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Exhibit 10.5(1)  

 
  SENIOR MANAGER EMPLOYMENT AGREEMENT    
    

        THIS SENIOR MANAGER EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of September 1, 2003 by and
between Fieldstone Mortgage Company, a Maryland corporation (the "Company"), and the employee named on the attached cover letter (the
"Employee") to be effective only upon the occurrence of the sale of shares of Fieldstone Investment Corporation in an offering under Rule 144A of
the Securities Act of 1933 (the "Effective Date"). If the Effective Date does not occur prior to December 31, 2003, this Agreement shall be
automatically null and void. 

        WHEREAS,
the Company desires to continue to employ the Employee, and the Employee desires to continue to be employed by the Company, on the terms and conditions set forth herein from and
after the Effective Date. 

        NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the Employee and the Company agree as follows: 

        1.    Employment Agreement.    On the terms and conditions set forth in this Agreement, the Company agrees to employ
the Employee and the Employee agrees to be employed by the Company for the Employment Period (as defined below). Terms used herein with initial capitalization not otherwise defined are defined in  Section 10 below. 

        2.    Position and Duties.    

        2.1    Position.    The Employee shall, during the Employment Period serve in the position shown on the attached cover
letter. 

        2.2    Duties.    The Employee shall have the duties shown on the attached cover letter. In addition, the Employee
shall perform such other duties with the Company and with any Subsidiary as the Board or the Employee's supervisor may from time to time reasonably determine and assign to the Employee. The Employee
shall devote the Employee's reasonable best efforts and full business time to the performance of the Employee's duties and the advancement of the business and affairs of the Company. 

        3.    Term.    Subject to earlier termination as hereinafter provided, the initial term of employment under this
Agreement shall be for the period commencing on the Effective Date and ending on the date specified in the attached cover letter (the "End Date") (the
period is the "Initial Term"). The term of employment under this Agreement shall be automatically renewed for additional consecutive
12-month periods (the "Extended Term") as of the End Date and every subsequent anniversary of the End Date, unless and until either party
provides written notice to the other party in accordance with Section 11.1 hereof not less than 60 days before such anniversary date that
such party is terminating the term of employment under this Agreement (the "Non-Renewal Notice"), which termination shall be effective as of
the end of the Initial Term or Extended Term, as the case may be, or until the term of employment is otherwise terminated as hereinafter set forth. Such Initial Term and all such Extended Terms are
collectively referred to herein as the "Employment Period." A Non-Renewal Notice given by either party to this Agreement shall not be deemed
a termination of the Employee's employment for purposes of Section 7 below. The parties' obligations under Sections
6 and 7 hereof shall survive the expiration or termination of the Employment Period. 

        4.    Place of Performance.    In connection with the Employee's employment by the Company, the Employee shall be
based at the office of the Company in the United States indicated in the attached cover letter, except as otherwise agreed by the Employee and the Company and except for reasonable travel on Company
business. 

        5.    Compensation and Benefits.    

        5.1    Base Salary.    During the Employment Period, the Company shall pay to the Employee an annual base salary (the
"Base Salary") at the rate per year indicated in the attached cover 

 

letter.
The Base Salary shall be reviewed no less frequently than annually and may be increased or decreased, from time to time, in the discretion of the Company on written notice to the Employee. The
Base Salary shall be payable consistent with the Company's payroll procedures, as may be amended in the future. 

        5.2    Bonuses.    The Employee shall be eligible for the bonus payments outlined in the attached cover letter, to be
calculated and paid in accordance with the attached cover letter and such other written terms regarding the calculation of the bonus amounts, eligibility and payment as the Company may deliver from
time to time to the Employee. The Company shall have the right to increase or decrease or otherwise amend the bonus payments outlined in the attached cover letter from time to time by delivering
written notice of such changes to the Employee. The bonus payments outlined in the attached cover letter are collectively referred to as the "Bonus." 

        5.3    Benefits.    During the Employment Period, the Employee will be entitled to the employee benefit plans and
arrangements and other fringe benefits and perquisite programs generally provided to other employees of the Company and may be entitled to other special benefits available only to senior managers of
the Company in the sole discretion of the Company. Nothing contained in this Agreement shall prevent the Company from amending or terminating its generally available benefit plans, changing insurance
carriers or from effecting modifications in insurance coverage for the Employee, provided that the Employee is treated in substantially the same manner as other employees of the Company. 

        5.4    Vacation; Holidays.    The Employee shall be entitled to all public holidays observed by the Company and the
vacation days specified in the attached cover letter, in accordance with the applicable vacation policies for similarly situated employees of the Company, which shall be taken at a reasonable time or
times upon advance notice by the Employee to his or her direct supervisor and written approval thereof by the Employee's direct supervisor. 

        5.5    Expenses.    The Employee is expected and is authorized to incur reasonable expenses in the performance of his
or her duties hereunder. The Company shall reimburse the Employee for all such expenses promptly upon periodic presentation by the Employee of an itemized account of such expenses to his or her direct
supervisor. 

        5.6    Withholding Taxes and Other Deductions.    To the extent required by law, the Company shall withhold from any
payments due to the Employee under this Agreement any applicable federal, state, excise or local taxes and such other deductions as are prescribed by law or Company policy. 

        6.    Restrictions on Competition; Solicitation; and Hiring; Confidentiality.    

        6.1   During
the term of Employee's employment by the Company and during either the Extended Severance Period or the Post Termination Period, if any, the Employee shall not,
without the prior written consent of Company, for himself or herself or on behalf of or in conjunction with any other person, persons, company, firm, partnership, corporation, business, group or other
entity (each, a "Person"), work in the United States of America either in the business of originating, underwriting, purchasing, securitizing, selling or servicing residential mortgage loans or in any
other principal line of business engaged in, or planned to be engaged in, by the Company at the time of the Termination Date. 

        6.2   During
the term of Employee's employment by the Company, and thereafter during either the Extended Severance Period or the Post Termination Period, if any, the Employee
shall 

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not,
for any reason whatsoever, directly or indirectly, for himself or herself or on behalf of or in conjunction with any other Person: 

        (i)    solicit
and/or hire any Person who is on the Termination Date, or has been within six (6) months prior to the Termination Date, an employee of the Company or its
affiliates, for the purpose or with the intent of enticing such Person away from or out of the employ of the Company or its affiliates; 

        (ii)   in
order to protect the confidential information and proprietary rights of Company, solicit, induce or attempt to induce any Person who is, at the Termination Date, or
has been within six (6) months prior to the Termination Date, an actual customer, client, business partner, or a prospective customer, client, business partner (i.e., a customer, client or
business partner who is party to a written proposal or letter of intent with Company, in each case written less than six (6) months prior to the Termination Date) of the Company, for the
purpose or with the intent of (A) inducing or attempting to induce such Person to cease doing business with Company or its affiliates, (B) enticing or attempting to entice such Person to
do business with Employee or any affiliate of Employee, or (C) in any way interfering with the relationship between such Person and Company or its affiliates; or 

        (iii)  solicit,
induce or attempt to induce any Person who is or that is, at the time of the Termination Date, or has been within six (6) months prior to the
Termination Date, a supplier, licensee or consultant of, or provider of goods or services to Company or its affiliates, for the purpose or with the intent of (A) inducing or attempting to
induce such Person to cease doing business with Company or its affiliates or (B) in any way interfering with the relationship between such Person and Company or its affiliates. 

