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Exhibit 10.17
CLOSING AGREEMENT
THIS CLOSING AGREEMENT dated this 5th day of August, 1997 by and
between Xxxxxxx Inc., a Delaware corporation ("Seller"), Sovereign Specialty
Chemicals, L.P., a Delaware limited partnership ("Sovereign L.P."), and
Sovereign Specialty Chemicals, Inc., a Delaware corporation ("SSC"). In
connection with and in furtherance of the Closing under the Stock Purchase
Agreement dated May 22, 1997 by and between Seller and Sovereign L.P., (the
"Stock Purchase Agreement"), the parties agree as follows:
1. Capitalized terms used herein but not defined herein shall have the
meaning ascribed thereto in the Stock Purchase Agreement. To the extent a
provision hereof conflicts with a provision of the Stock Purchase Agreement,
this Closing Agreement shall govern. This Closing Agreement shall be deemed to
have been entered into and effective immediately prior to the Closing.
2. SSC is hereby made a party to the Stock Purchase Agreement,
entitled to the rights and jointly and severally responsible and liable for the
obligations of "Buyer" thereunder. Each reference to "Buyer in the Stock
Purchase Agreement (other than in Article III thereof) shall be deemed to be a
reference to Sovereign L.P. and SSC, jointly and severally. SSC and Sovereign
L.P. hereby represent and warrant to Seller as set forth on Schedule I hereto.
3. Sovereign L.P. shall purchase 21,685 shares of LCCNA at the Closing
in consideration of the issuance of the Note. The remainder of the LCCNA Shares
shall be purchased by SSC in consideration of the remaining $67,000,000 of the
Purchase Price allocable to the LCCNA Shares.
4. Amounts paid or payable in respect of the trade show booth
currently being constructed for LCCNA shall be disregarded in determining
Closing Working Capital. Sovereign L.P. and SSC shall at the Closing pay Seller
$79,244 representing amounts heretofore paid by LCCNA on account of said booth.
5. Sovereign L.P. and SSC shall at the Closing pay Seller $25,000,
representing amounts payable by Laporte people to KPMG in connection with the
review by Xxxxxx & Young L.L.P. of KPMG's work papers in respect of the audited
financial statements referred to in Section 4.13 of the Stock Purchase
Agreement.
6. Accruals on account of free goods to be supplied by LCCNA to Lowes
and inventory to be repurchased by LCCNA from Lowes in connection with Lowes
proposal made in May, 1997 to expand LCCNA's sales to Lowes will be disregarded
in determining Closing Working Capital, except that Closing Working Capital will
be (x) decreased by an amount equal to 50% of amounts payable to repurchase such
inventory and such free goods required to be supplied after Closing, and (y)
increased by an amount equal to 50% of amounts paid to repurchase inventory
prior to Closing.
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7. The "Inventory Revaluation Adjustment" of $428,000 for Xxxxxx
arising from the reappraisal of Xxxxxx'x inventory valuation policy in respect
of overhead absorption will be disregarded in determining Closing Working
Capital. In finally determining Closing Working Capital for the Companies, any
write-down or write-off or reserve taken in respect of assets included in
Closing Working Capital, which write-down, write-off or reserve was not
reflected in the calculation of Closing Working Capital set forth on the
Estimated Closing Statement, shall be reduced (but not to an amount less than
zero) by $428,000 in the aggregate (representing the amount of such Inventory
Revaluation Adjustment).
8. Amounts estimated to be payable by Sovereign L.P. pursuant to the
letter dated May 22, 1997 from Seller to Sovereign L.P. in respect of the
employment of Xxxx Xxxxxx will be paid by Sovereign L.P. and SSC to Seller at
the Closing. This amount will be finally determined (and adjustment payments
will be made) in the same manner as Closing Working Capital is finally
determined pursuant to Section 1.5 of the Stock Purchase Agreement.
9. Retained Cash Balances will not be included in Closing Working
Capital. Sovereign L.P. and SSC will cause the Companies to distribute Retained
Cash Balances as set forth in the memorandum dated July 31, 1997 from Xxx Xxxxxx
to Xxxxx Xxxx, Xxx Xxxxxxx and Xxx Xxxxxx, except that Retained Cash Balances in
the three lockbox accounts of the Companies ("Lockbox Cash") will be retained by
the Companies to be applied against checks written on the Control Disbursement
Accounts on or prior to August 5, 1997 ("Outstanding Checks"). Following the
Closing, Seller and SSC will determine whether Lockbox Cash exceeds or is less
than the amount of Outstanding Checks. If there is an excess of Lockbox Cash
over the amount of Outstanding Checks, Sovereign L.P. and SSC will promptly
refund to Seller the difference, and if there is a shortfall of Lockbox Cash
below the amount of Outstanding Checks, Seller will promptly reimburse the
Companies for the amount of the shortfall. Accounts payable of the Companies
shall be reduced by the amount of Outstanding Checks for purposes of calculating
Closing Working Capital. Any Retained Cash Balances not so distributed to Seller
will be finally determined (and adjustment payments will be made) in the same
manner as Closing Working Capital is finally determined pursuant to Section 1.5
of the Stock Purchase Agreement.
