EXHIBIT 10.1B
EMPLOYMENT MODIFICATION AGREEMENT
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This Employment Modification Agreement ("Agreement") is made and
entered into as of the 24th day of July, 2002, between Xxxxxx X. Xxxxxx
("Xxxxxx") and Sovereign Specialty Chemicals, Inc., a Delaware corporation
(the "Company").
RECITALS
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X. Xxxxxx and the Company have previously entered into that certain
Employment Agreement (the "Xxxxxx Employment Agreement") dated as of
December 29, 1999 pursuant to which, among other things, Xxxxxx was
employed as the President and Chief Executive Officer of the Company.
B. The Company has determined that it is no longer in the best
interest of the Company for Xxxxxx to serve as the Company's President and
Chief Executive Officer and, accordingly, has requested that Xxxxxx agree
to modify his employment relationship with, and to limit his duties and
responsibilities to, the Company.
X. Xxxxxx has agreed to abide by the Company's request, subject to the
terms, provisions and conditions set forth in this Employment Modification
Agreement.
NOW, THEREFORE, Xxxxxx and the Company hereby agree as follows:
1. Modification of Employment Relationship; Duties and
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Responsibilities
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1.1 By mutual agreement and pursuant to the terms of this
Agreement, effective on July 24, 2002, Xxxxxx shall cease holding the
offices of President and Chief Executive Officer of the Company and of its
subsidiaries and affiliates. However, Xxxxxx will continue to hold the
office of Chairman of the Board of the Company ("Chairman") and shall also
continue to serve as a Director of the Company. In his capacity as
Chairman, Xxxxxx shall preside at all meetings of the Board of Directors
and of the stockholders of the Company and he shall have such other powers
and shall perform such other duties as may from time to time be prescribed
by the Board of Directors of the Company, so long as the tasks assigned are
consistent with Xxxxxx'x status, seniority and experience.
1.2 Xxxxxx agrees that he will remain as Chairman until (i) the
later of (x) December 31, 2002 or (y) such date after December 31, 2002 as
may be mutually agreed upon between the Company and Xxxxxx or (ii) such
date prior to December 31, 2002 as may be specified on thirty (30) days
prior written notice from either party hereto to the other as permitted by
Sections 1.3 and 1.4 below.
1.3 If, prior to December 31, 2002, the Company shall elect to
terminate Xxxxxx'x employment by the Company, such election shall be made
by the Company giving written notice to Xxxxxx not less than thirty (30)
days in advance of the effective date of termination. In such event, Xxxxxx
shall be entitled to receive the remainder of all compensation and benefits
provided for under the Xxxxxx Employment Agreement, as modified hereby, as
he would have been entitled to receive had the Termination Date been
December 31, 2002, including, without limitation, "Annual Base
Compensation" (as defined in the Xxxxxx Employment Agreement) through such
date, the amount of his "Potential Annual Target Bonus" (as defined in the
Xxxxxx Employment Agreement) provided for under Section 2.2 below through
such date, and all other benefits provided for under Section 2.3 below.
1.4 If, prior to December 31, 2002, Xxxxxx shall elect to
terminate his employment by the Company, such election shall be made by
Xxxxxx giving written notice to the Company not less than thirty (30) days
in advance of the Termination Date. In such event, Xxxxxx shall be entitled
to receive "Annual Base Compensation" through the Termination Date, the
amount of his "Potential Annual Target Bonus" (as provided in Section 2.2
below) based upon the number of months during 2002 that Xxxxxx was employed
by the Company, and benefits provided for under Section 2.3 below through
and until the Termination Date.
1.5 As used herein, (i) "Termination Date" shall mean the actual
effective date of the termination of Xxxxxx'x employment by the Company and
(ii) "Term" shall mean the period between the date of this Agreement and
the Termination Date.
2. Payments/Obligations
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2.1 During the Term and for a period of one year after the
Termination Date, the Company shall pay Xxxxxx at a rate equal to his
"Annual Base Compensation" for each such period in accordance with the
Company's usual payroll practices for executives.
2.2 Subject to Sections 1.3 and 1.4 above, Xxxxxx shall be
eligible to receive his "Potential Annual Target Bonus" (as defined in the
Xxxxxx Employment Agreement) for the fiscal year ended December 31, 2002.
The amount of such bonus shall be the amount determined by the Company's
Compensation Committee in good faith based upon (i) the Company's past
practices with respect to Xxxxxx (as if he continued to be the President
and Chief Executive Officer of the Company through such year end unless the
Term shall have ended prior to such date by reason of an election by Xxxxxx
under Section 1.4 above, in which case Xxxxxx shall be deemed for this
purpose to have continued to serve as the Company's President and Chief
Executive Officer through the Termination Date) and (ii) the Company's
performance against the plan applicable to Xxxxxx for such period. Such
bonus, if any, shall be paid at the time the Company pays annual bonuses to
its other senior executives with respect to such bonus period, whether or
not the Termination Date shall have occurred.
