FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 2, 1996
THE VALSPAR CORPORATION
Delaware 1-3011 36-2443580
(State or other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
1101 Third Street South, Minneapolis, Minnesota 55415
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612)332-7371
Not applicable
(Former name or former address, if changed, since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 2, 1996, The Valspar Corporation (the "Company") completed the
acquisition of certain operations of Coates Coatings pursuant to an Acquisition
Agreement between Coates Brothers PLC and the Company dated as of February 26,
1996 (the "Acquisition Agreement"). Coates Coatings is the worldwide can
coatings business, comprised of the metal packaging coatings and inks
businesses, of Coates Brothers PLC ("Coates"), a subsidiary of TOTAL SA of
France. Worldwide sales for Coates Coatings and all of its affiliates were
approximately $125 million in 1995. The acquisition, completed on May 2, 1996,
was deemed by the parties to be effective as of April 30, 1996, and represented
the first phase of the proposed acquisition of substantially all of the
worldwide business of Coates Coatings pursuant to the Acquisition Agreement.
In the first phase of the transaction, the Company acquired the
operations of Coates Coatings in the United Kingdom, France, Norway, Germany,
Spain, Australia and the United States. In the United Kingdom, Spain, Australia
and the United States, the Company acquired certain assets and assumed certain
liabilities of the acquired operations. In France, Norway and Germany, the
Company acquired the outstanding share capital of companies affilitated with
Coates. The acquired operations represented consolidated sales of approximately
$73 million in 1995. The Coates Coatings European businesses, which include can
coatings and metal decorating inks, will be combined with the Company's existing
European packaging coatings business and will be known as ValsparCoates-Europe.
The Coates Coatings Australian and U.S. businesses will be combined with the
Company's existing businesses in these countries.
The Acquisition Agreement calls for several subsequent phases of the
acquisition of Coates Coatings, subject to certain conditions and regulatory
approvals, where applicable. The next phase of the transaction is expected to
occur on or before December 31, 1996 and involves assets in Hong Kong and the
People's Republic of China. The third phase of the acquisition, involving
operations in India and South Africa, is contemplated to occur in two closings.
In the first closing, which is expected to be held in 1997, it is anticipated
that the Company will acquire a portion of the share capital or assets relating
to the packaging coatings business of Coates Coatings in India and South Africa.
It is anticipated that the Company will acquire the remaining share capital or
assets relating to the packaging coatings business of Coates Coatings in India
and South Africa in the second closing, which is expected to be held in 2001.
Since various governmental approvals must be obtained and various conditions
contained in the Acquisition Agreement must be met prior to the closings, the
closings for India and South Africa may not occur at the same time. In addition,
if the relevant governmental authorities prove unwilling to provide the
requested approvals, it is possible that the parties will re-negotiate certain
provisions of the Acquisition Agreement relating to India and South Africa. The
fourth phase of the acquisition involves various options for Coates to sell to
Valspar, or Valspar to purchase from Coates, assets located in any or all of the
following locations: Singapore, Malaysia, Thailand, Indonesia, Kenya, New
Zealand, Nigeria, Zimbabwe, Korea and Zambia.
The total consideration for this first phase of the transaction was
approximately $50 million in cash; including approximately $40 million paid for
assets and share capital of certain Coates affiliates, and approximately $10
million paid to acquire intercompany debts owed by certain of the acquired
Coates affiliates. The total consideration paid for this first phase is subject
to adjustment as provided in the Acquisition Agreement and was negotiated after
weighing various factors, including earnings, book values, trends and other
customary valuation methods. Approximately $49 million of the total
consideration was obtained from Societe General on an interim basis through
uncommitted credit facilities, and approximately $1 million of the total
consideration was obtained from a bank through overdraft advances. A portion of
the facilities provided by Societe General has been refinanced with borrowings
from the Company's primary credit facility with a consortium of six financial
institutions.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
It is currently impracticable to provide the required
financial statements of the acquired business. Pursuant to
paragraph (a)(4) of Item 7 of Form 8-K, such financial
information will be filed by amendment not later than 60 days
after the due date of this report on Form 8-K.
(b) Pro Forma Financial Information.
It is currently impracticable to provide the required pro
forma financial information. Pursuant to paragraph (b)(2) of
Item 7 of Form 8-K, such financial information will be filed
by amendment not later than 60 days after the due date of this
report on Form 8-K.
(c) Exhibits.
2.1 Acquisition Agreement between Coates Brothers PLC and
the registrant made and entered into as of February
26, 1996, as amended by Amendment No. 1 to the
Acquisition Agreement dated May 2, 1996 (pursuant to
Rule 24b-2, certain information has been deleted and
filed separately with the Commission).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE VALSPAR CORPORATION
By /s/ Rolf Engh
Printed Name: Rolf Engh
Title: General Counsel and Secretary
Date: May 17, 1996
Exhibit 2.1
Certain information in this exhibit has been deleted and filed separately
pursuant to Rule 24b-2
TABLE OF CONTENTS
OF
ACQUISITION AGREEMENT
Section Page
- ------- ----
1 INTERPRETATION 1
1.1 Definitions 1
1.2 Assets and Liabilities 15
1.3 Principles 19
2 ACQUISITION OF PHASE I SHARES AND ASSETS 20
2.1 Purchase and Sale 20
2.2 Purchase Price 21
2.3 Ancillary Agreements 21
2.4 Closing 24
2.5 Allocation 24
3 ACQUISITION OF PHASE II SHARES AND ASSETS 25
3.1 Purchase and Sale 25
3.2 Purchase Prices 25
3.3 Ancillary Agreements 26
3.4 Closing 26
4 ACQUISITION OF PHASE III SHARES AND ASSETS 27
4.1 Completion and Approvals of Shareholders Agreements 27
4.2 Formation, Capitalization and Operation of New Coatings
Company in India 30
4.3 Formation, Capitalization and Operation of New Coatings
Company in South Africa 31
4.4 Purchase Prices 33
4.5 Ancillary Agreements 34
4.6 Closings 34
4.7 Alternative Structures 35
Section Page
- ------- ----
5 ACQUISITION OF PHASE IV ASSETS 35
5.1 Put and Call Options 35
5.2 Exercise of Options 36
5.3 Option Prices 37
5.4 Ancillary Agreements 37
5.5 Closings 38
6 CLOSINGS AND CONDITIONS 38
6.1 Closings 38
6.2 Conditions to Obligations of Valspar 40
6.3 Conditions to the Obligations of Coates 43
6.4 Post-Closing Adjustments 44
7 REPRESENTATIONS AND WARRANTIES OF COATES 46
7.1 Affirmation 46
7.2 Reaffirmation 58
8 REPRESENTATIONS AND WARRANTIES OF VALSPAR 59
8.1 Affirmation 59
8.2 Reaffirmation 61
9 COVENANTS OF COATES 61
9.1 Conduct of Business 61
9.2 Additional Financial Statements 63
9.3 Access to Records 66
9.4 Government Filings 66
9.5 Inventory Valuation 67
9.6 Identification and Disposal of Waste 67
9.7 Share Purchase Loans 68
9.8 Consents 68
9.9 Other Actions 69
9.10 Assistance in Tax Matters 69
9.11 Non-Competition 69
9.12 Subsequent Acquisitions 69
9.13 Corporate Control 70
Section Page
- ------- ----
9.14 Royalties for Coates Products 70
9.15 Nantes Real Property 71
9.16 Redundant Employees 71
10 COVENANTS OF VALSPAR 71
10.1 Government Filings 71
10.2 Other Actions 71
10.3 Change of Corporate Names 72
10.4 Solicitation of Employees 72
10.5 Refund of Excess Royalties 72
11 TERMINATION 72
11.1 Grounds 72
11.2 Consequences 73
11.3 No Subsequent Termination 73
12 SURVIVAL AND INDEMNIFICATION 73
12.1 Survival 73
12.2 Coates Indemnity 74
12.3 Valspar Indemnity 77
12.4 Indemnified Parties 78
13 DEFAULT 80
13.1 Definition 80
13.2 Notice and Cure 81
13.3 Rights Upon Default 81
14 DISPUTES 82
14.1 Arbitration 82
14.2 Governing Law 82
15 MISCELLANEOUS 82
15.1 Press Releases and Announcements 82
15.2 Expenses; Transfer Taxes 82
15.3 Further Assurances 83
Section Page
- ------- ----
15.4 Amendment and Waiver 83
15.5 Notices 83
15.6 Assignment 84
15.7 Severability 84
15.8 Complete Agreement 84
15.9 Counterparts 85
15.10 Entry into Force 85
Appendices to Acquisition Agreement
Appendix 1 Machen Lease Agreement
Appendix 2 Coates Technology License Agreement
Appendix 3 Coates Trademark License Agreement
Appendix 4 Valspar Technology Sublicense Agreement
Appendix 5 Pension Scheme Agreement Provisions
Appendix 6 Resin Supply Agreement
Appendix 7 Machen Facility Services Agreement
Appendix 8 Facilities and Services Agreement
Appendix 8-A Term Sheet for Services in France and the United Kingdom
Appendix 9 Toll Manufacturing Agreement
Appendix 10 Valspar Technology License Agreement
Appendix 11 Valspar Sales Representation Agreement
Appendix 12 Coates Sales Representation Agreement
Appendix 13 Shareholders Agreement
Appendix 14 Guaranty
Exhibits to Acquisition Agreement
Exhibit 2.1(a) Packaging Coating Assets: Coates Brothers PLC
Exhibit 2.1(e) Packaging Coating Assets: Coates Coatings, Inc.
Exhibit 2.1(f) Packaging Coating Assets: Coates Lorilleux S.A.
Exhibit 2.1(g) Packaging Coating Assets: Coates Brothers, Australia
Pty Limited
Exhibit 2.5 Allocation
Exhibit 3.1(a) Packaging Coating Assets: Coates Brothers (Hong
Kong) Limited
Exhibit 3.1(b) Packaging Coating Assets: Coates (Guangzhou) PRC
Limited
Exhibit 4.2(b)(i) Packaging Coating Assets: Coates of India Ltd.
Exhibit 4.3(b)(i) Packaging Coating Assets: Coates Brothers (South
Africa) Limited
Exhibit 5.1 Packaging Coating Assets: Phase IV Coatings Companies
Exhibit 6.1(b) Exclusions from Packaging Coating Employees
Exhibit 10.5 Valspar Royalty Schedule
Disclosure Schedules to Acquisition Agreement
Coates Brothers PLC
Coates Coatings SA
Coates Coatings A/S
Coates Coatings, Inc.
Coates Brothers, Australia Pty Limited
Coates Coatings GmbH
Coates Lorilleux S.A.
Coates Brothers (Hong Kong) Limited
Coates (Guangzhou) PRC Limited
Coates of India Ltd.
Coates Brothers (South Africa) Limited
ACQUISITION AGREEMENT
THIS AGREEMENT is made and entered into as of the 26th day of February, 1996 by
and between:-
(1) COATES BROTHERS PLC, a public limited company organized under English law
having its registered office at Cray Avenue, St. Mary Cray, Orpington,
Kent BR5 3PP, England (hereinafter referred to as "Coates"); and
(2) THE VALSPAR CORPORATION, a corporation organized under the laws of the
State of Delaware, United States of America having its principal offices
at 1101 Third Street South, Minneapolis, Minnesota 55415, USA
(hereinafter referred to as "Valspar").
RECITALS:
(A) Coates is engaged, through certain of its subsidiaries and affiliated
companies, in the business of developing, manufacturing, marketing and
selling certain coatings and inks used in the production of rigid metal
packaging for food, beverages and other products.
(B) Valspar desires to acquire, and Coates desires to sell, the said
business, in the manner and on the terms and conditions hereinafter set
forth.
NOW THEREFORE, in consideration of the mutual representations, warranties and
covenants set forth in this Agreement, the parties hereto agree as follows:
1 INTERPRETATION
1.1 Definitions. The following terms, when used in capitalized form herein,
shall have the meanings set forth below:
(a) "Adjusted Annual Financial Statements" shall mean the audited
financial statements to be delivered to Valspar by Coates as
provided in Section 9.2(a).
(b)
(c) "Adjusted Operating Income" when used with reference to any
Coatings Company or the Packaging Coatings Business thereof
shall mean the Operating Income of such Coatings Company
attributable to its Packaging Coatings Business, adjusted as
necessary (i) to exclude (A) fifty percent (50%) of (I) any
sales commissions received from Valspar or its Affiliates
under the provisions of any Valspar Sales Representation
Agreement entered into pursuant to Section 2.3(h), net of (II)
related costs incurred, with the approval of Valspar,
exclusively for the purpose of generating the sales resulting
in such commissions and (B) any Non-Recurring Items and (ii)
to bring such financial statements into conformity with United
States generally accepted accounting principles.
(d) "Adjusted Quarterly Financial Statements" shall mean the
financial statements to be delivered to Valspar by Coates
prior to each Closing as provided in Section 9.2(b).
(e) "Affiliate" when used with reference to either Party shall
mean another company controlled by, controlling or under
common control with that Party, where "control" means either
(i) the ownership, either directly or indirectly, of more than
fifty percent (50%) of the voting shares or comparable
interests in such Party or other company, as the case may be,
or (ii) the right to elect the majority of the directors of
such Party or other company, as the case may be, where such
rights may be exercised without the consent of any third
party.
(f) "Agreement" shall mean this Acquisition Agreement, including
all Exhibits and Appendices attached hereto.
(g) "Ancillary Agreements" shall mean the Guaranty as well as the
agreements to be entered into at various Closings as described
in Section 2.3, Section 3.4, Section 4.5 and Section 5.4.
(h) "Assets" shall mean the Packaging Coatings Assets to be sold
to Valspar or its Affiliates or transferred to New Coatings
Companies pursuant to this Agreement subject to the Packaging
Coatings Liabilities which are to be assumed by Valspar, its
Affiliates or the New Coatings Companies, respectively, in
connection with such sale and transfer, and, when used with
reference to any Coatings Company, shall mean the Packaging
Coatings Assets, subject to the Packaging Coatings
Liabilities, of such Coatings Company to be thus sold or
transferred and assumed, respectively.
(i) "Balance Sheet Date" when used with reference to any Closing
shall mean the most recent Fiscal Year ending prior to the
Closing Date.
(j) "Base Currency" when used with reference to any Coatings
Company shall mean the currency in which the official books
and records of that Coatings Company are denominated.
(k) "Basket Amount" shall mean (i) with respect to losses,
liabilities, deficiencies, damages, expenses and costs of the
Valspar Indemnified Parties under Section 12.2(a), 12.2(b)(i),
12.2(b)(ii) or 12.2(b)(iii) relating to any of the Phase I
Coatings Companies or the Phase II Coatings Companies, Two
Hundred Fifty Thousand Dollars ($250,000) in the aggregate for
all such Phase I Coatings Companies and Phase II Coatings
Companies, and (ii) with respect to losses, liabilities,
deficiencies, damages, expenses and costs of the Valspar
Indemnified Parties under Section 12.2(a), 12.2(b)(i),
12.2(b)(ii) or 12.2(b)(iii) relating to any of the Phase III
Coatings Companies or the Phase IV Coatings Companies, one
half of one percent (0.5%) of the amount of the Purchase Price
received by Coates with respect to such Coatings Company.
(l) "Business Day" shall mean any day on which commercial banks
are open for business in the United Kingdom.
(m)
(n) "CBSA Technology License Agreement" shall mean a license
agreement to be entered into between Coates Brothers (South
Africa) Ltd. and Valspar Coates (South Africa) Ltd. whereby
Coates Brothers (South Africa) Ltd. shall grant to Valspar
Coates (South Africa) Ltd. licenses for the use of all
Licensed Intellectual Property Rights owned by Coates Brothers
(South Africa) Ltd., as more fully provided in Section
4.1(b)(ii)(C) and in the South Africa Shareholders Agreement.
(o) "Claim" shall mean any action or proceeding, judicial or
administrative, instituted against any Indemnified Party by
any third party seeking to establish liability or obligation
which, if established, would be subject to indemnification by
either Party hereunder without regard, for purposes of this
definition, to any of the limitations on such indemnification
that are provided for in Section 12.
(p) "Closing" shall mean any of the closings at which the purchase
and sale of Shares and/or Assets of the respective Coatings
Companies shall occur as provided in this Agreement.
(q) "Closing Balance Sheet" shall mean a pro-forma consolidated
balance sheet showing the Adjusted Net Book Value of the
Shares and Packaging Coatings Assets to be purchased and sold
at each Closing as of the respective Closing Date.
(r) "Closing Date" when used with reference to any Closing shall
mean the date on which such Closing shall actually take place.
(s) "Closing Statements" shall mean the Closing Balance Sheet and
the Closing Statement of Financial Indebtedness to be prepared
in accordance with Section 6.4.
(t) "Closing Statement of Financial Indebtedness" shall mean a
statement showing the Financial Indebtedness as of any Closing
Date of those Coatings Companies the Shares of which are to be
transferred to Valspar or its Affiliates at the respective
Closing.
(u) "Coates' Accountants" shall mean Arthur Andersen & Co. and
such other firms of independent public accountants as Coates
shall from time to time appoint as the principal outside
accountants for any of the Coatings Companies.
(v) "Coates Brothers, Australia Pty Limited" shall mean the
limited liability company by that name organized under the
laws of the Commonwealth of Australia which is an Affiliate of
Coates.
(w) "Coates Brothers (East Africa) Ltd." shall mean the limited
liability company by that name organized under the laws of the
Republic of Kenya which is an Affiliate of Coates.
(x) "Coates Brothers (Hong Kong) Limited." shall mean the limited
liability company by that name organized under the laws of the
Crown Colony of Hong Kong which is an Affiliate of Coates.
(y) "Coates Brothers (Malaysia) Sdn. Bhd." shall mean the
sendirian berhad or limited liability company by that name
organized under the laws of Malaysia which is an Affiliate of
Coates.
(z) "Coates Brothers (Singapore) Ltd." shall mean the limited
liability company by that name organized under the laws of the
Republic of Singapore which is an Affiliate of Coates.
(aa) "Coates Brothers (South Africa) Ltd." shall mean the limited
liability company by that name organized under the laws of the
Republic of South Africa which is an Affiliate of Coates.
(bb) "Coates Brothers (West Africa) Ltd." shall mean the limited
liability company by that name organized under the laws of the
Federal Republic of Nigeria which is an Affiliate of Coates.
(cc) "Coates Brothers (Zimbabwe) (Private) Ltd." shall mean the
limited liability company by that name organized under the
laws of Zimbabwe which is an Affiliate of Coates.
(dd) "Coates Coatings AS" shall mean the aksjeselskap or stock
company by that name organized under the laws of the Kingdom
of Norway which is an Affiliate of Coates.
(ee) "Coates Coatings GmbH" shall mean the Gesellschaft mit
beschrankter Haftung or limited liability company by that name
organized under the laws of the Federal Republic of Germany
which is an Affiliate of Coates.
(ff) "Coates Coatings, Inc." shall mean the corporation by that
name organized under the laws of the State of Delaware, United
States of America, which is an Affiliate of Coates.
(gg) "Coates Coatings SA" shall mean the societe anonyme or stock
company by that name organized under the laws of the Republic
of France which is an Affiliate of Coates.
(hh) "Coates Indemnified Parties" shall mean Coates, its
Affiliates, shareholders and permitted assigns.
