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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT entered into as of the
5th day of January,
2009, by and between Patriot Capital Funding, Inc.
(the "Company"), a Delaware corporation, and Timothy W. Hassler, an
individual (the "Executive") (hereinafter collectively referred to
as the "Parties").
WHEREAS, the Executive has heretofore been employed
by the Company as its Chief Investment Officer, the Company
recognizes the Executive’s experience and relationships in
the Company’s industry, and the Company desires to retain the
services and employment of the Executive on the terms set forth
herein;
WHEREAS, the Executive and the Company have entered
into an employment agreement dated July 27, 2005 (the "Prior
Agreement"); and
WHEREAS, the Company and the Executive desire to
enter into this agreement (the "Agreement") which will replace the
Prior Agreement and will provide for the continued employment of
the Executive by the Company upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the respective
agreements of the Parties contained herein, it is agreed as
follows:
1. Term . The term of employment (the
"Term") under this Agreement shall be the period from
January 5, 2009 through January 5, 2011 unless terminated
earlier by either Party pursuant to Section 7.
2. Employment .
(a) During the Term, the Executive shall be
employed as the Chief Investment Officer of the Company or such
other position as may be mutually agreed upon in writing by the
Parties. The Executive shall perform the duties, undertake the
responsibilities and exercise the authority customarily performed,
undertaken and exercised by persons situated in a similar executive
capacity in a company the size and nature of the Company.
(b) The Executive shall devote his full
working time, attention and skill to the performance of such
duties, services and responsibilities, and will use his best
efforts to promote the interests of the Company. The Executive will
not, without prior written approval of the Board of Directors of
the Company (the "Board"), engage in any other activities that
would interfere with the performance of his duties as an employee
of the Company, are in violation of written policies of the
Company, are in violation of applicable law, or would create a
conflict of interest with respect to the Executive’s
obligations as an employee of the Company. The Executive may
(i) serve on corporate (subject to the prior approval of the
Board) or charitable boards or committees, (ii) deliver lectures
and teach at educational institutions, (iii) manage his
personal affairs, including financial and legal aspects thereto,
and (iv) invest personally in any business where no conflict
of interest exists between such investment and the business of the
Company, as long as the foregoing activities are consistent with
the Executive’s commitments in the preceding sentence and
Section 9 hereof and do not interfere with the
Executive’s performance of his duties and responsibilities
for the Company or any affiliate and the Executive’s time
devoted to such matters falls outside of the Company’s normal
hours of operation.
3. Base Salary . Effective
January 1, 2009, the Company agrees to pay or cause to be paid
to the Executive during the Term a base salary at the annual rate
of $375,000 (as adjusted from time to time in accordance with this
Section, the "Base Salary"). Such Base Salary shall be payable in
accordance with the Company’s customary practices applicable
to its executives. Such Base Salary shall be reviewed at least
annually on or about each March 31 during the Term and may be
increased by the Board or an authorized committee of the Board in
its sole discretion. Such Base Salary may be reduced only if such
reduction is implemented by the Company as part of an overall
general salary reduction affecting substantially all of its
employees and such reduction to the Base Salary on a percentage
basis is equal to or less than the percentage reduction otherwise
implemented.
4. Annual Bonus . During the Term, the
Executive shall be eligible to receive an annual bonus (the "Annual
Bonus") as set forth in this Section. For each calendar year
beginning with 2008, the Executive shall be eligible for an Annual
Bonus of up to 200% of the Executive’s then-current Base
Salary for achieving the highest level of performance objectives.
The objectives for the Annual Bonus, which may include quantitative
and qualitative objectives, shall be determined by the Board or an
authorized committee of the Board no later than 60 days after
the beginning of the applicable measurement period, and the amount
of any Annual Bonus shall be determined by the Board or an
authorized committee of the Board and paid no later than
March 15 of the following year.
