EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of October, 1996 by
and between DELTA FINANCIAL CORPORATION, a Delaware corporation (the
"Corporation"), and Xxxx X. Xxxxxx (the "Executive").
W I T N E S S E T H :
In consideration of the representations, warranties
and conditions contained herein, the parties hereto agree as follows:
1. Position and Responsibilities.
1.1. The Executive shall serve in an executive
capacity as Chief Executive Officer and President of the Corporation.
Subject to the direction and authorization of the Board of Directors
of the Corporation, the Executive shall direct and manage the affairs
of the Corporation and shall perform such other functions and
undertake such other responsibilities as are customarily associated
with such capacity. The Executive shall hold such directorships and
executive officerships in the Corporation and any subsidiary to which,
from time to time, he may be elected or appointed during the term of
this Agreement.
1.2. The Executive shall devote his full time and
best efforts to the business and affairs of the Corporation and to the
promotion of its interests.
1.3. The principal executive offices of the
Corporation shall be maintained in Long Island, New York and the
Executive shall not be required to relocate outside Long Island, New
York, without his prior consent.
2. Term of Employment.
2.1. The term of employment shall be five years,
commencing with the date hereof, unless sooner terminated as provided
in this Agreement. The initial term of employment and any extension
thereof is herein referred to as the "Term."
2.2. Notwithstanding the provisions of Section 2.1
hereof, the Corporation shall have the right, on written notice to the
Executive, to terminate the Executive's employment for Cause, such
termination to be effective as of the date on which notice is given or
as of such later date otherwise specified in the notice.
2.3. For purposes of this Agreement, the term
"Cause" shall mean any of the following actions by the Executive: (a)
failure to comply with any of the material terms of this Agreement,
which shall not be cured within 30 days after written notice; (b)
engagement in gross misconduct injurious to the Corporation which
shall not be cured within 30 days after written notice; (c) knowing
and willful neglect or refusal to attend to the material duties
reasonably assigned to him by the Board of Directors of the
Corporation, which shall not be cured within 30 days after written
notice; (d) intentional misappropriation of property of the
Corporation to the Executive's own use; (e) the commission by the
Executive of an
-2-
act of embezzlement; (f) Executive's conviction for a felony or if
criminal penalties are imposed on Executive relating to any taxes due
and owing by Executive; or (g) Executive's engaging in any activity
which would constitute a material conflict of interest with the
Corporation, which shall not be cured within 30 days after written
notice. If the provisions contained in subsections (a), (b), (c) or
(g) above cannot be cured within 30 days due to the nature of the
breach, the cure period shall then be extended for a reasonable period
of time; provided, however, the Executive undertakes and continues in
good faith to cure the same.
2.4. No later than six months prior to the end of
the Term, the Corporation and the Executive shall meet to discuss the
terms and conditions of an extension of the Term. If the Term of this
Agreement shall not be extended, at the end of the Term the
Corporation shall pay as severance pay to Executive his salary at the
rate in effect as of the termination for a period of six months after
the termination in accordance with the Corporation's normal payroll
practices; provided, however, that such payments shall be reduced by
the amount of any compensation earned by the Executive from any other
employment during such six months.
2.5. If the Executive's employment with the
Corporation shall be terminated (a) by the Corporation other than
pursuant to Sections 2.2, 4.1 or 4.2 hereof or (b) by the Executive
for Good Reason (as defined herein), then the Corporation shall
continue to provide or pay to the Executive
-3-
for the balance of the Term of this Agreement, the salary, bonus and
benefits received by the Executive prior to such termination. The
Executive shall have the right for a period of 30 days after the
occurrence of a Good Reason event to terminate this Agreement for Good
Reason.
2.6. For purposes of this Agreement, the term "Good
Reason" shall mean any of the following: (a) the assignment to the
Executive by the Corporation of duties inconsistent with, or a
material reduction in the nature of, Executive's responsibilities
hereunder; (b) a reduction by the Corporation in the Executive's base
salary as in effect on the later of the date of this Agreement or the
last date on which base salary is increased; (c) a relocation of the
Executive's place of employment outside of Long Island, New York
without Executive's prior consent; (d) a reduction in amount of bonus
which may be earned by the Executive; (e) (i) prior to a Change in
Control, failure of the Corporation to continue to maintain the same
medical benefit plans covering the Executive as are made available to
other senior executives of the Corporation or (ii) after a Change in
Control, failure of the Corporation to continue to maintain at least
the same medical benefits covering the Executive as were made
available to him immediately prior to the Change in Control; or (f)
failure by the Corporation to comply with any of the material terms of
this Agreement, which shall not have been cured within 30 days after
written notice thereof.
