EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is executed this 9th day of April,
1997 by and between FIDELITY MORTGAGE FUNDING, INC., a Delaware corporation
(the "Company"), XXXXXX X. XXXXX (the "Executive") and RESOURCE AMERICA, INC.,
a Delaware corporation ("RAI").
WHEREAS, the Company is a subsidiary of RAI; and
WHEREAS, Executive has been offered employment by the Company as President
and Chief Executive Officer (the "Office"); and
WHEREAS, Executive wishes to be employed in the Office by the Company; and
WHEREAS, the Company and RAI desire to assure the availability of
Executive's services in the Office; and
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the adequacy of which is hereby acknowledged, Company, Executive and RAI,
intending to be legally bound, agree as follows:
1. Employment.
The Company hereby employs Executive in the Office and Executive hereby
accepts such employment, positions and responsibilities, and agrees to serve
the Company in such capacities upon the terms and conditions set forth herein.
2. Services.
Executive shall serve the Company diligently, competently, and to the best
of his abilities during the period of employment. Executive's services shall
be performed within a reasonable commuting distance of Philadelphia except for
reasonable travel.
Executive's duties shall include the development and strategic oversight
of the Company's business, and such other matters as may be designated from
time to time by the Company's Board of Directors and which are appropriate to
the Office.
In carrying out his duties Executive shall report to and accept direction
from the Board of Directors of the Company; provided, however, Executive shall
not be required to devote all of his time to the Office, but only so much as
may be reasonably necessary to carry out the duties of such Office.
3. Term.
Executive's 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 (the "Contract Period"). Such automatic extensions shall cease upon
Company's written notice to Executive of its election to terminate this
Agreement at the end of the three (3) year period then in effect.
4. Compensation.
(a) Base Salary. During the period of employment, the Company shall pay
to Executive a Base Salary of One Hundred Fifty Thousand Dollars ($150,000) per
annum, payable monthly. It is understood that Company will review annually and
may, in the discretion of the Board of Directors, increase or decrease (but not
below $150,000) the Base Salary, as adjusted, in light of the Executive's
performance and other factors. It is understood that Executive may perform
other services for entities owned directly or indirectly by RAI and the Base
Salary shall not be intended to compensate for such services; rather Executive
will be directly compensated therefor.
(b) Incentive Compensation Plan. During the period of employment the
Executive shall receive bonus payments equal to 2.75% of the annual after tax
earnings of the Company, but not more than 2.0% of the pre-tax earnings of the
Company. After Tax Earnings shall mean the before tax earnings of the Company
determined by the Company's independent auditors in accordance with generally
acceptable accounting principles consistently applied adjusted for the taxes
that would be payable if the Company were a corporation that filed a separate
tax return. Payment of such bonus shall be made within fifteen (15) days of
the receipt by the Company of its audited financial statement for the preceding
fiscal year, but in no event later than 105 days after the end of the preceding
fiscal year.
(c) Payments in Lieu of Dividends. In the case of any dividend paid by
the Company at a time during which Executive has unvested or unexercised stock
options to acquire Company stock, Executive shall receive, contemporaneous with
the payment of such dividend, an amount hereunder equal to that amount to which
he would have been entitled had he previously exercised his stock options.
5. Benefits.
During the period of employment, Executive shall be entitled to receive
the following additional benefits:
(a) Participation in Benefit Plans. Executive will participate on a
substantially equal basis as all other employees of Company in all employee
benefit plans and arrangements now in effect or which may hereafter be
established which are generally applicable to other employees of the Company or
any of its subsidiaries.
(b) Car Allowance. The Company agrees to pay Executive a car allowance
not to exceed Five Hundred Dollars ($500) per month.
6. Termination.
Anything herein contained to the contrary notwithstanding, Executive's
employment hereunder shall terminate as a result of any of the following
events:
(a) Executive's death;
(b) Termination by the Company, for Cause (as hereinafter defined).
