Exhibit 99k.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made between GLADSTONE CAPITAL CORPORATION,
a Maryland corporation (the "COMPANY"), and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, a resident of
the Commonwealth of Virginia (the "EXECUTIVE").
The Company wishes to secure the services of the Executive and the
Executive wishes to furnish such services to the Company pursuant to the terms
and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and obligations hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as set forth below.
1. EMPLOYMENT; TERM. The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to enter into such employment, as President and
Chief Operating Officer of the Company, for the period commencing on the date
that this Agreement is executed by all parties (the "EFFECTIVE DATE") and ending
on the date three (3) years from the Effective Date, unless terminated sooner
pursuant to Section 5 hereof. The initial three (3)-year term shall be extended
for additional successive periods of one (1) year each, on the same terms and
conditions contained herein, unless three (3) months' prior written notice is
given by the Company of its intention to terminate the term of this Agreement
without cause. For purposes hereof, the period of Executive's employment
hereunder is referred to as the "TERM."
2. DUTIES AND EXTENT OF SERVICES.
(a) The Executive shall serve as President and Chief Operating Officer of
the Company with such duties and responsibilities as are consistent with such
positions, and shall so serve faithfully and to the best of his ability, under
the direction and supervision of the Company's Board of Directors (the "BOARD").
(b) Subject to the Company's procedures for selection and removing Board
members, the Executive shall serve as a member of the Board of Directors and
hold such other positions and executive offices of the Company or of any of the
Company's subsidiaries or affiliates as may from time to time be authorized by
the Board, provided that each such position shall be commensurate with the
Executive's standing in the business community as President and Chief Operating
Officer of the Company. The Executive shall not be entitled to any compensation
other than the compensation provided for herein for serving during the Term as a
Director of the Company or in any other office or position of the Company, or
any of its subsidiaries or affiliates, unless the Board shall have specifically
approved such additional compensation.
(c) The Executive shall devote the substantial majority of his business
time, attention and efforts to his duties hereunder, except when necessary to
fulfill his fiduciary obligations as a member of the board of directors of Heads
Up Systems and River Logic, which are expected to require no more than twenty
percent (20%) of Executive's time. The Executive agrees that
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he will not be employed by any other entity, or serve as Chairman of the Board,
co-Chairman of the Board, or non-executive Chairman of the Board of any other
entity during the term of this Agreement, except as specified in the preceding
sentence. The Executive shall diligently perform to the best of his ability all
of the duties required of him as President and Chief Operating Officer of the
Company, and in the other positions or offices of the Company or its
subsidiaries or affiliates required of him hereunder. The Executive shall
faithfully adhere to, execute and fulfill all policies established by the
Company. Notwithstanding the foregoing provisions of this Section, the Executive
may participate in charitable, civic, political, social, trade or other
non-profit organizations to the extent such participation does not materially
interfere with the performance of his duties hereunder, and may serve as a
non-management director of business corporations (or in a like capacity in other
for-profit organizations) so long as it does not materially interfere with the
Executive's obligations hereunder.
(d) The Executive shall be required to live within one hundred fifty (150)
miles of the greater Washington, D.C. area in order to perform his duties
hereunder. The Executive understands that he will be required to travel from
time to time in order to perform his duties hereunder and agrees to undertake
such travel as part of his duties to the Company under the terms of this
Agreement.
3. COMPENSATION.
(a) BASE SALARY.
(i) BASE SALARY PRIOR TO N-2 EFFECTIVE DATE. Up until the date that
the Company's Registration Statement on Form N-2 relating to its initial public
offering is declared effective by the Securities and Exchange Commission (the
"N-2 EFFECTIVE DATE"), the Executive's Base Salary shall be $13,000, minus
deductions and withholdings required by law, payable on a regular basis in
accordance with the Company's regular payroll policies in effect from time to
time, but not less frequently than monthly.