        6.3   Because
of the difficulty of measuring economic losses to Company as a result of a breach of the foregoing covenants, and because of the immediate and irreparable damage
that could be caused to Company for which it would have no other adequate remedy, Employee agrees that the foregoing covenants in this Section 6,
in addition to and not in limitation of any other rights, remedies or damages available to Company at law, in equity or under this Agreement, may be enforced by Company in the event of the breach or
threatened breach by Employee, by injunctions and/or restraining orders. If the Company is involved in court or other legal proceedings to enforce the covenants contained in this  Section 6, then in
the event Company prevails in such proceedings, Employee shall be liable for the payment of reasonable attorneys' fees, costs
and ancillary expenses incurred by Company in enforcing its rights hereunder. 

        6.4   It
is agreed by the parties that the covenants contained in this Section 6 impose a fair and reasonable restraint
on Employee in light of the activities and business of Company on the date of the execution of this Agreement and the current plans of Company; but it is also the intent of Company and Employee that
such covenants be construed and enforced in accordance with the changing activities, business and locations of Company and its affiliates throughout the term of these covenants. 

        6.5   It
is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and enters into a business or pursues other activities
within twelve months from such Termination Date that, at such time, are not in competition with the Company or its affiliates or with any business or activity which the Company or its affiliates
contemplated pursuing, as of the Termination Date, or similar activities or business in locations the operation of which, under such circumstances, does not violate this  Section 6 or any of
Employee's obligations under this Section 6, Employee shall not be
chargeable with a violation of this Section 6 if the Company or its affiliates subsequently enter the same (or a similar) competitive business,
course of activities or location, as applicable (except as to business or activities actively contemplated by the Company at the Termination Date). 

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        6.6   The
covenants in this Section 6 are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth herein are
unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent that such court deems reasonable, and the Agreement shall thereby be reformed to reflect
the same. 

        6.7   All
of the covenants in this Section 6 shall be construed as an agreement independent of any other provision in
this Agreement, and the existence of any claim or cause of action of Employee against Company whether predicated on this Agreement or otherwise shall not constitute a defense to the enforcement by
Company of such covenants. It is specifically agreed that the duration of the period during which the agreements and covenants of Employee made in this  Section 6 shall be effective shall be
computed by excluding from such computation any time during which Employee is in violation of any provision
of this Section 6. 

        6.8   Notwithstanding
any of the foregoing, if any applicable law, judicial ruling or order shall reduce the time period during which Employee shall be prohibited from
engaging in any competitive activity described in Section 6 hereof, the period of time for which Employee shall be prohibited pursuant to  Section 6 hereof shall be the maximum time permitted by law. 

        6.9   At
all times during and after Employee's employment with the Company (whether or not such termination is voluntary or involuntary, with or without Cause or Good Reason
or by Employee's
Disability), Employee agrees to keep in strict confidence and trust all Proprietary Information and not to use or disclose (or induce or assist in the use or disclosure of) any Proprietary Information
without the prior express written consent of the Company, except as may be necessary in the ordinary course of performing Employee's duties as an officer of the Company. Upon termination of Employee's
employment for any reason, Employee will deliver to the Company all Proprietary Information and any equipment, supplies, facilities and other tangible property owned, leased or contracted for by the
Company which property is in Employee's possession as of the date of such termination. 

        7.    Termination and Termination Benefits.    Notwithstanding the provisions of  Section 1 above, this Agreement and the
Employee's employment shall terminate under the circumstances, and subject to the terms, set forth below.
The effective date of the termination of the Employee's employment by the Company is referred to as the "Termination Date". 

        7.1.    Death.    In the event of the Employee's death during the Employment Period, this Agreement and the Employee's
employment hereunder shall immediately and automatically terminate effective on the date of death and the Company shall pay to the Employee's designated beneficiary or, if no beneficiary has been
designated by the Employee, to the Employee's estate, any earned, accrued, or incurred but unpaid Base Salary, Bonus, benefits and business expenses prorated through the Termination Date
("Accrued Obligations"). 

        7.2.    Termination by the Company for Cause.    (a)    The Company may terminate the Employee's employment
hereunder for Cause (as defined in Section 10 below) at any time following the occurrence of the circumstances giving rise to Cause, upon written
notice to the Employee setting forth in reasonable detail the nature of such Cause. Upon the giving of written notice of termination of the Employee's employment hereunder for Cause, the Company shall
have no further obligation to the Employee other than for the Accrued Obligations and the Employee shall receive no severance pay except as the Company shall determine in its sole discretion in
accordance with Section 7.2(c) below. 

        (b)   Upon
a termination of the Employee's employment for Cause, the Extended Severance Period shall be eliminated (i.e., there will be no Extended Severance Period) and 

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the
Company shall, in its sole discretion, determine the duration of the Post Termination Period, which may range from a minimum period of zero months to a maximum period of the number of months
provided as the Extended Severance Term in the attached cover letter. 

        (c)   If
the Company determines that the Post Termination Period will be one or more months, the Company shall continue to pay the Employee his or her Extended Severance
Amount in effect on the Termination Date, in accordance with the Company's customary payroll practices, for the duration of the Post Termination Period (as may be terminated or shortened by the
Company), subject to reduction
or discontinuance in accordance with Section 7.5 (relating to re-employment of the Employee). 

        (d)   It
is agreed by the parties that the payment of Extended Severance Amount in accordance with subsection 7.2(c) above is sufficient and appropriate consideration for the
enforcement of the provisions of Section 6. 

        7.3.    Termination by the Company Other than for Cause.    The Company may terminate the Employee's employment
hereunder other than for Cause at any time upon written notice to the Employee (a "Termination Without Cause"). A termination for Disability pursuant to  Section 7.6 shall be considered a Termination Without Cause. In the event of Termination Without Cause: 

        (a)   the
Company shall pay any Accrued Obligations through the Termination Date; 

        (b)   for
a period of six months after the Employee's Termination Date, on written request from the Employee the Company shall, at its sole expense as incurred, provide the
Employee with temporary office space or an outplacement service which, in the sole discretion of the Company, is comparable to the office in which the Employee worked for the Company; 

        (c)   in
lieu of any further base salary, Bonus or any other payments to the Employee for periods subsequent to the Termination Date, the Company shall pay as severance to the
Employee during the Extended Severance Period the Extended Severance Amount indicated as in the attached cover letter, in accordance with the Company's customary payroll practices, subject to
reduction or discontinuance in accordance with Sections 7.5 (relating to re-employment of the Employee) and  7.6 (relating to long-term disability insurance
payments) below; and 

        (d)   the
Company shall, at the Employee's request, also pay the share of the cost of health care insurance for Employee and Employee's dependents (to the extent enrolled at
the date of termination) that the Company paid for the Employee prior to the Termination Date under the Company's health insurance plan for a period of up to twenty four months from the Termination
Date or, if earlier, the date on which the Employee becomes fully employed in a job in which the Employee is eligible for comparable health insurance benefits. 

        7.4.    Termination by Employee.    

        7.4.1    Without Good Reason.    (a)    The Employee may terminate the Employee's employment hereunder at
any time upon 60 days' prior written notice to the Company (the "Employee Notice Period"); it being
understood that the Termination Date shall be the 60th day of the Employee Notice Period unless an
earlier date is designated in writing by the Company in its sole discretion. In the event of termination by the Employee without Good Reason (as defined in  Section 10 below), the Company shall have
no further obligation to the Employee other than for the Accrued Obligations and other than as the
Company may determine in its sole discretion under Section 7.4.1(c) below. 

        (b)   Upon
the Employee's termination of his or her employment without Good Reason, the Extended Severance Period shall be eliminated (i.e., there will be no Extended
Severance Period) and the Company shall, in its sole discretion, determine the 

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duration
of the Post Termination Period, which may range from a minimum period of zero months to a maximum period of the number of months provided as the Extended Severance Term in the attached cover
letter. 