-4-
3. Compensation.
3.1. The Corporation shall pay or cause Delta
Funding Corporation to pay to the Executive for the services to be
rendered by the Executive hereunder a salary at the rate of $350,000
per annum. The salary shall be payable in equal installments in
accordance with the Corporation's normal payroll practices. Such
salary will be reviewed at least annually and shall be increased (but
not decreased) by the Board of Directors of the Corporation in such
amount as determined in its sole discretion. In addition, the salary
each year shall be increased by the percentage increase in the United
States Consumer Price Index-Cities (for New York City)-All-Item
Figures for All Urban Consumers (1982-84=100) published by the United
States Department of Labor, Bureau of Labor Statistics (or if such
index is not available, a comparable index published by the United
States Department of Labor) for the year preceding such year over the
prior year. In addition, the Executive will be paid a quarterly cash
bonus based on the actual performance of the Corporation. The amount
of such quarterly cash bonus will be as follows: for each 1% increase
in net earnings per share for the relevant fiscal quarter greater than
10% as measured against the corresponding quarter in the prior fiscal
year, the Executive will receive a cash bonus of 15% of his current
annual salary, provided that for any fiscal year the sum of the
quarterly cash bonuses paid to the Executive may not exceed 400% of
the Executive's current annual salary. Such quarterly cash bonuses
will be payable 60 days after the relevant quarter. By
-5-
way of illustration only, if the Company reports net earnings per
share for the quarter 13% higher than in the corresponding quarter of
the prior fiscal year and the Executive's salary is $350,000 per
annum, 60 days after the last day of the relevant quarter the
Executive would be paid a cash bonus of $157,500.
3.2. On the date the Corporation adopts its 1996
Stock Option Plan (the "1996 Option Plan"), the Executive shall be
granted a non-qualified stock option pursuant to the terms of the 1996
Option Plan to purchase 100,000 shares of the Corporation's Common
Stock, par value $.01 (the "Common Stock") at the initial public
offering price, which option shall vest 20% per year and have a term
of 5 years.
3.3. The Executive shall be entitled to participate
in, and receive benefits from, any insurance, medical, disability,
bonus, incentive compensation or other employee benefit plan, if any
are adopted, of the Corporation or any subsidiary which may be in
effect at any time during the course of his employment by the
Corporation and which shall be generally available to the Executive on
terms no less favorable than to other senior executives of the
Corporation or its subsidiaries. The Corporation agrees to reimburse
Executive for all medical costs and expenses incurred by him which are
not covered by the Corporation's group medical plans, up to an
aggregate maximum amount of $100,000 per annum, upon submission of
appropriate and itemized documentation.
3.4. The Corporation agrees to reimburse the
Executive for all reasonable and necessary business expenses
-6-
incurred by him on behalf of the Corporation in the course of his
duties hereunder upon the presentation by the Executive of appropriate
vouchers therefor. In addition, in view of the amount of business
related travel and entertainment expenses to be incurred by the
Executive in the performance of his duties hereunder, the Corporation
shall provide to the Executive a $25,000 per annum travel and
entertainment allowance.
3.5. The Executive will be entitled each year of
this Agreement to a paid vacation of four weeks, no more than half of
which may be carried forward to future years.
3.6. The Corporation agrees to use its best
reasonable efforts to obtain life insurance for the Executive in an
amount of at least $1,000,000, with the Executive to have the right to
name the beneficiary thereof. Upon termination of this Agreement, the
Executive shall have the right to cause the Corporation to assign such
life insurance policy to the Executive or his designee at no cost to
Executive, except that Executive shall be responsible for any premiums
due thereon after the balance of the Term of this Agreement
3.7. Upon termination of this Agreement for Cause or
due to the death or incapacity of the Executive (as defined in Section
4.1), the Executive (or his estate) shall be entitled to all
compensation (including pro rata bonus) and benefits accrued and
unpaid up to the date of termination.
3.8. The Executive shall not be required to mitigate
damages or the amount of any payment provided to him under this
-7-
Agreement by seeking other employment or otherwise, except as provided
in Section 2.4 hereof.
4. Death; Incapacity.
4.1. If, during the period of employment hereunder,
because of illness or other incapacity, the Executive shall fail for a
period of 120 consecutive days, or for shorter periods aggregating
more than 120 days during any twelve month period, to render the
services contemplated hereunder, then the Corporation, at its option,
may terminate the term of employment hereunder upon not less than 10
days written notice from the Corporation to the Executive, effective
on the 10th day after giving of such notice; provided, however, that
no such termination will be effective if prior to the 10th day after
giving such notice, the Executive's illness or incapacity shall have
terminated and he shall be physically and mentally able to perform the
services required hereunder and shall be performing such services.
4.2. In the event of the death of the Executive
during the term hereof, the employment hereunder shall terminate on
the date of death of the Executive.