(ii) "Coates Korea Ltd." shall mean the limited liability company
by that name organized under the laws of the Republic of Korea
which is an Affiliate of Coates.
(jj) "Coates Lorilleux SA" shall mean the sociedad anonima or stock
company by that name organized under the laws of Spain which
is an Affiliate of Coates.
(kk) "Coates of India Ltd." shall mean the limited liability
company by that name organized under the laws of the Union of
India which is an Affiliate of Coates.
(ll) "Coates (New Zealand) Ltd." shall mean the limited liability
company by that name organized under the laws of the
Commonwealth of New Zealand which is an Affiliate of Coates.
(mm) "Coates (Guangzhou) PRC Ltd." shall mean the limited liability
company by that name organized under the laws of the People's
Republic of China.
(nn) "Coates Thailand Ltd." shall mean the limited liability
company by that name organized under the laws of Thailand
which is an Affiliate of Coates.
(oo) "Coates Trademark License Agreement" shall mean the agreement
to be entered into by Coates and Valspar pursuant to Section
2.3 (b)(ii).
(pp) "Coates Zambia Ltd." shall mean the limited liability company
by that name organized under the laws of the Republic of
Zambia which is an Affiliate of Coates.
(qq) "Coatings Companies" shall mean the Phase I Coatings
Companies, the Phase II Coatings Companies, the Phase III
Coatings Companies and the Phase IV Coatings Companies,
including as applicable the New Coatings Companies, and
"Coatings Company" shall mean any of them, provided that any
such company shall cease to be a Coatings Company for purposes
hereof at such time as all of the Shares or Packaging Coatings
Assets thereof shall have been transferred to Valspar, its
Affiliates or any New Coatings Company as herein provided.
(rr) "Coatings Technology" shall mean any and all technical
information and know-how, including but not limited to
inventions, technology, know-how, plans, discoveries,
approaches, techniques, methods, concepts, data,
specifications, flow charts, formulas, ingredient lists,
laboratory books, test results, costs and other financial
information, which have been developed by the Coatings
Companies for use in, or have since December 31, 1990 been
used by the Coatings Companies in, the manufacture, use,
and/or sale of Packaging Coatings, including, but not limited
to, all such technical information and know-how used in the
manufacture, use or sale of the resins and products listed in
Exhibit 7.1(s).
(ss) "COI Technology License Agreement" shall mean a license
agreement to be entered into between Coates of India Ltd. and
Valspar Coates (India) Ltd. whereby Coates of India Ltd. shall
grant to Valspar Coates (India) Ltd. licenses for the use of
all Licensed Intellectual Property Rights owned by Coates of
India Ltd., as more fully provided in Section 4.1(a)(ii)(C)
and in the India Shareholders Agreement.
(tt) "Constitutive Documents" when used with reference to either of
the Parties, their respective Affiliates or any of the
Coatings Companies shall mean the statutes, articles of
association, memorandum and articles of association, articles
of incorporation and bylaws or other similar documentation of
such entity.
(uu) "Cray Valley Ltd." shall mean the private limited company by
that name organized under the laws of the United Kingdom which
is an Affiliate of Coates.
(vv) "Disclosure Schedule" shall mean the schedule of disclosures
which has been delivered by Coates to Valspar on the date
hereof qualifying the representations and warranties of Coates
as set forth in Section 7.1.
(ww) "Disclosure Schedule Amendment" shall mean the document to be
delivered by Coates to Valspar prior to each Closing setting
forth any modifications to the disclosures made in the
Disclosure Schedule as provided in Section 7.2(c).
(xx) "Dollars" and "$" shall mean the lawful currency of the United
States of America.
(yy) "Employee Benefits" shall mean any compensation or other
benefits that any Coatings Company currently provides or may
be obligated under applicable law, by contract or otherwise to
provide to any its employees in respect of retirement,
redundancy, unemployment, termination, repatriation,
reassignment, disability, injury, illness, medical care, child
care, education, vacations or otherwise, including but not
limited to contributions to public or private deferred
compensation, pension or retirement plans or schemes,
insurance contracts or other similar arrangements.
(zz) "Environmental Laws" shall mean all laws, rules, regulations,
codes, ordinances, orders, decrees and directives under the
laws of any country relating to pollution, contamination or
protection of the environment and any permits, licenses and
judgments issued under such laws that are applicable to the
Coatings Companies or any of their activities or properties.
(aaa) "Financial Indebtedness" shall mean the total amount of any
and all current and long-term debt of any Coatings Company for
monies borrowed by such Coatings Company, including
outstanding balances owed by such Coatings Company under any
lines of credit, any capital lease obligations of the Coatings
Company, and notes, loans, advances and accounts payable by
the Coatings Company to Coates and/or any Affiliates of
Coates.
(bbb) "Final Purchase Price" when used with reference to the Shares
and/or Assets purchased and sold at any Closing shall mean the
definitive purchase price for such Shares and/or Assets as
finally determined pursuant to Section 6.4.
(ccc) "Fiscal Quarter" shall mean the three (3) month accounting
period constituting a quarter of a Fiscal Year.
(ddd) "Fiscal Year" shall mean the twelve (12) month accounting
period constituting the fiscal year of Coates.
(eee) "Guaranty" shall mean the guaranty of Total SA to be given as
provided in Section 15.10.
(fff) "Hazardous Materials" shall mean any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste, material or
substance as defined in or governed by any applicable law,
statute, code, ordinance, regulation, rule or other
requirement relating to such substance or otherwise relating
to the environment or human health or safety, including
without limitation any waste, material, substance,
pollutant or contaminant that might cause any injury to human
health or safety or to the environment or might subject any of
the Coatings Companies to any imposition of costs or liability
under any Environmental Law.
(ggg) "Indemnified Parties" shall mean the Valspar Indemnified
Parties and the Coates Indemnified Parties, and "Indemnified
Party" shall mean any of them.
(hhh) "Indemnifying Party" shall refer to the Party obligated under
the provisions of Section 12 to indemnify any Indemnified
Party.
(iii) "India Shareholders Agreement" shall mean the agreement by
that name to be entered into pursuant to Section 4.1(a).
(jjj) "Intellectual Property Rights" shall mean any and all
intellectual property rights, including but not limited to
patents, patent applications, registered designs, copyrights
and trade secrets, that cover in whole or in part, relate to
or are required for the use of the Coatings Technology or any
portion thereof.
(kkk) "Latest Balance Sheets" shall mean the unaudited balance
sheets of the Packaging Coatings Business of the Coatings
Companies as of December 31, 1995.
(lll) "Latest Financial Statements" shall mean the Latest Balance
Sheets together with the unaudited statements of earnings and
shareholders' equity of the Packaging Coatings Business of
each of the Coatings Companies for the twelve (12) month
period ended on December 31, 1995.
(mmm) "Leases" shall mean all leases that are described in the
Disclosure Schedule under the caption referring to Section
7.1(m).
(nnn) "Licensed Intellectual Property Rights" shall mean all
Intellectual Property Rights that are not Transferred
Intellectual Property Rights.
(ooo) "Limit Amount" shall mean (i) with respect to losses,
liabilities, deficiencies, damages, expenses and costs of the
Valspar Indemnified Parties under Section 12.2(a), 12.2(b)(i),
12.2(b)(ii) or 12.2(b)(iii) relating to any of the Phase I
Coatings Companies or the Phase II Coatings Companies, one
hundred percent (100%) of the amount of the Purchase Price
received by Coates with respect to all such Phase I Coatings
Companies and Phase II Coatings Companies in the aggregate,
and (ii) with respect to losses, liabilities, deficiencies,
damages, expenses and costs of the Valspar Indemnified Parties
under Section 12.2(a), 12.2(b)(i), 12.2(b)(ii) or 12.2(b)(iii)
relating to any of the Phase III Coatings Companies or the
Phase IV Coatings Companies, one hundred percent (100%) of the
amount of the Purchase Price received by Coates with respect
to such Coatings Company.
(ppp) "Machen Lease Agreement" shall mean the lease agreement to be
entered into between Cray Valley Ltd. and Coates or one of the
Other Affiliates pursuant to Section 2.3(a) and assigned to
Valspar or one of its Affiliates pursuant to Section 2.3(b)(i)
providing for the use and possession of certain industrial
facilities and related real property at Machen, Wales.
(qqq) "Nantes Lease Agreement" shall mean the agreement to be
entered into between Coates Coatings SA and one of the Other
Affiliates whereby the latter will lease to the former the
land currently owned by Coates Coatings SA as more fully
provided in Section 2.3(g).
(rrr) "Neutral Accountants" shall mean any firm of public
accountants selected to resolve accounting differences between
the Parties pursuant to Section 6.4(a)(iii).
(sss) "New Coatings Companies" shall mean Valspar Coates (India)
Ltd. and Valspar Coates (South Africa) Ltd., and "New Coatings
Company" shall mean either of them.
(ttt) "Nominal Closing Date" when used with reference to any Closing
shall be the earliest date by which such Closing is expected
to take place, as provided in Section 6.
(uuu) "Non-Recurring Items" shall mean items of income, expense,
credit or charge resulting from events or transactions that
are unusual in the experience of the Coatings Company and not
within the ordinary course of its Packaging Coatings Business
and that could not reasonably be expected to recur in the
foreseeable future, as shall be agreed between the Parties or
determined by the Neutral Accountants as provided in Section
6.4.
(vvv) "Notifying Party" shall mean a Party that shall have notified
the other Party that it and/or any of its Indemnified Parties
claim entitlement to indemnification under Section 12.
(www) "Operating Income" when used with reference to any Coatings
Company or the Packaging Coatings Business thereof shall mean
(i) the total net sales revenue thereof less (ii) operating
costs consisting of raw material costs (including containers),
operating variable costs, production fixed costs, research and
development costs, other operating fixed costs, selling costs,
administrative costs, variation operating provisions and
depreciation, but (iii) prior to the inclusion of any
intra-group fees, exchange gains or losses, non-trading costs,
goodwill amortization or equity participation as those terms
are defined and used in the financial reports Coates and its
Affiliates.
(xxx) "Other Affiliates" shall mean those Affiliates of Coates that
are not Coatings Companies.
(yyy) "Packaging Coatings" shall mean inks and other coatings used
in metal decorating and on either the outside or the inside of
rigid metal packaging for food, beverages and other products.
(zzz) "Packaging Coatings Assets" when used with reference to any
Coatings Company shall mean those assets of such Coatings
Company described in Section 1.2(a) but excluding those listed
in Section 1.2(b).
(aaaa) "Packaging Coatings Business" shall mean that worldwide
business of Coates and its Affiliates which consists of the
development, manufacture, marketing and sale of Packaging
Coatings and, when used with reference to any Coatings
Company, shall mean that portion of the operations, revenues,
expenses, assets and liabilities of such Coatings Company
which relate exclusively or primarily to such business.
(bbbb) "Packaging Coatings Employees" when used with reference to any
Coatings Company shall mean those employees of that Coatings
Company who are engaged primarily in the Packaging Coatings
Business, as listed in the Disclosure Schedule under the
caption referring to Section 7.1(ff).
(cccc) "Packaging Coatings Liabilities" when used with reference to
any Coatings Company shall mean those liabilities of such
Coatings Company described in Section 1.2(c).
(dddd) "Parties" shall mean Coates and Valspar, and "Party" shall
mean either of them.
(eeee) "Phase I Closing" shall mean the Closing referred to in
Section 2.4.
(ffff) "Phase I Coatings Companies" shall mean Coates, Coates
Brothers, Australia Pty Limited, Coates Coatings AS, Coates
Coatings GmbH, Coates Coatings, Inc., Coates Coatings SA and
Coates Lorilleux SA, and "Phase I Coatings Company" shall mean
any of them.
(gggg) "Phase II Coatings Companies" shall mean Coates Brothers (Hong
Kong) Limited., Valspar Coates (HK) Ltd. and Coates
(Guangzhou) PRC Ltd., and "Phase II Coatings Company" shall
mean any of them.
(hhhh) "Phase III Coatings Companies" shall mean Coates of India
Ltd., Valspar Coates (India) Ltd., Coates Brothers (South
Africa) Ltd., and Valspar Coates (South Africa) Ltd., and
"Phase III Coatings Company" shall mean any of them.
(iiii) "Phase IV Coatings Companies" shall mean Coates Brothers (East
Africa) Ltd., Coates Brothers (Malaysia) Sdn. Bhd., Coates
(New Zealand) Ltd., Coates Brothers (Singapore) Ltd., Coates
Brothers (West Africa) Ltd., Coates Brothers (Zimbabwe)
(Private) Ltd., Coates Korea Ltd., Coates Thailand Ltd.,
Coates Zambia Ltd. and PT Coates Indonesia, and "Phase IV
Coatings Company" shall mean any of them.
(jjjj) "Product Liability" shall mean any claim asserted against or
liability incurred by any of the Coatings Companies by reason
of any actual or alleged defect in any product manufactured or
supplied by any of the Coatings Companies or of any
non-conformity of such product with any applicable contractual
or regulatory provisions, in each case, in connection with the
Packaging Coatings Business.
(kkkk) "Provisional Purchase Price" when used with reference to any
Closing shall mean the estimated purchase price of the Shares
and/or Assets to be paid to Coates and/or its Affiliates at
such Closing as determined pursuant to Section 6.1(c).
(llll) "PT Coates Indonesia" shall mean the perseroan terbatas or
stock company by that name organized under the laws of
Indonesia which is an Affiliate of Coates.
(mmmm) "Purchase Price" shall mean the purchase price for the Shares
and/or Assets, which shall be calculated first as a
Provisional Purchase Price payable at Closing and subsequently
as a Final Purchase Price arrived at through the adjustment
process provided for in Section 6.4.
(nnnn) "Real Property" shall mean all real property which is either
owned by any of the Coatings Companies or used by any of them
under the terms of any Lease, as described in the Disclosure
Schedule under the caption referring to Section 7.1(m).
(oooo) "Returns" shall mean all returns, declarations, reports,
estimates, information returns, and statements required to be
filed or sent by any of the Coatings Companies in respect of
any Taxes or required to be filed or sent by any of the
Coatings Companies to any taxing authority having
jurisdiction.
(pppp) "Sales Representation Agreements" shall mean the agreements
referred to in Section 2.3(h) and Section 2.3(i).
(qqqq) "Shares" when used with reference to any Coatings Company
shall mean the shares of such Coatings Company to be acquired
by Valspar or its Affiliates pursuant to this Agreement.
(rrrr) "South Africa Shareholders Agreement" shall mean the agreement
by that name to be entered into pursuant to Section 4.1(b).
(ssss) "Taxes" shall mean all taxes, charges, fees, levies, or other
assessments, including, without limitation, all net income,
gross income, gross receipts, sales, value added, use, ad
valorem, franchise, profits, license, withholding, payroll,
employment, social security, unemployment, excise, estimated,
severance, stamp, occupation, property, or other taxes,
customs duties, fees, assessments, or charges of any kind
whatsoever, including, without limitation, all interest and
penalties thereon, and additions to tax or additional amounts
imposed by any taxing authority, domestic or foreign, upon any
of the Coatings Companies.
(tttt) "Total SA" shall mean the societe anonyme or stock company by
that name organized under the laws of the Republic of France
which is an Affiliate of Coates.
(uuuu) "Transferred Intellectual Property Rights" shall mean all
Intellectual Property Rights in and to Coatings Technology
that is used primarily in the manufacture, use and/or sale of
Packaging Coatings including, but not limited to, all Coatings
Technology used in the manufacture, use or sale of the resins
and products listed in Exhibit 7.1(s).
(vvvv)
(wwww) "Valspar Coates (India) Ltd." shall mean the limited liability
company to be organized under the laws of the Republic of
India pursuant to Section 4.1(a).
(xxxx) "Valspar Coates (South Africa) Ltd." shall mean the limited
liability company to be organized under the laws of the
Republic of South Africa pursuant to Section 4.1(b).
(yyyy) "Valspar Indemnified Parties" shall mean Valspar, its
Affiliates, shareholders and permitted assigns and any of the
New Coatings Companies.
(zzzz) "Valspar Technology License Agreements" shall mean the
agreements referred to in Section 2.3(g) and, for purposes of
Section 9.14 only the Existing License Arrangements as defined
in the Valspar Technology Sub-License Agreement referred to in
Section 2.3(b)(iv).
(aaaaa) "Valspar's Accountants" shall mean Ernst & Young or such other
firm of independent public accountants as Valspar shall from
time to time appoint as its principal outside accountants.
(bbbbb) "Wythenshawe Lease Agreement" shall mean that certain lease
agreement dated April 29, 1974 between the Manchester City
Council and Lorilleux & Bolton Limited (and currently vested
in Coates) providing for the lease to the latter of certain
commercial real property at Wythenshawe, England.
1.2 Assets and Liabilities. Wherever in this Agreement provision is made
for the purchase and sale or transfer of Packaging Coatings Assets
subject to Packaging Coatings Liabilities, the assets and liabilities
involved shall be determined in accordance with the following
provisions, subject to any specific inclusions or exclusions set forth
in the Exhibits relating to the Packaging Coatings Assets and Packaging
Coatings Liabilities of individual Coatings Companies:
(a) The Packaging Coatings Assets shall consist of the following
assets of each Coatings Company, the Assets of which are to be
acquired by Valspar or transferred to New Coatings Companies
hereunder:
(i) as to Coates Brothers PLC, the real property owned by
Coates in Witney, England, together with all
buildings and improvements thereon and all rights,
privileges, easements and licenses relating to that
property;
(ii) as to Coates of India Ltd., the real property owned
by Coates of India Ltd. in Bangalore, India, having
an area of eight thousand twenty-eight square meters
(8,028 m2) which is used in the Packaging Coatings
Business, together with all buildings and
improvements thereon and all rights, privileges,
easements and licenses relating to that property;
(iii) the accounts receivable, notes receivable from trade
accounts and prepaid expenses of each such Coatings
Company, but only if and to the extent that such
assets relate to the Packaging Coatings Business;
(iv) equipment, machinery, spare parts, supplies,
vehicles, furniture, fixtures, and all other tangible
personal property which, in each case, are used by
such Coatings Company primarily in connection with
the Packaging Coatings Business; provided that for
this purpose each item of such personal property
shall be deemed to be used primarily in connection
with the Packaging Coatings Business if it is used
more than fifty percent (50%) of the time in
connection with such business, taking into account
such time as it is used exclusively in connection
with such business and an allocation of the time
during which it is used for shared or common purposes
with other businesses of the Coatings Company that
owns such property;
(v) items of inventory, including raw materials,
intermediates and work-in-process used in the
manufacture of Packaging Coatings as well as finished
Packaging Coatings products, wherever located;
(vi) any and all Coatings Technology that is owned,
controlled or otherwise licensable by such Coatings
Company, including title to all Transferred
Intellectual Property Rights and perpetual,
worldwide, royalty-free licenses under all Licensed
Intellectual Property Rights, as well as all
documentation and other materials of any kind
incorporating Technology in written, electronic or
other tangible form;
(vii) such Coatings Company's rights under any contracts,
leases, commitments, understandings, unfilled sales
orders, open purchase orders or other agreements,
including supply agreements, equipment leases and
manufacturers' and vendors' warranties relating to
Packaging Coatings or to other items included in the
Packaging Coatings Assets and all similar rights
against third parties relating to items included in
the Packaging Coatings Assets;
(viii) marketing and advertising materials, printed
catalogs, promotional materials, labels and packaging
relating to Packaging Coatings; and
(ix) copies of general ledgers and underlying books of
original entry, and all other books, records, files,
reports, surveys, laboratory books, studies and other
documents relating to Packaging Coatings.