        (c)   If
the Company determines that the Post Termination Period will be one or more months, the Company shall continue to pay the Employee his or her Extended Severance
Amount in effect on the Termination Date, in accordance with the Company's customary payroll practices, for the duration of the Post Termination Period (as may be terminated or shortened by the
Company), subject to reduction or discontinuance in accordance with Section 7.5 (relating to re-employment of the Employee). 

        (d)   It
is agreed by the parties that the payment of Extended Severance Amount in accordance with subsection 7.4.1(c) above is sufficient and appropriate consideration for
the enforcement of the provisions of Section 6. 

        7.4.2    With Good Reason.    Upon the Employee's termination of his or her employment with Good Reason, the Company
shall pay to the Employee the amounts, and make available to the Employee the benefits, set forth in Section 7.3 above, subject to reduction or
discontinuance in accordance with Section 7.5 below.

        7.5.    Notification Requirement by the Employee Regarding New Employment.    The Employee shall have an affirmative
obligation promptly to notify the Company in accordance with Section 11.1 if the Employee obtains employment with a new employer during the
Extended Severance Period or a Post Termination Period under this Agreement. Such notification shall include the name of the new employer, the amount of the Employee's base salary from the new
employer and the amount of the variable or incentive compensation for which the Employee is eligible. The Company shall have the right, in its sole discretion, to reduce the Employee's Extended
Severance Amount by the amount of compensation the Employee receives from the new employer, or to discontinue any extended severance payments under this Agreement if the amount of compensation the
Employee receives from the new employer exceeds the Extended Severance Amount, in which case a Post Termination Period shall terminate at the time the extended severance payments are discontinued. 

        7.6    Disability and Off-set of Severance Payments.    A termination of Employee's employment by the
Company due to Disability shall be communicated to the Employee by written notice, and shall be effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), unless Employee returns to full-time performance of his duties hereunder before the Disability Effective Date.
In the event of a termination of Employee's employment by the Company due to Disability, any severance payments by the Company pursuant to Section 7.3
(c) above shall be off-set by the payments, if any, to the Employee under any long-term disability plan provided to the Employee by the Company. 

        8.    Effect of Termination.    

        8.1.    No Additional Payments.    Payment by the Company of any Accrued Obligations and severance payments and
benefits that may be due to the Employee under the applicable termination provision of Section 7 shall constitute the entire obligation of the
Company to the Employee to pay compensation under this Agreement. 

        8.2.    Continued Performance.    Provisions of this Agreement shall survive any termination of this Agreement if so
provided herein or if necessary or desirable fully to accomplish the purposes of such provisions, including, without limitation, the obligations of the Employee under the terms and conditions of  Section 6. Any obligation of the Company to make payments to or on behalf of the Employee under Sections 7.2, 7.3 and
7.4 is expressly conditioned upon the Employee's continued performance of the Employee's obligations under Section 6 for
the time periods stated 

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in  Section 6. The Employee recognizes that, except to the extent, if any, provided in Sections 7.2, 7.3 and
7.4, the Employee will earn no compensation from the Company after the Termination Date. 

        8.3    Liquidated Damages.    The parties acknowledge and agree that damages which will result to the Employee for
termination by the Company without Cause or other breach of this Agreement by the Company shall be extremely difficult or impossible to establish or prove, and agree that the payments made to the
Employee under Sections 7.2, 7.3 and 7.4 shall constitute liquidated damages for any breach of this Agreement by the Company through the Termination
Date. The Employee agrees that, except for such other payments and benefits to which the Employee may be entitled as expressly provided by the terms of this Agreement or any applicable benefit plan,
such liquidated damages shall be in lieu of all other claims that the Employee may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to
receiving payments under Sections 7.2, 7.3 and 7.4, the Employee will execute a release of claims in a form reasonably satisfactory to the Company. 

        9.    Additional Payments by the Company.    

        9.1   If
it is determined (as hereafter provided) that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock
option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as
the "Excise Tax"), then Employee will be entitled to receive an additional payment or payments (a "Gross-Up
Payment") in an amount such that, after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax,
imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. 

        9.2   All
determinations required to be made under this Section 9, including whether an Excise Tax is payable by
Employee and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, will be made by the Company's then current
outside auditors; provided that if that firm is unwilling or unable to provide such services, the Accounting Firm may be selected by the Company. The Company will direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the Company and Employee within 30 calendar days after the date of the change in control or the date of Employee's termination of
employment, if applicable, and any other such time or times as may be requested by the Company or Employee. If the Accounting Firm determines that any Excise Tax is payable by Employee, the Company
will pay the required Gross-Up Payment to Employee no later than five calendar days prior to the due date for Employee's income tax return on which the Excise Tax is included. If the
Accounting Firm determines that no Excise Tax is payable by Employee, it will, at the same time as it makes such determination, furnish Employee with an opinion that he has substantial authority not
to report any Excise Tax on his federal, state, local income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment will be binding upon the
Company and Employee. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"), consistent 

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with
the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to  Section 9.6 hereof and Employee thereafter is required to make a
payment of any Excise Tax, Employee shall so notify the Company, which will
direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and Employee as
promptly as possible. Any such Underpayment will be promptly paid by the Company to, or for the benefit of, Employee within five business days after receipt of such determination and calculations. 

        9.3   The
Company and Employee will each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or Employee, as
the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by  Section 9.2 hereof. 

        9.4   The
federal, state and local income or other tax returns filed by Employee will be prepared and filed on a consistent basis with the determination of the Accounting Firm
with respect to the Excise Tax payable by Employee. To the extent the Excise Tax has not been previously withheld from amounts paid to the Employee, Employee will make proper payment of the amount of
any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior
to the filing of Employee's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment
should be reduced, Employee will within five business days pay to the Company the amount of such reduction. 

        9.5   The
fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections
9.2 and 9.4 hereof will be borne by the Company. If such fees and expenses are initially advanced by Employee, the Company will
reimburse Employee the full amount of such fees and expenses within five business days after receipt from Employee of a statement therefore and reasonable evidence of his payment thereof. 

        9.6   Employee
will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification will be given as promptly as practicable but no later than ten (10) business days after Employee actually receives notice of such claim and
Employee will further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by Employee). Employee will not pay
such claim prior to the earlier of (x) the expiration of the 30-calendar-day period following the date on which he gives such notice to the Company and (y) the
date that any payment of amount with respect to such claim is due. If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee
will: 

        9.6.1   provide
the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company; 

        9.6.2   take
such action in connection with contesting such claim as the Company will reasonably request in writing from time to time, including without
limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company; 

        9.6.3   cooperate
with the Company in good faith in order effectively to contest such claim; and 

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        9.6.4   permit
the Company to participate in any proceedings relating to such claim; provided, however, that the Company will bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such contest and will indemnify and hold harmless Employee, on an after-tax basis, for and against any Excise Tax or
income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this  Section 9.6, the Company will control all proceedings taken in connection with the contest of any claim contemplated by this  Section 9.6 and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim (provided that Employee may participate therein at his own cost and expense) and may, at its option, either direct Employee to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company will determine; provided, however, that if the Company directs Employee to pay the tax claimed and sue for a refund, the Company will advance the amount of
such payment to Employee on an interest-free basis and will indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax or income tax, including interest
or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable
year of Employee with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim will be
limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Employee will be entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority. 

