DIPLOMAT CORPORATION
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT made as of this 13th day of January, 1998
by and between DIPLOMAT CORPORATION, a Delaware corporation (hereinafter
referred to as "Employer") and XXX XXXXXX LTD., a New York corporation and
wholly owned subsidiary of Employer (hereinafter referred to as "Magram"), and
XXXXXX XXXXXX, (hereinafter referred to as "Employee");
W I T N E S S E T H:
WHEREAS, Employer desires to employ Employee as its Executive
Vice President and Chief Operating Officer and Magram wishes to employ Employee
as its Executive Vice President; and
WHEREAS, Employee is willing to be employed in the manner
provided for herein, and to perform the duties provided for herein upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein set forth it is agreed as follows:
1. Employment of Employee. Employer hereby employs Employee as
Executive Vice President and Chief Operating Officer and Magram hereby employs
Employee as Executive Vice President.
2. Term. The term of this Agreement shall commence on
the execution hereof (the "Commencement Date") and expire three (3) years from
such date (which, with renewals, if any, the "Term"). Each 12 month period from
the Commencement Date forward during the Term shall be referred to as an "Annual
Period." After three years from the Commencement Date, this Agreement shall
automatically renew annually unless either Employer or Employee gives notice not
to renew at least one hundred eighty (180) days prior to the end of the
applicable Annual Period. During the Term, Employee shall devote substantially
all of his business time and efforts to Employer and its subsidiaries and
affiliates.
3. Duties. Employee hereby agrees that, throughout the
period of his employment hereunder, he shall devote his business time,
attention, knowledge and skills, diligently in furtherance of the business of
Employer and Magram, shall perform the duties assigned to him by the President
and Board of Directors of Employer and Magram consistent with his executive
positions with Employer and Magram, respectively, and shall observe and carry
out such rules and regulations, policies and directions as Employer and Magram
may from time to time establish to the extent consistent herewith. During the
term of this Agreement, Employee shall do such traveling as may be reasonably
required of him in the performance of his duties on behalf of Employer
consistent with travel during periods prior to the date hereof. Employee shall
be available to confer and consult with and advise the officers and directors of
Employer and Magram at such times during
business hours that may be reasonably required by Employer and Magram. Employee,
in his capacity as an employee of Employer shall report directly and solely to
the President of Employer, and, in his capacity as an employee of Magram shall
report directly and solely to the President of Magram.
4. Compensation.
(a) Employee shall be paid a minimum of $200,000 for each
Annual Period such amount to be increased, if Employer is profitable for the
fiscal year ending September 30, 1998, in an amount determined by the majority
of the noninterested members of the Board of Employer excluding Employee at the
Board's discretion. Employee shall be paid periodically in accordance with the
policies of the Employer during the term of this Agreement, but not less
frequently than monthly. As an executive officer of Employer, Employee is
eligible for an annual bonus, if any, which will be determined and paid in
accordance with policies set from time to time by the Board of Employer. As an
executive officer of Magram, Employee is eligible for an annual bonus, if any,
which will be determined and paid in accordance with policies set from time to
time by the majority of the non interested members of the Board of Magram,
excluding Employee. Such bonuses are in addition to amounts received from the
Total Bonus Pool pursuant to Section 10 hereof.
(b) Employee shall be entitled to participate in and
receive the benefits of all pension, profit-sharing, deferred compensation,
retirement, hospitalization, insurance, medical or dental or other benefit plan
or arrangement generally available to executive employees of Employer as may now
or hereafter exist; provided that Employer shall provide Employee medical
benefits consistent with Xxx Xxxxxx Ltd.'s former practices. Employee shall also
be entitled to participate in or receive all other benefits and perquisites
generally available to senior executives of Employer that may be in effect from
time to time during the Employee's employment hereunder. Employer shall be under
no obligation to institute or continue the existence of any such employee plan,
benefit or perquisite. Employer shall consider adopting a deferred
compensation/retirement benefits plan, in which, upon adoption, Employee will be
permitted to participate.
