the expense was incurred;”

and Section 3(h) of the Prior Agreement, as so amended, is stricken effective as of the Effective
Date.

     18. Notices. All notices under this Agreement shall be in writing and shall be sent
to the parties at the following addresses:

15

 

	 	 	 
	If to the Employee, to:

	 	Irma N. Tavares
	 

	 	1260 Lenape Way
	 

	 	Scotch Plains, New Jersey 07076
	 
	 	 
	If to the Company, to:

	 	Hanover Capital Mortgage Holdings, Inc.
	 

	 	200 Metroplex Drive, Suite 100
	 

	 	Edison, New Jersey 08817

	 	 	 	 	 
	 

	 	Attn:
	 	Chairman of Compensation
Committee of the Board of Directors

All notices shall be delivered in person or given by registered or certified mail postage prepaid,
and shall be deemed to have been given when delivered in person or deposited in the United States
mail. Either party may designate any other address to which notice shall be given, by giving
written notice to the other of such change of address in the manner herein provided.

{Signatures appear on next page}

16

 

IN WITNESS WHEREOF, the Employee has executed this Agreement and the Company has caused this
Agreement to be executed by a duly authorized officer as of the 26th day of November,
2007.

	 	 	 	 	 	 	 
	 	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	HANOVER CAPITAL MORTGAGE HOLDINGS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Suzette Berrios
 

     Name: Suzette Berrios
	 	 
	 

	 	 	 	     Title: General Counsel	 	 
	 
	 	 	 	 	 	 
	 	 	EMPLOYEE:	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Irma N. Tavares	 	 
	 	 	 	 	 
	 

	 	 	 	     Irma N. Tavares	 	 

17

 

EXHIBIT A

Financial and Other Obligations to the Employee

by the Company or any of its Subsidiaries as of the Effective Date

None

Irma N. Tavares

 

 

EXHIBIT B

Separation Agreement and General Release

By mutual agreement Irma N. Tavares (“Employee”) and Hanover Capital Mortgage Holdings, Inc.
(“Company”) (collectively the “Parties”) have agreed to enter into this Separation Agreement and
General Release (“General Release”) in connection with Employee’s Amended and Restated Employment
Agreement effective July 1, 2007 (the “Employment Agreement”) and the receipt by Employee of any
severance payments after Employee’s termination of employment.

	1.	 	Employee and the Company have entered into this General Release as a way of amicably settling
any potential dispute that has developed or may in the future develop concerning Employee’s
employment with the Company, Employee’s termination therefrom or from any corporation or other
business entity that directly or indirectly controls, or is controlled by, or is under common
control with, the Company (“Affiliate”), and any claim that the Company or any Affiliate has
acted unlawfully, fraudulently, negligently, recklessly, maliciously or breached the terms of
any contract, including but not limited to the Employment Agreement, or any other promise,
obligation, duty, policy, practice, law or regulation. The execution date of this General
Release shall be after Employee’s termination of employment and prior to Employee’s receipt of
any severance payments from the Company.
	 
	2.	 	In consideration for the Company entering into the Employment Agreement and for the severance
payments which Employee shall receive following Employee’s termination of employment and
execution of this General Release, Employee on behalf of Employee, Employee’s heirs and
assignees, hereby irrevocably and unconditionally releases and forever discharges,
individually and collectively, the Company, its Affiliates, and each of their respective
officers, directors, employees, shareholders, representatives, agents, predecessors,
successors, assigns, and all persons acting by, through or in concert with them (hereinafter
the “Released Parties”) of and from any and all charges, claims, complaints, demands,
liabilities, causes of action, losses, costs and expenses of any kind whatsoever (including
any attorneys’ fees and costs) known or unknown, suspected or unsuspected, that Employee may
now have or has ever had against any of the Released Parties by reason of any act, omission,
transaction, or event occurring up to the date of Employee’s execution of this General
Release. Such release and discharge includes, without limitation, any wrongful, unlawful or
constructive termination or discipline claim, any claims relating to any contracts of
employment, whether express or implied, any claims related to compensation, including short
term, long term, or Employee incentive plans, retention plans, equity or stock option plans,
401(k) plans, and any other compensation or benefit plans in which Employee participated or
was entitled to participate. Such release and discharge further includes, without limitation,
any claims for defamation, slander, libel, invasion of privacy, misrepresentation, fraud or
breach of any covenant of good faith and fair dealing, infliction of emotional distress, or
any other claims related to Employee’s employment with the Company or its Affiliate and the
termination thereof. Such release and discharge further applies to, but is not limited to,

