Document:

Exhibit 10.3

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

5.             Compensation and Related Matters.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)           Termination by the Executive.

 

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

 

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

 

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

 

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

 

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

 

7.             Compensation Upon Termination, Death or During Disability.

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

If to the Executive:

 

Vernon B. Schwartz

51 Glendale Road

Rye, NY 10580

 

If to the Trust:

 

Falcon Financial Investment Trust

c/o iStar Financial Inc.

1114 Avenue of the Americas, 27th Floor

New York, NY 10036

 

Attn: Compensation Committee

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

	
   

  	
  FALCON FINANCIAL INVESTMENT TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Allison W. Berman

  	
   

  	
  By:

  	
  /s/ David A. Karp

  
	
   

  	
   

  	
  Name:

  	
  David A. Karp

  
	
   

  	
   

  	
  Title:

  	
  President and Chief Financial Officer

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Allison W. Berman

  	
   

  	
  /s/ Vernon B. Schwartz

  
	
   

  	
  Vernon B. Schwartz

  
								

 

 

Appendix A

 

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

 

	
  Percentage of Target Satisfied

  	
   

  	
  Annual Bonus

  
	
   

  	
   

  	
   

  
	
  75%

  	
   

  	
  50% of Base Salary

  
	
  100%

  	
   

  	
  100% of Base Salary

  
	
  125%

  	
   

  	
  125% of Base Salary

  
	
  150%

  	
   

  	
  150% of Base Salary

  

 

App. A-1

 

Appendix B

 

Example 1

 

Assumptions:

 

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

•                                          Base Salary
of $390,000

•                                          Termination
without Cause, June 30, 2005

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

 

Calculation of Prorated Bonus:

 

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

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

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

 

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

 

Calculation of Liquidated Damages

 

Base Salary + Prorated Bonus x 2 =

 

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

 

Example 2*

 

Assumptions:

 

•                                          Effective
Date of January 1, 2005

•                                          Base Salary
of $390,000

•                                          Termination
without Cause, June 30, 2006

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

 

Calculation of Prorated Bonus:

 

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

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

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

 

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

 

App. B-1

 

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

 

Calculation of Liquidated Damages

 

Base Salary + Prorated Bonus x 1 =

 

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

 

App. B-2Exhibit 10.4

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3.             Position and Duties. During the Term, the Executive shall
have primary responsibility for managing (i) the integration and operation of
the Trust business prior to the Control Date with that of iStar and its
affiliates and (ii) the operations of the Trust, under the direction of the
Trust’s Board of Trustees.  Prior to the
Effective Time of the Merger (as defined in the Merger Agreement), the
Executive shall serve as the Trust’s principal financial officer for purposes
of executing all reports and financial statement certifications required to be
filed by the 

 

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

 

 

Trust
pursuant to the Securities Exchange Act of 1934, as amended.  The Executive shall also serve without
additional compensation in such other offices of the Trust or its subsidiaries
to which Executive may be elected or appointed by the Board of Trustees with
the consent of Executive.  The Executive
shall devote substantially all his working time, energy, skill and best efforts
to the performance of his duties hereunder in a manner that will faithfully and
diligently further the business and interests of the Trust; provided, that,
nothing in this Agreement shall preclude Executive from serving as a director
or trustee in any other firm that is not a competitor of the Trust and its
subsidiaries or from pursuing personal investments, as long as such activities
do not, in the reasonable judgment of the Board of Trustees with regard to
activities other than passive investments of less than five percent ownership,
interfere with Executive’s performance of his duties hereunder.

 

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

 

5.             Compensation and Related Matters.

 

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

 

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

 

(c)           Other Benefits.  The
Executive shall be eligible to participate in or receive benefits under any
employee benefit plan, arrangement or perquisite made available by the Trust,
prior to the Effective Time of the Merger, and by iStar after such time,
presently or in the future to its executives and key management employees,
subject 

 

2

 

to
and on a basis consistent with the terms, conditions and overall administration
of such plans, arrangements and perquisites.

