EXHIBIT 10-B
SECOND AMENDMENT TO CONSULTING AGREEMENT
THIS IS AN AMENDMENT TO THE CONSULTING AGREEMENT dated as of
January 1, 1994, between GUARDSMAN PRODUCTS, INC. ("Guardsman") and ▇▇▇▇
▇. ▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇"). This Second Amendment is effective August 10,
1995, and amends the aforementioned Agreement in the following
particulars:
(A) PARAGRAPH 2 OF THE AGREEMENT IS AMENDED TO READ AS FOLLOWS:
2. TERM OF AGREEMENT. This Agreement shall continue in
effect through December 31, 1998.
(B) PARAGRAPH 3 IS AMENDED TO ADD A SENTENCE, TO READ AS
FOLLOWS:
Provided, however, that all allocations of cash and deferred
compensation after a "Change in Control" (as that term is defined
in Guardsman's Long Term Incentive Plan of 1995), shall be in the
same amount as last determined before the Change in Control.
(C) PARAGRAPH 3.2.2 IS AMENDED TO ADD THE FOLLOWING TEXT:
Provided, however, that Guardsman shall maintain the "Trust
Under Consulting Agreement for ▇▇▇▇ ▇. ▇▇▇▇▇▇" dated July 31,
1995 (the "Trust"), and shall make periodic deposits into the
Trust (i.e. accruals of deferred compensation and the rate of
return amounts), in accordance with the terms of the Trust.
(D) PARAGRAPH 4.3 IS AMENDED TO READ AS FOLLOWS:
4.3 TERMINATION BY ▇▇. ▇▇▇▇▇▇ OR GUARDSMAN BY NOTICE.
Either ▇▇. ▇▇▇▇▇▇ or Guardsman may terminate this Agreement
(subject to performance of its obligations under this paragraph
4.3) by providing sixty (60) days' written notice to the other.
Termination of this Agreement by Guardsman under this Section 4.3
may be at will, with or without cause. Upon termination under
this Section 4.3 by Guardsman, or in the event of any other
termination not authorized by Section 4.1, 4.2, or 4.4:
1. Within 7 days after the termination, Guardsman shall:
(a) Compute an amount equal to the sum of: (i) the
remaining cash compensation portion of the consulting fees that
would have been payable to ▇▇. ▇▇▇▇▇▇ from January 1 of the year
following that in which the termination occurs through December
31, 1998; and (ii) the sum of the monthly deferred compensation
installments accrued through the month of the termination, plus,
for each such installment, the 7% monthly compounded rate of
return factor in paragraph 3.2.2 from the date of accrual to a
date 5 years after such accrual; and (iii) the sum of the monthly
deferred compensation installments that would have accrued from
the month after the termination through December 31, 1998, plus,
for each such installment, the 7% monthly compounded rate of
return factor in paragraph 3.2.2 from the date such installment
would have accrued to a date 5 years thereafter. In addition,
Guardsman shall make subsequent monthly payments (by deposit to
the Trust as described in (b) below) of any additional amounts
accruing under paragraph 3.2.2 of the Agreement because the
United States 30-year Treasury Bond rate exceeds 7%.
(b) Deposit the sum of the amounts computed in
subparagraphs 1(a)(i), (ii) and (iii) (to the extent not already
deposited) in the Trust.
2. Guardsman shall pay to ▇▇. ▇▇▇▇▇▇:
(a) Any unpaid cash compensation portion of the consulting
fee for the month of termination, payable immediately.
(b) An amount equal to the remaining unpaid cash
compensation portion of the consulting fee which would have been
paid for the year in which the termination occurs, but for such
termination, payable in one lump sum within fifteen (15) days
after the termination.
(c) $90,000 per year, with each $90,000 installment payable
in one lump sum on or before January 15 of each year after the
year in which the termination occurs, until the remaining amount
computed under subparagraph 1(a) above (reduced by the payments
under this subparagraph 2(c)), is less than $90,000; and then a
final payment equal to such remaining amount on the next January
15.
(d) His continuing automobile lease expenses under
paragraph 3.4, through December 31, 1998.
3. Guardsman hereby irrevocably directs the Trustee of the
Trust to make the payments to ▇▇. ▇▇▇▇▇▇ called for under such
subparagraph 2(c), from the Trust, and Guardsman shall confirm
such direction in writing upon request by the Trustee. Guardsman
shall not be excused from its obligations under subparagraph
2(c), however, except to the extent of payments actually made to
▇▇. ▇▇▇▇▇▇ by the Trust, nor shall Guardsman be excused from such
obligation if it is asserted that any payment made to ▇▇. ▇▇▇▇▇▇
by the Trustee was improperly made.