        9.7   If,
after the receipt by Employee of an amount advanced by the Company pursuant to Section 9.6 hereof, Employee
receives any refund with respect to such claim, Employee will (subject to the Company's complying with the requirements of Section 9.6) hereof)
promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by Employee of an amount advanced
by the Company pursuant to Section 9.6 hereof, a determination is made that Employee will not be entitled to any refund with respect to such
claim and the Company does not notify Employee in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance will be
forgiven and will not be required to be repaid and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid pursuant to this  Section 9. If,
after the receipt by Employee of a Gross-Up Payment but before the payment by Employee of the Excise Tax, it is
determined by the Accounting Firm that the Excise Tax payable by Employee is less than the amount originally computed by the Accounting Firm and consequently that the amount of the
Gross-Up Payment is larger than that required by this Section 9, Employee shall promptly refund to the Company the amount by which
the Gross-Up Payment initially made to Employee exceeds the Gross-Up Payment required under this Section 9. 

        10.    Definitions.    

        "Accrued Obligations" means any earned, accrued, or incurred but unpaid Base Salary, Bonus, benefits and business expenses prorated
through the Termination Date of the Employee under this Agreement. 

        "Affiliate" shall mean, with respect to any entity, any person or other entity that, directly or indirectly, controls, is controlled by,
or is under common control with, such entity, where the term "control" means the possession, directly or indirectly, of the power to direct or cause the
direction of 

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the
management and policies of an entity, whether through the ownership of voting securities, by contract, or otherwise. 

        "Board" means the board of directors of the Company. 

        "Cause" for termination means: (i) the commission by the Employee of a felony or a crime involving moral turpitude or the intentional
commission of any other act or omission involving dishonesty or fraud with respect to the Company or any of its Affiliates or any of their customers or suppliers, for which the Company has reasonable
proof was committed by the Employee; (ii) conduct by the Employee tending to bring the Company or any of its Affiliates into substantial public disgrace or disrepute; (iii) substantial
and repeated failure by the Employee to perform duties of the office held by the Employee as reasonably directed by the Board and not cured within twenty (20) business days after written notice
thereof; (iv) gross negligence or willful misconduct by the Employee with respect to the Company or any of its Affiliates; or (v) any material breach of  Section 3 or Section 6 of the Agreement by the Employee not cured within fifteen
(15) business days after written notice thereof from the Company; in each case, as determined in the reasonable judgment of the Board. Any failure or breach resulting from the Employee's
Disability shall not constitute Cause. 

        "Code" means the Internal Revenue Code of 1986, as amended. 

        "Disability" means that Employee has been unable, for a period of not less than (x) 120 consecutive days, or
(y) 180 days within any 12 month period, to perform Employee's duties under this Agreement, as a result of physical or mental illness, injury or impairment. 

        "Extended Severance Period" means the period of time commencing on the Termination Date and continuing for the number of months provided
as the Extended Severance Term in the attached cover
letter provided that the Employee is eligible for payment of the Extended Severance Amount under Section 7.3, i.e., if the Employee is not
eligible for payment of the Extended Severance Amount under Section 7.3, then there is no Extended Severance Period under this Agreement. 

        "Good Reason" means, without the consent of the Employee, (i) any material diminution of the Employee's duties or responsibilities
hereunder (except in each case in connection with the termination of the Employee's employment for Cause or as a result of the Employee's death or disability), or, the assignment to the Employee of
duties or responsibilities that are materially inconsistent with the Employee's then position; (ii) any material breach of the Agreement by the Company which is not cured within 15 business
days after written notice thereof is given by Employee to the Company; or (iii) a relocation by the Company of the Employee from the office indicated on the attached cover letter to a location
more than 50 miles from the location of office indicated on the attached cover letter, other than on a temporary basis not to exceed a period equal to two calendar months. A reduction in Base Salary
in exchange for increased Bonus opportunity, as determined by the Company, shall not constitute Good Reason. In addition, as the amount and terms and conditions of the Bonus opportunity may vary from
year to year based on the Company's profitability, a reduced or different Bonus opportunity shall not constitute Good Reason. 

        "Parent Company" means Fieldstone Investment Corporation. 

        "Post Termination Period" means the period of time determined by the Company in its sole discretion that commences on the Termination Date
and ends not later than the number of months after the Termination Date specified as the Extended Severance Term provided in the attached cover letter;  provided, however, that the Post Termination
Period may be extended in the sole discretion of the Company beyond the number of months specified as the
Extended Severance Period in the attached cover letter by an additional period of time equal to any time during which Employee is in violation of any provision of  Section 6 of this Agreement. The
Post Termination Period shall commence on the Termination Date. The Company may, in its sole discretion,
terminate or shorten the Post Termination Period, upon 60 days' prior written notice to the Employee. 

10

 

        "Proprietary Information" means information generally unavailable to the public that has been created, discovered, developed or otherwise
become known to the Company or in which property rights have been assigned or otherwise conveyed to the Company, including any modifications or enhancements thereto, which information has material
economic value or potential material economic value to the Company or the business in which the Company is or will be engaged. Proprietary Information shall include, but not be limited to, financial,
sales and distribution information; business plans, strategies and forecasts; lists of employees, contractors, customers, agents and independent brokers; trade secrets; processes; formulas; data;
know-how; negative know-how; improvements; discoveries; developments; designs; inventions; techniques; proposals; reports; client information; and software programs and
information (whether or not expressed in written form). Such restrictions on the use or disclosure of Proprietary Information do not extend to any item of information which (i) is
publicly known immediately prior to the time of its disclosure, (ii) is lawfully received from a third party not bound in a confidential relationship to the Company or (iii) is published
or otherwise made known to the public by the Company. 

        "Subsidiary" means any subsidiary of the Company. 

        "Termination Date" means the effective date of the termination of the Employee's employment by the Company. 

        11.    Miscellaneous.    

        11.1    Notices.    All notices, demands, requests, or other communications which may be or are required to be given,
served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, sent by overnight courier or mailed by first-class, registered or certified
mail, return receipt requested, postage prepaid, or transmitted by fax as follows: 

	(i)
	If to the Company: 

Fieldstone
Mortgage Company

11000 Broken Land Parkway, Suite 600

Columbia, Maryland 21044

Tel: (410) 772-7211

Fax: (443) 367-2060

Attn: President 

with a copy to:

Hogan &
Hartson LLP

555 Thirteenth Street, N.W.

Washington, D.C. 20004

Tel: (202) 637-5824

Fax: (202) 637-5910

Attn: William L. Neff, Esq. 

	(ii)
	If to the Employee: 

To
the Employee's home address in the Company's

Human Resources records, as may be updated in

writing from time to time by the Employee. 

The
Company may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or
communication which shall be hand delivered, mailed, or faxed in the manner described above, shall be deemed sufficiently given, served, sent, received or delivered for all purposes at such time as it
is 

11

 

delivered
to the addressee (with the return receipt, the delivery receipt, or (with respect to a fax) the confirmation of facsimile being deemed conclusive, but not exclusive, evidence of such
delivery) or at such time as delivery is refused by the addressee upon presentation. 

        11.2    Severability.    The invalidity or unenforceability of any one or more provisions of this Agreement shall not
affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect. 

        11.3    Survival.    It is the express intention and agreement of the parties hereto that the provisions of  Sections 6, 7 and 8 hereof and this  Section 11.3 shall survive the termination of employment of the Employee. In addition, all
obligations of the Company to make payments hereunder
shall survive any termination of this Agreement on the terms and conditions set forth herein. 

        11.4    Assignment.    The rights and obligations of the parties to this Agreement shall not be assignable or
delegable, except that (i) in the event of the Employee's death, the personal representative or legatees or distributees of the Employee's estate, as the case may be, shall have the right to
receive any amount owing and unpaid to the Employee hereunder and (ii) the rights and obligations of the Company hereunder shall be assignable and delegable in connection with any subsequent
merger, consolidation,
sale of all or substantially all of the assets or stock of the Company or similar transaction involving the Company or a successor corporation. 

