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                                                                    Exhibit 10.5


                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT ("AGREEMENT") is made and entered into as of the 29th
day of December, 1999, by and between Sovereign Specialty Chemicals, Inc., a
Delaware corporation (the "COMPANY"), and John R. Mellett (the "EMPLOYEE"). The
Company and the Employee are sometimes hereinafter collectively referred to as
the "PARTIES" and individually as a "PARTY." Certain capitalized terms used in
this Agreement are defined in Article VII hereof.

                                    RECITALS

         A. The Company is and will be engaged in the manufacture of adhesives,
sealants and coatings. The Company wishes to employ the Employee, and the
Employee wishes to be employed by the Company, as the Company's Vice President
and Chief Financial Officer. As a condition of that employment, the Company
requires that an employment agreement be entered into pursuant to which the
Employee furnishes the Company with, among other things, certain covenants of
the Employee, including his covenant not to compete with the businesses of the
Company, its Subsidiaries and their Affiliates.

         B. In order to induce the Employee to enter into this Agreement, and to
incentivize and reward his effort, loyalty and commitment to the Company,
concurrent with the execution and delivery of this Agreement the Company has
granted to the Employee a certain stock option (the "OPTION") to purchase shares
of Common Stock of the Company ("SHARES") under and pursuant to the terms of the
"Sovereign Specialty Chemicals, Inc. Stock Option Plan" (the "PLAN") and a Stock
Option Agreement in the form of Exhibit C attached hereto and by this reference
made a part hereof (the "STOCK OPTION AGREEMENT").

         C. The Employee acknowledges that as a member of the Company's
management, he is one of the persons charged with primary responsibility for the
implementation of the Company's business plans, and that he will have regular
access to various confidential and/or proprietary information relating to the
Company, its Subsidiaries, their Affiliates and their businesses. Further, the
Employee acknowledges that his covenants to the Company hereinafter set forth,
specifically including but not limited to the Employee's covenant not to engage
in competition with the Company, its Subsidiaries, their Affiliates and their
businesses, are being made in partial consideration of the Company's grant of
the Option to the Employee.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the foregoing recitals, and the
mutual agreements herein contained and other good and valuable consideration,
the receipt and sufficiency of which are hereby mutually acknowledged, the
parties hereby agree as follows:
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                                    ARTICLE I
                             EMPLOYMENT RELATIONSHIP

         1.1 EMPLOYMENT. Subject to the terms and conditions of this Agreement,
the Company hereby agrees to employ the Employee to serve as the Company's Vice
President and Chief Financial Officer, and the Employee hereby accepts such
employment, and agrees to perform his duties and responsibilities to the best of
his abilities in a diligent, trustworthy, businesslike and efficient manner.

         1.2 DUTIES. The Employee shall have the normal and customary duties,
responsibilities and authority of a Vice President and Chief Financial Officer
and shall perform such other duties on behalf of the Company, its Subsidiaries
and their Affiliates as may be assigned to him by the Chief Executive Officer of
the Company. The Employee shall report to the Chief Executive Officer of the
Company in connection with the Employee's performance of his duties.

         1.3 EXCLUSIVE EMPLOYMENT. While he is employed by the Company
hereunder, the Employee covenants to the Company that he will devote his entire
business time, energy, attention and skill to the Company, its Subsidiaries and
their Affiliates (except for permitted vacation periods and reasonable periods
of illness or other incapacity), and use his good faith best efforts to promote
the interests of the Company, its Subsidiaries and their Affiliates. The
foregoing shall not be construed as prohibiting the Employee from spending such
time as may be reasonably necessary to attend to his personal affairs and
investments so long as such activities do not conflict or interfere with the
Employee's obligations and/or timely performance of his duties to the Company,
its Subsidiaries and their Affiliates hereunder.

         1.4 EMPLOYEE REPRESENTATIONS. The Employee hereby represents and
warrants to the Company that:

                  (a) the execution, delivery and performance by the Employee of
         this Agreement and any other agreements contemplated hereby to which
         the Employee 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 the Employee is a party or by which
         he is bound;

                  (b) the Employee is not a party to or bound by any employment
         agreement, non-competition agreement or confidentiality agreement with
         any other person or entity (or if a party to such an agreement, the
         Employee 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

                  (c) upon the execution and delivery of this Agreement by the
         Company, this Agreement shall be the valid and binding obligation of
         the Employee, enforceable in accordance with its terms.


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The Employee hereby acknowledges and represents that 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.

                                   ARTICLE II
                              PERIOD OF EMPLOYMENT

         2.1 EMPLOYMENT PERIOD. The Employee has been employed by the Company
for nine months, and such employment shall continue hereunder until the date
fixed by the provisions of Section 2.2 hereof, subject to the early termination
provisions of Article V hereof (the "EMPLOYMENT PERIOD"), it being acknowledged
that the Company's fiscal year ends on December 31, and that the Employment
Period shall therefore be denominated in calendar years.

         2.2 INITIAL TERM OF EMPLOYMENT PERIOD AND EXTENSION TERMS. The
Employment Period shall initially continue for a term commencing on the date
hereof and ending on December 31, 2003 (the "INITIAL TERM"). The Employment
Period shall be automatically extended for successive calendar years of the
Company following the expiration of the Initial Term (each such one year period
being hereinafter referred to as an "EXTENSION TERM") upon the same terms and
conditions provided for herein unless either party provides the other party with
advance written notice of its or his intention not to extend the Employment
Period; provided, however, that such notice must be delivered by the
non-extending party to the other party not later than ninety (90) days prior to
the expiration of the Initial Term or any Extension Term, as the case may be.