(b) The following assets used in the operation of the Packaging
Coatings Business shall not be considered to be Packaging
Coatings Assets and shall be retained by the Coatings
Companies and shall not be sold or assigned:
(i) cash and cash equivalents;
(ii) subject to the terms of the Coates Trademark License
Agreement, all rights to the name "Coates" whether or
not registered (and all issued registrations and
pending registration of such name) or any name that
includes "Coates";
(iii) all rights under or pursuant to all insurance
policies, all prepaid insurance premiums with respect
to those policies and all claims against insurers
with respect to any Packaging Coatings Liability if
and to the extent that such liability is reflected in
the Closing Balance Sheet;
(iv) any agreement with a third party providing for the
license to such third party of technology relating to
the Packaging Coatings Business; provided, however,
that Valspar will cooperate with Coates in good faith
in the negotiation of substitute agreements that will
resolve conflicts with existing licensees of Valspar,
avoid risk of loss of technology owned by Valspar and
otherwise be in form and content satisfactory to
Valspar;
(v) any contract, lease, commitment, understanding or
other agreement as to which consent to assignment is
required but has not been obtained;
(vi) all tax returns of the Coatings Companies relating to
franchise and income Taxes and all right to credits
and refunds in respect of franchise and income Taxes;
(vii) all notes or other receivables from employees or
former employees of the Coatings Companies, including
all rights in respect of any loans made to Packaging
Coatings Employees for the purpose of purchasing
shares of Total SA; and
(viii) any cash value life insurance policies.
(c) The Packaging Coatings Liabilities shall consist of the
following liabilities of the Coatings Companies the Packaging
Coatings Assets of which are to be acquired by Valspar:
(i) all trade payables and other accounts payable
relating to the operation of the Packaging Coatings
Business through the Closing Date, but only to the
extent fully and properly reflected in the Closing
Balance Sheet for the said Coatings Company as
detailed in an attachment to the Closing Statement;
(ii) all accrued expenses relating to employee
compensation (such as salaries, wages, bonuses,
commissions, vacation and sick days) of Packaging
Coatings Employees through the Closing Date, but only
to the extent fully and properly reflected in the
Closing Balance Sheet for the said Coatings Company
as detailed in an attachment to the Closing
Statement;
(iii) other accrued expenses arising out of the operation
of the Packaging Coatings Business through the
Closing Date, which
(A) in the case of Coatings Companies as to
which the Purchase Price is determined by
reference to the of the
Packaging Coatings Assets thereof, shall be
of the types reflected in the Adjusted
Operating Income which shall have been
utilized in the calculation of the
of the Assets of such
Coatings Company and
(B) in the case of Coatings Companies as to
which the Purchase Price is determined by
reference to the ,
shall have been taken into account in the
determination thereof,
but only, in each case, to the extent fully and
properly reflected in the Closing Balance Sheet for
the said Coatings Company as detailed in an
attachment to the Closing Statement;
(iv) all obligations and liabilities of the Coatings
Companies under the contracts referred to in Section
1.2(a)(vii) (excluding those referred to in Sections
1.2(b)(iii), 1.2(b)(iv) and 1.2(b)(v)), but only to
the extent that those obligations and liabilities
relate to the period after the Closing Date;
(v) Taxes other than franchise and income taxes of the
Coatings Companies arising out of the operation of
the Packaging Coatings Business through the Closing
Date, but only to the extent fully and properly
reflected in the Closing Balance Sheet for the said
Coatings Company as detailed in an attachment to the
Closing Statement; and
(vi) fifty percent (50%) of all liabilities for
termination, severance or similar obligations to or
with respect to Packaging Coatings Employees, other
than any such employees of Coates (Guangzhou) PRC
Ltd., who do not accept the offer of employment by
Valspar referred to in Section 6.1(b), but only if
and to the extent that such obligations shall have
arisen by reason of any termination of such employees
to whom notice of such termination shall have been
given within thirty (30) days following their
respective failures to accept the said offers;
provided that, for the avoidance of doubt, nothing
herein shall be construed as creating any liability
on the part of either Party to any employee who,
being under a legal obligation to accept such offer
in connection with the transfer of the Packaging
Coatings Business from Coates to Valspar, fails to do
so.
1.3 Principles. This Agreement shall be interpreted in accordance with the
following principles:
(a) This Agreement and the Ancillary Agreements are intended to be
mutually explanatory of one another and shall, to the extent
possible, be interpreted as a whole. In the event of any
inconsistency, this Agreement shall prevail over any of the
Ancillary Agreements.
(b) All accounting terms used in this Agreement that are not
specifically defined shall have the meanings customarily
accorded to them under United States generally accepted
accounting principles. When used with reference to any
financial attribute of any Coatings Company, except as
otherwise expressly provided, any such term shall mean such
attribute as reflected in the financial statements, books and
records of such Coatings Company prepared in accordance with,
or adjusted to conform to, United States generally accounting
principles consistently applied.
(c) The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or
interpretation of this Agreement or of any Section or
provision hereof. Except as otherwise expressly stated, any
reference to a Section, Exhibit or Appendix shall mean the
corresponding section, exhibit or appendix of this Agreement.
2 ACQUISITION OF PHASE I SHARES AND ASSETS
2.1 Purchase and Sale. At the Phase I Closing, Valspar and/or its
Affiliates shall purchase, and the Coatings Companies and Other
Affiliates and their respective nominees shall sell, transfer and
assign to Valspar and/or its Affiliates, all right title and interest
of the Coatings Companies and the Other Affiliates in and to the
following Shares and Assets:
(a) the Packaging Coatings Assets, subject to the Packaging
Coatings Liabilities, of Coates, subject to the specific
inclusions and exclusions set forth in Exhibit 2.1(a);
(b) one hundred ninety-five thousand (195,000) shares,
representing all of the issued and outstanding shares, in
Coates Coatings SA;
(c) eleven thousand one hundred (11,100) shares, representing all
of the issued and outstanding shares, in Coates Coatings AS;
(d) the entirety of the share capital interest in Coates Coatings
GmbH;
(e) the Packaging Coatings Assets, subject to the Packaging
Coatings Liabilities, of Coates Coatings, Inc., subject to the
specific inclusions and exclusions set forth in Exhibit
2.1(e);
(f) the Packaging Coatings Assets, subject to the Packaging
Coatings Liabilities, of Coates Lorilleux SA, subject to the
specific inclusions and exclusions set forth in Exhibit
2.1(f); and
(g) the Packaging Coatings Assets, subject to the Packaging
Coatings Liabilities, of Coates Brothers, Australia Pty
Limited, subject to the specific inclusions and exclusions set
forth in Exhibit 2.1(g).
2.2 Purchase Price. The Purchase Price for the Shares and Assets of each of
the Coatings Companies referred to in Section 2.1 shall be an amount
denominated in the Base Currency of such Coatings Company which shall
be equal to the of the said Shares or Assets
plus the following amounts:
(a)
as additional consideration for the Packaging Coatings Assets
of ; and
(b) as
additional consideration for the Packaging Coatings Assets of
2.3 Ancillary Agreements. In addition to the purchase and sale of Shares
and Assets described in Section 2.1, Coates and Valspar shall, and
shall cause their respective Affiliates to, conclude at the Phase I
Closing the following Ancillary Agreements:
(a) Cray Valley Ltd., as lessor, and Coates or an Other Affiliate,
as lessee, will enter into the Machen Lease Agreement
substantially in the form set forth in Appendix 1;
(b) Coates and Valspar will enter into the following Agreements:
(i) the Assignment and Assumption Agreement, whereby
Coates will assign to Valspar its rights, and Valspar
will assume the obligations of Coates under:
(A) the Machen Lease Agreement, and
(B) the Wythenshawe Lease Agreement;
(ii) the Coates Technology License Agreement substantially
in the form set forth in Appendix 2,
(iii) the Coates Trademark License Agreement substantially
in the form set forth in Appendix 3,
(iv) the Valspar Technology Sublicense Agreement
substantially in the form set forth in Appendix 4,
and
(v) the Pension Scheme Agreement, if any, negotiated in
accordance with the provisions set forth in Appendix
5;
(c) Cray Valley Ltd. and an Affiliate of Valspar will enter into
the following agreements:
(i) the Resin Supply Agreement substantially in the form
set forth in Appendix 6; and
(ii) the Machen Facility Services Agreement substantially
in the form set forth in Appendix 7.
(d) Affiliates of Coates and Valspar will enter into the
Facilities and Services Agreements substantially in the form
set forth in Appendix 8, subject to requirements of applicable
law, relating to the provision by Coates of certain facilities
and/or administrative services to Affiliates of Valspar in
France (Lille), the United Kingdom, Portugal, Spain and
Australia, as specified in the Schedule to Appendix 8 and with
respect to services in France and the United Kingdom, based on
the services specified in the term sheet attached hereto as
Appendix 8-A.
(e) Coates Lorilleux SA and an Affiliate of Valspar will enter
into a Toll Manufacturing Agreement with respect to Spain
substantially in the form set forth in Appendix 9, subject to
any requirements of applicable law.
(f) Coates Brothers, Australia Pty Limited and an Affiliate of
Valspar will enter into a Toll Manufacturing Agreement with
respect to Australia substantially in the form set forth in
Appendix 9, subject to any requirements of applicable law.
(g) Coates and Valspar shall agree upon the definitive text of the
Nantes Lease Agreement, which shall provide for the lease to
Coates Coatings SA by an Other Associate of the land at
Nantes, France currently occupied and used by Coates Coatings
SA, such lease to be for nominal rent and for a term of the
same duration as the Machen Lease Agreement or for such
shorter term as shall be the longest term permitted under
applicable law, subject to termination by Valspar at any time
on one (1) year's notice, and containing (i) provisions for
the transfer of all buildings and improvements on the land to
an Affiliate of Coates upon expiration or termination of the
lease without compensation to Valspar or its Affiliate, (ii)
an undertaking by the lessor Other Affiliate of Coates
incorporating the covenant set forth in Section 9.15 and (iii)
such other terms as shall be customary and in accordance with
applicable law.
(h) Valspar or one of its Affiliates, on one hand, and each of the
Phase II Coatings Companies, the Phase III Coatings Companies
and the Phase IV Coatings Companies, on the other hand, will
enter into a Valspar Technology License Agreement
substantially in the form set forth in Appendix 10, subject to
any requirements of applicable law.
(i) Valspar and Valspar Coates (India) Ltd. and the following
Phase IV Coatings Companies will enter into Valspar Sales
Representation Agreements, substantially in the form set forth
in Appendix 11, subject to any requirements of applicable law,
under which Valspar will grant to those Coatings Companies
exclusive sales rights for Packaging Coatings in respect of
the countries noted:
(i) Coates (New Zealand) Ltd. will be granted exclusive
rights as to New Zealand;
(ii) PT Coates Indonesia will be granted exclusive rights
as to Indonesia;
(iii) Coates Brothers (Singapore) Ltd. will be granted
exclusive rights as to Singapore, Brunei, Bangladesh,
Sri Lanka, Vietnam, Laos and Cambodia;
(iv) Coates Brothers (Malaysia) Sdn. Bhd. will be granted
exclusive rights as to Malaysia;
(v) Coates Brothers (East Africa) Ltd. will be granted
exclusive rights as to Kenya, Tanzania, Uganda and
Ethiopia;
(vi) Coates Brothers (West Africa) Ltd. will be granted
exclusive rights as to Nigeria;
(vii) Coates Brothers (Zimbabwe) (Private) Ltd. will be
granted exclusive rights as to Zimbabwe; and
(viii) Coates Zambia Ltd. will be granted exclusive rights
as to Zambia.
(j) Coates will enter into a Coates Sales Representation Agreement
with one or more Affiliates of Valspar, substantially in the
form set forth in Appendix 11, subject to any requirements of
applicable law, under which Valspar's Affiliate will be
granted exclusive sales rights for the Republic of
Philippines.
2.4 Closing. The actions required to complete the purchase and sale of the
Shares and Assets described in Section 2.1 and to conclude the
Ancillary Agreements described in Section 2.3 shall take place at a
Closing to be held in accordance with the provisions of Section 6.1.
The Nominal Closing Date for the said Closing shall be April 30, 1996.
2.5 Allocation. The amount of the Purchase Price representing additional
consideration for the Packaging Coatings Assets of and the
Packaging Coatings Assets of pursuant to Section
2.2 shall be allocated among such assets as set forth in Exhibit 2.5.
The Parties shall prepare all tax returns and other reports on a basis
consistent with such allocation. The Parties shall cooperate in making
all such elections or other filings with the Inland Revenue of the
United Kingdom as may be necessary to transfer to an Affiliate of
Valspar all transferable allowances relating to the buildings that are
subject to the Machen Lease Agreement with the exception of any
recapture to which Cray Valley Ltd. would be subject as a result of
such transfer.
3 ACQUISITION OF PHASE II SHARES AND ASSETS
3.1 Purchase and Sale. At the Phase II Closing, Valspar and/or its
Affiliates shall purchase, and the Coatings Companies shall sell,
transfer and assign to Valspar and/or its Affiliates, all right, title
and interest of the Phase II Coatings Companies in and to the following
Assets:
(a) the Packaging Coatings Assets, subject to the Packaging
Coatings Liabilities, of Coates Brothers (Hong Kong) Limited.,
subject to the specific inclusions and exclusions set forth in
Exhibit 3.1(a); and
(b) the Packaging Coatings Assets, subject to the Packaging
Coatings Liabilities, of Coates (Guangzhou) PRC Ltd., subject
to the specific inclusions and exclusions set forth in Exhibit
3.1(b); provided, however, that in the event that Coates
(Guangzhou) PRC Ltd. is unable to obtain any required consents
or approvals of governmental authorities for the sale of such
Assets or to retain or obtain a license to continue to conduct
the other businesses conducted by Coates (Guangzhou) PRC Ltd.
under terms and conditions no less favorable than those under
which such businesses are currently conducted, Coates may, at
its option, elect not to transfer such Assets, in which event
the Parties shall negotiate in good faith as to the action to
be taken by them with respect to such Assets.
3.2 Purchase Prices. The Purchase Prices for the Assets referred to in
Section 3.1 shall be as follows:
(a) The Purchase Price for the Assets of Coates Brothers (Hong
Kong) Limited. to be purchased pursuant to Section 3.1(a)
shall be an amount in Hong Kong dollars which shall be the
equivalent of
; and
(b) The Purchase Price for the Assets of Coates (Guangzhou) PRC
Ltd. to be purchased pursuant to Section 3.1(b) shall be an
amount in renminbi which shall be equal to the
of such Assets, exclusive of any portion thereof
that may be attributable to customs duties, plus the
equivalent of and
Coates shall remain responsible for any customs duties that
may become payable in respect of such Assets, provided that
Valspar shall, at the request and expense of Coates, cooperate
in good faith with Coates to minimize any such customs duties.
3.3 Ancillary Agreements. In addition to the purchase and sale of Assets
described in Section 3.1, Coates and Valspar shall cause their
respective Affiliates to conclude at the Phase II Closing Ancillary
Agreements as follows:
(a) Coates Brothers (Hong Kong) Limited. and an Affiliate of
Valspar will enter into a Facilities and Services Agreement
substantially in the form set forth in Appendix 8, subject to
any requirements of applicable law, relating to the provision
by Coates of certain facilities and/or administrative services
in Hong Kong, as specified in an attachment to Appendix 8;
(b) Coates Brothers (Hong Kong) Limited. and an Affiliate of
Valspar will enter into a Toll Manufacturing Agreement with
respect to Hong Kong substantially in the form set forth in
Appendix 9, subject to any requirements of applicable law; and
(c) Coates (Guangzhou) PRC Ltd. and an Affiliate of Valspar will
enter into a Toll Manufacturing Agreement with respect to the
People's Republic of China substantially in the form set forth
in Appendix 8, subject to any requirements of applicable law.
(d) Coates will enter into Coates Sales Representation Agreements
with one or more Affiliates of Valspar, substantially in the
form set forth in Appendix 12, subject to any requirements of
applicable law, under which Valspar's Affiliate will be
granted exclusive sales rights for Packaging Coatings in
respect of Hong Kong, the Republic of China (Taiwan) and, upon
the completion of the transactions referred to in Section
3.1(b) or the termination of the Packaging Coatings Business
of Coates (Guangzhou) PRC Ltd., the People's Republic of
China.
3.4 Closing. The actions required to complete the purchase and sale of the
Assets described in Section 3.1 and to conclude the Ancillary
Agreements described in Section 3.3 shall take place at a Closing to be
held in accordance with the provisions of Section 6.1. The Nominal
Closing Date for the said Closing shall be December 31, 1996.
4 ACQUISITION OF PHASE III SHARES AND ASSETS
4.1 Completion and Approvals of Shareholders Agreements. As soon as shall
be practicable following the signature of this Agreement, the following
actions shall be taken:
(a) The Parties shall take, and shall cause their respective
Affiliates to take, all steps required for the establishment
of a New Coatings Company in India, including but not limited
to the following:
(i) The Parties shall agree upon the definitive text of
the India Shareholders Agreement, which shall be in
the form set forth in Appendix 13 subject to any
requirements of applicable law, as well as the
following:
(A) the Memorandum and Articles of Association
of the company to be established pursuant to
Section 4.2(a); and
(B) the definitive lists of any inclusions in
and exclusions from the Packaging Coatings
Assets and Packaging Coatings Liabilities of
Coates of India Ltd. to be listed,
respectively, in Schedules 1.1(yy) and
1.1(bbb) of the India Shareholder Agreement
and transferred to Valspar Coates (India)
Ltd. as provided in Section 4.2(b)(i).
(ii) The Parties shall further agree upon the definitive
text of the following Related Agreements, as that
term is defined in the India Shareholders Agreement:
(A) the India Toll Manufacturing Agreement,
which shall conform as closely as possible,
consistent with the requirements of Indian
law, to the Toll Manufacturing Agreement set
forth in Appendix 7;
(B) the India Management and Services Agreement,
pursuant to which Coates of India Ltd. will
provide to Valspar Coates (India) Ltd. all
management, administrative and other
services that are currently performed by
Coates of India Ltd. for the Packaging
Coatings Business of Coates of India Ltd.
and the resources for performance of which
will not be transferred to Valspar Coates
(India) Ltd., for service fees equal to the
actual costs of providing such services as
reflected in the Adjusted Operating Income
of Coates of India Ltd. which shall have
been utilized in the calculation of the
Capitalized Value for purposes of Section
4.4(a);
(C) the COI Technology License Agreement, which
shall conform as closely as possible,
consistent with the requirements of
applicable law, to the Coates Technology
License Agreement set forth in Appendix 2;
(D) a Valspar Technology License Agreement,
which shall conform as closely as possible,
consistent with the requirements of
applicable law, to the Valspar Technology
License Agreement set forth in Appendix 10;
and
(E) a Valspar Sales Representation Agreement,
which shall conform as closely as possible,
consistent with the requirements of
applicable law, to the Valspar Sales
Representation Agreement set forth in
Appendix 11.
(iii) Coates of India Ltd. and Valspar or one of its
Affiliates shall each execute and deliver the India
Shareholders Agreement.