5. Expenses. Employer shall reimburse Employee, promptly
upon presentation of receipts or vouchers thereof, for all expenses
reasonably incurred by him in connection with the performance of his duties
hereunder and the business of Employer, in accordance with policies of Employer
from time to time in effect. Until expiration of the current automobile lease,
Employer shall furnish Employee a luxury automobile for so long as Employee
shall remain in the employ of Employer for his exclusive use in connection with
the business of Employer by paying the existing lease payments, insurance and
all costs incident to the maintenance and operation of such automobile. After
the current lease expires, Employee will be entitled to a similar automobile
procedurally consistent with Parent's policies. Employer shall pay all expenses
incident to the maintenance and operation of such automobile, including, without
limitation, insurance, gasoline, oil, and repairs, the costs of furnishing such
automobile and of such maintenance and operation not to exceed $20,000 per
Annual Period. Employer shall also pay the cost of a
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parking space for Employee's automobile in a facility as proximate to Employer's
New York office as is practicable, where needed. Employer shall also provide
Employee with a cellular phone.
6. Vacation. Employee shall be entitled to receive
three (3) weeks paid vacation time after each year of employment upon dates
agreed upon by Employer. Upon separation of employment, for any reason, vacation
time accrued and not used shall be paid at the salary rate of Employee in effect
at the time of employment separation.
7. Employee's Representations. Employee is free to
enter into this Employment Agreement and to perform each of the provisions
contained herein. Employee represents and warrants that Employee is not
restricted or prohibited, contractually or otherwise, from entering into and
performing this Employment Agreement, and that Employee's execution and
performance of this Employment Agreement is not a violation or breach of any
agreement between Employee and any other person or entity.
8. Nondisclosure of Confidential Information; Ownership of
Intellectual Property Rights; Non Competition; Covenant Not to Compete.
(a) Nondisclosure of Confidential Information. During the
term of this Employment Agreement and at all times thereafter, Employee will
keep confidential and will not directly or indirectly divulge to anyone nor use
or otherwise appropriate for Employee's own benefit, or on behalf of any other
person, firm, partnership or corporation by whom Employee might subsequently be
employed or otherwise associated or affiliated with, any Confidential
Information (as defined herein). For this purpose, "Confidential Information"
means any and all trade secrets or other confidential information of any kind,
nature or description relating to the business of Employer provided that such
information is not and does not in the future become known or available to third
parties or general economic trade information known to the industry, both of
which does not arise as a result of a disclosure by Employee or his agents.
(b) Employer Materials. All reports and analysis, designs,
drawings, contracts, contractual arrangements, specifications, computer
software, computer hardware and other equipment, computer printouts, computer
disks, documents, memoranda, notebooks, correspondence, files, lists and other
records, and the like, and all photocopies or other reproductions thereof,
relating to the business of Employer which Employee shall prepare, use,
construct, observe, possess or control, except Employee copies of all such
documents which pertain to Employee ("Employee Materials"), shall be and remain
the sole property of Employer. Upon termination of this Employment Agreement,
Employee shall deliver promptly to Employer all such Employer Materials.
(c) Certain Restrictions on Business Activities. During
the term of this Employment Agreement, Employee agrees that:
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(i) Business Activities. He will not, directly or
indirectly, own an interest in, operate, join, control or participate in, or be
connected as an officer, employee, agent, independent contractor, partner,
shareholder or principal of any corporation, partnership, proprietorship, firm,
association, person or other entity providing services and/or products or a
combination thereof which directly or indirectly compete with Employer's
business, and he will not undertake planning for or organization of any business
activity directly competitive with Employer's business, except for the period
after notice of non-renewal of Employee's employment, or combine or conspire
with other employees or representatives of Employer's business for the purpose
of organizing any such competitive business activity, except the purchase of
less than four percent (4%) of the stock of a publicly traded company which is
not affiliated with Employer.
(ii) Solicitation of Employees, Etc. During the term
of this Agreement and six (6) months thereafter, he will not, directly or
indirectly or by action in concert with others, induce or influence (or seek to
induce or influence) any person who is engaged (as an employee, agent,
independent contractor or otherwise) by Employer to terminate his or her
employment or engagement.