                                   ARTICLE III
                                  COMPENSATION

         3.1 ANNUAL BASE COMPENSATION. During the Employment Period the Company
shall pay to the Employee an annual base salary (the "ANNUAL BASE COMPENSATION")
in the amount of $200,000. The Annual Base Compensation shall be paid in regular
installments in accordance with the Company's general payroll practices, and
shall be subject to all required federal, state and local withholding taxes. The
Employee's Annual Base Compensation shall be reviewed by the Board annually, and
may, in the discretion of the Board be increased, provided that there shall be
no obligation on the part of the Company to increase the Employee's Annual Base
Compensation, further provided that in no event shall the Employee's Annual Base
Compensation be less than the greater of (i) the amount indicated in the first
sentence of this Section 3.1 or (ii) the highest amount such Annual Base
Compensation may have been increased to by the Board subsequent to the date of
this Agreement in its discretion.

         3.2 POTENTIAL ANNUAL TARGET BONUSES. In respect of each calendar year
falling within the Employment Period, the Employee shall be eligible to earn an
annual bonus, depending upon the results of operation of the Company, its
Subsidiaries and their Affiliates and the personal performance of the Employee,
of up to forty percent (40%) of the Employee's Annual Base Compensation for that
calendar year (the "POTENTIAL ANNUAL TARGET BONUS") in accordance with the terms
of a bonus plan which shall be adopted and maintained in effect by the


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Board for that calendar year. The amount of the Potential Annual Target Bonus,
if any, which is earned by the Employee (the "BONUSABLE AMOUNT") shall be paid
by the Company to the Employee no later than seventy-five (75) days following
the close of the Company's calendar year, provided that unless expressly
provided otherwise herein, it shall be a condition precedent to the Employee's
right to receive any Bonusable Amount that the Employee be employed by the
Company on the last day of that calendar year.

         3.3 DISCRETIONARY BONUSES. In respect of each calendar year falling
within the Employment Period, the Company may pay a discretionary annual bonus
to the Employee (a "DISCRETIONARY BONUS") to be determined by the Board, in its
sole discretion. Any Discretionary Bonus shall be paid by the Company to the
Employee within seventy-five (75) days following the close of the Company's
calendar year, provided that unless expressly provided otherwise herein, it
shall be a condition precedent to the Employee's right to receive any
Discretionary Bonus that the Employee be employed by the Company on the last day
of that calendar year.

         3.4 EXPENSES. During the Employment Period, the Employee shall be
entitled to reimbursement of all travel, entertainment and other business
expenses reasonably incurred in the performance of his duties for the Company,
upon submission of all receipts and accounts with respect thereto, and approval
by the Company thereof, in accordance with the business expense reimbursement
policies of the Company from time to time adopted by the Board. In addition, for
the six month period commencing January 1, 2000, the Employee shall be paid a
$3,000 per month allowance for temporary living and travel, provided that the
foregoing allowance shall not be considered part of the Employee's Annual Base
Compensation, and further provided that the said $3,000 shall be paid in regular
installments in accordance with the Company's general payroll practices, and
shall be subject to all required federal, state and local withholding taxes.

         3.5 VACATION. In respect of each calendar year falling within the
Employment Period, the Employee 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 unused vacation may be used by
the Employee in the following calendar year only in accordance with and as
permitted by the Company's then current vacation policies in effect from time to
time.

         3.6 OTHER FRINGE BENEFITS. During the Employment Period, the Employee
shall be entitled to receive such of the Company's other fringe benefits as are
being provided to other employees of the Company holding senior executive
positions, including but not limited to health insurance benefits, disability
benefits and retirement benefits.

         3.7 GRANT OF STOCK OPTION. Concurrently with the parties' execution and
delivery of this Agreement the Company has granted to the Employee the Option to
purchase an aggregate of Fifteen Thousand (15,000) Shares pursuant to the terms
of the Stock Option Agreement as part consideration for the Employee's execution
and delivery of this Agreement to the Company.


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                                   ARTICLE IV
                            COVENANTS OF THE EMPLOYEE

         4.1 PROPRIETARY RIGHTS. The Employee 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 reduced 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 (x) 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 Employee for the Company,
its Subsidiaries or any of their Affiliates and (y) are conceived, developed,
made or contributed to in whole or in part by the Employee during the Employment
Period ("WORK Product") shall be and remain the sole and exclusive property of
the Company, such Subsidiary or such Affiliate. The Employee shall communicate
promptly and fully all Work Product to the Board.

                  (a) WORK MADE FOR HIRE. The Employee 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 Employee within the scope of the Employee's employment
         by the Company during the Employment Period shall be deemed a "work
         made for hire" under the copyright laws and shall be owned by the
         Company, its Subsidiaries or their Affiliates, as applicable.

                  (b) ASSIGNMENT OF PROPRIETARY RIGHTS. The Employee 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, improvements, 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 sue 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 sue and recover for past and future
         infringement or misappropriation thereof.

                  (c) FURTHER INSTRUMENTS. At the request of the Company (its
         Subsidiaries or their Affiliates, as the case may be), at all times
         during the Employment Period and thereafter, the Employee will promptly
         and fully assist the Company (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 (its Subsidiaries or
         their Affiliates, as the case may be) such


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         Proprietary Rights and other rights to all Work Product and all
         confidential information related thereto, providing cooperation and
         giving testimony.

                  (d) INAPPLICABILITY OF SECTION 4.1 IN CERTAIN CIRCUMSTANCES.
         The Company expressly acknowledges and agrees that, and the Employee is
         hereby advised that, this Section 4.1 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 which was developed entirely on the Employee'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 Employee for the Company, its Subsidiaries or
         any of their Affiliates.

         4.2 OWNERSHIP AND COVENANT TO RETURN DOCUMENTS, ETC. The Employee
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 Employee by the Company, its Subsidiaries or
any of their Affiliates or are prepared, compiled or otherwise acquired by the
Employee during the Employment Period, shall be the sole and exclusive property
of the Company, such Subsidiaries or such Affiliates. The Employee 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 Employment
Period or thereafter. The Employee agrees that he will deliver all of the
aforementioned documents and objects that may be in his possession to the
Company on 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 4.2 in the form of Exhibit A to
this Agreement in accordance with the provisions of Section 5.3 hereof.