 

(d)           Vacations.  The
executive shall be entitled to four (4) weeks’ vacation in each calendar year,
or such greater amount of vacation as may be determined in accordance with
iStar’s vacation policy as in effect from time to time.  The Executive shall also be entitled to all
paid holidays given by the Trust to its executives, and sick and personal days
on an as needed basis.

 

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

 

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

 

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

 

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

 

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

 

3

 

action
or omission was in the best interests of the Trust, prior to the Effective Time
of the Merger, and iStar thereafter.  Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or based upon the advice of counsel for iStar shall
be conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Trust.  The cessation of employment of the Executive
shall not be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the membership of the Board at
a meeting of the Board called and held for such purpose (after reasonable
notice is provided to the Executive and the Executive is given an opportunity,
together with counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive was guilty of the conduct set forth
in clause (i), (ii), (iii) or (iv) hereof, and specifying the particulars
thereof in detail.

 

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

 

(e)           Termination by the Executive.

 

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

 

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

 

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

 

4

 

(g)           “Date of
Termination” shall mean (i) if the Executive’s employment is terminated by his
death, the date of his death, (ii) if the Executive’s employment is terminated
pursuant to subsection (b) above, the date as of which the physician’s written
opinion is received by the Trust, (iii) if the Executive’s employment is
terminated pursuant to subsection (c) above, the date specified in the Notice
of Termination, and (iv) if the Executive’s employment is terminated for any
other reason, the date thirty (30) days following the date on which a Notice of
Termination is given.

 

7.             Compensation Upon Termination, Death or During Disability.

 

(a)           Disability.  During
any period that the Executive fails to perform his duties hereunder as a result
of his incapacity due to a physical or mental illness (“disability period”),
the Executive shall continue to receive his full Base Salary at the rate then
in effect for such period (and shall not be eligible for payments under the
disability plans, programs and policies maintained by the Trust or in
connection with employment by the Trust (“Disability Plans”)) until his
employment is terminated pursuant to Section 6(b) hereof, and upon such
termination, the Executive shall, within ten (10) days of such termination, be
entitled to all amounts to which the Executive is entitled pursuant to
short-term Disability Plans.  The
Executive’s rights under any long-term Disability Plan shall be determined in
accordance with the provisions of such plan. 
In addition, upon the Executive’s termination in accordance with Section
6(b) hereof, the Executive shall be paid a pro rata portion of (i) the
Performance Bonus based upon Executive’s satisfaction of the Target as of the
Date of Termination and (ii) the Discretionary Bonus earned in the prior fiscal
year, to be calculated by the number of days he was employed in the calendar
year in which the Date of Termination occurs (collectively, the “Prorated
Annual Bonus Amount”).  For purposes of
this Agreement, during the first fiscal year of this Agreement, the
Discretionary Bonus earned in the prior fiscal year shall be deemed to be
$150,000.

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

8.             Nondisclosure.  The
Executive shall hold in a fiduciary capacity for the benefit of the Trust and
iStar all Confidential Information relating to the Trust, iStar or any of their
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive’s employment by the Trust, iStar
or any of their affiliated companies. 
For the purposes of this Agreement, “Confidential Information” means any
data or information with respect to the business conducted by the Trust, iStar
or their affiliates, that is material to the Trust’s or iStar’s business
operations and is not generally known by the public, 

 

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

 

6

 

including
business and trade secrets.  To the
extent consistent with the foregoing definition, Confidential Information
includes without limitation: (a) reports, pricing, underwriting and pricing
procedures, and financing methods of the Company, together with any specific
and proprietary techniques utilized by the Company in designing, developing,
and marketing its loan products or in performing services for customers and
accounts of the Company; (b) the business plans and financial statements,
reports, data and projections of the Company; (c) identities and addresses of
consultants, borrowers or customers or any other confidential information
relating to or dealing with the business operations or activities of the Trust,
iStar and their affiliates; and (d) information concerning trade secrets of the
Trust, iStar and their affiliates.  After
termination of the Executive’s employment with the Trust, the Executive shall
not, without the prior written consent of the Trust or as may otherwise be
required by law or legal process, communicate or divulge any such Confidential
Information to anyone other than the Trust and those designated by it.  The agreement made in this Section 8 shall be
in addition to, and not in limitation or derogation of, any obligations
otherwise imposed by law or by separate agreement upon the Executive in respect
of Confidential Information of the Trust and iStar.