(ii) BASE SALARY AFTER N-2 EFFECTIVE DATE. After the N-2 Effective
Date, the Executive's Base Salary shall be Two Hundred Thousand Dollars
($200,000) per year, minus deductions and withholdings required by law, payable
on a regular basis in accordance with the Company's regular payroll policies in
effect from time to time, but not less frequently than monthly. On at least an
annual basis, the Board will review the Executive's performance and may make
increases to such Base Salary if, in its sole discretion, any such change is
warranted.
(b) INCENTIVE BONUS. Following the initial public offering, the
Executive will be eligible to receive a year-end incentive bonus of up to one
hundred percent (100%) of his Base Salary determined in the sole discretion
of the Board or a compensation committee thereof. Subject to the provisions
of Section 3(d) hereof, such bonus payments shall be made to the Executive,
if earned, as soon as practicable after the end of each calendar year during
the Term.
2.
(c) DEFERRAL. The Executive may elect to defer payment of all or any
part of his incentive bonus compensation amount payable in accordance with
Section 3(b) hereof with respect to any calendar year during the Term, by
giving the Company written notice thereof not later than June 30 of such
year. Additionally, in the event that in respect of any fiscal year of the
Company any amount of Base Salary, incentive bonus compensation or any other
amount payable to the Executive hereunder or otherwise, shall, either alone
or in combination with other amounts payable hereunder or otherwise, result
in a payment by the Company that shall not be currently deductible by it
pursuant to the provisions of Section 162(m) of the Internal Revenue Code, as
amended, or like or successor provisions (a "NON-DEDUCTIBLE AMOUNT"), as
determined by the Company's independent accountants, the Company may elect to
defer the payment of the Non-Deductible Amount. Any amounts so deferred,
either by election of the Executive or by election of the Company, shall be
immediately invested in a brokerage money market account controlled by the
Company. The entire amount invested in such account shall be paid to the
Executive on a date to be chosen by the Company, but in no event later than
the first anniversary of the termination of the Executive from employment
with the Company.
(d) STOCK OPTIONS. Upon Board approval, the Executive shall receive an
option to purchase two hundred thousand (200,000) shares of the Company's
outstanding Common Stock. These options will vest according to the following
schedule: one hundred thousand (100,000) shares subject to the option shall vest
on the date of the grant; and the remaining one hundred thousand (100,000)
shares subject to the option shall vest on the first anniversary of the date of
the grant. The purchase price for the shares subject to the option shall be the
fair market value of the shares on the date of the grant. The option shall be an
incentive stock option to the extent permitted by law. Such options shall be
subject to the Company's 2001 Equity Incentive Plan. The Executive may be
required to sign additional stock agreements as a condition for receiving the
option, and the option shall be subject to such agreements.
The Executive is permitted to exercise his option before it is fully
vested. In the event the Executive elects to exercise his option early, the
stock he receives upon such exercise will be subject to the same vesting
schedule that was applicable to the option shares. The specific terms and
conditions of the transfer of such stock to the Executive shall be governed by
an "Early Exercise Stock Purchase Agreement" in a form approved by the Company.
Generally, until the Executive satisfies the vesting requirements, he may not
sell, assign or convey the shares of early exercised stock. The Company will
have the right to repurchase those early exercised shares at the original price
paid by the Executive for the shares, in the event the Executive's employment
terminates for any reason before such shares are vested.
4. BENEFITS.
(a) STANDARD BENEFITS. During the Term, the Executive shall be entitled to
participate in any and all benefit programs and arrangements now in effect and
hereinafter adopted and generally made available by the Company to its senior
officers, including but not limited to, four (4) weeks of paid vacation during
each year of the Term in accordance with the policies and procedures of the
Company as in effect from time to time for its senior officers, pension plans,
contributory and non-contributory Company welfare and benefit plans, disability
plans, and medical, death benefit and life insurance plans for which the
Executive shall be eligible, or may become eligible during the Term.
3.
