EXHIBIT 10.23
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of October 1, 2002, by and between
Sovereign Specialty Chemicals, Inc., a Delaware corporation (the
"Company"), and Xxxxxx X. Xxxxx, Xx. (the "Executive").
WHEREAS, the Company is engaged in the manufacture of lines of
adhesives, sealants and coatings (the "Company Business") and the Company
desires to employ the Executive and the Executive desires to accept such
employment on the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and agreements
herein contained, and other good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereby agree as
follows:
1. Term of Employment. The term of the Executive's employment under
this Agreement shall commence on August 1, 2002 and continue through and
expire on December 31, 2004 unless earlier terminated as herein provided
(the "Term"). The Term shall be extended automatically for successive
one-year periods unless one of the parties hereto gives the other party
thirty (30) days written notice prior to the end of the Term and thereafter
prior to the end of any subsequent one-year period. As used herein, "Term"
shall include any such successive period to the extent that it has
commenced and until such date as it may be terminated pursuant to the
provisions of this Agreement.
2. Duties of Employment. The Executive hereby agrees for the Term to
render his exclusive services to the Company as its chief executive officer
with the title of Chief Executive Officer and in connection therewith, to
perform such duties commensurate with his office as the Board of Directors
of the Company (the "Board") shall reasonably direct him to perform. The
Executive shall devote during the Term substantially all of his business
time and skill to his duties hereunder and perform such duties faithfully,
except for absences for illness; incapacity; holidays; participation in
social, charitable and civic activities; family obligations; and the
performance of his duties as a Managing Director of AEA Investors Inc. that
are expected to be part time, and that, in each case, do not interfere with
the performance of his duties to the Company and its subsidiaries. When and
if requested to do so by the Board, the Executive shall serve as a director
and officer of any subsidiary of the Company to the extent consistent with
his position hereunder without any additional compensation therefor.
3. Compensation and Other Benefits.
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3.1 Salary. As compensation for all services to be rendered by the
Executive during the Term, the Company shall pay to the Executive a salary
at the rate of $350,000 per year (the "Annual Salary"), payable in
accordance with the Company's usual payroll practices for executives. The
Executive shall be eligible to receive annual salary reviews and salary
increases as authorized by the Board.
3.2 Bonus. In addition to the Annual Salary, the Executive shall be
eligible to be paid a bonus of 100% of the Annual Salary in respect of each
subsequent full fiscal year of the Company ending on December 31 (the
"Annual Target Bonus") based upon the results of operations of the Company
and its subsidiaries and the personal performance of the Executive measured
according to targets specified by the Company's Compensation Committee
pursuant to the Company's Management Incentive Compensation Plan, it being
understood that such percentage of Annual Salary relates only to the
"target" specified under such Plan from time to time for the chief
executive officer of the Company and shall not limit any additional bonus
amount, or preclude any lesser bonus amount, that may be payable in respect
of operating results above or below the specified target or otherwise
pursuant to the terms of such Plan, as determined from time to time at the
sole discretion of the Compensation Committee. The foregoing bonus plan
shall be subject to review and modification from time to time by the Board
or the Compensation Committee, if any, acting in good faith. For the 2002
fiscal year of the Company, the Executive shall receive a bonus of
$150,000.
3.3 Participation in Employee Benefit Plans. During the Term, the
Executive shall be permitted to participate in any group life,
hospitalization or disability insurance plan, health program, pension plan,
similar benefit plan or other so-called "fringe benefit programs" of the
Company as now existing or as may hereafter be revised or adopted to the
extent the Executive meets the eligibility requirements of any such plan or
program.
3.4 Stock Option Agreement; Vesting Agreement. Within ninety (90)
days of the date hereof and following appropriate corporate approvals that
the Company shall use reasonable efforts to obtain, the Company shall grant
options (the "Options") to the Executive to purchase 60,000 shares of its
Common Stock at an exercise price of $115.00 per share on the terms and
conditions set forth in the Company's Stock Option Plan and a Stock Option
Agreement to be entered into between the Company and the Executive (the
"Stock Option Agreement").
