Exhibit 10.1
EMPLOYMENT AGREEMENT

AGREEMENT made as of the 12th day of October, 2006 by and between DELTA
FINANCIAL CORPORATION, a Delaware corporation (the “Corporation”), and Randall
F. Michaels (the “Executive”).
W I T N E S S E T H:
 
                In consideration of the representations, warranties and
conditions contained herein, the parties hereto agree as follows:
 
           1.    Position and Responsibilities

            1.1.     The Executive shall serve in an executive capacity as
Executive Vice President of the Corporation. The Executive shall perform such
functions and undertake such responsibilities as are customarily associated with
such capacity. The Executive shall hold such directorships and executive
officerships in the Corporation and any subsidiary to which, from time to time,
he may be elected or appointed during the term of this Agreement.

            1.2.    The Executive shall devote his full time and best efforts to
the business and affairs of the Corporation and to the promotion of its
interests.

            2.      Term of Employment

            2.1    The term of employment shall be three years, commencing with
the date hereof, unless sooner terminated as provided in this Agreement. The
initial term of employment and any extension thereof is herein referred to as
the “Term.”

            2.2.    Notwithstanding the provisions of Section 2.1 hereof, the
Corporation shall have the right, on written notice to the Executive, to
terminate the Executive’s employment for Reasonable Cause, such termination to
be effective as of the date on which notice is given or as of such later date
otherwise specified in the notice.

 
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            2.3.     For purposes of this Agreement, the term “Reasonable Cause”
shall mean any of the following actions by the Executive: (a) failure to comply
with any of the material terms of this Agreement, which shall not be cured
within 30 days after the Executive’s receipt of written notice from the Board of
Directors or President of the Corporation; (b) engagement in gross misconduct
injurious to the Corporation or an affiliate of the Corporation, which shall not
be cured within 30 days after the Executive’s receipt of written notice from the
Board of Directors or President of the Corporation; (c) knowing and willful
neglect or refusal to attend to the material duties reasonably assigned to him
by the Board of Directors, which shall not be cured within 30 days after the
Executive’s receipt of written notice from the Board of Directors or the
President of the Corporation; (d) intentional misappropriation of property of
the Corporation or an affiliate of the Corporation to the Executive’s own use;
(e) the commission by the Executive of an act of embezzlement; (f) Executive’s
conviction for a felony or if criminal penalties are imposed on Executive
relating to any individual income taxes due and owing by Executive; or (g)
Executive’s engaging in any activity which would constitute a material conflict
of interest with the Corporation which shall not be cured within 30 days after
the Executive’s receipt of written notice from the Board of Directors or
President of the Corporation. If the provisions contained in subsections (a),
(b), (c) or (g) above cannot be cured within 30 days due to the nature of the
breach, the cure period shall then be extended for a reasonable period of time;
provided, however, the Executive undertakes and continues in good faith to cure
the same.

            2.4.     If the Executive’s employment with the Corporation shall be
terminated prior to the expiration of the Term by the Corporation other than
pursuant to Sections 2.2, 4.1 or 4.2 hereof, then the Corporation shall pay to
the Executive as severance and amount equal to: (a) if such termination occurs
within the first two years of the Term of this Agreement, the sum of (i) one
year’s salary, less withholding and payroll taxes and (ii) twelve times the
average commissions per month earned by the Executive pursuant to this Agreement
over the six calendar months immediately preceding the date of termination, less
withholding and payroll taxes, or (b) if such termination occurs after the
second year of the Term of this Agreement, the sum of (i) the lesser of six
month’s salary and the total salary due over the remaining Term, in each case
less withholding and payroll taxes and (ii) six times the average commissions
per month earned by the Executive pursuant to this Agreement over the six
calendar months immediately preceding the date of termination, less withholding
and payroll taxes. Any payments made under clause (a)(i) or (b)(i) of this
Section 2.4 shall be based upon the Executive’s salary as it existed immediately
prior to such termination, and any payments made under clause (a)(i), (a)(ii),
(b)(i) or (b)(ii) of this Section 2.4 shall be paid in equal installments over
the six months following any such termination; provided, however that the
Executive shall only be entitled to such payments under either clause (a) or
clause (b) of this Section 2.4 as long as the Executive is in compliance with
the provisions of Section 5 below.

 
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           3.      Compensation

            3.1.    (a) The Corporation shall pay or cause Delta Funding
Corporation to pay to the Executive for the services to be rendered by the
Executive hereunder a salary at the rate of $225,000 per annum. The salary shall
be payable in equal installments in accordance with the Corporation’s normal
payroll practices. Such salary will be reviewed at least annually and shall be
increased (but not decreased) by the Board of Directors of the Corporation in
such amount as determined in its sole discretion.