(iv) Coates of India Ltd. shall, if and as necessary,
submit the India Shareholders Agreement, including
the Related Agreements as therein defined, to (A) the
Reserve Bank of India, (B) any other Indian
governmental or regulatory authorities whose approval
may be required, and (C) the Coates of India Ltd.
shareholders, for their respective approvals of such
agreements, the consummation of all transactions
therein contemplated and the taking of all other
actions required for those purposes.
(b) The Parties shall take, and shall cause their respective
Affiliates to take, all steps required for the establishment
of a New Coatings Company in South Africa, including but not
limited to the following:
(i) The Parties shall agree upon the definitive text of
the South Africa Shareholders Agreement which shall
be in the form set forth in Appendix 13, subject to
any requirements of applicable law, as well as the
following:
(A) the Memorandum and Articles of Association
of the company to be established pursuant to
Section 4.3(a); and
(B) the definitive lists of any inclusions in
and exclusions from the Packaging Coatings
Assets and Packaging Coatings Liabilities of
Coates Brothers (South Africa) Ltd. to be
listed, respectively, in Schedules 1.1(yy)
and 1.1(bbb) of the South Africa Shareholder
Agreement and transferred to Valspar Coates
(South Africa) Ltd. as provided in Section
4.3(b)(i).
(ii) The Parties shall agree upon the definitive texts of
the following Related Agreements, as defined in the
South Africa Shareholders Agreement:
(A) the South Africa Toll Manufacturing
Agreement, which shall conform as closely as
possible, consistent with the requirements
of South African law, to the Toll
Manufacturing Agreement set forth in
Appendix 9;
(B) the South Africa Management and Services
Agreement, pursuant to which Coates Brothers
(South Africa) Ltd. will provide to Valspar
Coates (South Africa) Ltd. all management,
administrative and other services to Valspar
Coates (South Africa) Ltd. that are
currently performed by Coates Brothers
(South Africa) Ltd. for the Packaging
Coatings Business of Coates Brothers (South
Africa) Ltd. and the resources for
performance of which will not be transferred
to Valspar Coates (South Africa) Ltd., for
service fees equal to the actual costs of
providing such services as reflected in the
Adjusted Operating Income of Coates Brothers
(South Africa) Ltd. which shall have been
utilized in the calculation of the
Capitalized Value for purposes of Section
4.4(b);
(C) the CBSA Technology License Agreement, which
shall conform as closely as possible,
consistent with the requirements of South
African law, to the Coates Technology
License Agreement set forth in Appendix 3;
(D) the South Africa Resin Supply Agreement,
which shall conform as closely as possible,
consistent with the requirements of South
African law, to the Resin Supply Agreement
set forth in Appendix 6; and
(E) a Valspar Technology License Agreement,
which shall conform as closely as possible,
consistent with the requirements of South
African law, to the Valspar Technology
License Agreement set forth in Appendix 10.
(iii) Coates Brothers (South Africa) Ltd. and Valspar or
one of its Affiliates shall each execute and deliver
the South Africa Shareholders Agreement.
(iv) Coates Brothers (South Africa) Ltd. shall submit the
South Africa Shareholders Agreement, including the
Related Agreements as therein defined, to (A) the
Reserve Bank of South Africa, (B) any other South
African governmental or regulatory authorities whose
approval may be required, and (C) if and as
necessary, the Coates Brothers (South Africa) Ltd.
shareholders, for their respective approvals of such
agreements, the consummation of all transactions
therein contemplated and the taking of all other
actions required for those purposes.
4.2 Formation, Capitalization and Operation of New Coatings Company in
India. Subject to receipt of the governmental, regulatory and
shareholder approvals referred to in Section 4.1(a)(iv), the following
actions shall be taken in accordance with the provisions of the India
Shareholders Agreement:
(a) Coates of India Ltd. shall form a new Indian limited liability
company to be known as Valspar Coates (India) Ltd., or, if
such name shall be unavailable, such other name as the Parties
may agree, as more fully provided in the India Shareholders
Agreement.
(b) As soon as possible after receipt of all approvals referred to
in Section 4.1(a)(iv) and the satisfaction of all other
conditions to the First Closing as defined and provided for in
the India Shareholders Agreement, Coates of India Ltd. and
Valspar or one of its Affiliates shall take all actions
required for the completion of the transactions to be
consummated at the said First Closing, including but not
limited to the following:
(i) the transfer by Coates of India Ltd. to Valspar
Coates (India) Ltd. of the Packaging Coatings Assets,
subject to the Packaging Coatings Liabilities, of
Coates of India Ltd. as more fully defined by the
specific inclusions and exclusions set forth in
Exhibit 4.2(b)(i) subject to any modifications that
may be agreed pursuant to Section 4.1(a)(i)(B), and
the issuance to Coates of India Ltd., in
consideration for the said Assets, of five thousand
one hundred (5,100) shares in the capital of Valspar
Coates (India) Ltd., and a promissory note of Valspar
Coates (India) Ltd. in a principal amount equal to
the issue price of the shares to be issued to Valspar
or its Affiliate pursuant to Section 4.2(b)(ii); and
(ii) the subscription by Valspar or one of its Affiliates
for four thousand nine hundred (4,900) shares in the
capital of Valspar Coates (India) Ltd. and the
issuance of such shares to Valspar or its Affiliate
for the Purchase Price defined in Section 4.4(a)(i),
the proceeds from which shall then be used to repay
the promissory note referred to in Section 4.2(b)(i).
(c) Coates of India Ltd. and Valspar or its Affiliate shall
operate Valspar Coates (India) Ltd. in all respects in
conformity with the requirements of the India Shareholders
Agreement and, at the Second Closing as defined and provided
for in the India Shareholders Agreement, Coates of India Ltd.
shall sell, transfer and assign to Valspar or its Affiliate,
for the Purchase Price defined in Section 4.4(a)(2), the
shares in the capital of Valspar Coates (India) Ltd.
originally issued to Coates of India pursuant to Section
4.2(b)(i).
4.3 Formation, Capitalization and Operation of New Coatings Company in
South Africa. Subject to receipt of the governmental, regulatory and
shareholder approvals referred to in Section 4.1(b)(iv), the following
actions shall be taken in accordance with the provisions of the South
Africa Shareholders Agreement:
(a) Coates Brothers (South Africa) Ltd. shall form a new South
African limited liability company to be known as Valspar
Coates (South Africa) Ltd., or, if such name shall be
unavailable, such other name as the Parties may agree, as more
fully provided in the South Africa Shareholders Agreement.
(b) As soon as possible after receipt of all approvals referred to
in Section 4.1(b)(iv) and the satisfaction of all other
conditions to the First Closing as defined and provided for in
the South Africa Shareholders Agreement, Coates Brothers
(South Africa) Ltd. and Valspar or one of its Affiliates shall
take all actions required for the completion of the
transactions to be consummated at the said First Closing,
including but not limited to the following:
(i) the transfer by Coates Brothers (South Africa) Ltd.
to Valspar Coates (South Africa) Ltd. of the
Packaging Coatings Assets, subject to the Packaging
Coatings Liabilities, of Coates Brothers (South
Africa) Ltd. as more fully defined by the specific
inclusions and exclusions set forth in Exhibit
4.3(b)(i) subject to any modifications that may be
agreed pursuant to 4.1(a)(i)(B), and the issuance to
Coates Brothers (South Africa) Ltd., in consideration
for the said Assets, of five thousand one hundred
(5,100) shares in the capital of Valspar Coates
(South Africa) Ltd., and a promissory note of Valspar
Coates (South Africa) Ltd. in a principal amount
equal to the issue price of the shares to be issued
to Valspar or its Affiliate pursuant to Section
4.3(b)(ii); and
(ii) the subscription by Valspar or one of its Affiliates
for four thousand nine hundred (4,900) shares in the
capital of Valspar Coates (South Africa) Ltd. and the
issuance of such shares to Valspar or its Affiliate
for the Purchase Price defined in Section 4.4(b)(i),
the proceeds from which shall then be used to repay
the promissory note referred to in Section 4.3(b)(i).
(c) Coates Brothers (South Africa) Ltd. and Valspar or its
Affiliate shall operate Valspar Coates (South Africa) Ltd. in
all respects in conformity with the requirements of the South
Africa Shareholders Agreement and, at the Second Closing as
defined and provided for in the South Africa Shareholders
Agreement, Coates Brothers (South Africa) Ltd. shall sell,
transfer and assign to Valspar or its Affiliate, for the
Purchase Price defined in Section 4.4(b)(2), the shares in the
capital of Valspar Coates (South Africa) Ltd. originally
issued to Coates Brothers (South Africa) pursuant to Section
4.3(b)(i).
4.4 Purchase Prices. The Purchase Prices for the Shares and Assets of the
Phase III Coatings Companies shall be as follows:
(a) The purchase prices for the Shares of Valspar Coates (India)
Ltd. shall be as follows:
(i) the Purchase Price for the initial forty-nine percent
(49%) of the Shares to be purchased pursuant to
Section 4.2(b)(ii) shall be an amount in Indian
rupees which shall be equal to forty-nine
one-hundredths (49/100) of the greater of (i) the
of the Packaging Coatings
Assets of Coates of India Ltd. immediately prior to
their transfer to Valspar Coates (India) Ltd. or (ii)
the of the Packaging Coatings
Business of Coates of India Ltd. as of the date of
such transfer; and
(ii) the Purchase Price for the remaining fifty-one
percent (51%) of the Shares to be purchased pursuant
to Section 4.2(c) shall be an amount in Indian rupees
which shall be equal to fifty-one one hundredths
(51/100) of the greater of (i) the
of the Packaging Coatings Assets of Valspar
Coates (India) Ltd. as of the date of such purchase
or (ii) the of Valspar Coates
(India) Ltd. as of the date of such purchase.
(b) The Purchase Prices for the Shares of Valspar Coates (South
Africa) Ltd. shall be as follows:
(i) the Purchase Price for the initial forty-nine percent
(49%) of the Shares to be purchased pursuant to
Section 4.3(b)(ii) shall be an amount in South
African rand which shall be equal to forty-nine
one-hundredths (49/100) of the greater of (i) the
of the Packaging Coatings
Assets of Coates Brothers (South Africa) Ltd.
immediately prior to their transfer to Valspar Coates
(South Africa) Ltd. or (ii) the of
the Packaging Coatings Business of Coates Brothers
(South Africa) Ltd. as of the date of such transfer;
and
(ii) the Purchase Price for the remaining fifty-one
percent (51%) of the Shares to be purchased pursuant
to Section 4.3(c) shall be an amount in South African
rand which shall be equal to fifty-one one hundredths
(51/100) of the greater of (i) the
of Valspar Coates (South Africa) Ltd. as of the
date of such purchase or (ii) the
of Valspar Coates (South Africa) Ltd. as of the date
of such purchase.
4.5 Ancillary Agreements. In connection with the transfer of Assets and the
purchase and sale Shares of the Phase III Coatings Companies, Ancillary
Agreements shall be concluded as follows:
(a) Contemporaneously with the purchase by Valspar or its
Affiliate of Shares of Valspar Coates (India) Ltd. as
described in Section 4.2(b)(ii), Coates of India Ltd. and
Valspar Coates (India) Ltd. shall enter into the Related
Agreements as defined and provided in the India Shareholders
Agreement.
(b) Contemporaneously with the initial purchase by Valspar or its
Affiliate of Shares of Valspar Coates (South Africa) Ltd. as
described in Section 4.3(b)(ii), Coates Brothers (South
Africa) Ltd. and Valspar Coates (South Africa) Ltd. shall
enter into the Related Agreements as defined and provided in
the South Africa Shareholders Agreement.
4.6 Closings. The actions required to consummate the purchase and sale of
the Shares and Assets of the Phase III Coatings Companies shall take
place at Closings as follows:
(a) The completion of the transactions described in Section 4.2(b)
and the conclusion of the Ancillary Agreements referred to in
Section 4.5(a) shall take place at the First Closing, as
defined in the India Shareholders Agreement and to be held in
accordance with the provisions of Section 9.1 thereof, for
which the Nominal Closing Date shall be July 1, 1997.
(b) The completion of the transactions described in Section 4.2(c)
shall take place at the Second Closing, as defined in the
India Shareholders Agreement and to be held in accordance with
the provisions of Section 9.1 thereof, for which the Nominal
Closing Date shall be April 30, 2001.
(c) The completion of the transactions described in Section 4.3(b)
and the conclusion of the Ancillary Agreements referred to in
Section 4.5(b) shall take place at the First Closing, as
defined in the South Africa Shareholders Agreement and to be
held in accordance with the provisions of Section 9.1 thereof,
for which the Nominal Closing Date shall be July 1, 1997.
(d) The completion of the transactions described in Section 4.3(c)
shall take place at the Second Closing, as defined in the
South Africa Shareholders Agreement and to be held in
accordance with the provisions of Section 9.1 thereof, for
which the Nominal Closing Date shall be April 30, 2001.
4.7 Alternative Structures. In the event that the consummation of the
transactions in the form provided for in either or both of Sections 4.2
and 4.3 shall prove to be legally impossible, to entail undue cost or
delay, or to be materially less advantageous to either Party than an
alternative structure which preserves the economic balance of the
transaction, the Parties shall restructure the transactions concerned
so as to achieve substantially the same economic results in a manner
which avoids or mitigates the legal restrictions or disadvantages in
question.
5 ACQUISITION OF PHASE IV ASSETS
5.1 Put and Call Options. Valspar will have "call" options to purchase and
Coates will have "put" options to sell the Packaging Coatings Assets,
subject to the Packaging Coatings Liabilities, of the Phase IV Coatings
Companies as follows:
(a) Coates will have "put" options to sell to Valspar, and Valspar
will have "call" options to purchase from Coates, any or all
of the following:
(i) the Packaging Coatings Assets, subject to the
Packaging Coatings Liabilities, of Coates Brothers
(Singapore) Ltd., as more fully defined by the
specific inclusions and exclusions, if any, set forth
in Exhibit 5.1;
(ii) the Packaging Coatings Assets, subject to the
Packaging Coatings Liabilities, of Coates Brothers
(Malaysia) Sdn. Bhd., as more fully defined by the
specific inclusions and exclusions, if any,set forth
in Exhibit 5.1;
(iii) the Packaging Coatings Assets, subject to the
Packaging Coatings Liabilities, of Coates Thailand
Ltd., as more fully defined by the specific
inclusions and exclusions, if any, set forth in
Exhibit 5.1; and
(iv) the Packaging Coatings Assets, subject to the
Packaging Coatings Liabilities, of PT Coates
Indonesia, as more fully defined by the specific
inclusions and exclusions, if any, set forth in
Exhibit 5.1.
(b) Valspar will have further "call" options to purchase from
Coates any or all of the following:
(i) the Packaging Coatings Assets, subject to the
Packaging Coatings Liabilities, of Coates Brothers
(East Africa) Ltd., as more fully defined by the
specific inclusions and exclusions, if any, set forth
in Exhibit 5.1;
(ii) the Packaging Coatings Assets, subject to the
Packaging Coatings Liabilities, of Coates (New
Zealand) Ltd., as more fully defined by the specific
inclusions and exclusions, if any, set forth in
Exhibit 5.1;
(iii) the Packaging Coatings Assets, subject to the
Packaging Coatings Liabilities, of Coates Brothers
(West Africa) Ltd., as more fully defined by the
specific inclusions and exclusions, if any, set forth
in Exhibit 5.1;
(iv) the Packaging Coatings Assets, subject to the
Packaging Coatings Liabilities, of Coates Brothers
(Zimbabwe) (Private) Ltd., as more fully defined by
the specific inclusions and exclusions, if any, set
forth in Exhibit 5.1;
(v) the Packaging Coatings Assets, subject to the
Packaging Coatings Liabilities, of Coates Korea Ltd.,
as more fully defined by the specific inclusions and
exclusions, if any, set forth in Exhibit 5.1; and
(vi) the Packaging Coatings Assets, subject to the
Packaging Coatings Liabilities, of Coates Zambia
Ltd., as more fully defined by the specific
inclusions and exclusions, if any, set forth in
Exhibit 5.1.
5.2 Exercise of Options. The options provided for in Section 5.1 shall be
exercisable upon twelve (12) month's notice in writing, which notice
may be given to the other Party at any time during the period of six
(6) months commencing on the fourth (4th) anniversary of the Phase I
Closing Date and again at any time during the period of six (6) months
commencing on the seventh (7th) anniversary of the Closing Date. They
shall be exercisable independently in respect of each of the Phase IV
Coatings Companies.
5.3 Option Prices. The Purchase Price for the Packaging Coatings Assets,
subject to the Packaging Coatings Liabilities, of each Phase IV
Coatings Company as to which either Party shall have and exercise an
option under Section 5.1 shall be an amount in the Base Currency of the
said Coatings Company which shall be equal to the greater of the
following amounts:
(a) the of the Packaging Coatings Assets,
subject to the Packaging Coatings Liabilities, of that
Coatings Company as of the date of the purchase; or
(b) the of the Packaging Coatings Business of
that Coatings Company as of such date.
5.4 Ancillary Agreements. Whenever either Valspar or Coates exercises its
respective option in respect of any of the Phase IV Coatings Companies,
Coates will at the request of Valspar cause the Coatings Company in
question to enter into:
(a) a Toll Manufacturing Agreement substantially in the form set
forth in Appendix 7, consistent with any requirements of
applicable law, under which the said Coatings Company will
manufacture Packaging Coatings for Valspar and/or its
Affiliates for a period of up to five (5) years as to
Packaging Coatings inks and up two (2) years as to other
Packaging Coatings following the purchase of the respective
Packaging Coatings Assets at prices which equal the actual
cost of such manufacture as reflected in the Adjusted
Operating Income of the respective Coatings Company which
shall have been utilized in the calculation of the Capitalized
Value of the said Packaging Coatings Assets; and
(b) a Services Agreement substantially in the form set forth in
Appendix 3, consistent with any requirements of applicable
law, under which Coates will for a period up to two (2) years
following the purchase of the respective Packaging Coatings
Assets provide full management and other services to Valspar
or its Affiliates for service fees equal to the actual costs
of providing such services as reflected in the Adjusted
Operating Income of the respective Coatings Company which
shall have been utilized in the calculation of the Capitalized
Value of the said Packaging Coatings Assets.
5.5 Closings. Consummation of each purchase of Assets pursuant to the
exercise by either Party of any of its options under Section 5.1 shall
take place at a Closing for which the Nominal Closing Date shall be the
date twelve (12) months after the date of the notice of such exercise.
6 CLOSINGS AND CONDITIONS
6.1 Closings. The actions required to consummate each purchase and sale of
Shares and Assets and to conclude each of the Ancillary Agreements as
described herein shall take place at Closings to be held at the offices
of Dorsey & Whitney P.L.L.P., 35, Square de Meeus, 1040 Brussels,
Belgium at 11:00 a.m., or at such other time and/or place as shall be
agreed, on the latest of: (a) the Nominal Closing Date for each such
Closing as set forth in this Agreement or such other date as the
Parties shall hereafter agree in writing; (b) the date on which all
conditions to such Closing set forth in Sections 6.2 and 6.3 shall have
been fulfilled; or (c) the date which shall be ten (10) Business Days
after the date on which Coates shall have made available to Valspar the
Adjusted Annual Financial Statements for the Fiscal Year most recently
ended, together with Adjusted Quarterly Financial Statements for all
Fiscal Quarters ending at the end of such Fiscal Year or thereafter, of
all Coatings Companies any Shares or Assets of which are to be
purchased by Valspar or its Affiliates at such Closing. Subject to the
conditions set forth in this Agreement, the Parties agree to take
and/or cause their respective Affiliates to take the following actions
at each Closing:
(a) Coates and/or its Affiliates shall sell, assign and transfer
to Valspar or its Affiliates good and valid title in and to
the Shares and Assets to be transferred at such Closing, free
and clear of all liens and encumbrances.