5. Restricted Stock . At such time
during each of 2009 and 2010 as determined by the Board or an
authorized committee of the Board, the Company will grant to the
Executive restricted stock awards with a value of up to 125% of the
Executive’s Base Salary. The share value of the
Company’s common stock used in determining the number of
restricted shares to be issued will be the greater of (i) the
closing price of a share of the Company’s common stock on the
NASDAQ Stock Market (or any other national securities exchange on
which the Company’s common stock is then listed) on the grant
date or (ii) $4.00. If the Company’s common stock is not
listed on a national securities exchange on the grant date, then
the fair market value of a share of the Company’s common
stock will be determined by the Board. The value at the time of
grant of the restricted stock awards for 2009 shall be equal to at
least $300,000, and the value at the time of grant of the
restricted stock awards for 2010 shall be equal to at least
$350,000. Except as otherwise provided in Section 8, all
restricted stock shall become vested in accordance with the
schedule established by the Board at the time of the grant and
shall have such other terms as are provided under the applicable
restricted stock plan and grant agreement, including any limitation
on the number of shares of restricted stock to be issued in any
year.
6. Employee Benefits .
(a) During the Term, subject to the
Company’s right to amend, modify, or terminate any plan or
program, the Executive shall be entitled to participate in all
employee benefit plans, practices and programs maintained by the
Company and made available to employees generally including,
without limitation, all pension, retirement, savings, medical,
hospitalization, disability, dental, life or travel accident
insurance benefit plans, vacation and sick leave. The
Executive’s participation in such plans, practices and
programs shall be on a basis and subject to terms no less favorable
than applicable to employees of the Company generally (subject to
applicable Internal Revenue Code (the "Code") and other legal
restrictions), provided, however, that such participation may be on
a basis and subject to terms more favorable than applicable to
employees of the Company generally.
(b) During the Term, subject to the
Company’s right to amend, modify or terminate any such plans
or benefits, the Executive shall be entitled to participate in all
executive benefit plans, and fringe benefit and perquisite
arrangements now maintained or hereafter established by the Company
for the purpose of providing compensation and/or benefits generally
to executives of the Company. Unless otherwise provided herein, the
Executive’s participation in such plans shall be on a basis
and subject to terms no less favorable than applicable to other
similarly situated executives of the Company generally, provided,
however, that such participation may be on a basis and subject to
terms more favorable than applicable to similarly situated
executives of the Company generally.
(c) During the Term, the Company agrees to pay
all reasonable business expenses, subject to reasonable
documentation, incurred by the Executive in furtherance of the
Company’s business, including, without limitation, continuing
education, obtaining professional licenses, traveling, and
entertainment expenses, in accordance with the Company’s
policies. All reimbursements shall be made no later than
March 15 of the year following the year in which the expenses
are incurred.
(d) During the Term, if the Executive agrees
to relocate his residence at the Company’s request, the
Company shall pay all reasonable relocation expenses, subject to
reasonable documentation, including, but not limited to, the costs
of moving the Executive’s household goods and real estate
commission costs related to selling the Executive’s home,
provided, however, that such relocation expenses shall not include
any loss on the sale of the Executive’s home. The Company
will also make a payment to the Executive in the amount necessary
to ensure that the Executive, after all applicable federal, state,
and local taxes, and taking into account any tax deductions
available to the Executive, is in the same economic position as if
the Executive had not been subject to tax on the Company’s
payment or reimbursement of relocation expenses. All relocation
reimbursements shall be made no later than March 15 of the
year following the year in which the expenses are incurred.
7. Termination of Employment . The
Executive’s employment by the Company may be terminated by
either the Executive or the Company at any time and, except as
expressly set forth in this Section 7, with no requirement of
notice or explanation from either Party. Upon the Executive’s
termination of employment during the Term, the Executive (or his
estate in the event he dies after becoming entitled to, but before
receiving, any payment) shall be entitled to the payments and
benefits described below.
