EMPLOYMENT AGREEMENT

        AGREEMENT made this 14th day of November, 2003, between Falcon Financial Investment Trust, a Maryland Real Estate Investment Trust (the "Trust"), and Vernon B. Schwartz (the "Executive"), to be effective immediately before the closing of the Trust's initial public offering.

        The Executive is presently employed as the Chief Executive Officer of the Trust. The Board of Trustees of the Trust (the "Board") recognizes that the Executive's 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 Executive's 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 Trust's 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 of the Trust's initial public offering and end on December 31, 2006 (the "Term"), unless further extended or sooner terminated as hereinafter provided. Commencing on January 1, 2004, and each January 1 thereafter, the Term of the Executive's 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 Chief Executive Officer and as a Trustee 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 Trust's 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 Executive's performance of his duties hereunder.

        4.    Place of Performance.    In connection with the Executive's employment by the Trust, the Executive shall be based at the principal executive offices of the Trust in Stamford, Connecticut, except for travel that is reasonably necessary for the Executive to carry out his duties hereunder.

        5.    Compensation and Related Matters.    

        (a)    Base Salary and Annual Bonus.    During the period of the Executive's employment hereunder, the Trust shall pay to the Executive an annual base salary of $375,000 ("Base Salary"), such Base Salary to be paid in accordance with the Trust's 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 130% of his Base Salary (with the target bonus being 100% of Base Salary), based on his performance and the performance of the Trust as determined by the Compensation Committee of the Board.


 

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