        11.5    Binding Effect.    Subject to any provisions hereof restricting assignment, this Agreement shall be binding
upon the parties hereto and shall inure to the benefit of the parties and their respective heirs, devisees, executors, administrators, legal representatives, successors and assigns. 

        11.6    Amendment; Waiver.    This Agreement shall not be amended, altered or modified except by an instrument in
writing duly executed by the parties hereto. Neither the waiver by either of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of
the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent
breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder. 

        11.7    Dispute Resolution.    Any dispute or controversy arising under or in connection with this Agreement, other
than a claim for injunctive relief or other equitable relief, shall be settled exclusively by arbitration, conducted before one (1) arbitrator in Baltimore, Maryland in accordance with the
National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having competent
jurisdiction. The costs of arbitration (including legal and other professional fees incurred) will be borne by the party by which they are incurred, provided that, if the Employee prevails, the
Company shall reimburse him for all legal fees, disbursements and other costs and provided further, that if the Company prevails, and it is determined by the Arbitrator that Employee's claim was
brought in bad faith or otherwise frivolous Employee shall reimburse the Company for all legal fees, disbursements and other costs. 

        11.8    Governing Law.    This Agreement, the rights and obligations of the parties hereto, and any claims or disputes
relating thereto, shall be governed by and construed in accordance with the laws of the State of Maryland (but not including any choice of law rule thereof that would cause the laws of another
jurisdiction to apply). 

        11.9    Entire Agreement.    This Agreement constitutes the entire agreement between the parties respecting the
employment of the Employee, there being no representations, warranties or commitments except as set forth herein. Notwithstanding the foregoing, this Agreement shall not supercede the Deferred /
Retention bonus provisions of the Senior Manager Incentive and 

12

 

Retention
Bonus Plan following the effective date of this Agreement. Also, the Change of Control Bonus provisions of the of the Senior Manager Incentive and Retention Bonus Plan shall remain in effect
relative to the sale of shares of Fieldstone Investment Corporation in an offering under Rule 144A of the Securities Act of 1933 contemplated by this Agreement following the Effective Date.
This Agreement shall supercede the extended severance portion of the Senior Manager Incentive and Retention Bonus Plan. 

        11.10    Counterparts.    This Agreement may be executed in two or more counterparts, each of which shall be an
original and all of which shall be deemed to constitute one and the same instrument. 

13

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Exhibit 10.5(2)  

 
  FIELDSTONE MORTGAGE COMPANY    
    
    SENIOR MANAGER INCENTIVE AND RETENTION BONUS PLAN    
    

1.     PURPOSE  

        The purpose of the Fieldstone Mortgage Company Senior Manager Incentive Bonus and Retention Plan (the "Plan") is to provide incentives to certain senior managers
of the Company to remain with the Company over time, to continue to contribute to the success of the Company, and to provide additional incentive compensation to these senior managers in connection
with a Change of Control transaction. 

2.     DEFINITIONS  

        Capitalized terms used in this Plan have the meanings specified in the Plan and in the appendix to the Plan. 

3.     ELIGIBILITY AND PARTICIPATION  

        Participation in the Plan shall be limited to senior managers of the Company who are designated by the Board of Directors to be eligible. The Board of Directors
will appoint a Compensation Committee of
the Board of Directors, composed of selected directors and any other individuals designated by the Board of Directors. The Compensation Committee is empowered to administer the Plan in its sole
discretion. 

4.     DEFERRED LONG TERM INCENTIVE BONUS AWARDS  

        4.1    Deferred Long-Term Incentive Bonuses    

        The
Company may award long-term incentive cash bonuses from time to time at the sole discretion of the Board of Directors. If the Board of Directors, in the exercise of its
discretion, deems the financial performance of the Company to be exceptional, then the Compensation Committee will recommend to the Board of Directors that it establish an aggregate amount that may be
awarded as long-term incentive cash bonuses to be earned by certain senior managers over a defined period of time. The Compensation Committee shall determine both the amount to be awarded
to a Participant, if any, and the timing of the payment of any deferred long-term incentive cash bonuses to be awarded for a designated year. 

        4.2    Eligibility for Deferred Long-Term Incentive Bonuses    

        (a)   2005 Bonus: The entire amount of a 2005 Deferred Long Term Incentive Bonus Award granted under this Plan will be earned
on June 30, 2005. Each Participant will be notified in writing of his or her award of a 2005 Deferred Long Term Incentive Bonus. 

        (b)   2006 Bonus: The entire amount of a 2006 Deferred Long Term Incentive Bonus Award granted under this Plan will be earned
on June 30, 2006. Each Participant will be notified in writing of his or her award of a 2006 Deferred Long Term Incentive Bonus. 

        (c)   Possible Future Bonuses: If there are additional awards of Deferred Long Term Incentive Bonus amounts under this Plan, a
letter from the Board of Directors to the Participants will define the amount of any such future award and the date on which any such award will be earned. 

        (d)   Payment of Deferred Long-Term Incentive Bonuses when the Participant's Employment Terminates Prior to the Dates on which the Bonuses
are Earned: 

	i.
	If
the Participant terminates his or her employment as a result of Normal Retirement, death or Disability prior to the dates on which the payments are earned pursuant to the prior
subsections of this section 4.2, then the Participant will receive 100% of the 

 

Deferred
Long-Term Incentive Bonuses awarded to him or her in cash within 31 days following the date on which the Participant's employment terminates. 

	ii.
	If
the Company terminates the employment of a Participant without Cause prior to the dates on which the payments are earned pursuant to the prior subsections of this
section 4.2, then the Participant will receive 100% of the Deferred Long-Term Incentive Bonuses awarded to him or her in cash within 31 days following the Participant's
termination date.

	iii.
	Following
a Change in Control transaction and the Closing Date, if all of the following three events occur:

	(A)
	the
Company creates a circumstance that gives rise to Good Reason, which is deemed to occur on the date on which the Participant is notified of a circumstance that when effective will
give rise to Good Reason; provided, however, that if the Participant is notified by the Company of the circumstance giving rise to Good Reason prior to the Closing Date, then the date the Good Reason
is deemed to occur will be the Closing Date;

	(B)
	the
Participant provides written notice to the Company of his or her intent to terminate his or her employment voluntarily due to the Good Reason within 14 days following the
occurrence of the Good Reason; this notice must (I) identify for the Company the circumstance giving rise to Good Reason and (II) provide at least 14 days' advance notice to the
Company of the Participant's intended termination date, and

	(C)
	the
Company fails to eliminate the circumstance that gave rise to Good Reason within five days following its receipt of notice from the Participant 

then
the Participant will receive 100% of the Deferred Long-Term Incentive Bonuses awarded to him or her in cash within 31 days following the dates on which those amounts otherwise
would have been earned. If the Company does eliminate the circumstances that gave rise to Good Reason within the five days following its receipt of the above-mentioned notice from the Participant and
the Participant chooses not to remain an employee of the Company or its successor, then the Participant will forfeit all remaining unearned Deferred Long-Term Incentive Bonuses (see
section 10.8). 