4.3. The Corporation (or its designee) shall have
the right to obtain for its benefit an appropriate life insurance
policy on the life of the Executive, naming the Corporation (or its
designee) as the beneficiary. If requested by the Corporation, the
Executive agrees to cooperate with the Corporation in obtaining such
policy.
-8-
4.4. In the event the employment of Executive is
terminated by the Corporation as the result of the death or incapacity
of the Executive, the Corporation agrees to continue to pay the
Executive (or his estate) his then rate of salary for a period of one
year after such termination. In addition, if termination occurs as a
result of Executive's incapacity, the Corporation will continue to pay
during the balance of the Term of this Agreement the premiums on the
$1,000,000 of life insurance policies presently maintained by the
Corporation on Executive's life for the benefit of Executive's
designated beneficiary.
5. Other Activities During Employment;
Non-Competition; Solicitation.
5.1. The Executive shall not during the term of this
Agreement undertake or engage in any other employment, occupation or
business enterprise. Subject to compliance with the provisions of this
Agreement, the Executive may engage in reasonable activities with
respect to personal investments of the Executive.
5.2. During Executive's employment, neither the
Executive nor any entity in which he may be interested as a partner,
trustee, director, officer, employee, shareholder, option holder,
lender of money, guarantor or consultant shall be engaged directly or
indirectly in any business engaged in by the Corporation in any area
where the Corporation, or any subsidiary, conducts such business at
any time during this Agreement; provided, however, that the foregoing
shall not be
-9-
deemed to prevent the Executive from investing in securities if such
class of securities in which the investment is so made is listed on a
national securities exchange or is issued by a company registered
under Section 12(g) of the Securities Exchange Act of 1934, so long as
such investment holdings do not, in the aggregate, constitute more
than 5% of the voting stock of any company's securities.
5.3. The Executive will not at any time during his
employment with the Corporation solicit (or assist or encourage the
solicitation of) any employee of the Corporation or any of its
subsidiaries or affiliates to work for Executive or for any business,
firm, corporation or other entity in which the Executive, directly or
indirectly, in any capacity described in Section 5.2 hereof,
participates or engages (or expects to participate or engage) or has
(or expects to have) a financial interest or management position.
5.4. The Executive shall not at any time during this
Agreement or for a period of one year after the termination hereof
directly or indirectly divulge, furnish, use, publish or make
accessible to any person or entity any Confidential Information (as
hereinafter defined). Any records of Confidential Information prepared
by the Executive or which come into Executive's possession during this
Agreement are and remain the property of the Corporation and upon
termination of Executive's employment all such records and copies
thereof shall be either left with or returned to the Corporation.
-10-
5.5. The term "Confidential Information" shall mean
information disclosed to the Executive or known, learned, created or
observed by him as a consequence of or through his employment by the
Corporation, not generally known in the relevant trade or industry,
about the Corporation's business activities, services and processes,
including but not limited to information concerning advertising, sales
promotion, publicity, sales data, research, finances, accounting,
methods, processes, business plans, broker or correspondent lists and
records and potential broker or correspondent lists and records.
6. Assignment. The Corporation shall require any
successor or assign to all or substantially all the assets of the
Corporation (whether by merger or by acquisition of stock, assets or
otherwise) prior to consummation of any transaction therewith, to
expressly assume and agree to perform in writing this Agreement in the
same manner and to the same extent that the Corporation would be
required to perform it if no such succession or assignment had taken
place. This Agreement shall inure to the benefit of and be binding
upon the Corporation, its successors and assigns, and upon the
Executive and his heirs, executors, administrators and legal
representatives. This Agreement shall not be assignable by the
Executive.
7. Change in Control. Upon the occurrence of a
"Change in Control" (as hereinafter defined) of the Corporation,
Executive may at his election, at any time within six months
thereafter, terminate this Agreement, and Executive shall be
-11-
entitled to the following compensation, in lieu of any other
compensation and bonuses provided herein:
(a) The Corporation shall pay as severance pay
to Executive, no later than the fifth day following the termination, a
lump sum severance payment equal (i) to 100% of Executive's salary for
the balance of the Term, at the rate in effect as of the termination,
and (ii) any bonuses due to the Executive pursuant to Section 3.1.
through the end of the fiscal quarter in which such termination was so
effective.
(b) For 18 months after such termination, the
Corporation shall use its best efforts to arrange to provide Executive
with group health benefits substantially similar to those which
Executive was receiving immediately prior to the termination. Benefits
otherwise receivable by the Executive pursuant to this paragraph (b)
shall be reduced to the extent comparable benefits are actually
received by Executive during such period.
(c) Executive shall not be required to mitigate
the amount of any payment provided for in this Section 7 by
seeking employment or otherwise.
