Cto Employment Agreement

EMPLOYMENT AGREEMENT



AGREEMENT made this 1st day of July, 2004, between Falcon Financial Investment Trust, a Maryland Real Estate Investment Trust (the "Trust"), and Ralph L. Miller (the "Executive").



The Executive is presently employed as Senior Vice President and National Marketing Director of the Trust. The Board of Trustees of the Trust (the "Board") recognizes that the Executive92s contribution to the growth and success of the Trust has been substantial. The Board desires to provide for the continued employment of the Executive and to make certain changes in the Executive92s employment arrangements with the Trust which the Board has determined will reinforce and encourage the continued attention and dedication to the Trust of the Executive as a member of the Trust92s management, in the best interest of the Trust and its shareholders. The Executive is willing to commit himself to continue to serve the Trust, on the terms and conditions herein provided.



In order to effect the foregoing, the Trust and the Executive wish to enter into an employment agreement on the terms and conditions set forth below. Accordingly, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:



1. Employment . The Trust hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue to serve the Trust, on the terms and conditions set forth herein.



2. Term . The employment of the Executive by the Trust as provided in Section 1 will commence on the date hereof and end on December 31, 2005 (the "Term"), unless further extended or sooner terminated as hereinafter provided. Commencing on January 1, 2005, and each January 1 thereafter, the Term of the Executive92s employment shall automatically be extended for one additional year, unless, not later than the October 31 immediately preceding such January 1, the Trust or the Executive shall have given written notice to the other that it does not wish to extend this Agreement.



3. Position and Duties . The Executive shall serve as Senior Vice President and National Marketing Director of the Trust and shall faithfully exercise such authority and perform such duties on behalf of the Company as are normally associated with his title and position as the Trust92s Board of Trustees may determine from time to time or such other duties as the Board of Trustees of the Trust shall reasonably request, provided such other duties are consistent with the duties of a senior executive officer of a public company serving in a similar capacity. The Executive shall also serve without additional compensation in such other offices of the Trust or its subsidiaries to which Executive may be elected or










appointed by the Board of Trustees with the consent of Executive. The Executive shall devote substantially all his working 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 Trust; provided, that, nothing in this Agreement shall preclude Executive from serving as a director or trustee in any other firm that is not a competitor of the Trust and its subsidiaries or from pursuing personal investments, as long as such activities do not, in the reasonable judgment of the independent members of the Board of Trustees with regard to activities other than passive investments of less than five percent ownership, interfere with Executive92s performance of his duties hereunder.



4. Place of Performance . In connection with the Executive92s employment by the Trust, the Executive shall be based in Bethesda, Maryland, provided, however, the Executive shall visit the principal executive offices of the Trust in Stamford, Connecticut, on a regular basis and the Executive shall be expected to travel to the extent necessary for the Executive to carry out his duties hereunder.



5. Compensation and Related Matters .



(a) Base Salary, Annual Bonus and Incentive Compensation . During the period of the Executive92s employment hereunder, the Trust shall pay to the Executive an annual base salary of $175,000 ("Base Salary"), such Base Salary to be paid in accordance with the Trust92s standard payroll practices and subject to all applicable withholdings. The Base Salary may, subject to the approval of the Board of Trustees, be increased from time to time in accordance with normal business practices of the Trust and, if so increased, shall become the new Base Salary for the calendar year and shall not thereafter during the Term of this Agreement be decreased. The Executive shall be eligible for an annual bonus ("Annual Bonus") of up to a maximum of $175,000 (with the target bonus being $87,500), based on his performance and the performance of the Trust as determined by the Compensation Committee of the Board. The Executive shall also be eligible for incentive compensation upon the closing of loans by the Trust in an amount equal to 5 basis points of the amount of the closed loan ("Incentive Compensation").



(b) Expenses . During the Term, the Executive shall be entitled to receive prompt reimbursement for all reasonable and customary out of pocket expenses incurred by the Executive in performing his duties hereunder, including all reasonable expenses of travel and reasonable living expenses while away from home on business or at the request of and in the service of the Trust, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Trust.



(c) Vacations . The executive shall be entitled to three (3) weeks92 vacation in each calendar year, or such greater amount of vacation as may



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be determined in accordance with the Trust92s vacation policy as in effect from time to time. The Executive shall also be entitled to all paid holidays given by the Trust to its executives, and sick and personal days on an as needed basis.



6. Termination . Each party shall have the right to terminate Executive92s employment hereunder before the Term expires to the extent, and subject to the provisions, set forth in this Section 6:



(a) Death . The Executive92s employment hereunder shall terminate upon his death.



(b) Disability . If, in the written opinion of a qualified physician reasonably agreed to by the Trust and the Executive, the Executive shall become unable to perform his duties hereunder due to Disability, the Trust may terminate the Executive92s employment hereunder. As used in this Agreement, the term "Disability" shall mean incapacity due to physical or mental illness which has, in the reasonable judgment of the Board, caused the Executive to be unable to perform his duties hereunder on a full-time basis for any period of 180 consecutive days and the return of the Executive to his duties hereunder for periods of 15 days or less shall not interrupt such 180 day period.



