Document:

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                                                                     Exhibit 4.8

                                                                  EXECUTION COPY

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                          FIRST SUPPLEMENTAL INDENTURE

                           Dated as of March 22, 2001

                                       to

                                   INDENTURE

                           Dated as of March 29, 2000

                                     Among

                 SOVEREIGN SPECIALTY CHEMICALS, INC., as Issuer

                  THE GUARANTORS PARTY THERETO, as Guarantors

                                      and

                        THE BANK OF NEW YORK, as Trustee

                                  ------------

                               up to $200,000,000

              11-7/8% Senior Subordinated Notes Due 2010, Series A
              11-7/8% Senior Subordinated Notes Due 2010, Series B

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<PAGE>   2
         FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as
of March 22, 2001, by and among SOVEREIGN SPECIALTY CHEMICALS, INC., a Delaware
corporation (the "Company"), the guarantors party hereto and THE BANK OF NEW
YORK, a New York banking corporation, as Trustee (the "Trustee").

                              W I T N E S S E T H:

         WHEREAS, pursuant to the terms of the Indenture, dated as of March 29,
2000 (the "Indenture"), among the Company, the guarantors party thereto and the
Trustee, the Company has issued $150,000,000 aggregate principal amount of its
11-7/8% Senior Subordinated Notes due 2010, Series A and 11-7/8% Senior
Subordinated Notes due 2010, Series B and may issue up to an aggregate
principal amount of $200,000,000 of notes under the Indenture (all such notes
under the Indenture are "Securities");

         WHEREAS, pursuant to Articles Eleven and Twelve of the Indenture, each
Guarantor unconditionally guaranteed the Company's obligations under the
Securities and the Indenture in accordance with the terms set forth therein;

         WHEREAS, subsequent to the issuance of the Securities, the Company has
acquired or formed SOVEREIGN ADHESIVES, INC., a Delaware corporation, IMPERIAL
ADHESIVES, INC., a Delaware corporation, SOVEREIGN HOLDINGS, LLC, a Delaware
limited liability company and SOVEREIGN LATIN AMERICA, LLC, a Delaware limited
liability company (the "New Subsidiaries") which are required to become
Guarantors;

         WHEREAS, pursuant to Section 4.19 of the Indenture, the New
Subsidiaries, the Company and the Trustee are required to execute and deliver
this Supplemental Indenture pursuant to which the New Subsidiaries shall
unconditionally guarantee all the Company's obligations under the Indenture and
the Securities pursuant to a Subsidiary Guarantee on the terms and conditions
set forth herein;

         NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:

         SECTION 1. Definitions. All capitalized terms used but not defined
herein shall have the respective meanings ascribed thereto in the Indenture.

         SECTION 2. Guarantee.

         (a)      Each New Subsidiary hereby unconditionally, jointly and
severally, guarantees to each Holder of a Security authenticated and delivered
by the Trustee, and to the Trustee and its successors and assigns, all of the
Company's obligations under the Securities and the Indenture on the terms set
forth in Articles Eleven and Twelve thereof.

         (b)      Each New Subsidiary agrees that it shall be deemed a
"Guarantor" for all purposes under the Indenture.

<PAGE>   3
     SECTION 3.  Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. Upon the execution and delivery of this
Supplemental Indenture by the Company, the Guarantors and the Trustee, this
Supplemental Indenture shall form a part of the Indenture for all purposes, and
every holder of Securities heretofore or hereafter authenticated and delivered
shall be bound hereby. Any and all references, whether within the Indenture or
in any notice, certificate or other instrument or document, shall be deemed to
include a reference to this Supplemental Indenture (whether or not made), unless
the context shall otherwise require.

     SECTION 4. Governing Law. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN
THIS SUPPLEMENTAL INDENTURE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW
(OTHER THAN NEW YORK GENERAL OBLIGATION LAW SECTIONS 5-1401 AND 5-1402).

     SECTION 5. Trust Indenture Act Controls. This Supplemental Indenture is
subject to the provisions of the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) ("TIA") that are required to be a part of this
Supplemental Indenture, and shall, to the extent applicable, be governed by
such provisions. If any provision of this Supplemental Indenture modifies any
TIA provision that may be so modified, such TIA provision shall be deemed to
apply to this Supplemental Indenture as so modified. If any provision of this
Supplemental Indenture excludes any TIA provision that may be so excluded, such
TIA provision shall be excluded from this Supplemental Indenture. The
provisions of TIA Sections 310 through 317 that impose duties on any Person
(including the provisions automatically deemed included unless expressly
excluded by this Supplemental Indenture) are a part of and govern this
Supplemental Indenture, whether or not physically contained herein.