(a) Termination by the Executive Without
Good Reason or Due to Death or Disability. If during the Term
the Executive voluntarily terminates employment with the Company
without Good Reason (as defined below) or due to death or
Disability (as defined below), the Company shall pay the Executive
any earned but unpaid Base Salary, any Annual Bonus payment that
has been approved by the Compensation Committee of the Board with
respect to a completed measurement period that is fully earned and
vested at separation or death but not yet paid, both at the time
otherwise payable, and any amounts to which the Executive is
legally entitled under the generally applicable terms of pension,
savings, disability, life insurance, or other programs, and any
business expenses that would otherwise be reimbursed under the
Company’s policies. In addition, if the Executive terminates
employment with the Company due to death or Disability, then with
respect to any Annual Bonus measurement period during which the
Executive terminates employment, the Company shall pay the
Executive (or, in the case of death, the Executive’s
beneficiary) a lump sum cash amount equal to a pro rata portion,
based on the length of the Executive’s service with the
Company during such period, of the Average Annual Bonus (as defined
below). Furthermore, if the Executive terminates employment with
the Company due to death, then the Company shall pay the
Executive’s beneficiary in a lump sum payment the sum of
(i) the Executive’s annual Base Salary for the year in
which he terminates employment and (ii) his Average Annual
Bonus, multiplied by a fraction, the numerator of which is the
longer of 12 months or the number of full and partial calendar
months remaining in the term of this Agreement determined
immediately before such termination, up to 18 months, and the
denominator of which is 12. The payments provided for in this
Section 7(a) (exclusive of any amounts payable under any other plan
or program) shall be made no later than March 15 of the year
following the year in which the termination of employment occurs.
Other than the payments and benefits described in this
Section 7(a), the Company will be under no obligation to make
additional severance or similar payments to the Executive or his
estate, as the case may be.
(b) Termination by the Company Without
Cause or by the Executive With Good Reason . If during the Term
the Company terminates the Executive’s employment without
Cause (as defined below) or the Executive terminates employment
with Good Reason (as defined below), subject to the
Executive’s compliance with Section 7(d),
Section 7(e), and Section 9 hereof, the Company shall
provide the payments and benefits described in this
Section 7(b). The Company shall pay the Executive the sum of
(i) his annual Base Salary for the year in which he terminates
employment and (ii) his Average Annual Bonus, multiplied by a
fraction, the numerator of which is the number of months in the
Severance Period and the denominator of which is 12. The "Severance
Period" is the longer of 12 months or the number of full and
partial calendar months remaining in the term of this Agreement
determined immediately before such termination, up to
18 months. Such amount shall be paid in equal monthly
installments, provided that if the Executive is a "specified
employee" (within the meaning of Code section 409A) at the time he
terminates employment, the first six months of installments shall
be paid in a lump sum six months after the Executive’s
termination of employment. With respect to any Annual Bonus
measurement period during which the Executive is terminated, the
Company shall also pay the Executive a lump sum cash amount within
30 days of his termination of employment equal to a pro rata
portion, based on the length of the Executive’s service
during such measurement period, of the Average Annual Bonus. In
addition, the Executive’s stock options shall become 100%
vested and exercisable for their full term, and the
Executive’s restricted stock will become 100% vested.
The Company shall provide continued medical and
dental insurance coverage during the Severance Period (or until the
Executive becomes eligible for such coverage under another
employer’s program, if sooner), which coverage shall be
deemed to satisfy COBRA health coverage requirements, at a cost to
the Executive that does not exceed the amount the Executive would
have paid had the Executive continued in employment during the
period. Should the Executive’s continued participation under
the Company’s medical and dental insurance programs described
above become impermissible under the Code, ERISA, or other
applicable law, or likely to result in adverse tax consequences to
the Company or other participants covered by such programs, the
Company may, in its sole discretion, satisfy any of its obligations
to the Executive under this paragraph by providing the Executive
with economically equivalent coverage through alternative
arrangements, or the Company will reimburse the Executive for
premium costs to obtain such economically equivalent coverage to be
reasonably agreed upon by the Company and the Executive.
The Company shall also pay the Executive any earned
but unpaid Base Salary, any Annual Bonus awards with respect to a
completed measurement period that are fully earned and vested at
separation but not yet paid, both at the time otherwise payable,
and any amounts to which the Executive is entitled under the
generally applicable terms of pension, savings, disability, life
insurance, or other programs. Other than the payments and benefits
described in this Section 7(b), the Company will make no
additional severance or similar payments unless otherwise approved
by the Board or an authorized committee of the Board.
(c) Termination by the Company With
Cause . If the Company terminates the Executive’s
employment with Cause, the Company shall pay the Executive only any
earned but unpaid Base Salary at the time otherwise payable and any
amounts to which the Executive is legally entitled under the
generally applicable terms of pension, savings, disability or other
programs.