4. Termination.
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4.1 Termination Upon Death. If the Executive dies during the Term,
this Employment Agreement shall terminate immediately, and the Company's
sole obligation hereunder shall be to pay the Executive's legal
representatives: (i) any Annual Salary to the extent such Annual Salary has
accrued and remains payable up to the date of the Executive's death and
(ii) any benefits to which the Executive, his heirs or legal
representatives are entitled under and in accordance with the terms of any
employee benefits plan or program maintained by the Company.
4.2 Termination Upon Disability. If the Executive becomes disabled
during the Term so that he is unable substantially to perform his services
hereunder for 180 consecutive days or for 180 days during any 360-day
period, then the Executive's employment may be terminated by resolution of
the Board on or after the last day of such 180-day period or such 360-day
period, as applicable, such termination to be effective upon delivery of
written notice to the Executive of the adoption of such resolution. Upon
such termination, the Company's sole obligation hereunder shall be to: (i)
pay the Executive any accrued and unpaid Annual Salary through the date of
such termination and (ii) provide the Executive with any benefits to which
the Executive is entitled under and in accordance with the terms of any
employee benefits plan or program maintained by the Company.
4.3 Termination for Cause. The Company has the right, at any time
during the Term, exercisable by serving notice, to terminate immediately
the Executive's employment under this Agreement and discharge the Executive
for "Cause" (as defined below). If such right is exercised, the Company's
sole obligation hereunder shall be to: (i) pay the Executive any accrued
and unpaid Annual Salary through the date of such termination, and (ii)
provide the Executive with any benefits to which the Executive is entitled
under and in accordance with the terms of any employee benefit plan or
program maintained by the Company. As used in this Section 4, the term
"Cause" shall mean and include: (i) chronic alcoholism or drug addiction,
(ii) material misappropriation of any monies or assets or properties of the
Company, (iii) a material breach by the Executive of the terms of this
Agreement that has not been cured within thirty (30) days after written
notice to the Executive of such breach, (iv) the conviction of or plea of
guilty or nolo contendere by the Executive to any felony or crime involving
the Executive's moral turpitude, (v) willful violation of written
directions of the Board, (vi) any willful action of the Executive which
constitutes dereliction (willful neglect or abandonment of assigned
duties), malfeasance or misconduct resulting in material economic harm to
the Company, or (vii) gross negligence or willful misconduct of the
Executive, as determined by the Board in its sole discretion, in connection
with his employment, which, in the case of gross negligence, has not been
cured within 30 days after written notice of such conduct is provided to
the Executive.
4.4 Termination Without Cause or On Good Grounds. In the event that
the Company terminates the Executive's employment hereunder without Cause,
or the Executive terminates his employment hereunder on Good Grounds, then
the Company's sole obligation hereunder shall be to (i) pay to the
Executive (a) any accrued and unpaid Annual Salary through the date of such
termination, (b) the pro rata portion of the Executive's Annual Target
Bonus as set forth in Section 3.2, based on the number of days elapsed from
the beginning of the bonus period to the date of termination and the
performance of the Company during such time period, to be paid to the
Executive at the time that the Company pays Annual Target Bonuses to its
other senior executives for such bonus period and (c) an amount equal to
the Annual Salary amount, to be paid to the Executive according to the
Company's normal payroll practices and (ii) provide the Executive with any
benefits to which the Executive is entitled under and in accordance with
the terms of any employee benefit plan or program maintained by the Company
for a period of one year after the date of such termination; provided,
however, that if the Executive returns to a full time position as a
Managing Director of AEA Investors Inc. after the date of such termination,
then the Company shall not be required to pay to the Executive the amounts
specified in clause(i)(c) of this Section 4.4; and provided, further,
however, that if the Executive has breached his obligations under the terms
of Section 8 of this Agreement, then the Company shall not be required to
make any further payments or provide benefits to the Executive under
clauses (i)(b), (i)(c) and (ii) of this Section 4.4. For purposes hereof,
"Good Grounds" means that the Executive voluntarily terminates his
employment hereunder on account of, and within sixty (60) days after, the