(b) EXPENSE REIMBURSEMENT. The Company agrees to reimburse, within thirty
(30) days of presentation, the Executive for all reasonable and necessary
travel, business entertainment and other business out-of-pocket expenses
incurred or expended by him in connection with the performance of his duties
hereunder upon presentation of proper expense statements or vouchers or such
other supporting information as the Company may reasonably require of the
Executive.
(c) OTHER EXECUTIVE PERQUISITES. The Company shall provide the Executive
with other executive perquisites as may be available to or deemed appropriate
for the Executive by the Board or a compensation committee thereof.
5. TERMINATION. This Agreement and the Executive's employment with the Company
may be terminated either upon the expiration of its Term (as set forth in
Section 1), or as set forth in Sections 5(a) through 5(e) or as set forth in
Section 11:
(a) DEATH. In the event of the death of the Executive during the Term, this
Agreement shall automatically terminate with the effective date of termination
being the date of the Executive's death, and the Company shall have no further
obligations hereunder except to pay all compensation due for the period up to
(i) the effective date of termination, plus an amount equal to any bonus he
received during the previous year and (ii) acceleration of the vesting of all
options previously granted to the Executive that would have vested within the
one year period commencing with the effective date of the Executive's
termination had the Executive remained employed by the Company for that one (1)
year period. Such options that will accelerate will vest and become exercisable
on the effective date of termination.
(b) DISABILITY. In the event of the "PERMANENT DISABILITY" (as hereinafter
defined) of the Executive during the Term, the Company shall have the right, to
the extent permissible under applicable law and upon written notice to the
Executive, to terminate the Executive's employment hereunder, effective upon the
giving of such notice (or such later date as shall be specified in such notice).
For purposes of this Section, "PERMANENT DISABILITY" means any disability as
defined under the Company's applicable disability insurance policy or, if no
such policy is available, any physical or mental disability or incapacity that
renders the Executive incapable of performing the services required of him in
accordance with his obligations under Section 2 hereof for a period of four (4)
consecutive months or for shorter periods aggregating six (6) months during any
twelve (12)-month period. In the event of such termination, and subject to the
provisions of Section 5(g) below, the Company shall have no further obligations
hereunder, except that the Executive shall be entitled to be paid as severance
(i) his Base Salary then in effect under Section 3(a) hereof for a period of two
(2) years from the effective date of termination, plus any bonus he received
during the previous year; provided, however, that the Company shall only be
required to pay that amount of the Executive's Base Salary which shall not be
covered by long-term disability payments, if any, to the Executive, and (ii)
acceleration of the vesting of all options previously granted to the Executive
that would have vested within the two (2) year period commencing with the
effective date of the Executive's termination had the Executive remained
employed by the Company for that one year period. Such options that will
accelerate will vest and become exercisable on the effective date of
termination.
4.
(c) CAUSE. The Company shall have the right, upon ten (10) days' written
notice to the Executive, to terminate the Executive's employment under this
Agreement for "CAUSE" (as hereinafter defined), effective upon the giving of
such notice (or such later date as shall be specified in such notice), and the
Company shall have no further obligations hereunder, except to pay the Executive
compensation due for the period up to the effective date of termination. The
Executive's right to participate in any of the Company's retirement, insurance
and other benefit plans and programs shall be as determined under such programs
and plans. For purposes of this Agreement, "CAUSE" means:
(i) fraud, embezzlement or gross insubordination on the part of the
Executive or material breach by the Executive of his obligations under Sections
6 or 7 hereof;
(ii) a material breach of, gross negligence with respect to, or the
willful failure or refusal by the Executive to perform and discharge, his
duties, responsibilities or obligations under this Agreement (other than under
Sections 6 and 7 hereof, which shall be governed by clause (i) above, and other
than by reason of disability or death) that is not corrected within ten (10)
days following written notice thereof to the Executive by the Company, such
notice to state with specificity the nature of the breach, failure or refusal;
provided that if such breach, failure or refusal cannot reasonably be corrected
within ten (10) days of written notice thereof, correction shall be commenced by
the Executive within such period and may be corrected within a reasonable period
thereafter;
(iii) conviction of, or the entry of a plea of nolo contendere by,
the Executive of any felony; or
(iv) illegal drug use, alcohol abuse or drug abuse by the Executive.