"Cause" shall encompass the following: (i) A court of competent jurisdiction
determines that Executive has committed a material fraud against the Company or
RAI; or (ii) Executive has been convicted of a felony involving any material
conflict of interest or self-dealing related to the Company and/or RAI;
(c) The Executive becomes disabled by reason of any physical or mental
disability whatsoever for more than one hundred eighty (180) days in the
aggregate during any 365-day period and the Board of Directors determines, in
good faith and in writing, that the Executive, by reason of such physical or
mental disability, is rendered unable to perform his duties and services
hereunder (a "Disability"); or
(d) Termination by Executive for "Good Reason" upon forty-five (45) days'
prior written notice to the Company. "Good Reason" shall mean: (i) without the
written consent of Executive, a substantial change in the services or duties
(including relocation in contravention of Paragraph 2 of this Agreement)
required of the Executive hereunder or the imposition of any services or duties
substantially inconsistent with, or in diminution of Executive's position,
services or duties, or status with the Company; (ii) failure to continue
Executive's coverage under any benefit plan as required under paragraph 5(a)
except pursuant to a change to a benefit plan that applies to senior executives
of the Company generally or is required by law or regulation; (iii) any breach
by the Company of any provision of this Agreement; (iv) Company should provide
Executive with the written notice of its election to terminate the automatic
extension of this Agreement as set forth in paragraph 3 hereof; or (v) a Change
in Control or Potential Change in Control (as such terms are hereinafter
defined); provided, however, that Termination by Executive for Good Reason
shall be effective in the case of clause (i)-(iii) only if such failure has not
been cured to Executive's satisfaction within thirty (30) days after notice of
such failure has been given to the Company. If notice has been given under
the previous sentence for a failure of the Company, Executive may terminate
this Agreement for Good Reason without further notice in the case of a similar
failure.
For the purposes of this Paragraph 6(d), "Change in Control" means the
occurrence of any of the following events:
i) any person, corporation, partnership or unincorporated association
(each a "Person") or Persons acting together, excluding RAI or employee benefit
plans of the Company or 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 the Company or RAI
representing twenty-five percent (25%) or more of the combined voting power of
the Company's or RAI then outstanding securities;
ii) the Company's or RAI's shareholders approve (or, in the event no
approval of the Company's or RAI's shareholders is required, the Company or RAI
consummates) a merger, consolidation, share exchange, division or other
reorganization or transaction of the Company (a "Fundamental Transaction") with
any other corporation, other than a Fundamental Transaction which would result
in the voting securities of the Company or 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 (a) the Company's or RAI's outstanding securities, (b) the
surviving entity's outstanding securities, or (c) in the case of a division,
the outstanding securities of each entity resulting from the division;
iii) the shareholders of the Company or RAI approve a plan of complete
liquidation or winding-up of the Company or RAI or an agreement for the sale or
disposition (in one transaction or a series of transactions) of all or
substantially all of the Company's or RAI's assets; or
iv) during any period of twenty-four (24) consecutive months, individuals
who at the beginning of such period constituted RAI's Board (including for this
purpose any new director whose election or nomination for election by the
Company'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.
For the purposes of this Paragraph 6(d), "Potential Change in Control"
means the occurrence of any of the following events:
i) the Board of the Company or RAI approves a transaction described in
clause (ii) of the definition of Change in Control; or
ii) the commencement of a proxy or other contest or effort in which any
Person seeks to obtain effective control of the Company or RAI.
7. Consideration Payable to Executive Upon Termination or in the Event of
Disability.
(a) During any period that the Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), the Executive shall continue to receive his full salary
at the rate then in effect for such period until his employment is terminated
pursuant to subparagraph 6(c) hereof (together with his bonus, so long as any
such disability is for less than sixty (60) days in the aggregate in any bonus
year), provided that payments so made to the Executive shall be reduced by the
sum of the amounts, if any, payable to the Executive at or prior to the time of
any such payment under disability benefits of Company and which were not
previously applied to reduce any such payment.
(b) If Executive's employment shall terminate pursuant to subparagraph
6(a),(b) or (c), Executive shall receive his full Base Salary, together with
all benefits required pursuant to paragraph 5, through the date of termination,
but shall not be entitled to receive any additional payments, benefits or
compensation otherwise due subsequent to the date of termination.
(c) If Executive's employment by the Company under this Agreement shall be
terminated for "Good Reason" as specified under subparagraph 6(d), Company
shall pay to Executive a lump sum severance payment, in cash, without discount,
equal to the sum of the total amount payable to Executive under this Agreement
until expiration of the term then in effect, assuming that Executive's total
compensation for each year would be equal to the Average Compensation. For the
purposes of this paragraph 7(c) "Average Compensation" shall mean the average
of the three highest annual total compensation received by Executive during
any of the then current calendar year (on an annualized basis) and the then
preceding five (5) calendar years during which Executive was employed by the
Company for the entire calendar year. If employee has been employed for fewer
than three years, Average Compensation shall be employee's highest compensation
for any 12 months during such period. Executive shall not be required to
mitigate the amount of any payment provided for in this subparagraph 7(c) by
seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for therein be reduced by any compensation of any retirement
benefit heretofore or hereafter earned by Executive as the result of employment
by any other person, firm or corporation.
