EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is executed on this ____ day of
October, 1999 by and between RESOURCE AMERICA, INC., a Delaware corporation
having its principal place of business at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000 ("RAI") and XXXXX X. XXXXXXXXX ("Xxxxxxxxx").
BACKGROUND
A. Since 1995, Xxxxxxxxx has been an officer of RAI and currently he
serves as the Vice Chairman of RAI.
X. Xxxxxxxxx and RAI desire to formally set forth the terms, conditions
and agreements regarding Xxxxxxxxx'x employment as Vice Chairman of RAI.
TERMS
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and intending to be legally bound hereby, RAI and Xxxxxxxxx agree as
follows:
1. Employment. During the term of this Agreement, Xxxxxxxxx shall be
employed as the Vice Chairman of the Board of Directors of RAI.
2. Duties. Xxxxxxxxx shall report to and accept direction from the
Chairman of the Board and from the Board. Xxxxxxxxx shall serve RAI diligently
and to the best of his abilities, but Xxxxxxxxx shall be required to devote only
so much of his time and attention to the business of RAI as may be required to
fulfill his duties. It is recognized that Xxxxxxxxx in the past has
participated, and it is agreed that Xxxxxxxxx in the future may participate in
business endeavors separate and apart from RAI.
3. Term. Xxxxxxxxx'x employment hereunder shall continue in full force
and effect for a period of three (3) years, unless sooner terminated in
accordance with the provisions hereof. Such term shall automatically extend so
that on any day that this Agreement is in effect, it shall have a then current
term of three (3) years. Such automatic extensions shall cease upon RAI's
written notice to Xxxxxxxxx of its election to terminate this Agreement at the
end of the three (3) year period then in effect.
4. Compensation.
(a) Base Compensation. During the period of employment, RAI shall
pay to Xxxxxxxxx "Base Compensation" to be established by the Board, initially
in an amount equal to Four Hundred Twenty-Five Thousand Dollars ($425,000.00)
per annum base compensation which Xxxxxxxxx, under existing arrangements
approved by the Board, is to receive during calendar 1999 (the "Initial Level").
The Base Compensation will be payable in accordance with the general payroll
practices by which RAI pays its executive officers, and the historical practice
of RAI's compensation of Xxxxxxxxx. It is understood that RAI, through the
compensation committee of the Board, will review Xxxxxxxxx'x performance on an
annual basis and increase or decrease (but in no event below the Initial Level)
such Base Compensation, based upon Xxxxxxxxx'x performance.
(b) Incentive Compensation. During the period of employment
Xxxxxxxxx may receive incentive compensation in the form of cash bonus payments,
stock option grants and other forms of incentive compensation, based upon
Xxxxxxxxx'x performance.
(c) Reimbursement of Expenses. RAI shall reimburse Xxxxxxxxx for
all reasonable expenses incurred by Xxxxxxxxx in the performance of his duties,
including (without limitation) expenses incurred during business-related travel.
5. Benefits.
Xxxxxxxxx shall be entitled to receive the following benefits from
RAI independent of any other benefits which Xxxxxxxxx may receive from RAI or
otherwise:
(a) Participation in Benefit Plans. Xxxxxxxxx will participate in
all employee benefit plans in effect during the term of Xxxxxxxxx'x employment
hereunder.
(b) Temporary Disability. During any period that Xxxxxxxxx fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness Xxxxxxxxx shall continue to receive his full compensation at the rate
then in effect for such period until his employment is terminated pursuant to
paragraph 6(b) hereof.
2
6. Termination.
Xxxxxxxxx'x employment hereunder shall terminate as follows:
(a) Death. Xxxxxxxxx'x employment shall terminate automatically
upon the death of Xxxxxxxxx.