occurrence of one or more of the following events: (i) the assignment to
the Executive of any duties inconsistent in any material respect with the
Executive's position (including status, offices and titles), authority,
duties or responsibilities as contemplated by Section 2 hereof which
results in a diminution of the Executive's position, excluding for this
purpose an isolated, insubstantial or inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of
written notice thereof given by the Executive; (ii) the Executive's Annual
Salary and/or Annual Target Bonus is/are decreased below the amount of his
then Annual Salary and/or Annual Target Bonus fixed by the applicable
provisions of Sections 3.1 and 3.2 hereof (provided that so long as the
aggregate sum of the Executive's Annual Salary and Annual Target Bonus in
respect of any calendar year during the Term are not decreased, the Company
shall be free to decrease the Annual Target Bonus for that year and
commensurately increase the Annual Salary for that year without any effect
on the subsequent calendar year Annual Salary and Annual Target Bonus) or
the Executive's benefits under any material employee benefit plan, program
or arrangement of the Company (other than a change that affects all
executives of the Company) are materially reduced from the level in effect
upon the Executive's commencement of participation therein; or (iii) the
failure of the Company to comply with any of the provisions of this
Agreement, other than of an isolated, insubstantial or inadvertent action
not taken in bad faith and which is remedied by the Company promptly after
receipt of written notice thereof given by the Executive.
4.5 Other. Except as otherwise provided herein, upon the expiration
or other termination of this Agreement, including resignation by the
Executive, the Company's sole obligation hereunder shall be to: (i) pay to
the Executive any Annual Salary accrued and unpaid through the date of such
termination, and (ii) provide to the Executive any benefits to which the
Executive is entitled under and in accordance with the terms of any
employee benefits plan or program maintained by the Company. All other
obligations of the Company shall forthwith terminate, except as otherwise
required by applicable law
4.6 Payments Subject to Excise Tax.
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4.6.1. In the event of a transaction (a "280G Transaction") that
causes the Executive to become eligible to receive any "parachute payments"
("Parachute Payments") within the meaning of Section 280G(b)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), and immediately
prior to the 280G Transaction, (i) AEA Investors Inc. controls, directly or
indirectly, more than 75% of the voting power of all of the outstanding
stock of the Company and (ii) no stock of the Company is "readily tradeable
on an established securities market or otherwise" within the meaning of
Section 280G(b)(5)(A)(ii)(I) of the Code or the Company is otherwise
eligible to seek exemption from the excise tax imposed under Section 4999
of the Code (the "Excise Tax"), then, unless shareholder approval is
attained in accordance with Section 4.6.2, to the extent that the payments
and benefits provided under this Agreement and benefits provided to, or for
the benefit of, the Executive under any other Company plan or agreement or
otherwise (such payments or benefits are collectively referred to as the
"Payments") would be subject to the Excise Tax, the Payments shall be
reduced (but not below zero) if and to the extent necessary so that no
Payments made or benefit to be provided to the Executive shall be subject
to the Excise Tax (such reduced amount is hereinafter referred to as the
"Limited Payment Amount"). Unless the Executive shall have given prior
written notice specifying to the Company a different order in which to
effectuate the foregoing, the Company shall reduce or eliminate the
Payments first, by reducing or eliminating the portion of the Payments
which are not payable in cash and then, by reducing or eliminating cash
payments, in each case in reverse order beginning with payments or benefits
which are to be paid the farthest in time from the initial determination of
the Accounting Firm provided for in Section 4.6.4. Any notice given by the
Executive pursuant to the preceding sentence shall take precedence over the
provisions of any other plan, arrangement or agreement governing the
Executive's rights and entitlements to any benefits or compensation.
4.6.2 If the conditions set forth in Section 4.6.1(i) and (ii) are
satisfied, then, prior to the consummation of the 280G Transaction, the
Company shall seek the approval of its shareholders in accordance with
Section 280G(b)(5)(B) of the Code of all Payments that would be Parachute
Payments if the shareholder approval described herein were not attained (or
shall otherwise seek exemption from the Excise Tax as permitted under the
Code).