         4.3 NON-DISCLOSURE COVENANT. During the Employment Period and at all
times thereafter, the Employee shall not, either directly or indirectly,
disclose to any "unauthorized person" or use for the benefit of the Employee or
any person or entity other than the Company, its Subsidiaries or their
Affiliates any Work Product or any knowledge or information which the Employee
may acquire while employed by the Company (whether before or after the date of
this Agreement) relating to (i) the financial, marketing, sales and business
plans and affairs, financial statements, analyses, forecasts and projections,
books, accounts, records, operating costs and expenses and other financial
information of the Company, its Subsidiaries and their Affiliates, (ii) internal
management tools and systems, costing policies and methods, pricing policies and
methods and other methods of doing business, of the Company, its Subsidiaries
and their Affiliates, (iii) customers, sales, customer requirements and usages,
distributor lists, of the


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Company, its Subsidiaries and their Affiliates, (iv) agreements with customers,
vendors, independent contractors, employees and others, of the Company, its
Subsidiaries and their Affiliates, (v) existing and future products or services
and product development plans, designs, analyses and reports, of the Company,
its Subsidiaries and their Affiliates, (vi) computer software and data bases
developed for the Company, its Subsidiaries or their Affiliates, trade secrets,
research, records of research, models, designs, drawings, technical data and
reports of the Company, its Subsidiaries and their Affiliates and (vii)
correspondence or other private or confidential matters, information or data
whether written, oral or electronic, which is proprietary to the Company, its
Subsidiaries and their Affiliates and not generally known to the public
(individually and collectively "CONFIDENTIAL INFORMATION"), without the
Company's prior written permission. For purposes of this Section 4.3, the term
"UNAUTHORIZED PERSON" shall mean any person who is not (i) an officer or
director of the Company, or (ii) an employee, officer or director of a
Subsidiary or Affiliate of the Company for whom the disclosure of the knowledge
or information referred to herein is necessary for his performance of his
assigned duties, or (iii) a person expressly authorized by the Company to
receive disclosure of such knowledge or information. The Company expressly
acknowledges and agrees that the term "Confidential Information" excludes
information which is (A) in the public domain or otherwise generally known to
the trade, or (B) disclosed to third parties other than by reason of the
Employee's breach of his confidentiality obligation hereunder or (C) learned of
by the Employee subsequent to the termination of his employment hereunder from
any other party not then under an obligation of confidentiality to the Company,
its Subsidiaries and their Affiliates. Further, the Employee covenants to the
Company that in the Employee's performance of his duties hereunder, the Employee
will violate no confidentiality obligations he may have to any third persons.

         4.4 ANTI-PIRATING AND NON-INTERFERENCE COVENANTS. The Employee
covenants to the Company that while the Employee is employed by the Company
hereunder and for the two (2) year period thereafter (the "NON-SOLICITATION
PERIOD"), he will not, for any reason, directly or indirectly: (a) solicit,
hire, or otherwise do any act or thing which may induce any other employee of
the Company, its Subsidiaries or their Affiliates to leave the employ or
otherwise interfere with or adversely affect the relationship (contractual or
otherwise) of the Company, its Subsidiaries and their Affiliates with any person
who is then or thereafter becomes an employee of the Company, its Subsidiaries
and their Affiliates; or (b) do any act or thing which may interfere with or
adversely affect the relationship (contractual or otherwise) of the Company, its
Subsidiaries and their Affiliates with any customer or vendor of the Company,
its Subsidiaries and their Affiliates or induce any such customer or vendor to
cease doing business with the Company, its Subsidiaries and their Affiliates.

         4.5 COVENANT NOT TO COMPETE. The Employee expressly acknowledges that
(i) the Company is and will be engaged in the manufacture of adhesives, sealants
and coatings; (ii) the Employee is one of a limited number of persons who has
extensive knowledge and expertise relevant to the businesses of the Company, its
Subsidiaries and their Affiliates; (iii) the Employee's performance of his
services for the Company hereunder will afford him full and complete access to
and cause him to become highly knowledgeable about the Company's, its
Subsidiaries' and their Affiliates' Confidential Information; (iv) the
agreements and covenants


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contained in this Section 4.5 are essential to protect the business and goodwill
of the Company, its Subsidiaries and their Affiliates because, if the Employee
enters into any activities competitive with the businesses of the Company, its
Subsidiaries and their Affiliates, he will cause substantial harm to the Company
or its Subsidiaries and Affiliates; and (v) his covenants to the Company, its
Subsidiaries and their Affiliates set forth in this Section 4.5 are being made
in partial consideration of the Company's grant of the Option to him.
Accordingly, the Employee hereby agrees that while he is employed by the Company
hereunder and for the one (1) year period thereafter (the "NON-COMPETITION
PERIOD"), he shall not directly or indirectly own any interest in, invest in,
lend to, borrow from, manage, control, participate in, consult with, become
employed by, render services to, or in any other manner whatsoever engage in,
any business which is competitive with any business actively being engaged in by
the Company, its Subsidiaries and their Affiliates or actively (and
demonstrably) being considered by the Company, its Subsidiaries and their
Affiliates for entry into on the date of the termination of the Employment
Period, within any states or geographical regions in which any such business is
being conducted or in which the Company, its Subsidiaries and their Affiliates
is or are actively (and demonstrably) considering engaging in on the date of the
termination of the Employment Period. The preceding to the contrary
notwithstanding, the Employee shall be free to make investments in the publicly
traded securities of any corporation, provided that such investments do not
amount to more than 1% of the outstanding securities of any class of such
corporation.