(d) Release of Claims . As a condition
to receiving the severance, benefits and entitlements pursuant to
Section 7(a) (other than benefits payable upon death), Section 7(b)
or Section 8 hereof, the Executive shall be required to
deliver to the Company and not revoke a general release of claims
against the Company, its affiliates, and their officers, directors,
employees and agents in substantially the form attached hereto as
Exhibit A. The Executive shall be afforded seven days after
execution and delivery of such release to revoke it, in which event
the Executive shall not be entitled to the payments, rights or
other entitlements hereunder other than as required by applicable
law.
(e) Resignation . Notwithstanding any
other provision of this Agreement, upon the termination of the
Executive’s employment for any reason, unless otherwise
requested by the Company, the Executive shall immediately resign
from the Board, if applicable, and from the boards of directors of
any affiliates of the Company and as a trustee of, or fiduciary to,
any employee benefit plans of the Company or any of its affiliates.
The Executive agrees to execute any and all documentation of such
resignations upon request by the Company, but he shall be treated
for all purposes as having so resigned upon termination of his
employment regardless of when or whether he executes any such
documentation.
(f) Definitions . The following terms
shall have the following meanings for purposes of this
Agreement.
" Cause " means (i) the
Executive’s willful and continued failure to perform
substantially his duties with the Company (other than any such
failure resulting from the Executive’s incapacity due to
physical or mental illness or any such failure subsequent to the
Executive being delivered a notice of termination without Cause by
the Company or delivering a notice of termination for Good Reason
to the Company that results in the Executive’s termination of
employment) after a written demand for substantial performance is
delivered to the Executive by the Company which specifically
identifies the manner in which the Company believes that the
Executive has failed to perform substantially his duties;
(ii) the Executive’s willfully engaging in illegal
conduct or gross misconduct which is demonstrably and materially
injurious to the Company or its affiliates, (iii) the
Executive’s ineligibility to serve as an employee, officer,
or director of the Company pursuant to Section 9 of the
Investment Company Act of 1940, as amended, or (iv) the
Executive’s conviction of a felony or crime involving moral
turpitude; provided, however, that a failure on the part of the
Executive to achieve performance objectives set by the Company
shall not in and of itself constitute Cause pursuant to clause
(i) hereof. Prior to terminating the Executive’s
employment for Cause, the Company must notify the Executive in
writing of any event purporting to constitute Cause within
45 days of the Board’s knowledge of its existence and,
if curable, must provide the Executive with at least 20 days
to cure such event. If such event is not cured by the Executive in
such time period, or is incurable, then the Executive’s
employment shall be terminated for Cause if 2/3 of the independent
members of the Board determine in writing to so terminate his
employment.
" Disability " means a physical or mental
infirmity which impairs the Executive’s ability to
substantially perform his duties under this Agreement for at least
one hundred eighty (180) days (which need not be consecutive)
during any 365-consecutive-day period. The Executive shall be
entitled to the compensation and benefits provided for under this
Agreement for any period during the Term and prior to the
establishment of the Executive’s Disability during which the
Executive is unable to work due to a physical or mental
infirmity.
" Good Reason " means, without the
Executive’s express written consent, the occurrence of any of
the following events:
(i) any material change in the duties or
responsibilities (including reporting responsibilities) of the
Executive that is inconsistent in any material and adverse respect
with the Executive’s position, duties, responsibilities or
status with the Company (including any material and adverse
diminution of such duties or responsibilities); or
(ii) a material and adverse change in the
Executive’s titles or offices (including, if applicable,
membership on the Board) with the Company set forth in Section 2(a)
hereof;
(iii) a reduction by the Company in the
Executive’s rate of annual Base Salary or an adverse change
in the Executive’s Annual Bonus opportunity as a percentage
of his Base Salary, provided, however, that the Executive’s
rate of annual Base Salary may be reduced without being considered
Good Reason if such reduction is implemented by the Company as part
of an overall general salary reduction affecting substantially all
of its employees and such reduction to the Base Salary on a
percentage basis is equal to or less than the percentage reduction
otherwise implemented;
(iv) any requirement of the Company that the
Executive be based anywhere more than 35 miles from the office
where the Executive is located at the commencement of the Term or,
if the Executive subsequently agrees to a change in such location,
35 miles from such new office location; or
(v) the failure of any purchaser of or
successor to all or substantially all of the Company’s assets
to assume the obligations of the Company contained in this
Agreement, either in writing or as a matter of law.