4.6.3 If the conditions set forth in Section 4.6.1(i) and (ii) are
not satisfied, in the event it shall be determined that any Payments are
subject to the Excise Tax and the Company is not otherwise able to obtain
exemption from the Excise Tax under the Code, the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment of all taxes imposed upon the Gross-Up
Payment (including, without limitation, all income taxes, Excise Taxes and
employment taxes, and any interest or penalties imposed with respect to any
such taxes), the Executive retains a Gross-Up Payment amount equal to the
Excise Tax imposed upon the Payments.
4.6.4 All determinations as to whether any of the Payments are
Parachute Payments, whether the payments shall be reduced to the Limited
Payment Amount and the amount of such Limited Payment Amount or whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall
be made by Ernst & Young, the Company's independent accounting firm, or any
successor independent accounting firm appointed by the Company (the
"Accounting Firm"). The Accounting Firm shall provide its determinations
using "substantial authority" (within the meaning of Section 6662(d) of the
Code) reporting positions, together with detailed supporting calculations
and documentation for all determinations hereunder, to both the Company and
the Executive at such time as is reasonably requested by the Company or the
Executive (if the Company or the Executive reasonably believes that any of
the Payments may be subject to the Excise Tax). Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. It is
understood that as a result of uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm or the possibility of additional Parachute Payments being made, the
Company may fail to make a payment ("Underpayment") that should have been
made, or may make a payment that should not have been made ("Overpayment").
In either such event, the Accounting Firm shall determine the amount of any
such Underpayment or Overpayment that has occurred. If an Underpayment has
occurred, the Company shall promptly pay the amount of such Underpayment to
or for the benefit of the Executive. If an Overpayment has occurred, the
Executive shall, at the direction and expense of the Company, take such
steps as are reasonably necessary (including the filing of returns and
claims for refund), and follow reasonable instructions from and procedures
established by, the Company, and otherwise reasonably cooperate with the
Company to correct such Overpayment.
4.6.5. Disputes with IRS. In the event of any controversy with the
Internal Revenue Service (or other taxing authority) over matters addressed
in this Section 4.6, the Executive shall permit the Company to control
issues related to this Section 4.6 (at its expense), provided that such
issues do not potentially materially adversely affect the Executive, but
the Executive shall control any other personal issues. In the event that
the issues are interrelated, the Executive and the Company shall cooperate
in good faith so as not to jeopardize resolution of either issue, but if
the parties cannot agree, the Company shall make the final determination
with regard to the issues. In the event of any conference with any taxing
authority as to the Excise Tax or associated income taxes, the Executive
shall permit a representative of the Company to accompany the Executive to
such conference and the Executive and the Executive's representative shall
cooperate with the Company and its representative.
5. Expenses. During the Term, the Executive will be reimbursed for his
reasonable business expenses incurred for the benefit of the Company in
accordance with the general policy of the Company or directives and
guidelines established by management of the Company and upon submission of
documentation evidencing such business expenses satisfactory to the
Company. With respect to any expenses that are to be reimbursed by the
Company to the Executive, the Executive shall be reimbursed upon his
presenting to the Company an itemized expense voucher and documentation
evidencing expenses satisfactory to the Company.
5.1. Housing Expenses. During the Term, the Company shall reimburse
the Executive for reasonable housing or other accommodation expenses for
living accommodations located in Chicago, Illinois.
5.2. Travel Expenses. During the Term, the Company shall reimburse
the Executive for reasonable travel expenses to and from Chicago, Illinois
from and to Cleveland, Ohio, or such other place as the Executive may
require.
5.3. Tax Preparation. During the Term, the Company shall reimburse
the Executive for payments made by him in connection with tax preparation
and filing up to a maximum of $5,000 per annum.
5.4. Gross-Up for Taxes. The Company shall also pay to the
Executive a "gross-up" amount equal to the amount of any taxes payable by
the Executive on payments received by the Executive as reimbursement of the
expenses referred to in Section 5.1 and 5.2 hereof.
6. Vacation. In respect of each calendar year falling within the Term,
the Executive shall be entitled to such vacation time as the Company
customarily provides to its senior executives (but in no event less than
four (4) weeks per calendar year), provided that the Executive may use
unused vacation in the following calendar year only in accordance with and
as permitted by the Company's then current vacation policies in effect form
time to time.