         4.6 REMEDIES FOR BREACH. If the Employee commits a breach, or threatens
to commit a breach, of any of the provisions of this Article IV, the Company and
its Subsidiaries shall have the right and remedy, in addition to any other
remedy that may be available at law or in equity, to have the provisions of this
Article IV specifically enforced by any court having equity jurisdiction,
together with an accounting therefor, it being expressly acknowledged and agreed
by the Employee that any such breach or threatened breach will cause irreparable
injury to the Company and its Subsidiaries and that money damages will not
provide an adequate remedy to the Company and its Subsidiaries. Such injunction
shall be available without the posting of any bond or other security, and the
Employee hereby consents to the issuance of such injunction. The Employee
further agrees that any such injunctive relief obtained by the Company or its
Subsidiaries shall be in addition to, and not in lieu of, monetary damages and
any other remedies to which the Company or its Subsidiaries may be entitled.
Further, in the event of an alleged breach or violation by the Employee of any
of the provisions of Sections 4.4 or 4.5 hereof, the Non-Solicitation Period
and/or the Non-Competition Period, as the case may be, shall be tolled until
such breach or violation has been cured. The parties agree that in the event of
the institution of any action at law or in equity by either party to enforce the
provisions of this Article IV, the losing party shall pay all of the costs and
expenses of the prevailing party, including reasonable legal fees, incurred in
connection therewith. If any covenant contained in this Article IV or any part
thereof is hereafter construed to be invalid or unenforceable, the same shall
not affect the remainder of such covenant or any other covenants, which shall be
given full effect, without regard to the invalid portions, and any court having
jurisdiction shall have the power to modify such covenant to the least extent
necessary to render it enforceable and, in its modified form, said covenant
shall then be enforceable.


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                                    ARTICLE V
                            TERMINATION OF EMPLOYMENT

         5.1 TERMINATION AND TRIGGERING EVENTS. Notwithstanding anything to the
contrary elsewhere contained in this Agreement, the Employment Period shall
terminate at the expiration of the Initial Term or any Extension Term, or prior
to the expiration of the Initial Term or any Extension Term upon the occurrence
of any of the following events (hereinafter referred to as "TRIGGERING EVENTS"):
(a) the Employee's death; (b) the Employee's Total Disability; (c) the
Employee's Resignation; (d) the Employee's Resignation with Good Grounds; (e) a
Termination by the Company for Cause; or (f) a Termination by the Company
Without Cause.

         5.2 RIGHTS UPON OCCURRENCE OF A TRIGGERING EVENT. Subject to the
provisions of Section 5.3 hereof, the rights of the parties upon the occurrence
of a Triggering Event prior to the expiration of the Initial Term or any
Extension Term shall be as follows:

                  (a) RESIGNATION AND TERMINATION BY THE COMPANY FOR CAUSE: If
         the Triggering Event was the Employee's Resignation or a Termination by
         the Company for Cause, the Employee shall be entitled to receive his
         Annual Base Compensation and accrued but unpaid vacation through the
         date thereof 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 that date and thereafter, only to
         the extent permitted under the terms of such plans and programs.

                  (b) DEATH OR TOTAL DISABILITY: If the Triggering Event was the
         Employee's death or Total Disability, the Employee (or the Employee's
         designated beneficiary) shall be entitled to receive the Employee's
         Annual Base Compensation and accrued but unpaid vacation through the
         date thereof plus a pro rata portion of the Employee's Potential Annual
         Target Bonus for the calendar year in which such death or Total
         Disability occurred (based on the number of days the Employee was
         employed during the applicable calendar year), 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.

                  (c) TERMINATION BY COMPANY WITHOUT CAUSE OR RESIGNATION BY
         EMPLOYEE WITH GOOD GROUNDS: If the Triggering Event was a Termination
         by the Company Without Cause or a Resignation by the Employee With Good
         Grounds, the Employee shall be entitled to receive his Annual Base
         Compensation and accrued but unpaid vacation through the date thereof
         plus, in the case of either (i) Resignation by the Employee with
         Grounds or (ii) a Termination By the Company Without Cause in the
         discretion of the Chief Executive Officer of the Company, a pro rata
         portion of the Employee's Potential Annual Target Bonus for the
         calendar year in which such Triggering Event occurred (based on the
         number of days the Employee was employed during the applicable calendar
         year), payable in accordance with the Company's normal payroll
         practices, provided that in addition, the Employee shall also be paid
         an amount


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         equal to his then current Annual Base Compensation payable in
         accordance with the Company's normal payroll practices, and to continue
         to participate in the Company's health, insurance and disability plans
         and programs ("ADDITIONAL SEVERANCE BENEFITS") during the one (1) year
         period immediately following the date of the termination of the
         Employment Period (the "SEVERANCE PERIOD"); provided that the Employee
         shall be entitled to receive such Additional Severance Benefits during
         the Severance Period if and only if the Employee has executed and
         delivered to the Company the General Release substantially in form and
         substance as set forth in Exhibit B to this Agreement and only so long
         as the Employee has not breached any of his covenants to the Company
         set forth in Article IV of this Agreement.

                  (d) CESSATION OF ENTITLEMENTS AND COMPANY RIGHT OF OFFSET.
         Except as otherwise expressly provided herein, all of the Employee's
         rights to salary, employee benefits, fringe benefits and bonuses
         hereunder (if any) which would otherwise accrue after the termination
         of the Employment Period shall cease upon the date of such termination.
         The Company may offset any loans, cash advances or fixed amounts which
         the Employee owes the Company or its Affiliate against any amounts it
         owes the Employee under this Agreement.

         5.3 SURVIVAL OF CERTAIN OBLIGATIONS AND TERMINATION CERTIFICATE. The
provisions of Articles IV, VI and VIII shall survive any termination of the
Employment Period, whether by reason of the occurrence of a Triggering Event or
the expiration of the Initial Term or any Extension Term. Immediately following
the termination of the Employment Period, the Employee shall promptly return to
the Company all property required to be returned to the Company pursuant to the
provisions of Section 4.2 hereof and execute and deliver to the Company the
Termination Certificate attached hereto as Exhibit A and by this reference made
a part hereof.

