EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is executed on this 11th day of
March, 1997, but effective as of January 1, 1997, by and between RESOURCE
AMERICA, INC., a Delaware corporation having its principal place of business at
0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 ("RAI") and XXXXXX X.
XXXXX ("Xxxxx").
BACKGROUND
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A. Since 1988, Xxxxx has been an officer of RAI and currently serves as
the Chairman of RAI's Board of Directors. Although certain verbal
understandings regarding Xxxxx'x employment with RAI have existed during
Xxxxx'x tenure with RAI, there has not been a formalized written agreement to
reflect those understandings.
X. Xxxxx and RAI desire to formally set forth the terms, conditions and
agreements regarding Xxxxx'x employment as Chairman of RAI.
TERMS
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NOW, THEREFORE, in consideration of the mutual promises set forth herein,
and intending to be legally bound hereby, RAI and Xxxxx agree as follows:
1. EMPLOYMENT. During the term of this Agreement, Xxxxx shall be
employed as the Chairman of the Board of Directors of RAI. Until such time as
the Board shall fill the office of President, Xxxxx shall also serve as
President.
2. DUTIES. Xxxxx shall report to and accept direction from the Board.
Xxxxx shall serve RAI diligently and to the best of his abilities, but Xxxxx
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 Xxxxx in the past has participated, and it is agreed that Xxxxx in the
future may participate in business endeavors separate and apart from RAI.
3. TERM. Xxxxx'x employment hereunder shall continue in full force and
effect for a period of five (5) 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
five (5) years. Such automatic extensions shall cease upon RAI's written
notice to Xxxxx of its election to terminate this Agreement at the end of the
five (5) year period then in effect.
4. COMPENSATION.
a. BASE COMPENSATION. During the period of employment, RAI shall pay
to Xxxxx "Base Compensation" to be established by the Board, initially in an
amount equal to the Three Hundred Fifty Thousand Dollars ($350,000) per annum
base compensation which Xxxxx, under existing arrangements approved by the
Board, is to receive during calendar 1997 (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 Xxxxx. It is understood that RAI, through the compensation
committee of the Board, will review Xxxxx'x performance on an annual basis and
increase or decrease (but in no event below the Initial Level) such Base
Compensation, based upon Xxxxx'x performance.
b. INCENTIVE COMPENSATION. During the period of employment Xxxxx may
receive incentive compensation in the form of cash bonus payments, stock option
grants and other forms of incentive compensation, based upon Xxxxx'x
performance.
c. REIMBURSEMENT OF EXPENSES. RAI shall reimburse Xxxxx for all
reasonable expenses incurred by Xxxxx in the performance of his duties,
including (without limitation) expenses incurred during business-related
travel.
5. BENEFITS.
Xxxxx shall be entitled to receive the following benefits from RAI
independent of any other benefits which Xxxxx may receive from RAI or
otherwise:
a. PARTICIPATION IN BENEFIT PLAN. Xxxxx will participate in all
employee benefit plans in effect during the term of Xxxxx'x employment
hereunder.
b. SUPPLEMENT RETIREMENT PLAN. RAI hereby establishes a Supplemental
Employment Retirement Plan (the "SERP") for the benefit of Xxxxx. The SERP
will pay to Xxxxx upon his retirement at any time after he has reached
Retirement Age, a monthly retirement benefit equal to one twelfth (1/12) of the
product of (i) the Average Compensation, multiplied by (ii) seventy five
percent (75%), less any amounts payable to Xxxxx under any other retirement
plan of RAI in which Xxxxx participates. If Xxxxx should die prior to receipt
of at least one-hundred twenty (120) months of retirement benefits under the
SERP, such retirement benefits shall continue to be paid to Xxxxx'x estate
until a total of one-hundred twenty (120) months of such benefits shall have
been paid.
c. TEMPORARY DISABILITY. During any period that Xxxxx fails to
perform his duties hereunder as a result of incapacity due to physical or
mental illness Xxxxx 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.
