EXECUTION
COPY
RETENTION
AGREEMENT
THIS RETENTION AGREEMENT (the “
Agreement ”) is entered into by and between Joan M.
Sweeney (“ you ”) and Allied Capital Corporation
(the “ Company ”), a Maryland corporation, and
will be effective on May 13, 2009 (the “ Effective
Date ”). You and the Company shall be referred to
collectively as the “ Parties .” This Agreement
is an important document and you are hereby advised to review it
with an attorney before signing it.
WHEREAS, as Chief Operating Officer,
you have had a central role in the management of the Company;
WHEREAS, in November 2008 you
postponed your retirement that you had planned for
December 31, 2008;
WHEREAS, you and the Company want to
have a transition period before you retire from the Company;
WHEREAS, the Company will provide you
with compensation and other benefits on the terms and conditions
set forth in this Agreement;
WHEREAS, you are willing to continue
your employment and perform services for the Company on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of
the promises and the mutual agreements contained herein, the
Parties agree as follows:
1. Responsibilities .
You agree to serve as a Managing
Director and Senior Advisor to the Chief Executive Officer (“
CEO ”). In that position, you shall report to the CEO
and be responsible for advising him on strategic business and
management issues and for such special projects as directed by the
CEO. You shall devote sufficient time, attention, skill and energy
to the business of the Company to accomplish assigned tasks. Except
when the CEO reasonably requires your presence in the office or at
meetings at other locations, you may regularly perform your
services from any location you choose as long as you take
appropriate precautions to protect the Company’s Confidential
Information (as defined in Section 5 below). You shall perform
your responsibilities in accordance with the standards and policies
that the Company may from time to time establish. You may engage in
appropriate civic, charitable, non-profit activities or business
activities and devote a reasonable amount of time to private
investments or boards or other activities, provided that you notify
the CEO in writing of any such activities and the CEO reasonably
determines that such activities do not interfere or conflict with
your job responsibilities and are not or are not likely to be
contrary to the Company’s interests. Nothing in this
Agreement shall preclude you from managing any passive investment
made by you in publicly traded equity securities or other property
(provided that no such investment may exceed 5% of the equity of
any entity), without the prior approval of the Company. You and the
Company agree that your position is important to the
Company’s success and that the highest level of performance
is required from you. You represent that you are not subject to any
legal obligations or restrictions that would prevent or limit you
from performing your responsibilities under this Agreement.
2. Compensation . During the Term (as defined in
Section 3(a) below):
(a) Base Compensation .
Your “ Base Compensation ” shall be $125,000.00
per month (which would equal one million five hundred thousand
dollars on an annualized basis) payable in accordance with the
Company’s regular payroll practices in effect from time to
time and subject to withholding of amounts required by law. The
Company may review and adjust your Base Compensation periodically,
usually annually, but may not decrease your Base Compensation.
(b) Business Expenses .
The Company shall pay or reimburse you for all ordinary and
reasonable business-related expenses you incur in the performance
of your duties under this Agreement, including reasonable and
necessary travel expenses. The Company will reimburse you for all
such expenses upon the presentation by you of an itemized account
of such expenditures, together with supporting receipts and other
appropriate documentation.
(c) Stock Options . At a
meeting of the Compensation Committee of the Company’s Board
of Directors on May 13, 2009, the Company awarded you 500,000
stock options in accordance with the terms and conditions of the
Allied Capital Corporation Amended Stock Option Plan and a Notice
of Grant of Stock Options and Option Agreement in a form
substantially similar to that in Attachment A.
(d) Special Retention
Bonuses . You will receive special retention bonuses, which
shall be subject to withholdings of amounts required by law, as
follows: (A) $150,000 to be paid on the next regularly scheduled
payroll date after the first anniversary of the Effective Date, and
(B) $300,000 to be paid on the next regularly scheduled payroll
date after the second anniversary of the Effective Date (“
Special Retention Bonuses ”).