                                   ARTICLE VI
                                   ASSIGNMENT

         6.1 PROHIBITION OF ASSIGNMENT BY EMPLOYEE. The Employee expressly
agrees for himself and on behalf of his executors, administrators and heirs,
that this Agreement and his obligations, rights, interests and benefits
hereunder shall not be assigned, transferred, pledged or hypothecated in any way
by the Employee, his executors, administrators or heirs, and shall not be
subject to execution, attachment or similar process. Any attempt to assign,
transfer, pledge, hypothecate or otherwise dispose of this Agreement or any such
rights, interests and benefits thereunder contrary to the foregoing provisions,
or the levy of any attachment or similar process thereupon shall be null and
void and without effect and shall relieve the Company of any and all liability
hereunder.

         6.2 RIGHT OF COMPANY TO ASSIGN. This Agreement shall be assignable and
transferable by the Company to any successor-in-interest without the consent of
the Employee.


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                                   ARTICLE VII
                                   DEFINITIONS

         "AFFILIATE" means each of the Company's Subsidiaries.

         "BOARD" means the Board of Directors of the Company.

         "RESIGNATION" means the voluntary termination of employment hereunder
by the Employee which is not a Resignation with Good Grounds (except if made in
contemplation of a Termination by the Company for Cause), provided that if such
action is taken by the Employee without the giving of at least ninety (90) days
prior written notice, such termination of employment shall not be a
"Resignation," but instead shall constitute a Termination for Cause.

         "RESIGNATION WITH GOOD GROUNDS" means a voluntary termination of the
Employee's 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 Employee of any duties inconsistent
         in any material respect with the Employee's position (including status,
         offices and titles), authority, duties or responsibilities as
         contemplated by Section 1.2 hereof which results in a diminution of the
         Employee'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 Employee;

                  (ii) the Employee's Annual Base Compensation and/or Potential
         Annual Target Bonus is/are decreased below the amount of his then
         Annual Base Compensation and/or Potential 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 Employee's Annual Base Compensation
         and Potential Annual Target Bonus in respect of any calendar year
         during the Employment Term are not decreased, the Company shall be free
         to decrease the Potential Annual Target Bonus for that year and
         commensurately increase the Annual Base Compensation for that year
         without any affect on the subsequent calendar year Annual Base
         Compensation and Potential Annual Target Bonus, it being expressly
         acknowledged by the Employee that the operating result achievement
         criteria for the payment of any of the Potential Annual Target Bonus by
         the Company, its Subsidiaries and their Affiliates shall be determined
         by the Board, in its absolute discretion) or the Employee's benefits
         under any material employee benefit plan, program or arrangement of the
         Company (other than a change that affects all Employees of the Company)
         are materially reduced from the level in effect upon the Employee's
         commencement of participation therein;

                  (iii) the Employee is required by the Company to relocate his
         personal residence outside of a 50 mile radius of the Company's current
         principal place of business (other than as agreed to by the Employee
         prior to the execution of this Agreement or as provided in another
         agreement between the Company and the Employee); or


                                     - 11 -
<PAGE>   12
                  (iv) the failure of the Company to comply with any of the
         provisions of this Agreement, other than 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
         Employee.

         "SUBSIDIARY" 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.

         "TERMINATION BY THE COMPANY FOR CAUSE" means termination by the Company
of the Employee's employment for:

                  (i) misappropriation of any significant monies or significant
         assets or properties of the Company;

                  (ii) conviction of a felony or a crime involving moral
         turpitude;

                  (iii) substantial and repeated failure to comply with
         directions of the Chief Executive Officer of the Company;

                  (iv) gross negligence or willful misconduct;

                  (v) chronic alcoholism or drug addiction together with the
         Employee's refusal to cooperate with or participate in counseling
         and/or treatment of same; or

                  (vi) any willful action or inaction of the Employee which, in
         the reasonable opinion of the Board, constitutes dereliction (willful
         neglect or willful abandonment of assigned duties), or a material
         breach of Company policy or rules which, if susceptible to cure, is not
         cured by the Employee within five (5) days following the Employee's
         receipt of written notice from the Company advising the Employee with
         reasonable specificity as to the action or inaction viewed by the Board
         to be dereliction or a material breach of Company policy or rules;


                                     - 12 -
<PAGE>   13
provided that the termination of the Employee's employment hereunder by the
Company shall not be deemed a Termination by the Company for Cause unless and
until there shall have been delivered to the Employee a written notice from the
Chief Executive Officer of the Company (after reasonable notice to and an
opportunity for the Employee (alone and in person) to have a meeting with the
Chief Executive Officer of the Company) finding that in the good faith opinion
of the Chief Executive Officer of the Company, the Employee was guilty of the
conduct set forth in one or more of such clauses.

         "TERMINATION BY THE COMPANY WITHOUT CAUSE" means a termination of the
Employee's employment by the Company which is not a Termination by the Company
for Cause, provided that the termination of the Employment Period on account of
the failure of the Company to extend the Employment Period in accordance with
the provisions of Section 2.2 hereof shall constitute a Termination by the
Company Without Cause.

         "TOTAL DISABILITY" means the Employee's inability, because of illness,
injury or other physical or mental incapacity, to perform his duties hereunder
(as determined by the Board in good faith) for a continuous period of one
hundred eighty (180) consecutive days, or for a total of ninety (90) days within
any three hundred sixty (360) consecutive day period, in which case such Total
Disability shall be deemed to have occurred on the last day of such one hundred
eighty (180) day or three hundred sixty (360) day period, as applicable.