        (e)   Forfeiture of Deferred Long-Term Incentive Bonuses when the Participant's Employment Terminates Prior to the Dates on which the
Bonuses are Earned: 

	i.
	If
a Participant is not an employee in good standing on the dates on which the Deferred Long-Term Incentive Bonuses are earned for any reason except those specifically
provided in subsection 4.2 (d), then the Participant will forfeit any unearned Deferred Long-Term Incentive Bonuses in their entirety and will not receive any of the unearned Deferred
Long-Term Incentive Bonuses awarded to him or her.

	ii.
	If
the Company terminates the employment of a Participant for Cause prior to the dates on which the payments are earned (pursuant to the prior subsections of this section 4.2),
then the Participant will forfeit any unearned Deferred Long Term Incentive Bonus and will not receive any of the unearned Deferred Long-Term Incentive Bonuses awarded to him or her.

	iii.
	Following
a Change in Control transaction and the Closing Date, if the Participant terminates his or her employment voluntarily without Good Reason, but prior to the dates on which
the payments are earned (pursuant to the prior subsections of this section 4.2), then the Participant will forfeit any unearned Deferred Long-Term Incentive 

2

 

Bonus
and will not receive any of the unearned Deferred Long-Term Incentive Bonuses awarded to him or her. 

	iv.
	Following
a Change in Control transaction and the Closing Date, if any one of the following events occur prior to the dates on which the payments are earned (pursuant to the prior
subsections of this section 4.2):

	(A)
	the
Participant terminates his or her employment voluntarily without Good Reason;

	(B)
	the
Participant terminates his or her employment voluntarily more than 14 days following the later to occur of (I) the date on which the Participant is notified of a
circumstance that when effective will give rise to Good Reason or (II) the Closing Date,

	(C)
	the
Participant provides less than 14 days' advance written notice to the Company of his or her intent to terminate his or her employment, regardless of whether a circumstance
that gives rise to Good Reason has occurred, or

	(D)
	the
Company eliminates the circumstances that gave rise to Good Reason within five days following its receipt of the Participant's written notice provided in section 4.2.d.iii.
and the Participant nevertheless voluntarily terminates his or her employment with the Company then the Participant will forfeit any unearned Deferred Long Term Incentive Bonus and will not receive
any of the unearned Deferred Long-Term Incentive Bonuses awarded to him or her (see section 10.8). 

        4.3    Form and Timing of Deferred Long-Term Incentive Bonus Distributions    

        Deferred
Long-Term Incentive Bonus amounts that have been earned pursuant to this Section 4, if any, shall be distributed to the Participant in the form of a cash lump
sum payment (net of withholding taxes) within 31 days after such Bonus Amounts have been earned, or, as appropriate, to the Participant's beneficiaries as specified in Section 8. 

5.     CHANGE IN CONTROL BONUS AWARDS  

        5.1    Change in Control/Retention Bonuses    

        (a)   If
a Change in Control event occurs, the Board of Directors will determine in its sole discretion: 

	i.
	the
aggregate amount of the Change in Control/Retention Bonuses to be paid to the Participants and

	ii.
	the
form and timing of the payment of any Change in Control/Retention Bonuses to be paid. 

The
Compensation Committee will determine each Participant's portion of the Change in Control/Retention Bonus pool based on that Participant's responsibilities and relative contributions to the
business of the Company in the period immediately prior to the Change of Control event. 

        (b)   the
aggregate value of the Change in Control/Retention Bonuses for all of the Participants as a group will be determined by the Compensation Committee of the Company in
its sole discretion within 31 days following a Change of Control event. The aggregate pool value of the Change in Control/Retention Bonuses will be a percentage of the total valuation of the
Company established by the Change of Control event, so that the aggregate value of the Change of Control/Retention Bonuses will increase as the valuation of the Company increases. 

3

 

        5.2    Eligibility for Change in Control/Retention Bonuses    

        (a)   Each
Participant individually may only earn the portion of the Change in Control/Retention Bonus awarded to him or her under the Plan by remaining an employee in good
standing of the Company continuously through the Closing Date. 

        (b)   Forfeiture of Change in Control/Retention Bonuses When the Participant's Employment Terminates Prior to the Closing Date:
A Change in Control/Retention Bonus awarded under the Plan shall be forfeited in its entirety by any Participant if the Participant's employment is terminated for any reason prior to the Closing Date,
including from death, Disability or Normal Retirement. 

        5.3    Form and Timing of Change in Control/Retention Bonus Distributions    

        (a)   Subject
to the provisions of subsections (b) and (c) of this section, each Change in Control/Retention Bonus paid to a Participant under the Plan (or to a
Participant's Beneficiary) shall be paid in the same form as the consideration received by the Company's shareholders (the "Shareholders") as outlined in the Closing Documents and shall be paid at the
same time as such consideration is paid to the Shareholders, unless the Compensation Committee determines otherwise in its sole discretion. 

        (b)   If
all or a portion of the sales proceeds received by the Shareholders is either (i) "restricted securities" (as such term is defined under the Securities Act of
1933, as amended, and the regulations promulgated thereunder) or (ii) subject to contractual transfer restrictions, then a corresponding portion of the Change in Control/Retention Bonus shall
be retained by the Company until both (x) the securities are registered or may be sold pursuant to an exemption from the registration requirements and (y) the contractual transfer
restrictions lapse, as may be outlined in the Closing Documents. 

        (c)   Notwithstanding
paragraphs (a) and (b) of this section, if the Change of Control transaction is an IPO, the Change in Control/Retention Bonuses paid to
Participants under the Plan may be paid in the form of restricted shares of the Company's common stock that are subject to forfeiture, in their entirety, if the Participant voluntarily terminates his
or her employment with the Company before the first anniversary of the IPO. 

6.     EXTENDED SEVERANCE PAYMENTS  

        6.1    Extended Severance Payments    

        (a)   A
Participant may be entitled to an Extended Severance Payment in the event of a Change in Control under this Plan, as specifically provided in the eligibility
provisions of section 6.2 below. 

        (b)   The
Compensation Committee will determine in its sole discretion any Extended Severance Payment amounts for which each Participant may be eligible. The amount of any
Extended Severance Payment amount will be communicated in writing to the Participant, signed by the Chief Executive Officer or President of the Company. 

        (c)   A
Participant that is eligible for an Extended Severance Payment will be eligible for both the basic severance payment to
which he or she is entitled under the Company's regular severance plans and this additional extended severance payment. 

4

 

        6.2    Eligibility Requirements for Extended Severance Payments    

        (a)   Except
as is specifically provided in section 6.2 (c) below, to earn an Extended Severance Payment under the Plan a Participant must meet both of the
following eligibility requirements: 

	i.
	the
Participant must be an employee in good standing of the Company on the Closing Date; and

	ii.
	one
of the following two circumstances must also occur, either:

	A.
	on
or prior to the Closing Date the Participant receives notice from the Company that his or her employment will be terminated following the Closing Date; or

	B.
	on
or prior to the Closing Date: (I) the Participant receives a written offer describing the terms of the Participant's employment following the Closing Date, (II) one or
more of the terms of that written offer would give rise to Good Reason, (III) the Participant notifies the Company in writing within 14 days of his or her receipt of the Company's
written offer that he or she will not accept the terms of the written offer and will voluntarily terminate his or her employment not less than 14 days following the date of the notice and
(IV) the Company fails to revise the terms of the written offer within five days of its receipt of the Participant's written notice to eliminate the term(s) that gave rise to Good Reason (see
section 10.8). 

        (b)   A
Participant will forfeit the entire amount of an Extended Severance Payment award available under the Plan if any one or more of the following circumstances occurs: 

	i.
	the
Participant is not an employee in good standing of the Company on the Closing Date;

	ii.
	the
Participant voluntarily terminates his or her employment with the Company following the Closing Date when there is no Good Reason, including when the Participant voluntarily
terminates his or her employment after Company has eliminated any circumstance that would give rise to Good Reason within five days of the Company receiving written notice from the Participant of his
or her intent to resign based on Good Reason (see section 10.8);

	iii.
	the
Participant fails to provide 14 days' advance written notice to the Company of his or her intent to terminate his or her employment for Good Reason; or

	iv.
	the
Participant fails to provide written notice of his or her intent to terminate his or her employment with the Company within 14 days following the later of (A) the
Closing Date or (B) the date on which the Participant receives notice of a circumstance that would give rise to Good Reason. 

