EXHIBIT 10.1B

                     EMPLOYMENT MODIFICATION AGREEMENT
                     ---------------------------------

     This  Employment  Modification  Agreement  ("Agreement")  is made  and
entered  into as of the 24th day of July,  2002,  between  Robert B. Covalt
("Covalt") and Sovereign Specialty Chemicals,  Inc., a Delaware corporation
(the "Company").

                                  RECITALS
                                  --------

     A. Covalt and the Company  have  previously  entered into that certain
Employment  Agreement  (the  "Covalt  Employment  Agreement")  dated  as of
December  29,  1999  pursuant  to which,  among  other  things,  Covalt was
employed as the President and Chief Executive Officer of the Company.

     B.  The  Company  has  determined  that it is no  longer  in the  best
interest of the Company for Covalt to serve as the Company's  President and
Chief Executive Officer and,  accordingly,  has requested that Covalt agree
to modify his  employment  relationship  with,  and to limit his duties and
responsibilities to, the Company.

     C. Covalt has agreed to abide by the Company's request, subject to the
terms,  provisions and conditions set forth in this Employment Modification
Agreement.

     NOW, THEREFORE, Covalt and the Company hereby agree as follows:

     1. Modification    of   Employment    Relationship;    Duties   and
        ----------------------------------------------------------------
        Responsibilities
        ----------------

           1.1 By  mutual  agreement  and  pursuant  to the  terms  of this
Agreement,  effective  on July 24,  2002,  Covalt  shall cease  holding the
offices of President and Chief Executive  Officer of the Company and of its
subsidiaries  and  affiliates.  However,  Covalt will  continue to hold the
office of Chairman of the Board of the Company  ("Chairman") and shall also
continue  to  serve  as a  Director  of the  Company.  In his  capacity  as
Chairman,  Covalt  shall  preside at all meetings of the Board of Directors
and of the  stockholders of the Company and he shall have such other powers
and shall  perform such other duties as may from time to time be prescribed
by the Board of Directors of the Company, so long as the tasks assigned are
consistent with Covalt's status, seniority and experience.

           1.2 Covalt agrees that he will remain as Chairman  until (i) the
later of (x) December 31, 2002 or (y) such date after  December 31, 2002 as
may be  mutually  agreed  upon  between the Company and Covalt or (ii) such
date prior to  December  31, 2002 as may be  specified  on thirty (30) days
prior written  notice from either party hereto to the other as permitted by
Sections 1.3 and 1.4 below.

           1.3 If, prior to December 31, 2002,  the Company  shall elect to
terminate Covalt's  employment by the Company,  such election shall be made
by the Company  giving  written  notice to Covalt not less than thirty (30)
days in advance of the effective date of termination. In such event, Covalt
shall be entitled to receive the remainder of all compensation and benefits
provided for under the Covalt Employment Agreement,  as modified hereby, as
he would  have been  entitled  to  receive  had the  Termination  Date been
December   31,   2002,   including,   without   limitation,   "Annual  Base
Compensation" (as defined in the Covalt Employment  Agreement) through such
date, the amount of his "Potential  Annual Target Bonus" (as defined in the
Covalt Employment  Agreement)  provided for under Section 2.2 below through
such date, and all other benefits provided for under Section 2.3 below.

           1.4 If,  prior to  December  31,  2002,  Covalt  shall  elect to
terminate  his  employment by the Company,  such election  shall be made by
Covalt giving  written notice to the Company not less than thirty (30) days
in advance of the Termination Date. In such event, Covalt shall be entitled
to receive "Annual Base  Compensation"  through the  Termination  Date, the
amount of his  "Potential  Annual Target Bonus" (as provided in Section 2.2
below) based upon the number of months during 2002 that Covalt was employed
by the Company,  and benefits  provided for under Section 2.3 below through
and until the Termination Date.

           1.5 As used herein, (i) "Termination Date" shall mean the actual
effective date of the termination of Covalt's employment by the Company and
(ii) "Term" shall mean the period  between the date of this  Agreement  and
the Termination Date.