(b) Disability. RAI may terminate this Agreement if Xxxxxxxxx
becomes disabled by reason of any physical or mental disability whatsoever for
more than two hundred forty (240) days in the aggregate during any calendar year
and the Board determines, that Xxxxxxxxx, by reason of such physical or mental
disability, is rendered unable to perform his duties and services hereunder (a
"Disability");
(c) Termination by Xxxxxxxxx for Cause. Xxxxxxxxx may terminate his
employment for cause upon thirty (30) days' prior written notice to RAI, with
opportunity to cure any condition reasonably susceptible of cure. For the
purposes of this paragraph 6(c), cause shall be deemed to exist if any of the
following shall occur: (i) without the written consent of Xxxxxxxxx, a
substantial change in the services or duties required of Xxxxxxxxx hereunder or
the imposition of any services or duties substantially inconsistent with, or in
diminution of Xxxxxxxxx'x current position, services or duties, or status with
RAI; (ii) failure to continue Xxxxxxxxx'x coverage under any RAI benefit plan as
required under paragraph 5(a) except pursuant to a change to a benefit plan that
applies to senior executives of RAI generally or is required by law or
regulation; or (iii) any material breach by RAI of any provision of this
Agreement;
(d) Termination by Xxxxxxxxx Without Cause. Xxxxxxxxx may terminate
this Agreement without cause upon one hundred eighty (180) days prior written
notice to RAI.
(e) Change of Control. Xxxxxxxxx may, in his discretion, terminate
his employment upon a Change in Control or Potential Change in Control by
sending a Notice of Termination.
(f) Termination by RAI. In accordance with paragraph 3 hereof, RAI
may terminate this Agreement at the end of the then current three (3) year term.
7. Effect of Termination.
(a) Death. Upon the termination of Xxxxxxxxx'x employment pursuant
to paragraph 6(a) hereof due to Xxxxxxxxx'x death, a death benefit shall be paid
to Xxxxxxxxx'x estate equal to the total amount payable to Xxxxxxxxx under this
Agreement until expiration of the term then in effect, assuming that Xxxxxxxxx'x
total compensation for each year would be equal to the Average Compensation. The
death benefit shall be paid in thirty-six (36) equal, consecutive monthly
installments, beginning the first month following the month in which Xxxxxxxxx
shall have died.
3
(b) Disability. Upon the termination of Xxxxxxxxx'x employment
pursuant to paragraph 6(b) hereof due to Xxxxxxxxx'x disability, Xxxxxxxxx shall
be entitled to receive a monthly disability benefit equal to one twelfth (1/12)
of the product of (i) the Average Compensation, multiplied by (ii) seventy-five
percent (75%). The disability benefit described above shall be paid to
Xxxxxxxxx, beginning the first month following the termination pursuant to
paragraph 6(b). Xxxxxxxxx'x disability benefit shall cease if he resumes his
employment with RAI on the terms provided in this Agreement. Disability payments
made under this paragraph shall not be reduced by any payments made directly to
Xxxxxxxxx by an insurance company.
(c) For Cause; Change of Control. Upon the termination of this
Agreement either (i) by Xxxxxxxxx for cause pursuant to paragraph 6(c) hereof,
(ii) by Xxxxxxxxx pursuant to paragraph 6(e) after a Change in Control or
Potential Change of Control or (iii) by RAI pursuant to section 6(f) hereof,
then RAI shall provide to Xxxxxxxxx the benefits described in Section 7(c)(1)
and 7(c)(2) below (the "Severance Benefits").
(1) Lump-Sum Severance Payment. In lieu of any further
compensation payments to Xxxxxxxxx for periods subsequent to the Date of
Termination, RAI shall pay to Xxxxxxxxx a lump sum severance payment, in cash,
without discount, equal to the sum of the total amount payable to Xxxxxxxxx
under this Agreement until expiration of the term then in effect, assuming that
Xxxxxxxxx'x total compensation for each year would be equal to the Average
Compensation.
(2) Continued Benefits. For a thirty-six (36) month period
after the Date of Termination (the "Benefits Period"), RAI shall provide
Xxxxxxxxx with group term life insurance, health insurance, accident and
long-term disability insurance benefits (collectively, "Welfare Benefits")
substantially similar in all respects to those that Xxxxxxxxx was receiving
immediately prior to the Date of Termination (without giving effect to any
reduction in such benefits subsequent to a Change in Control). During the
Benefits Period, Xxxxxxxxx shall be entitled to elect to change his level of
coverage and/or his choice of coverage options with respect to the Welfare
Benefits to be provided by RAI to Xxxxxxxxx to the same extent that actively
employed senior executives of RAI are permitted to make such changes.