6. Termination.
Xxxxx'x employment hereunder shall terminate as follows:
a. DEATH. Xxxxx'x employment shall terminate automatically upon the
death of Xxxxx.
b. DISABILITY. RAI may terminate this Agreement if Xxxxx 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 Xxxxx, by reason of such physical or mental
disability, is rendered unable to perform his duties and services hereunder (a
"Disability");
x. XXXXX'X RETIREMENT. Xxxxx may, upon reaching the Retirement Age,
retire upon ninety (90) days written notice to RAI and upon his retirement
shall receive the benefits set forth in paragraph 7(c) hereof.
d. TERMINATION BY XXXXX FOR CAUSE. Xxxxx 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(d), cause shall be deemed to exist if any of the following shall
occur: (i) without the written consent of Xxxxx, a substantial change in the
services or duties required of Xxxxx hereunder or the imposition of any
services or duties substantially inconsistent with, or in diminution of Xxxxx'x
current position, services or duties, or status with RAI; (ii) failure to
continue Xxxxx'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;
e. TERMINATION BY XXXXX WITHOUT CAUSE. Xxxxx may terminate this
Agreement without cause upon one hundred eighty (180) days prior written notice
to RAI.
f. CHANGE OF CONTROL. Xxxxx may, in his discretion, terminate his
employment upon a Change in Control or Potential Change in Control by sending a
Notice of Termination.
g. TERMINATION BY RAI. In accordance with paragraph 3 hereof, RAI may
terminate this Agreement at the end of the then current five (5) year term.
7. Effect of Termination.
a. DEATH. Upon the termination of Xxxxx'x employment pursuant to
paragraph 6(a) hereof due to Xxxxx'x death, a death benefit shall be paid to
Xxxxx'x estate equal to the total amount payable to Xxxxx under this Agreement
until expiration of the term then in effect, assuming that Xxxxx'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 Xxxxx
shall have died.
b. DISABILITY. Upon the termination of Xxxxx'x employment pursuant to
paragraph 6(b) hereof due to Xxxxx'x disability, Xxxxx 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 Xxxxx, beginning the
first month following the termination pursuant to paragraph 6(b). Xxxxx'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 Xxxxx by an
insurance company. If during a period in which Xxxxx is receiving disability
benefits, he should reach the Retirement Age then effective the month following
his reaching such age, disability benefits shall terminate and retirement
benefits shall commence as if this Agreement were in effect on such date and
terminated on that date pursuant to section 6(c) hereof due to Xxxxx'x
retirement.
c. RETIREMENT. Upon the termination of Xxxxx'x employment pursuant to
paragraph 6(c) hereof due to Xxxxx'x retirement, Xxxxx shall be paid retirement
benefits pursuant to the SERP.
d. FOR CAUSE; CHANGE OF CONTROL. Upon the termination of this
Agreement either (i) by Xxxxx for cause pursuant to paragraph 6(d) hereof, (ii)
by Xxxxx pursuant to paragraph 6(f) after a Change in Control or Potential
Change of Control or (iii) by RAI pursuant to section 6(g) hereof, then RAI
shall provide to Xxxxx the benefits described in Section 7(d)(1) and 7(d)(2)
below (the "Severance Benefits").
(1) LUMP-SUM SEVERANCE PAYMENT. In lieu of any further
compensation payments to Xxxxx for periods subsequent to the Date of
Termination, RAI shall pay to Xxxxx a lump sum severance payment, in cash,
without discount, equal to the sum of the total amount payable to Xxxxx under
this Agreement until expiration of the term then in effect, assuming that
Xxxxx'x total compensation for each year would be equal to the Average
Compensation.