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4. Upon the completion of all payments to ▇▇. ▇▇▇▇▇▇ as
provided in this paragraph 4.3, all remaining Trust fund earnings
in the Trust may be returned to the Company.
(E) A NEW PARAGRAPH 4.5 IS ADDED TO THE AGREEMENT, TO READ AS
FOLLOWS:
4.5 TERMINATION BY ▇▇. ▇▇▇▇▇▇ FOR GOOD REASON. ▇▇. ▇▇▇▇▇▇
may terminate this Agreement and the engagement by Guardsman for
Good Reason if Guardsman purports to require him to perform
duties of a nature inconsistent with his duties prior to August
1995, or if Guardsman purports to require him to locate or be
available at any particular place (but this does not prohibit
Guardsman from requesting reasonable travel of ▇▇. ▇▇▇▇▇▇
consistent in frequency with his business travel for Guardsman
prior to the date to August 1995), or if Guardsman materially
breaches this Agreement (provided that ▇▇. ▇▇▇▇▇▇ has given
notice of the breach and that Guardsman has failed to promptly
cure it).
A termination for Good Reason by ▇▇. ▇▇▇▇▇▇ shall be deemed
a termination by Guardsman under paragraph 4.3, and shall require
Guardsman to make payments and take actions as set forth in
subparagraphs 4.3(1) through (4).
(F) A NEW PARAGRAPH 7.3 IS ADDED TO THE AGREEMENT, TO READ AS
FOLLOWS:
7.3 NON-COMPETITION. During the term of this Agreement,
and for three (3) years following its expiration or termination,
▇▇. ▇▇▇▇▇▇ shall refrain from owning, engaging in, or providing
services to, any business competitive with Guardsman, provided
that Guardsman fulfills its obligation under this Agreement. The
term "providing services" shall not include legal services
provided as a non-employee attorney, but shall include any other
services provided as an officer, director, employee, consultant,
or contractor. The term "owning" shall not include ownership of
up to five percent (5%) of a class of publicly traded securities,
but shall include any other direct or indirect ownership
interest. The term "business competitive with the Guardsman"
shall mean a business which offers a service or product which
competes in any market with any service or product offered by
Guardsman on the date this Agreement expires of terminates.
(G) A NEW PARAGRAPH 20 IS ADDED TO THE AGREEMENT TO READ AS
FOLLOWS:
20. EXCISE TAX - AFTER TAX REIMBURSEMENT. Notwithstanding
any other provision of this Agreement, if ▇▇. ▇▇▇▇▇▇ is required
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to pay any excise tax under 4999 of the Internal
Revenue Code, or any successor provision, by reason of his
receipt of any payments or benefits from Guardsman (including,
but not limited to, any payments under this Agreement, any
payments made to ▇▇. ▇▇▇▇▇▇ as a Director or former Director of
Guardsman, and any amounts attributable to the grant, exercise or
vesting of stock options granted by Guardsman), then the Company
will make an additional payment or payments to ▇▇. ▇▇▇▇▇▇
sufficient to reimburse ▇▇. ▇▇▇▇▇▇, after all federal, state and
local income or excise taxes, for the amount of excise tax under
4999, and any interest or penalties incurred with
regard to such excise tax. Such payment will be made to ▇▇.
▇▇▇▇▇▇ using the principles and procedures in "Appendix A" to
this Amendment.
(H) A NEW PARAGRAPH 21 IS ADDED TO THE AGREEMENT TO READ AS
FOLLOWS:
21. DISPUTE RESOLUTION. In the event of any dispute
involving the interpretation or application of this Agreement,
the parties stipulate and agree that jurisdiction and venue shall
lie in the state or federal courts in the state of Delaware in
preference to any other court in which jurisdiction or venue
might otherwise lie.
(I) A NEW PARAGRAPH 22 IS ADDED TO THE AGREEMENT TO READ AS
FOLLOWS:
22. INDEMNIFICATION. Guardsman shall indemnify ▇▇. ▇▇▇▇▇▇
against, and pay, any liability or expense, including without
limitation attorney fees, incurred by ▇▇. ▇▇▇▇▇▇ in enforcing his
rights under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment to Agreement as of August 10, 1995.
GUARDSMAN PRODUCTS, INC.
By:\S\ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
"Guardsman"
And by \S\ ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
"▇▇. ▇▇▇▇▇▇"
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APPENDIX A TO SECOND AMENDMENT
TO CONSULTING AGREEMENT
CERTAIN ADDITIONAL PAYMENTS BY GUARDSMAN
(a) If any payment or distribution by the Company or its affiliated
companies to or for the benefit of ▇▇. ▇▇▇▇▇▇ (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments
required under this Appendix A (a "Payment")) would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, or any
successor Code provision, or any interest or penalties are incurred by ▇▇.