        (c)   Payment of an Extended Severance Payment when the Participant's Employment Terminates After Execution of the Closing
Documents: If there is a pending Change of Control event and the Company terminates the employment of a Participant without Cause after the execution by the Company of the
Closing Documents and prior to the Closing Date, then the Participant will be eligible to receive the Extended Severance Bonus awarded to him or her within 31 days following the later of the
Closing Date or the date on which the Participant's employment is terminated; 

        (d)   Forfeiture of an Extended Severance Payment when the Participant's Employment Terminates Prior to the Closing Date: If
the Participant's employment is terminated for any reason prior to a Closing Date, other than pursuant to subsection 6.2 (c) above, including termination from death, Disability or Normal
Retirement, then the Participant will not receive any of the Extended Severance Bonus that had been awarded to him or her. 

5

 

        6.3    Form and Timing of Extended Severance Bonus Distributions    

        An
Extended Severance Bonus amount that has been earned, if any, shall be distributed to the Participant in the form of a cash lump sum payment (net of withholding taxes) within
31 days after the date on which the Participant's employment terminates or, as appropriate, to the Participant's beneficiaries, as specified in Section 7. 

7.     BENEFICIARY DESIGNATION  

        Each Participant must designate, by written notice to the Personnel Department one or more Family Member(s) as such Participant's Beneficiary under the Plan. By
written notice to the Company, a Participant may revoke the Participant's designation of a Beneficiary or change such Participant's Beneficiary at any time prior to such Participant's termination or
death. If a Participant has designated no Family Member as such Participant's Beneficiary or if no designated Beneficiary survives such Participant, such Participant's Beneficiary shall be such
Participant's estate. Participants and their Beneficiaries shall furnish to the Personnel Department such evidence, data, or information and execute such documents as the Company may request. 

8.     ADMINISTRATION  

        8.1    Compensation Committee    

        The
Compensation Committee shall administer the Plan and may designate person(s) who are Company employees to oversee the day-to-day administration of the Plan.
The Compensation Committee shall be responsible for the management, operation, and administration of the Plan. Subject to the remaining terms of the Plan, the Compensation Committee shall, in addition
to those provided elsewhere in the Plan, have the following powers, rights, and duties. 

        Any
determination made by the Compensation Committee pursuant to the provisions of the Plan with respect to any awards, payments, or other transactions under the Plan shall be made in
the sole discretion of such committee at the time of the award, payment, or other transaction or, unless in contravention of any express term of the Plan, at any time thereafter. All decisions made by
the Compensation Committee shall be final and binding on all persons, including the Company and Plan Participant. 

        8.2    Responsibility and Indemnification    

        No
member of the Compensation Committee or of the Board of Directors or any person who is designated to oversee the day to day administration of the Plan shall be liable to any person
for any action taken or omitted in connection with the administration of this Plan nor shall the Company be liable to any person for any such action on the part of a director, officer, or employee of
the Company within the scope of his or her Company duties. Each member of the Compensation Committee shall be indemnified and held harmless by the Company for any liability arising out of the
administration of the Plan. 

        8.3    Tax Withholding    

        The
Company shall deduct from any distributions hereunder any federal, state, or local taxes required by law to be withheld with respect to such Participant's distributions. 

9.     AMENDMENT AND TERMINATION  

        9.1    Amendment    

        The
Plan may be amended in whole or in part by the Company, the Compensation Committee, by action of the Board of Directors at any time. The Company reserves the unilateral right to
change any 

6

 

rule
under the Plan if it deems such a change is necessary to avoid the application of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to the Plan. No such action may
adversely affect the amount of any Deferred Long Term Incentive Bonus previously awarded to any Participant. 

        9.2    Company's Right to Terminate    

        The
Company reserves the sole right to terminate the Plan, by action of the Board of Directors, at any time. No such action may adversely affect the amount of any Deferred Long Term
Incentive Bonus previously awarded to any Participant. 

        9.3    Successor to the Company    

        This
Plan shall be binding upon any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of
the Company, and the Company shall require any such successor to expressly assume and agree to perform under this Plan. As used in this Plan, all references to the term "Company' shall include a
reference to any such successor. 

10.   MISCELLANEOUS  

        10.1    No Implied Rights    

        Neither
the establishment of the Plan nor any amendment thereof shall be construed as giving any Participant, Beneficiary, or any other person any legal or equitable right unless such
right shall be specifically provided for in the Plan or conferred by specific action of the Compensation Committee in accordance with the terms and provisions of the Plan. Except as expressly provided
in this Plan, the Company shall not be required or be liable to make any payment under the Plan. 

        10.2    No Implied Rights To Assets of Company    

        Neither
the Participant, Beneficiary nor any other person shall acquire, by reason of the Plan, any right in or title to any assets, funds or property of the Company whatsoever
including, without limiting the generality of the foregoing, any specific funds, assets, or other property which the Company, the Board of Directors or the Compensation Committee, in their sole
discretion, may set aside in anticipation of a liability hereunder. Any benefits which become payable hereunder shall be paid only from the general assets of the Company. The Bonus Amounts shall be
bookkeeping memorandums only and do not represent allocated or separated funds. The Company retains sole and absolute discretion regarding the use and investment of any amounts necessary for it to
fund the Bonus Amounts, including using such amounts as part of the general working capital to support the Company's business. The Participant shall have only a contractual right to the amounts, if
any, payable hereunder unsecured by any asset of the Company. Nothing contained in the Plan constitutes a guarantee by the Company, the Board of Directors, the Compensation Committee, the officers,
directors or shareholders of the Company, or
affiliates of any of them, that the assets of the Company shall be sufficient to pay any benefit to any person. However, the payments pursuant to this Plan will be senior in preference to any proceeds
that are distributable to the shareholders of the Company in connection with a sale or liquidation of the Company. 

        10.3    No Employment Rights or Terms of Employment    

        Nothing
herein shall constitute a contract of employment or of continuing service or in any manner obligate the Company to continue the services of the Participant, or shall serve as a
limitation of the right of the Company to discharge any of its employees, with or without cause. Nothing herein shall be construed as fixing or regulating the compensation payable to the Participant.
The terms of the Company's Employee Handbook, as amended from time to time, shall govern the terms of the 

7

 

employment
of the Participants by the Company, and any apparent conflict between the terms of the Employee Handbook and this Plan shall be resolved in favor of the terms of the Employee Handbook. 

        10.4    Other Benefits    

        No
Bonus paid under the Plan shall be considered compensation for purposes of computing benefits under any "employee benefit plan" (as defined in Section 3(3) of ERISA) of the
Company nor affect any benefits or compensation due to the Participant under any other benefit or compensation plan of the Company now or subsequently in effect (except as provided to the contrary in
such Company plan). 

        10.5    Replacement of Prior Incentive Plan    

        Bonus
Amounts awarded to the Participants under the Plan shall be considered to replace and extinguish any awards to Participants or other employees under the Company's Performance Share
plan. The Performance Share Plan is cancelled in its entirety, and all awards under that plan are cancelled, as of the effective date of this Plan. 

        10.6    Offset    

        If,
at the time payments are to be made hereunder, the Participant or the Beneficiary or both are indebted, obligated or have loans or assets due to the Company, then the payments under
the Plan
remaining to be made to the Participant or the Beneficiary or both may, at the discretion of the Company, be reduced by the amount of such indebtedness or obligation, provided, however, that an
election by the Company not to reduce any such payment or payments shall not constitute a waiver of its claim for such indebtedness or obligation in the future. 