(d) Covenant Not to Compete. Employee covenants and agrees
that, if Employee's employment with Employer is terminated other than by
Employer without Cause (as defined herein) at any time, for a period of six (6)
months after the date of such termination, Employee will not engage or be
engaged, in any capacity, directly or indirectly, including but not limited as
employee, agent, consultant, manager, executive, owner or stockholder (except as
a passive investor holding less than a four percent (4%) equity interest in any
enterprise the securities of which are publicly traded) in any business entity
doing business in the United States engaged in direct competition with the
business conducted by Employer on the date of termination. This Covenant Not to
Compete shall survive the termination or expiration of the other provisions of
this Employment Agreement. If any court determines that this Covenant Not to
Compete, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
(e) Severability. Employee agrees, in the event that any
provision of this Section 8 or any word, phrase, clause, sentence or other
portion thereof shall be held to be unenforceable or invalid for any reason,
such provision or portion thereof shall be modified or deleted in such a manner
so as to make this Section 8 as modified legal and enforceable to the fullest
extent permitted under applicable laws. The validity and enforceability of the
remaining provisions or portions thereof shall not be affected thereby and shall
remain valid and enforceable to the fullest extent permitted under applicable
laws. A waiver of any breach of the provisions of this Section 8 shall not be
construed as a waiver of any subsequent breach of the same or any other
provision.
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9. Termination.
(a) Termination by Employer.
(i) Employer may terminate this Agreement
upon written notice for Cause. For purposes hereof, "Cause" shall mean (A)
engaging by the Employee in conduct that constitutes ctivity in direct
competition with Employer's businesses; (B) the conviction of Employee for the
commission of a felony; (C) the habitual abuse of alcohol or controlled
substances; (D) deliberate actions taken by Employee to the material detriment
of Employer; and/or (E) material breach of this Agreement. Notwithstanding
anything to the contrary in this Section 9(a)(i), Employer may not terminate
Employee's employment under this Agreement for Cause unless Employee shall have
first received notice from the Board advising Employee of the specific acts or
omissions alleged to constitute Cause, and such acts or omissions continue after
Employee shall have had a reasonable opportunity (at least 20 days from the date
Employee receives the notice from the Board) to correct the acts or omissions so
complained of.
(ii) In the event that during the term of
his employment with Employer, Employee shall become Disabled (as that term is
defined herein), Employer may terminate this Agreement and Employee's employment
hereunder at any time upon 10 days' written notice to Employee and Employee
shall be entitled to receive disability payments during the succeeding 12-month
period at a rate equal to one-half of the rate of the base salary as provided in
Section 4(a) to which he was theretofore entitled, payable in equal installments
no less frequently than monthly. For the purposes of this Agreement, Employee
shall be deemed to have become Disabled when by reason of his physical or mental
incapacity, Employee shall not perform his duties hereunder for a period of four
consecutive months or for an aggregate of 120 days in any consecutive period of
six months. Any proceeds of disability insurance policies or plans maintained by
Employer, in addition to the contributory state mandated minimum coverage
policy, for the benefit of Employee shall be paid to Employee and shall reduce
on a dollar for dollar basis the obligations of Employer under this Section 9.
(iii) This Employment Agreement and
Employer's obligations hereunder shall terminate upon Employee's death. Upon
termination for death, Employer shall continue to pay the compensation payments
pursuant to Section 4(a) to the surviving spouse of Employee (or if there is
none to Employee's estate) for the succeeding six (6) months.
(b) Termination by Employee. Employee shall have the
right to terminate his employment under this Agreement upon 30 days' notice to
Employer given within 90 days following the occurrence of any of the following
events:
(A) Employer acts to materially reduc
Employee's duties and responsibilities hereunder.
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(B) A reduction in Employee's rate of base
compensation, the failure to pay Employee a bonus due under Section 10 hereof,
or material reduction in Employee's other benefits; or
(C) A material breach of this Agreement by
Employer, which is not cured within thirty (30) days of written notice of such
breach by Employer.
If Employer shall terminate Employee's employment other than due to his death or
disability or for Cause (as defined in Section 9(a)(i) of this Agreement), or if
Employee shall terminate this Agreement under Section 9(b), Employee shall
continue to be entitled to receive all amounts provided for by Section 4 and all
additional employee benefits under Section 4 regardless of the amount of
compensation he may earn with respect to any other employment he may obtain for
the remainder of the Term as it may be extended from time to time.
10. Bonus. Each of Employee, Xxxxxx Xxxxxx and
Xxxxxxxxx Xxxxx (collectively the "Total Bonus Pool Participants") shall be
entitled to a portion of an amount equal to ten percent (10%) of Magram's
earnings before income taxes up to a maximum of $150,000 per Annual Period
("Total Bonus Pool"). The allocation of the Total Bonus Pool to each Total Bonus
Pool Participant shall be as follows: Employee - 40%; Xxxxxx Xxxxxx - 40%;
Xxxxxxxxx Xxxxx - 20%. The Total Bonus Pool shall be payable within 90 days
after the end of Magram's fiscal year commencing with the fiscal year ended
September 30, 1998. So long as any Total Bonus Pool Participant is an employee
of Magram, the full amount of the Total Bonus Pool shall be dispersed to the
Total Bonus Pool Participants annually.