3. Term of Retention .
(a) The Company agrees to employ
you, and you agree to remain in employment with the Company, up to
but not including the third anniversary of the Effective Date (the
“ Term ”), provided that either you or the
Company may end your employment earlier under the terms set forth
in Section 3(b) through 3(f) below. At the end of the Term, your
employment with the Company shall terminate. “ Termination
Date ” shall mean the day that your employment with the
Company ends for any reason. Unless the Company requests otherwise,
when your employment ends for any reason, you shall be deemed to
have resigned as of the Termination Date from all positions you
hold with the Company or any affiliated entity, or based on your
employment with the Company.
(b) The Company has the right to
terminate your employment at any time with or without Cause. For
all purposes under this Agreement, “ Cause ”
shall mean:
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(i)
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a willful refusal by you to substantially
perform your duties under this Agreement, other than a refusal
resulting from your complete or partial incapacity due to physical
or mental illness or impairment, which refusal is materially
injurious to the Company and which continues on an uninterrupted
basis for more than thirty (30) days after written notice by
the Company to you specifying in reasonable detail your claimed
refusal; provided, however, that you shall have no authority to
bind the Company during the thirty (30) days after written
notice is delivered hereunder;
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(ii)
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a willful act by you, which constitutes
embezzlement or criminal fraud and which is materially injurious to
the Company;
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(iii)
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your ineligibility to serve as employee,
officer or director of the Company pursuant to Section 9 of
the Investment Company Act of 1940, as amended; or
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(iv)
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a breach by you of your duty of loyalty to the
Company, which breach is materially injurious to the Company and
continues unremedied for more than thirty (30) days after
written notice by the Company to you specifying in reasonable
detail such breach; provided, however, that you shall have no
authority to bind the Company during the thirty (30) days
after written notice is delivered hereunder.
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No act, or failure to act, by you shall be considered
“willful” if done in good faith and with a reasonable
belief that the act or omission was lawful and in the
Company’s best interest. Any determination of Cause under
this Agreement shall be made by a resolution duly adopted by the
affirmative vote of at least two-thirds (2/3) of the members of the
Board (not including you if you are a member of the Board) at a
meeting of the Board called and held for that purpose provided that
you shall have been given written notice of such meeting at least
ten (10) business days prior to the meeting and shall have
been given the opportunity to be heard by the Board before any such
resolution is passed. Any failure by the Company to follow the
procedures set forth in this Section 3(b) in connection with a
termination of your employment shall result in such termination
being deemed to be a termination by the Company without Cause under
this Agreement.
(c) You have the right to resign
your employment with the Company at any time with or without Good
Reason after having given the Company thirty (30) days written
notice. The Company may, in its sole discretion, select any date
prior to the end of such thirty (30) day period as the
Termination Date.
Before you can resign for Good
Reason, you must give the Company thirty (30) days written
notice of your intent to resign for Good Reason and of the facts
and circumstances you believe constitute Good Reason. If the
Company fails to cure within thirty (30) days after receipt of
such notice, your employment will end on the day following the
expiration of that thirty (30) day period. For purposes of
this Agreement, “ Good Reason ” shall mean that
within the sixty (60) days prior to your notice of intent to
resign for Good Reason there has been: (1) a material breach
of this Agreement by the Company; (2) a reduction in your Base
Compensation or Special Retention Bonus (as defined in
Section 2 above); (3) a failure by the Company to
maintain directors’ and officers’ liability coverage;
(4) John Scheurer ceases to be Chief Executive Officer of the
Company other than due to his death or Disability; or (5) a
Change in Control. For purposes of this Agreement, “
Change in Control ” shall mean the occurrence of any
of the following events after the Effective Date of this
Agreement:
(i) the sale or other
disposition of all or substantially all of the Company’s
assets;
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(ii)
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the acquisition, whether directly, indirectly,
beneficially (within the meaning of rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the “ 1934 Act
”)) or of record, as a result of a merger, consolidation or
otherwise, of securities of the Company representing fifteen
percent (15%) or more of the aggregate voting power of the
Company’s then-outstanding Common Stock by any “
person ” (within the meaning of Sections 13(d) and
14(d) of the 1934 Act), including, but not limited to, any
corporation or group of persons acting in concert, other than
(i) the Company or its subsidiaries and/or (ii) any employee
pension benefit plan (within the meaning of Section 3(2) of
the Employee Retirement Income Security Act of 1974) of the Company
or its subsidiaries, including a trust established pursuant to any
such plan; or
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(iii)
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the individuals who were members of the Board
as of the Effective Date (the “ Incumbent Board
” ) cease to constitute at least two-thirds of the
Board; provided, however, that any director appointed by at least
two-thirds of the then Incumbent Board or nominated by at least
two-thirds of the Nominating Committee of the Board (a majority of
the members of the Nominating Committee shall be the then Incumbent
Board or appointees thereof), other than any director appointed or
nominated in connection with, or as a result of, a threatened or
actual proxy or control contest, shall be deemed to constitute a
member of the Incumbent Board.