                                  ARTICLE VIII
                                     GENERAL

         8.1 NOTICES. All notices under this Agreement shall be in writing and
shall be deemed properly sent, (i) when delivered, if by personal service or
reputable overnight courier service, or (ii) when received, if sent (x) by
certified or registered mail, postage prepaid, return receipt requested, or (y)
via facsimile transmission (provided that a hard copy of such notice is sent to
the addressee via one of the methods of delivery or mailing set forth above on
the same day the facsimile transmission is sent); to the recipient at the
address indicated below:

                  Notices to Employee:
                  -------------------

                  John R. Mellett
                  31 Windsor Ridge
                  Frisco, Texas  75034

                  Notices to Company:
                  ------------------

                  Sovereign Specialty Chemicals, Inc.
                  C/O Chief Executive Officer
                  Suite 2200
                  225 West Washington Street
                  Chicago, Illinois 60606
                  Facsimile (312) 419-7151


                                     - 13 -
<PAGE>   14
                  With Copies to:
                  --------------

                  Robert I. Schwimmer, Esq.
                  McBride Baker & Coles
                  500 West Madison, 40th Floor
                  Chicago, Illinois 60661
                  Facsimile (312) 993-9350

                  Timothy E. Peterson, Esq.
                  Fried, Frank, Harris, Shriver & Jacobson
                  4 Chriswell Street
                  London EC1Y 4UP
                  Facsimile (0207) 972-9602

                  Christine J. Smith, Esq.
                  AEA Investors Inc.
                  65 East 55th Street
                  New York, New York 10022
                  Facsimile (212) 888-1459

         8.2 GOVERNING LAW. This Agreement shall be subject to and governed by
the laws of the State of Illinois without regard to any choice of law or
conflicts of law rules or provisions (whether of the State of Illinois or any
other jurisdiction), irrespective of the fact that the Employee may become a
resident of a different state.

         8.3 BINDING EFFECT. The Agreement shall be binding upon and inure to
the benefit of the Company, its successors and assigns, and the Employee and his
executors, administrators, personal representatives and heirs.

         8.4 COMPLETE UNDERSTANDING. This Agreement constitutes the complete
understanding among the parties hereto with regard to the subject matter hereof,
and supersedes any and all prior agreements and understandings relating to the
employment of the Employee by the Company, including, without limitation, the
employment agreement between the Employee and the Company, dated March 31, 1999,
which is hereby null and void.

         8.5 AMENDMENTS. No change, modification or amendment of any provision
of this Agreement shall be valid unless made in writing and signed by all of the
parties hereto.

         8.6 WAIVER. The waiver by the Company of a breach of any provision of
this Agreement by the Employee shall not operate or be construed as a waiver of
any subsequent breach by the Employee. The waiver by the Employee of a breach of
any provision of this Agreement by the Company shall not operate as a waiver of
any subsequent breach by the Company.

         8.7 VENUE, JURISDICTION, ETC. The Employee hereby agrees that any suit,
action or proceeding relating in any way to this Agreement may be brought and
enforced in the Circuit


                                     - 14 -
<PAGE>   15
Court of Cook County of the State of Illinois or in the District Court of the
United States of America for the Northern District of Illinois, Eastern
Division, and in either case the Employee hereby submits to the jurisdiction of
each such courts. The Employee hereby waives and agrees not to assert, by way of
motion or otherwise, in any such suit, action or proceeding, any claim that the
Employee is not personally subject to the jurisdiction of the above-named
courts, that the suit, action or proceeding is brought in an inconvenient forum
or that the venue of the suit, action or proceeding is improper. The Employee
consents and agrees to service of process or other legal summons for purpose of
any such suit, action or proceeding by registered mail addressed to the Employee
at his or her address listed in the business records of the Company. Nothing
contained herein shall affect the rights of the Company to bring suit, action or
proceeding in any other appropriate jurisdiction. The Employee and the Company
do each hereby waive any right to trial by jury, he or it may have concerning
any matter relating to this Agreement.

         8.8 SEVERABILITY. If any portion of this Agreement shall be for any
reason, invalid or unenforceable, the remaining portion or portions shall
nevertheless be valid, enforceable and carried into effect.

         8.9 HEADINGS. The headings of this Agreement are inserted for
convenience only and are not to be considered in the construction of the
provisions hereof.

         8.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which, taken together, shall constitute one and the same
agreement.


                                     - 15 -
<PAGE>   16
         IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officers and its corporate seal to be hereunto affixed,
and the Employee has hereunto set his hand on the day and year first above
written.

COMPANY:                                    EMPLOYEE:
-------                                     --------

SOVEREIGN SPECIAL CHEMICALS,
INC., a Delaware Corporation


                                            ____________________________________
                                                       John R. Mellett
By: __________________________
      Chairman of the Board
<PAGE>   17
                                    EXHIBIT A

                                       TO

                              EMPLOYMENT AGREEMENT

                                     BETWEEN

                       SOVEREIGN SPECIALTY CHEMICALS, INC.

                                       AND

                                 JOHN R. MELLETT

                             TERMINATION CERTIFICATE

         This is to certify that, except as permitted by the Employment
Agreement (as defined below) I do not have in my possession, nor have I failed
to return, any software, inventions, designs, works of authorship, copyrightable
works, formulas, data, marketing plans, forecasts, product concepts, marketing
plans, strategies, forecasts, devices, records, data, notes, reports, proposals,
customer lists, correspondence, specifications, drawings, blueprints, sketches,
materials, patent applications, continuation applications, continuation-in-part
applications, divisional applications, other documents or property, or
reproductions of any aforementioned items belonging to SOVEREIGN SPECIALTY
CHEMICALS, INC. (the "COMPANY"), its Subsidiaries and their Affiliates,
successors or assigns.

         I further certify that I have complied with all the terms of the
Employment Agreement dated December 29, 1999 between the Company and me (the
"EMPLOYMENT AGREEMENT"), relating to the reporting of any Work Product (as that
term is defined therein), conceived or made by me (solely or jointly with
others) covered by the Employment Agreement.

         I acknowledge that the provisions of the Employment Agreement relating
to Confidential Information, as defined in the Employment Agreement, continue in
effect beyond the termination of the Employment Agreement, as set forth therein.

         Finally, I further acknowledge that the provisions of the Employment
Agreement relating to my (i) anti-pirating, (ii) noninterference and (iii)
non-competition covenants to the Company, its Subsidiaries and their Affiliates,
remain in effect following the date of my termination of employment with the
Company.