2.3 During the Term, Xxxxxx shall continue to receive (and
participate in and accrue benefits under) Company fringe benefits and shall
be entitled to paid vacation time and expense reimbursements, all as and to
the extent provided for in Sections 3.4, 3.5 and 3.6 of the Xxxxxx
Employment Agreement; provided, however, that (i) Xxxxxx shall be entitled
to receive payment for any unused vacation time arising during the Term,
any such payment for unused vacation time to be made to Xxxxxx within
thirty (30) days after the Termination Date and (ii) during the one year
period following the Termination Date, Xxxxxx shall be entitled to continue
to participate in the Company's health insurance and disability plans and
programs provided for in Section 5.2(c) of the Xxxxxx Employment Agreement.
2.4 During the Term, the option to purchase 48,000 shares of the
Company's Common Stock at an exercise price of $129.50 per share pursuant
to that certain Nonqualified Stock Option Agreement, dated as of December
30, 1999, between the Company and Xxxxxx (the "Option Agreement") shall
continue to vest and become exercisable in accordance with Section 2.1 of
the Option Agreement. By way of example, at the date hereof, such option is
exercisable with respect to 30,000 shares of Common Stock subject thereto
and, at December 31, 2002, such option will be exercisable with respect to
36,000 shares of Common Stock subject thereto. Notwithstanding Section 4 of
the Option Agreement, the Option to the extent vested and exercisable at
the Termination Date shall be exercisable for a period of five years after
the Termination Date unless the Termination Date shall occur by reason of
Xxxxxx electing to terminate his employment prior to December 31, 2002
pursuant to Section 1.4 above, in which case Section 4 of the Option
Agreement shall continue to apply as in effect prior to execution of this
Agreement.
2.5 Xxxxxx shall retain ownership of 130,837.25 shares of Common
Stock of the Company. The Common Stock referred to in this Section 2.5
shall be referred to herein as the "Purchased Shares."
2.6 Xxxxxx, the Purchased Shares and the Option shall remain
subject to the terms and conditions of the Amended and Restated
Shareholders Agreement, dated as of May 12, 2000, by and among the Company
and certain of its securities holders parties thereto (the "Shareholders
Agreement").
3. Additional Arrangements
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3.1 Xxxxxx agrees to sign any consents in writing of Employee
Party (as defined in the Shareholders Agreement) with respect to amending
the Shareholders Agreement (i) to remove Xxxxxx from the definition of
"Employee Party" for purposes of amending the Shareholders Agreement and
(ii) to amend Section 3.2(b) so that Xxxxxx has no right to the title of
President or of Chief Executive Officer of the Company or its subsidiaries
pursuant to his continued employment by the Company. The Company agrees
that it will take all steps necessary or appropriate (including the
execution of any documents) to cause the deletion of Section 3.2(b)(Z) of
the Shareholders Agreement.
3.2 Xxxxxx agrees that, for a period of five years from the
Termination Date, he will not exercise his right to make an Employee Offer
Proposal pursuant to Section 4.6 of the Shareholders Agreement.
3.3 Xxxxxx acknowledges that, notwithstanding any provision in
the Shareholders Agreement, from and after the date hereof, he has no right
to hold the title of President and Chief Executive Officer of the Company.
4. Miscellaneous
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4.1 The parties acknowledge and agree that, except as expressly
modified hereby, the provisions of the Xxxxxx Employment Agreement,
including Articles IV, VI and VIII thereof, shall remain in full force and
effect. "Confidential Information" as used in the Xxxxxx Employment
Agreement shall include the terms and existence of this Agreement.
4.2 At the Termination Date, Xxxxxx, on the one hand, and the
Company, on the other hand, shall each execute a general release (the
"Release") in the form attached to the Xxxxxx Employment Agreement as
Exhibit B. This Agreement shall be of no force and effect if Xxxxxx revokes
the Release in accordance with the terms thereof. The Released Parties (as
defined in the Release) are third party beneficiaries of this Agreement.
However, Paragraph 11 of the Release shall be amended in its entirety so
that such Paragraph shall read as follows:
Notwithstanding anything in this General Release
to the contrary, this General Release shall not
relinquish, diminish, or in any way affect any
rights or claims arising out of any breach by the
Company, or by any Released Party, of the
Agreement, the Nonqualified Stock Option
Agreement, dated as of December 29, 1999, between
the Company and myself (as heretofore and as from
time to time hereafter modified and/or amended),
the Amended and Restated Shareholders Agreement,
dated as of May 12, 2000 (as heretofore and as
from time to time hereafter modified and/or
amended) among the Company, myself and others,
and that certain Employment Modification
Agreement dated as of July 24, 2002 between the
Company and myself (as heretofore and as from
time to time hereafter modified and/or amended).
