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Exhibit 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of August 19, 1996, by and between Pierce
& Stevens Corp., a New York corporation (the "Company"), and Richard Johnston
("Executive").
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:
1. Employment. The Company shall employ Executive, and Executive
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in paragraph 4 hereof (the "Employment Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the
Executive Vice President of the Company and shall have the normal duties,
responsibilities and authority of the Executive Vice President, subject to the
power of the Board (as defined below) or the Company's Chief Executive Officer,
if any, to expand or limit such executive duties, responsibilities and authority
and to override actions of the Executive Vice President. During the Employment
Period, Executive shall render such administrative, sales, marketing and other
managerial services as the Company's Chief Executive Officer or the Board may
from time to time direct.
(b) Executive shall report to the Company's Chief Executive
Officer and the Board, and Executive shall devote his best efforts and his full
business time and attention (except for permitted vacation periods and
reasonable periods of illness or other incapacity) to the business and affairs
of the Company and its Subsidiaries. Executive shall perform his duties and
responsibilities to the best of his abilities in a diligent, trustworthy,
businesslike and efficient manner.
3. Base Salary and Benefits.
(a) During the Employment Period, the Company shall pay to
Executive a base salary (the "Base Salary") equal to $145,000 per annum, or such
higher rate as the Board may designate from time to time. The Base Salary shall
be payable in regular installments in accordance with the Company's general
payroll practices and shall be subject to customary withholding. In addition,
during the Employment Period, Executive shall be entitled to participate in all
of the Company's employee benefit programs for which senior executive employees
of the Company are generally eligible.
(b) The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent
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with the Company's policies in effect from time to time with respect to travel,
entertainment and other business expenses, subject to the Company's requirements
with respect to reporting and documentation of such expenses.
(c) Within three months after the date hereof, the Company and
Executive shall in good faith develop a bonus plan applicable to Executive which
shall provide for Executive to receive an annual bonus not exceeding 50% of his
Base Salary for the year to which such annual bonus relates if the Company and
its Subsidiaries achieve specified financial measures established by the Board
as part of its annual operating budget for a calendar year.
4. Term.
(a) Except as otherwise provided in the following sentence,
the Employment Period shall end on the third anniversary of the date hereof;
provided that (i) the Employment Period shall terminate prior to such date upon
Executive's resignation, death or Disability and (ii) the Employment Period may
be terminated by the Company at any time prior to such date for Cause (as
defined below) or without Cause. The Employment Period shall be automatically
renewed and extended for, successive one-year terms beginning on the third
anniversary of the date hereof and on each anniversary date thereafter unless
the Company or Executive receives within three months prior to such anniversary
date written notice of an election not to renew the Employment Period as of such
anniversary date.
(b) If the Employment Period is terminated as a result of a
nonrenewal pursuant to paragraph 4(a) above, by the Company without Cause or by
Executive with Good Reason, Executive shall be entitled to (i) receive his Base
Salary, payable in accordance with the Company's normal payroll practices, (ii)
receive his pro rata share of Executive's targeted bonus for the fiscal year in
which Executive has been terminated (i.e., if Executive is terminated on June 30
he will receive 50% of his target bonus) and (iii) continue to participate in
the Company's health, insurance and disability plans and programs during the
period ending one year from the date the Employment Period is terminated (the
"Severance Period"); provided that Executive shall be entitled to receive such
compensation, bonus and benefits during the Severance Period if and only if
Executive has complied with and continues to comply with the provisions of
paragraphs 5, 6 and 7 hereof; provided, however, that if such termination is
prior to August 19, 1998, then Executive shall be only be entitled to the
severance provided in that certain special severance agreement (the "Special
Severance Agreement") between Pratt & Lambert United, Inc. and Executive dated
October 30, 1995. After the expiration of the Severance Period, the Company
shall pay to Executive 50% of his Base Salary (payable in accordance with the
Company's normal payroll practices) so long as the Noncompete Period, if any,
continues. The amounts payable pursuant to this paragraph 4(b) shall be reduced
by the amount of any compensation Executive earns with respect to any other
employment during the Noncompete Period. Upon reasonable request from time to
time, Executive shall furnish the Company with a true and complete certificate
specifying any such compensation due to or received by him during the Noncompete
Period.