Date: ____________________________          ____________________________________
                                                         Employee
<PAGE>   18
                                    EXHIBIT B

                                       TO

                              EMPLOYMENT AGREEMENT

                                     BETWEEN

                       SOVEREIGN SPECIALTY CHEMICALS, INC.

                                       AND

                                 JOHN R. MELLETT

                                 GENERAL RELEASE

         I, John R. Mellett, in consideration of and subject to the performance
by SOVEREIGN SPECIALTY CHEMICALS, INC., a Delaware corporation (the "COMPANY"),
of its material obligations under the Employment Agreement, dated as of the date
as of December 29, 1999 (the "AGREEMENT"), do hereby release and forever
discharge as of the date hereof the Company, its Subsidiaries and their
Affiliates (as those terms are defined in the Agreement) and all present and
former directors, officers, agents, representatives, employees, successors and
assigns of the Company, its Subsidiaries and their Affiliates and their direct
or indirect owners (collectively, the "RELEASED PARTIES") to the extent provided
below.

1.       I understand that any payments or benefits paid or granted to me under
         Section 5.2(c) of the Agreement represent, in part, consideration for
         signing this General Release and are not salary, wages or benefits to
         which I was already entitled. I understand and agree that I will not
         receive the payments and benefits specified in Section 5.2(c) of the
         Agreement unless I execute this General Release and do not revoke this
         General Release within the time period permitted hereafter or breach
         this General Release.

2.       Except as provided in paragraph 4 of this General Release, I knowingly
         and voluntarily release and forever discharge the Company and the other
         Released Parties from any and all claims, controversies, actions,
         causes of action, cross-claims, counterclaims, demands, debts,
         compensatory damages, liquidated damages, punitive or exemplary
         damages, other damages, claims for costs and attorneys' fees, or
         liabilities of any nature whatsoever in law and in equity, both past
         and present (through the date of this General Release) and whether
         known or unknown, suspected, or claimed against the Company or any of
         the Released Parties which I, my spouse, or any of my heirs, executors,
         administrators or assigns, may have, which arise out of or are
         connected with my employment with, or my separation from, the Company
         (including, but not limited to, any allegation, claim or violation,
         arising under: Title VII of the Civil Rights Act of 1964, as amended;
         the Civil Rights Act of 1991; the Age Discrimination in Employment Act
         of 1967, as amended (including the Older Workers Benefit Protection
         Act); the Equal Pay Act of 1963, as amended; the Americans with
         Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the
         Civil Rights Act of 1866, as amended; the Worker Adjustment Retraining
         and Notification Act; the Employee Retirement Income Security Act of
         1974;
<PAGE>   19
         any applicable Employee Order Programs; the Fair Labor Standards Act;
         or their state or local counterparts; or under any other federal, state
         or local civil or human rights law, or under any other local, state, or
         federal law, regulation or ordinance; or under any public policy,
         contract or tort, or under common law; or arising under any policies,
         practices or procedures of the Company; or any claim for wrongful
         discharge, breach of contract, negligent or intentional infliction of
         emotional distress, defamation; or any claim for costs, fees, or other
         expenses, including attorneys' fees incurred in these matters) (all of
         the foregoing collectively referred to herein as the "CLAIMS").

3.       I represent that I have made no assignment or transfer of any right,
         claim, demand, cause of action, or other matter covered by paragraph 2
         of this General Release.

4.       I and the Company mutually agree that this General Release does not
         waive or release any rights or claims that I may have under (a) the Age
         Discrimination in Employment Act of 1967 and (b) any agreements to
         which I and the Company are parties pertaining to any shares of capital
         stock of the Company owned by me, which arise after the date I execute
         this General Release. I acknowledge and agree that my separation from
         employment with the Company in compliance with the terms of the
         Agreement shall not serve as the basis for any claim or action
         (including, without limitation, any claim under the Age Discrimination
         in Employment Act of 1967).

5.       In signing this General Release, I acknowledge and intend that it shall
         be effective as a bar to each and every one of the Claims hereinabove
         mentioned or implied. I expressly consent that this General Release
         shall be given full force and effect according to each and all of its
         express terms and provisions, including those relating to unknown and
         unsuspected Claims (notwithstanding any state statute that expressly
         limits the effectiveness of a general release of unknown, unsuspected
         and unanticipated Claims), if any, as well as those relating to any
         other Claims hereinabove mentioned or implied. I acknowledge and agree
         that this waiver is an essential and material term of this General
         Release and that without such waiver the Company would not have agreed
         to the terms of the Agreement. I further agree that in the event I
         should bring a Claim seeking damages against the Company, or in the
         event I should seek to recover against the Company in any Claim brought
         by a governmental agency on my behalf, this General Release shall serve
         as a complete defense to such Claims. I further agree that I am not
         aware of any pending charge or complaint of the type described in
         paragraph 2 as of the execution of this General Release.

6.       I agree that neither this General Release, nor the furnishing of the
         consideration for this General Release, shall be deemed or construed at
         any time to be an admission by the Company, any Released Party or
         myself of any improper or unlawful conduct.

7.       I agree that I will forfeit all amounts payable by the Company pursuant
         to the Agreement if I challenge the validity of this General Release,
         provided that nothing herein contained in this Agreement shall prohibit
         or bar me from filing a charge, including a challenge to the validity
         of the Agreement, with the United States Equal Employment Opportunity


                                     - 2 -
<PAGE>   20
         Commission ("EEOC"), or any state or local fair employment practices
         agency, or from participating in any investigation, hearing or
         proceeding conducted by the EEOC, or any state or local fair employment
         practices agency. I also agree that if I violate this General Release
         by suing the Company or the other Released Parties, I will pay all
         costs and expenses of defending against the suit incurred by the
         Released Parties, including reasonable attorneys' fees, and return all
         payments received by me pursuant to the Agreement.