10. Section 4.10 of the Stock Purchase Agreement is hereby amended to
delete the second sentence thereof and to insert the following sentence in its
place:
"Notwithstanding the foregoing, Seller shall permit checks written on
the Control Disbursement Accounts prior to the Closing which are
posted to the Control Disbursement Accounts on the Closing Date to
clear and be paid to the extent that accounts payable of the Companies
have been reduced by the amount of such checks for purposes of
calculating Closing Working Capital (and Buyer shall be responsible
for funding the Control Disbursement Accounts in respect of checks
written prior to the Closing but posted after the Closing Date).
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11. Section 4.11 of the Stock Purchase Agreement is hereby amended to
delete the last four words of the first sentence thereof and to insert the
following words: "within 60 days of the Closing. Buyer shall indemnify and hold
harmless the Seller Indemnitees from all Losses incurred by Seller Indemnitees
that would not have been incurred by Seller Indemnitees had such updates,
amendments and reissuances of Permits occurred effective the Closing."
12. For the avoidance of doubt, but without limitation of Article VIII
of the Stock Purchase Agreement, all obligations of Seller and Evode U.S.A.
under the Release, Settlement, and Guarantee Agreement dated June 14, 1995 and
the Guaranty Agreement dated April 5, 1984 referred to in item 2 under the
heading "Evode-Xxxxxx Industries, Inc." on Schedule 2.1.15 of the Stock Purchase
Agreement shall be deemed to be guarantees of Seller and its Affiliates for
purposes of Section 4.16 of the Stock Purchase Agreement.
13. For the avoidance of doubt, a claim for indemnification made
pursuant to Article VIII of the Stock Purchase Agreement within the relevant
survival periods set forth in Section 8.1 (which, for purposes of Sections
8.2(i) and 8.3(i) will be the survival period of the representation and warranty
alleged to have been breached) that is not resolved at the expiration of such
survival period shall survive the expiration of such survival period until it is
resolved.
14. For the avoidance of doubt, Seller shall not be responsible for
monitoring costs associated with remediation of pollution at Evode's Greenville,
South Carolina site payable after the 5th anniversary of the Closing.
15. Prior to Closing, the employment of Xxxxxx Stabitzski shall be
transferred from LCCNA to another Affiliate of Seller (that is not a Company).
Seller shall be responsible for all costs associated with such transfer of
employment.
16. All transactions occurring on the Closing Date (and all
instruments and agreements executed on the Closing Date) in respect of the
financing of the Purchase Price and obtaining title insurance on the Companies'
properties shall be deemed to have occurred (or been executed, as the case may
be) after the Closing and Sovereign L.P. and SSC shall indemnify and hold
harmless Seller Indemnitees from all Losses incurred by them in respect of or
arising from such transactions and actions.
17. Sovereign L.P. and SSC will cooperate with Seller in obtaining for
Seller a refund of amounts paid in respect of New York Stock Transfer Stamps
purchased in connection with the Closing.
18. Sovereign L.P. will cause the Companies to amend all of their
fictitious name filings as soon as practicable following the Closing to
eliminate all references to "Evode" and "Xxxxxxx", and will supply Seller and
confirmation that such filings have been made.
19. Section 9.2 of the Stock Purchase Agreement is hereby amended by
adding the following new paragraph (i) at the end thereof:
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"(i) Buyer agrees to, or to cause the Companies to, (i) adopt the
Healthcare Reimbursement and Dependent Care Reimbursement Accounts ("FSAs")
under the Xxxxxxx Flexible Benefit Plan as of Closing with respect to any
Continuing Employee, (ii) continue to maintain such FSAs through December 31,
1997, (iii) assume all liability for the reimbursement of claims incurred by
Continuing Employees in 1997 which are reimbursable under the FSAs but were not
reimbursed prior to Closing, and (iv) allow Continuing Employees to file claims
for reimbursement for such claims through a date which shall be no earlier than
March 31, 1998. On and after the Closing Date, Buyer shall be responsible for
all benefit claims under the FSAs which are incurred in calendar year 1997, and
Seller shall cease to have any liability for such benefits."