     SECTION 6. Recitals. The recitals herein shall be taken as the statements
of the Company and the New Subsidiaries, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Supplemental Indenture.

     SECTION 7. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

                            [SIGNATURE PAGE FOLLOWS]
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     IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be
duly executed as of the day and year first above written.

                                        SOVEREIGN SPECIALTY
                                        CHEMICALS, INC.,
                                        as Issuer

                                   By:  /s/ John R. Mellett
                                        ---------------------------
                                        Name: John R. Mellett
                                        Title: Vice President

                                        PIERCE & STEVEN CORP.,
                                        SIA ADHESIVES, INC.,
                                        OSI SEALANTS, INC.,
                                        TANNER CHEMICALS, INC.,
                                        as Guarantors

                                   By:  /s/ John R. Mellett
                                        ---------------------------
                                        Name: John R. Mellett
                                        Title: Vice President

                                        New Subsidiaries:
                                        -----------------

                                        SOVEREIGN ADHESIVES, INC.,
                                        as Guarantor

                                   By:  /s/ Louis M. Pace
                                        ---------------------------
                                        Name: Louis M. Pace
                                        Title: Vice President

                                        IMPERIAL ADHESIVES, INC.,
                                        as Guarantor

                                   By:  /s/ Louis M. Pace
                                        ---------------------------
                                        Name: Louis M. Pace
                                        Title: Vice President

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                                             SOVEREIGN HOLDINGS, LLC,
                                             as Guarantor

                                        By:  /s/ Robert B. Covalt
                                             --------------------------------
                                             Name: Robert B. Covalt
                                             Title: Manager

                                             SOVEREIGN LATIN AMERICA, LLC,
                                             as Guarantor

                                        By:  /s/ Robert B. Covalt
                                             --------------------------------
                                             Name: Robert B. Covalt
                                             Title: Manager

                                             THE BANK OF NEW YORK,
                                             as Trustee

                                        By:  /s/ Mary LaGumina
                                             --------------------------------
                                             Name: Mary LaGumina
                                             Title: Vice President<PAGE>   1
                                                                    Exhibit 10.4

                              EMPLOYMENT AGREEMENT

     THIS AGREEMENT ("Agreement") is made and entered into as of first day of
July, 2000, by and between Sovereign Speciality Chemicals, Inc., a Delaware
corporation (the "COMPANY"), and John L. Fox (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 President and
Chief Operating 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 Speciality 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"). Further, the
Company has concurrently entered into an agreement to sell Shares to the
Employee pursuant to the terms of a Stock Purchase Agreement in the form of
Exhibit D attached hereto and by this reference made a part hereof (the "STOCK
PURCHASE AGREEMENT"), and incident thereto the Employee has adopted and become a
party to that certain Amended and Restated Shareholders Agreement dated May 12,
2000 by and between the Company and certain key employees of the Company (the
"MANAGEMENT SHAREHOLDERS AGREEMENT"), a copy of which is attached hereto as
Exhibit E and by this reference made a part hereof.

     C.   The Employee acknowledges that, as a member of the Company's
management, he is one of the persons charged with primary responsibility for
this 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

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     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:

                                   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
President and Chief Operating 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 President and Chief Operating 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 interest 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 REPRESENTATION. 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 part do not and shall not conflict with, breach, violate or
     cause a default under any contract, agreement, instrument, order, judgement
     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 is 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);

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          (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; and

          (d)  the Employee has consulted with independent legal counsel
     regarding his rights and obligations under this Agreement and he fully
     understands the terms and conditions contained herein.

     1.5  PLACE OF EMPLOYMENT.     Initially, in the performance of his duties
hereunder, the Employee shall be based out of the Company's offices located in
Seabrook, New Hampshire. The Employee expressly agrees, however, that if the
Company shall, in its absolute discretion, determine that it is in the Company's
best interests that in the performance of his duties hereunder the Employee
should be based out of the Company's corporate headquarters located in Chicago,
Illinois, while the Employee shall not be obligated to relocate his personal
residence to the Chicagoland area, the Employee agrees that he shall be
responsible for performing his duties hereunder at the Company's Chicago,
Illinois corporate offices and, in connection therewith, will be responsible for
making such housing arrangements as shall be necessary to enable him to do so,
provided that the Employee shall be entitled to the benefit of the moving
expense reimbursement provisions of the last sentence of Section 3.4 hereof,
provided that the Employee shall not be obligated to accomplish such relocation
in less than sixty (60) days following the date of his receipt of written notice
from the Company directing him to so relocate.