(d) In the event that any payment or benefit
received or to be received by Executive in connection with a Change in
Control of the Corporation or the termination of Executive's
employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Corporation, any person
whose actions result in a Change in Control or any person affiliated
with the Corporation or such
-12-
person) (collectively the "Total Payments") would not be deductible
(in whole or in part) as a result of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), by the Corporation, an
affiliate or other person making such payment or providing such
benefit, the payments or benefits shall be so reduced until no portion
of the Total Payments is not deductible. Executive shall be entitled
to elect which payments or benefits shall be so reduced. For purposes
of this limitation, (1) no portion of the Total Payments the receipt
or enjoyment of which Executive shall have effectively waived in
writing prior to the date of payment shall be taken into account, (2)
no portion of the Total Payments shall be taken into account which in
the opinion of tax counsel selected by the Corporation's independent
auditors and acceptable to Executive does not constitute a "parachute
payment" within the meaning of Section 280G(b)(2) of the Code, and (3)
the value of any noncash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the
Corporation's independent auditors in accordance with the principles
of Sections 280(d)(3) and (4) of the Code.
(e) For purposes hereof, a "Change in Control"
shall be deemed to have occurred if (a) members of the immediate
Xxxxxx family shall cease to be the owners of at least 51% of the
outstanding shares of common stock of the Corporation, (b) if the
Corporation shall sell all or substantially all its assets, or (c) if
the Corporation shall merge or consolidate with another entity and as
a result thereof members of the
-13-
immediate Xxxxxx family ceases to be the owners, either directly or
indirectly, of at least 51% of the outstanding shares of common stock
of the entity surviving the merger or consolidation.
(f) The Company shall pay all legal fees and
related expenses (including the costs of experts, evidence and
counsel) incurred by the Executive on, after or in connection with a
Change in Control as statements therefor are received (whether or not
the Executive is successful) as a result of (a) the Executive's
termination or non-renewal of employment (including all such fees and
expenses, if any, incurred in contesting or disputing any such
termination or non-renewal of employment), (b) the Executive seeking
to obtain or enforce any right or benefit provided by this Agreement
or by any other plan or arrangement maintained by the Company under
which the Executive is or may be entitled to receive benefits or (c)
in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder.
8. No Third Party Beneficiaries. This Agreement
does not create, and shall not be construed as creating, any
rights enforceable by any person not a party to this Agreement,
except as provided in Section 6 hereof.
9. Headings. The headings of the sections hereof
are inserted for convenience only and shall not be deemed to
constitute a part hereof nor to affect the meaning thereof.
-14-
10. Interpretation. In case any one or more of the
provisions contained in this Agreement shall, for any reason, be held
to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this Agreement, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been
contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held by a court of
competent jurisdiction to be enforceable because it is excessively
broad as to duration, geographical scope, activity or subject, it
shall be construed by limiting and reducing it, so as to be
enforceable to the extent compatible with the applicable law as it
shall then appear.
11. Notices. All notices under this Agreement shall
be in writing and shall be deemed to have been given at the time when
mailed by registered or certified mail, addressed to the address below
stated of the party to which notice is given, or to such changed
address as such party may have fixed by notice:
To the Corporation:
Delta Funding Corporation
0000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
-15-
- copy to -
Stroock & Stroock & Xxxxx
0 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
To the Executive:
Xxxx X. Xxxxxx
000 Xxxxx Xxxxx
Xxxxxx Xxx Xxxx, Xxx Xxxx 00000
provided, however, that any notice of change of address shall be
effective only upon receipt.
12. Waivers. If either party should waive any breach
of any provision of this Agreement, he or it shall not thereby
be deemed to have waived any preceding or succeeding breach of
the same or any other provision of this Agreement.
13. Complete Agreement; Amendments. The foregoing is
the entire agreement of the parties with respect to the subject
matter hereof and may not be amended, supplemented, canceled or
discharged except by written instrument executed by both parties
hereto.
14. Equitable Remedies. The Executive acknowledges
that he has been employed for his unique talents and that his leaving
the employ of the Corporation would seriously hamper the business of
the Corporation and that the Corporation will suffer irreparable
damage if any provisions of Section 5 hereof are not performed
strictly in accordance with their terms or are otherwise breached. The
Executive hereby expressly agrees that the Corporation shall be
entitled as a matter of right to injunctive or other equitable relief,
in addition to all other
-16-
remedies permitted by law, to prevent a breach or violation by the
Executive and to secure enforcement of the provisions of Section 5.
Resort to such equitable relief, however, shall not constitute a
waiver or any other rights or remedies which the Corporation may have.
15. Governing Law. This Agreement is to be governed
by and construed in accordance with the laws of the State of
New York, without giving effect to principles of conflicts of
law.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
DELTA FINANCIAL CORPORATION
By: /s/ Xxxx Xxxxxx
----------------------------
Name: Xxxx Xxxxxx
Title: Vice President
/s/ Xxxx X. Xxxxxx
--------------------------------
Xxxx X. Xxxxxx
-17-