(2) CONTINUED BENEFITS. For a thirty-six (36) month period (or, if
less, the number of months from the Date of Termination until the date Xxxxx
will reach age seventy (70)) after the Date of Termination (the "Benefits
Period"), RAI shall provide Xxxxx 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 Xxxxx
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, Xxxxx 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 Xxxxx to the same extent that
actively employed senior executives of RAI are permitted to make such changes.
e. TERMINATION BY XXXXX WITHOUT CAUSE. If this Agreement is
terminated by Xxxxx without cause, on or after January 1, 2000, pursuant to
paragraph 6(e) hereof, Xxxxx shall be entitled to a benefit equal to one-fourth
(1/4) of the death benefit to which his estate would be entitled under
paragraph 7(a) hereof, calculated as if Xxxxx had died on the effective date of
the termination of this Agreement. Such benefit shall be paid in sixty (60)
equal, consecutive monthly installments, beginning on the month following the
effective date of termination.
f. VESTING OF OPTIONS. Upon any termination of this Agreement, the
vesting of all options to purchase securities of RAI granted to Xxxxx 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(f).
8. GROSS-UP PAYMENT.
a. In the event that (i) Xxxxx becomes entitled to any benefits or
payments in connection with the termination of Xxxxx'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 Xxxxx an additional amount (the "Gross-Up Payment") such that the net amount
retained by Xxxxx, 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
Xxxxx, 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, Xxxxx 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 Xxxxx'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 Xxxxx
applies first to reduce the amount of such state and local income taxes that
would otherwise be deductible by Xxxxx). 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
Xxxxx'x employment, Xxxxx 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 Xxxxx 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 Xxxxx'x employment (including by reason of any
payment the existence or amount of which cannot be determined at the time of
the Gross-Up Payment), RAI shall make an additional Gross-Up Payment to Xxxxx
in respect of such excess (plus any interest, penalties or additions payable by
Xxxxx with respect to such excess) at the time that the amount of such excess
is finally determined.
9. INDEMNIFICATION.
a. If Xxxxx 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, Xxxxx 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 Xxxxx in connection therewith and such indemnification
shall continue as to Xxxxx after he has ceased to be a director, officer,
employee or agent and shall inure to the benefit of Xxxxx'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 Xxxxx (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
Xxxxx, 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 Xxxxx
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.
x. Xxxxx, 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.
x. Xxxxx 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
annual total compensation received by Xxxxx 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) any Person or Persons acting together, excluding employee
benefit plans of RAI, are or 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
(other than a Person or Persons holding such combined voting power at the
beginning of the current fiscal year (being October 1, 1996));
(2) 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 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;
(3) 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
(4) 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. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
f. "Excise Tax" means any excise tax imposed under Section 4999 of the
Code or a similar provision that may later be enacted.
g. "Notice of Termination". After a Potential Change in Control or a
Change in Control, Xxxxx 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.
h. "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.
i. "Potential Change in Control" means the occurrence of any of the
following:
(1) the Board approves a transaction described in Subsection (b) of
the definition of Change in Control contained in paragraph 10(c) hereof; or
(2) the commencement of a proxy or other contest or effort in which
any Person seeks to obtain effective control of RAI.
j. "RAI" means Resource America, Inc., a Delaware corporation. If
Xxxxx becomes employed by a direct or indirect subsidiary of RAI, then RAI
shall also be deemed to refer to the subsidiary thereof by which Xxxxx is
employed. In such case, references to payments, benefits, privileges or other
rights to be provided by such subsidiary by which Xxxxx is employed or RAI, as
the case may be, to 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.
k. "Retirement Age" means sixty-two (62) years old.
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.
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 Xxxxx:
Xxxxxx X. Xxxxx
0000 Xxxxxx Xxxxxx; Xxx. 000
Xxxxxxxxxxxx, XX 00000
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement on March 11th, 1997, but effective as of January 1,
1997.
RESOURCE AMERICA, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
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XXXXXX X. XXXXX
/s/ Xxxxxx X. Xxxxx
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