(b) As to Coatings Companies the Assets of which are to be
transferred at such Closing, Valspar and/or its Affiliates
shall assume the Packaging Coatings Liabilities and shall
extend to the Packaging Coatings Employees of such Coatings
Companies, other than those listed on Exhibit 6.1(b), offers
of employment on terms and conditions which, in the aggregate,
shall not be materially less advantageous to them than those
on which they shall have been employed by such Coatings
Companies and shall comply with applicable legal requirements.
(c) Valspar and/or its Affiliates shall deliver to Coates and/or
its Affiliates the Provisional Purchase Price by wire transfer
of immediately available funds, either in the Base
Currency(ies) or in such other convertible and transferrable
currencies as the Parties may agree, to one or more bank
accounts designated by Coates in writing at least five (5)
business days prior to the Closing. The Provisional Purchase
Price shall be the Purchase Price provided for in respect of
the Shares and Assets to be transferred at each Closing,
determined on the basis of the most recent Adjusted Annual
Financial Statements or the most recent Adjusted Quarterly
Financial Statements, whichever shall relate to an accounting
period ending on the more recent date.
(d) Coates and/or its Affiliates shall execute and deliver to
Valspar and/or its designated Affiliates one or more
assignments whereby Coates and/or its Affiliates shall assign
to Valspar or its Affiliates and Valspar and/or its Affiliates
shall purchase any and all Financial Indebtedness to Coates
and/or its Affiliates of each Coatings Company of which
Valspar is at such Closing purchasing the Shares, provided
that, except as otherwise provided in this Agreement, Valspar
shall have no obligation to purchase a percentage of such
Financial Indebtedness to Coates and/or its Affiliates which
exceeds the percentage of the Shares of the debtor Coatings
Company being purchased at such Closing.
(e) Valspar and/or its Affiliates shall pay to Coates and/or its
Affiliates the principal amount and any accrued interest on
the Financial Indebtedness transferred pursuant to Section
6.1(d), in the currency in which such Financial Indebtedness
is denominated or in any other currency as the Parties may
agree, by wire transfer of immediately available funds to one
or more bank accounts designated by the relevant lender in
writing at least five (5) business days prior to the Closing.
(f) Coates and Valspar shall, and shall cause their respective
Affiliates to, execute and deliver the Ancillary Agreements to
be concluded at such Closing.
(g) Each of the Parties shall, and shall cause its Affiliates to,
deliver to the other Party and its Affiliates the documents
required to be delivered by it and them pursuant to this
Section 6.
6.2 Conditions to Obligations of Valspar. The obligation of Valspar to
consummate the transactions to be completed at each Closing
contemplated by this Agreement shall be subject to the satisfaction of
the following conditions prior to or at the respective Closing:
(a) The representations and warranties of Coates set forth in
Section 7.1 hereof, as reaffirmed at each Closing pursuant to
Section 7.2, shall be true and correct in all material
respects (except that all such representations and warranties
which are given subject to a separate qualification as to
materiality shall be true and correct subject only to that
qualification) at and as of the Closing Date, subject to the
following:
(i) no modification to the Disclosure Schedule introduced
in any Disclosure Schedule Amendment delivered by
Coates to Valspar at or prior to such Closing
pursuant to Section 7.2(c) shall be effective unless
and until accepted by Valspar, it being understood
that Valspar shall not withhold acceptance of any
modification introduced in a Disclosure Schedule
Amendment delivered prior to any Closing unless the
modification is one the absence of which would cause
any of the said representations and warranties as
reaffirmed at Closing not to be true and correct in
all material respects (or would cause any of such
representations and warranties which are given
subject to a separate qualification as to materiality
not to be true and correct subject to that
qualification), such materiality being determined in
relation to the Packaging Coatings Business of any
Coatings Company;
(ii) in the event that Valspar shall, in accordance with
Section 6.2(a)(i), decline to accept any modification
to the Disclosure Schedule contained in any
Disclosure Schedule Amendment delivered prior to any
Closing, Valspar shall be relieved of its obligation
to consummate the transactions contemplated by this
Agreement in respect of any Coatings Company if, but
only if, the absence of such modification would have
caused any of the said representations and warranties
as reaffirmed at Closing not to be true and correct
in any respect that would be material in relation to
the Packaging Coatings Business of such Coatings
Company, provided, however, that, if the Disclosure
Schedule Amendment delivered prior to the Phase I
Closing shall introduce a modification which, either
alone or in conjunction with any other modifications
introduced in the same or prior Disclosure Schedule
Amendments, would cause any of the said
representations and warranties as reaffirmed at such
Closing not to be true or correct in any respect
which would be material in relation to the Packaging
Coatings Business of any of Coates, Coates Coatings
AS and Coates Coatings SA, Valspar shall be relieved
of its obligation to consummate all transactions
contemplated by this Agreement but, if its elects to
proceed to consummate any of such transactions, it
shall not have the right to exclude the transactions
relating to any of Coates, Coates Coatings AS and
Coates Coatings SA; and
(iii) in the event that the aggregate
of the Phase I Coatings Companies as reflected
in the Adjusted Annual Financial Statements delivered
prior to the Phase I Closing shall be less than the
aggregate , the said
difference shall be deemed not to constitute a
material untruth or incorrectness of the
representations and warranties given as of the date
of this Agreement if, but only if, such difference,
excluding any portion thereof that may result solely
from the adjustments required to restate the Latest
Financial Statements in a manner that conforms to
United States generally accepted accounting
principles, shall be less than ten percent (10%) of
the
(b) Coates shall have performed in all material respects all of
the covenants and agreements required to be performed and
complied with by it under this Agreement prior to the Closing.
(c) Coates shall have obtained, or caused to be obtained, each
consent and approval required in order to complete the
transactions contemplated hereby, provided that, in the event
that Coates shall not have obtained any required consents of
any third parties to the assignment to Valspar or its
Affiliates of any material contracts to be so assigned
pursuant to this Agreement, the said condition shall be deemed
fulfilled as to such contracts if and for so long as Coates
shall be in compliance with its obligations under Section 9.8
in respect thereof.
(d) All material governmental filings, authorizations and
approvals that are required for the consummation of the
transactions contemplated hereby will have been duly made and
obtained.
(e) There shall not be threatened, instituted or pending any
action or proceeding, before any court or governmental
authority or agency, domestic or foreign, (i) challenging or
seeking to make illegal, or to delay or otherwise directly or
indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material
damages in connection with such transactions, (ii) seeking to
prohibit direct or indirect ownership or operation by Valspar
of all or a material portion of the Packaging Coatings
Business of any of the Coatings Companies, or to compel
Valspar or any of its Affiliates to dispose of or to hold
separately all or a material portion of the business or assets
of Valspar or any of the Coatings Companies as a result of the
transactions contemplated hereby, (iii) seeking to require
direct or indirect transfer or sale by Valspar of any of the
Shares or Assets, (iv) seeking to invalidate or render
unenforceable any material provision of this Agreement, or (v)
otherwise relating to and materially adversely affecting the
transactions contemplated hereby.
(f) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered,
enforced, promulgated, issued or deemed applicable to the
transactions contemplated hereby by any court, government or
governmental authority or agency, which would reasonably be
expected to result, directly or indirectly, in any of the
consequences referred to in subsection (e) above.
(g) On or before each Closing Date, Coates shall have delivered to
Valspar: (i) a certificate of appropriate officer(s) of Coates
dated the Closing Date, stating that the conditions precedent
set forth in subsections (a) and (b) above have been
satisfied, (ii) such evidence as counsel to Valspar shall
reasonably require as to the incumbency and authority of the
officers signing the said certificate, (iii) copies of the
third party and governmental consents and approvals referred
to in subsections (c) and (d) above, (iv) where Shares are to
be transferred, (A) the certificate or certificates issued to
Coates and/or its Affiliates representing any Shares to be
transferred at Closing, duly endorsed in blank, accompanied by
such evidence as counsel to Valspar shall reasonably require
as to the incumbency and authority of the officers signing the
said share certificate(s) on behalf of the selling entity, (B)
the share transfer records showing registration of the
transfer of the Shares to Valspar, and (C) resignations,
effective as of the Closing Date, from the members of the
boards of directors of any Coatings Companies whose Shares are
to be transferred at Closing, and (v) where Assets are to be
transferred at Closing, bills of sale and/or such other
instruments of conveyance, transfer, assignment and delivery
as Valspar shall reasonably request, duly executed and listing
or describing all of the Assets, transferring to Valspar or
its Affiliate ownership and possession of the Assets,
accompanied by such evidence as counsel to Valspar shall
reasonably require as to the incumbency and authority of the
persons signing such instrument to do so on behalf of the
selling entity, in each case as Valspar shall have requested
prior to the respective Closing Date and in form and substance
reasonably satisfactory to counsel for Valspar.
6.3 Conditions to the Obligations of Coates. The obligation of Coates to
consummate the transactions to be completed at each Closing
contemplated by this Agreement shall be subject to the satisfaction of
the following conditions prior to or at the respective Closing:
(a) The representations and warranties of Valspar set forth in
Section 8 hereof will be true and correct in all material
respects at and as of the Closing as though then made.
(b) Valspar shall have performed in all material respects all the
covenants and agreements required to be performed by it under
this Agreement prior to the Closing.
(c) All material governmental filings, authorizations and
approvals that are required for the consummation of the
transactions contemplated hereby will have been duly made and
obtained.
(d) There shall not be threatened, instituted or pending any
action or proceeding before any court or governmental
authority or agency of any country (i) challenging or seeking
to make illegal, or to delay or otherwise directly or
indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material
damages in connection with such transactions, (ii) seeking to
invalidate or render unenforceable any material provision of
this Agreement, or (iii) otherwise relating to and materially
adversely affecting the transactions contemplated hereby.
(e) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction, enacted, entered,
enforced, promulgated, issued or deemed applicable to the
transactions contemplated hereby by any court, government or
governmental authority or agency, which would reasonably be
expected to result, directly or indirectly, in any of the
consequences referred to in subsection (d) above.
(f) There shall not have been a material adverse change to the
Coatings Packaging Business of any Coatings Company involving
a known or reasonably probable prospective liability of Coates
to indemnify Valspar in respect of any matter arising under
Environmental Laws in an amount exceeding Ten Million Dollars
($10,000,000).
(g) On each Closing Date, Valspar shall have delivered to Coates
(i) a certificate of appropriate officers of Valspar dated the
Closing Date stating that the conditions precedent set forth
in subsections (a) and (b) above have been satisfied, (ii)
such evidence as counsel to Coates shall reasonably require as
to the incumbency and authority of the officers signing the
said certificate and (iii) where Packaging Coatings
Liabilities are to be assumed at Closing, assumption
agreements and/or such other instruments as Coates shall
reasonably request, duly executed and listing or describing
all of the Packaging Coatings Liabilities, accompanied by such
evidence as counsel to Coates shall reasonably require as to
the incumbency and authority of the persons signing such
instrument to do so on behalf of the purchasing entity, in
each case as Coates shall have requested prior to the
respective Closing Date and in form and substance reasonably
satisfactory to counsel for Coates.
6.4 Post-Closing Adjustments. The Final Purchase Price in respect of any
Shares or Assets shall be the Purchase Price specified in this
Agreement determined on the basis of the Closing Statements, which
shall be prepared as follows:
(a) Within forty-five (45) days after the Closing Date, Coates
shall prepare and deliver to Valspar the Closing Statements.
(b) Within forty-five (45) days after the delivery to Valspar of
the Closing Statements, Valspar shall deliver to Coates a
written statement of any objections it may have to any item
therein. Valspar shall bear and pay the costs and expenses
incurred in connection with its review of the Closing
Statements and with the preparation of any objections on the
basis thereof.
(c) If Valspar and Coates shall fail to resolve any disputed items
within thirty (30) days after delivery of its notice of
objection to Coates, the unresolved disputed items shall be
finally determined by the Neutral Accountants, who shall be
selected by agreement of the Parties or, failing such
agreement, by the President for the time being of the American
Institute of Certified Public Accountants, from among the six
(6) largest international firms of public accountants, but
excluding any such firm which shall have served as auditors of
either of the Parties or their Affiliates at any time after
the date of this Agreement. The Neutral Accountants shall act
as experts and not as arbitrators. Each of the Parties shall
present to the Neutral Accountants its position with respect
to the unresolved disputed items together with such other
materials as the Neutral Accountants may deem appropriate. The
Neutral Accountants shall, within thirty (30) days after such
presentation, render a written decision defining the
appropriate treatment of each of the unresolved disputed
items, which decision shall be final and binding on both
Parties. The Parties shall each bear one-half (1/2) of the
fees and expenses of the Neutral Accountants, but each shall
bear its own expenses, including fees and expenses of its own
accountants.
(d) Within five (5) Business Days following the date on which the
Parties shall have reached agreement on the Closing Statements
or the Neutral Accountants shall have rendered their
determination or, if no notice of objection shall have been
given by Valspar, then within fifty (50) days after delivery
to Valspar of the Closing Statements, Valspar or its
Affiliates shall pay to Coates any excess of the Final
Purchase Price over the Provisional Purchase Price, or Coates
shall refund to Valspar or its Affiliates any excess of the
Provisional Purchase Price over the Final Purchase Price, as
the case may be, by wire transfer of immediately available
funds to the account or accounts designated by the
recipient(s) no less than two (2) Business Days prior to the
date of such payment, together with simple interest on the
amount of such payment calculated for the period from the
Closing Date through the date of payment at the average daily
interbank lending rate over that period in the country the
currency of which is the currency of payment.
(e) Valspar shall provide to Coates and Coates' Accountants full
access at all reasonable times and upon reasonable notice to
the books, records, premises, facilities and other materials
of the Coatings Companies as shall be necessary in order to
enable them to prepare the Closing Statements and to respond
to any notice of objection delivered by Valspar and shall
furnish to Coates and Coates' Accountants such information and
assistance as the latter shall reasonably request for those
purposes, provided that Coates shall not unreasonably
interfere with the operations and business of the Coatings
Companies. Valspar and Valspar's Accountants shall be provided
such access to Coates' Accountants' work papers and Coates'
personnel and to such historical financial information
relating to the Coatings Companies as Valspar may reasonably
request for the purpose of reviewing the Closing Balance
Sheets, and such access shall include the right to be present
when Coates's Accountants observe the Subsidiaries'
inventories and perform similar tasks for the preparation of
the Closing Balance Sheets.
7 REPRESENTATIONS AND WARRANTIES OF COATES
7.1 Affirmation. Subject to the exceptions set forth in the Disclosure
Schedule under the respective captions referring to each of the
relevant subsections of this Section 7.1, and with the proviso that no
representation and warranty given in this Section 7.1 as to the
Coatings Companies shall be deemed to be given as to any of the Phase
IV Coatings Companies except as provided in Section 7.2, Coates hereby
represents and warrants to Valspar as of the date of this Agreement as
follows:
(a) Coates is a corporation duly incorporated, validly existing
and in good standing under the laws of the United Kingdom and
has the requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations
hereunder, including, without limitation, the corporate power
and authority to sell, transfer and convey, and to cause its
Affiliates to sell, transfer and convey, the Shares and Assets
and to execute, deliver and perform the Ancillary Agreements
as provided by this Agreement.
(b) The execution, delivery and performance by Coates of this
Agreement and the consummation by Coates of the transactions
contemplated hereby have been duly and validly authorized by
all requisite corporate action, and no other corporate
proceedings on its part are necessary to authorize the
execution, delivery and performance of this Agreement. The
consummation by Coates, the Coatings Companies and the Other
Affiliates of the transactions contemplated hereby to be
entered into on their parts respectively will, prior to the
respective Closing Date on which each of such transactions is
to be consummated, have been duly and validly authorized by
all requisite corporate action, and no other corporate
proceedings on their parts will as of such Closing Date be
necessary to authorize the consummation of such transactions.
This Agreement has been duly executed and delivered by Coates
and constitutes the valid and binding obligation of Coates,
enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors'
rights.
(c) Coates and/or its Affiliates own, beneficially and of record,
all right, title and interest in and to the Assets, free and
clear of any security interests, claims, liens, pledges,
options, encumbrances, charges, agreements or other
arrangements, restrictions or limitations of any kind and, on
each Closing Date, the delivery by Coates and its Affiliates
at Closing of the certificates and instruments as provided in
Section 6.2(g) will transfer to Valspar and/or its Affiliates
good and marketable title to the Assets, free and clear of any
security interests, claims, liens, pledges, options,
encumbrances, charges, agreements or other arrangements,
restrictions or other legal limitations or interests of any
kind, other than (i) liens for current taxes not yet due and
payable, (ii) liens imposed by law and incurred in the
ordinary course of business for obligations not yet due to
carriers, warehousemen, laborers and materialmen, and (iii)
other liens set forth in the Disclosure Schedule under the
caption referring to this Section 7.1(c).
(d) The Shares constitute, or in the case of New Coatings
Companies will when issued constitute, all of the authorized,
issued and/or outstanding shares in the capital of the
respective Coatings Companies of which such Shares are to be
purchased hereunder and all such Shares are, or will when
issued be, owned, beneficially and of record, by Coates and
its Affiliates, free and clear of any security interests,
claims, liens, pledges, options, encumbrances, charges,
agreements, voting trusts, proxies or other arrangements,
restrictions or other legal or equitable limitations of any
kind. All of the Shares have been, or will when issued be,
duly authorized, validly issued, fully paid and nonassessable.
There are no agreements or other rights or arrangements in
existence which provide for the sale or issuance of shares by
any of such Coatings Companies and there are no rights,
subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise
acquire any shares or other securities of any of such Coatings
Companies. On each Closing Date, the delivery by Coates and/or
its Affiliates at Closing of the respective certificates and
instruments as provided in Section 6.2(g) will transfer to
Valspar and/or its Affiliates good and valid title to the
Shares, free and clear of any security interests, claims,
liens, pledges, options, encumbrances, charges, agreements,
voting trusts, proxies or other arrangements, restrictions or
other legal limitations or interests of any kind.
(e) Each of the Coatings Companies is a corporation duly
incorporated, validly existing and in good standing under the
laws of its country of incorporation and has the corporate
power and authority and all authorizations, licenses, permits
and certifications necessary to own and operate its properties
and to carry on its business as heretofore conducted. The
copies of the statutes, articles of association, memorandum
and articles of association or articles of incorporation and
bylaws of each of the Coatings Companies which have been
furnished by Coates to Valspar prior to the date hereof
reflect all amendments made thereto and are correct and
complete as of the date hereof. None of the Coatings Companies
owns any shares, partnership interest, joint venture interest
or any other security or ownership interest issued by any
other corporation, organization or entity which, in the case
of any Coatings Company of which Assets rather than Shares are
to be purchased hereunder, involves, relates to or in any way
affects the Packaging Coatings Business, the Packaging
Coatings Assets or the Packaging Coatings Liabilities of such
Coatings Company.
