EMPLOYMENT AGREEMENT
Exhibit
10.1(k)
(this
“Agreement”) dated
as
of May 26, 2006, between COVALENCE
SPECIALTY MATERIALS CORP.,
a
Delaware corporation (the “Company”)
and
XXXXX
X. XXXXX
(the
“Executive”).
WHEREAS,
the
Company desires to employ the Executive and the Executive desires to be employed
by the Company effective as of the Effective Date (as defined in Section 10(l)
of this Agreement);
NOW
THEREFORE,
in
consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section
1. Employment
Period.
The
initial term of the Executive’s employment will commence on the Effective Date
and end on the fifth anniversary of the Effective Date (the “Initial
Employment Period”),
unless terminated earlier pursuant to Section 3 of this Agreement; provided,
however, that as of the expiration date of each of (i) the Initial Employment
Period and (ii) if applicable, any Renewal Period (as defined below), the
Employment Period will automatically be extended for a one-year period (each,
a
“Renewal
Period”),
unless either party gives at least ninety (90) days written notice prior to
such
expiration date of its intention not to renew the Employment Period (the Initial
Employment Period and each subsequent Renewal Period shall constitute the
“Employment
Period”).
The
Employment Period shall automatically end upon termination of the Executive’s
employment for any reason. Upon the Executive’s termination of employment with
the Company for any reason, he shall immediately resign all positions (including
directorships) with the Company or any of its subsidiaries or
affiliates.
Section
2. Terms
of
Employment.
(a) Position.
During
the Employment Period, the Executive
shall
serve as the Chief Executive Officer of the Company reporting to the Board
of
Directors of the Company (the “Board”)
and
perform such duties and responsibilities customary to such position. The
Executive shall also serve as a member of the Board and as a member of the
Board
of Directors of Covalence Specialty Materials Holding Corp. (the “Parent
Board”). At the request of the Company, the Executive shall also serve as an
officer of any of its subsidiaries or affiliates without additional
compensation.
(b) Duties.
During
the Employment Period, the Executive agrees to devote all of his business time
to the business and affairs of the Company and to use the Executive’s reasonable
best efforts to perform the duties of a Chief Executive Officer and his
responsibilities and obligations hereunder faithfully, effectively and
efficiently. Notwithstanding the foregoing, nothing herein shall prohibit the
Executive from (i) serving on civic or charitable boards or committees, (ii)
delivering lectures or fulfilling speaking engagements, (iii) managing personal
investments, so long as such
(c) activities
do
not interfere with the performance of the Executive’s responsibilities hereunder
and (iv) serving on the boards of directors of each of Longyer Realty
Corporation and Minnesota Steel Industries until September 30, 2006.
(d) Compensation.
(i) Base
Salary.
During
the Employment Period, the Executive shall receive an initial annual base salary
in an amount equal to $600,000 (the “Annual
Base Salary”),
which
shall be paid in accordance with the customary payroll practices of the Company.
The Base Salary will be reviewed by the Board or the Compensation Committee
of
the Board (the “Compensation
Committee”)
or its
designee annually. The Base Salary, as then increased, will be the “Base Salary”
for all purposes of this Employment Agreement.
(ii) Bonuses.
During
the Employment Period, the Company shall establish an annual bonus plan for
each
fiscal year of the Company (the “Plan”)
pursuant to which the Executive will be eligible to receive a target annual
bonus in an amount equal to 75 percent of the Annual Base Salary (the
“Bonus”),
which
Bonus may be higher or lower than this percentage based on actual performance.
With respect to the Company’s 2006 fiscal year, the Executive will be entitled
to a pro-rated Bonus from the Effective Date to the end of such fiscal year
(provided that the Executive remains employed by the Company) (the “2006
Pro-Rata Bonus Period”)
based
on actual performance by the Company for the entirety of such fiscal year.
The
Board or the Compensation Committee will administer the Plan and establish
performance objectives for each year. The Executive’s Bonus will be determined
based on the achievement of performance objectives for the applicable year,
provided that the Board and/or the Compensation Committee may provide
discretionary bonuses to the Executive under the Plan. Unless the Executive
is
employed on the last day of the applicable performance period, the Executive
will not be entitled to receive the Bonus upon the Company’s achievement of the
specified performance objectives (subject to Section 4 of this Agreement);
provided, however, the Compensation Committee may award such bonus to Executive.