(c) Cause . The Trust shall have the right to terminate Executive92s employment at any time upon delivery of written notice of termination for Cause (as defined below) to Executive (which notice shall specify in reasonable detail the basis upon which such termination is made), such employment to terminate immediately upon delivery of such notice unless otherwise specified by the Board of Trustees of the Trust if a majority of the Board of Trustees (other than Executive) determines that Executive: (i) has misappropriated, stolen or embezzled funds or property from the Trust or an affiliate of the Trust or secured or attempted to secure personally any profit in connection with any transaction entered into on behalf of the Trust or any affiliate of the Trust, (ii) has been convicted of a felony or entered a plea of " nolo contendre " which in the reasonable opinion of the Board brings Executive into disrepute or is likely to cause material harm to the Trust92s (or any affiliate of the Trust) business, customer or supplier relations, financial condition or prospects, (iii) has, notwithstanding not less than 30 days92 prior written notice from the Board of Trustees, willfully and persistently failed to perform (other than by reason of illness or temporary disability, regardless of whether such temporary disability is or becomes total Disability, or by reason of vacation or approved leave of absence) his material duties hereunder, or (iv) has willfully violated or breached any provision of this Agreement, any material law or regulation or any written policy or code of business conduct or ethics of the Trust to the material detriment of the Trust or any affiliate of the Trust or its business. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in



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bad faith or without reasonable belief that his action or omission was in the best interests of the Trust. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Trust shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Trust. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the membership of the Board (the Executive shall not be counted for the purpose of determining a majority of the membership of the Board if he is a Trustee at the time of such vote) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive was guilty of the conduct set forth in clause (i), (ii), (iii) or (iv) hereof, and specifying the particulars thereof in detail.



(d) Without Cause . The Trust may at any time terminate the Executive92s employment hereunder without Cause.



(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) a failure by the Trust to comply with any material provision of this Agreement which has not been cured within thirty (30) days after notice of such noncompliance has been given by the Executive to the Trust, (B) the assignment to the Executive of any duties materially inconsistent with the Executive92s position with the Trust or a substantial adverse alteration in the nature of the Executive92s responsibilities without the consent of the Executive, (C) without the consent of the Executive, a material reduction in employee benefits other than a reduction generally applicable to all eligible employees of the Trust, or (D) any purported termination of the Executive92s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (e) hereof (and for purposes of this Agreement no such purported termination shall be effective).



(f) Any termination of the Executive92s employment by the Trust or by the Executive (other than termination pursuant to subsection (a) or (b) hereof) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 12. 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



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facts and circumstances claimed to provide a basis for termination of the Executive92s employment under the provision so indicated.



(g) "Date of Termination" shall mean (i) if the Executive92s employment is terminated by his death, the date of his death, (ii) if the Executive92s employment is terminated pursuant to subsection (b) above, the date as of which the physician92s written opinion is received by the Trust, (iii) if the Executive92s employment is terminated pursuant to subsection (c) above, the date specified in the Notice of Termination, and (iv) if the Executive92s employment is terminated for any other reason, the date thirty (30) days following the date on which a Notice of Termination is given.



7. Compensation Upon Termination, Death or During Disability .



(a) 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 ("disability period"), the Executive shall continue to receive his full Base Salary at the rate then in effect for such period (and shall not be eligible for payments under the disability plans, programs and policies maintained by the Trust or in connection with employment by the Trust ("Disability Plans")) until his employment is terminated pursuant to Section 6(b) hereof, and upon such termination, the Executive shall, within ten (10) days of such termination, be entitled to all amounts to which the Executive is entitled pursuant to short-term Disability Plans. The Executive92s rights under any long-term Disability Plan shall be determined in accordance with the provisions of such plan. In addition, upon the Executive92s termination in accordance with Section 6(b) hereof, all share options, restricted share awards and any other equity awards granted by the Trust to the Executive shall become fully vested and exercisable as of the Date of Termination and the Executive shall be paid a pro-rata portion of his Annual Bonus at the target level based on the number of days he was employed in the year in which the Date of Termination occurs and shall also be paid Incentive Compensation on all loans closed as of the Date of Termination.



(b) Death . If the Executive92s employment is terminated by his death, the Trust shall within ten (10) days following the date of the Executive92s death, pay any amounts due to the Executive under Section 5 through the date of his death, an amount equal to one-half (1/2) of the Executive92s annual Base Salary for the year in which the termination took place, and an amount equal to one-half (1/2) of the Executive92s target Annual Bonus for the year in which the termination took place, together with any other amounts to which the Executive is entitled pursuant to death benefit plans, programs and policies. In addition, all share options, restricted share awards and any other equity awards granted by the Trust to the Executive shall become fully vested and exercisable as of the Date of Termination.



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(c) Cause or other than Good Reason . If the Executiv ...