 

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

 

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

 

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

 

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

 

7

 

Executive,
or (C) in any way interfering with the relationship between such Person and
Trust or its affiliates; or

 

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

 

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

 

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

 

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

 

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

 

(f)            All of
the covenants in this Section 9 shall be construed as an agreement independent
of any other provision in this Agreement, and the existence of any claim or
cause of action of Executive against Trust whether predicated on this Agreement
or otherwise shall not constitute a defense to the enforcement by Trust of such
covenants.  It 

 

8

 

is
specifically agreed that the duration of the period during which the agreements
and covenants of Executive made in this Section 9 shall be effective shall be
computed by excluding from such computation any time during which Executive is
in violation of any provision of this Section 9.

 

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

 

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

 

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

 

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

 

If to the Executive:

 

David A. Karp

29 Wesskum Wood Road

Riverside, CT 06878

 

If to the Trust:

 

Falcon Financial Investment Trust

c/o iStar Financial Inc.

1114 Avenue of the Americas, 27th Floor

New York, NY 10036

Attn: Compensation Committee

 

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

 

9

 

13.           Miscellaneous.  No
provisions of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by the
Executive and such officer of the Trust as may be specifically designated by
the Board.  No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.  No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this
Agreement.  The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York without regard to its conflicts of law principles.

 

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

 

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

 

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

 

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

 

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

 

10

 

or
representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein.

 

[Remainder of the Page Intentionally Left Blank.]

 

11

 

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

 

	
   

  	
  FALCON FINANCIAL INVESTMENT TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Allison W. Berman

  	
   

  	
  By: 

  	
  /s/ Vernon B. Schwartz

  	
   

  
	
   

  	
  Name:

  	
  Vernon B. Schwartz

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Allison W. Berman

  	
   

  	
  /s/ David A. Karp

  	
   

  
	
   

  	
  David A. Karp

  
							

 

 

Appendix A

 

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

 

	
  Percentage of Target Satisfied

  	
   

  	
  Performance Bonus

  
	
   

  	
   

  	
   

  
	
  75%

  	
   

  	
  10% of Base Salary

  
	
  100%

  	
   

  	
  20% of Base Salary

  
	
  125%

  	
   

  	
  24% of Base Salary

  
	
  150%

  	
   

  	
  30% of Base Salary

  

 

App. A-1

 

Appendix B

 

Example 1

 

Assumptions:

 

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

•                  Base Salary of $390,000

•                  Termination without Cause, June 30,
2005

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

•                  Discretion Bonus in prior fiscal year
deemed to be $150,000

 

Calculation of Prorated Annual Bonus Amount

 

1.  Performance
Bonus

 

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

Performance Bonus payable upon satisfaction of 100% of
Target:  $78,000 (See Appendix A)

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

 

Performance Bonus = $78,000 x 50% = $39,000

 

2. 
Discretionary Bonus = $150,000 x 50% = $75,000

 

Prorated Annual Bonus Amount = $39,000 + $75,000 =
$114,000

 

Calculation of Liquidated Damages

 

Base Salary + Prorated Annual Bonus Amount x 2 =

 

($390,000 + $114,000) x 2 = $1,008,000

 

Example 2*

 

Assumptions:

 

•                  Effective Date of January 1, 2005

•                  Base Salary of $390,000

•                  Termination without Cause, June 30,
2006

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

•                  Discretionary Bonus earned in the
prior fiscal year of $200,000

 

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

 

App. B-1

 

Calculation of Prorated Annual Bonus Amount

 

1.  Performance
Bonus

 

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

Performance Bonus payable upon satisfaction of 125% of
Target:  $93,600 (See Appendix A)

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

 

Performance Bonus = $93,600 x 50% = $46,800

 

2. Discretionary Bonus = $200,000 x 50% = $100,000

 

Prorated Annual Bonus Amount = $46,800 + $100,000 =
$146,000

 

Calculation of Liquidated Damages

 

Base Salary + Prorated Annual Bonus Amount x 1 =

 

($390,000 + $146,000) x 1 = $536,000

 

App. B-2

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