 

 

	 	 	any claims based on Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991,
the Age Discrimination in Employment Act of 1967, the Older Workers’ Benefit Protection Act,
the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of
1974, Employee Order 11246, the U.S. Constitution, the New Jersey Law Against
Discrimination, the New Jersey Conscientious Employee Protection Act, the New Jersey Family
Leave Act, and any other applicable federal, state or local laws, ordinances and regulations
to the fullest extent permitted by law. Employee has not filed any complaints, claims or
actions against any of the Released Parties with any federal, state or local court or agency
or any arbitration or mediation entity. Employee further agrees not to bring, continue or
maintain any claim or legal or arbitration proceeding against any of the Released Parties
before any court, agency, arbitration or mediation entity or in any other forum by reason of
any of the matters hereby released and discharged. If any court, agency or arbitration or
mediation entity assumes jurisdiction of any complaint or claim against any of the Released
Parties, Employee shall direct the withdrawal or dismissal of the case or claim with
prejudice. However, this General Release shall not be construed to prohibit Employee from
filing a charge or complaint with the Equal Employment Opportunity Commission or state or
local human rights agency charged with enforcing workplace discrimination laws, except that
Employee agrees to waive any right to monetary recovery should any federal, state or local
administrative agency pursue any claims on Employee’s behalf arising out of or relating to
Employee’s employment with and/or separation from employment with the Company.
	 
	3.	 	Employee understands and agrees that Employee is waiving all actions, claims, and grievances,
whether actual or potential, known or unknown, against the Released Parties recited in
Paragraph 2 hereof or otherwise arising from Employee’s employment with the Company or its
Affiliates, the termination thereof or any other conduct occurring on or prior to the date of
Employee’s execution of this General Release. All such claims are forever barred by this
General Release whether they arise in contract, tort or upon a statute, law, regulation, or
order. Employee hereby waives Employee’s rights under any law that limits a general release
to claims that are known to exist at the date of this General Release. The final release of
all claims by Employee against the Released Parties constitutes a material part of the
consideration flowing from Employee under the Employment Agreement, and the Released Parties
as well as their officers, directors, employees, shareholders, representatives, agents,
predecessors, successors, assigns, and all persons acting by, through or in concert with them
are the intended beneficiaries of this consideration. It is expressly understood and agreed
by the parties that this General Release is in full accord, satisfaction and discharge of any
and all doubtful and disputed claims by Employee against any of the Released Parties and that
this General Release has been signed with the express intent of extinguishing all obligations
as herein described. Provided, however, that notwithstanding anything herein to the contrary,
Employee is not releasing or waiving any right to severance pay under the Employment
Agreement.
	 
	4.	 	Employee agrees that Employee will keep the terms of this General Release completely
confidential and that, except as provided herein, Employee will not hereafter disclose or
publish any information concerning this General Release, any severance payments, or

 

 

	 	 	any of the matters related thereto. Employee represents that Employee has not discussed and
shall not discuss or publish any items related to this General Release, any severance
payments or any of the matters related thereto to any person, group of persons, agency,
body, commission, hearing or news or other media, including the Internet. Employee may make
such disclosures as are finally compelled by laws, provided Employee gives the Company
prompt notice of such legal process in order for the Company to have the opportunity to
object to the disclosure of such information.
	 
	5.	 	Employee agrees reasonably to cooperate with the Company in connection with any dispute,
claim, litigation or investigation by any person or entity against or involving the Company,
any Affiliate, or any of their officers, employees, agents or representatives. As part of
this agreement reasonably to cooperate, Employee agrees to speak and/or meet with the Company
and/or its representatives or counsel at and for reasonable times upon reasonable notice,
without the need for any legal proceeding or compulsory process. Employee also agrees to make
Employee available at and for reasonable times upon reasonable notice for such things as
interviews, depositions and trials. The Company agrees, to the extent permitted by legal and
ethical obligations, to reimburse Employee for reasonable expenses incurred with respect to
such cooperation, and for Employee’s time incurred in such cooperation during any period for
which Employee is not receiving severance payments. Employee further acknowledges and agrees
that the Employee shall continue to be bound by the terms of Sections 5, 6 and 7 of the
Employment Agreement and shall fully comply with the terms of that agreement.
	 
