1
EXHIBIT 12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is hereby made and entered
into as of this 12th day of November, 1998, by and between McWhorter
Technologies, Inc., a Delaware corporation (the "Company"), and John R.
Stevenson (the "Employee").
WITNESSETH
WHEREAS, the Employee is currently employed by the Company as its
Chief Executive Officer;
WHEREAS, the Employee desires to resign from his duties and position
as Chief Executive Officer effective March 1, 1999 (the "Effective Date");
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
and
WHEREAS, the Company desires to secure the services and employment of
the Employee on behalf of the Company in such other capacities as the parties
may determine, and the Employee is willing to render such services on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Employment Term. Subject to the terms and conditions of this Agreement,
following his resignation as the Company's Chief Executive Officer, Employee
hereby agrees to remain in the employment of the Company, and the Company hereby
agrees to continue to employ Employee, for the period commencing on the
Effective Date and ending on February 29,2004 (the "Employment Term"). The term
of this Agreement shall be coincident with the Employment Term.
2. Duties.
(a) During the Employment Term, the Employee shall serve as an employee of
the Company in such capacities, offices or positions as may be mutually agreed
upon between the Company and the Employee. In such capacities, Employee agrees
to perform such duties, services and responsibilities incident to and consistent
with such position(s) as reasonably determined from time to time by the Board of
Directors of the Company (the "Board") and the Company's Chief Executive
Officer, including but not limited to, continuing involvement in such areas as
strategic planning, corporate development, and the colorant business.
2
(b) The Employee will devote the level of time to his employment that is
specified for the applicable time periods in Schedule A hereto. The Employee
will not, without the prior written approval of the Board, engage in any other
business activity that would reduce the number of such expected hours.
(c) Employee further agrees that, during the period beginning on the
Effective Date and ending on February 28, 2004, he will not accept full time
employment with another employer and will remain available to return to full
time employment with the Company as its Chief Executive Officer, and in such
additional offices or positions as the Employee and the Company may mutually
agree upon. Notwithstanding anything to the contrary in this Agreement whether
express or implied, Employee shall not be obligated to return to full time
employment with the Company after the Effective Date unless Employee and the
Company mutually agree on all of the relevant terms and conditions relating to
such full time employment, including compensation and other benefits. In the
event the parties fail reach a mutually acceptable agreement regarding any such
requested return to full time employment, this Agreement and Employee's
employment hereunder shall continue in accordance with the remaining terms
hereof.
3. Compensation and Certain Benefits.
(a) In consideration of the performance by Employee of his obligations
during the Employment Term, the Company will pay Employee a base annual salary
(the "Salary") at an annual rate set forth for each year during the Employment
Term as follows:
Period Annual Salary
3/11/1999 - 2/29/2000 $350,000.00
3/1/2000 - 2/28/2001 $250,000.00
During each of the remaining periods of the Employment Term, Employee's Salary
shall equal the annual compensation paid by the Company to its non-employee
directors (including, but not limited to, annual retainers, meeting fees, etc.).
Payments under this Section 3(a) shall be made in regular installments in
accordance with the Company's general payroll practices; provided that payments
under the preceding sentence shall be made at the same time or times as the
Company pays such compensation to its non-employee directors.
(b) On the date hereof, the Company will grant to Employee an award of
22,922 restricted shares of Common Stock of the Company, pursuant to the
Company's 1996 Incentive Stock Plan (the "Plan"). The terms and conditions of
such restricted stock award shall be more fully set forth in a formal stock
award entered into between the Company and Employee substantially in the form
attached as Exhibit A hereto. Following the Company's fiscal year ending October
31, 1999, Employee shall be considered an eligible participant in the Plan and
shall be entitled to receive an additional award of restricted shares of Common
Stock for that number of shares, if any, as may be determined by the Board in
its sole
-2-
3
discretion.
(c) Employee shall be solely responsible for taxes imposed on him by reason
of any compensation or benefits provided hereunder and the Company shall be
entitled to withhold from all such compensation and benefits all applicable
taxes required to be withheld pursuant to federal, state or local law.