                                   ARTICLE II
                              PERIOD OF EMPLOYMENT

     2.1  EMPLOYMENT PERIOD.  The Employee's employment hereunder shall commence
on the date hereof and 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 be for the period 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

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     3.1  ANNUAL BASE COMPENSATION.     During the Employment Period the
Company shall pay to the Employee a base salary at the annual rate (the "ANNUAL
BASE COMPENSATION") of $250,000. 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 fifty percent (50%) 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 Board or
its Compensation Committee 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 or its
Compensation Committee, 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, if
the Company elects to have the Employee's performance of his duties hereunder
relocated to the Company's Chicago, Illinois corporate headquarters, then for a
six (6) month period commencing with the first day of the first whole month in
which the Employee has transferred to the Chicagoland area, the Company agrees
to pay to the Employee a $3,000 per month allowance for temporary living and
travel, provided that the foregoing allowance shall not be considered to be part
of the Employee's Annual Base Compensation, and further provided that the said
$3,000

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amounts 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 sixteen thousand (16,000) 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.

     3.8  SALE OF SHARES.     Concurrently with the parties' execution and
delivery of this Agreement the Company has sold to the Employee one thousand
(1,000) Shares pursuant to the terms of the Stock Purchase Agreement, and
pursuant thereto the Employee has adopted and become a party to the Management
Shareholders Agreement.

                                   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

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<PAGE>   6
     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 and 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 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

                                     - 6 -
<PAGE>   7
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 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 or 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.

                                     - 7 -
<PAGE>   8
     4.4  ANTI-PIRATING AND NON-INTERFERENCE COVENANT. 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 knowledgable about the Company's, its
Subsidiaries' and their Affiliates' Confidential Information; (iv) the
agreements and covenants 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,

                                     - 8 -

<PAGE>   9
together with an accounting therefore, 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.

                                   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

                                     - 9 -
<PAGE>   10
     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 Good 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 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.

                                     - 10 -
<PAGE>   11
                                   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.

                                  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 Section 3.1 and 3.2 hereof (provided that so long as the
      aggregate sum of the Employee's Annual Base

                                       11
<PAGE>   12
     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)  if the Company elected to have the Employee's performance of
     his duties hereunder be based out of the Company's corporate headquarters
     in Chicago, Illinois, the Employee is required by the Company to relocate
     his personal residence outside of a 50 mile radius of the Company's
     corporate headquarters (other than as provided in another agreement between
     the Company and the Employee); or

          (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;

                                      -12-

<PAGE>   13
         (ii) convictions 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;

         (vi) the failure of the Employee to perform his relocation obligations
     imposed by the provisions of Section 1.5 hereof; or

         (vii) 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;

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

                                      -13-
<PAGE>   14
     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 L. Fox
          188 Bear Hill Road
          North Andover, MA 01845

          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

          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 Chiswell 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) 702-0518

     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

                                      -14-
<PAGE>   15
(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 an 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 contains the entire agreement
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, and the
parties hereto have made no agreements, representations or warranties relating
to the subject matter of this Agreement which are not set forth herein;
provided, however, that the Employee and the Company are parties to the Stock
Option Agreement, the Stock Purchase Agreement and the Management Shareholders
Agreement. Nothing in this Agreement shall be construed to limit or affect in
any manner or to any extent the restrictions or prohibitions that are
applicable to the Employee under the Stock Option Agreement, the Stock Purchase
Agreement and/or the Management Shareholders Agreement or the duration thereof.
Similarly, nothing in the Stock Option Agreement, the Stock Purchase Agreement
and/or the Management Shareholders Agreement shall be construed to limit or
affect in any manner or to any extent the rights and obligations of the Company
and the Employee hereunder.

     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 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.

                                      -15-
<PAGE>   16
     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.

     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 SPECIALTY CHEMICALS,
INC., a Delaware Corporation

By: /s/ [Illegible]                               /s/ John L. Fox
    ---------------                               ---------------
    Chief Executive Officer                       John L. Fox

                                     - 16 -

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