Exhibit 10.3
EMPLOYMENT AGREEMENT
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(Thomas R. Hobbs)
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made this 1st day of
August, 1996 by and between MUNICIPAL MORTGAGE AND EQUITY, L.L.C., a
Delaware limited liability company ("Employer") and THOMAS R. HOBBS
("Employee").
WHEREAS, Employer is engaged in the business of acquiring and
providing asset management services for real estate and debt and equity
investments therein, with a particular emphasis on investments generating
tax-exempt income and investments in, or secured by, multi-family
properties, congregate care and assisted living facilities and similar
properties;
WHEREAS, Employee has particular skill, experience and background in
investments and asset management services of the type in which the Employer
primarily engages; and
WHEREAS, Employer and Employee desire to enter into an employment
relationship, the terms of which are to be set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Employer and Employee hereby agree as follows:
1. EMPLOYMENT AND DUTIES. Employer agrees to hire Employee, and
Employee agrees to be employed by Employer, as Senior Vice President of
Employer on the terms and conditions provided in this Agreement. Employee
shall perform the duties and responsibilities reasonably determined from
time to time by the Chief Executive Officer ("CEO") of the Employer
consistent with the types of duties and responsibilities typically
performed by a person serving as Senior Vice President of businesses
similar to that of Employer. Employee agrees to devote his best efforts
and full time, attention and skill in performing the duties of Senior Vice
President. Provided that such activity shall not violate any provision of
this Agreement (including the noncompetition provisions of Section 8 below)
or materially interfere with his performance of his duties hereunder,
nothing herein shall prohibit Employee (a) from consulting with or serving
as an officer or director of SCA Realty Holdings, Inc. and its subsidiaries
and affiliates and or of Shelter Development Corporation and its
subsidiaries and affiliates, (b) from participating in any other business
activities approved in advance by the CEO or by the Chairman of the Board
of Directors (the "Board") in accordance with any terms and conditions of
such approval, such approval not to be unreasonably withheld or delayed,
(c) from engaging in charitable, civil, fraternal or trade group
activities, or (d) from investing in other entities or business ventures.
2. COMPENSATION. As compensation for performing the services
required by this Agreement, and during the term of this Agreement, Employee
shall compensated as follows:
(a) BASE COMPENSATION. Employer shall pay to Employee an annual
salary ("Base Compensation") of One Hundred Twenty-Five Thousand Dollars
($125,000), payable in accordance with the general policies and procedures
of the Employer for payment of salaries to executive personnel, but in any
event no less frequently than every two weeks, in substantially equal
installments, subject to withholding for applicable federal, state and
local taxes. Increases in Base Compensation, if any, shall be determined
by the Compensation Committee of the Board based on the recommendation of
the CEO and on periodic reviews of Employee's performance conducted on at
least an annual basis. During the term of this Agreement, Employee's
annual Base Compensation shall not be reduced below the initial Base
Compensation set forth above.
(b) INCENTIVE COMPENSATION. In addition to Base Compensation,
Employee shall be eligible to receive additional compensation ("Incentive
Compensation"), pursuant to an Incentive Compensation Plan to be adopted by
the Employer. The Incentive Compensation Plan will provide that Employee
is eligible to receive an annual cash bonus of up to 100% of Employee's
Base Compensation then in effect. The Incentive Compensation Plan will
provide that the amount of the bonus will be based on a formula tied to
Employer's achievement of specified targets of growth in earnings available
for distribution to shareholders as determined by the Compensation
Committee and the recommendation of the CEO. Employee acknowledges that
the formula set forth in the Incentive Compensation Plan may vary for each
employee who participates therein. Incentive Compensation for any given
fiscal year shall be determined no later than 60 days after the end of
Employer's fiscal year and paid no later than 75 days after the close of
the fiscal year. If Employee shall be employed for only a portion of a
fiscal year for which Employee is eligible for Incentive Compensation, the
amount of Incentive Compensation payable shall be the amount payable for
the full year reduced by the percentage which the number of months
(including any partial months) worked bears to twelve (the "Proportionate
Share").
(c) OPTION TO ACQUIRE SHARES. Employer has established and
Employee shall be entitled to participate throughout the term of this
Agreement in Employer's 1995 Share Incentive Plan and any successor plan.
Employee's participation in such plan is subject to the terms thereof. The
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CEO of the Employer shall recommend to the Compensation Committee of the
Board that Employee receive, during Employer's first year of operation,
options to purchase Employer's Growth Shares. Such options shall be
exercisable at the market value of Growth Shares as of the date the options
are awarded. The CEO shall base his recommendation on comparable option
awards to employees having similar responsibilities in companies of
comparable business and size.
3. EMPLOYEE BENEFITS.
(a) During the term of this Agreement, Employee and his eligible
dependents shall have the right to participate in any retirement, pension,
insurance, health or other benefit plan or program adopted by Employer (or
in which Employer participates) to the same extent as any other officer of
the Employer, subject, in the case of a plan or program, to all of the
terms and conditions thereof, and to any limitations imposed by law. To
the extent that Employee has similar benefits under a plan or program
established by any other entity, Employee shall nonetheless have the right
to the benefits provided by Employer's plan or program; provided, however,
that where by the terms of any plan or program, or under applicable law,
Employee may only participate in one such plan or program, Employee shall
have the option to limit his participation to the plan or program sponsored
by Employer, or to such other plan or program. Employee shall have the
right, to the extent permitted under any applicable law, to participate
concurrently in plans or programs sponsored by others (including self-
employment plans or programs) and in plans or programs sponsored by
Employer.
(b) TAX BENEFIT ADJUSTMENT. If, as a result of any acquisition
of Growth Shares by Employee, Employee shall either lose personal income
tax deductions, be required to report additional personal taxable income,
or be required to pay additional taxes or charges, which deductions, income
or taxes would not have been lost, reportable, or payable, as the case may
be, had Employee not owned any Growth Shares, Employer shall pay Employee a
bonus on April 1 of each calendar year equal to all additional taxes or
charges Employee is required to pay, attributable to the prior calendar
year, which would not have been payable had Employee not owned Growth
Shares.
4. VACATION, SICKNESS AND LEAVES OF ABSENCE. Employee shall be
entitled to the normal and customary amount of paid vacation provided to
officers of Employer, but in no event less than six weeks during each
fiscal year. Employee shall provide Employer with reasonable notice of
anticipated vacation dates. Any vacation days that are not taken in a
given fiscal year shall accrue and carryover from year to year, and, upon
any termination of this Agreement for any reason whatsoever, all accrued
and unused vacation time will be paid to Employee within 10 days of such
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termination based on his annual rate of Base Compensation in effect on the
date of such termination; provided, however, that no more than 20 days of
accrued vacation may be carried over at any time. In addition, Employee
shall be entitled to such sick leave and holidays, with pay, as Employer
provides to other officers. Unused sick leave shall be carried forward or
compensated upon termination of employment. Employee may also be granted
leaves of absence with or without pay for such valid and legitimate reasons
as the Board on recommendation from the CEO, in its sole and absolute
discretion, may determine.
5. EXPENSES. Employee shall be entitled to receive, within 14 days
after he has delivered to the Employer an itemized statement thereof, and
after presentation of such invoices or similar records as the Employer may
reasonably require, reimbursement for all necessary and reasonable expenses
incurred by him in connection with the performance of his duties.
6. TERM. The initial term of this Agreement shall be for three
years (the "Initial Term"), commencing on the effective date of the merger
of SCA Tax Exempt Fund Limited Partnership into Employer (the "Effective
Date"). This Agreement shall automatically renew for successive one-year
periods after the end of the Initial Term, unless at least thirty days
prior to the commencement of any such extension period either party shall
give the other party written notice of its intention to terminate this
Agreement. The term of this Agreement in effect at any given time is
herein referred to as the "Term". Any termination under of this Agreement
shall be subject to Section 7 below.
7. TERMINATION AND TERMINATION BENEFITS.
(a) TERMINATION BY EMPLOYER.
(i) WITHOUT CAUSE. Employer may terminate this
Agreement and Employee's employment at any time upon ninety (90) days prior
written notice to Employee, during which period Employer shall have the
option to require Employee to continue to perform his duties under this
Agreement. Employee shall be paid his Base Compensation and all other
benefits to which he is entitled under this Agreement up through the
effective date of termination, plus his Proportionate Share of Incentive
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Compensation for the year in which the termination occurs.
(ii) WITH CAUSE. Employer may terminate this Agreement
with cause upon ten (10) days prior written notice to Employee. In such
event, Employee shall be paid his Base Compensation and all other benefits
to which he is entitled under this Agreement up through the effective date
of termination, plus his Proportionate Share of Incentive Compensation for
the year in which termination occurs. For purposes of this Section,
termination for cause shall mean (A) acts or omissions by the Employee with
respect to the Employer which constitute intentional misconduct or a
knowing violation of law; (B) receipt by the Employee of money, property or
services from the Employer or from another person dealing with Employer in
violation of law or this Agreement, (C) breach by Employee of the
noncompetition provisions of this Agreement, (D) breach by the Employee of
his duty of loyalty to the Employer, (E) gross negligence by the Employee
in the performance of his duties, or (F) repeated failure by the Employee
to perform services that have been reasonably requested of him by the
Board, following notice and an opportunity to cure and if such requests are
consistent with this Agreement.
(iii) DISABILITY. If due to illness, physical or mental
disability, or other incapacity, Employee shall fail to perform the duties
required by this Agreement, Employer may terminate this Agreement upon 30
days written notice to Employee. In such event, Employee shall be paid his
Base Compensation and receive all benefits owing to him under this
Agreement through the effective date of termination and shall receive his
Proportionate Share of Incentive Compensation for the year in which the
termination occurs. Employee shall be considered disabled under this
paragraph if he is unable to work due to disability for a total of 120 or
more business days during any 12-month period. Nothing in this paragraph
shall be construed to limit Employee's rights to the benefits of any
disability insurance policy provided by Employer and this Section shall not
be construed as varying the terms of any such policy in any manner adverse
to Employee. Employer shall provide Employee with disability coverage at
least as favorable to Employee as that provided to Employee by its prior
employer.
(b) TERMINATION BY EMPLOYEE. Employee may terminate this
Agreement for good reason upon 90 days prior written notice to Employer.
In such event, Employee shall be paid his Base Compensation and shall
receive all benefits through the date of termination and shall receive his
Proportionate Share of Incentive Compensation for the year of termination.
Employee shall have "good reason" to terminate his employment if (i) his
Base Compensation, as in effect at any given time, shall be reduced without
his consent, (ii) Employer shall fail to provide any of the payments or
benefits provided for under this Agreement, (iii) Employer shall materially
reduce or alter Employee's duties as Senior Vice President, (iv) Employer
shall require Employee to take any act which would be a violation of
federal, state or local criminal law, and (v) Employer shall require
Employee to take any act which would not be in the best interests of the
Employer and its shareholders.
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(c) TERMINATION COMPENSATION.
(i)TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. In the
event of a termination of this Agreement prior to the end of the Term,
pursuant to Section 7(a)(i), 7(a)(iii) or 7(b), Employer, in addition to
the Base Compensation, benefits and Incentive Compensation payable as
provided in such sections, shall pay to Employee additional compensation
("Termination Compensation") as follows. If the termination does not
follow a Change in Control (as defined in subparagraph (ii) below),
Termination Compensation shall be equal to the greater of (a) 18 months
Base Compensation or (b) the Base Compensation that Employee would have
received during the remaining Term of this Agreement. Termination
Compensation shall be paid in four equal quarterly payments beginning on
the first day of the first calendar month following the termination date,
unless Employer elects to make such payments sooner.
(ii) CHANGE IN CONTROL. The acquisition of voting
control of the Employer by any one or more persons or entities who are
directly, or indirectly through one or more intermediaries, under common
control, or who are related to each other within the meaning of Sections
267 and 707(b) of the Internal Revenue Code, shall be deemed a "Change in
Control." In the event Employee is terminated within eighteen months of a
Change in Control, Termination Compensation shall be equal to two years
Base Compensation, payable in a lump sum on the effective date of
Employee's termination. Such Termination Compensation shall be in addition
to all other compensation and benefits to which Employee is entitled for a
termination without cause under Section 7(a)(i) above, and shall be payable
even in the event of a termination effective as of the end of the Term.
(d) DEATH BENEFIT. Notwithstanding any other provision of this
Agreement, this Agreement shall terminate on the date of Employee's death.
In such event, Employee's estate shall be paid two years' Base Compensation
as follows: to the extent of any insurance carried by Employer on
Employee's life, the death benefit shall be payable in a lump sum within
five (5) business days' of Employer's receipt of the insurance proceeds;
any portion of the death benefit not covered by insurance shall be paid in
eight equal installments payable on the first day of each calendar quarter
following Employee's death. Employer shall carry as much life insurance on
Employee's life as the Board on the recommendation of the CEO may from time
to time determine.
8. COVENANT NOT TO COMPETE.
(a) NONCOMPETITION. From and after the Effective Date and
continuing for the longer of (i) 12 months following the termination of
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this Agreement or (ii) the remainder of the Term of this Agreement,
Employee shall not within the State of Maryland engage in or carry on,
directly or indirectly, whether as an advisor, principal, agent, partner,
officer, director, employee, shareholder, associate or consultant of or to
any person, partnership, corporation or any other business entity, the
business of financing or asset management of multi-family apartment
properties financed by tax-exempt bonds without the prior written consent
of the Board; provided, however, if Employer terminates Employee without
cause under Section 7(a)(i) above, or the Employee resigns for good reason
under Section 7(b) above, this Section 8(a) shall not apply.