4. Benefits. In addition to the payments and benefits described above,
during the Employment Term:
(a) The Company shall furnish Employee with, and Employee shall be allowed
full use of, office facilities, automobiles, secretarial and clerical
assistance, and other Company property and services of a quality, nature and to
the extent made available to executive employees, during the first two years of
the Employment term, and to non-employee directors, during the balance of the
Employment Term, of the Company from time to time;
(b) Except as otherwise provided in Section 4(d) hereof, Employee shall be
eligible to participate in any non-discretionary compensation or employee
benefit plans or programs, if any, maintained by the Company from time to time
for its executive employees, including, but not limited to, life, health,
dental, and long-term disability insurance programs, employee stock ownership
plans, 401(k) and other pension programs, and other fringe benefit programs, in
all events subject to the terms of such plans or programs adopted by the
Company;
(c) Employee shall also be eligible to participate in, and to receive
benefits under, any discretionary compensation plans or programs, if any,
maintained by the Company from time to time for its executive employees,
including, but not limited to, stock purchase programs, stock option plans,
bonus plans, or other incentive or deferred compensation plans or programs,
provided that Employee's participation, if any, under any such discretionary
plans or programs shall at all times be determined by the Board in its sole
discretion;
(d) If at any time during the Employment Term Employee is not otherwise
eligible to participate in the Company's group medical or dental plans because
he does not work the minimum number of hours specified in the plan for
eligibility, and during periods after the Employment Term (but not beyond the
earlier of (i) the deaths of both he and his spouse or (ii) he and his spouse
both attaining age 65), Employee and his spouse shall be eligible to participate
in such plans on the same basis and at the same cost as former married employees
of the Company who have elected COBRA continuation coverage under Part 6 of
Title I of ERISA (without regard to the time limit in Section 602(2)(A)(i) of
ERISA).
-3-
4
(e) The Company shall reimburse Employee for all reasonable out-of-pocket
expenses incurred by Employee in the performance of his duties hereunder in
accordance with the Company's policies from time to time in effect, provided
that Employee presents an itemized statement of such expenditures, which
itemized statement shall comply with the Company's expense reimbursement
procedures.
5. Termination. Notwithstanding anything to the contrary in this Agreement
whether express or implied, Employee's employment with the Company and the
Employment Term shall terminate upon the expiration of the Employment Term or
upon the earlier occurrence of any of the following events:
(a) The death of the Employee.
(b) The voluntary termination of employment by Employee. Employee shall
have the right to terminate this Agreement and the Employment Term at any time
and for any reason upon delivery of prior written notice to the Company not less
than sixty (60) days prior to the effective date of such termination.
Notwithstanding anything to the contrary herein, whether express or implied, in
the event that Employee voluntarily terminates his employment with the Company
at any time following a "Change of Control" of the Company (as defined in the
Grant of Nonqualified Stock Option to Employee from the Company dated November
13, 1997), Employee's employment shall be deemed for all purposes of this
Agreement to have been terminated by the Company without Cause, thereby
entitling the Executive to the post-termination benefits provided for under
Section 5(f) hereof.
(c) The termination of employment by the Company for Cause. Termination of
employment for "Cause" shall mean termination based on the Employee's breach of
this Agreement, conduct by the Employee that is dishonest, fraudulent or
unlawful, gross negligence, or willful misconduct by the Employee, in any case,
which discredits or materially damages the Company.
(d) The termination of employment by the Company for Disability. In the
event that during the Employment Term Employee shall be unable to perform his
duties under this Agreement for 180 consecutive days during any twelve-month
period due to illness, accident or other incapacity (as determined in good faith
by the Board) or if a physician selected in good faith by the Board (and
consented to by Employee or his personal representative) examines Employee and
advises the Company that it is likely that Employee will be unable to perform
such duties for 180 consecutive days during the succeeding twelve-month period
(a "Disability"), the Company may elect to terminate Employee's employment by
sending written notice of such election to Employee at any time during the
period of such disability.
-4-
5
(e) After any termination of Employee's employment hereunder for any
reason, Employee (or his legal representative) shall be entitled to receive
accrued and unpaid Salary and expense reimbursements due for the period ending
on the effective date of such termination. After termination of Employee's
employment hereunder for any reason, the Company and the Employee shall have no
further obligations hereunder except as otherwise described in this Section 5(e)
and in Sections 4(d), 5(f), 5(g), 6, and 9 hereof.
(f) If the Employee's employment with the Company terminates after the
date hereof for any reason other than (i) a termination by the Company for Cause
pursuant to Section 5(c) hereof, or (ii) a voluntary termination by Employee
pursuant to Section 5(b) (except as otherwise expressly provided in the last
sentence of Section 5(b) hereof), in addition to the amounts described in the
preceding paragraph, the Company will be obligated to continue to pay Employee
an amount equal to Employee's Salary at the rates set forth in Section 3 hereof,
for the period beginning on the effective date of such termination and ending on
February 29,2004.
(g) In the event of termination of this Agreement for any reason other than
Employee's death or Disability, Employee agrees to cooperate with the Company
and to be reasonably available to the Company with respect to continuing and/or
future matters arising out of the Employee's employment or any other
relationship with the Company, whether such matters are business-related, legal
or otherwise. The provisions of this paragraph shall survive termination of this
Agreement.
6. Expenses. The Company will pay or reimburse Employee for all costs and
expenses (including court costs and reasonable attorneys' fees) incurred by
Employee as a result of any claim, action or proceeding arising out of, or
challenging the validity or enforceability of, this Agreement or any provision
hereof.
7. Mitigation. In the event of a termination of Employee's employment for
any reason, Employee shall not be required to seek other employment; in
addition, no amount payable under Section 6 of this Agreement, if any, following
the termination of Employee's employment with the Company, shall be reduced by
any compensation earned by Employee as a result of employment by another
employer after such termination of employment with the Company.