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(c) If the Employment Period is terminated by the Company for
Cause (other than Performance Shortfall Cause), Executive shall be entitled to
receive his Base Salary through the date of termination and to receive one week
of severance for each year of service with the Company payable in accordance
with the Company's severance program and accrued but unpaid vacation in
accordance with the policy of the Company and to continue to participate in the
Company's health, insurance and disability plans and programs through the date
of termination and thereafter only to the extent permitted under the terms of
such plans and programs.
(d) If the Employment Period is terminated by Executive
without Good Reason or as a result of Executive's death or Disability, Executive
shall be entitled to receive hi s Base Salary through the date of termination
and accrued but unpaid vacation in accordance with the policy of the Company and
to continue to participate in the Company's health, insurance and disability
plans and programs through the date of termination and thereafter only to the
extent permitted under the terms of such plans and programs.
(e) If the Employment Period is terminated by the Company for
Performance Shortfall Cause, Executive shall be entitled to (i) receive his Base
Salary, payable in accordance with the Company's normal payroll practices, (ii)
receive his pro rata share of Executive's targeted bonus for the fiscal year in
which Executive has been terminated and (iii) continue to participate in the
Company's health, insurance and disability plans and programs during the period
ending on the number of weeks equal to the number of years of Executive's
service with the Company (the "PS Severance Period"); provided that Executive
shall be entitled to receive such compensation, bonus and benefits during the PS
Severance Period if and only if Executive has complied with and continues to
comply with the provisions of paragraphs 5, 6 and 7 hereof; provided, however,
that if such termination is prior to August 19, 1998, then Executive shall be
only be entitled to the severance provided in the Special Severance Agreement.
After the expiration of the PS Severance Period, the Company shall pay to
Executive 50% of his Base Salary (payable in accordance with the Company's
normal payroll practices) so long as the Noncompete Period, if any, continues.
The amounts payable pursuant to this paragraph 4(e) shall be reduced by the
amount of any compensation Executive earns with respect to any other employment
during the Noncompete Period. Upon reasonable request from time to time,
Executive shall furnish the Company with a true and complete certificate
specifying any such compensation due to or received by him during the Noncompete
Period.
(f) Except as otherwise expressly provided herein, all of
Executive's rights to salary, employee benefits, fringe benefits and bonuses
hereunder (if any) which accrue after the termination of the Employment Period
shall cease upon such termination. The Company and its Subsidiaries may offset
any loans, cash advances or fixed amounts which Executive owes the Company and
its Subsidiaries against any amounts it owes Executive.
5. Trade Secret Information. Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
concerning the business or affairs of the Company, the Parent Partnership or any
of their Subsidiaries (or any of their predecessors) which the Company, the
Parent Partnership or any such Subsidiary considers to be
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confidential and which is proprietary to the Company, the Parent Partnership or
any such Subsidiary ("Trade Secret Information") are the property of the
Company, the Parent Partnership or any such Subsidiary. Therefore, Executive
agrees that he shall not disclose to any unauthorized Person (except (i) to any
entity which shall succeed to the business of the Company, the Parent
Partnership or any such Subsidiary, (ii) as may be required in the regular
course of business of the Company, the Parent Partnership or any such Subsidiary
or (iii) as required by law) or use for his own purposes any Trade Secret
Information without the prior written consent of the Board, unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public or Persons knowledgeable in the Company's industry other
than as a result of Executive's acts or omissions which constitute a breach
hereof. Executive shall deliver to the Company at the termination of the
Employment Period, or at any other time the Company may request, all memoranda,
notes, plans, records, reports, computer tapes, printouts and software and other
documents and data (and copies thereof) relating to the Trade Secret
Information, Work Product (as defined below) or the business of the Company, the
Parent Partnership or any such Subsidiary which he may then possess or have
under his control.