(e) Vesting of Options. Upon any termination of this Agreement, the
vesting of all options to purchase securities of RAI granted to Xxxxxxxxx during
his employment with RAI shall be accelerated to the later of the effective date
of termination of this Agreement, or six months after the date such option was
granted, and any provision contained in the agreements under which such options
were granted that is inconsistent with such acceleration is hereby modified to
the extent necessary to provide for such acceleration; such acceleration shall
not apply to any option that by its terms would vest prior to the date provided
for in this paragraph 7(d).
4
8. Gross-Up Payment.
(a) In the event that (i) Xxxxxxxxx becomes entitled to any
benefits or payments in connection with the termination of Xxxxxxxxx'x
employment, whether pursuant to the terms of this Agreement or otherwise,
including without limitation the Severance Benefits (collectively, the "Total
Benefits"), and (ii) any of the Total Benefits will be subject to the Excise
Tax, RAI shall pay to Xxxxxxxxx an additional amount (the "Gross-Up Payment")
such that the net amount retained by Xxxxxxxxx, after deduction of any Excise
Tax on the Total Benefits and any federal, state and local income taxes, Excise
Tax, and FICA and Medicare withholding taxes upon the payment provided for by
this paragraph 8(a), shall be equal to the Total Benefits. For purposes of
determining whether any of the Total Benefits will be subject to the Excise Tax
and the amount of such Excise Tax, the amount of the Total Benefits that shall
be treated as subject to the Excise Tax shall be equal to the amount of the
Total Benefits reduced by the amount of such Total Benefits that, in the opinion
of tax counsel selected by Xxxxxxxxx, at RAI's expense and reasonably acceptable
to RAI ("Tax Counsel"), are not excess parachute payments (within the meaning of
Section 28OG(b)(1) of the Code).
(b) For purposes of this Section 8, Xxxxxxxxx shall be deemed to
pay federal income taxes at the highest marginal rate of federal income taxation
in the calendar year in which the Excise Tax is (or would be) payable and state
and local income taxes at the highest marginal rate of taxation in the state and
locality of Xxxxxxxxx'x residence on the Date of Termination, net of the
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes (calculated by assuming that any reduction under Section
68 of the Code in the amount of itemized deductions allowable to Xxxxxxxxx
applies first to reduce the amount of such state and local income taxes that
would otherwise be deductible by Xxxxxxxxx). Except as otherwise provided
herein, all determinations required to be made under this Section 8 shall be
made by Tax Counsel.
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of Xxxxxxxxx'x employment, Xxxxxxxxx shall repay to RAI, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax, federal, state and local income
taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment
being repaid by Xxxxxxxxx to the extent that such repayment results in a
reduction in Excise Tax, FICA and Medicare withholding taxes and/or a federal,
state or local income tax deduction) plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of Xxxxxxxxx'x employment (including by
reason of any payment the existence or amount of which cannot be determined at
5
the time of the Gross-Up Payment), RAI shall make an additional Gross-Up Payment
to Xxxxxxxxx in respect of such excess (plus any interest, penalties or
additions payable by Xxxxxxxxx with respect to such excess) at the time that the
amount of such excess is finally determined.