(f) The execution, delivery and performance of this Agreement and
the Ancillary Agreements by Coates and its Affiliates and the
consummation by Coates and its Affiliates of the transactions
contemplated hereby and thereby do not and will not conflict
with, result in any breach of any of the provisions of,
constitute a default under, result in a violation of, or
result in the creation of a right of termination or
acceleration or of any lien, security interest, charge or
encumbrance upon any of the Shares or any Assets of any of the
Coatings Companies under, the provisions of (i) the
Constitutive Documents of Coates or any of the Coatings
Companies or Other Affiliates, (ii) any indenture, mortgage,
lease, loan agreement or other agreement or instrument by
which Coates or any of the Coatings Companies or Other
Affiliates is bound or affected, or (iii) any law, statute,
rule or regulation or order, judgment or decree to which
Coates or any of its Affiliates is subject, the result of
which, in each case, would constitute a material adverse
effect on the business or financial condition of any of the
Coatings Companies.
(g) None of Coates, the Coatings Companies or the Other Affiliates
is required to submit any notice, report or other filing with
any governmental authority in connection with the execution or
delivery of this Agreement or any of the Ancillary Agreements
or the consummation of the transactions contemplated hereby
and thereby, and no consent, approval or authorization of any
governmental or regulatory authority or any other party or
person is required to be obtained by Coates or any of the
Coatings Companies or Other Affiliates in connection with the
execution, delivery and performance of this Agreement or any
of the Ancillary Agreements or the transactions contemplated
hereby and thereby.
(h) Coates has delivered to Valspar true, correct and complete
copies of the Latest Financial Statements, which copies are
included in the Disclosure Schedule under the caption
referring to this Section 7.1(h). The Latest Financial
Statements are based upon the information contained in the
books and records of Coates and the Coatings Companies and
fairly present, in all material respects, the financial
condition of each of the Coatings Companies as of the dates
thereof and results of operations for the periods referred to
therein. The Latest Financial Statements have been prepared in
accordance with French generally accepted accounting
principles applicable to unaudited financial statements and
reflect all adjustments necessary to a fair statement of the
results for the period(s) presented.
(i) Except as reflected in the Latest Balance Sheets, none of the
Coatings Companies has any liabilities which are material,
either individually or in the aggregate, in relation to the
Packaging Coatings Business of such Coatings Company, whether
accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, whether known or unknown, and
regardless of when asserted, arising out of transactions or
events heretofore entered into, or any action or inaction, or
any state of facts existing, with respect to or based upon
transactions or events heretofore occurring, other than
liabilities which have arisen after the date of the Latest
Balance Sheets in the ordinary course of business, provided
that no uninsured liability for breach of contract, breach of
warranty, product defect, tort, infringement, claim or lawsuit
shall be deemed for purposes hereof to have arisen in the
ordinary course of business.
(j) Since the Balance Sheet Date, there has been no adverse change
in the business or financial condition of any Coatings Company
which is material in relation to the Packaging Coatings
Business of such Coatings Company.
(k) Since the Balance Sheet Date, none of the Coatings Companies
has: (i) borrowed any amount or incurred or become subject to
any liability in excess of One Hundred Thousand Dollars
($100,000) or the equivalent thereof in other currencies,
except (A) liabilities incurred in the ordinary course of
business and (B) liabilities under contracts entered into in
the ordinary course of business; (ii) mortgaged, pledged or
otherwise subjected to any lien, charge or any other
encumbrance, any of its assets with a fair market value in
excess of One Hundred Thousand Dollars ($100,000) or the
equivalent thereof in other currencies, or in any amount
otherwise than in the ordinary course of business; (iii) sold,
assigned or transferred, including, without limitation,
transfers to any employees, affiliates or shareholders, any
tangible assets other than inventories of raw materials or
finished goods, having a value of more than One Hundred
Thousand Dollars ($100,000) or the equivalent thereof in other
currencies, or canceled any debts or claims in an amount in
excess of One Hundred Thousand Dollars ($100,000) or the
equivalent thereof in other currencies; (iv) sold, assigned or
transferred, including, without limitation, transfers to any
employees, affiliates or shareholders, any patents,
trademarks, trade names, copyrights, trade secrets or other
intangible assets; (v) waived any contractual or other rights
of material value or suffered any extraordinary losses; (vi)
declared or paid any dividends or other distributions with
respect to any of its shares or redeemed or purchased,
directly or indirectly, any of its shares; (vii) issued, sold
or transferred any of its shares, securities convertible into
or exchangeable for its shares, warrants, options or other
rights to acquire its shares, or any bonds or debt securities;
(viii) made any single capital expenditure or commitment
therefor in excess of One Hundred Thousand Dollars ($100,000)
or the equivalent thereof in other currencies; (ix) suffered
any material theft, damage, destruction or loss of or to any
property or properties owned or used by it, whether or not
covered by insurance; (x) made or granted any increase in any
employee benefit plan or arrangement, or amended or terminated
any existing employee benefit plan or arrangement, or adopted
any new employee benefit plan or arrangement or made any
commitment or incurred any liability to any labor
organization, other than in the ordinary course of business
and in accordance with past custom and practice; (xi) made any
change in accounting principles or employed accounting
practices inconsistent with those previously adhered to by
such Coatings Company in the preparation of its financial
statements; or (xii) taken any other material action or
entered into any other material transaction other than in the
ordinary course of business and in accordance with past custom
and practice, other than the transactions contemplated by this
Agreement.
(l) The parcels of Real Property described in the Disclosure
Schedule under the caption referring to this Section 7.1(l)
are either owned by the Coatings Companies or occupied by them
under one or more Leases, as set forth in the Disclosure
Schedule under the said caption. Such parcels constitute all
of the real property owned or occupied by the Coatings
Companies and used in the operation of the Packaging Coatings
Business and are sufficient for the operation of such business
as heretofore conducted. Each of such parcels of Real Property
has access, sufficient for the conduct of the Packaging
Coatings Business of the respective Coatings Company as
heretofore conducted, to public roads and to all utilities,
including electricity, sanitary and storm sewer, potable
water, natural gas and other utilities, used in the operation
of the Packaging Coatings Business at that location.
(m) The Leases described in the Disclosure Schedule under the
caption referring to this Section 7.1(m) constitute all the
leases applicable to the Real Property. Each of such Leases is
in full force and effect, and the Coatings Company listed in
respect of each such Lease holds a valid and existing
leasehold interest under such Lease for the term set forth
under the aforesaid caption in the Disclosure Schedule. Coates
has delivered to Valspar complete and accurate copies of each
of such Leases, and none of such Leases has been modified in
any respect, except to the extent that such modifications are
disclosed by the copies delivered to Valspar. None of the
Coatings Companies is in default under any of such Leases and
no circumstances exist which, if not remedied, would, either
with or without notice or the passage of time or both, result
in such default under any of such Leases.
(n) Each Coatings Company owns good and marketable title to each
parcel of Real Property identified in the Disclosure Schedule
under the caption referring to Section 7.1(l) as being owned
by such Coatings Company and to all buildings, plant,
equipment and other tangible assets that are used by such
Coatings Company in the conduct of the Packaging Coatings
Business, whether or not reflected on the Latest Balance
Sheets, free and clear of all liens, charges and encumbrances,
other than (i) liens for current taxes not yet due and
payable, (ii) liens imposed by law and incurred in the
ordinary course of business for obligations not yet due to
carriers, warehousemen, laborers and materialmen, and (iii)
other liens set forth in the Disclosure Schedule under the
caption referring to Section 7.1(c). All of such buildings,
plant, equipment and assets are, in all material respects, in
good condition and repair, ordinary wear and tear excepted,
and are adequate and suitable for the purposes for which they
are currently being used.
(o) Each of the Coatings Companies has: (i) timely filed all
returns, declarations, reports, estimates, information
returns, and statements required to be filed or sent by it in
respect of any Taxes or required to be filed or sent by it by
any taxing authority having jurisdiction; (ii) timely and
properly paid all Taxes shown to be due and payable on such
Returns; and (iii) established on the Latest Balance Sheets,
in accordance with generally accepted accounting principles,
reserves that are adequate for the payment of any Taxes not
yet due and payable.
(p) The Disclosure Schedule lists under the caption referring to
this Section 7.1(p) each written agreement and commitment of
the following types to which any of the Coatings Companies is
a party, which relate to or affect the Packaging Coatings
Business and are currently in effect: (i) any collective
bargaining agreement or contract with a labor union; (ii) any
bonus, pension, profit sharing or retirement plan or other
form of deferred compensation plan; (iii) any hospitalization
insurance or other welfare benefit plan or practice, whether
formal or informal; (iv) any share purchase or option plan;
(v) any contract for the employment of any person on a
full-time or consulting basis or relating to severance pay for
any such person involving annual compensation in excess of
Fifty Thousand Dollars ($50,000) per year or the equivalent
thereof in other currencies, other than any such contract that
is implied or imposed by law; (vi) any contract, agreement or
understanding relating to the voting of shares or the election
of directors of any of the Coatings Companies; (vii) any
agreement or indenture relating to the borrowing of money by
any Coatings Company, or to the issuance or any letter of
credit, bank guaranty, performance bond or other similar
instrument for the account or benefit of any Coatings Company,
or to mortgaging, pledging or otherwise placing a lien or
charge on any of the assets of any of the Coatings Companies,
in each case in an amount exceeding, either individually or
together with other similar items, Ten Thousand Dollars
($10,000) or the equivalent thereof in other currencies;
(viii) any guaranty by such Coatings Company of the
obligations of another entity with respect to borrowed money,
contract performance or otherwise; (ix) any lease or other
agreement under which such Coatings Company is a lessee of, or
holds or operates, any personal property owned by any third
party, for which the annual rental exceeds Five Thousand
Dollars ($5,000) or the equivalent thereof in other
currencies; (x) any lease or other agreement under which such
Coatings Company is a lessor of, or permits any third party to
hold or operate, any personal property for which the annual
rental exceeds Five Thousand Dollars ($5,000) or the
equivalent thereof in other currencies; (xi) any contract or
arrangement, or group of related contracts or arrangements,
including intercompany contracts and/or arrangements, with the
same party for the purchase of products or services under
which the undelivered balance of such products or services is
in excess of One Hundred Thousand Dollars ($100,000) or the
equivalent thereof in other currencies; (xii) any contract or
arrangement, or group of related contracts or arrangements,
including intercompany contracts and/or arrangements, with the
same party for the sale of products or services under which
the undelivered balance of such products or services has a
sales price in excess of One Hundred Thousand Dollars
($100,000) or the equivalent thereof in other currencies;
(xiii) any contract or arrangement, or group of related
contracts or arrangements, including intercompany contracts
and/or arrangements, with the same party, other than any
contract or group of related contracts for the purchase or
sale of products or services, continuing over a period of more
than one (1) year from the date or dates thereof, not
terminable by it on thirty (30) days' or less notice without
penalty and involving more than One Hundred Thousand Dollars
($100,000) or the equivalent thereof in other currencies;
(xiv) any contract for the performance of development,
engineering, design, or manufacturing services; (xv) any
contract which prohibits any of the Coatings Companies from
freely engaging in business anywhere in the world; (xvi) any
contract for the distribution of the products or services of
any of the Coatings Companies, including any sales agency or
representation, distribution, and original equipment
manufacturer contracts; (xvii) any license agreement providing
for the payment or receipt of royalties or other compensation
by any of the Coatings Companies in connection with the
intellectual property rights listed in the Disclosure Schedule
under the caption referring to Section 7.1(r); (xviii) any
agreement licensing, authorizing or permitting any person or
entity other than a Coatings Company to use the intellectual
property rights listed in the Disclosure Schedule under the
caption referring to Section 7.1(r); (xix) any contract or
commitment for capital expenditures in excess of One Hundred
Thousand Dollars ($100,000) or the equivalent thereof in other
currencies; (xx) any agreement for the sale of a capital asset
for a price in excess of One Hundred Thousand Dollars
($100,000) or the equivalent thereof in other currencies;
(xxi) any agreement for the purchase or sale of currencies in
excess of Two Hundred Fifty Thousand Dollars ($250,000) or the
equivalent thereof in other currencies; or (xxii) any other
agreement or commitment which is material to the business of
any of the Coatings Companies. None of the Coatings Companies
is a party to any oral agreement of the types enumerated in
this Section 7.1(p).
(q) Each of the Coatings Companies has substantially performed all
obligations required to be performed by it in connection with
the contracts or commitments disclosed in the Disclosure
Schedule under the caption referring to Section 7.1(p). The
Disclosure Schedule lists under the caption referring to this
Section 7.1(q) all memoranda, correspondence or other written
communications received by any Coatings Company in which any
third party has, with reference to any contract listed in the
Disclosure Schedule under the caption referring to Section
7.1(p), stated or indicated that such party or another
responsible third party considers it to be either true or
likely that (i) any Coatings Company is in default or breach
of warranty under such contract (ii) any Coatings Company will
fail to complete such contract in accordance with the
completion schedule established thereunder; (iii) any Coatings
Company will be required under such contract, at its own cost,
to repair or replace products having a value in excess of
Fifty Thousand Dollars ($50,000), or the equivalent thereof in
other currencies; (iv) any Coatings Company is in breach of
any material term of such contract; or (v) another party to
such contract is in breach of any material term thereof.
(r) The Disclosure Schedule describes under the caption referring
to this Section 7.1(r) all patents, patent applications,
registered designs, registered trademarks, registered service
marks, trade names and corporate names that are owned by,
licensed to or otherwise controlled by any of the Coatings
Companies and/or the Other Affiliates that constitute a part
of the Intellectual Property Rights.
(s) Coates either owns and possesses all right, title and interest
in and to, or holds valid, perpetual, worldwide, exclusive and
royalty-free licenses to use, without restriction, any and all
technical information and know-how, including but not limited
to inventions, technology, know-how, plans, discoveries,
approaches, techniques, methods, concepts, data,
specifications, flow charts, formulas, ingredient lists,
laboratory books, test results, costs and other financial
information, which have been developed by the Coatings
Companies for use in, or have since December 31, 1990 been
used by the Coatings Companies in, the manufacture, use,
and/or sale of Packaging Coatings, including but not limited
to the finished products and intermediates listed in the
Disclosure Schedule under the caption referring to this
Section 7.1(s), which constitute all the products and
intermediaries of the Packaging Coatings Business, or
otherwise in the operation of the Packaging Coatings Business
since that date.
(t) None of the Coatings Companies or the Other Affiliates has
granted to any third party any license or other authorization
or permission to use any of the Technology or the Intellectual
Property Rights. None of the Coatings Companies or the Other
Affiliates has received any notice of infringement or
misappropriation by, or conflict with, any third party with
respect to the Intellectual Property Rights. No claim by any
third party contesting the validity of any of the Intellectual
Property Rights has been made, is currently outstanding or, to
the best knowledge of the Coatings Companies, is threatened.
None of the Coatings Companies or, to the best knowledge of
the Coatings Companies, the Other Affiliates has received any
notice of any infringement, misappropriation or violation by
any of the Coatings Companies of any intellectual property
rights of any third parties. The delivery by the Coatings
Companies and the Other Affiliates of the certificates and
instruments as provided in Section 6.2(g) will transfer to
Valspar and its Affiliates all of the right, title and
interest of the Coatings Companies and the Other Affiliates in
and to the Intellectual Property Rights.
(u) There are no actions, suits, proceedings, orders or
investigations pending or, to the best knowledge of the
Coatings Companies, threatened against any of the Coatings
Companies or, to the best knowledge of the Coatings Companies,
pending or threatened against any of the Other Affiliates,
which are material to the Packaging Coatings Business of any
of the Coatings Companies.
(v) The Disclosure Schedule lists under the caption referring to
this Section 7.1(v) each insurance policy maintained by the
Coatings Companies and the Other Affiliates with respect to
the properties, assets and operations of each of the Coatings
Companies and sets forth a summary of the coverage under and
the date of expiration of each such insurance policy. All of
such insurance policies are in full force. None of the
Coatings Companies or the Other Affiliates is in default with
respect to its obligations under any of such insurance
policies.
(w) None of the Coatings Companies or, to the best knowledge of
the Coatings Companies, the Other Affiliates is in violation
of or default under any law, regulation or order applicable to
it, the effect of which, individually or in the aggregate with
such other violations and defaults, could reasonably be
expected to have a material adverse effect on the Packaging
Coatings Business of any of the Coatings Companies.
(x) To the best knowledge of Coatings Companies, none of the
customers of any Coatings Company which, during the Fiscal
Year ending on the Balance Sheet Date, was among the ten (10)
largest customers of the Packaging Coatings Business, measured
in terms of the volume of purchases from the Coatings
Companies taken as a group, has indicated that it will stop or
materially decrease the rate of purchases from the Coatings
Companies.
(y) To the best knowledge of the Coatings Companies, none of the
suppliers of any Coatings Company has supplied material
quantities of any raw material, service, utility or other item
at prices or on other terms and conditions that are more
favorable to such Coatings Company than the commercial terms
that are generally available to purchasers similarly situated
to such Coatings Company.
(z) Each of the Coatings Companies has, in full force and effect,
all licenses, permits and certificates from governmental
authorities that are necessary for or used in and,
individually or in the aggregate, material to the Packaging
Coatings Business of any of the Coatings Companies, and
neither the execution of this Agreement nor the consummation
of the transactions contemplated by this Agreement will affect
the validity, terms, conditions or duration of any of the
foregoing. A true, correct and complete list of all such
licenses, permits and certificates is set forth in the
Disclosure Schedule under the caption referring to this
Section 7.1(z). Each of the Coatings Companies has conducted
its business in compliance with all material terms and
conditions of such licenses, permits and certificates.
(aa) Each of the Coatings Companies and the Real Property are in
substantial compliance with all Environmental Laws, and each
of the Coatings Companies has obtained, and maintained in full
force and effect, all environmental permits, licenses,
certificates of compliance, approvals and other authorizations
material to the conduct of its business and the ownership or
operation of the Real Property and has conducted its business
in compliance with all material terms and conditions thereof.
(bb) Since December 31, 1990 and, to the best knowledge of the
Coatings Companies, prior to that date (i) no Hazardous
Materials have been generated, treated, contained, handled,
located, used, manufactured, processed, buried, incinerated,
deposited, stored, or released by any of the Coatings
Companies or, to the best knowledge of the Coatings Companies,
by the Other Affiliates on, under or adjacent to any of the
Real Property, except in accordance with applicable
Environmental Laws; (ii) the Real Property and any
improvements thereon contain no asbestos, urea, formaldehyde
or polychlorinated biphenyls; and (iii) no aboveground or
underground storage tanks are located on, under or adjacent to
the Real Property, or have been located on, under or adjacent
to the Real Property and then subsequently been removed or
filled. If any such storage tanks exist on, under or adjacent
to the Real Property, such storage tanks have been duly
registered with all appropriate governmental entities and are
otherwise in compliance with all applicable Environmental
Laws.
(cc) None of the Coatings Companies or, to the best knowledge of
the Coatings Companies, the Other Affiliates has since
December 31, 1990 or, to the best knowledge of the Coatings
Companies, prior to December 31, 1990 received any written
notice alleging in any manner that any of the Coatings
Companies is, or might be, responsible for any spilling,
leaking, disposing, discharging, emitting, depositing,
ejecting, leaching, escaping or any other release or
threatened release, however defined, whether intentional or
unintentional, of any Hazardous Material or for any costs
arising under or violation of applicable Environmental Laws.