6. Inventions and Patents. Executive acknowledges that all
inventions, innovations, improvements, developments, methods, designs,
analyses, drawings, reports and all similar or related information (whether or
not patentable) which (i) relate to the Company's or any of its Subsidiaries'
(or any of their predecessors) actual or anticipated business, research and
development or existing or future products or services or (H) result from any
work performed by Executive for the Company and its Subsidiaries (or any of
their predecessors) and which are conceived, developed or made by Executive
while employed by the Company ("Work Product") belong to the Company or such
Subsidiaries; provided that this paragraph 6 regarding the Company's and its
Subsidiaries' ownership of Work Product does not apply to any invention for
which no equipment, supplies, facilities or trade secret information of the
Company or any of its Subsidiaries was used and which was developed entirely on
Executive's own time, unless (i) the invention relates to the business of the
Company or any of its Subsidiaries or to the Company's or any of its
Subsidiaries' (or any of their predecessors) actual or demonstrably anticipated
research or development or (ii) the invention results from any work performed by
Executive for the Company or any of its Subsidiaries (or any of their
predecessors). Executive shall promptly disclose such Work Product to the Board
and perform all actions reasonably requested by the Board (whether during or
after the Employment Period) to establish and confirm such ownership (including,
without limitation, assignments, consents, powers of attorney and other
instruments).
7. Non-Compete, Non-Solicitation.
(a) In further consideration of the compensation to be paid to
Executive hereunder and his exposure to or involvement in the Trade Secret
Information, Executive acknowledges that in the course of his employment with
the Company, he shall become familiar with trade secrets and other Trade Secret
Information concerning the Company and its Subsidiaries and that his services
have been and shall be of special, unique and extraordinary value to the Company
and its Subsidiaries. Therefore, Executive agrees that, during the Noncompete
Period, he shall not directly or indirectly own any interest in, manage,
control, participate in, consult with, render
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services for, or in any manner engage in any business competing with the
businesses of the Company and its Subsidiaries, as such businesses exist or are
in process on the date of the termination of Executive's employment, within any
states or geographical regions in which the Company and its Subsidiaries engage
or plan to engage in such businesses on the date of the termination of
Executive's employment; provided that nothing herein shall prohibit Executive
from being a passive owner of not more than 2% of the outstanding stock of any
class of a corporation which is publicly traded, so long as Executive has no
active participation in the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly
or indirectly through another entity (i) induce or attempt to induce any
employee of the Company or any of its Subsidiaries to leave the employ of the
Company or such Subsidiaries, or in any way interfere with the relationship
between the Company or any of its Subsidiaries and any employee thereof, (ii)
hire any person who was a management employee of the Company or any of its
Subsidiaries at any time during the one-year period prior to the termination of
the Employment Period or (W) induce or attempt to induce any customer, supplier,
licensee' licensor, franchisee or other business relation of the Company or any
of its Subsidiaries to cease doing business with the Company or such
Subsidiaries, or in any way materially interfere with the relationship between
any such customer, supplier, licensee or business relation and the Company or
any of its Subsidiaries (including, without limitation, making any negative
statements or communications about the Company or its Subsidiaries).
(c) If, at the time of enforcement of this paragraph 7, a
court shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law. Executive agrees that the restrictions
contained in this paragraph 7 are reasonable.
(d) In the event of any breach or threatened breach by
Executive of any of the provisions of this paragraph 7, the Company and its
Subsidiaries, in addition and supplementary to other rights and remedies
existing in its favor, may apply to any court of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof (without posting a bond or other
security). In addition, in the event of an alleged breach or violation by
Executive of this paragraph 7, the Noncompete Period shall be tolled until such
breach or violation has been duly cured.
