Exhibit 10.23
MANAGEMENT AGREEMENT
AGREEMENT made as of December 29, 1999 by and between SOVEREIGN
SPECIALTY CHEMICALS, INC., a Delaware corporation (the "Corporation"), and AEA
INVESTORS INC., a Delaware corporation ("AEA").
WHEREAS, AEA rendered certain investment banking services to the
Corporation since the date of the Stock Purchase Agreement, dated November 24,
1999, by and between SSCI Investors LLC and Sovereign Specialty Chemicals, L.P.;
WHEREAS, AEA also renders advisory services to selected client
companies, and the Corporation desires to retain AEA to render advisory and
consulting services to it and AEA is willing to provide such services on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, it is mutually agreed as follows:
1. The Corporation hereby retains AEA to render advisory and
consulting services to the Corporation, and AEA hereby agrees to render such
services, for the period commencing on the date hereof and continuing until
December 28, 2000. AEA shall render such advisory and consulting services to the
Corporation in connection with such financial, management and other matters
relating to the business and operations of the Corporation, or any of its
subsidiaries or affiliated companies, as the Corporation's Board of Directors
may from time to time request.
2. As compensation for AEA's advisory and consulting services rendered
pursuant to Section 1 hereof, the Corporation will pay, and AEA will accept, so
long as this Agreement continues in effect, a fee of $999,999.00 payable per
annum quarterly in advance, on the first day of each calendar quarter,
commencing as of January 1, 2000. The Corporation also agrees to the provisions
with respect to indemnifying AEA and the other matters set forth in Annex A
hereto, which is incorporated by reference into this Agreement (the
"Indemnification Agreement").
(a) It is the understanding of the parties that AEA may be involved
with potential acquisitions, mergers, financing or other major transactions
involving the Corporation, in which case AEA shall be entitled to such
compensation, in addition to the fee provided above, as the Corporation and AEA
shall mutually agree.
(b) In the event that the Corporation employs any employee of AEA as
an officer of the Corporation or otherwise, and such employment involves a
substantial amount of such employee's time, the Corporation shall compensate
such employee at a reasonable rate to be agreed upon among such employee, the
Corporation and AEA, and the compensation payable to such employee by the
Corporation shall not reduce or affect in any way the fees payable to AEA
hereunder.
In addition to the aforementioned fees, the Corporation shall
reimburse AEA for its reasonable out-of-pocket costs and expenses incurred in
connection with the performance of its advisory and consulting services
hereunder.
3. Any notice required to be given hereunder shall be in writing and
shall be deemed sufficient if delivered in person or mailed by certified mail as
follows: if to the Corporation, to it at its office at Sovereign Specialty
Chemicals, Inc., 225 West Washington Street, Chicago, IL 60606 or such other
address as the Corporation may hereafter designate for that purpose; and if to
AEA, to it at its office at Park Avenue Tower, 65 East 55th Street, New York,
New York 10022, or such other address as AEA may hereafter designate for that
purpose.
4. This Agreement, together with the Indemnification Agreement,
constitutes the entire agreement between the parties and supersedes all prior
agreements and understandings, both written and oral, with respect to the
subject matter hereof. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
including any corporation into which the Corporation shall consolidate or merge
or to which it shall transfer substantially all of its assets. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed entirely within such
state.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
SOVEREIGN SPECIALTY CHEMICALS, INC.
By: /s/ John R. Mellet
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Name: John R. Mellett
Title: Vice President
AEA INVESTORS INC.
By: /s/ Christine J. Smith
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Name: Christine J. Smith
Title: Vice President
ANNEX A - INDEMNIFICATION AGREEMENT
As part of the consideration for the agreement of AEA to
furnish its services under this Agreement, the Corporation hereby agrees to
indemnify and hold harmless AEA and its affiliates and the respective managing
directors, officers, directors, investors, shareholders, members, partners,
employees and agents of, and persons controlling, AEA or any of its affiliates
within the meaning of either Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities Act of 1934, as amended, and each of
their respective successors and assigns (collectively, the "indemnified
persons") from and against all claims, liabilities, expenses, losses or damages
(or actions in respect thereof) related to or arising out of actions taken (or
omitted to be taken) by AEA pursuant to the terms of this Agreement, or AEA's
role in connection therewith; provided, however, that the Corporation shall not
be responsible for any claims, liabilities, expenses, losses and damages to the
extent that it is finally judicially determined that they result primarily from
actions taken or omitted to be taken by AEA in bad faith or due to AEA's gross
negligence or willful misconduct. If for any reason (other than the bad faith,
gross negligence or willful misconduct of AEA as provided above) the foregoing
indemnity is unavailable to the indemnified persons or insufficient to hold the
indemnified persons harmless, then the Corporation shall contribute to the
amount paid or payable by the indemnified persons as a result of such claim,
liability, expense, loss or damage in such proportion as is appropriate to
reflect not only the relative benefits received by the Corporation on the one
hand and AEA on the other, but also the relative fault of the Corporation and
AEA, as well as any relevant equitable considerations, subject to the limitation
that in any event AEA's aggregate contribution to all claims, expenses, losses,
liabilities and damages shall not exceed the amount of fees actually received by
AEA pursuant to this Agreement. Promptly after receipt by AEA of notice of any
complaint or the commencement of any action or proceeding with respect to which
indemnification may be sought against the Corporation, AEA will notify the
Corporation in writing of the receipt or commencement thereof, but failure to
notify the Corporation will relieve the Corporation from any liability which it
may have hereunder only if, and to the extent that, such failure results in the
forfeiture of substantial rights and defenses, and will not in any event relieve
the Corporation from any other obligation to any indemnified person other than
under this Indemnification Agreement. The Corporation shall assume the defense
of such action (including payment of fees and disbursements of counsel) insofar
as such action shall relate to any alleged liability in respect of which
indemnity may be sought against the Corporation. AEA shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and disbursements of such counsel shall be at the expense
of AEA unless employment of such counsel has been specifically authorized by the
Chief Executive Officer of the Corporation in writing. The Corporation shall pay
the fees and expenses of one separate counsel for AEA and any other indemnified
persons if the named parties to any such action (including any impleaded
parties) include the Corporation (or any of the directors of the Corporation)
and AEA and (i) in the good faith judgment of AEA the use of joint counsel would
present such counsel with an actual or potential conflict of interest or (ii)
AEA shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Corporation (or the director(s)). The Corporation shall not be
liable to indemnify any person for any settlement of any claim or action
effected without written consent of the Chief Executive Officer of the
Corporation, which consent shall not be unreasonably withheld. In addition, the
Corporation hereby agrees to reimburse AEA and each other indemnified person for
all expenses (including reasonable fees and disbursements of counsel if the
Corporation does not assume the defense of such action) as they are incurred by
AEA, or any indemnified person in connection with investigating, preparing or
defending any such action or claim. AEA shall have no liability to the
Corporation or any other person in connection with the services which they
render pursuant to this Agreement, except for AEA's bad faith, gross negligence
or willful misconduct judicially determined as aforesaid. The indemnification,
contribution and expense reimbursement obligation the Corporation has under this
paragraph shall be in addition to any liability the Corporation may otherwise
have. Any right to trial by jury with respect to any action or proceeding
arising in connection with or as a result of either AEA's engagement or any
matter referred to in this Agreement is hereby waived by the parties hereto. The
provisions of this Annex A shall survive any termination or completion of the
engagement provided by this Agreement.
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