EMPLOYMENT
AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered
into this 13th day of February, 2007, between Capital Lease
Funding, Inc., a Maryland corporation (the “Company”),
and Paul C. Hughes (the “Executive”).
RECITALS
WHEREAS, the Company desires to employ the Executive, and
the Executive desires to be employed by the Company, all on the
terms and subject to the conditions set forth herein;
and
WHEREAS, the Executive is willing to enter into this
Agreement in consideration of the benefits which the Executive will
receive under the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
1.
Term
. The term of this Agreement will
commence on the date hereof (the “Effective Date”) and
end on December 31, 2009 (the “Initial Term”), and
shall be automatically extended for one additional year each
December 31 following the Effective Date, unless at least 90 days
immediately preceding such December 31, the Company or the
Executive provides written notice to the other that it does not
wish to extend this Agreement. The Initial Term, together with any
such extensions, shall be referred to herein as the
“Employment Period.”
2.
Position and
Duties . The Executive shall be employed by the Company
as Vice President, Corporate Secretary and General Counsel. During
the Employment Period, the Executive shall perform such duties on
behalf of the Company as are normally associated with his position
and such other duties as may be assigned by the Board of Directors
from time to time. The Executive shall also serve without
additional compensation in such other offices of the Company or its
subsidiaries to which the Executive may be elected or appointed by
the Board of Directors.
3.
Extent of
Services .
(a) During the Employment Period, the Executive
shall devote substantially all of his business 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 Company. Notwithstanding the foregoing, the
Executive may (i) make any investment where he is not
obligated or required to, and shall not in fact, devote significant
managerial efforts, (ii) participate in charitable, academic
or community activities, and in trade or professional
organizations, or (iii) hold directorships in other companies
consistent with the Company’s conflict of interest policies
and corporate governance guidelines as in effect from time to
time.
(b) Corporate Opportunities . The Executive agrees that he will not take
personal advantage of any business opportunity which arises during
his employment with the Company and which may be of benefit to the
Company unless all material facts regarding such opportunity are
promptly reported by the Executive to the Board of Directors for
consideration by the Company and the disinterested members of the
Board of Directors decide to reject the opportunity.
4.
Compensation and Related
Matters .
(a) Annual Base Salary . During the Employment Period, the Company
shall pay to the Executive an annual base salary of $215,000 (less
all applicable deductions, the “Base Salary”) for all
services rendered by the Executive to the Company. The Base Salary
shall be payable in equal installments in accordance with the
practice of the Company in effect from time to time for the payment
of salaries to officers of the Company. The Executive’s Base
Salary shall be reviewed annually by the Compensation Committee of
the Board of Directors (the “Compensation Committee”).
During the Employment Period and as of each anniversary of the
Effective Date, the Base Salary shall be increased by (i) the
product of (A) the Base Salary as then in effect and (B) the
percentage increase in the Consumer Price Index for the prior
calendar year (as defined in Section 14(c)) and (ii) the amount, if
any, determined by the Compensation Committee.
(b) Annual Bonuses . The Executive shall be eligible for an annual
bonus (“Annual Bonus”) for each calendar year, payable
no later than March 31 of the following year, based on his
performance and the performance of the Company during such period
as determined by the Compensation Committee. During the Employment
Period, there shall be no maximum limit on the Annual Bonus
awardable to the Executive.
(c) Restricted Stock . In addition to awards of restricted common
stock made on or prior to the date hereof, the Executive shall be
eligible for future awards of restricted common stock pursuant to
the Company’s 2004 stock incentive plan at the discretion of
the Compensation Committee. Such future and currently outstanding
awards shall be governed by the applicable grant agreement and
related plan.
(d) Expenses . The Company shall pay or reimburse the
Executive for all reasonable expenses actually paid or incurred by
the Executive during the Employment Period in the performance of
the Executive’s duties under this Agreement in accordance
with the Company’s employee business expense reimbursement
policies in effect from time to time.