(d) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EMPLOYEE FOR GOOD
REASON.
(1) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company shall
have the right, upon thirty (30) days' written notice given to the Executive, to
terminate this Agreement for any reason whatsoever. In the event of a
termination without cause, the Executive shall be entitled to receive as
severance (i) from the Company an amount equal to two (2) years of his Base
Salary at the rate then in effect, plus any bonus he received during the
previous year and (ii) acceleration of the vesting of all Options previously
granted to the Executive that have not yet vested, which options shall
immediately vest and be exercisable as of the effective date of termination.
(2) TERMINATION BY THE EMPLOYEE FOR GOOD REASON. In the event the
Executive terminates employment for Good Reason, he shall receive the same
severance as set forth in Section 5(d)(1). For purposes of the Agreement, "GOOD
REASON" means:
a. a material change in the Executive's responsibilities and
duties which is not agreed to by the Executive;
b. a material breach by the Company of its compensation
obligations under this Agreement which is not agreed to by the Executive; or
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c. a change in ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇'▇ employment status that
reduces his role or time commitment to the Company.
(e) BY EXECUTIVE. The Executive shall have the right, exercisable at any
time during the Term, to terminate this Agreement for any reason whatsoever,
upon three (3) months written notice to the Company. In such event, the Company
shall have no further obligations except to pay the Executive all compensation
due for the period up to the effective date of termination, except if the
Executive terminates for "Good Reason" as described above.
(f) GENERAL PROVISIONS/OPTION VESTING AND EXERCISE PERIODS. If the
Executive is terminated pursuant to either Section 5(c) or 5(e), all options
that are not vested as of the effective date of termination shall be forfeited.
In the event the Executive has vested but unexercised options upon his
termination, the exercise period for such option shall be (i) eighteen (18)
months if the Executive is terminated upon death or permanent disability; (ii)
twelve (12) months if the Executive's employment is terminated pursuant to
Section 11; or (iii) ninety (90) days if the Executive's employment terminates
for any other reason. Additional compensation subsequent to termination, if any,
will be due and payable to the Executive only to the extent and in the manner
expressly provided in this Agreement. In the event that the Executive secures
employment with another entity during the period that any payment is continuing
pursuant to the provisions of this Section 5, the amounts to be paid hereunder
shall be reduced by the amount of the Executive's earnings from such other
employment.
(g) SEVERANCE PAY/RELEASE. The Company's payment of severance pay
(including option acceleration) pursuant to Section 5(b) and 5(d) is contingent
on the Executive entering into a release in favor of the Company with language
mutually agreeable to the Executive and the Company. Severance payments will be
made, minus the deductions and withholdings, in installments for the duration of
the severance period according to the Company's regular payroll periods
commencing with the first payroll period following the effective date of the
release.
6. CONFIDENTIALITY. The Executive acknowledges that, by reason of his
employment by the Company, he will have access to confidential information of
the Company and its subsidiaries and affiliates, including, without limitation,
information and knowledge pertaining to products, inventions, discoveries,
improvements, innovations, designs, ideas, trade secrets, proprietary
information, manufacturing, packaging, advertising, distribution and sales
methods, sales and profit figures, customer and client lists and relationships
between the Company, any of its subsidiaries or affiliates and dealers,
distributors, sales representatives, wholesalers, customers, clients, suppliers
and others who have business dealings with them ("CONFIDENTIAL INFORMATION").