Except as provided for in Section 4 of this Agreement, the Bonus shall become
payable on or before March 15 following the end of the applicable fiscal year
provided that the Board or Compensation Committee finally determines (x) that
the Company has achieved the applicable performance objectives and (y) the
amount of Bonus that shall be paid to the Executive for the applicable Plan
year.
(iii) Benefits.
During
the Employment Period, the Executive shall be entitled to participate in
employee benefit plans generally made available to senior executives of the
Company.
(iv) Expenses.
During
the Employment Period, the Executive shall be entitled to receive reimbursement
for all reasonable expenses incurred by the Executive in performance of his
duties hereunder provided that the Executive provides all necessary
documentation in accordance with Company policy.
(v)Vacation
and
Holidays.
During
the Employment Period, the Executive shall be entitled to four weeks per
annum
of paid vacation.
(vi) Relocation
Benefits.
In
connection with the Executive’s commencement of employment with the Company
hereunder and the Executive’s relocation to Princeton, New Jersey from Houston,
Texas, the Company will reimburse the Executive in accordance with the Company’s
standard relocation policy for all of the normal and customary relocation
expenses the Executive incurs.
(vii) Stock
Options.
The
Executive and the Company acknowledge that on the Effective Date, the Parent
shall grant the Executive stock options (the “Executive
Options”)
to
purchase 91,772 shares of common stock of Covalence Specialty Materials Holding
Corp. (the “Parent”)
at an
exercise price of $10.00 per share pursuant to the terms and conditions set
forth in the Covalence Specialty Materials Holding Corp. 2006 Long-Term
Incentive Plan (the “Long-Term
Incentive Plan”).
The
Executive Options shall be subject to the terms of the Long-Term Incentive
Plan
and the Executive’s Non-Qualified Stock Option Agreement (attached hereto as
Exhibit A).
(viii) Investment.
The
Executive hereby agrees to purchase, as soon as reasonably practicable (but
no
later than three (3) business days) after
the
disposition of the portion of the Executive’s equity interests in Hexion LLC
pursuant to the Securities Purchase Agreement by and among the Executive, Apollo
and Hexion LLC (such date of purchase, the “Purchase
Date”),
61,212 shares of common stock of the Parent, par value $0.01 (the “Common
Stock”),
at a
price of $10.00 per share and 1,017.097 shares of Series A Cumulative
Non-Redeemable Perpetual Preferred Stock of the Company, liquidation preference
$1,000 per share (the “Preferred
Stock”),
at a
price of $1,038.639 per share (collectively, the “Purchased
Shares”).
The
Purchased Shares shall be subject to the terms of the Long-Term Incentive Plan
and the Executive’s Subscription Agreement (attached hereto as Exhibit B).
(ix) Notwithstanding
anything to the contrary herein, all of the Purchased Shares will be fully
vested at the Effective Date and all Purchased Shares, all Executive Options
and
Common Stock held by the Executive pursuant to the exercise of the Executive
Options will be subject to the terms and conditions of the Investor Rights
Agreement by and among the Parent, the Executive, and other signatories thereto
(the “Investor
Rights Agreement”).
Section
3. Termination
of Employment.
(a) Death
or Disability.
The
Executive’s employment shall terminate automatically upon the Executive’s death.
If the Executive becomes subject to a Disability during the Employment Period
(pursuant to the definition of Disability set forth below), the Company may
give
the Executive written notice in accordance with Sections 3(e) and 10(h) of
its
intention to terminate the Executive’s employment. For purposes of this
Agreement, “Disability”
means
(i) the Executive’s inability to engage in any substantial gainful activity by
reason of any medically determinable physical or
(ii)
mental impairment which can be expected to result in death or can
be
expected to last for a continuous period of not less than 12 months, or (ii)
the
Executive is, by reason of any medically determinable physical or mental
impairment which can be expected to last for a continuous period of not less
than 12 months, receiving income replacement benefits for a period of not
less
than three months under an accident, disability or health plan covering
employees of the Company. Whether the Executive has incurred a “Disability”
shall be determined by a physician jointly-selected by the Company or its
insurers and the Executive (or the Executive’s legal
representative).