(e) Other Benefits . During the Employment Period, the Executive
shall be eligible to receive such employee benefits including,
without limitation, participation in the Company’s retirement
and welfare plans, as the Company may provide from time to time to
similarly situated employees, and such other benefits as the Board
of Directors may from time to time establish for the
Company’s executive officers. In addition, the Company shall
endeavor to provide at its sole expense a whole life insurance
policy or policies to the Executive with a death benefit
aggregating at least $500 thousand, as well as disability insurance
providing for income replacement upon termination of at least 95%
of the Base Salary, subject to such insurance being available at
reasonable cost. The Company agrees to indemnify the Executive for
any income tax he incurs as a result of the Company’s payment
of these premiums.
(f) Vacations . The Executive shall be entitled to at least
five (5) weeks vacation in each calendar year, together with leave
of absence and leave for illness or temporary disability in
accordance with the policies of the Company in effect from time to
time.
5.
Termination
.
Each party shall have the right to
terminate the Executive’s employment hereunder before the
Employment Period expires to the extent, and subject to the
provisions, set forth in this Section 5:
(a) Death . The Executive’s employment hereunder
shall terminate upon his death.
(b) Disability . The Company shall have the right to terminate
the Executive’s employment if the Board of Directors
determines that the Executive is unable to perform his duties by
reason of Disability. As used herein, “Disability”
shall mean the inability of the Executive due to physical or mental
illness or injury to perform his duties hereunder for any period of
180 consecutive days and the return of the Executive to his duties
for periods of 15 days or less shall not interrupt such 180 day
period.
(c) Cause . The Company shall have the right to terminate
the Executive’s employment at any time upon delivery of a
Notice of Termination (as defined in subsection (f) below) for
Cause (as defined below) to Executive, such employment to terminate
immediately upon delivery of such notice unless otherwise specified
by the Board of Directors. For purposes of this Agreement, the term
“Cause” means that the Executive: (i) has been
convicted of, or entered a plea of guilty or “ nolo
contendere ” to, a felony (excluding any felony relating
to the negligent operation of an automobile), (ii) has
intentionally failed to substantially perform (other than by reason
of illness or temporary disability) his reasonably assigned
material duties hereunder, (iii) has engaged in willful misconduct
in the performance of his duties or (iv) has materially breached
any non-competition or non-disclosure agreement in effect between
the Executive and the Company, including such agreements in this
Agreement.
(d) Without Cause . The Company may at any time terminate the
Executive’s employment hereunder.
(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) any reduction by the Company in the
Base Salary, (B) a material reduction in the Executive’s
titles, duties and responsibilities, or the assignment to the
Executive of any duties materially inconsistent with the
Executive’s position with the Company without the consent of
the Executive, (C) a requirement by the Company that the Executive
relocate to a location other than the New York, New York
metropolitan area, or (D) a material breach of this Agreement by
the Company, which, with respect to (B) and (D), has not been cured
within thirty (30) days after written notice of such action or
breach has been given by the Executive to the Company.
(f) Notice of Termination . Any termination of the Executive’s
employment by the Company or by the Executive (other than
termination pursuant to subsection (a) hereof) shall be
communicated by written Notice of Termination to the other party
hereto in accordance with Section 14(a). 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 . The “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) or (c) above,
upon delivery of the Notice of Termination unless otherwise
specified in such notice, and (iii) 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.
6.
Compensation Upon
Termination, Death or During Disability
.
(a) Death . If the Executive’s employment is
terminated by his death, the Company shall, within ten (10) days
following the Date of Termination, pay any earned and accrued but
unpaid installment of Base Salary through the Date of Termination
at the rate then in effect and any other accrued and unpaid amounts
due to the Executive under Section 4, together with any other
amounts to which the Executive is entitled pursuant to death
benefit plans, programs and policies. In addition, subject to
compliance with Section 6(f), upon the Executive’s
termination, (i) the Executive’s estate shall be paid a Pro
rata Portion of the Executive’s Maximum Bonus (each as
defined below), and (ii) all of the Executive’s outstanding
options, restricted share awards and any other equity rights
granted by the Company to the Executive shall continue to be
governed by the applicable grant agreement and related plan. For
purposes of this Agreement, (i) “Maximum Bonus” means
the highest aggregate Annual Bonus or incentive payment paid by the
Company (or any predecessor of the Company) to the Executive for
any of the three calendar years prior to the year the Date of
Termination occurs and (ii) the “Pro rata Portion” of
the Executive’s Maximum Bonus shall be calculated by
multiplying the Maximum Bonus by a fraction, the numerator of which
shall be the number of calendar days elapsed in the year in which
the Date of Termination occurs, up to and including the Date of
Termination, and the denominator of which shall be 365.