The Executive acknowledges that such Confidential Information is a valuable and
unique asset of the Company and its subsidiaries and affiliates and covenants
that, both during and after the Term, he will not disclose any Confidential
Information to any person (except as his duties as an employee of the Company
may require) without the prior written authorization of the Board. The
obligation of confidentiality imposed by this Section 6 shall not apply to
Confidential Information that otherwise becomes generally known in the industry
or to the public through no act of the Executive in breach of this Agreement or
any other party in violation of an existing confidentiality agreement with the
Company or any subsidiary or affiliate or which is required to be disclosed by
court order or applicable law.
6.
7. COVENANT NOT TO COMPETE.
(a) SCOPE OF COVENANT. The Executive agrees that during the Term and for a
period equal to the longer of (i) two (2) years commencing upon the expiration
or termination of the Executive's employment hereunder (for any reason
whatsoever) and (ii) the period during which the Executive is receiving the full
and timely payments pursuant to Section 5 hereof, the Executive shall not,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature, without the prior written consent of the Company:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any business
selling any products or services in direct competition with the Company within
the United States (the "TERRITORY");
(ii) call upon any person who is at that time, or who was at any time
within one (1) year prior to that time, an employee of the Company (including
the respective subsidiaries thereof) in a managerial capacity for the purpose or
with the intent of enticing such employee away from or out of the employ of the
Company (including the respective subsidiaries thereof), provided that the
Executive shall be permitted to call upon and hire any member of his immediate
family;
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to that time, a customer of the Company
(including the respective subsidiaries thereof) within the Territory for the
purpose of soliciting or selling products or services in direct competition with
the Company (including the respective subsidiaries thereof) within the
Territory; or
(iv) call upon any prospective acquisition candidate, on the
Executive's own behalf or on behalf of any competitor, which candidate was
either called upon by the Company (including the respective subsidiaries
thereof) or for which the Company (including the respective subsidiaries
thereof) made an acquisition analysis, for the purpose of acquiring such entity;
provided, however, that nothing in this Section 7(a) shall be construed to
preclude the Executive from making any investments in the securities of any
business enterprise, whether or not engaged in competition with the Company or
any of its subsidiaries, to the extent that such securities are actively traded
on a national securities exchange or in the over-the-counter market in the
United States or on any foreign securities exchange; and provided further,
however, that nothing shall preclude the Executive from serving as a member of
the board of directors of Heads Up Systems and River Logic.
For purposes of this Agreement, "businesses in competition with the Company" are
any entities or persons who make senior and subordinated loans to small and
medium sized private
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businesses that are substantially owned by buyout or venture capital funds or
similar institutional investors.
(b) REASONABLENESS. It is agreed by the parties that the foregoing
covenants in this Section 7 impose a reasonable restraint on the Executive in
light of the activities and business of the Company (including the Company's
subsidiaries) on the date of the execution of this Agreement and the current
plans of the Company (including the Company's subsidiaries); but it is also the
intent of the Company and the Executive that such covenants be construed and
enforced in accordance with the changing activities, business and locations of
the Company (including the Company's other subsidiaries) throughout the term of
this covenant.
(c) SEVERABILITY. The covenants in this Section 7 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 are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and this Agreement shall thereby be reformed.
(d) ENFORCEMENT BY THE COMPANY NOT LIMITED. All of the covenants in this
Section 7 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 the
Executive against the Company, whether predicated in this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
such covenants. It is specifically agreed that the period of one (1) year stated
at the beginning of this Section 7, during which the agreements and covenants of
the Executive made in this Section 7 shall be effective, shall be computed by
excluding from such computation any time during which the Executive is in
violation of any provision of this Section 7.
(e) CHANGE OF RELEVANT LAW. Notwithstanding any of the foregoing, if any
applicable law shall reduce the time period during which the Executive shall be
prohibited from engaging in any competitive activity described in Section 7(a)
hereof, the period of time for which the Executive shall be prohibited from
engaging in competitive activities pursuant to Section 7(a) hereof shall be the
maximum time permitted by law. However, in the event that the time period
specified by Section 7(a) shall be so reduced, then, notwithstanding the
provisions of Section 5 hereof, the Executive shall be entitled to receive from
the Company his Base Salary at the rate then in effect solely for the longer of
(i) the time period during which the provisions of Section 7(a) shall be
enforceable under the provisions of such applicable law, or (ii) the time period
during which the Executive is not engaging in any competitive activity, but in
no event longer than the term provided in Section 5.