                     (b) In addition to the salary, the Corporation will pay to
the Executive commissions and bonuses as agreed to by the Executive and the
Corporation in writing from time to time.

                     (c) In addition, the Corporation may also pay the Executive
an annual bonus with respect to each fiscal year of the Corporation, either on
an “ad hoc” basis or pursuant to a bonus plan or arrangement as may be
established at the Corporation’s discretion for Executive Vice Presidents of
this Corporation, of at least Fifty Thousand ($50,000) dollars for each year of
this Agreement. Nothing herein contained shall, however, obligate the
Corporation to pay any annual bonus to the Executive in any amount exceeding
$50,000 per year, it being understood that any such bonus shall be in the sole
discretion of the Board of Directors and that the amount thereof, if any, may
vary depending upon actual performance of the Corporation and the Executive as
determined at the discretion of the Board of Directors.

 
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               3.2.      In consideration of entering into this Agreement, the
Executive shall be entitled to receive on the date hereof:

                     (a) a non-qualified stock option grant pursuant to the
terms of Delta Financial Corporation’s 1996 Stock Option Plan to purchase 25,000
shares of Delta Financial Corporation Common Stock, par value $.01 per share
(the “Common Stock”) at a price per share equal to the closing price of the
Common Stock on the American Stock Exchange on the date hereof, which option
shall have a term of seven years and shall vest 25% on the date of grant and 25%
on each succeeding anniversary of the grant date thereafter; and

                     (b) a restricted stock grant pursuant to the terms of Delta
Financial Corporation’s 2005 Stock Incentive Plan for 25,000 shares of Delta
Financial Corporation’s Common Stock, which stock grant shall 100% vest on the
third anniversary date of grant.

              3.3       The Corporation agrees to pay the Executive a car
allowance of $1,000 per month.

              3.4.       The Executive shall be entitled to participate in, and
receive benefits from, any insurance, medical, disability, bonus, incentive
compensation (including additional grants of restricted stock and/or non-
qualified stock options under any of the Corporation's stock plans, as
determined by the Corporation) or other employee benefit plan, if any are
adopted, of the Corporation or any subsidiary which may be in effect at any time
during the course of the Executive's employment by the Corporation and which
shall be generally available to the Executive on terms no less favorable than to
other senior executives of the Corporation or its subsidiaries. The Corporation
agrees to reimburse Executive for all medical costs and expenses incurred by him
which are not covered by the Corporation’s group medical plans, up to an
aggregate maximum amount of $100,000 per annum, upon submission of appropriate
and itemized documentation.

 
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              3.5.        Upon the occurrence of a Change in Control (as defined
herein), all stock options and restricted stock held by the Executive
beneficially (in trust or otherwise) and/or of record shall vest and become
immediately exercisable on the date of the Change of Control.

                   For purposes hereof, a “Change in Control” shall be deemed to
have occurred if (a) during any period of 12 months, individuals who at the
beginning of such period constitute the Board of Directors of the Corporation
cease for any reason to constitute a majority thereof unless the election, or
the nomination for the election by the Corporation’s stockholders of each new
director was approved by a vote of at least a majority of all of the directors
then still in office who were directors at the beginning of the period, (b) a
person or group of persons acting in concert (as defined in Section 13 (a) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than
one or more members of the Miller Family (hereinafter defined), acquires
beneficial ownership, within the meaning of Rule 13 (d) (3) of the Rules and
Regulations of the United States Securities and Exchange Commission promulgated
pursuant to the Exchange Act, of a number of voting shares of the Corporation
which constitutes 35% or more of the Corporation’s outstanding voting shares,
(c) the Corporation is merged, consolidated or reorganized into or with another
corporation or another legal entity and, as a result of such merger,
consolidation or reorganization, less than 50% of the combined voting power of
the then-outstanding securities of such corporation or entity immediately after
such transaction is held in the aggregate by the holders of the combined voting
power of the securities of the Corporation entitled to vote generally in the
election of directors of the Corporation immediately prior to such transaction,
or (d) the Corporation undergoes a liquidation or dissolution or, in one or more
related transactions or one or more transactions occurring within a consecutive
12-month period, a sale of all or substantially all of the assets of the
Corporation. No merger, consolidation or corporate reorganization in which the
owners of the combined voting power of the Corporation’s then outstanding voting
securities entitled to vote generally prior to said combination, own 50% or more
of the resulting entity’s outstanding voting securities shall, by itself, be
considered a Change in Control.