9. Indemnification.
(a) If Xxxxxxxxx is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (herein a "proceeding"), by reason of
the fact that he is or was an employee (which term includes officer, director,
agent and any other capacity) of RAI or is or was serving at the request of RAI
as an employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as an employee or agent or in any other capacity while serving
as an employee or agent, Xxxxxxxxx shall be indemnified and held harmless by RAI
to the fullest extent authorized by applicable law, against all expense,
liability and loss (including, but not limited to, attorneys' fees, judgments,
fines, ERISA excise taxes and penalties and amounts paid or to be paid in
settlement) incurred or suffered by Xxxxxxxxx in connection therewith and such
indemnification shall continue as to Xxxxxxxxx after he has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
Xxxxxxxxx'x heir, executors, and administrators; provided, however, that RAI
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by Xxxxxxxxx (other than a proceeding to
enforce this paragraph 9) only if such proceeding (or part thereof) was
authorized directly or indirectly by the Board of RAI. The right to
indemnification conferred in this paragraph shall be a contract right and shall
include the right to be, promptly upon request, paid by RAI the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that if the Business Corporation Law of the Commonwealth of
Pennsylvania requires the payment of such expenses incurred by an employee in
his capacity as an employee (and not in any other capacity in which service was
or is rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, payment shall be made only upon delivery to RAI of
an undertaking, by or on behalf of Xxxxxxxxx, to repay all amounts so advanced
if it shall ultimately be determined that such employee is not entitled to be
indemnified under this paragraph or otherwise.
(b) The indemnification provided by this paragraph shall not be
limited or exclude any rights, indemnities or limitations of liability to which
Xxxxxxxxx may be entitled, whether as a matter of law, under the Certificate of
Incorporation, By-laws of RAI, by agreement, vote of the stockholders or
disinterested directors of RAI or otherwise.
6
(c) Xxxxxxxxx, in seeking indemnification under this Agreement (an
"Indemnitee"), shall give the other party or parties (the "Indemnitor") prompt
written notice of any claim, suit or demand that the Indemnitee believes will
give rise to indemnification under this Agreement; provided, however, that the
failure to give such notice shall not affect the liability of the Indemnitor
under this Agreement unless the failure to give such notice materially and
adversely affects the ability of the Indemnitor to defend itself against or to
cure or mitigate the damages. Except as hereinafter provided, the Indemnitor
shall have the right (without prejudice to the right of the Indemnitee to
participate at its expense through counsel of its own choosing) to defend and to
direct the defense against any such claim, suit or demand, at the Indemnitor's
expense and with counsel chosen jointly by Indemnitor and Indemnitee, and the
right to settle or compromise any such claim, suit or demand; provided, however,
that the Indemnitor shall not, without the Indemnitee's written consent, which
shall not be unreasonably withheld, settle or compromise any claim or consent to
any entry of judgment. The Indemnitee shall, at the Indemnitor's expense,
cooperate in the defense of any such claim, suit or demand. If the Indemnitor,
within a reasonable time after notice of a claim fails to defend the Indemnitee,
the Indemnitee shall be entitled to undertake the defense, compromise or
settlement of such claim at the expense of and for the account and risk of the
Indemnitor.
(d) Xxxxxxxxx will be covered during the entire term of this
Agreement by Officer and Director liability insurance in amounts and on terms
similar to that afforded to other executives and/or directors of RAI or its
affiliates, which such insurance shall be paid by RAI.
10. Definitions. Any terms not otherwise defined herein shall have the
following meaning:
(a) "Average Compensation" means the average of the three highest
amounts of annual total compensation received by Xxxxxxxxx during any of the
then current calendar year (on an annualized basis) and the then preceding eight
(8) calendar years.
(b) "Board" means the Board of Directors of RAI.
(c) A "Change in Control" means the occurrence of any of the
following events:
(1) RAI's shareholders approve (or, in the event no approval of
RAI's shareholders is required, RAI consummates) a merger, consolidation, share
exchange, division or other reorganization or transaction of RAI (a "Fundamental
Transaction") with any other corporation, other than a Fundamental Transaction
which would result in the voting securities of RAI outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
7
converted into voting securities of the surviving entity) at least sixty percent
(60%) of the combined voting power immediately after such Fundamental
Transaction of (i) RAI's outstanding securities, (ii) the surviving entity's
outstanding securities, or (iii) in the case of a division, the outstanding
securities of each entity resulting from the division;
(2) the shareholders of RAI approve a plan of complete,
liquidation or winding-up of RAI or an agreement for the sale or disposition (in
one transaction or a series of transactions) of all or substantially all of
RAI's assets; or
(3) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constituted the Board (including
for this purpose any new director whose election or nomination for election by
RAI's shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Control Effort" means any acting together or undertaking
efforts to act together by any Person or Persons, excluding employee benefit
plans of RAI, who are, or seek in any direct or indirect manner to become, the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act
or any successor provisions thereto), directly or indirectly, of securities of
RAI representing twenty-five percent (25%) or more of the combined voting power
of RAI's then outstanding securities.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(g) "Excise Tax" means any excise tax imposed under Section 4999 of
the Code or a similar provision that may later be enacted.