(f) WAIVER OF SEVERANCE. If the Executive's employment terminates pursuant
to Section 5(d) and the Executive chooses to waive his right to severance
(including option acceleration) as provided for under those Sections, this
Covenant Not to Compete shall not take effect.
(g) TERMINATION FOR GOOD CAUSE. Notwithstanding the foregoing provisions of
this Section, if the Executive terminates his employment for Good Reason
pursuant to Section 5(d)(2) hereof, then the period of time for which the
Executive shall be prohibited from
8.
engaging in competitive activities pursuant to Section 7(a) hereof shall be one
(1) year from the effective date of termination.
8. SPECIFIC PERFORMANCE. The Executive acknowledges that the services to be
rendered by the Executive are of a special, unique and extraordinary character
and, in connection with such services, the Executive will have access to
confidential information vital to the Company's business and the business of the
Company's subsidiaries and affiliates. By reason of this, the Executive consents
and agrees that if the Executive violates any of the provisions of Section 6 or
7 hereof, the Company and its subsidiaries and affiliates would sustain
irreparable injury and that monetary damages would not provide adequate remedy
to the Company or any of its subsidiaries or affiliates. Therefore, the
Executive hereby agrees that the Company and any affected subsidiary and
affiliate shall be entitled to have Sections 6 or 7 hereof, specifically
enforced (including, without limitation, by injunctions and restraining orders)
by any court having equity jurisdiction. Nothing contained herein shall be
construed as prohibiting the Company or any of its subsidiaries or affiliates
from pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of damages from the Executive.
9. DEDUCTIONS AND WITHHOLDING. The Executive agrees that the Company or its
subsidiaries or affiliates, as applicable, shall withhold from any and all
compensation paid to and required to be paid to the Executive pursuant to this
Agreement, all Federal, state, local and/or other taxes which the Company
determines are required to be withheld in accordance with applicable statutes or
regulation from time to time in effect and all amounts required to be deducted
in respect of the Executive's coverage under applicable employee benefit plans.
10. NO CONFLICTS. The Executive hereby represents and warrants to the Company
that his execution, delivery and performance of this Agreement and any other
agreement to be delivered pursuant to this Agreement will not (a) require the
consent, approval or action of any other person or (b) violate, conflict with or
result in the breach of any of the terms of, or constitute (or with notice or
lapse of time or both, constitute) a default under, any agreement, arrangement
or understanding with respect to the Executive's employment to which the
Executive is a party or by which the Executive is bound or subject including,
without limitation, any non-competition or non-disclosure provisions in
agreements to which the Executive is or was a party. The Executive hereby agrees
to indemnify and hold harmless the Company and its directors, officers,
employees, agents, representatives, subsidiaries and affiliates (and each such
subsidiary's and affiliate's directors, officers, employees, agents and
representatives) from and against any and all losses, liabilities or claims
(including interest, penalties and attorneys' fees, disbursements and related
charges) based upon or arising out of the Executive's breach of any of the
foregoing representations and warranties.
11. CHANGE IN CONTROL.
(a) GENERALLY. Unless the Executive elects to terminate this Agreement
pursuant to subsections (b), (c) or (d) below, the Executive understands and
acknowledges that the Company may be merged or consolidated with or into another
entity and that such entity shall automatically succeed to the rights and
obligations of the Company hereunder or that the Company may undergo another
type of Change in Control. In the event such a merger or
9.
consolidation or other Change in Control is initiated prior to the end of the
Term or any extension or renewal thereof, then the provisions of this Section 11
shall be applicable.
