LEW MAGRAM LTD.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 2nd day of February, 1998 by and
between LEW MAGRAM LTD., a New York corporation (hereinafter referred to as
"Employer"), a wholly-owned subsidiary of Diplomat Corporation, a Delaware
corporation ("Parent") and STEPHANIE SOBEL, (hereinafter referred to as
"Employee");
W I T N E S S E T H:
WHEREAS, Employer desires to employ Employee as Senior Vice President of
Merchandising; and
WHEREAS, Employee is willing to be employed as Senior Vice President of
Merchandising in the manner provided for herein, and to perform the duties of
Senior Vice President of Merchandising of Employer 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 Senior Vice
President of Merchandising.
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 her business time
and efforts to Employer and its subsidiaries and affiliates.
3. Duties. Employee hereby agrees that, throughout the period of her
employment hereunder, she shall devote her business time, attention, knowledge
and skills, diligently in furtherance of the business of Employer, shall perform
the duties assigned to her by the Board of Directors of Employer (the "Board")
consistent with her executive position at Lew Magram, Ltd. immediately prior to
the date hereof, and shall observe and carry out such rules and regulations,
policies and directions as Employer may from time to time establish. During the
term of this Agreement, Employee shall do such traveling as may be reasonably
required of her in the performance of her 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 at such times during business hours that may be reasonably required by
Employer. Employee shall report directly and solely to the President of
Employer.
4. Compensation.
(a) Employee shall be paid a minimum of $172,500 for each Annual
Period such amount to be increased, if Parent is profitable for the fiscal
year ending September 30, 1998, in an amount determined by the majority of
the noninterested members of the Board excluding Employee Board of
Directors 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. 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 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 Parent or
Employer as may now or hereafter exist; provided that Employer shall
provide Employee medical benefits consistent with Lew Magram Ltd.'s former
policies. Employee shall also be entitled to participate in or receive all
other benefits and perquisites generally available to senior executives of
Employer or Parent 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. Parent shall consider adopting a deferred
compensation/retirement benefits plan, in which, upon adoption, Employee
shall be permitted to participate.
5. Expenses. Employer shall reimburse Employee, promptly upon presentation
of receipts or vouchers thereof, for all expenses reasonably incurred by her in
connection with the performance of her 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 standard size automobile or minivan automobile for so long as
Employee shall remain in the employ of Employer for her 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 an
automobile procedurally consistent with Parent's policies. Employer shall pay
lease payments, insurance and maintenance not to exceed $8,000 per Annual
Period.
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
2
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 generally, both of which does not
arise as a result of a disclosure by Employee or her 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:
(i) Business Activities. She 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 she 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 form of this
Agreement and six (6) months thereafter, she 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
3
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.
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 activity 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 her employment with
Employer, Employee shall become Disabled (as that term is defined
herein), Employer may
4
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 she 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 her 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 reduce Employee's duties and
responsibilities hereunder.
(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 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 she may obtain for
the remainder of the Term as it may be extended from time to time.
10. Bonus. Each of Employee, Warren Golden and Irving Magram (collectively
the "Total Bonus Pool Participants") shall be entitled to a portion of an amount
equal to ten percent (10%) of Employer'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 - 20%; Warren Golden - 40%; Irving Magram - 40%. The Total Bonus Pool
shall be payable within 90 days after the end of Employer's fiscal year
commencing with
5
the fiscal year ended September 30, 1998. So long as any Total Bonus Pool
Participant is an employee of Employer, 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 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.
6
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
25 Kay Fries Drive
Stony Point, New York 10980
Attention: Jonathan Rosenberg
Telefax: (914) 786-8727
Telephone: (914) 786-5552
With a copy to:
Gersten, Savage, Kaplowitz & Fredericks, LLP
101 East 52nd Street
New York, New York 10022
Attention: Jay M. Kaplowitz, Esq.
Telefax: (212) 980-5192
Telephone: (212) 752-9700
(ii) if to the Employee:
Stephanie Sobel
21 Alice Avenue
Merrick, New York 11566
Telefax:
Telephone:
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Joel Yunis
Telefax: (212) 940-8776
Telephone: (212) 940-8800
7
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.
19. Guarantee. In order to induce Employee to execute and deliver this
Agreement, Parent hereby irrevocably and unconditionally guarantees the full,
prompt and complete performance of each and every obligation and liability of
Employer under this Agreement.
[Signatures on following page]
8
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the
day and year first above written.
LEW MAGRAM LTD.