(dd) Since December 31, 1990 or, to the best knowledge of the
Coatings Companies, prior to December 31, 1990, no part of the
business of any of the Coatings Companies has involved the
operation of, and none of the Real Property has been used as,
a landfill, dump or other disposal, storage, transfer,
handling or treatment area for Hazardous Materials, or as a
gasoline service station or a facility for selling,
dispensing, storing, transferring, disposing or handling
petroleum and/or petroleum products, otherwise than in
accordance with applicable Environmental Laws.
(ee) Since December 31, 1989, none of the Coatings Companies or, to
the best knowledge of the Coatings Companies, the Other
Affiliates has ordered or obtained, or has knowledge of, any
environmental investigation or report with respect to the
Packaging Coatings Business of any of the Coatings Companies
or to any of the Real Property.
(ff) The Disclosure Schedule lists under the caption referring to
this Section 7.1(ff) the names of all employees of each of the
Coatings Companies of which Valspar is to purchase Shares, and
of all Packaging Coatings Employees of each of the Coatings
Companies of which Valspar is to purchase Assets, under this
Agreement, including in each case employees currently seconded
to other Coatings Companies or Other Affiliates, together with
(i) their current workplace locations and (ii) if and to the
extent known to and lawfully disclosable by Coates, their
labor union affiliations, if any.
(gg) No third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory
services or similar compensation in connection with the
transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of any of
Coates, the Coatings Companies or the Other Affiliates.
(hh) All documents made available by Coates to Valspar that are
referred to in any of the foregoing representations and
warranties or in the Disclosure Schedule, other than original
documents, are true and correct copies of the original
documents as contained in the business records of the Coatings
Companies and the Other Affiliates, and all such documents
made available to Valspar, whether originals or copies, are
complete and include or are accompanied by all amendments,
waivers and other alterations thereto.
(ii) No disclosure of Coates contained in the Disclosure Schedule
contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements
contained therein, in light of the circumstances under which
they are made and in the context of the representations and
warranties in relation to which they are made, not misleading.
7.2 Reaffirmation. Participation by Coates and/or its Affiliates in each
Closing and its acceptance of the Purchase Price in respect of any
Shares and Assets shall constitute a reaffirmation, as of the
respective Closing Date, of each of the representations and warranties
set forth in Section 7.1 hereof as if such representations and
warranties had been given at the Closing, with the following
amendments:
(a) The following representations and warranties shall be added to
those set forth in Section 7.1:
(i) Coates has delivered to Valspar prior to the Closing
true, correct and complete copies of all Adjusted
Annual Financial Statements and Adjusted Quarterly
Financial Statements required to be so delivered
under the provisions of Section 9.2. The Adjusted
Annual Financial Statements and Adjusted Quarterly
Financial Statements are based upon the information
contained in the books and records of Coates and the
Coatings Companies and fairly present, in all
material respects, the financial condition of the
Packaging Coatings Business of each of the Coatings
Companies as of the dates thereof and the results of
the operation of such business for the periods
referred to therein in accordance with United States
generally accepted accounting principles,
consistently applied throughout the periods
indicated.
(ii) Except as reflected in the Adjusted Annual Financial
Statements or Adjusted Quarterly Financial Statements
on the basis of which the Preliminary Purchase Price
shall have been determined pursuant to Section
6.1(c), none of the Coatings Companies has any
liabilities which are material, either individually
or in the aggregate, in relation to the Packaging
Coatings Business of such Coatings Company, whether
accrued, absolute, contingent, unliquidated or
otherwise, whether due or to become due, whether
known or unknown, and regardless of when asserted,
arising out of transactions or events heretofore
entered into, or any action or inaction, or any state
of facts existing, with respect to or based upon
transactions or events heretofore occurring, other
than liabilities which have arisen after the date of
the Latest Balance Sheets in the ordinary course of
business, provided that no uninsured liability for
breach of contract, breach of warranty, product
defect, tort, infringement, claim or lawsuit shall be
deemed for purposes hereof to have arisen in the
ordinary course of business.
(b) All references to the Disclosure Schedule shall mean the
Disclosure Schedule attached to this Agreement as modified by
a Disclosure Schedule Amendment to be submitted by Coates to
Valspar on or before the respective Closing Date.
(c) All representations and warranties made and given in Section
7.1, as modified by Section 7.2(a), as to the Coatings
Companies shall be deemed to be given for the first time as to
each Phase IV Coatings Company at the Closing at which the
Packaging Coatings Assets of such Coatings Company are to be
purchased, provided that, for the purposes of Section 6.2(a)
only, the representations and warranties set forth in Section
7.1 shall be deemed to have been given as of the date of this
Agreement.
8 REPRESENTATIONS AND WARRANTIES OF VALSPAR
8.1 Affirmation. Valspar hereby represents and warrants to Coates as
follows:
(a) Valspar is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware,
United States of America, with the requisite corporate power
and authority to enter into this Agreement and perform its
obligations hereunder, including, without limitation, the
corporate power and authority to cause its Affiliates to
execute, deliver and perform the Ancillary Agreements as
provided by this Agreement.
(b) The execution, delivery and performance of this Agreement by
Valspar and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all requisite
corporate action, and no other corporate proceedings on its
part are necessary to authorize the execution, delivery or
performance of this Agreement. The consummation by Valspar's
Affiliates of the transactions contemplated hereby will, prior
to the respective Closing Date on which each of such
transactions is to be consummated, have been duly and validly
authorized by all requisite corporate action, and no other
corporate proceedings on their parts will as of such Closing
Date be necessary to authorize the consummation of such
transactions. This Agreement has been duly executed and
delivered by Valspar and constitutes the valid and binding
obligation of Valspar, enforceable in accordance with its
terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
laws of general application affecting enforcement of
creditors' rights or by general principles of equity.
(c) The execution, delivery and performance of this Agreement and
the Ancillary Agreements by Valspar and its Affiliates and the
consummation by Valspar and its Affiliates of the transactions
contemplated hereby and thereby do not conflict with or result
in any breach of any of the provisions of, constitute a
default under, result in a violation of, result in the
creation of a right of termination or acceleration or any
lien, security interest, charge or encumbrance upon any assets
of Valspar, or require any authorization, consent, approval,
exemption or other action by or notice to any court or other
governmental body, under the provisions of the Constitutive
Documents of Valspar or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Valspar is
bound or affected, or any law, statute, rule or regulation or
order, judgment or decree to which Valspar is subject.
(d) Valspar is not required to submit any notice, report or other
filing with any governmental authority in connection with the
execution or delivery by it of this Agreement or the
consummation of the transactions contemplated by this
Agreement, and no consent, approval or authorization of any
governmental or regulatory authority or any other party or
person is required to be obtained by Valspar in connection
with its execution, delivery and performance of this Agreement
or the transactions contemplated hereby.
(e) There are no actions, suits, proceedings, orders or
investigations pending or, to the best knowledge of Valspar,
threatened which are material to the ability of Valspar to
perform its obligations under this Agreement.
8.2 Reaffirmation. Valspar's participation in each Closing and its
acceptance of the transfer of the Shares and Assets shall constitute a
reaffirmation, as of each Closing Date, of each of the representations
and warranties set forth in Section 8.1 hereof as if such
representations and warranties had been given at the Closing.
9 COVENANTS OF COATES
9.1 Conduct of Business. Coates agrees to cause each of the Phase I
Coatings Companies, the Phase II Coatings Companies and the Phase III
Coatings Companies to observe each term set forth in this Section 9.1,
and agrees that, from the date hereof until the Closing Date in respect
of the Shares and Assets of each Coatings Company respectively, and
unless otherwise consented to by Valspar in writing:
(a) The Packaging Coatings Business of each of such Coatings
Companies shall be conducted only in, and none of such
Coatings Companies shall take any action except in, the
ordinary course of the business of such Coatings Company in
accordance with its past custom and practice.
(b) None of such Coatings Companies shall sell, pledge, dispose of
or encumber any of its Packaging Coatings Assets, except in
the ordinary course of business, nor shall any Coatings
Company of which Valspar has the right to acquire the Shares
hereunder do or permit to occur any of the following,
otherwise than as permitted under Section 9.13: (i) issue or
sell to any third party which is not an Affiliate of Coates
any additional shares in its capital or any options, warrants,
conversion privileges or rights of any kind to acquire any of
such shares, (ii) sell, pledge, dispose of or encumber any of
its assets, except in the ordinary course of business; (iii)
amend or propose to amend its Constitutive Documents; (iv)
split, combine or reclassify any of its outstanding shares, or
declare, set aside or pay any dividend or other distribution
payable in cash, shares, property or otherwise with respect to
its shares; (v) redeem, purchase or acquire or offer to
acquire any of its shares; (vi) acquire, whether by merger,
exchange, consolidation, acquisition of shares or assets or
otherwise, any corporation, partnership, joint venture or
other business organization or division or material assets
thereof; (vii) incur any indebtedness for borrowed money or
issue any debt securities except the borrowing of working
capital in the ordinary course of business and consistent with
past practice; or (viii) enter into or propose to enter into,
or modify or propose to modify, any agreement, arrangement or
understanding with respect to any of the matters set forth in
this subsection.
(c) None of such Coatings Companies shall, directly or indirectly,
(i) enter into or modify any employment, severance or similar
agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officers or
directors or consultants, (ii) in the case of employees,
officers or consultants who earn in excess of Fifty Thousand
Dollars ($50,000), or the equivalent thereof in other
currencies, per year, take any action with respect to the
grant of any bonuses, salary increases, severance or
termination pay or with respect to any increase of benefits
payable in effect on the date hereof, except in each case in
the ordinary course of business consistent with past practice.
(d) None of such Coatings Companies shall enter into or modify any
collective bargaining agreement or contract with any labor
union which would apply to or affect the employment rights of
any of the Packaging Coatings Employees.
(e) None of such Coatings Companies shall adopt, amend or
implement any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment
or other employee benefit plan, trust, fund or group
arrangement for the benefit or welfare of any employees or any
bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or arrangements
for the benefit or welfare of any director, except in each
case in the ordinary course of business consistent with past
practice.
(f) Each of Coates, its Affiliates and such Coatings Companies
shall (i) use all commercially reasonable efforts to preserve
intact the business organization and goodwill of the such
Coatings Companies, keep available the services of the
officers and employees of such Coatings Companies as a group
and maintain satisfactory relationships with suppliers,
distributors, customers and others having business
relationships with the such Coatings Companies; (ii) confer on
a regular basis with representatives of Valspar to report
operational matters and the general status of ongoing
operations; (iii) not intentionally take any action which
would render, or which reasonably may be expected to render,
any representation or warranty made by it in this Agreement
untrue at any Closing; and (iv) notify Valspar of any
emergency or other change in the normal course of the business
of the Company or that of any of such Coatings Companies or in
the operation of the properties of each of such Coatings
Companies and of any governmental or third party complaints,
investigations or hearings, or communications indicating that
the same may be contemplated, if such emergency, change,
complaint, investigation or hearing would be material,
individually or in the aggregate, to the business, operations
or financial condition of any of such Coatings Companies or to
Coates' or Valspar's ability to consummate the transactions
contemplated by this Agreement.
(g) Coates, each of such Coatings Companies and each of the Other
Affiliates shall (i) file all Returns, elections or
information statements with respect to any liabilities for
Taxes of any of such Coatings Companies or other matters
relating to Taxes of any of such Coatings Companies which
pursuant to applicable law must be filed prior to any
applicable Closing Date; (ii) promptly upon filing provide
copies of any such Tax returns, elections or information
statements to Valspar if and whenever reasonably requested by
Valspar; and (iii) make any formal Tax election or take any
other material discretionary position with respect to Taxes
affecting any of such Coatings Companies only upon prior
consultation with and consent of Valspar.
(h) None of such Coatings Companies shall modify or deviate from
its practices with respect to the collection of accounts
receivable or the payment of accounts payable in a manner that
would cause the cash position of such Coatings Company to
increase materially from the normal cash position of such
Coatings Company.
9.2 Additional Financial Statements. From the date of this Agreement until
such time as (i) the sale and purchase of the Shares and Assets of all
of the Phase I Coatings Companies, the Phase II Coatings Companies and
the Phase III Coatings Companies shall have been completed and (ii) the
sale and purchase of the Assets of those Phase IV Coatings Companies,
if any, as to which either of the Parties shall have exercised its
options under Section 5.1 shall have been completed and the time
allowed for the exercise of all options as to the remainder of such
Coatings Companies shall have expired, Coates shall deliver to Valspar
the following financial statements in addition to those delivered prior
to signature of this Agreement:
(a) Each year, Coates shall deliver to Valspar audited balance
sheets and statements of earnings, shareholders' equity and
cash flows of the Packaging Coatings Business of each Coatings
Company any Shares or Assets of which are to be purchased or
otherwise transferred at a Closing the Nominal Closing Date
for which falls during the then-current Fiscal Year,
(i) in the case of the Phase I Closing, no later than the
date which shall be five (5) Business Days after the
certification by Coates' Accountants of the audited
balance sheets of Coates and its Affiliates as at the
end of the previous Fiscal Year, and
(ii) in the case of all other Closings, no later than ten
(10) Business Days before the Nominal Closing Date
for each such Closing,
in each case restated to conform, in the certified opinion of
Coates' Accountants, to United States generally accepted
accounting principles applied in a manner consistent with the
practices followed by the said Coatings Companies in the
preparation of their financial statements for prior years, to
the extent applicable.
(b) Not later than each Closing Date, Coates shall deliver to
Valspar
(i) unaudited balance sheets and quarterly statements of
earnings and shareholders' equity of the Coatings
Companies any Shares or Assets of which are to be
purchased at the respective Closing for the most
recent Fiscal Quarter ending at least forty-five (45)
days prior to the Closing Date and
(ii) if, as and to the extent that Valspar reasonably
considers necessary to enable it to comply with
applicable accounting and regulatory requirements,
unaudited balance sheets and quarterly statements of
earnings, shareholders' equity and cash flows of such
Coatings Companies for the Fiscal Quarter ending on
the Balance Sheet Date and for any other Fiscal
Quarters ending after the Balance Sheet Date but at
least forty-five (45) days prior to the Closing Date,
together with a schedule of adjustments showing all accounting
adjustments to such financial statements that shall be
required to restate each of such balance sheets and statements
of earnings, shareholders' equity and cash flows on a
consolidated pro forma basis in a manner that (A) eliminates,
as to those Coatings Companies of which Valspar and its
Affiliates will acquire Assets rather than Shares at the
Closing, all assets, liabilities and items of income and
expense of such Coatings Companies that are not attributable
to the Packaging Coatings Business, and (B) conforms, in the
certified opinion of Coates' Accountants, to United States
generally accepted accounting principles.
(c) From and after the dates of the respective Closings referred
to in Sections 4.6(a) and 4.6(c) until the dates of the
respective Closings referred to in Sections 4.6(b) and 4.6(d),
Coates shall cause each of the New Coatings Companies to
deliver financial statements to Valspar, if and as necessary
to enable Valspar to comply with applicable accounting and
regulatory requirements, as follows:
(i) Each year, no later than the date which shall be five
(5) Business Days after the certification by Coates'
Accountants of the audited balance sheets of Coates
and its Affiliates as at the end of the previous
Fiscal Year, Coates shall deliver to Valspar audited
balance sheets and statements of earnings,
shareholders' equity and cash flows of each of the
New Coatings Companies, restated to conform, in the
certified opinion of Coates' Accountants, to United
States generally accepted accounting principles
applied in a manner consistent with the practices
followed by the said New Coatings Companies in the
preparation of their financial statements for prior
years, to the extent applicable.
(ii) Within forty-five (45) days after the end of each
Fiscal Quarter, Coates shall deliver to Valspar (A)
unaudited balance sheets and quarterly statements of
earnings, shareholders' equity and cash flows of each
of the New Coatings Companies and (B) if, as and to
the extent that Valspar reasonably considers
necessary to enable it to comply with applicable
accounting and regulatory requirements, a schedule of
adjustments showing all accounting adjustments to
such financial statements that shall be required to
restate each of such balance sheets and statements of
earnings, shareholders' equity and cash flows on a
consolidated pro forma basis in a manner that
conforms, in the certified opinion of Coates'
Accountants, to United States generally accepted
accounting principles.
(d) No later than thirty (30) days after its receipt of any other
financial statements, reports or other written financial
information from any of the Coatings Companies, including but
not limited to operating statements generated for Coates
management, Coates shall deliver to Valspar copies of all such
materials to the extent that they relate exclusively to the
Packaging Coatings Business or that information relating to
other businesses can readily be deleted therefrom; provided,
however, that (i) Coates shall provide such information only
once every six (6) months as to the Phase IV Companies
referred to in Section 5.1(a), and (ii) Coates shall not be
required to provide any such information as to the Phase IV
Companies referred to in Section 5.1(b).
9.3 Access to Records. Between the date hereof and each Closing Date or, in
the case of the Phase IV Coatings Companies, during the period
beginning on the date which shall be three (3) months prior to the
earliest date on which Valspar shall have the right to give notice of
its exercise of any option pursuant to Section 5.2 and ending on the
Closing Date at which the transactions resulting from the exercise of
such option shall be completed, Coates shall cause the each of the
Coatings Companies to afford to Valspar and its authorized
representatives access at reasonable times and upon reasonable notice
to the offices, properties, books, records, officers, employees,
suppliers, customers and other items of each of the Coatings Companies
and the work papers of the outside auditors and accountants of the
Coatings Companies relating to work done by such outside auditors and
accountants with respect to each of the Coatings Companies for each of
their fiscal years beginning with the year ending on December 31, 1995
and shall otherwise provide such assistance as shall reasonably be
requested by Valspar in order that Valspar may have a full opportunity
to make such investigation and evaluation as it shall reasonably desire
to make of the business and affairs of each of the Coatings Companies.
9.4 Government Filings. As promptly as practicable after the signature of
this Agreement, Coates shall, and shall cause each of the Coatings
Companies to, make or cause to be made all filings and submissions
under any laws or regulations applicable to Coates or any of the
Coatings Companies for the consummation of the transactions
contemplated herein. Coates will coordinate and cooperate with Valspar
in exchanging such information, and will provide such reasonable
assistance as Valspar may request in connection with all of the
foregoing.
9.5 Inventory Valuation. Immediately prior to the Closing at which any
Shares or Assets of any Coatings Company are to be transferred to
Valspar or its Affiliates, personnel of Coates and Valspar shall
jointly conduct a physical inventory of all raw materials,
intermediates, work-in-process and finished goods of such Coatings
Company in order to determine the value, if any, which should be
assigned to the following portions of such inventory:
(a) inventories of raw materials which are not usable in their
current condition or which exceed six (6) months' average
usage over the previous twelve (12) months in connection with
the production of finished goods for sale to current
customers;
(b) inventories of intermediates and work-in-process which are not
usable in their current condition or which exceed six (6)
months' average usage over the previous twelve (12) months in
connection with the production of finished goods for sale to
current customers; and
(c) inventories of finished goods which are not of merchantable
quality or are not saleable over the following four (4) months
in their current condition and at normal prices to current
customers at the average rates at which such customers have
purchased such goods over the previous twelve (12) months.