 
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                  For purposes of this Agreement, the term “Miller Family” shall
mean Hugh Miller, Marc E. Miller, Sidney A. Miller and Lee Miller, any of their
respective spouses or lineal descendants, or any trust (a) the beneficial
interests of which are directly or indirectly held by such persons or (b) of
which any of such persons serves as a trustee.

           3.6.       The Corporation agrees to reimburse the Executive for all
reasonable and necessary business expenses incurred by the Executive on behalf
of the Corporation in the course of the Executive's duties hereunder upon the
presentation by the Executive of appropriate vouchers therefor.

           3.7.       The Executive will be entitled each year of this Agreement
to a paid vacation of four weeks.

           3.8.       Upon termination of this Agreement for Reasonable Cause or
due to the death or incapacity of the Executive (as defined in Section 4.1), the
Executive shall be entitled to all unpaid compensation and benefits accrued to
the date of termination.

           3.9.       The Executive shall not be required to mitigate damages or
the amount of any payment provided to him under this Agreement by seeking other
employment or otherwise.

          3.10.      Nothing contained herein shall prohibit the Board of
Directors of the Corporation, in its sole discretion, from increasing the
compensation payable to the Executive pursuant to this Agreement and/or making
available to the Executive other benefits in addition to those to which the
Executive is entitled hereunder.
 
                 4.           Incapacity; Death
 
                4.1          If, during the period of employment hereunder,
because of illness or other incapacity, the Executive shall fail for a period of
90 consecutive days, or for shorter periods aggregating more than 90 days during
any twelve month period, to render the services contemplated hereunder, then the
Corporation, at its option, may terminate the term of employment hereunder, upon
not less than 30 days written notice from the Corporation to the Executive,
effective on the 30th day after giving of such notice; provided, however, that
no such termination will be effective if prior to the 30th day after giving such
notice, the Executive’s illness or incapacity shall have terminated and he shall
be physically and mentally able to perform the services required hereunder and
shall be performing such services.

 
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             4.2       In the event of the death of the Executive during the
term hereof, the employment hereunder shall terminate on the date of death of
the Executive.

                4.3.      The Corporation (or its designee) shall have the right
to obtain for its benefit an appropriate life insurance policy on the life of
the Executive, naming the Corporation (or its designee) as the beneficiary. If
requested by the Corporation, the Executive agrees to cooperate with the
Corporation in obtaining such policy.

                4.4.       In the event the employment of Executive is
terminated by the Corporation as the result of the death or incapacity of the
Executive, the Corporation agrees to continue to pay the Executive (or his
estate) one year’s salary at his then rate of salary, less withholding and
payroll taxes, plus twelve times the average commissions per month earned by the
Executive pursuant to the Commission Agreement over the six calendar months
immediately preceding the date of termination, less withholding and payroll
taxes. Any payments made under this Section 4.4 shall be paid in equal
installments over a period of one year after such termination.
 
 
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                5.         Other Activities During Employment; Non-Competition;
Solicitation.
 
               5.1.       The Executive shall not during the Term of this
Agreement undertake or engage in other employment, occupation or business
enterprise. Subject to compliance with the provisions of this Agreement, the
Executive may engage in reasonable activities with respect to personal
investments of the Executive.

               5.2         During the Term of this Agreement, and for the
Restricted Period (hereinafter defined), if any, neither the Executive nor any
entity in which the Executive may be interested as a partner, trustee, director,
officer, employee, shareholder, option holder, lender of money, guarantor or
consultant, shall be engaged directly or indirectly in any business engaged in
by the Corporation, or any subsidiary, in any area where the Corporation, or any
subsidiary, conducts such business at any time during this Agreement; provided
however, that the foregoing shall not be deemed to prevent the Executive from
investing in securities if such class of securities in which the investment is
so made is listed on a national securities exchange or is issued by a company
registered under Section 12(g) of the Securities Exchange Act of 1934, so long
as such investment holdings do not, in the aggregate, constitute more than 5% of
the voting stock of any company’s securities. For purposes of this Section 5.2,
the term “Restricted Period” shall mean: in the event that the Corporation
terminates the Executive pursuant to Section 2.2 of this Agreement or the
Executive terminates his employment with the Corporation for any reason (i)
during the first two years of the Term of this Agreement, a period of one year
after the Executive leaves the employ of the Corporation, and (ii) if such
termination occurs after the second year of the Term of this Agreement, then for
the remaining Term of this Agreement.