The Executive must notify the Company of any event
purporting to constitute Good Reason within 45 days following
the Executive’s knowledge of its existence, and the Company
shall have 20 days in which to correct or remove such Good
Reason, or such event shall not constitute Good Reason.
" Average Annual Bonus " means the average
of the Annual Bonuses paid and restricted stock awarded to the
Executive in 2008 and during the Term.
8. Change in Control .
(a) Upon a Change in Control during the Term,
all outstanding options held by the Executive shall become 100%
vested and exercisable for their full term (subject to earlier
termination thereafter in accordance with the applicable plan
and/or award agreement), and all restricted stock granted to the
Executive shall become 100% vested.
In addition, if during the Term the Executive
voluntarily terminates employment without Good Reason at any time
during the 30-day period following the six-month anniversary of the
Change in Control, the Executive shall be entitled to receive the
payments and benefits described in Section 7(b) (for clarification,
upon such a voluntary termination without Good Reason, the
Executive shall not be entitled to the thirty-six month Severance
Period provided by the following sentence of this Section 8).
If, during the Term, the Executive’s employment is terminated
by the Company without Cause or by the Executive with Good Reason
within one year following a Change in Control, the Severance Period
under Section 7(b) shall be thirty-six months, notwithstanding
anything to the contrary in Section 7(b). Solely for purposes
of this Section 8(a), "Good Reason" shall mean Good Reason as
defined in Section 7(f), but taking into account only clauses
(iii), (iv), and (v).
(b) " Change in Control " means the
occurrence of any of the following events:
(i) An acquisition in one or more transactions
(other than directly from the Company) of any voting securities of
the Company by any Person (as defined below) immediately after
which such Person has Beneficial Ownership (as defined below) of
fifty percent or more of the combined voting power of the
Company’s then outstanding voting securities; provided,
however, in determining whether a Change in Control has occurred,
voting securities which are acquired in a "Non-Control Acquisition"
(as hereinafter defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control Acquisition" shall
mean an acquisition by (A) an employee benefit plan (or a
trust forming a part thereof) maintained by (I) the Company or
(II) any corporation or other Person of which a majority of
its voting power or its voting equity securities or equity interest
is owned, directly or indirectly, by the Company (for purposes of
this definition, a "Subsidiary"), (B) the Company or its
Subsidiaries, or (C) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(ii) The individuals who, as of the IPO Date
are members of the Board (the "Incumbent Board"), cease for any
reason to constitute at least a majority of the members of the
Board or, following a Merger (as defined below), the board of
directors of the ultimate Parent Corporation (as defined below);
provided, however, that if the election, or nomination for election
by the Company’s common stockholders, of any new director was
approved by a vote of at least a majority of the Incumbent Board
(or, with respect to the directors who are not "interested persons"
as defined in the Investment Company Act of 1940, by a majority of
the directors who are not "interested persons" serving on the
Incumbent Board), such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board;
provided further, however, that no individual shall be considered a
member of the Incumbent Board if such individual initially assumed
office as a result of an actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board (a "Proxy Contest") including by reason of any agreement
intended to avoid or settle any Proxy Contest; or
(iii) The consummation of:
(A) A merger, consolidation or reorganization
involving
the Company
(a "Merger") or an indirect or direct Subsidiary of the Company,
provided that only entities whose accounts are consolidated with
the Company for financial reporting purposes shall be deemed to be
a Subsidiary of the Company for this purpose, or to which
securities of the Company are issued, unless:
(I) the stockholders of the Company,
immediately before a Merger, own, directly or indirectly
immediately following the Merger, more than fifty percent of the
combined voting power of the outstanding voting securities of
(1) the corporation resulting from the Merger (the "Surviving
Corporation") if fifty percent or more of the combined voting power
of the then outstanding voting securities of the Surviving
Corporation is not Beneficially Owned, directly or indirectly, by
another Person subsumed in the definition of a "person" in
§13d of the Securities Exchange Act of 1934 (the "Exchange
Act") (a "Parent Corporation"), or (2) if there is one or more
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