8.       I agree that this General Release is confidential and agree not to
         disclose any information regarding the terms of this General Release,
         except to my immediate family and any tax, legal or other counsel I
         have consulted regarding the meaning or effect hereof or as required by
         law, and I will instruct each of the foregoing not to disclose the same
         to anyone.

9.       Any non-disclosure provision in this General Release does not prohibit
         or restrict me (or my attorney) from responding to any inquiry about
         this General Release or its underlying facts and circumstances by the
         Securities and Exchange Commission (SEC), the EEOC (or a state or local
         fair employment practices agency), the National Association of
         Securities Dealers, Inc. (NASD), any other self-regulatory organization
         or governmental entity.

10.      I agree to reasonably cooperate with the Company in any internal
         investigation or administrative, regulatory, or judicial proceeding. I
         understand and agree that my cooperation may include, but not be
         limited to, making myself available to the Company upon reasonable
         notice for interviews and factual investigations; appearing at the
         Company's request to give testimony without requiring service of a
         subpoena or other legal process; volunteering to the Company pertinent
         information; and turning over to the Company all relevant documents
         which are or may come into my possession all at times and on schedules
         that are reasonably consistent with my other permitted activities and
         commitments. I understand that in the event the Company asks for my
         cooperation in accordance with this provision, the Company will
         reimburse me solely for reasonable travel expenses, including lodging
         and meals, upon my submission of receipts.

11.      Notwithstanding anything in this General Release to the contrary, this
         General Release shall not relinquish, diminish, or in any way affect
         any rights or claims arising out of any breach by the Company or by any
         Released Party of the Agreement.

12.      Whenever possible, each provision of this General Release shall be
         interpreted in, such manner as to be effective and valid under
         applicable law, but if any provision of this General Release 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 General Release shall be reformed, construed and
         enforced in such jurisdiction as if such invalid, illegal or
         unenforceable provision had never been contained herein.

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:


                                     - 3 -
<PAGE>   21
(a)      I HAVE READ IT CAREFULLY;

(b)      I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT
         RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE
         DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE
         CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE
         AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT
         INCOME SECURITY ACT OF 1974, AS AMENDED;

(c)      I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

(d)      I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND
         I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION I HAVE
         CHOSEN NOT TO DO SO OF MY OWN VOLITION;

(e)      I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE
         SUBSTANTIALLY IN ITS FINAL FORM ON _______________ ____, ____ TO
         CONSIDER IT AND THE CHANGES MADE SINCE THE ______________ _____,
         _____VERSION OF THIS RELEASE ARE NOT MATERIAL AND WILL NOT RESTART THE
         REQUIRED 21-DAY PERIOD;

(f)      THE CHANGES TO THE AGREEMENT SINCE ____________ ___, _____ EITHER ARE
         NOT MATERIAL OR WERE MADE AT MY REQUEST.

(g)      I UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE
         TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR
         ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

(h)      I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH
         THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

(i)      I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED,
         WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED
         BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

DATE: _________________ ____ , ______       ____________________________________


                                     - 4 -
<PAGE>   22
                                    EXHIBIT C

                                       TO

                              EMPLOYMENT AGREEMENT

                                     BETWEEN

                       SOVEREIGN SPECIALTY CHEMICALS, INC.

                                       AND

                                 JOHN R. MELLETT

                             STOCK OPTION AGREEMENT
<PAGE>   23
                                TABLE OF CONTENTS

<TABLE>
<S>                                                                           <C>
ARTICLE I.................................................................     2
EMPLOYMENT RELATIONSHIP...................................................     2
         1.1 Employment...................................................     2
         1.2 Duties.......................................................     2
         1.3 Exclusive Employment.........................................     2
         1.4 Employee Representations.....................................     2

ARTICLE II................................................................     3
PERIOD OF EMPLOYMENT......................................................     3
         2.1 Employment Period............................................     3
         2.2 Initial Term of Employment Period and Extension Terms........     3

ARTICLE III...............................................................     3
COMPENSATION..............................................................     3
         3.1 Annual Base Compensation.....................................     3
         3.2 Potential Annual Target Bonuses..............................     4
         3.3 Discretionary Bonuses........................................     4
         3.4 Expenses.....................................................     4
         3.5 Vacation.....................................................     4
         3.6 Other Fringe Benefits........................................     5
         3.7 Grant of Stock Option........................................     5

ARTICLE IV................................................................     5
COVENANTS OF THE EMPLOYEE.................................................     5
         4.1 Proprietary Rights...........................................     5
         4.2 Ownership and Covenant to Return Documents, etc..............     6
         4.3 Non-Disclosure Covenant......................................     7
         4.4 Anti-Pirating and Non-Interference Covenants.................     8
         4.5 Covenant Not To Compete......................................     8
         4.6 Remedies For Breach..........................................     8

ARTICLE V.................................................................     9
TERMINATION OF EMPLOYMENT.................................................     9
         5.1 Termination and Triggering Events............................     9
         5.2 Rights Upon Occurrence of a Triggering Event.................     9
         5.3 Survival of Certain Obligations and Termination Certificate..    11
</TABLE>
<PAGE>   24
<TABLE>
<S>                                                                           <C>
ARTICLE VI................................................................    11
ASSIGNMENT................................................................    11
         6.1 Prohibition of Assignment by Employee........................    11
         6.2 Right of Company to Assign...................................    11

ARTICLE VII...............................................................    11
DEFINITIONS...............................................................    11

ARTICLE VIII..............................................................    14
GENERAL...................................................................    14
         8.1 Notices......................................................    14
         8.2 Governing Law................................................    15
         8.3 Binding Effect...............................................    15
         8.4 Complete Understanding.......................................    15
         8.5 Amendments...................................................    15
         8.6 Waiver.......................................................    15
         8.7 Venue, Jurisdiction, Etc.....................................    15
         8.8 Severability.................................................    16
         8.9 Headings.....................................................    16
         8.10 Counterparts................................................    16
</TABLE>


                                     - ii -