              5.3.        The Executive shall not at any time during his
employment with the Corporation, and for a period of one year after Executive
leaves the Corporation’s employ for any reason, solicit (or assist or encourage
the solicitation of) any employee of the Corporation or any of its subsidiaries
or affiliates to work for Executive or for any business, firm corporation or
other entity in which the Executive, directly or indirectly, in any capacity
described in Section 5.2 hereof, participates or engages (or expects to
participate or engage) or has (or expects to have) a financial interest or
management position.

 
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             5.4.         The Executive shall not at any time during this
Agreement or after the termination hereof directly or indirectly divulge,
furnish, use, publish or make accessible to any person or entity any
Confidential Information (as hereinafter defined). Any records of Confidential
Information prepared by the Executive or which come into Executive’s possession
during this Agreement are and remain the property of the Corporation and upon
termination of Executive’s employment all such records and copies thereof shall
be either left with or returned to the Corporation.

             5.5.         The term “Confidential Information” shall mean
information disclosed to the Executive or known, learned, created or observed
by the Executive as a consequence of or through the Executive's employment by
the Corporation, not generally known in the relevant trade or industry, about
the Corporation’s or any of its subsidiaries’ or affiliates’ business
activities, services and processes, including but not limited to information
concerning advertising, sales promotion, publicity, sales data, research,
finances, accounting, methods, processes, business plans, broker or
correspondent lists and records and potential broker or correspondent lists and
records.
 
              6.              Assignment. The Corporation shall require any
successor or assign to all or substantially all the assets of the Corporation
(whether by merger or by acquisition of stock, assets or otherwise) prior to
consummation of any transaction therewith, to expressly assume and agree to
perform in writing this Agreement in the same manner and to the same extent that
the Corporation would be required to perform it if no such succession or
assignment had taken place. This Agreement shall inure to the benefit of and be
binding upon the Corporation, its successors and assigns, and upon the Executive
and his heirs, executors, administrators and legal representatives. This
Agreement shall not be assignable by the Executive.

 
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              7.          No Third Party Beneficiaries. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as provided in Section 6 hereof.

              8.          Headings. The headings of the sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof.

              9.          Interpretation. In case any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, 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 had never been contained herein. If, moreover, any one or more of the
provisions contained in this Agreement shall for any reason be held by a court
of competent jurisdiction to be unenforceable because it is excessively broad as
to duration, geographical scope, activity or subject, it shall be construed by
limiting and reducing it, so as to be enforceable to the extent compatible with
the applicable law as it shall then appear.
 
             10.         Notices. All notices under this Agreement shall be in
writing and shall be deemed to have been given at the time when mailed by
registered or certified mail, addressed to the address below stated party to
which notice is given, or to such changed address as such party may have fixed
by notice given as set forth herein:
 
To the Corporation:
Delta Financial Corporation
1000 Woodbury Road, Suite 200
Woodbury, NY 11797
Attn:  General Counsel

and

To the Executive:
Randall F. Michaels
                                XXXXXXXXXXXX
                                XXXXXXXXXXXX
 
provided, however, that any notice of change of address shall be effective only
upon receipt.

 
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               11.      Waivers.  If either party should waive any breach of any
provision of this Agreement, that party shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provision of
this Agreement.
 
               12.       Complete Agreement; Amendments. The foregoing is the
entire agreement of the parties with respect to the subject matter hereof and
may not be amended, supplemented, canceled or discharged except by written
instrument executed by both parties hereto.

13.      Equitable Remedies.  The Executive acknowledges that he has been
employed for his unique talents and that his leaving the employ of the
Corporation would seriously hamper the business of the Corporation and that the
Corporation will suffer irreparable damage if any provisions of Section 5 hereof
are not performed strictly in accordance with their terms or are otherwise
breached. The Executive hereby expressly agrees that the Corporation shall be
entitled as a matter of right to injunctive or other equitable relief, in
addition to all other remedies permitted by law, to prevent a breach or
violation by the Executive and to secure enforcement of the provisions of
Section 5. Resort to such equitable relief, however, shall not constitute a
waiver or any other rights or remedies, which the Corporation may have.

               14.      Governing Law. This Agreement is to be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as the date
first above written.
 
 
                                                                                               DELTA
FINANCIAL CORPORATION
 

By: _____________________________
Name: Hugh Miller
Title: President and CEO

________________________________
RANDALL F. MICHAELS

 
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