7. Proprietary Rights.
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7.1 Work Product. The Executive hereby expressly agrees that all
research, discoveries, inventions and innovations (whether or not reduced
to practice or documented), improvements, developments, methods, designs,
analyses, drawings, reports and all similar or related information (whether
patentable or unpatentable, and whether or not deduced to writing), trade
secrets (being information about the business of the Company, its
subsidiaries and their affiliates which is considered by the Company or any
such subsidiary or affiliate to be confidential and is proprietary to the
Company or any such subsidiary or affiliate) and confidential information,
copyrightable works, and similar and related information (in whatever form
or medium), which (a) either (i) relate to the Company's, its subsidiaries
or their affiliates' actual or anticipated business, research and
development or existing or future products or services or (ii) result from
any work performed by the Executive for the Company, its subsidiaries or
any of their affiliates and (b) are conceived, developed, made or
contributed to in whole or in part by the Executive during the Term ("Work
Product") shall be and remain the sole and exclusive property of the
Company, such subsidiary or such affiliate. The Executive shall communicate
promptly and fully all Work Product to the Board.
7.1.1. Work Made for Hire. The Executive acknowledges that, unless
otherwise agreed in writing by the Company, all Work Product eligible for
any form of copyright protection made or contributed to in whole or in part
by the Executive within the scope of the Executive's employment by the
Company during the Term shall be deemed a "work made for hire" under the
copyright laws and shall be owned by the Company, its subsidiaries or their
affiliates.
7.1.2. Assignment of Proprietary Rights. The Executive hereby
assigns, transfers and conveys to the Company, and shall assign, transfer
and convey to the Company, all right, title and interest in and to all
inventions, ideas, improvement, designs, processes, trademarks, service
marks, trade names, trade secrets, trade dress, data, discoveries and other
proprietary assets and proprietary rights in and of the Work Product (the
"Proprietary Rights") for the Company's exclusive ownership and use,
together with all rights to xxx and recover for past and future
infringement or misappropriation thereof, provided that if a subsidiary or
affiliate of the Company is the owner thereof, such assignment, transfer
and conveyance shall be made to such subsidiary or affiliate, which shall
enjoy exclusive ownership and use, together with all rights to xxx and
recover for past and future infringement or misappropriation thereof.
7.1.3. Further Instruments. At the request of the Company (its
subsidiaries or their affiliates, as the case may be), at all times during
the Term and thereafter, the Executive will promptly and fully assist the
Company (or its subsidiaries or their affiliates, as the case may be) in
effecting the purpose of the foregoing assignment, including but not
limited to the further acts of executing any and all documents necessary to
secure for the Company (or its subsidiaries or their affiliates, as the
case may be) such Proprietary Rights and other rights to all Work Product
and all confidential information related thereto, including providing
cooperation and giving testimony.
7.1.4. Inapplicability of Section 7.1 In Certain Circumstances. The
Company expressly acknowledges and agrees that, and the Executive is hereby
advised that, this Section 7.1 does not apply to any invention for which no
equipment, supplies, facilities or trade secret information of the Company,
its subsidiaries or any of their affiliates was used and that was developed
entirely on the Executive's own time, unless (i) the invention relates to
the business of the Company, its subsidiaries or any of their affiliates or
to the Company's, its subsidiaries' or any of their affiliates' actual or
demonstrably anticipated research or development or (ii) the invention
results from any work performed by the Executive for the Company, its
subsidiaries or any of their affiliates.
7.2. Property of the Company. The Executive agrees that all Work
Product and all documents or other tangible materials (whether originals,
copies or abstracts), including without limitation, price lists, quotation
guides, outstanding quotations, books, records, manuals, files, sales
literature, training materials, customer records, correspondence, computer
disks or print-out documents, contracts, orders, messages, phone and
address lists, invoices and receipts, and all objects associated therewith,
which in any way relate to the business or affairs of the Company, its
subsidiaries and their affiliates either furnished to the Executive by the
Company, its subsidiaries or any of their affiliates or are prepared,
complied or otherwise acquired by the Executive during the Term, shall be
the sole and exclusive property of the Company, such subsidiaries or such
affiliates. The Executive shall not, except for the use of the Company, its
subsidiaries or any of their affiliates, use, copy or duplicate any of the
aforementioned documents or objects, nor remove them from the facilities of
the Company or such subsidiaries or such affiliates, nor use any
information concerning them except for the benefit of the Company, its
subsidiaries and their affiliates, either during the Term or thereafter.