11. Excise Tax. In the event that any payment or benefit
received or to be received by Employee in connection with a termination
of his employment with Employer would constitute a "parachute payment" within
the meaning of Code Section 280G or any similar or successor provision to 280G
and/or would be subject to any excise tax imposed by Code Section 4999 or any
similar or successor provision then Employer shall assume all liability for the
payment of any such tax and Employer shall immediately reimburse Employee on a
"grossed-up" basis for any income taxes attributable to Employee by reason of
such Employer payment and reimbursements.
12. Arbitration. Any controversies between Employer and
Employee involving the construction or application of any of the terms,
provisions or conditions of this Agreement, save and except for any breaches
arising out of Sections 7 and 8 hereof, shall on the written request of either
party served on the other be submitted to arbitration. Such arbitration shall
comply with and be governed by the rules of the American Arbitration
Association. An arbitration demand must be made within one (1) year of the date
on which the party demanding arbitration first had notice of the existence of
the claim to be arbitrated, or the right to arbitration along with such claim
shall be considered to have been waived. An arbitrator shall be selected
according to the procedures of the American Arbitration Association. The cost of
arbitration shall be born by the losing party or in such proportions as the
arbitrator shall decide. The arbitrator shall have no authority to add to,
subtract
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from or otherwise modify the provisions of this Agreement, or to award punitive
damages to either party.
13. Attorneys' Fees and Costs. If any action at law or
in equity is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which he may be
entitled.
14. Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the transactions
contemplated herein and supersedes, effective as of the date hereof any prior
agreement or understanding between Employer and Employee with respect to
Employee's employment by Employer. The unenforceability of any provision of this
Agreement shall not effect the enforceability of any other provision. This
Agreement may not be amended except by an agreement in writing signed by the
Employee and the Employer, or any waiver, change, discharge or modification as
sought. Waiver of or failure to exercise any rights provided by this Agreement
and in any respect shall not be deemed a waiver of any further or future rights.
15. Assignment. This Agreement shall not be assigned to
other parties.
16. Governing Law. This Agreement and all the
amendments hereof, and waivers and consents with respect thereto shall be
governed by the internal laws of the State of New York.
17. Notices. All notices, responses, demands or other
communications under this Agreement shall be in writing and shall be deemed to
have been given when (a) delivered by hand; (b) sent be telex or telefax, (with
receipt confirmed), provided that a copy is mailed by registered or certified
mail, return receipt requested; or (c) received by the addressee as sent be
express delivery service (receipt requested) in each case to the appropriate
addresses, telex numbers and telefax numbers as the party may designate to
itself by notice to the other parties:
(i) if to the Employer:
Diplomat Corporation
00 Xxx Xxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxxxxxx
Telefax: (000) 000-0000
Telephone: (000) 000-0000
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With a copy to:
Gersten, Savage, Xxxxxxxxx & Xxxxxxxxxx, LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxxxx, Esq.
Telefax: (000) 000-0000
Telephone: (000) 000-0000
(ii) if to the Employee:
Xxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxx, Xxx Xxxx 00000
Telefax: (000) 000-0000
Telephone: (000) 000-0000
With a copy to:
Rosenman & Colin LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxx
Telefax: (000) 000-0000
Telephone: (000) 000-0000
18. Severability of Agreement. Should any part of this
Agreement for any reason be declared invalid by a court of competent
jurisdiction, such decision shall not affect the validity of any remaining
portion, which remaining provisions shall remain in full force and effect as if
this Agreement had been executed with the invalid portion thereof eliminated,
and it is hereby declared the intention of the parties that they would have
executed the remaining portions of this Agreement without including any such
part, parts or portions which may, for any reason, be hereafter declared
invalid.
IN WITNESS WHEREOF, the undersigned have executed this
agreement as of the day and year first above written.
DIPLOMAT CORPORATION
By: /s/
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Xxxxxxxx Xxxxxxxxx, President
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XXX XXXXXX LTD.
By: /s/
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Xxxxxxxx Xxxxxxxxx, Vice President
/s/
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Xxxxxx Xxxxxx
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