▇▇▇▇▇▇ with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as
the "Excise Tax"), then ▇▇. ▇▇▇▇▇▇ shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by ▇▇. ▇▇▇▇▇▇ of all taxes (including any interest or penalties
imposed with respect to such taxes) including, without limitation, any
income and employment taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax, imposed upon the Gross-Up Payment, ▇▇.
▇▇▇▇▇▇ retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Appendix A, all determinations
required to be made under this Appendix A, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be
made by the public accounting firm that is retained by the Company as of
the date immediately prior to the Change in Control (the "Accounting
Firm") which shall provide detailed supporting calculations both to the
Company and ▇▇. ▇▇▇▇▇▇ within fifteen (15) business days of the receipt of
notice from ▇▇. ▇▇▇▇▇▇ that there has been a Payment, or such earlier time
as is requested by the Company (collectively, the "Determination"). In
the event that the Accounting Firm is serving as accountant or auditor for
the individual, entity, or group affecting the Change in Control, ▇▇.
▇▇▇▇▇▇ shall appoint another nationally recognized public accounting firm
to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Appendix A, shall be paid
by the Company to ▇▇. ▇▇▇▇▇▇ within five (5) days of the receipt of the
Determination. If the Accounting Firm determines that no Excise Taxes are
payable by ▇▇. ▇▇▇▇▇▇, it shall furnish ▇▇. ▇▇▇▇▇▇ with a written opinion
that failure to report the Excise Tax on ▇▇. ▇▇▇▇▇▇'▇ applicable federal
income tax return would not result in the imposition of a negligence or
similar penalty. The Determination by the Accounting Firm shall be
binding upon the Company and ▇▇. ▇▇▇▇▇▇. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the
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Determination, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to subparagraph (c)
below and ▇▇. ▇▇▇▇▇▇ thereafter is required to make payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of ▇▇. ▇▇▇▇▇▇.
(c) ▇▇. ▇▇▇▇▇▇ shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall
be given as soon as practicable but no later than ten (10) business days
after ▇▇. ▇▇▇▇▇▇ is informed in writing of such claim and shall apprise
the Company of the nature of such claim and the date on which such claim
is requested to be paid. ▇▇. ▇▇▇▇▇▇ shall not pay such claim prior to the
expiration of the 30-day period following the date on which ▇▇. ▇▇▇▇▇▇
gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies ▇▇. ▇▇▇▇▇▇ in writing prior to the expiration of such
period that it desires to contest such claim, ▇▇. ▇▇▇▇▇▇ shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively to
contest such claim, and
(4) permit the Company to participate in any proceeding relating to
such claim; provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify
and hold ▇▇. ▇▇▇▇▇▇ harmless, on an after-tax basis, for any Excise Tax or
income or employment tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this
Appendix A, the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings, and conferences with
the taxing authority in respect of such claim and may, at its sole option,
either direct ▇▇. ▇▇▇▇▇▇ to pay the tax claimed and ▇▇▇ for a refund or
contest the claim in any permissible manner, and ▇▇. ▇▇▇▇▇▇ agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
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courts, as the Company shall determine; provided further, that if the
Company directs ▇▇. ▇▇▇▇▇▇ to pay such claim and ▇▇▇ for a refund, the
Company shall advance the amount of such payment to ▇▇. ▇▇▇▇▇▇ on an
interest-free basis and shall indemnify and hold ▇▇. ▇▇▇▇▇▇ harmless, on
an after-tax basis, from any Excise Tax or income or employment tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect
to such advance; and provided further, that any extension of the statute
of limitations relating to payment of taxes for the taxable year of ▇▇.
▇▇▇▇▇▇ with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and ▇▇. ▇▇▇▇▇▇ shall be
entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by ▇▇. ▇▇▇▇▇▇ of an amount advanced by the
Company pursuant to this Appendix A, ▇▇. ▇▇▇▇▇▇ becomes entitled to
receive, and receives, any refund with respect to such claim, ▇▇. ▇▇▇▇▇▇
shall (subject to the Company's complying with the requirements of
Section 9.2) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by ▇▇. ▇▇▇▇▇▇ of an amount
advanced by the Company pursuant to Appendix A, a determination is made
that ▇▇. ▇▇▇▇▇▇ shall not be entitled to any refund with respect to such
claim and the Company does not notify ▇▇. ▇▇▇▇▇▇ in writing of its intent
to contest such denial of refund prior to the expiration of thirty (30)
days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
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