20. Section 9.2 of the Stock Purchase Agreement is hereby amended by
adding the following new paragraph (j) at the end thereof:
"(j) Buyer agrees to make a profit sharing contribution to Buyer's
Qualified Plan on behalf of Continuing Employees for the plan year of
Buyer's Qualified Plan which includes the Closing Date in an amount
not less than the amount accrued by the Companies for the 1997 profit
sharing and money purchase pension contributions and reflected in the
calculation of Closing Working Capital. Such amounts shall be
allocated to each Continuing Employee (whether or not still employed
by the Companies when the contribution is made) in proportion to such
employees compensation for 1997."
21. The provisions of Article X of the Stock Purchase Agreement will
apply to this Closing Agreement as if it were part of the Stock Purchase
Agreement.
IN WITNESS WHEREOF the parties have caused this Closing Agreement to
be duly executed as of the date and year first above written.
XXXXXXX INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
Vice President
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SOVEREIGN SPECIALTY CHEMICALS, L.P.
By: Sovereign Chemicals Corporation, its
general partner
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Chairman, President and Chief
Executive Officer
SOVEREIGN SPECIALTY CHEMICALS, INC.
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Chairman, President and Chief
Executive Officer
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SCHEDULE I
1. Incorporation and Ownership of SSC. SSC is a corporation validly
existing and in good standing under the laws of the State of Delaware. All of
the outstanding capital and voting stock of SSC is owned of record and
beneficially by Sovereign L.P.
2. Power; Authorization; Consents.
(a) SSC has the corporate power and corporate authority to execute,
deliver and perform this Closing Agreement and the Stock Purchase Agreement and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Closing Agreement and the Stock Purchase
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly authorized and approved by the Board of Directors of SSC,
and neither any other corporate proceedings on the part of the SSC nor any
action by shareholders of SSC are necessary to authorize and approve this
Closing Agreement and the Stock Purchase Agreement and the transactions
contemplated hereby. This Closing Agreement has been duly executed and delivered
by SSC, and the other instruments and documents required or contemplated herein
to be executed and delivered by SSC at the Closing will be duly executed and so
delivered. This Closing Agreement and the Stock Purchase Agreement constitute,
and at the Closing each of such other instruments will constitute, a valid and
binding obligation of SSC, enforceable against SSC in accordance with their
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or similar laws
affecting creditors' rights generally or by the principles governing the
availability of equitable remedies.
(b) Except as otherwise set forth in Schedule 3.2 to the Stock
Purchase Agreement, the execution, delivery and performance of this Closing
Agreement and the Stock Purchase Agreement by SSC and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(i) contravene any provisions of SSC's certificate of
incorporation or bylaws;
(ii) after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result in
the modification or cancellation of, or give rise to any right of termination in
respect of, any contract, agreement, commitment, understanding or arrangement of
any kind to which SSC or any Affiliate of SSC is a party or to which SSC or any
of SSC's property is subject, with such exceptions as would not in the aggregate
reasonably be expected to have a material adverse effect on SSC's ability to
consummate the transactions contemplated hereby and by the Stock Purchase
Agreement.
(iii) violate or conflict with any material Legal Requirements
applicable to SSC or any of it's business or property, except where such
violations or conflicts would not in
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the aggregate reasonably be expected to have a material adverse effect on SSC's
ability to consummate the transactions contemplated hereby and by the Stock
Purchase Agreement; or
(iv) require any Government Filing on the part of SSC except
for filings under the HSR Act already made (and as to which the waiting period
has terminated).
3. Brokers. Neither SSC, nor any director, officer or employee
thereof, has employed any broker or finder or has incurred or will incur any
broker's, finder's or similar fees, commissions or expenses, in each case in
connection with the transactions contemplated by this Agreement and by the Stock
Purchase Agreement.
4. Investment Intent of SSC. SSC is receiving the Shares
delivered pursuant to the Stock Purchase Agreement for investment purposes for
its own account, and not with the view to or in connection with any distribution
thereof. SSC understands that the Shares may not be sold, assigned, offered for
sale, pledged or otherwise transferred unless such transaction is registered
under the Securities Act of 1933 and applicable state securities laws, or
exemptions from such registration requirements are available or such
requirements are not applicable.
5. Financing; Equity. SSC has sufficient funds and/or
commitments for any financing which may be necessary to enable SSC to complete
payment of the Purchase Price which commitments are in full force and effect. At
least $33,000,000 of the Purchase Price will be funded through cash capital
contributions to SSC through Sovereign L.P. by partners of Sovereign L.P.
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