4.3 Xxxxxx agrees that during the Term and at all times
thereafter he shall not make, nor cause or attempt to cause any other
person to make, any statement, either written or oral, nor shall Xxxxxx
convey any information about the Company, AEA Investors Inc., any of their
affiliates, or any of their employees, shareholders, officers, or directors
(collectively, the "Company Group"), which information is defamatory or
disparaging or which reflects negatively upon the character, personality,
integrity or performance of any member of the Company Group, or which is or
may be damaging to the reputation of any member of the Company Group,
provided that nothing contained in this Section 4.3 shall affect any legal
obligation of Xxxxxx to respond to inquiries concerning the Company Group.
The Company hereby agrees that during the Term and at all times thereafter,
the Company will direct the officers and directors of each member of the
Company Group (the "Company Representatives") not to make, nor cause or
attempt to cause any other person to make, any statement, either written or
oral, which is defamatory or disparaging or which reflects negatively upon
the character, personality integrity or performance of Xxxxxx, or which may
be damaging to the reputation of Xxxxxx; nor shall the Company
Representatives convey any information about Xxxxxx, which information is
defamatory or disparaging or which reflects negatively upon the character,
personality, integrity or performance of Xxxxxx, or which may be damaging
to the reputation of Xxxxxx, provided that nothing contained in this
Section 4.3 shall affect any legal obligation of Company Representatives to
respond to inquiries concerning Xxxxxx. Xxxxxx also agrees that he shall
not directly or indirectly interfere with the Company's or any of its
affiliates' sales or prospective sales or the Company's or its affiliates'
relationships with customers or potential customers or employees; provided,
however, that Xxxxxx'x failure or alleged failure to comply with this
Section 4.3 shall not relieve the Company from performing any obligations
of the Company owed to Xxxxxx hereunder or under any other agreement
between the Company and Xxxxxx..
4.4 During the Term and for a period of one year after the
Termination Date, Xxxxxx shall endeavor to cooperate fully with the Company
regarding all Company matters, as may be reasonably requested by the
Company, and as may be reasonably acceptable to Xxxxxx, including, but not
limited to, any and all communications with the public and/or banking
community and any litigation involving the Company; provided, however, that
Xxxxxx'x failure or alleged failure to comply with this Section 4.4 shall
not relieve the Company from performing any obligations of the Company owed
to Xxxxxx hereunder or under any other agreement between the Company and
Xxxxxx.
4.5 This Agreement, the Xxxxxx Employment Agreement (as modified
hereby), the Shareholders Agreement, the Option Agreement and the Release
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior oral and written agreements,
decisions and understandings.
4.6 The provisions of this Agreement shall be binding on and
inure to the benefit of the heirs, successors and assigns of the parties
hereto and on their estates and legal representatives. This Agreement is
not assignable except as contemplated by Section 4.7 hereof.
4.7 The Company shall 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 expressly
assume 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.
4.8 This Agreement and all rights of Xxxxxx hereunder shall
inure to the benefit of and be enforceable by Xxxxxx'x personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Xxxxxx should die while any amounts
would still be payable to him and/or his family hereunder if he had
continued to live, all such amounts shall be paid or provided in accordance
with the terms of this Agreement to Xxxxxx'x devisees, legatees or other
designees or, if there be no such designee, to Xxxxxx'x estate.
4.9 For purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered (including by
telecopy) or (unless otherwise specified) mailed by United States certified
or registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to Xxxxxx:
Xxxxxx X. Xxxxxx
0000 Xxxx Xxxxxx Xxxx
XxXxxxx, Xxxxxxxx 00000
If to the Company:
c/o AEA Investors, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of changes of address
shall be effective in accordance herewith only upon receipt.
4.10 No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing by the party against which such waiver, modification or discharge
is sought to be enforced. No waiver by any of the parties hereto at any
time of any breach by any other party hereto, or compliance with, any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by any of the parties which are not
set forth expressly in this Agreement.
4.11 The validity or enforceability of any provision or
provisions of this Agreement shall not be affected by the invalidity or
unenforceability of any other provision of this Agreement, and such valid
and enforceable provisions shall remain in full force and effect.
4.12 This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together
will constitute one and the same instrument.
4.13 The Company shall have the right to deduct from any amounts
payable hereunder any taxes or other amounts required by law to be
withheld. Except to the extent of any amounts so deducted by the Company,
Xxxxxx shall be fully responsible for the payment of all taxes payable in
respect of the payments made hereunder. The Company agrees to pay all
reasonable fees and expenses of legal counsel incurred by Xxxxxx in
connection with the "Termination by the Company Without Cause" of Xxxxxx'x
employment by the Company and the preparation and negotiation of this
Agreement.
4.14 This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth above.
/s/ Xxxxxx X. Xxxxxx
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XXXXXX X. XXXXXX
SOVEREIGN SPECIALTY CHEMICALS, INC.
By: /s/ Xxxx X. Xxxxxx
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Name: Xxxx X. Xxxxxx
Title: Vice-President