The Executive agrees that he will deliver all of the aforementioned
documents and objects that may be in his possession to the Company of the
termination of his employment with the Company, or at any other time upon
the Company's request, together with his written certification of
compliance with the provisions of this Section 7.2.
8. Covenants Against Competition. In order to induce the Company to
enter into this Agreement and the Stock Option Agreement and in
consideration for payments or other benefits provided to the Executive
under Sections 4.4(i)(b) and (c) and 4.4(ii) of this Agreement and Section
2.4(d) of the Company's Stock Option Plan relating to the Executive's Stock
Option Agreement, the Executive hereby agrees as follows:
8.1 Acknowledgments of Executive. The Executive acknowledges that
(i) the Company and any affiliates or subsidiaries thereof that are
currently existing or are acquired or formed during the Restricted Period,
as hereinafter defined (collectively, the "Companies"), are and will be
engaged primarily in the Company Business; (ii) his work for the Companies
will give him access to trade secrets of and confidential information
concerning the Companies, including, without limitation, information
concerning its organization, business and affairs, organization and
operations, formulae, scientific and technical information, proprietary
information and processes, technical data, "know-how", customer lists,
details of client or consultant contracts, pricing policies, financial
information, operational methods, marketing plans or strategies, business
acquisition plans, new personnel acquisition plans, technical processes,
projects of the Companies, financing projections, budget information and
procedures, marketing plans or strategies, and research products
(collectively, the "Trade Secrets"); and (iii) the agreements and covenants
contained in this Section 8 are essential to protect the Company Business
and goodwill of the Companies.
8.2 Restrictions on Competition. During the Term and for a two-year
period after the end of the Term (the "Restricted Period") the Executive
shall not, directly or indirectly, in any geographical location anywhere in
the world (a) engage in the Company Business for his own account; (b) enter
the employ of, or render any services to any person or entity engaged in
the Company Business; or (c) become interested in any such person or entity
in any capacity, including, without limitation, as an individual, partner,
shareholder, officer, director, principal, agent, trustee or consultant;
provided, however, that (i) the Executive may own, directly or indirectly,
solely as an investment, securities of any entity traded on any national
securities exchange or registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934 if the Executive is not a controlling
person of, or a member of a group which controls, such entity and does not,
directly or indirectly, own 3% or more of any class of securities of such
entity and (ii) the Executive may become employed by, or render services
to, an entity that is engaged in the Company Business, so long as such
entity is primarily (which means that more than 10% of its revenues are
generated from Company Business) engaged in a business other than the
Company Business and the Executive does not participate in any manner in
the Company Business of such entity. The Company shall notify the Executive
of any additional entities which it may create or acquire which may
hereafter become a part of the Company, such entities being referred to as
"Companies" for purposes of this Agreement.
8.3 Confidential Information; Personal Relationships. During the
Restricted Period, the Executive shall keep secret and retain in strictest
confidence, and shall not use for the benefit of himself or others, all
confidential matters and Trade Secrets of the Companies. The
confidentiality obligations set forth in this Section 8.3 shall not apply
to any information which becomes part of the public domain other than
through Executive action or which is disclosed to the Executive by another
party that is not bound by confidentiality obligations to the Company.
8.4 Property of the Company. All memoranda, notes, lists, records
and other documents or papers, (and all copies thereof), including such
items stored in computer memories, on microfiche or by any other means,
made or compiled by or on behalf of the Executive relating to the Company
or Companies (if applicable), or made available to the Executive relating
to the Company or Companies (if applicable) are and shall be the Company's
or Companies' (if applicable) property and shall be delivered to the
Company or Companies (if applicable) upon the expiration of the Term unless
requested earlier by the Company or Companies (if applicable).