	6.	 	Employee covenants and agrees that Employee will not make any statement, written or oral, in
disparagement of the Company or any Affiliate, or any of their officers, shareholders,
directors, employees, agents or associates (including, but not limited to, negative references
to each or any of their products, services or corporate policies), to the general public
and/or to the employees, potential employees, customers, potential customers, suppliers,
potential suppliers, business partners, and/or potential business partners of the Company or
any Affiliate.
	 
	7.	 	Employee understands and agrees that Employee:

	 	a.	 	Has carefully read and fully understands all of the provisions of this General
Release;
	 
	 	b.	 	Knowingly and voluntarily agrees to all of the terms set forth in this General
Release;
	 
	 	c.	 	Knowingly and voluntarily intends to be legally bound by the same;
	 
	 	d.	 	Has been advised to consult with an attorney of Employee’s choice prior to
executing this General Release;

 

 

	 	e.	 	Waives any and all rights and claims arising under the Age Discrimination in
Employment Act, and any and all other federal, state, and local laws and regulations;
	 
	 	f.	 	Has been offered at least 21 days from Employee’s receipt of this General
Release to consider its terms;
	 
	 	g.	 	Has a full 7 days following the execution of this General Release to revoke
this General Release and has been and hereby is advised that this General Release shall
not become effective until this revocation period has expired; and
	 
	 	h.	 	Is not waiving rights or claims under the Age Discrimination in Employment Act
that may arise after the date Employee executes this General Release.

	8.	 	In the event of a breach by Employee of Employee’s obligations under the Employment
Agreement, the Company shall have the right to cease the severance payments as a partial
remedy for such breach. The cessation of such payments shall not act as a rescission of this
General Release, and shall not affect the validity of the general release of claims by
Employee, or any other obligation Employee may owe under the Employment Agreement.
	 
	9.	 	This General Release results from negotiations and compromises and shall not be deemed or
construed at any time or for any purpose as an admission of liability by the Released Parties.
	 
	10.	 	This General Release shall be governed by the laws of the State of New Jersey (without giving
effect to its conflict of laws principles) and shall inure to the benefit of the Company and
its successors and assigns. To the extent that either party is permitted to file any action
in court that involves any aspect of this General Release, the parties agree that such action
must be brought in either federal court in the State of New Jersey, or in the Superior Court
of New Jersey, Middlesex County, and the parties irrevocably consent to jurisdiction and venue
in such courts. 
	 
	11.	 	In the event any provision of this General Release is determined by a court of competent
jurisdiction to be unenforceable for any reason, the remaining provisions hereof shall remain
in full force and effect and the unenforceable provisions shall be interpreted and rewritten
to give effect to the Parties’ intentions.
	 
	12.	 	No modifications of this General Release can be made except in writing signed by Employee and
the Company’s authorized representative.

 

 

	13.	 	This General Release shall be interpreted in accordance with the plain meaning of its terms
and not strictly for or against either of the parties hereto.
	 
	14.	 	EMPLOYEE ACKNOWLEDGES AND AGREES THAT EMPLOYEE HAS BEEN ADVISED THAT THIS GENERAL RELEASE IS
A BINDING LEGAL DOCUMENT. EMPLOYEE FURTHER AGREES THAT EMPLOYEE HAS HAD ADEQUATE TIME AND A
REASONABLE OPPORTUNITY TO REVIEW THE PROVISIONS OF THIS GENERAL RELEASE, HAS BEEN ADVISED TO
SEEK LEGAL ADVICE REGARDING ALL OF ITS ASPECTS AND THAT IN EXECUTING THIS GENERAL RELEASE
EMPLOYEE HAS ACTED VOLUNTARILY AND HAS NOT RELIED UPON ANY REPRESENTATION MADE BY ANY OF THE
RELEASED PARTIES REGARDING THIS GENERAL RELEASE’S SUBJECT MATTER AND EFFECT. EMPLOYEE HAS
READ AND FULLY UNDERSTANDS THIS GENERAL RELEASE AND VOLUNTARILY AGREES TO ITS TERMS.

AGREED, UNDERSTOOD, AND INTENDING TO BE LEGALLY BOUND:

	 	 	 	 	 	 	 	 	 	 	 	 
	 	EMPLOYEE:	 	 
	 
	 	 

	 	 	 	 	 	Dated:	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	ON BEHALF OF THE BOARD OF THE COMPANY:	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	By:

	 	 	 	 	 	Dated:	 	 	 	 
	 	 

	 	 

	 	 	 	 	 	 

	 	 

	 	 	 	 	 	 
	 	Title:

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