(h) "Notice of Termination" After a Potential Change in Control or
a Change in Control, Xxxxxxxxx may terminate this Agreement by sending a written
notice to RAI that shall (i) specify the date of termination (the "Date of
Termination") which shall not be more than sixty (60) days from the date such
Notice of Termination is given, (ii) indicate the specific provisions of this
Agreement that will apply upon such termination and (iii) set forth in
reasonable detail the facts and circumstances for the application of the
provisions indicated.
8
(i) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act and shall also include any syndicate or group deemed to be a
"person" under Section 13(d)(3) of the Exchange Act.
(j) "Potential Change in Control" means the occurrence of any of
the following:
(1) the Board approves a transaction described in Subsection
(2) of the definition of Change in Control contained in paragraph 10(c) hereof;
(2) the commencement of a proxy or other contest or effort to
effectuate a Change in Control; or
(3) a Control Effort.
(k) "RAI" means Resource America, Inc., a Delaware corporation and
any direct or indirect subsidiary of RAI by which Xxxxxxxxx is employed.
References to payments, benefits, privileges or other rights to be provided by
RAI or such subsidiary by which Xxxxxxxxx is employed, as the case may be, will
correspond to the corporate entity obligated to make payments or provide
benefits, privileges or other rights pursuant to employee benefit plans affected
by the provisions hereof, and in the absence of any such existing plans or
provisions, such reference shall be deemed to be to RAI. RAI shall also mean any
successor by merger or other business combination to more than one-half of the
assets or ownership of RAI.
11. Miscellaneous.
(a) Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect such validity, 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(s) had never
been contained herein, provided that such invalid, illegal or unenforceable
provision(s) shall first be curtailed, limited or eliminated only to the extent
necessary to remove such invalidity, illegality or unenforceability with respect
to the applicable law as it shall then be applied.
(b) Modification of Agreement. This Agreement shall not be modified
by any oral agreement, either expressed or implied, and all modifications
thereof shall be in writing and signed by the parties hereto.
(c) Waiver. The waiver of any right under this Agreement by any of
the parties hereto shall not be construed as a waiver of the same right at a
future time or as a waiver of any other rights under this Agreement.
9
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
giving affect to the principles of conflicts of laws.
(e) Notices. Any notice to be given pursuant to this Agreement
shall be sufficient if in writing and mailed by certified or registered mail,
postage-prepaid, to the addresses listed below, or to such other address as
either party may notify the other of in accordance with this section.
If to RAI:
Resource America, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
If to Xxxxxxxxx:
Xxxxx X. Xxxxxxxxx
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
(f) Duplicate Originals and Counterparts. This Agreement may be
executed in any number of duplicate originals or counterparts or facsimile
counterparts, each of such duplicate original or counterpart or facsimile
counterpart shall be deemed to be an original and all taken together shall
constitute but one and the same instrument.
[INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement on the day first above written.
RESOURCE AMERICA, INC.
By:____________________________
XXXXX X. XXXXXXXXX
_______________________________
11
STATE OF PENNSYLVANIA :
:
COUNTY OF PHILADELPHIA :
On this ___ day of October, 1999, before me, the undersigned, a Notary
Public in and for said state personally appeared Xxxxxx X. Xxxxx and Xxxxx X.
Xxxxxxxxx, on behalf of Resource America, Inc., a Delaware corporation, known to
me or proved to me to be the persons who executed the within instrument of
behalf of said corporation and acknowledged to me that they executed the same
for the purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year last above written.
____________________________________
Notary Public
My Commission Expires:
