Exhibit 10.4
FIRST AMENDMENT TO THE
EMPLOYMENT AGREEMENT WITH J. PETER SCHERER
     This First Amendment to the Employment Agreement (this “Amendment”) is made
by and between Origen Financial, Inc, a Delaware corporation (“Parent”), Origen
Financial, L.L.C, a Delaware limited liability company (“Company”), and J. Peter
Scherer (“Executive”) on July 1, 2008. Capitalized terms used but not defined
herein shall have the meanings set forth in the Employment Agreement with
Executive effective as of October 8, 2006 (the “Agreement”).
RECITALS:
     A. The Company and Executive entered into that certain Employment Agreement
effective as of October 8, 2006.
     B. The Internal Revenue Service issued final regulations regarding the
application of Internal Revenue Code (“Code”) section 409A to nonqualified
deferred compensation, with an effective date of January 1, 2008.
     C. Because the Agreement provides for certain deferrals of compensation, it
is subject to Code section 409A.
     D. Section 17(k) of the Agreement provides that the Agreement will be
timely amended to comply with the requirements of Code section 409A and
published guidance in a manner that will not have a material adverse impact to
either party of the Agreement.
     E. Parent, Company and Executive desire to amend the Agreement to conform
to the provisions of Code section 409A and the accompanying final regulations in
compliance with Internal Revenue Service Notice 2007-86 and generally applicable
published guidance.
     F. This Amendment shall supersede the provisions of the Agreement to the
extent those provisions are inconsistent with the provisions of this Amendment.
     Now, therefore, effective January 1, 2008, the Agreement is hereby amended
as follows:
     1. Paragraph 2(a) is amended by the addition of the following sentence at
the end of the paragraph:
 “Base Salary for each successive one-year extension shall be paid on a
bi-weekly basis as services are rendered.”
     2. Paragraph 4(c), entitled “Target Bonus,” is amended by the addition of
the following sentence:

 

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     “Any Target Bonus to which Executive shall be entitled will be paid to
Executive during the period February 15 through March 15 each year immediately
following the taxable year to which the Target Bonus relates.”
     3. Paragraph 4(e), entitled “Disability,” is amended by replacing the
reference to paragraph 7(a)(ii) with a reference to paragraph 7(a)(iii) in the
first sentence, and deleting the last two sentences of Paragraph 4(e) in their
entirety and replacing them with the following:
“For purposes of this paragraph 4(e) only, Executive shall be deemed to be
‘Disabled,’ and on a bona fide leave of absence, if he is eligible to receive
disability benefits under any disability benefit plan or policy provided by
Company to its employees generally or to Executive specifically (a ‘Company
Sponsored Plan’). If Company does not provide coverage to Executive under a
Company Sponsored Plan, Executive shall be deemed to be ‘Disabled’ if he is
unable to perform the essential functions of his duties hereunder (with or
without reasonable accommodation by the Company) as a result of incapacity due
to physical or mental illness.”
     4. Paragraph 7(a)(iii) is amended by deleting it in its entirety and
replacing it with the following:
“(iii) upon Executive’s death or if Executive is Totally Disabled as defined in
paragraph 7(c) below.”
     5. Paragraph 7, entitled “Termination of Employment,” is amended by the
addition of the following new paragraph 7(c):
     “(c) For purposes of this paragraph 7 and payment of compensation and
benefits pursuant to paragraph 8(d), Executive shall be considered ‘Totally
Disabled’ if, by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, (i) he is unable to engage
in any substantial gainful activity, or (ii) he is receiving income replacement
benefits for a period of not less than 3 months under an accident and health
plan covering employees of the Company.”
     6. Paragraph 8(a) is amended by the replacement of 8(a)(iii) with the
following:
“(iii) if applicable, during the Severance Period, Company shall pay the
premiums to continue those medical care benefits in effect on Executive’s
termination date (provided, that to the extent permitted under applicable law,
the Severance Period will run concurrently with, and not in addition to, the
applicable statutory maximum COBRA continuation period, and provided further,
any change in benefits under the medical plan for active executive employees
will also apply to Executive), and continue to provide Executive with such other
employee benefits for which Executive continues

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      to qualify during the Severance Period, but only if Executive fully
complies with paragraph 10 of this Agreement,     7.   Paragraph 8(d) is amended
by the replacement of 8(d)(i) with the following:         “(i) the Company shall
pay Executive or his Designated Beneficiary, as applicable, within thirty
(30) days after the effective date of such termination any unpaid Base Salary,
Pro Rata Target Bonus Amount and benefits accrued and earned by him hereunder up
to and including the effective date of such termination,”     8.  
Paragraph 8(d) is amended by the replacement of 8(d)(ii) with the following:    
    “(ii) in the event the Company terminates this Agreement because of
Executive’s death, Company shall pay within thirty (30) days after the effective
date of such termination, an amount equal to Executive’s Base Salary on his
termination date to Executive’s Designated Beneficiary,”     9.   Paragraph 8(d)
is amended by the replacement of 8(d)(iii) with the following:         “(iii) in
the event the Company terminates this Agreement because Executive is Totally
Disabled, Company shall pay to Executive, on the day that is six (6) months
after the effective date of such termination, an amount equal to Executive’s
Base Salary on his termination date,”     10.   Paragraph 8(d) is further
amended by renumbering 8(d)(iv) as 8(d)(v) and adding the following replacement
paragraph 8(d)(iv):

      “(iv) if applicable, during the Severance Period, Company shall pay the
premiums to continue those medical care benefits in effect on Executive’s
termination date (provided, that, to the extent permitted under applicable law,
the Severance Period will run concurrently with, and not in addition to, the
applicable statutory maximum COBRA continuation period, and provided further,
any change in benefits under the medical plan for active executive employees
will also apply to Executive),”     11.   Paragraph 9, entitled “Change in
Control,” is deleted in its entirety and replaced with the following paragraph
9:

      “9. Change in Control.

         (a) If there is a Change in Control Event, the Company will pay
Executive the Change in Control Payment upon the first Permissible Payment Event
to occur following the Change in Control Event, subject to any applicable

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six- (6-) month delay required under section 409A of the Internal Revenue Code
of 1986, as amended.
     (b) A ‘Permissible Payment Event’ shall be deemed to have occurred for
purposes of this Agreement upon the first to occur of:
     (i) One- (1-) year anniversary of the Change in Control Event;
     (ii) Date Executive resigns for Good Reason during the six- (6-) month
period following the Change in Control Event;
     (iii) Date Company terminates Executive’s employment without Cause during
the six- (6-) month period following a Change in Control Event;
     (iv) Date Executive becomes Totally Disabled during the one- (1-) year
period following the Change in Control Event; or
     (v) Date Executive Dies during the one- (1-) year period following the
Change in Control Event.
     (c) In no event will a Change in Control Payment be made to Executive if he
is terminated for Cause or resigns without Good Reason.
     (d) ‘Change in Control Payment’ means an amount equal to the product of to
two (2) times the sum of (i) Executive’s Base Salary as of the Change in Control
Event, plus (ii) fifty (50%) percent of Executive’s Target Bonus.
     (e) ‘Good Reason’ means the occurrence of any of the following events:
(a) a substantial adverse change, not consented to by Executive, in the nature
and scope of Executive’s responsibilities, authorities or duties hereunder,
(b) a substantial involuntary reduction in Executive’s Base Salary except for an
across-the-board salary reduction similarly affecting all or substantially all
employees, or (c) the relocation of Executive’s principal place of employment to
another location of the Company outside a sixty (60) mile radius from the
location of Executive’s principal place of employment as of the date hereof.
Executive must provide notice to the Company of the existence of a condition, or
conditions, described in this paragraph 9(e) within ninety (90) days of the
initial existence of such condition(s). Upon receipt by the Company of
Executive’s notice, the Company will have thirty (30) days to remedy the
condition(s). If the Company remedies the condition(s) of which it received
notice from Executive within thirty (30) days, the Executive may not resign for
Good Reason.
     (f) Any of the following will be deemed the ‘Change in Control Event,’
which shall serve as a vesting event only:

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     (i) The date on which any ‘person,’ as such term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the ‘Exchange
Act’) (other than the Parent, any Parent subsidiary, or any trustee, fiduciary
or other person or entity holding securities under any employee benefit plan or
trust of the Parent), together with all ‘affiliates’ and ‘associates’ (as such
terms are defined in Rule 12b-2 of the Exchange Act) of such person, shall
become the ‘beneficial owner’ (within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, through an event or series of events, of
more than 50% of the combined voting power of Parent’s then outstanding
securities having the right to vote in an election of Parent’s Board (other than
as a result of an acquisition of securities directly from Parent);
     (ii) The consummation of: (1) any consolidation or merger of Parent in
which the stockholders of Parent immediately prior to the consolidation or
merger would not, immediately after the consolidation or merger, ‘beneficially
own’ (as such term is defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, shares representing in the aggregate more than fifty percent (50%)
of the voting shares of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any), or
(2) any sale, lease, exchange or other transfer to an unrelated party (in one
transaction or a series of transactions contemplated or arranged by any party as
a single plan) of all or substantially all of Parent’s assets;
     (iii) The date Parent’s stockholders approve any plan or proposal for the
liquidation or dissolution of Parent; or
     (iv) Where the persons who, as of the Effective Date, constitute Parent’s
Board of Directors (the ‘Incumbent Directors’) cease for any reason, including,
without limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board, provided
that any person becoming a director of Parent subsequent to such date shall be
considered an Incumbent Director if such person’s election was approved by or
such person was nominated for election by either (1) a vote of at least
two-thirds of the Incumbent Directors or (2) a vote of at least a majority of
the Incumbent Directors who are members of a nominating committee of the Board
comprised, in the majority, of Incumbent Directors; provided further, however,
that notwithstanding the foregoing, any director designated by a person or
entity that has entered into an agreement with the Company to effect a
transaction described in clauses (i), (ii) or (iii) above, shall not be deemed
to be an Incumbent Director.

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     (g) If a Permissible Payment Event occurs because Executive resigns for
Good Reason, Company terminates Executive’s employment without Cause or
Executive becomes Totally Disabled, the Change in Control Payment will be paid
to Executive six (6) months after the effective date of such termination.
Otherwise the Company will pay Executive the Change in Control Payment within
thirty (30) days of the Permissible Payment Event.
     (h) Anything to the contrary in this Agreement notwithstanding, in no event
shall more than one Change in Control Payment be made to Executive under this
Agreement, regardless of whether more than one Change in Control Event occurs
during the term of this Agreement.
     (i) If Executive is entitled to any payments that vest upon a Change in
Control Event or other substantially similar event pursuant to the Origen
Financial, Inc. Retention Plan or any other plan, program, agreement or
arrangement with Parent, the Company or their subsidiaries, the Company shall
not be obligated to make such payments to Executive under both this Agreement
and the other plan, program, agreement or arrangement. Instead, the Company
shall be obligated to pay Executive only the greater of the amounts payable as
determined under this Agreement and such other plan, program, agreement or
arrangement.
     (j) Except as set forth in paragraph 9(h) above, if payable, the Change in
Control Payment shall be in addition to, and not in lieu of, the severance
payments to which Executive may be entitled under paragraph 8 above, the
non-compete payments to which Executive may be entitled under paragraph 10 below
or payments from any other plan, program, agreement or arrangement with Parent,
the Company or their subsidiaries
     (k) Prior to and as a condition of any payment under this paragraph 9,
Executive shall execute and deliver to Company a general release of claims to
other change in control payments in a form acceptable to the Company and, if
Executive’s employment has been terminated, a general release of claims,
substantially in the form attached hereto as Exhibit A.”
     12. Paragraph 11 is amended by deleting it in its entirety and replacing it
with the following paragraph 11:
     “11. Excise Tax Payments. Anything in this Agreement to the contrary
notwithstanding, if any of the payments or benefits received or to be received
by Executive following a Change in Control Event and/or Executive’s termination
or resignation of employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with Parent, the Company or their
subsidiaries) (the ‘Aggregate Payment’) is determined to constitute a ‘parachute
payment’ as such term is deemed in Section 280G(b)(2) of the Internal Revenue

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Code of 1986, as amended (the ‘Code’), the Company shall pay to Executive an
additional amount which, after the imposition of all income and excise taxes
thereon, is equal to the excise tax imposed by Section 4999 of the Code with
respect to the Aggregate Payment. The determination of whether the Aggregate
Payment constitutes a parachute payment and, if so, the amount to be paid to
Executive shall be made by a nationally recognized United States public
accounting firm selected by the Company which has not, during the two years
preceding the date of its selection, acted in any way on behalf of Parent, the
Company or any affiliate thereof. The Company shall pay Executive the amount
payable to him under this paragraph 11 by the end of the taxable year in which
Executive remits these amounts to the taxing authority(s).”
     13. Paragraph 17(k) is amended by deleting it in its entirety and replaced
with “Intentionally left blank.”
     14. Paragraph 17, entitled “Miscellaneous,” is amended by the addition of
the following new paragraph 17(n):
     “(n) Executive may, on a form prescribed by the Company, designate a
beneficiary or beneficiaries (his ‘Designated Beneficiary’) to receive the
benefits under this Agreement in the event of his death. If Executive does not
designate a beneficiary, his benefits will be paid first to his spouse, if
surviving him, and if unmarried or if his spouse does not survive him, in equal
shares to his children surviving him, and if neither his spouse nor children
survive him, to his estate.”
     15. Unless otherwise modified by this Amendment, all provisions of the
Agreement shall remain in full force and effect. Copies (whether photostatic,
facsimile or otherwise) of this Amendment may be made and relied upon to the
same extent as an original.
[Signatures on next page]

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     In witness whereof, the parties have executed this First Amendment to the
Amended and Restated Employment Agreement by and between Origen Financial, Inc,
Origen Financial, L.L.C and J. Peter Scherer on the date first above written.

                  Parent:         Origen Financial, Inc.,         a Delaware
corporation:    
 
           
 
  By:   /s/ Ronald A. Klein    
 
           
 
  Its:   CEO    
 
           
 
                Company:         Origen Financial, L.L.C.,         a Delaware
limited liability company:    
 
           
 
  By:   /s/ Ronald A. Klein    
 
           
 
  Its:   CEO    
 
           
 
                Executive:    
 
                /s/ J. Peter Scherer                   J. Peter Scherer    

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