(b) NON ASSUMPTION. In the event of a Change in Control wherein the Company
and the Executive have not received written notice at least five (5) business
days prior to the date of the event giving rise to the Change in Control from
the successor to all or a substantial portion of the Company's business or
assets that such successor is willing as of the closing to assume and agrees to
perform the Company's obligations under this Agreement in the same manner and to
the same extent that the Company is hereby required to perform, then the
Executive may, at the Executive's sole discretion, elect to terminate the
Executive's employment on such Change in Control by providing written notice to
the Company prior to the closing of the transaction giving rise to the Change in
Control. In such case, the Executive shall receive the severance compensation as
set forth in Section 5(d).
(c) EXECUTIVE'S OPTION. In any Change in Control situation, the Executive
may, at the Executive's sole discretion, elect to terminate the Executive's
employment upon the effective date of such Change in Control by providing
written notice to the Company at least ten (10) business days prior to the
closing of the transaction (or ten (10) business days after receipt of notice of
such transaction, whichever is later) giving rise to the Change in Control. In
such case, the Executive shall receive the severance compensation as set forth
in Section 5(d).
(d) DEEMED CHANGE OF CONTROL. If, on or within one (1) year following the
effective date of a Change in Control the Company or its successor terminates
the Executive's employment other than for cause or if the Executive's employment
with the Company is terminated by the Company within three (3) months before the
effective date of a Change in Control other than for cause and it is reasonably
demonstrated that such termination (i) was at the request of a third party that
has taken steps reasonably calculated to effect a Change in Control, or (ii)
otherwise arose in connection with or anticipation of a Change in Control, then
the Executive shall receive the severance compensation as set forth in Section
5(d).
(e) EFFECTIVE DATE. Solely for purposes of applying Section 5 under the
circumstances described in (b) above, the effective date of termination will be
the closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due the Executive must be
paid in full by the Company at or prior to such closing.
(f) DEFINITION. A "CHANGE IN CONTROL" shall be deemed to have occurred if:
(i) any person, other than the Company or benefit plan of the Company,
acquires, directly or indirectly, the beneficial ownership (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting
security of the Company and immediately after such acquisition such person is,
directly or indirectly, the beneficial owner of voting securities representing
more than fifty percent (50%) or more of the total voting power of all of the
then-outstanding voting securities of the Company; or
(ii) the date the individuals who constitute the Board as of the date
of the Company's initial public offering (the "INCUMBENT BOARD") cease for any
reason to constitute at
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least a majority of the members of the Board, provided that any individual
becoming a director subsequent to the effective date of this Agreement whose
election, or nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than any individual whose nomination for election to Board
membership was not endorsed by the Company's management prior to, or at the time
of, such individual's initial nomination for election) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization or reorganization of the Company, a reverse
stock split of outstanding voting securities, the issuance of shares of Company
stock in connection with the acquisition of the stock or assets of another
entity, or consummation of any such transaction if stockholder approval is not
obtained, but a Change in Control shall include any transaction which would
result in more than fifty percent (50%) of the total voting power represented by
the voting securities of the surviving entity outstanding immediately after such
transaction being beneficially owned by more than fifty percent (50%) of the
holders of outstanding voting securities of the Company immediately prior to the
transactions with the voting power of each such continuing holder relative to
other such continuing holders not substantially altered in the transaction; or
(iv) the stockholders of the Company shall approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or a substantial portion of the Company's assets (i.e., more than
fifty percent (50%) or more of the total assets of the Company).
(g) TAX GROSS UP. The Executive shall be fully "GROSSED UP" by the Company
or its successor for any excise taxes that the Executive incurs under Section
4999 of the Internal Revenue Code of 1986, as amended (as well as for income tax
on the "GROSS UP" amount), as a result of any Change in Control. Such amount
will be due and payable by the Company on the date of the Change of Control.