8.5 Employees of the Companies. The Executive acknowledges that any
attempt on the part of the Executive to induce any employee of any of the
Companies to leave any of the Companies' employ, or any efforts by the
Executive to interfere with the Company's or Companies' (if applicable)
relationship with other employees, would be harmful and damaging to the
Company or Companies (if applicable). During the Restricted Period, the
Executive will not without the prior agreement of the Companies, in any
way, directly or indirectly: (i) induce or attempt to induce any employee
to terminate employment with the Companies; or (ii) solicit or entice any
person employed by the Company or Companies (if applicable) to terminate
his/her employment with the Company or Companies (if applicable) or accept
employment with another entity.
8.6 Business Opportunities. The Executive acknowledges that the
Company may consider strategic business relationships with, or the
acquisition of, various entities engaged in the Company Business and that
it would be harmful and damaging to the Company or Companies (if
applicable) if he were to become interested in any such entity without the
Company's prior consent. During the Restricted Period, the Executive will
not, without the Company's prior consent, become interested in any such
entity in the capacity of employee, partner, shareholder, officer,
director, principal, trustee or consultant, if the Executive was aware at
any time during the Term that the Company or Companies (if applicable) had
been considering a strategic business relationship with, or the acquisition
of, such entity.
8.7 Negative Information. During the Restricted Period, the
Executive shall not disclose confidential or negative or disparaging
non-public information regarding, or take any action materially detrimental
to the reputation of, the Company, AEA Investors Inc., or its and their
directors, officers, employees, investors, shareholders and affiliates
(collectively, the "Company Affiliates"), provided that nothing contained
in this Section 8.7 shall affect any legal obligation of Executive to
respond to inquiries concerning the Company Affiliates or to act in
accordance with his rights under this Agreement. The Company likewise
agrees that, during the Restricted Period, it shall not disclose negative
or disparaging non-public information regarding, or take any action
materially detrimental to the reputation of, the Executive, provided that
nothing contained in this Section 8.7 shall affect any legal obligation of
the Company Affiliates to respond to inquiries concerning the Executive or
to act in accordance with the rights of the Company Affiliates under this
Agreement. In addition, during Executive's tenure as Chief Executive
Officer of the Company, the Executive shall provide full cooperation on
Company-related matters, including, but not limited to, road show matters
and communications with the public or banking community.
8.8 Restrictive Covenants. For the purposes of this Agreement all
matters discussed in Sections 8.1, 8.2, 8.3, 8.4, 8.5, 8.6 and 8.7 of this
Agreement shall be referred to as the "Restrictive Covenants."
8.9 Reasonableness of Restrictions. Executive recognizes and
acknowledges that (i) the types of employment which are prohibited by this
Section 8 are narrow and reasonable in relation to the skills which
represent Executive's salable asset both to the Company and to your
prospective employers and (ii) the specific but broad geographical scope of
the provisions of this Section 8 is reasonable, legitimate and fair to the
Executive in light of the Company's need to market its services and sell
its products in a large geographic area in order to make the Company's
business profitable and in light of the limited restrictions on the type of
employment prohibited herein compared to the types of employment for which
the Executive is qualified to earn his livelihood.
8.10 Rights and Remedies Upon Breach. If the Executive breaches, or
threatens to commit a breach of, any of the provisions of the Restrictive
Covenants, the Company shall have the following rights and remedies with
respect to the Executive, each of which rights and remedies shall be
independent of the others and severally enforceable, and each of which is
in addition to, and not in lieu of, any other rights and remedies available
to the Company under law or in equity.
8.10.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced, it being agreed that any
breach or threatened breach of the Restrictive Covenants would cause
irreparable injury to the Company and money damages will not provide an
adequate remedy to the Company.
8.10.2 Accounting. The right and remedy to require the Executive to
account for and pay over to the Company all compensation, profits, monies,
accruals, increments or other benefits derived or received by him as a
result of any transactions constituting a breach of the Restrictive
Covenants.