(b) Cause.
The
Executive’s employment may be terminated at any time by the Company for Cause.
For purposes of this Agreement, “Cause” shall mean (i) the Executive’s
commission of a felony or a crime of moral turpitude; (ii) the Executive’s
willful commission of a material act of dishonesty involving the Company; (iii)
the Executive’s material breach (which breach is not promptly cured) of his
obligations hereunder or any other agreement entered into between the Executive
and the Company or any of its subsidiaries or affiliates, including, without
limitation, the Executive’s failure to purchase the Purchased Shares by the
Purchase Date (as defined in Section 2(c)(vii) of this Agreement); (iv) the
Executive’s willful failure to perform his duties; (v) the Executive’s material
breach of the Company’s material policies or the material policies of the Parent
or any of their respective subsidiaries (collectively, the “Affiliated
Entities”
and
each such entity an “Affiliated
Entity”)
or
procedures that is not reasonably curable in the Company’s reasonable
discretion; or (vi) any other willful misconduct by the Executive which causes
material harm to the Company or any of the Affiliated Entities or their business
reputation, including due to any adverse publicity. A termination will not
be
for “Cause” under (iii), (iv) or (v) above unless the Company shall have given
the Executive 15 days’ prior written notice describing the alleged action(s) and
then only if the Executive has not reasonably cured such actions (except in
the
case of actions that are not curable).
(c) Termination
Without Cause.
The
Company may terminate the Executive’s employment hereunder without Cause at any
time upon thirty (30) days prior written notice.
(d) Good
Reason.
The
Executive’s employment may be terminated at any time by the Executive for Good
Reason or without Good Reason upon thirty (30) days prior written notice. For
purposes of this Agreement, “Good Reason” means voluntary resignation after any
of the following actions are taken by the Company or any of its subsidiaries
without the Executive’s consent: (i) a reduction in the Executive’s Annual Base
Salary or Bonus potential (i.e., 75% of Base Salary) described in Section
2(c)(ii) of this Agreement (but not including any diminution related to an
across the board reduction applying to senior executives of the Company
generally); (ii) the assignment to Executive by the Company of duties materially
inconsistent with Executive’s duties as set forth in Section 2 hereof, or any
material diminution of the Executive’s responsibilities, which for these
purposes shall not include the failure to maintain the Executive as an officer
of the Parent or a member of the Parent Board in the event that (x) the Company
or any successor to the Company ceases to be owned by the
Parent
or
any successor to the Parent or (y) the Parent or any successor to the Parent
ceases to exist whether by merger or otherwise; or (iii) any other material
breach by the Company of this Agreement; provided, however, that none of the
events described in the foregoing clauses (i), (ii) or (iii) shall constitute
Good Reason unless the Executive shall have notified the Company in writing
describing the events which constitute Good Reason within sixty (60) days
following the Executive’s knowledge of such events and then only if the Company
shall have failed to cure such events within thirty (30) days after the
Company’s receipt of such written notice.
(e) Notice
of Termination.
Any
termination by the Company for Cause or without Cause, or by the Executive
for
Good Reason or without Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 10(h).
For purposes of this Agreement, a “Notice of Termination” means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date. The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to
a
showing of Good Reason or Cause shall not waive any right of the Executive
or
the Company hereunder or preclude the Executive or the Company from asserting
such fact or circumstance in enforcing the Executive’s or the Company’s rights
hereunder.
(f) Date
of Termination.
“Date
of Termination” means (i) if the Executive’s employment is terminated by the
Company for Cause, without Cause or by reason of Disability, or by the Executive
for Good Reason or without Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein pursuant to Section 3(e), as
the
case may be and (ii) if the Executive’s employment is terminated by reason of
death, the date of death.
Section
4. Obligations
of the Company upon Termination.
(a) With
Good Reason; Other Than for Cause.