(e) After the later of (i) the date Executive's employment
hereunder is terminated or (H) the expiration of either the Severance Period or
the PS Severance Period, as applicable (such date being referred to as the
"Effective Date"), the Company shall advise Executive of its election to
continue to enforce the provisions of paragraph 7 above for the period of time
desired, in incremental periods of one month, in writing within 15 business days
after the Effective Date. If the Company elects to continue to enforce the
provisions of paragraph 7 after the Effective Date, the Company shall pay the
Executive, as additional consideration for Executive's agreement not to compete,
an amount equal to 50% of Executive's then monthly Base Salary during
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each month of the non-compete commencing with the first calendar month after the
month of the Effective Date, such amount to be paid to Executive in accordance
with the Company's normal payroll schedule. In no event shall such time period
exceed the Noncompete Period.
8. Executive's Representations. Executive hereby represents and
warrants to the Company that (i) the execution, delivery and performance by
Executive of this Agreement and all other agreements contemplated hereby to
which Executive is a party do not and shall not conflict with, breach, violate
or cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity (or if a party to such
an agreement, Executive has disclosed the material terms thereof to the Board
prior to the execution hereof and promptly after the date hereof shall deliver a
copy of such agreement to the Board), and (iii) upon the execution and delivery
of this Agreement by the Company, this Agreement shall be the valid and binding
obligation of Executive, enforceable in accordance with its terms. Executive
hereby acknowledges and represents that (i) he has consulted with independent
legal counsel regarding his rights and obligations under this Agreement and that
he fully understands the terms and conditions contained herein and (ii) subject
to change by the Board at any time, the Company's headquarters are in, and a
majority of the services to be performed by Executive for the Company and its
Subsidiaries shall be performed in, the State of New York.
9. Definitions.
"Board" shall mean the Company's Board of Directors.
"Cause" means (i) the Executive's conviction of a felony or a
crime involving moral turpitude or the commission of any other act or omission
involving dishonesty, disloyalty or fraud with respect to the Company or any of
its Subsidiaries which is materially injurious to the Company, (ii) conduct
which brings the Company or any of its Subsidiaries into substantial public
disgrace or disrepute (including abuse of drugs or alcohol) which is materially
injurious to the Company, (iii) substantial and repeated failure to perform
duties as reasonably directed by the Board, (iv) gross negligence or willful
misconduct by the Executive with respect to the Company or any of its
Subsidiaries which is materially injurious to the Company, or (v) any other
material breach of this Agreement by Executive which is not cured within 15 days
after written notice thereof to Executive, provided that a termination of
Executive's employment by the Company shall not be deemed a termination for
Cause unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the Board at a meeting called and held for that
purpose (after reasonable notice to and an opportunity for Executive to be heard
before the Board) finding that in the good faith opinion of the Board, Executive
was guilty of the conduct set forth in any one or more of such clauses and such
conduct is not or cannot be cured within 30 days following such date.
"Disability" means Executive's inability, because of injury,
illness or other incapacity to perform the services to the Company or its
Subsidiaries contemplated hereby (as determined by the Board in its good faith
judgment) for a continuous period of 90 days or for 120
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days out of a continuous period of 360 days. Such Disability shall be deemed to
have occurred on the 90th consecutive day or, the 120th day within the specified
period, as applicable.
"EBITDA" means, for any period, the net income of the Company
and its Subsidiaries for any such period plus the amount deducted (or in the
case of extraordinary gains, minus any amount added) in the computation thereof
for (i) all federal, state and local income taxes, (ii) interest expense, (iii)
any extraordinary gains or losses, (iv) management fees and corporate overhead
of the Parent Partnership, (v) depreciation and (vi) amortization of goodwill
and other intangibles, determined in accordance with generally accepted
accounting principles consistently applied. For purposes of this Agreement,
EBITDA shall be determined from the audited financial statements of the Company
and its Subsidiaries (or, if audited financial statements are unavailable for
such period, from the financial statements of the Company and its Subsidiaries
for such period, which statements shall be reviewed at the election of the Board
by the Company's independent public accountants) and the components of EBITDA
contained in the financial statements shall be conclusive and binding upon the
parties.