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(d) Your employment shall be
deemed to have been terminated by you upon your (i) death or
(ii) inability to perform your duties under this Agreement due to
your physical or mental illness or impairment, even with reasonable
accommodation, for more than twenty-six (26) substantially
consecutive weeks in any twelve (l2)-month period (“
Disability ”) . For purposes of this Section
3(d), the Termination Date will be the date of your death or the
first day after the substantially consecutive 26 th week
that you receive notice of Disability, as applicable.
(e) Under the conditions set
forth under this Section 3(e) or Section 3(f) below, you may become
eligible to receive additional payments from the Company, provided,
however, that in no event shall any such payment be made unless you
have entered into a Designated Release that has become final and
binding within 36 days after your receive the form of
Designated Release from the Company. “ Designated
Release ” means a form of release that is substantially
similar to Attachment B to this Agreement that the Company may
modify as necessary for the release to have the same legal effect
on any claims at that time as the current form of Attachment B
would have on any claims if it were signed today, which the Company
shall provide you within seven (7) days after the other
conditions for any payment under this Section 3(e) or Section 3(f)
have been met. If during the Term (i) your employment is
terminated by the Company without Cause, by you for Good Reason or
due to your death or Disability and (ii) provided that within
thirty-six (36) days after you receive the form of Designated
Release from the Company you (or in the event of your death or
legal incapacity, the legal representative of you or your estate)
have released any claims you, your legal representatives or your
heirs, may have against the Company, its predecessors, successors,
parents, portfolio companies or affiliates or any of their then
current or former shareholders, officers, directors, agents, legal
representatives, or employees in accordance with the Designated
Release, then the Company shall pay you a lump sum equal to the sum
of (x) the total amount of Base Compensation (as defined in
Section 2(a) above) and any Special Retention Bonuses (as defined
in Section 2(d) above) that you would have received if your
employment had continued from the Termination Date through the end
of the Term and (y) an amount equal to $2,300 for the first
full month after the Termination Date and for every following month
through the last month of the Term.
(f) Subject to the Designated
Release requirement set forth in Section 3(e):
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(i)
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If the conditions in either subsection
3(f)(i)(a) or 3(f)(i)(b) are met, you shall be eligible to receive
an additional payment under any such subsection or subsections,
provided, however, that the total amount paid out under 3(f)(i)
shall in no event exceed two million dollars:
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a.
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If there is a Change in Control before the
second anniversary of the Effective Date and your employment is
terminated by you for Good Reason as a result of such Change in
Control or has previously been terminated either by the Company
without Cause or by you for Good Reason, you shall receive a lump
sum payment of two million dollars;
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b.
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If before the second anniversary of the
Effective Date your employment is terminated by the Company without
Cause or by you for a Good Reason other than Good Reason due to a
Change in Control and you also cease to be a member of the
Company’s Board of Directors other than due to your
resignation, death or disability, you shall receive a lump sum
payment of one million dollars.
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(ii)
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If there has not been a Change in Control that
would entitle you to a payment under Section 3(f)(i)(a) above
and the conditions in either subsection 3(f)(ii)(a) or 3(f)(ii)(b)
are met, you shall be eligible to receive an additional payment
under any such subsection or subsections, provided, however, that
the total amount paid out under 3(f)(ii) shall in no event exceed
one million dollars:
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a.
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If there is a Change in Control on or after
the second anniversary of the Effective Date but before the third
anniversary of the Effective Date and your employment is terminated
by you for Good Reason as a result of such Change in Control or has
previously been terminated either by the Company without Cause or
by you for Good Reason, you shall receive an additional lump sum
payment of one million dollars;
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