(h) VESTING. Upon the occurrence of a Change of Control, any unvested
portion of any awards of stock options or stock grants pursuant to this
Agreement or otherwise shall immediately vest and become exercisable to their
fullest extent (notwithstanding any vesting periods specified elsewhere) and the
Executive shall be entitled to all rights and privileges associated with such
awards (subject to applicable securities laws and regulations). With respect to
option awards which vest pursuant to this paragraph, the Executive shall have a
period of twelve (12) months from the date of vesting in which to exercise such
options.
12. COMPLETE AGREEMENT. This Agreement is not a promise of future employment.
This Agreement embodies the entire agreement of the parties with respect to the
Executive's employment, compensation, perquisites and related items and
supersedes any other prior oral or written agreements, arrangements or
understandings between the Executive and the Company or any of its subsidiaries
or affiliates, and any such prior agreements, arrangements or understandings are
hereby terminated and of no further effect. This Agreement may not be changed or
terminated orally but only by an agreement in writing signed by the parties
hereto.
11.
13. WAIVER. The waiver by the Company of a breach of any provision of this
Agreement by the Executive shall not operate or be construed as a waiver of any
subsequent breach by him. The waiver by the Executive of a breach of any
provision of this Agreement by the Company shall not operate or be construed as
a waiver of any subsequent breach by the Company.
14. GOVERNING LAW; JURISDICTION; ASSIGNABILITY.
(a) GOVERNING LAW. This Agreement shall be subject to, and governed by, the
laws of the Commonwealth of Virginia.
(b) JURISDICTION. Any action to enforce any of the provisions of this
Agreement shall be brought in a local or federal court within the Eastern
District of Virginia. The Parties consent to the jurisdiction of such court and
to the service of process in any manner provided by Virginia law. Each party
irrevocably waives any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in such court
and any claim that such suit, action or proceeding brought in such court has
been brought in an inconvenient forum and agrees that service of process in
accordance with the foregoing sentences shall be deemed in every respect
effective and valid personal service of process upon such party.
(c) ASSIGNABILITY. This obligations of the Executive may not be delegated
and, except with respect to the designation of beneficiaries in connection with
any of the benefits payable to the Executive hereunder, the Executive may not,
without the Company's written consent thereto, assign, transfer, convey, pledge,
encumber, hypothecate or otherwise dispose of this Agreement or any interest
herein. Any such attempted delegation or disposition shall be null and void and
without effect. Subject to the express provisions of Section 11, the Company and
the Executive agree that this Agreement and all of the Company's rights and
obligations hereunder may be assigned or transferred by the Company to and shall
be assumed by and be binding upon any successor to the Company. The term
"SUCCESSOR" means, with respect to the Company or any of its subsidiaries, any
corporation or other business entity which, by merger, consolidation, purchase
of the assets or otherwise acquires all or a material part of the assets of the
Company.
15. SEVERABILITY. If any provision of this Agreement of any part thereof,
including, without limitation, Sections 6 and 7 hereof, as applied to either
party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or remaining part thereof, which shall be
given full effect without regard to the invalid or unenforceable part thereof,
or the validity or enforceability of this Agreement. If any court construes any
of the provisions of Sections 6 or 7 hereof, or any part thereof, to be
unreasonable because of the duration of such provision or the geographic scope
thereof, such court may reduce the duration or restrict or redefine the
geographic scope of such provision and enforce such provision so reduced,
restricted or redefined.
12.
16. NOTICES. All notices to the Company or the Executive permitted or required
hereunder shall be in writing and shall be delivered personally, by telecopier
or by courier service providing for next-day delivery or sent by registered or
certified mail, return receipt requested, to the following addresses:
If to the Company: Gladstone Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Executive: ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Either party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party. Any such notice
shall be deemed given, if delivered personally, upon receipt; if telecopied,
when telecopied; if sent by courier service providing for next-day delivery, the
next business day following deposit with such courier service; and if sent by
certified or registered mail, three days after deposit (postage prepaid) with
the U.S. mail service.
17. SECTION HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
18. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
13.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of July 23, 2001.
GLADSTONE CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
EXECUTIVE
/s/ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
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