THIS EMPLOYMENT
AGREEMENT (the “ Agreement ”) is entered into by
and between John M. Scheurer (“ you ”) and
Allied Capital Corporation (the “ Company ”), a
Maryland corporation, and will be effective on May 5, 2009
(the “ Effective Date ”). You and the Company
shall be referred to collectively as the “ Parties
.”
WHEREAS, the
Company has determined that it is in the best interest of the
Company and its stockholders to retain your services as Chief
Executive Officer (“ CEO ”) and to provide you
with compensation and other benefits on the terms and conditions
set forth in this Agreement;
WHEREAS, you are
willing to accept such 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:
The Company agrees
to employ you as CEO. In that position, you shall report to the
Chairman of Company’s Board of Directors (the “
Board ”). As CEO, you, along with the Chairman of the
Board (the “ Chairman ”), shall be responsible
for the overall strategic direction of the Company and subject to
the direction of the Board, you shall perform such executive,
supervisory and management functions and duties as may be assigned
to you from time to time by the Board consistent with such
position. You shall devote your entire business time, attention,
skill and energy exclusively to the business of the Company and
shall not engage in any other business activity, including but not
limited to the development of any other business. 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 or other non-profit activities and
devote a reasonable amount of time to private investments or boards
or other activities, provided that you notify the Board and in the
reasonable determination of the Board such activities do not
interfere or conflict with your 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.
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, unless your
employment is
terminated earlier pursuant to Section 5 below (the “
Term ”). The Term may be extended by written agreement
of the Parties.
(a) Base
Compensation . Your base compensation shall be $91,667.67 per
month (which would equal $1.1 million dollars on an annualized
basis), less applicable taxes and withholdings, payable in
accordance with the Company’s regular payroll practices in
effect from time to time (such compensation, as increased pursuant
to and in accordance with the following sentence, “ Base
Compensation ”). The Company shall review your Base
Compensation annually and may increase in its discretion, but may
not decrease, your Base Compensation.
(b) Bonus
Compensation . You will be eligible to receive an annual bonus
as determined by the Board in its sole discretion.
(c)
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. 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. The
Company shall reimburse you for your reasonable legal fees and
expenses incurred in the preparation of this Agreement. As to
expenses eligible for reimbursement under the terms of the
Agreement, (i) the amount of such expenses eligible for
reimbursement in any taxable year shall not affect the expenses
eligible for reimbursement in another taxable year, and
(ii) any reimbursement of such expenses shall be made no later
than the end of the calendar year following the calendar year in
which the related expenses were incurred, except, in each case, to
the extent that the right to reimbursement does not provide for a
“deferral of compensation” within the meaning of
Section 409A.
(d)
Withholding . All payments under Sections 3(a) and 3(b)
above shall be reduced by the amount of withholdings that are
required to be made by law.
You shall be
eligible to participate in all employee benefit programs that the
Company may provide to employees at your level subject to the terms
of such programs, which may include, but are not limited to
benefits such as health insurance plans, paid holidays, vacation,
and 401(k), subject in each case to the generally applicable terms
and conditions of any such plan or program in question and to the
determinations of any person or committee administering any such
plan or program. The Company may modify or terminate any such
benefit or program at any time.
5.
Termination of Employment .
Upon the date your
employment with the Company ends for any reason (the “
Termination Date ”), except as otherwise provided
herein or under the specific terms and provisions of any written
plan, arrangement or agreement with the Company, you will not be
eligible for further compensation, benefits or other perquisites
under Sections 3 and 4 of this Agreement, other than those
that have already accrued or vested as of the Termination Date,
such payment of a pro rata share of your Base Compensation through
your Termination Date and payment for any accrued, unused vacation
as of your Termination Date. 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 Affiliate or based on your employment
with the Company. Termination of your employment may occur under
any of the following circumstances:
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(a)
Expiration of Term . Your employment will terminate if the
Term provided for under Section 2 expires without written
agreement of the Parties to continue your employment; or
(b)
Termination of Employment by the Company . The Company has
the right to terminate your employment at any time with or without
Cause. If the Company terminates your employment for Cause, it will
give you written notice of the specific provision of this Agreement
relied upon for Cause. For all purposes under this Agreement,
(“ Cause ”) shall mean:
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(i)
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your willful failure to
substantially perform your duties under this Agreement that
continues for more than thirty (30) days after the Company
sends written notice to you specifying in reasonable detail your
claimed failure;
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(ii)
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an
act or omission by you constituting gross misconduct or
fraud;
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(iii)
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your conviction or entry of a plea
other than “non-guilty” to a crime involving moral
turpitude or to a felony;
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(iv)
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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;
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(v)
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your willful failure to comply with
a lawful, written instruction of the Board of Directors that you
fail to remedy within five (5) days after the Company sends you
notice of such failure; or
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(vi)
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a
breach of your duty of loyalty to the Company that results in
substantial harm to the Company and is not remedied within thirty
(30) days after the Company gives written notice to you
describing in reasonable detail the conduct that constituted such a
breach.
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If the Company
gives the initial notice of a failure under Section 5(b)(i) or
a breach under 5(b)(vi), the Company may in its discretion specify
in such notice that during the thirty (30) day period after
such notice you shall have no authority to bind the
Company.
(c) Death
or Disability . 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, even with reasonable
accommodation, for more than twenty-six (26) weeks, whether or
not consecutive, in any twelve-month period (“
Disability ”). Termination will be effective upon the
occurrence of such event.