     2. Payments/Obligations
        --------------------

           2.1  During  the  Term and for a period  of one year  after  the
Termination  Date,  the  Company  shall pay  Covalt at a rate  equal to his
"Annual  Base  Compensation"  for each such period in  accordance  with the
Company's usual payroll practices for executives.

           2.2  Subject  to  Sections  1.3 and 1.4 above,  Covalt  shall be
eligible to receive his "Potential  Annual Target Bonus" (as defined in the
Covalt  Employment  Agreement) for the fiscal year ended December 31, 2002.
The amount of such bonus shall be the amount  determined  by the  Company's
Compensation  Committee  in good faith  based upon (i) the  Company's  past
practices  with respect to Covalt (as if he  continued to be the  President
and Chief Executive Officer of the Company through such year end unless the
Term shall have ended prior to such date by reason of an election by Covalt
under  Section  1.4 above,  in which case  Covalt  shall be deemed for this
purpose to have  continued to serve as the  Company's  President  and Chief
Executive  Officer  through the  Termination  Date) and (ii) the  Company's
performance  against the plan  applicable  to Covalt for such period.  Such
bonus, if any, shall be paid at the time the Company pays annual bonuses to
its other senior  executives with respect to such bonus period,  whether or
not the Termination Date shall have occurred.

           2.3 During  the Term,  Covalt  shall  continue  to receive  (and
participate in and accrue benefits under) Company fringe benefits and shall
be entitled to paid vacation time and expense reimbursements, all as and to
the  extent  provided  for in  Sections  3.4,  3.5  and  3.6 of the  Covalt
Employment Agreement;  provided, however, that (i) Covalt shall be entitled
to receive  payment for any unused  vacation time arising  during the Term,
any such  payment  for  unused  vacation  time to be made to Covalt  within
thirty  (30) days after the  Termination  Date and (ii) during the one year
period following the Termination Date, Covalt shall be entitled to continue
to participate in the Company's  health  insurance and disability plans and
programs provided for in Section 5.2(c) of the Covalt Employment Agreement.

           2.4 During the Term, the option to purchase 48,000 shares of the
Company's  Common Stock at an exercise  price of $129.50 per share pursuant
to that certain  Nonqualified Stock Option Agreement,  dated as of December
30,  1999,  between the Company and Covalt (the "Option  Agreement")  shall
continue to vest and become  exercisable in accordance  with Section 2.1 of
the Option Agreement. By way of example, at the date hereof, such option is
exercisable  with respect to 30,000 shares of Common Stock subject  thereto
and, at December 31, 2002, such option will be exercisable  with respect to
36,000 shares of Common Stock subject thereto. Notwithstanding Section 4 of
the Option  Agreement,  the Option to the extent vested and  exercisable at
the Termination  Date shall be exercisable for a period of five years after
the Termination  Date unless the Termination  Date shall occur by reason of
Covalt  electing to  terminate  his  employment  prior to December 31, 2002
pursuant  to  Section  1.4  above,  in which  case  Section 4 of the Option
Agreement  shall  continue to apply as in effect prior to execution of this
Agreement.

           2.5 Covalt shall retain ownership of 130,837.25 shares of Common
Stock of the  Company.  The Common  Stock  referred to in this  Section 2.5
shall be referred to herein as the "Purchased Shares."

           2.6 Covalt,  the  Purchased  Shares and the Option  shall remain
subject  to  the  terms  and   conditions   of  the  Amended  and  Restated
Shareholders Agreement,  dated as of May 12, 2000, by and among the Company
and certain of its securities  holders parties  thereto (the  "Shareholders
Agreement").

     3. Additional Arrangements
        -----------------------

           3.1 Covalt  agrees to sign any  consents  in writing of Employee
Party (as defined in the  Shareholders  Agreement) with respect to amending
the  Shareholders  Agreement  (i) to remove  Covalt from the  definition of
"Employee  Party" for purposes of amending the  Shareholders  Agreement and
(ii) to amend  Section  3.2(b) so that  Covalt has no right to the title of
President or of Chief Executive  Officer of the Company or its subsidiaries
pursuant to his  continued  employment by the Company.  The Company  agrees
that it will  take  all  steps  necessary  or  appropriate  (including  the
execution of any  documents) to cause the deletion of Section  3.2(b)(Z) of
the Shareholders Agreement.