"Forecasted EBITDA" means EBITDA amounts to be determined in
good faith by the Board from time to time after consultations with the
Executive, which EBITDA amounts shall be based upon those set forth in the
Company's annual budget. In the event that the Company or any of its
Subsidiaries acquires a company or business through merger, stock purchase,
asset purchase or otherwise, or disposes of any operating unit, during the
Employment Period, the EBITDA Amounts and the annual budget shall be equitably
adjusted to reflect such acquisition or disposition, as reasonably determined in
good faith by the Board.
"Good Reason" means (i) the removal without Cause of Executive
as the Executive Vice President of the Company, or its imposition upon him of
substantial additional or different duties which are inconsistent with such
position, (ii) either the reduction of Executive's salary or a material
reduction of other benefits under any employee benefit plan, program or
arrangement of the Company (other than a change that affects all senior
executives of the Company) from the level in effect upon Executive's
commencement of participation therein or (iii) the relocation of the executive
offices of the Company from the Buffalo, New York metropolitan area.
"Noncompete Period" means the Employment Period and during the
Severance Period, the PS Severance Period or any other period during which
Executive is receiving any severance pay from the Company, and thereafter for a
period of time, to be determined by the Board in its sole discretion within 30
days after the expiration of the Employment Period or the end of such severance
period, of up to two additional years thereafter.
"Parent Partnership" means Sovereign Specialty Chemicals,
L.P., a Delaware limited partnership.
"Performance Shortfall" means, with respect to any four
consecutive calendar quarters beginning with the four-quarter period consisting
of the last calendar quarter of 1996 and the first three calendar quarters of
1997, the aggregate EBITDA for such quarters is less
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than 75% of the aggregate Forecasted EBITDA for such quarters. Executive shall
be given written notice of any Performance Shortfall by the Company not more
than 60 days following the date that EBITDA was finally determined for the
applicable period.
"Subsidiaries" means, with respect to any person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such person or
entity or one or more of the other Subsidiaries of such person or entity or a
combination thereof, or (ii) if a limited liability company, partnership,
association or other business entity, a majority of the partnership or other
similar ownership interest thereof is at the time owned or controlled, directly
or indirectly, by any person or entity or one or more Subsidiaries of such
person or entity or a combination thereof. For purposes hereof, a person or
persons shall be deemed to have a majority ownership interest in a limited
liability company, partnership, association or other business entity if such
person or persons shall be allocated a majority of limited liability company,
partnership, association or other business entity gains or losses or shall be or
control any managing director or general partner of such limited liability
company, partnership, association or other business entity.
10. Survival. Paragraphs 4 through 18 shall survive and continue in
full force in accordance with their terms notwithstanding any termination of the
Employment Period.
11. Notices. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, sent by first class mail,
return receipt requested, or sent by reputable overnight courier service
(charges prepaid) to the recipient at the address indicated below:
Notices to Executive:
Richard Johnston
710 Ohio Street
Buffalo, New York 14240
with copies to:
Giardino & Schober, LLP
268 Main Street
Second Floor
Buffalo, New York 14202-4186
Attn: John Giardino
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Notices to the Company:
Pierce & Stevens Corp.
c/o Sovereign Chemicals Corporation
Suite 2200
225 West Washington Street
Chicago, Illinois 60606
Attn: Chief Executive Officer
with copies to:
First Chicago Equity Corporation
Three First National Plaza, Suite 1210
Chicago, IL 60670
Attn: Carol E. Branison
Eric C. Larson
and
Davis, Graham & Stubbs LLP
1314 Nineteenth Street, N.W.
Washington, D.C. 20036
Attn: Christopher J. Hagan, Esq.
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, if mailed, three days after deposit in the U.S. mail and one day after
deposit with a reputable overnight courier service.
12. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
13. Complete Agreement. This Agreement embodies the complete
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
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14. No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
15. 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.
16. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first written above.
PIERCE & STEVENS CORP.
By: /s/ William T. Schram
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Its: Vice President & Secretary
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/s/ Richard Johnston
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RICHARD JOHNSTON
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