8. Confidential Information.
All confidential information or trade secrets which Executive currently
has or may obtain during the period of employment relating to the business of
the Company and its affiliates shall not be published, disclosed, or made
accessible by him to any other person, firm, or corporation except in the
business and for the benefits of the Company, RAI and its affiliates. The
provisions of this paragraph 8 shall survive the termination of this Agreement,
but shall not apply to any information which is or becomes publicly available
otherwise than by any breach of this paragraph 8.
9. Covenant Not to Compete.
Executive shall not, during the period of employment, for whatever reason,
for himself, or on behalf of any other person, firm, partnership, corporation,
or other entity, without the prior written consent of RAI: (i) engage in the
residential sub-prime mortgage lending business; or (ii) solicit or hire, or
attempt to solicit or hire, any employee of the Company or its affiliates away
from the Company or its affiliates or away from the Company's employ. For
purposes of clause (i) of this paragraph, "to engage" shall include Executive's
acting as an owner (of more than 10%), employee, shareholder, consultant,
director or officer, directly or indirectly, of an entity so engaged.
10. Remedies in Case of Breach of Certain Covenants or Termination.
The Company and Executive agree that the damages that may result to the
Company from misappropriation of confidential information or competition as
prohibited by paragraphs 8 and 9 could be estimated only by conjecture and not
by any accurate standard, and, therefore, any breach by Executive of the
provisions of such paragraphs, in addition to giving rise to monetary damages,
will be enjoined.
11. Representations and Warranties.
(a) Executive represents and warrants to the Company that he is under no
contractual or other restriction or obligation which would prevent the
performance of his duties hereunder, or which interfere with the rights of the
Company hereunder. Executive represents and agrees that he has no agreements
or arrangements with the Company or any of its affiliates providing for the
compensation of Executive in any respect other than as set forth in this
Agreement.
(b) The Company represents and warrants to Executive that it has all
requisite power and authority to execute, deliver, and perform this Agreement
and all necessary corporate proceedings of the Company have been duly taken to
authorize the execution, delivery, and performance of this Agreement by the
Company.
12. Indemnification.
(a) If Executive 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 the Company or is or was serving at the request of the
Company 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, Executive shall be indemnified and held
harmless by RAI and the Company to the fullest extent authorized by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that
such amendment permits RAI and the Company to provide broader indemnification
rights than said law permitted RAI and the Company to provide prior to such
amendment), 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 Executive in
connection therewith and such indemnification shall continue as to Executive
after he has ceased to be a director, officer, employee or agent and shall
inure to the benefit of Executive's heir, executors, and administrators;
provided, however, that RAI and the Company shall indemnify any such person
seeking indemnification in connection with a Proceeding (or part thereof)
initiated by Executive (other than a proceeding to enforce this Section 12)
only if such Proceeding (or part thereof) was authorized directly or indirectly
by the Board of RAI and the Company. 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 and the Company the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that if the General Corporation Law of the State of Delaware 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 and the Company of
an undertaking, by or on behalf of Executive, 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 12 shall not be limited
or exclude any rights, indemnities or limitations of liability to which
Executive may be entitled, whether as a matter of law, under the Certificate of
Incorporation, By-laws of RAI and the Company, by agreement, vote of the
stockholders or disinterested directors of RAI and the Company or otherwise.
(c) Executive (an "Indemnitee"), in seeking indemnification under this
Agreement, shall give RAI or the Company (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) Executive 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 of RAI or its affiliates, which such
insurance shall be paid by RAI or Company.
13. 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 Section 13(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 13, 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 13 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.
(d) For the purposes of this Section, "Excise Tax" shall mean any excise
tax imposed under Section 4999 of the Code or a similar provision that may
later be enacted.
14. Joinder by RAI. RAI joins this Agreement for the purpose of
confirming its undertakings hereunder and for guaranteeing performance by the
Company. Accordingly, RAI does hereby unconditionally and unequivocally
guarantee to Executive that Company will perform its obligations hereunder and
make all payments hereunder. If Company should default or its payment or non-
payment obligations, RAI will pay any amounts due to Executive hereunder not
paid by Company and, to the extent a non-payment default can be performed by
RAI, will perform the non-payment obligations of Company.
15. 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.
16. Modification 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.
17. 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.
18. Governing Law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the Commonwealth of Pennsylvania, without giving affect to the
principles of conflicts of laws.
19. 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:
If to Company:
Fidelity Mortgage Funding, Inc.
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
If to Executive:
Xxxxxx X. Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement as of the date first written above.
FIDELITY MORTGAGE FUNDING, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------
Xxxxxx Xxxxxxxx, Chairman,
Comp. Committee
/s/ Xxxxxx X. Xxxxx
----------------------------
XXXXXX X. XXXXX
RESOURCE AMERICA, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------
Xxxxxx Xxxxxxxx, Chairman,
Comp. Committee