If
during the Employment Period, the Company shall terminate the Executive’s
employment other than for Cause or the Executive shall terminate his employment
for Good Reason, then the Company will provide the Executive with the following
severance payments and/or benefits:
(i) The
Company shall pay to the Executive in a lump sum (x) the Annual Base Salary
through the Date of Termination to the extent not paid, and (y) to the extent
not previously paid, the Bonus earned for any year prior to the year in which
the Date of Termination occurs, to the extent that the Executive is employed
on
the last day of the applicable performance period and such Bonus shall be paid
in accordance with the terms of the Plan (the “Accrued
Obligations”);
(ii) Starting
as of
the next applicable Company payroll date after the Date of Termination (provided
that the Executive has complied with Section 4(d) of this Agreement), the
Company will pay the Executive a monthly amount equal to (x) the Annual Base
Salary, divided by (y) 12 (the “Severance
Amount”),
until
the earlier of (A) the end of the 18th month following the Date of Termination
(the “Severance
Period”),
and
(B) the date, if any, the Executive violates the terms of this Agreement;
provided however, that in the event that the Executive’s employment is
terminated by the Company other than for Cause or by the Executive for Good
Reason, in each case during the one-year period after a Change in Control
of the
Parent (as defined in the Long-Term Incentive Plan), the Severance Amount
shall
be equal to (xx) the Annual Base Salary, divided by (yy) 12, and the Severance
Period shall be until the earlier of (AA) the end of the 24th month following
the Date of Termination, and (BB) the date, if any, the Executive violates
the
terms of this Agreement;
(iii) The
Company will pay the Executive a prorated Bonus for the year in which
termination occurs, based on actual performance for such year, the amount of
which prorated Bonus, if any, shall be determined and paid on or before March
15
of the year immediately following the end of the year to which such Bonus
relates and in accordance with the terms of the Plan; and
(iv) During
the Severance Period, the Company shall continue health and welfare benefits
(excluding long-term disability coverage) to the Executive and, where
applicable, the Executive’s dependents on the same terms that would have been
provided to them had the Executive continued employment with the Company in
accordance with the health and welfare benefits provided pursuant to Section
2(c)(iii) of this Employment Agreement; provided,
however,
that,
in the event the Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under any employer
provided plan, the health and other welfare benefits described herein shall
not
be provided by the Company during such applicable period of eligibility.
Notwithstanding
the foregoing provisions of this Section 4(a), to the extent required in order
to comply with Section 409A of the Code, amounts and benefits to be paid or
provided under this Section 4(a) shall be paid or provided to the Executive
on
the first business day after the date that is six months following the Date
of
Termination. To the extent that the benefits to be provided to the Executive
under Section 4(a)(v) are so delayed, the Executive shall be entitled to COBRA
continuation coverage under Section 4980B of the Code (“COBRA Coverage”) during
such period of delay, and the Company shall reimburse the Executive for any
Company portions of such COBRA Coverage in the seventh month following the
Date
of Termination.
(b) Death
or Disability.
If the
Executive’s employment shall be terminated by reason of the Executive’s death or
Disability, then the Company shall pay the Executive or his legal
representatives within 30 days following such termination (A)
the
Accrued Obligations and (B) a lump sum payment equal to the Executive’s Annual
Base Salary. Thereafter, the Company shall have no further obligation to the
Executive, other than any indemnification rights he may have pursuant to Section
9.
Notwithstanding the foregoing provisions of this Section 4(b), to the extent
required in order to comply with Section 409A of the Code, amounts to be paid
under this Section 4(b) shall be paid to the Executive on the first business
day
after the date that is six months following the Date of Termination.
(c) Cause;
Other than for Good Reason.
If the
Executive’s employment shall be terminated by the Company for Cause or by the
Executive without Good Reason, then the Company shall have no further payment
obligations to Executive other than for payment of the Annual Base Salary
through the Date of Termination to the extent not paid. Thereafter, the Company
shall have no further obligation to the Executive, other than any
indemnification rights he may have pursuant to Section 9, provided, however,
that the Company shall have no obligation to indemnify the Executive for any
act
resulting in his Termination for Cause.
(d) Separation
Agreement and General Release.
The
Company’s obligations to make payments under Sections 4(a) and 4(b) (other than
the Accrued Obligations) will be conditioned on the Executive or his legal
representatives executing and delivering a separation agreement and general
release of the Company, and its subsidiaries and affiliated companies and their
respective successors and assigns (and the officers and directors of such
entities) in a form acceptable to the Company.
Section
5. Nondisclosure
and Nonuse of Confidential Information.
(a) The
Executive shall not disclose or use at any time, either during the Employment
Period or thereafter, any Confidential Information (as hereinafter defined)
of
which the Executive is or becomes aware, whether or not such information is
developed by him, except to the extent that such disclosure or use is directly
related to and required by the Executive’s performance in good faith of duties
assigned to the Executive by the Company. The Executive will take all
appropriate steps to safeguard Confidential Information in his possession and
to
protect it against disclosure, misuse, espionage, loss and theft. The Executive
shall deliver to the Company upon the Date of Termination, or at any time the
Company may request, all memoranda, notes, plans, records, reports, computer
tapes and software and other documents and data (and copies thereof) relating
to
the Confidential Information or the Work Product (as hereinafter defined) of
the
business of the Company or any of its affiliates which the Executive may then
possess or have under his control.
(b) As
used
in this Agreement, the term “Confidential
Information”
means
information that is not generally known to the public (except for information
known to the public because of the Executive’s violation of this Section 5) and
that is used, developed or obtained by the Company (including its affiliates)
in
connection with its business, including, but not limited to, information,
observations and data obtained by the Executive while employed by the Company
or
any predecessors thereof (including those obtained prior to the date of this
Agreement) concerning (i) the business or affairs of the Company (or such
predecessors), (ii) products or services, (iii) fees, costs and pricing
structures, (iv) designs, (v) analyses, (vi) drawings, photographs and reports,
(vii) computer software, including operating systems, applications
and
program
listings, (viii) flow charts, manuals and documentation, (ix)
data bases, (x) accounting and business methods, (xi) inventions, devices,
new
developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice, (xii) customers and clients and customer
or
client lists, (xiii) other copyrightable works, (xiv) all production methods,
processes, technology and trade secrets, and (xv) all similar and related
information in whatever form. Confidential Information will not include any
information that has been published in a form generally available to the
public
prior to the date the Executive proposes to disclose or use such information.
Confidential Information will not be deemed to have been published or otherwise
disclosed merely because individual portions of the information have been
separately published, but only if all material features comprising such
information have been published in combination.
(c) As
used
in this Agreement, the term “Work
Product”
means
all inventions, innovations, improvements, technical information, systems,
software developments, methods, designs, analyses, drawings, reports, service
marks, trademarks, trade names, logos and all similar or related information
(whether patentable or unpatentable) which relates to the Company’s or any of
its affiliates’ actual or anticipated business, research and development or
existing or future products or services and which are conceived, developed
or
made by the Executive (whether or not during usual business hours and whether
or
not alone or in conjunction with any other person) while employed if and to
the
extent such Work Product results from any work performed for the Company, any
use of the Company’s premises or property or any use of the Company’s
Confidential Information) by the Company (including those conceived, developed
or made prior to the date of this Agreement) together with all patent
applications, letters patent, trademark, trade name and service xxxx
applications or registrations, copyrights and reissues thereof that may be
granted for or upon any of the foregoing.
Section
6. Non-Solicitation;
Non-Compete.
(a) During
the period commencing on the Effective Date and ending on the second anniversary
of the termination of the Executive’s employment for any reason (the
“Restricted
Period”),
the
Executive shall not directly or indirectly (i) induce or attempt to induce
any
employee or independent contractor of the Company or any affiliate of the
Company to leave the Company or such affiliate, or in any way interfere with
the
relationship between the Company or any such affiliate, on the one hand, and
any
employee or independent contractor thereof, on the other hand, (ii) hire any
person who was an employee or independent contractor of the Company or any
affiliate of the Company until twelve (12) months after such individual’s
relationship with the Company or such affiliate has been terminated or (iii)
induce or attempt to induce any customer (whether former or current), supplier,
licensee or other business relation of the Company or any affiliate of the
Company to cease doing business with the Company or such affiliate, or in any
way interfere with the relationship between any such customer, supplier,
licensee or business relation, on the one hand, and the Company or any
affiliate, on the other hand.
(b) The
Executive acknowledges that, in the course of his employment with the Company
and/or its affiliates and their predecessors, he has become familiar, or will
become familiar, with the Company’s and its affiliates’ and their predecessors’
trade secrets and with other confidential information concerning the Company,
its affiliates and their respective predecessors and that his services have
been
and will be of special, unique and extraordinary value to the Company and its
affiliates. Therefore, the Executive agrees that, during the Restricted Period,
the Executive shall not, directly or indirectly, own, manage, operate, control,
be employed by (whether as an employee, consultant, independent contractor
or
otherwise, and whether or not for compensation) or render services to any
person, firm, corporation or other entity, in whatever form, engaged in any
business of the same type as any business in which the Company or any of the
Affiliated Entities is engaged on the Date of Termination or in which they
have
proposed, on or prior to such date, to be engaged in on or after such date
and
in which the Executive has been involved to any extent (other than de minimis)
at any time during the one (1) year period ending with the Date of Termination,
in any locale of any country in which the Company or an Affiliated Entity
conducts business.
Notwithstanding
the foregoing, it shall not be a violation of this Section 6(b) for the
Executive to join a division or business line of a commercial enterprise with
multiple divisions or business lines if such division or business line is not
competitive with the businesses of the Company or any of the Affiliated
Entities, provided that the Executive performs services solely for such
non-competitive division or business line, and performs no functions on behalf
of (and has no involvement with or direct or indirect responsibilities with
respect to) businesses competitive with the businesses of the Company or any
of
the Affiliated Entities. Nothing herein shall prohibit the Executive from being
a passive owner of not more than 4.9% of the outstanding equity interest in
any
entity which is publicly traded, so long as the Executive has no active
participation in the business of such corporation.
Section
7. Severance
Payments.
In
addition to the foregoing, and not in any way in limitation thereof, or in
limitation of any right or remedy otherwise available to the Company, if the
Executive violates any provision of the foregoing Sections 5 or 6, any severance
payments then or thereafter due from the Company to the Executive shall be
terminated immediately and the Company’s obligation to pay and the Executive’s
right to receive such severance payments shall terminate and be of no further
force or effect, if and when determined by a court of competent jurisdiction
that the Executive has violated Sections 5 or 6 of this Agreement, in each
case
without limiting or affecting the Executive’s obligations under such Sections 5
and 6 or the Company’s other rights and remedies available at law or equity.
Section
8. Executive’s
Representations, Warranties and Covenants.
(a) The
Executive hereby represents and warrants to the Company that:
(1)
The
Executive has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, and this
Agreement has been duly executed by the Executive;
(2) the
execution, delivery and performance of this Agreement by the Executive does
not
and will not, with or without notice or the passage of time, conflict with,
breach, violate or cause a default under any agreement, contract or instrument
to which the Executive is a party or any judgment, order or decree to which
the
Executive is subject;
(3) The
Executive is not a party to or bound by any employment agreement, consulting
agreement, non-compete agreement, confidentiality agreement or similar agreement
with any other person except for (i) the Executive’s Separation Agreement with
Hexion Specialty Chemicals Inc. dated _________, (ii) the Executive’s
confidentiality agreement with Longyer Realty Corporation and its related
companies and (iii) the Executive’s agreements with Minnesota Steel
Industries;
(4) upon
the
execution and delivery of this Agreement by the Company and the Executive,
this
Agreement will be a legal, valid and binding obligation of the Executive,
enforceable in accordance with its terms;
(5) The
Executive understands that Apollo
Management V, LP (the “Investor”)
and
the Company will rely upon the accuracy and truth of the representations and
warranties of the Executive set forth herein and the Executive consents to
such
reliance.
(b) The
Company hereby represents and warrants to the Executive that:
(1) the
Company has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, and this
Agreement has been duly executed by the Company;
(2) the
execution, delivery and performance of this Agreement by the Company does not
and will not, with or without notice or the passage of time, conflict with,
breach, violate or cause a default under any agreement, contract or instrument
to which the Company is a party or any judgment, order or decree to which the
Company is subject;
(3) upon
the
execution and delivery of this Agreement by the Company and the Executive,
this
Agreement will be a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms; and
(4) the
Company understands that the Executive will rely upon the accuracy and truth
of
the representations and warranties of the Company set forth herein and the
Company consents to such reliance.
Section
9. Indemnification.
The
Company shall indemnify the Executive to the maximum extent permitted under
the
General Corporate Law of Delaware for acts taken within the scope of his
employment. To the extent that the Company obtains coverage under a director
and
officer indemnification policy, the Executive will be entitled to such coverage
on a basis that is no less favorable than the coverage provided to any other
officer or director of the Company.
Section
10. General
Provisions.
(a) Severability.
It is
the desire and intent of the parties hereto that the provisions of this
Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be adjudicated
by a court of competent jurisdiction to be invalid, prohibited or unenforceable
under any present or future law, and if the rights and obligations of any party
under this Agreement will not be materially and adversely affected thereby,
such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction; furthermore, in
lieu
of such invalid or unenforceable provision there will be added automatically
as
a part of this Agreement, a legal, valid and enforceable provision as similar
in
terms to such invalid or unenforceable provision as may be possible.
Notwithstanding the foregoing, if such provision could be more narrowly drawn
so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating
the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
(b) Entire
Agreement.
This
Agreement, the Investor Rights Agreement, the Long-Term Incentive Plan, the
Non-Qualified Stock Option Agreement and the Subscription Agreement embody
the
complete agreement and understanding among the parties hereto with respect
to
the subject matter hereof and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof.
(c) Counterparts.
This
Agreement may be executed in separate counterparts, each of which is deemed
to
be an original and all of which taken together constitute one and the same
agreement.
(d) Successors
and Assigns.
(i) This
Agreement is personal to the Executive and without the prior written consent
of
the Company shall not be assignable by the Executive otherwise than by will
or
the laws of descent and distribution. This Agreement shall inure to the benefit
of and be enforceable by the Executive’s legal representatives.
(ii) This
Agreement shall inure to the benefit of and be binding upon the Company and
its
successors and assigns. The Company will require 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 to assume
expressly and agree to perform this Agreement in the same manner and to the
same
extent that the Company would be required to perform it if no such succession
had
taken
place. As used in this Agreement, “Company” shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(e) Governing
Law.
THIS
AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE
STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING
PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE
TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE
OF
DELAWARE WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT,
EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(f) Remedies.
Each of
the parties to this Agreement and any such person or entity granted rights
hereunder whether or not such person or entity is a signatory hereto (including,
without limitation, the Investor and its affiliates) shall be entitled to
enforce its rights under this Agreement specifically to recover damages and
costs for any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The
Executive further acknowledges and agrees that (x) the Executive’s breach
of the provisions of Sections 5 and 6 of this Agreement will cause the Company
irreparable harm, which cannot be adequately compensated by money damages,
and
(y) if the Company elects to prevent the Executive from breaching such
provisions by obtaining an injunction against the Executive, there is a
reasonable probability of the Company’s eventual success on the merits. The
Executive consents and agrees that if the Executive commits any such breach
or
threatens to commit any breach, the Company shall be entitled to temporary
and permanent injunctive relief from a court of competent jurisdiction, without
posting any bond or other security and without the necessity of proof of actual
damage,
in
addition to,
and not
in lieu of,
such
other remedies as may be available to the Company for such breach, including
the
recovery of money damages.
Each
party shall be responsible for paying its own attorneys’ fees, costs and other
expenses pertaining to any judgment or verdict unless the court awards
otherwise.
(g) Amendment
and
Waiver.
The
provisions of this Agreement may be amended and waived only with the prior
written consent of the Company and the Executive and no course of conduct
or
failure or delay in enforcing the provisions of this Agreement shall be
construed as a waiver of such provisions or affect the validity, binding
effect
or enforceability of this Agreement or any provision hereof.
(h) Notices.
Any
notice provided for in this Agreement must be in writing and must be either
personally delivered, transmitted via telecopier, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated or at such other address or to the attention of such other
person
as
the recipient party has specified by prior written notice to the sending party.
Notices will be deemed to have been given hereunder and received when delivered
personally, when received if transmitted via telecopier, five days after deposit
in the U.S. mail and one day after deposit with a reputable overnight courier
service.
If
to the
Company, to:
Covalence
Specialty Materials Corp.
c/o
The
Apollo Group
0
Xxxx
00xx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx Xxxxxxxx
with
a
copy (which shall not constitute notice) to:
The
Apollo Group
0
Xxxx
00xx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx Xxxxxxxx
and
Wachtell,
Lipton, Xxxxx & Xxxx
00
Xxxx
00xx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx X. Xxxxxxxx, Esq.
If
to the
Executive, to the Executive’s address set forth on the signature page
hereto.
(i) Section
409A.
If any
compensation or benefits provided by this Employment Agreement may result in
the
application of Section 409A of the Code, the Company shall modify this
Employment Agreement in the least restrictive manner
necessary
in order to comply with the provisions of Section 409A, other applicable
provision(s) of the Code and/or any rules, regulations or other regulatory
guidance issued under such statutory provisions and, in each case, without
any
material diminution in the value of the payments to the Executive.
(j) Withholding.
The
Company may withhold from any amounts payable or benefits to be provided to
the
Executive under this Employment Agreement or otherwise all Federal, state,
city
or other taxes and other amounts that the Company may reasonably determine
are
required to be withheld pursuant to any applicable law or
regulation.
(k) Survival
of Representations, Warranties and Agreements.
All
representations, warranties and agreements contained herein shall survive the
consummation of the transactions contemplated hereby indefinitely.
(l) Effectiveness.
This
Agreement shall become binding and enforceable upon both parties upon the
Company’s acceptance of this Agreement by delivery of notice of acceptance to
the Executive and appointment of the Executive as Chief Executive Officer on
or
prior to June 30, 2006 (the date of such acceptance by the Company, the
“Effective
Date”);
provided, however, that the Executive shall be subject to the provisions of
the
last sentence of this Section 10(l). In the event (i) the Company, in its
discretion, does not accept this Agreement and appoint the Executive as Chief
Executive Officer as provided in the immediately foregoing sentence on or prior
to June 30, 2006 or (ii) the Executive is unable to perform his duties hereunder
or commits an act that constitutes Cause under Section 3(b) prior to the
Company's acceptance of this Agreement and appointment of the Executive as
Chief
Executive Officer, none of the Investor, the Parent and the Company shall have
any obligations to the Executive or his beneficiaries under this Agreement
and
this Agreement shall be of no force and effect. The Executive shall have no
right to void this Agreement or his obligations hereunder unless and until
the
Company has not accepted this Agreement or has not appointed the Executive
as
Chief Executive Officer on or prior to June 30, 2006, and in the event of the
Company's acceptance and appointment of the Executive as Chief Executive Officer
on or prior to June 30, 2006, shall be bound by this Agreement.
(n) Descriptive
Headings.
The
descriptive headings of this Agreement are inserted for convenience only and
do
not constitute a part of this Agreement.
(o) Construction.
Where
specific language is used to clarify by example a general statement contained
herein, such specific language shall not be deemed to modify, limit or restrict
in any manner the construction of the general statement to which it relates.
The
language used in this Agreement shall be deemed to be the language chosen by
the
parties to express their mutual intent, and no rule of strict construction
shall
be applied against any party.
(p) Waiver
of Jury Trial.
EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
[signature
page follows]
W/1128138v1
IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement as of the date first written
above.
|
COVALENCE
SPECIALTY MATERIALS CORP.
|
||
|
By:
|
/s/
Xxxxxx X. Xxxxxxxxx
|
|
|
Name:
Xxxxxx X. Xxxxxxxxx
|
||
|
Title:
Chairman
|
||
|
XXXXX
X. XXXXX
|
||
|
Signature:
|
/s/
Xxxxx X. Xxxxx
|
|
|
Last
address on the records of the Company.
|
||