           3.2  Covalt  agrees  that,  for a period of five  years from the
Termination  Date, he will not exercise his right to make an Employee Offer
Proposal pursuant to Section 4.6 of the Shareholders Agreement.

           3.3 Covalt  acknowledges that,  notwithstanding any provision in
the Shareholders Agreement, from and after the date hereof, he has no right
to hold the title of President and Chief Executive Officer of the Company.

     4. Miscellaneous
        -------------

           4.1 The parties  acknowledge and agree that, except as expressly
modified  hereby,  the  provisions  of  the  Covalt  Employment  Agreement,
including Articles IV, VI and VIII thereof,  shall remain in full force and
effect.  "Confidential  Information"  as  used  in  the  Covalt  Employment
Agreement shall include the terms and existence of this Agreement.

           4.2 At the Termination  Date,  Covalt,  on the one hand, and the
Company,  on the other  hand,  shall each  execute a general  release  (the
"Release")  in the form  attached  to the Covalt  Employment  Agreement  as
Exhibit B. This Agreement shall be of no force and effect if Covalt revokes
the Release in accordance with the terms thereof.  The Released Parties (as
defined in the Release) are third party  beneficiaries  of this  Agreement.
However,  Paragraph  11 of the Release  shall be amended in its entirety so
that such Paragraph shall read as follows:

           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,    the   Nonqualified   Stock   Option
           Agreement, dated as of December 29, 1999, between
           the Company and myself (as heretofore and as from
           time to time hereafter  modified and/or amended),
           the Amended and Restated Shareholders  Agreement,
           dated as of May 12,  2000 (as  heretofore  and as
           from  time  to  time  hereafter  modified  and/or
           amended)  among the  Company,  myself and others,
           and   that   certain   Employment    Modification
           Agreement  dated as of July 24, 2002  between the
           Company  and  myself (as  heretofore  and as from
           time to time hereafter modified and/or amended).

           4.3  Covalt  agrees  that  during  the  Term  and at  all  times
thereafter  he shall not  make,  nor  cause or  attempt  to cause any other
person to make,  any  statement,  either  written or oral, nor shall Covalt
convey any information about the Company,  AEA Investors Inc., any of their
affiliates, or any of their employees, shareholders, officers, or directors
(collectively,  the "Company  Group"),  which  information is defamatory or
disparaging or which reflects  negatively upon the character,  personality,
integrity or performance of any member of the Company Group, or which is or
may be  damaging  to the  reputation  of any member of the  Company  Group,
provided that nothing  contained in this Section 4.3 shall affect any legal
obligation of Covalt to respond to inquiries  concerning the Company Group.
The Company hereby agrees that during the Term and at all times thereafter,
the Company will direct the  officers  and  directors of each member of the
Company Group (the  "Company  Representatives")  not to make,  nor cause or
attempt to cause any other person to make, any statement, either written or
oral, which is defamatory or disparaging or which reflects  negatively upon
the character, personality integrity or performance of Covalt, or which may
be  damaging  to  the   reputation   of  Covalt;   nor  shall  the  Company
Representatives  convey any information about Covalt,  which information is
defamatory or disparaging or which reflects  negatively upon the character,
personality,  integrity or performance of Covalt,  or which may be damaging
to the  reputation  of Covalt,  provided  that  nothing  contained  in this
Section 4.3 shall affect any legal obligation of Company Representatives to
respond to inquiries  concerning  Covalt.  Covalt also agrees that he shall
not  directly or  indirectly  interfere  with the  Company's  or any of its
affiliates'  sales or prospective sales or the Company's or its affiliates'
relationships with customers or potential customers or employees; provided,
however,  that  Covalt's  failure  or alleged  failure to comply  with this
Section 4.3 shall not relieve the Company from  performing any  obligations
of the  Company  owed to Covalt  hereunder  or under  any  other  agreement
between the Company and Covalt..

