XXX XXXXXX, INC. DIPLOMAT CORPORATION
000 Xxxxxx Xxxxxx 25 Xxx Xxxxx Drive
Teaneck, New Jersey Stony Point, New York
October 23, 1997
Xxxxxx X. Xxxxxxxxx
00 Xxxxxxxxx Xxxx
Xxxxx Xxxx, Xxx Xxxx 00000
Re: Settlement Agreement
--------------------
Dear Xx. Xxxxxxxxx:
Xxx Xxxxxx, Inc. ("Magram") and Diplomat Corporation
("Diplomat"), on the one hand, and Xxxxxx X. Xxxxxxxxx ("Xxxxxxxxx"), on the
other hand, by executing this letter agreement (the "Agreement"), each
represent, stipulate, covenant, and agree as follows:
1. Until his employment was terminated on August 4, 1997,
Xxxxxxxxx served as President and Chief Executive Officer of Xxxx Xxxxxxx'x
Brownstone Studio, Inc., which along with its affiliate Xxxxxx, Inc., is
currently the subject of a Chapter 11 Bankruptcy Proceeding pending in the
United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court") captioned as In re Xxxx Xxxxxxx'x Brownstone Studio, Inc.,
d/b/a Brownstone Studio, Inc. and Xxxxxx, Inc., jointly administered Chapter 11
Case Nos. 97-B-41214 and 97 B-41215 (JLG) (the "Debtor").
2. On September 25, 1997, the Debtor filed a motion seeking
approval of an Asset Purchase Agreement between the Debtor, as seller and
Magram, as buyer, free and clear of all liens,
claims, interest and encumbrances (the "Sale motion"), which is scheduled for
hearing on October 24, 1997 at 9:00 a.m.
3. On October 16, 1997, Xxxxxxxxx served upon the Debtor,
Magram and the Official Committee of unsecured creditors (the "Committee") a
request for payment of Administrative Expenses in the amount of $262,843.40
("Administrative Claim"), which was filed with the Bankruptcy Court on October
17, 1997, seeking payment for inter alia, severance pay, accrued vacation pay,
unreimbursed travel and entertainment expense and other sums as more fully
delineated in the Administrative Claim.
4. On October 16, 1997, Xxxxxxxxx served upon the Debtor,
Magram and the Committee a Verified Objection of Xxxxxxxxx to the Sale Motion
("Objection") and Notices of Deposition and Requests for Production of Documents
upon the Debtor's principal, Xxxxxxx Xxxxxxxx, and upon Magram's principal's,
Xxx X. Xxxxxxxxx and Xxxxxx X. Xxxxx.
5. Magram, Diplomat and Xxxxxxxxx have agreed to the following
settlement regarding the Sale Motion, the Objection and the Administrative
Claim:
x. Xxxxxxxxx shall refrain from filing the Objection
prior to the Sale Hearing so long as the terms hereof are disclosed by Magram to
the Court at the Sale Hearing, but shall have until the beginning of the Sale
Hearing to file such Objection in the event of Magram's failure to comply with
the terms of this paragraph.
b. At the closing of the Asset Purchase Ageement, but
in no event later than October 31, 1997 at 5:00 p.m., Magram
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and/or Diplomat shall pay to Xxxxxxxxx the sum of $12,500.00 in good and
immediately available funds by certified or bank check and deliver to him 15,000
unrestricted shares of Diplomat common stock which is publicly traded on NASDAQ.
On or before November 28, 1997, Diplomat and/or Magram shall deliver to
Xxxxxxxxx an additional 2,500 unrestricted shares of publicly traded Diplomat
common stock. Upon full payment as set forth in the previous two (2) sentences,
Xxxxxxxxx shall assign his Administrative Claim to Magram.
x. Xxxxxxxxx shall be reasonably available on a
non-exclusive basis for a sixty (60) day period to consult with Magram
concerning the Debtor's business, so long as such consulting services do not
conflict with any other business activity engaged in by Xxxxxxxxx, including,
without limitation, Xxxxxxxxx'x search for employment and/or the performance of
the terms of any other employment or consulting position he may obtain. In no
event shall Xxxxxxxxx'x search for employment and/or his performance of the
terms of any employment make him unavailable to Magram for reasonably requested
consulting services.
6. If, for any reason, whether in connection with a voluntary
or involuntary bankruptcy proceeding, or otherwise, all or any portion of
payments made pursuant to this Agreement is required to be returned by or is
disgorged from Xxxxxxxxx pursuant to a Court Order, and Diplomat or Magram fail
to repay Xxxxxxxxx the amount so returned or disgorged within ten days of such
return or disgorgement, then, in such event, the assignment of the
Administrative Claim to Magram shall be nullified and the Debtor
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shall continue to be obligated for the full Administrative Claim, less any
payments which have been received on the Administrative Claim and are actually
retained by Xxxxxxxxx from any source.
7. In the event that any provision of this Agreement is
breached by Magram or Diplomat, Xxxxxxxxx shall (a) have the right to prosecute
his Administrative Claim in its full amount, minus any payments already received
by him under the Agreement and (b) may seek to enforce the terms of this
Agreement in any appropriate forum.
8. Upon full compliance with the provisions of Paragraph 4,
Magram, Diplomat, Xxxxxxxxx and the Debtor shall execute and deliver mutual
releases subject to the provisions of paragrphs 5 and 6.
9. This Agreement is only effective if Magram is the
successful purchaser at the Sale Hearing.
10. Time shall be of the essence as to each and every
obligation of Diplomat and Magram hereunder, and their failure to meet any one
such obligation shall constitute a default hereunder.
11. This Agreement is and shall be deemed to be a contract
entered into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of the State of New York.
12. This Agreement is binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
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13. The provisions of this Agreement are intended to be for
the sole benefit of the parties hereto and their respective successors and
assigns, and are not intended to be, nor shall be construed to be, for the
benefit of any third party.
14. This Agreement may be executed in counterparts.
Very truly yours,
Diplomat Corporation
By:
------------------------------
Name:
Title:
Xxx Xxxxxx, Inc.
By:
------------------------------
Name:
Title:
ACCEPTED AND AGREED TO:
--------------------------------
Xxxxxx X. Xxxxxxxxx
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STATE OF NEW YORK )
: ss.:
COUNTY OF )
On this __________ day of October, 1997, before me personally
came _______________________________________________, to me known to be the of
____________________________________________ Diplomat Corporation, who executed
the foregoing instrument on behalf of such entity, and acknowledged that he
executed the same.
__________________________________
______________________________
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this __________ day of October, 1997, before me personally
came XXXXXX X. XXXXXXXXX, to me known to be the individual described in and who
executed the foregoing instrument, and acknowledged that he executed the same.
__________________________________
______________________________
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this __________ day of October, 1997, before me personally
came _______________________________________________, to me known to be the
____________________________________________ of Xxx Xxxxxx, Inc., who executed
the foregoing instrument on behalf of such entity, and acknowledged that he
executed the same.
__________________________________
______________________________
Notary Public
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