(b) 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, the Executive shall continue to receive
his Base Salary at the rate then in effect for such period (and
shall not receive his disability insurance benefits) until his
employment is terminated pursuant to Section 5(b) hereof, and upon
the Date of Termination, the Company shall, within ten (10) days of
such termination, pay the Executive any earned and accrued but
unpaid installment of Base Salary through the Date of Termination
at the rate then in effect and any other accrued and unpaid amounts
due to the Executive under Section 4. In addition, subject to
compliance with Section 6(f), upon the Executive’s
termination, (i) the Executive shall be paid a Pro rata Portion of
his Maximum Bonus and (ii) all of the Executive’s outstanding
options, restricted share awards and any other equity rights
granted by the Company to the Executive shall continue to be
governed by the applicable grant agreement and related
plan.
(c) Cause or other than Good Reason
. If the Executive’s
employment shall be terminated by the Company for Cause or by the
Executive for other than Good Reason, the Company shall, within ten
(10) days following the Date of Termination, pay the Executive any
earned and accrued but unpaid installment of Base Salary through
the Date of Termination at the rate then in effect at the time
Notice of Termination is given and any other accrued and unpaid
amounts due to the Executive under Section 4, and the Company shall
have no further obligations to the Executive under this Agreement.
All of the outstanding options, restricted share awards and any
other equity rights granted by the Company to the Executive shall
continue to be governed by the applicable grant agreement and
related plan.
(d) Decision by the Company not to Extend the
Agreement . In the event
the Company determines not to extend this Agreement by giving
written notice in accordance with Section 1, the Executive shall be
entitled to receive, at the end of the Employment Period and
subject to compliance with Section 6(f), a lump sum payment equal
to his annual Base Salary, at the rate in effect on the last day of
the Employment Period.
(e) Termination by the Company without Cause or by
the Executive for Good Reason . If the Company shall terminate the
Executive’s employment other than for death, Disability
pursuant to Section 5(b) or Cause (and other than in connection
with a decision not to extend the Agreement), or the Executive
shall terminate his employment for Good Reason, then the Company
shall, within ten (10) days of the Date of Termination, pay the
Executive any earned and accrued but unpaid installment of Base
Salary through the Date of Termination at the rate then in effect
and any other accrued and unpaid amounts due to the Executive under
Section 4. In addition, subject to compliance with Section 6(f),
upon the Executive’s termination, the Executive shall be
entitled to receive:
(i) a lump sum payment equal to two (2) times his
Base Salary, at the rate in effect on the Date of
Termination;
(ii) a lump sum payment equal to two (2) times his
average Annual Bonus for the three (3) years preceding the year in
which the Date of Termination occurs;
(iii) a Pro rata Portion of his Maximum
Bonus;
(iv) continued payment by the Company of his life,
health and disability insurance coverage during the twenty-four
(24) month period following the Date of Termination to the same
extent that the Company paid for such coverage immediately prior to
the Date of Termination, subject to the eligibility requirements
and other terms and conditions of such insurance coverage, provided
that if any such insurance coverage shall become unavailable during
such twenty-four (24) month period, the Company thereafter shall be
obliged only to pay to the Executive an amount which, after
reduction for income and employment taxes, is equal to the employer
premiums for such insurance for the remainder of such severance
period; and
(v) all of the outstanding options, restricted
share awards and any other equity rights granted by the Company to
the Executive shall continue to be governed by the applicable grant
agreement and related plan.
(f) Release . Payments by the Company required under this
Section 6 following termination or expiration of the
Executive’s employment for any reason (other than payments of
accrued but unpaid amounts) shall be conditioned on and shall not
be payable until receipt of a written release in form and substance
reasonably acceptable to the Company of any and all past, present
or future claims that the Executive (or, in the event of his death,
his estate) may have aga