           4.4  During  the  Term and for a period  of one year  after  the
Termination Date, Covalt shall endeavor to cooperate fully with the Company
regarding  all  Company  matters,  as may be  reasonably  requested  by the
Company, and as may be reasonably acceptable to Covalt,  including, but not
limited  to,  any and all  communications  with the public  and/or  banking
community and any litigation involving the Company; provided, however, that
Covalt's  failure or alleged  failure to comply with this Section 4.4 shall
not relieve the Company from performing any obligations of the Company owed
to Covalt  hereunder or under any other  agreement  between the Company and
Covalt.

           4.5 This Agreement, the Covalt Employment Agreement (as modified
hereby), the Shareholders  Agreement,  the Option Agreement and the Release
constitute  the entire  agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior oral and written  agreements,
decisions and understandings.

           4.6 The  provisions  of this  Agreement  shall be binding on and
inure to the  benefit of the heirs,  successors  and assigns of the parties
hereto and on their estates and legal  representatives.  This  Agreement is
not assignable except as contemplated by Section 4.7 hereof.

           4.7 The Company shall require any successor  (whether  direct or
indirect,  by  purchase,  merger,  consolidation  or  otherwise)  to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform  this  Agreement  in the same manner and to the
same  extent  that the  Company  would be required to perform it if no such
succession had taken place.

           4.8 This  Agreement  and all  rights of Covalt  hereunder  shall
inure to the benefit of and be  enforceable  by Covalt's  personal or legal
representatives,     executors,    administrators,    successors,    heirs,
distributees, devisees and legatees. If Covalt should die while any amounts
would  still be  payable  to him  and/or  his  family  hereunder  if he had
continued to live, all such amounts shall be paid or provided in accordance
with the terms of this  Agreement to Covalt's  devisees,  legatees or other
designees or, if there be no such designee, to Covalt's estate.

           4.9 For  purposes of this  Agreement,  notices,  demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed  to have  been duly  given  when  delivered  (including  by
telecopy) or (unless otherwise specified) mailed by United States certified
or registered mail, return receipt requested, postage prepaid, addressed as
follows:

         If to Covalt:

                  Robert B. Covalt
                  7517 Bull Valley Road
                  McHenry, Illinois  60050

         If to the Company:

                  c/o AEA Investors, Inc.
                  65 East 55th Street
                  New York, New York  10022
                  Attention:  General Counsel

or to such other address as either party may have furnished to the other in
writing in accordance  herewith,  except that notices of changes of address
shall be effective in accordance herewith only upon receipt.

           4.10 No provisions of this Agreement may be modified,  waived or
discharged  unless such waiver,  modification  or discharge is agreed to in
writing by the party against which such waiver,  modification  or discharge
is sought to be  enforced.  No waiver by any of the  parties  hereto at any
time of any breach by any other  party  hereto,  or  compliance  with,  any
condition  or  provision  of this  Agreement  to be performed by such other
party  shall be deemed a waiver of  similar  or  dissimilar  provisions  or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject  matter  hereof have been made by any of the parties  which are not
set forth expressly in this Agreement.

           4.11  The  validity  or   enforceability  of  any  provision  or
provisions  of this  Agreement  shall not be affected by the  invalidity or
unenforceability  of any other provision of this Agreement,  and such valid
and enforceable provisions shall remain in full force and effect.

           4.12 This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original,  but all of which together
will constitute one and the same instrument.

           4.13 The Company shall have the right to deduct from any amounts
payable  hereunder  any  taxes  or  other  amounts  required  by  law to be
withheld.  Except to the extent of any amounts so deducted by the  Company,
Covalt shall be fully  responsible  for the payment of all taxes payable in
respect of the  payments  made  hereunder.  The  Company  agrees to pay all
reasonable  fees and  expenses  of legal  counsel  incurred  by  Covalt  in
connection with the  "Termination by the Company Without Cause" of Covalt's
employment  by the  Company and the  preparation  and  negotiation  of this
Agreement.

           4.14  This  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the State of Delaware  applicable to agreements
made and to be performed entirely within such State.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth above.



                                             /s/  Robert B. Covalt
                                           --------------------------
                                                ROBERT B. COVALT



                                           SOVEREIGN SPECIALTY CHEMICALS, INC.

                                           By:     /s/  John L. Garcia
                                                ------------------------------
                                                Name:    John L. Garcia
                                                Title:   Vice-President