        10.7    Non-Assignability and Non-Transferable    

        Neither
the Participant, Beneficiary nor any other person shall have any voluntary or involuntary right to commute, sell, assign, pledge, anticipate, mortgage, or otherwise encumber,
transfer, hypothecate, or convey in advance of actual receipt the amounts, if any payable hereunder or any part thereof, which are expressly declared to be unassignable and
non-transferable. No part of the amounts payable prior to actual payment shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony, or separate
liabilities or maintenance owed by the Participant or any other person, or be transferable by operation of law in the event of the Participant's or any other person's bankruptcy or insolvency. 

        10.8    Participant's Notice to Company of Good Reason    

        If
a Participant determines to terminate his or her employment with the Company following a Change of Control because the Participant is notified that circumstances giving rise to Good
Reason will occur, then in order to receive any unearned Bonus Amount under the Plan the Participant must: 

        (a)   Identify
in writing to the Company the circumstances that in the opinion of the Participant give rise to Good Reason; 

        (b)   Specify
in his or her notice that if the circumstance giving rise to Good Reason is not cured then the Participant will terminate his or her employment with the Company
in not less than 14 days; 

        (c)   Work
in good faith with the Company to resolve any misunderstanding by the Participant or the Company relative to the circumstance that the Participant believes has or
will cause Good Reason; and 

        (d)   Remain
in the employ of the Company if the Company eliminates within five days of its receipt of the Participant's written notice the circumstances that have or would
give rise to Good Reason. 

8

 

        10.9    Notice to Company    

        Any
notice required or permitted to be given under the Plan to the Company shall be sufficient if in writing and delivered by registered or certified mail to the Company at its principal
office, directed to the attention of the President. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail as of the date shown on the postmark, or the receipt
for registration or certification. 

        10.10    Notice to Participant    

        Any
notice required or permitted to be given under the Plan to the Participant shall be sufficient if in writing and delivered by registered or certified mail to the Participant's
principal residence as reflected in the Company's personnel records. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail as of the date shown on the postmark,
or the receipt for registration or certification. 

        10.11    Governing Law    

        The
Plan and all awards made and actions taken under the Plan shall be governed and construed according to the laws of the State of Maryland (without regard to the choice of law rules
thereof). 

        10.12    Gender and Number    

        Where
appropriate, references in this Plan to the masculine shall include the feminine, and references to the singular shall include the plural. 

        10.13    Severability    

        In
the event any provision of the Plan shall be held legally invalid for any reasons, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been included. 

	 Participant:	 	Fieldstone Mortgage Company
	

Signature:	
 	

 	
 	

By:	
 	

 
	 	 	
	 	 	 	

	Printed Name:	 	 	 	Name/Title:	 	 
	 	 	
	 	 	 	

	Date:	 	 	 	Date:	 	 
	 	 	
	 	 	 	

9

 
Appendix  

FIELDSTONE MORTGAGE COMPANY  

 SENIOR MANAGER INCENTIVE BONUS AND RETENTION PLAN  

 Definitions  

        2.1    "Beneficiary" means the person or persons so designated by a Participant pursuant to Section 8. 

        2.2    "Board"
means the Board of Directors of the Company. 

        2.3    "Bonus"
or "Bonus Amount" means any amount awarded to a Participant pursuant to Sections 4, 5 and 6 of this Plan, and does not include any amounts payable to a
Participant under any other incentive plan or any other term of his or her employment by the Company. 

        2.4    "Cause"
shall be deemed to exist if in the reasonable judgment of the Board: 

	(a)
	the
Participant is formally charged with or indicted for having committed either fraud, theft against the Company or any felony;

	(b)
	the
Participant has compromised trade secrets or other similarly valuable proprietary information of the Company;

	(c)
	the
Participant has failed to perform to the standards of his position, including failure to meet the Company's standards for financial performance, insubordination, or failure to
follow reasonable directives from his or her manager;

	(d)
	the
Participant has engaged in any unauthorized activity that has caused, or in the reasonable opinion of the Board of Directors may reasonably be expected to cause in the past or
future, substantial or material harm or embarrassment to the business, operations or reputation of the Company or a subsidiary of the Company.

	(e)
	the
Participant has engaged in activities, behavior or action, during or after business hours, that in the sole determination of the Board of Directors in its discretion is
unacceptable for an officer of the Company; 

        2.5    A
"Change in Control" shall be deemed to have occurred if: 

	(a)
	the
Company consummates a merger or consolidation of the Company with or into another corporation, the result of which is that the shareholders of the Company at the time of the
execution of the agreement to merge or consolidate own less than fifty percent (50%) of the total equity of the corporation surviving or resulting from the merger or consolidation; or

	(b)
	a
sale occurs of all or substantially all of the assets of the Company, provided that the ordinary course sales of the Company's inventory from time to time shall not be deemed to be
a sale of the Company for purposes of this clause. 

        2.6    "Closing
Date" means the date on which a Change of Control event is consummated according to the terms of the Closing Documents. 

        2.7    "Closing
Documents" means the definitive documents that establish the terms of a Change of Control transaction. 

        2.8    "Company"
means Fieldstone Mortgage Company, a Maryland corporation. 

        2.9    "Compensation
Committee" means the Compensation Committee of the Board of Directors, which may include members of the Board and other individuals. 

10

 

        2.10    "Disability"
shall have the same meaning as under the Company-sponsored long-term disability plan. 

        2.11    "Effective
Date" means June 30, 2002. 

        2.12    "Family
Member" means a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister,
brother-in-law, or sister-in-law, including adoptive relationships, of the Participant, any person sharing the Participant's household (other than a
tenant or employee), a trust in which any one or more of these persons have more than fifty percent of the beneficial interest, a foundation in which any one or more of these persons (or the
Participant) control the management of assets, and any other entity in which one or more these persons (or the Participant) own more than fifty percent of the voting interests; provided, however, that
to the extent required by applicable law, the term Family Member shall be limited to a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister,
brother-in-law, or sister-in-law, including adoptive relationships, of the Participant or a trust or foundation for the exclusive benefit of any one or
more of these persons. 

        2.13    "Good
Reason" means one or more of the following events if (and only if) it occurs in connection with a Change of Control: 

	(a)
	the
Participant's base salary is reduced, provided that the base salary may be reduced (and such reduction would not constitute "Good Reason") by up to 20% by the Company or its
successor;

	(b)
	a
change in responsibilities that reduces by 33% or more the projected total income (based on the Company's internal projections or plan) of the Participant;

	(c)
	the
Participant has his or her then current responsibilities or areas of supervision with the Company substantially reduced by 50% or more;

	(d)
	the
Participant is required to relocate his or her residence in order to retain his or her position with the Company as of the Closing Date; or

	(e)
	the
Participant is an employee in good standing with the Company on the Closing Date, but the Participant is notified prior to the Closing Date that he or she will not be offered any
employment by the Company or its successor following the Closing Date. 

A
change of the Participant's title that does not affect the scope of the Participant's responsibilities is not Good Reason. 

        2.14    "IPO"
means the public sale in an underwritten offering of equity securities of the Company registered with the Securities and Exchange Commission. 

        2.15    "Normal
Retirement" means voluntary termination of employment by the Participant after attainment of age 60 and after at least five years of uninterrupted full time
service with the Company. 

        2.16    "Participant"
means a person who is designated, pursuant to Section 3, to be eligible to receive benefits under the Plan. 

        2.17    "Plan"
means this Fieldstone Mortgage Company Senior Manager Incentive Bonus and Retention Plan, as amended from time to time. 

        2.18    "Shareholders"
means the shareholder(s) of Fieldstone Mortgage Company, as may change from time to time. 

        2.19    "Year
of Service" means a 365-day period (or 366 day period in the case of a leap year) during which a Participant has been employed by the Company. 

11

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