(d)
Resignation by You . 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 place you on paid
administrative leave as of any date prior to the end of such thirty
(30) day notice period and request that you no
longer
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be present on
Company premises. During any period of paid administrative leave,
you will not be authorized to act as a representative, or make any
statements on behalf of, the Company.
Before you can
resign for Good Reason, you must give the Company written notice
that you intend 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, your employment will
end at the end 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 (i) a material breach by
the Company of this Agreement, including without limitation any
material reduction in your Base Compensation or benefits and any
failure by the Company to maintain its directors’ and
officers’ liability coverage (but excluding any other
reduction in benefits applicable to all employees); or
(ii) without your consent, your office has been relocated to a
location more than 40 miles from your current office location; or
(iii) your duties or responsibilities have been materially
reduced.
(a) If
(i) your employment under this Agreement ends under Section
5(b) without Cause, Section 5(c) for death or Disability or Section
5(d) for Good Reason, and (ii) you or your authorized legal
representative release any claims you 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 a form (and consistent with the
time limits in such form) substantially similar to Attachment A to
this Agreement, but as such form may be modified within seven
(7) days after the Termination Date by the Company as
necessary for such release to be legally effective on the date it
is signed, you shall receive the severance payments specified below
in this Section 6 depending upon the particular Section of
this Agreement under which your employment ended (“
Severance Payments ”). Any such Severance Payments
shall be made in a lump sum on the first business day following the
expiration of six months after the Termination Date. You shall not
be eligible to receive any severance payments from the Company
other than those provided under this Agreement. All such Severance
Payments shall be reduced by the amount of withholdings that are
required to be made by law.
(b) Subject
to Section 6(a), if your employment ends under Section 5(b)
without Cause or Section 5(d) for Good Reason, you shall receive a
payment equal to the sum of (y) three times (3x) the “
Fiscal Year Average ” and (z) $1,000,000. The Fiscal
Year Average shall be determined by dividing by three (3) an
amount equal to the sum of all Base and Bonus Compensation that was
paid to you during the Company’s three (3) fiscal years
prior to the year in which your employment ends for any reason
listed in Section 6(a)(i) above.
(c) Subject
to Section 6(a), if your employment ends under Section 5(c)
for death or Disability, you shall receive a payment equal the sum
of (y) one time (1x) the “ Fiscal Year Average
” and (z) $1,000,000.
(d) If you
receive a payment under Sections 6(b) or (c), to assist you in
obtaining post-termination health and welfare benefits, you also
shall receive a payment of $49,500.
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(e) You shall
not be required to mitigate the amount of any Severance Payments
made under this Section 6, nor shall any such payment be
reduced by any earnings or benefits that you may receive from any
other source.
(f) If all
the conditions for your receipt of Severance Payments in accordance
with this Section 6 have been met and you become eligible for
Severance Payments, the Company’s obligation to make such
payment shall be absolute and unconditional and shall not be
subject to offset, counterclaim, recoupment, or defense by the
Company, except a defense that no such payment is due as a result
of a material breach by you of a material obligation under this
Agreement. If a dispute arises with respect to the enforcement of
your rights under this Section 6, or if any legal or
arbitration proceeding shall be brought in to enforce or interpret
this Section 6, you shall be entitled to reimbursement for any
reasonable attorney’s fees and necessary costs and
disbursements incurred as a result of such dispute unless, as a
result of such legal or arbitration proceeding, it is affirmatively
determined in a final and non-appealable judgment or determination
that you instituted such legal or arbitration proceeding in bad
faith or that your claims were frivolous.
(g) To the
extent required in order to avoid accelerated taxation and/or tax
penalties under Section 409A, you shall not be considered to
have terminated employment with the Company for purposes of the
Agreement until you would be considered to have incurred a
“separation from service” from the Company within the
meaning of Section 409A and, for the purposes of determining
the timing of payment, termination of employment shall not be
considered to occur until you have incurred such a
“separation from service.”
(h) If any
provision of this Agreement would cause you to incur any additional
tax or interest under Section 409A of the Code or any
regulations or Treasury guidance promulgated thereunder, the
Company shall reform such provision; provided that the Company
shall: (i) maintain, to the maximum extent practicable, the
original intent of the applicable provision without violating the
provisions of Section 409A of the Code, and (ii) notify
and consult with you regarding such amendments or modifications
prior to the effective date of any such change.
Upon termination
of your employment with the Company for any reason, you agree to
immediately return to the Company all equipment, credit cards and
other property belonging to the Company. This includes all
documents and other information prepared by you or on your behalf
or provided to you in connection with performing your duties for
the Company, regardless of the form in which such documents or
information were created or are maintained or stored, including
computer, typed, written, imaged, audio, video, micro-fiche,
digital, audio, electronic or any other means of recording or
storing documents or other information. You may retain a copy of
any documents describing any rights or obligations you may have
after the Termination Date under any employee benefit plan or other
agreements.
8.
Confidential Information .
(a) Except as
specifically provided below, you shall not disclose or use at any
time, either during or after the Term, any Confidential Information
(defined below) of the Company, its parents, subsidiaries,
portfolio companies, predecessors, successors or affiliates
(collectively “ the Companies ”), whether
patentable or not, that you learn as a result of your service to
the Companies in any capacity, whether or not you developed such
information. For purposes of this Agreement, " Confidential
Information ” shall mean the Companies’ and their
customers’ or business partners’ trade secrets or
proprietary information and shall include information regarding
either the Companies’ or their cus
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