(b) REASONABLE RESTRICTIONS. Employee acknowledges that the
restrictions of subparagraph (a) above are reasonable, fair and equitable
in scope, term and duration, are necessary to protect the legitimate
business interests of the Employer, and are a material inducement to the
Employer to enter into this Agreement. Employer and Employee both agree
that in the event a court shall determine any portion of the restrictions
in subparagraph (a) are not reasonable, the court may change such
restrictions, including without limitation the geographical restrictions
and the duration restrictions, to reflect a restriction which the court
will enforce as reasonable.
(c) SPECIFIC PERFORMANCE. Employee acknowledges that the
obligations undertaken by him pursuant to this Agreement are unique and
that if Employee shall fail to abide by any of the restrictions set forth
in subparagraph (a), Employer will have no adequate remedy at law.
Employee therefore confirms that Employer shall have the right, in the
event of a violation of subparagraph (a), to injunctive relief to enforce
the terms of this Section 8 or, in the alternative, the right to $50,000 in
liquidated damages. This right to injunctive relief or liquidated damages
shall be Employer's exclusive remedy at law or in equity.
9. INDEMNIFICATION AND LIABILITY INSURANCE. Employer hereby agrees
to indemnify and hold Employee harmless, to the maximum extent allowed by
law, from any and all liability for acts or omissions of Employee performed
in the course of Employee's employment (or reasonably believed by Employee
to be within the scope of his employment) provided that such acts or
omissions do not constitute (a) criminal conduct, (b) willful misconduct,
or (c) a fraud upon, or breach of Employee's duty of loyalty to, the
Employer. Employer shall at all times carry Directors' and Officers'
liability insurance in commercially reasonable amounts, but in any event
not less than One Million Dollars ($1,000,000).
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10. MISCELLANEOUS.
(a) COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the matters set forth herein
and supersedes all prior understandings and agreements between the parties
as to such matters. No amendments or modifications shall be binding unless
set forth in writing and signed by both parties.
(b) SUCCESSORS AND ASSIGNS. Neither party may assign its rights
or interest under this Agreement without the prior written consent of the
other party, except that Employer's interest in this Agreement may be
assigned to a successor by operation of law or to a purchaser purchasing
substantially all of Employer's business. This Agreement shall be binding
upon and shall inure to the benefit of each of the parties and their
respective permitted successors and assigns.
(c) SEVERABILITY. Each provision of this Agreement is
severable, such that if any part of this Agreement shall be deemed invalid
or unenforceable, the balance of this Agreement shall be enforced so as to
give effect as to the intent of the parties.
(d) REPRESENTATIONS OF EMPLOYER. Employer represents and
warrants to Employee that it has the requisite limited liability company
power to enter into this Agreement and perform the terms hereof and that
the execution, delivery and performance of this Agreement have been duly
authorized by all appropriate company action.
(e) CONSTRUCTION. This Agreement shall be governed in all
respects by the internal laws of the State of Maryland (excluding reference
to principles of conflicts of law). As used herein, the singular shall
include the plural, the plural shall include the singular, and the use of
any pronoun shall be construed to refer to the masculine, feminine or
neuter, all as the context may require.
(f) NOTICES. All notices required or permitted under this
Agreement shall be in writing and shall be deemed given on the date sent if
delivered by hand or by facsimile, and on the next business day if sent by
overnight courier or by United States mail, postage prepaid, to each party
at the following address (or at such other address as a party may specify
by notice under this section):
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IF TO EMPLOYER:
Municipal Mortgage and Equity, L.L.C.
218 North Charles Street
Suite 500
Baltimore, Maryland 21201
Attention: Chief Executive Officer
IF TO EMPLOYEE:
Thomas R. Hobbs
One St. Martin's Road
Baltimore, Maryland 21218
(g) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one instrument.
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IN WITNESS WHEREOF, and intending to be legally bound, the parties
have executed this Agreement as of the date and year first above written.
EMPLOYER:
WITNESS: MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
/S/ PATRICIA C. QUAYLE By: /S/ MARK K. JOSEPH
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Mark K. Joseph
President
EMPLOYEE:
/S/ PATRICIA C. QUAYLE By: /S/ THOMAS R. HOBBS
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Thomas R. Hobbs
2114SAG.caj
7/31/96
6252
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