8. Designated Beneficiary. In the event of the death of Employee while in
the employ of the Company, or at any time thereafter during which amounts remain
payable to Employee under Section 5 hereof, such payments shall thereafter be
made to such person or persons as Employee may specifically designate
(successively or contingently) to receive payments
-5-
6
under this Agreement following Employee's death by filing a written beneficiary
designation with the Company during Employee's lifetime. Such beneficiary
designation shall be in such form as may be prescribed by the Company and may be
amended from time to time or may be revoked by Employee pursuant to written
instruments filed with the Company during his lifetime. Beneficiaries designated
by Employee may be any natural or legal person or persons, including a
fiduciary, such as a trustee of a trust or the legal representative of an
estate. Unless otherwise provided by the beneficiary designation filed by
Employee, if all of the persons so designated die before Employee or on the
occurrence of a contingency not contemplated in such beneficiary designation, or
if Employee shall have failed to provide such beneficiary designation, then the
amount payable under this Agreement shall be paid to Employee's estate.
9. Employee Covenants.
(a) During the Employment Term and for a period of two years thereafter,
the Employee shall not (i) disclose any information likely to be regarded as
confidential and relating to the Company's business, (ii) solicit the Company's
employees to work for a competitor of the Company, or (iii) perform any act
detrimental to the Company or its employees, including, but not limited to,
disparaging the Company, its senior management or its products.
(b) The Employee agrees that any breach or threatened breach of Section
9(a) shall entitle the Company to apply for and to obtain injunctive relief,
which shall be in addition to any and all other rights and remedies available to
the Company at law or in equity.
(c) All of the Employee rights and benefits under this Agreement shall
cease upon any material breach by the Employee of Section 9(a) of this
Agreement.
10. Non-Waiver of Rights. The failure to enforce at any time the provisions
of this Agreement or to require at any time performance by the other party of
any of the provisions hereof shall in no way be construed to be a waiver of such
provisions or to affect either the validity of this Agreement or any part
hereof, or the right of either party to enforce each and every provision in
accordance with its terms.
11. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed by first class mail, return
receipt requested, to the recipient at the address below indicated:
-6-
7
Notices to Employee:
John R. Stevenson
12637 East Laurel Lane
Scottsdale, AZ 85259
Notices to the Company:
McWhorter Technologies, Inc.
400 East Cottage Place
Carpentersville, IL 60110
Attn: Chief Executive Officer
In each case with a copy to:
McDermott, Will & Emery
227 W. Monroe
Chicago, IL 60606-5096
Attn: Mr. Thomas J. Murphy
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed. Every notice relating to this Agreement shall be in writing and shall
be given by personal delivery or by registered or certified mail, postage
prepaid, return receipt requested.
12. Binding Effect; Assignment. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, executors,
personal representatives, estates, successors (including, without limitation, by
way of merger) and assigns. Notwithstanding the provisions or the immediately
preceding sentence, the Employee shall not assign all or any portion of this
Agreement without the prior written consent of the Company.
13. Entire Agreement. This Agreement sets forth the entire understanding of
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements, written or oral, between them as to such subject matter. This
Agreement may not be amended, nor may any provision hereof be modified or
waived, except by an instrument in writing duly signed by the party to be
charged.
-7-
8
14. Severability. If any provision of this Agreement, or any application
thereof to any circumstances, is invalid, in whole or in part, such provision or
application shall to that extent be severable and shall not affect other
provisions or applications of this Agreement.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois, without reference to
the principles of conflict of laws.
16. Modifications and Waivers. No provision of this Agreement may be
modified, altered or amended except by an instrument in writing executed by the
parties hereto. No waiver by either party hereto of any breach by the other
party hereto of any provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions at the time
or at any prior or subsequent time.
17. Headings. The headings contained herein are solely for the purposes of
reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
[Signature page follows]
-8-
9
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by authority of its Board of Directors, and the Employee has hereunto
set his hand, the day and year first above written.
McWHORTER TECHNOLOGIES, INC. JOHN R. STEVENSON
/s/ Jeffrey M. Nodland /s/ John R. Stevenson
- --------------------------------------- -------------------------------
By: Jeffrey M. Nodland
Title: President and Chief Operating
Officer
ACKNOWLEDGED AND AGREED ON
BEHALF OF THE COMPENSATION
COMMITTEE
/s/ Heinn F. Tomfohrde III
- --------------------------------------------
By: Heinn F. Tomfohrde III
Title: Chairman of the Compensation
Committee
10
Schedule A
During the first two years of the Employment Term, Employee shall
devote an average of approximately 30 hours per week to his employment with the
Company, including time spent in his home office and travel time, and will use
his reasonable best efforts during such time to promote the interests of the
Company. During the balance of the Employment Term, Employee shall devote a
reasonable amount of time commensurate with his compensation level, currently
expected to be an average of approximately 25 hours per calendar quarter, to his
employment with the Company.