By: /s/ JONATHAN ROSENBERG
------------------------------------
Jonathan Rosenberg, Vice President
/s/ STEPHANIE SOBEL
------------------------------------
Stephanie Sobel
AS TO SECTION 19
DIPLOMAT CORPORATION
By: /s/ JONATHAN ROSENBERG
------------------------------------
Jonathan Rosenberg, President
9
February 18, 1998
Magram Acquisition Corporation Diplomat Corporation
25 Kay Fries Drive 25 Kay Fries Drive
Stony Point, New York 10980 Stony Point, New York 10980
Lew Magram, Ltd. Warren Golden
414 Alfred Avenue 703 Hollywood Avenue
Teaneck, New Jersey 07666 Bronx, New York 10465
Irving Magram Stephanie Sobel
56 Huyler Landing 21 Alice Avenue
Cresskill, New Jersey 07262 Merrick, New York 11566
1. Reference is made to that certain Agreement and Plan of Merger (the "Merger
Agreement"), dated as of December 23, 1997 among Lew Magram Ltd. ("Lew Magram"),
Diplomat Corporation ("Diplomat") and Magram Acquisition Corporation ("Magram
Acquisitions"), and to the Employment Agreements (collectively, the "Employment
Agreements"), dated as of February 2, 1998 and executed in connection with the
Merger Agreement, among Lew Magram Ltd. and Diplomat Corporation on the one hand
and Irving Magram, Warren Golden and Stephanie Sobel, respectively, on the other
hand. Terms used but not otherwise defined herein shall have those meanings set
forth in the Merger Agreement.
2. In addition to any salary, bonuses or incentive compensation provided for or
contemplated in the Employment Agreements, the undersigned agree to amend the
Employment Agreements to reflect the following terms:
(a) During the fiscal year ending September 30, 1998, Irving Magram,
Warren Golden and Stephanie Sobel shall receive additional base salary
payments over and above those amounts set forth in their respective
Employment Agreements of $35,000, $35,000 and $15,000, respectively.
If, for the fiscal year ending September 30, 1998, Lew Magram Ltd.
shall have net income determined in accordance with generally accepted
accounting principles ("GAAP") consistently applied, then Irving
Magram, Warren Golden and Stephanie Sobel shall, immediately after the
end of such fiscal year and completion of financial statements,
receive further lump-sum salary payments of $15,000, $15,000 and
$5,000, respectively.
(b) During the fiscal year ending September 30, 1999, Irving Magram,
Warren Golden and Stephanie Sobel shall receive additional base salary
payments, over and above those amounts set forth in their respective
Employment Agreements of $35,000, $35,000 and $15,000, respectively.
If for the fiscal year ending September 30, 1999 Lew Magram Ltd. shall
have net income determined in accordance with GAAP consistently
applied, then Irving Magram, Warren Golden and Stephanie Sobel shall,
immediately after the end of such fiscal year and completion of
financial statements, receive further lump-sum salary payments of
$15,000, $15,000 and $5,000, respectively, and during the fiscal year
ending September 30, 2000, additional base salary payments of $50,000,
$50,000 and
1
$20,000, respectively, over and above those amounts set forth in their
respective Employment Agreements with respect to the fiscal year
ending September 30, 2000.
(c) If for the fiscal year ending September 30, 1999 Lew Magram Ltd.
does not have net income, determined in accordance with GAAP
consistently applied, then the lump-sum payments provided for in the
second sentence of paragraph (b) hereof shall not be made and the
respective salaries of Irving Magram, Warren Golden and Stephanie Sobel
for the fiscal year ending September 30, 2000 shall revert to those
amounts set forth in their respective Employment Agreements with
respect the fiscal year ending September 30, 2000.
3. The Employment Agreements, as hereby amended, shall remain in full force and
effect in accordance with their respective provisions. The salary increases
provided for in paragraph 2 hereof shall not diminish or reduce any other salary
increases, bonuses or benefits to which Irving Magram, Warren Golden or
Stephanie Sobel may be entitled pursuant to their respective Employment
Agreements.
4. The undersigned further agree that the terms and provisions of the
Certificate of Designations for the Series D Preferred Stock of Diplomat shall
be amended to provide that no dividends shall be payable thereon, except and to
the extent of dividends payable on the Diplomat Common Stock, in which event
dividends on the Series D Preferred Stock shall be paid in the same amounts as
paid on the Diplomat Common Stock equivalent of the Series D Preferred Stock.
This agreement may be executed multiple counterparts, each of which shall
be deemed an original.
Agreed:
Diplomat Corporation Magram Acquisition Corporation
By_/s/_________________ By_/s/_________________________
Lew Magram, Ltd. /s/__________________________
By:/s/_____________________ Irving Magram
/s/________________________ /s/__________________________
Warren Golden Stephanie Sobel
2