8.10.3 Severability of Covenants. The Executive acknowledges and
agrees that the Restrictive Covenants are reasonable and valid in
geographical and moral scope and in all other respects. If any court
determines that any of the Restrictive Covenants, or any part thereof, are
invalid or unenforceable, the remainder of the Restrictive Covenants shall
not thereby be affected and shall be given full effect, without regard to
the invalid portions.
8.10.4 Blue-Pencilling. If it is determined that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographic scope of such provision, the duration or scope of
such provision, as the case may be, shall be reduced so that such provision
becomes enforceable and, in its reduced form, such provision shall then be
enforceable.
8.11 Enforceability in Jurisdiction. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the states or county
in which the Company does business. If the courts of any one or more of
such jurisdictions hold the Restrictive Covenants unenforceable by reason
of the breadth of such scope or otherwise, it is the intention of the
Company and the Executive that such determination not bar or in any way
affect the Company's right to relief provided above in the courts of any
other jurisdiction within the geographical scope of the Restrictive
Covenants, as to breaches of such Restrictive Covenants in such other
respective jurisdictions, such Restrictive Covenants as they relate to each
jurisdiction being, for this purpose, severable into diverse and
independent covenants.
9. Other Provisions.
----------------
9.1 Withholding. Anything in this Agreement to the contrary
notwithstanding, all payments required to be made by the Company to the
Executive or to the Executive's estate or beneficiaries in connection with
the Executive's employment hereunder shall be subject to the withholding of
such amounts relating to taxes as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation.
9.2 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be
deemed given when so delivered personally, telegraphed, telexed or sent by
facsimile transmission or, if mailed, five days after the date of deposit
in the United States mail, as follows:
(i) if to the Company, to:
Sovereign Specialty Chemicals, Inc.
c/o AEA Investors Inc.
00 Xxxx 00 Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxx
(ii) if to the Executive, to:
Xxxxxx X. Xxxxx, Xx.
000 Xxxx Xxxxx
Xxxxxx, XX 00000
Any party may change its address for notice hereunder by notice to the
other parties hereto.
9.3 Entire Agreement. This Agreement entered into by the Executive
and the Company, dated as of the date hereof, contains the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto.
9.4 Waivers and Agreements. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the
part of any party of any right, power or privilege hereunder, nor any
single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.
9.5 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State.
9.6 Assignment. Executive may not delegate the performance of any
of his duties hereunder. Neither party hereto may assign any rights
hereunder without the written consent of the other party hereto.
9.7 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
9.8 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation
of this Agreement.
10. Arbitration. In the event of a dispute between the Company and the
Executive over the terms of this Agreement which is not settled by the
parties, then the Company and the Executive agree to settle any and all
such disputed issues by arbitration in accordance with the then-existing
rules of the American Arbitration Association. The Company and the
Executive shall jointly appoint one person to act as the arbitrator. In the
event the Company and the Executive cannot agree to an arbitrator within 30
days, the arbitrator shall be chosen by the President of the American
Arbitration Association. The decision of the arbitrator shall be binding
upon the parties and there shall be no appeal therefrom other than for
bias, fraud or misconduct. The costs of the arbitration, including the fees
and expenses of the arbitrator, shall be borne fifty percent by the
Company, on the one hand, and fifty percent by the Executive, on the other,
but each party shall pay its own attorneys' fees; provided, however, that
if the arbitrator shall rule for the Executive, the Company shall pay or
reimburse the Executive's reasonable attorneys' fees and the Executive's
share of the arbitration costs incurred in connection with such
arbitration. Notwithstanding the foregoing, it is specifically understood
that Executive shall remain free to assert and enforce in any court of
competent jurisdiction such rights, if any, as Executive may have under
federal law, including without limitation, rights arising under Title VII
of the Civil Rights Act of 1964, as amended, the Age Discrimination and
Employment Act of 1967, as amended, and/or the Americans With Disabilities
Act of 1990.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SOVEREIGN SPECIALTY CHEMICALS INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
/s/ Xxxxxx X Xxxxx, Xx.
---------------------------------
Xxxxxx X. Xxxxx, Xx.