In the event that the Parties are unable to resolve any differences as
to the valuation to be assigned to any of such inventories, they shall
jointly submit the issues to the Neutral Accountants for resolution in
accordance with the procedures set forth in Section 6.4.
9.6 Identification and Disposal of Waste. Coates shall, at its own risk and
expense prior to any Closing at which any Shares or Assets of any
Coatings Company are to be transferred to Valspar or its Affiliates,
label, physically segregate and dispose of all waste materials as well
as any raw materials, intermediates, work-in-process inventories and
finished goods that shall have been assigned a value of zero as a
result of the procedure described in Section 9.5.
9.7 Share Purchase Loans. Prior to each Closing, Coates shall cause all
rights of each Coatings Company the Shares of which are to be purchased
at such Closing in respect of any loans made to Packaging Coatings
Employees for the purpose of purchasing shares of Total SA to be
transferred to Coates and/or any of its Other Affiliates. If and for so
long as any of such loans remain outstanding after the respective
Closing, if requested by Coates, Valspar and/or its Affiliates shall
continue to withhold from the compensation of such Packaging Coatings
Employees the amounts that were withheld by the Coatings Companies
prior to the Closing and shall pay such amounts to Coates or its
Affiliates. Valspar shall have no other responsibility to Coates for
the collection of any amounts due in respect of such loans.
9.8 Consents. To the extent that an attempted assignment or transfer of any
contract or agreement to be transferred to and assumed by Valspar
hereunder, without the consent of a third party would constitute a
breach thereof, this Agreement shall not constitute an assignment or
attempted assignment thereof. Prior to the respective Closing, Coates
or, at Coates' option, Coates jointly with Valspar, shall initially
notify any such party whose consent is required about the transactions
contemplated hereby and the need for such consent, and Coates shall use
reasonable commercial efforts with the cooperation of Valspar to obtain
such consent of such party. Following the Closing, Valspar shall use
commercially reasonable efforts with the cooperation of Coates to
obtain the consent of such party to the assignment of any such contract
or agreement. If any such consent shall not be obtained, Coates shall
cooperate with Valspar and Valspar shall cooperate with Coates in any
reasonable back-to-back arrangements in order to:
(a) provide for Valspar the benefits intended to be assigned under
any such contract or agreement (unless the third party thereto
rightfully terminates or cancels such contract or agreement),
including, without limitation, the enforcement for the benefit
of Valspar and at Valspar's expense of any and all rights of
Coates against a third party to such contract or agreement
arising out of the breach by such third party or otherwise,
provided that Coates shall not be obligated to take any action
that would, in its reasonable opinion, risk material damage to
its business or properties; and
(b) provide for Coates a supply of all products and services
provided by Valspar (and otherwise take all necessary or
appropriate actions) to enable Coates to comply with its
obligations under such contract, without cost to Coates, in
favor of any third party to such contract or agreement.
9.9 Other Actions. Coates shall take all commercially reasonable actions
necessary to cause the conditions to Closing set forth in Section 6.2
to be satisfied and to consummate the transactions contemplated for
each Closing hereunder as soon as reasonably possible after the
satisfaction of the said conditions but in any event within ten (10)
Business Days after such date, provided that Coates shall have no
obligation hereunder to consummate any of such transactions prior to
the Nominal Closing Date.
9.10 Assistance in Tax Matters. Coates and its Affiliates shall provide, at
Valspar's expense, any and all assistance that Valspar shall reasonably
request in connection either with the preparation of tax returns to be
filed by Valspar or its Affiliates which are in any way affected by the
acquisition of Shares or Assets under this Agreement or with the audit
of any such tax returns whether filed by Valspar, its Affiliates or any
of the Coatings Companies.
9.11 Non-Competition. Coates shall not engage, either directly or
indirectly, in the Packaging Coatings Business anywhere in the world
for a period ending the earlier of five (5) years after the acquisition
of the last of the Phase IV Coatings Companies other than those listed
in Section 5.1(b) or ten (10) years following the Phase I Closing,
except for:
(a) the operation of the Phase II Coatings Companies, Phase III
Coatings Companies and Phase IV Coatings Companies in the
countries in which they are permitted to operate under the
terms of their respective License Agreements until the
acquisition by Valspar of their respective Shares or Assets;
(b) the operation of any other entity having a valid license from
Valspar to engage in the Packaging Coatings Business in
accordance with the provisions of such license; and
(c) the operation of any other entities engaged in the Packaging
Coatings Business that Coates or any of its Affiliates may
acquire as an incidental part of another acquisition, subject
to the provisions of Section 9.12.
9.12 Subsequent Acquisitions. If Coates should, during the term of the
covenant not to compete set forth in Section 9.11, acquire control or
the legal right to gain control of any company, whether through the
exercise of voting rights or the appointment of directors or managers,
of any company which engages in the Packaging Coatings Business, or any
assets used in any such business, then:
(a) Valspar will have the right at its option to purchase such
Packaging Coatings Business and related shares and/or assets
at a price to be negotiated which, if the Parties are unable
to reach agreement within thrity (30) days, will be
established by independent appraisal; and
(b) in the event that such acquisition takes place within five (5)
years after the Phase I Closing and the annual sales of the
acquired Packaging Coatings Business exceed Five Million
Dollars ($5,000,000) or the equivalent thereof in other
currencies, Valspar will have the right to require Coates to
divest that business within two (2) years after the date of
the acquisition.
9.13 Corporate Control. Coates shall, in respect of each Coatings Company
for so long as it remains under the control of Coates, within the
limits of such control:
(a) exercise its voting rights in the Coatings Companies in such a
manner as to give effect to the purposes and intents of this
Agreement;
(b) refrain from selling or otherwise transferring any shares or
Packaging Coatings Assets of any of the Coatings Companies to
any third party which is not an Affiliate of Coates, and from
ceasing to carry on the Packaging Coatings Business of any of
the Coatings Companies, without in either case having given
Valspar at least four (4) month's written notice thereof,
which notice shall be without prejudice to the rights of
Valspar under Sections 13.1 and 13.3; and
(c) not otherwise permit any of the Coatings Companies to engage
in transactions or activities not in the ordinary course of
business which adversely affect the Packaging Coatings
Business without the consent of Valspar.
9.14 Royalties for Coates Products. The royalty rate to be paid by Coatings
Companies with respect to sales of Coates Products, as defined in the
Valspar Technology License Agreement, pursuant to Section 4.1(a) of
that agreement shall be
except with respect to , with respect
to which the rate shall be ; provided, however, that to the extent
that the Parties are unable to obtain any required governmental
approval for, or are otherwise unable to implement, such rates in any
relevant jurisdiction, the royalty rates applicable to other licensees
under the Valspar Technology License Agreements shall be adjusted so
that the aggregate royalties paid by all licensees, other than Valspar
Coates (India) Ltd., under the Valspar Technology License Agreements
shall be equal to
of the aggregate of the Net Sales Prices of all Coates Products sold by
such licensees.
9.15 Nantes Real Property. As soon as practicible in connection with the
Phase I Closing or otherwise as agreed by the Parties, Coates shall
cause the land owned by Coates Coatings SA in Nantes, France, to be
transferred to an Other Affiliate of Coates, which shall lease the land
back to Coates Coatings SA under the Nantes Lease Agreement referred to
in Section 2.3(g). Upon any termination of the said Nantes Lease
Agreement by Valspar or its Affiliate in accordance with the terms
thereof, Coates shall cause such Other Affiliate to commence substitute
operations at the Nantes facility immediately upon such termination so
that the facility shall remain in continuous operation, due allowance
being made for any required conversions, and the Parties shall
cooperate in seeking any approvals of the governental authorities that
may be required to effect such transition without undue cost or delay.
9.16 Redundant Employees. Coates shall pay or reimburse to Valspar the
amount of any severance or other payments that any Coatings Companies
shall be legally required to make to any of the Packaging Coatings
Employees of such Coatings Company who are listed on Exhibit 6.1(b),
provided that such employee shall have been given notice of termination
within thirty (30) days after the date of the Closing at which the
Shares or such Coatings Companies shall have been purchased.
10 COVENANTS OF VALSPAR
10.1 Government Filings. As promptly as practicable after the signature of
this Agreement, Valspar shall make or cause to be made all filings and
submissions under any laws or regulations applicable to Valspar for the
consummation of the transactions contemplated herein. Valspar will
coordinate and cooperate with Coates in exchanging such information,
and will provide such reasonable assistance as Coates may request in
connection with all of the foregoing.
10.2 Other Actions. Valspar shall take all commercially reasonable actions
necessary to cause the conditions to Closing set forth in Section 6.3
to be satisfied and to consummate the transactions contemplated for
each Closing hereunder as soon as reasonably possible after the
satisfaction thereof, but in any event within ten (10) business days
after such date, provided that Valpar shall have no obligation
hereunder to consummate any of such transactions prior to the Nominal
Closing Date.
10.3 Change of Corporate Names. As soon as shall be reasonably practicable
after the purchase of the Shares or Assets of each Coatings Company,
Valspar shall change the name of such company so as to eliminate the
use of the Coates name in any manner otherwise than as permitted under
the Coates Trademark Agreement.
10.4 Solicitation of Employees. Valspar shall not, prior to the time at
which it shall have purchased the Shares or Assets of any Coatings
Company, solicit or seek to persuade any employee of such Coatings
Company to become an employee of Valspar or any of its Affiliates.
10.5 Refund of Excess Royalties. Notwithstanding that the Valspar Technology
License Agreement provides for the payment of royalties at a flat rate
of of the Net Sales Prices of all
Coates Products as therein defined, the Parties intend that the
Coatings Companies shall benefit from the declining royalty rates
applicable to larger aggregate sales volumes as set forth in the
Royalty Rate Schedule contained in Exhibit 10.5. Accordingly, to the
extent that the aggregate Net Sales Prices of Valspar Products, as
defined in the Valspar Technology License Agreement, sold by all the
Coatings Companies that are licensees under the Valspar Technology
License Agreement in any Valspar fiscal year would have been sufficient
to entitle the Coatings Companies to the benefit of a lower marginal
royalty rate as determined by the said Royalty Rate Schedule, Valspar
shall refund to Coates, or to such of Coates' Affiliates as Coates may
designate, the difference between the aggregate royalties actually paid
by such Coatings Companies with respect to such Valspar fiscal year and
the royalties that would have been paid using the lower marginal
royalty so determined. Such payment, if any, shall be made by Valspar
as promptly as practicable after the end of each Valspar fiscal year.
11 TERMINATION
11.1 Grounds. This Agreement may be terminated at any time prior to the
Phase I Closing:
(a) by the mutual consent of Valspar and Coates; or
(b) by either Valspar or Coates if the Phase I Closing shall not
have occurred prior to July 1, 1996, provided that neither
Valspar nor Coates shall be entitled to terminate this
Agreement pursuant to this Section 11.1(b) if such Party's
willful breach of this Agreement has prevented the
consummation of the transactions contemplated hereby.
11.2 Consequences. In the event of termination of this Agreement by either
Valspar or Coates as provided in Section 11.1, this Agreement shall
become void and there shall be no liability on the part of either
Valspar or Coates, or their respective stockholders, officers, or
directors, except with respect to willful breaches of this Agreement
prior to the time of such termination.
11.3 No Subsequent Termination. Neither Party shall have the right to
terminate this Agreement for any reason after completion of the Phase I
Closing, and the remedies of either Party for any breach of this
Agreement and/or the Ancillary Agreements shall be limited to the
rights provided in Article 13 and such damages or other relief as shall
be available under applicable law.
12 SURVIVAL AND INDEMNIFICATION
12.1 Survival. Notwithstanding any investigation made by or on behalf of
either of the Parties hereto or the results of any such investigation
and notwithstanding the participation of such Party in any Closing, the
representations and warranties of Coates contained in Section 7 and
those of Valspar contained in Section 8, as reaffirmed by each Party at
each Closing, shall survive the Closing for the following periods:
(a) All representations and warranties relating in any way to
Environmental Laws or Hazardous Materials shall survive for a
period ending nine (9) years after the Closing Date.
(b) All representations and warranties relating in any way to
Employee Benefits shall survive for a period ending
(i) as to Claims under governmental or social security
programs, six (6) months after the end of the
applicable period of prescription or statute of
limitations, including any extensions or
prolongations thereof that may be provided under
applicable law, and
(ii) as to all other Employee Benefits, eight (8) years
after the Closing Date.
(c) All representations and warranties relating in any way to
Taxes relating to the income of any of the Coatings Companies
shall survive for a period ending six (6) months after the end
of the applicable period of prescription or statute of
limitations, including any extensions or prolongations thereof
that may be provided under applicable law.
(d) All other representations and warranties shall survive for a
period ending two (2) years after the Closing Date.
12.2 Coates Indemnity. Coates agrees to indemnify, hold harmless and defend
the Valspar Indemnified Parties as follows, it being understood that
all references herein to Closing Dates shall mean the dates of the
Closings at which Shares or Assets of the respective Coatings Companies
shall have been purchased or transferred under or pursuant to this
Agreement:
(a) Subject to the limitations set forth in subsection (c) below,
Coates agrees to indemnify in full the Valspar Indemnified
Parties and hold them harmless against any and all losses,
liabilities, deficiencies, damages, expenses or costs
(including reasonable legal expenses), whether or not actually
incurred or paid prior to the end of the applicable survival
period set forth in Section 12.1, which Valspar Indemnified
Parties may suffer, sustain or become subject to, as a result
of:
(i) any misrepresentation or breach of warranty in any of
the representations and warranties of Coates or its
Affiliates contained in this Agreement or the
Ancillary Agreements or in any exhibits, schedules,
certificates or other documents delivered or to be
delivered by or on behalf of Coates pursuant to the
terms of this Agreement or the Ancillary Agreements,
(ii) any breach of, or failure to perform, any agreement
of Coates contained in this Agreement or any of the
Ancillary Agreements, or
(iii) any Claims asserted or threatened against the Valspar
Indemnified Parties which arise out of the actions or
inactions of Coates, its Affiliates or any of the
Coatings Companies with respect to the business of
any of the Coatings Companies, or the Real Property,
prior to the respective Closing,
but only if and to the extent that any such losses,
liabilities, deficiencies, damages, expenses or costs shall
not have been recovered by Valspar through the Post-Closing
Adjustment provided for in Section 6.4, and provided in each
case that notice of the claim for indemnification hereunder is
received by Coates within the applicable survival period
provided for in Section 12.1, and further provided, that with
respect to a Claim, the applicable survival period is the
survival period that applies to the liability or obligation
sought to be established by such Claim.
(b) Subject to the limitations set forth in subsection (c) below,
Coates agrees to indemnify the Valspar Indemnified Parties and
hold them harmless against any and all losses, liabilities,
deficiencies, damages, expenses or costs (including reasonable
legal expenses) which Valspar Indemnified Parties may suffer,
sustain or become subject to, arising out of:
(i) any of the following Claims:
(A) any action, suit, or other proceeding
seeking money damages, injunctive relief or
other remedies by reason of a violation of
Environmental Laws by any of the Coatings
Companies prior to the respective Closing
Date,
(B) any action, suit, or other proceeding
seeking money damages, injunctive relief or
other remedies by reason of the disposition
of Hazardous Materials at a site other than
one owned, leased or occupied by a Coatings
Company prior to the respective Closing
Date, or
(C) any action, suit, order, directive or claim
or other proceeding of a governmental
authority with respect to the disposal,
discharge, presence or release of Hazardous
Materials prior to the respective Closing
Date on real property owned, leased or
occupied by a Coatings Company in violation
of Environmental Laws in effect as of such
Closing Date, except any Claims arising as a
result of
(1) discretionary actions by any
Valspar Indemnified Parties, other
than any termination, or any action
related to or consequent upon
termination, of the Nantes Lease
Agreement in accordance with its
terms, or
(2) the actual or deemed sale, transfer
or other disposition of such real
property by Valspar, other than by
implication arising out of any
termination of the Nantes Lease
Agreement in accordance with its
terms,
provided in each case that notice of the claim for
indemnification hereunder is received by Coates
within the survival period provided for in Section
12.1(a);
(ii) Employee Benefits obligations of any of the Coatings
Companies in respect of service prior to the
respective Closing Dates, provided in each case that
notice of the claim for indemnification hereunder is
received by Coates within the applicable survival
period provided for in Section 12.1(b);
(iii) Product Liability obligations of any of the Coatings
Companies in respect of Packaging Coatings
manufactured prior to the respective Closing Dates,
provided in each case that
(A) as to any of such Packaging Coatings that
shall have been sold by Valspar or its
Affiliate after the Closing Date, such
Packaging Coatings shall not have been
either delivered to the customer after the
applicable "do not sell after" date or sold
for an application for which they are not
intended or suited, and
(B) notice of the claim for indemnification
hereunder shall have been received by Coates
within the survival period provided for in
Section 12.1(d); and
(iv) Taxes relating to the income of any of the Coatings
Companies attributable to periods or parts thereof
prior to the respective Closing Dates at which the
Shares or Assets of such Coatings Companies shall
have been purchased by Valspar or its Affiliates or
transferred to a New Coatings Company, as the case
may be.
(c) (i) Coates shall be liable to the Valspar Indemnified
Parties under Sections 12.2(a), 12.2(b)(i),
12.2(b)(ii) or 12.2(b)(iii) only if the aggregate
amount of all indemnified losses, liabilities,
deficiencies, damages, expenses and costs under those
sections relating to all of the Phase I Coatings
Companies and the Phase II Coatings Companies, on the
one hand, or relating to all of the Phase III
Coatings Companies and the Phase IV Coatings
Companies, on the other hand, exceeds the applicable
Basket Amount, in which case Coates shall be
obligated to indemnify the Valspar Indemnified
Parties with respect to any such losses, liabilities,
deficiencies, damages, expenses and costs only for
the excess of the amount of such losses, liabilities,
deficiencies, damages, expenses and costs over the
applicable Basket Amounts.
(ii) Coates shall not be liable to the Valspar Indemnified
Parties under Sections 12.2(a), 12.2(b)(i),
12.2(b)(ii) or 12.2(b)(iii) for any losses,
liabilities, deficiencies, damages, expenses and
costs relating to any of the Phase I Coatings
Companies or the Phase II Coatings Companies, on the
one hand, or relating to any of the Phase III
Coatings Companies or the Phase IV Coatings
Companies, on the other hand, that, together with all
such other indemnified losses, liabilities,
deficiencies, damages, expenses and costs under those
sections, in the aggregate exceed the applicable
Limit Amount.
12.3 Valspar Indemnity. Valspar agrees to indemnify, hold harmless and
defend the Coates Indemnified Parties as follows, it being understood
that all references herein to Closing Dates shall mean the dates of the
Closings at which Shares or Assets of the respective Coatings Companies
shall have been purchased or transferred under or pursuant to this
Agreement:
(a) Subject to the limitations set forth in subsection (b) below,
Valspar agrees to indemnify in full the Coates Indemnified
Parties and to hold them harmless against any and all losses,
liabilities, deficiencies, damages, expenses or costs
(including reasonable legal expenses) which any of the Coates
Indemnified Parties may suffer, sustain or become subject to
as a result of (i) any misrepresentation or breach of warranty
in any of the representations and warranties of Valspar
contained in this Agreement or in any of the Ancillary
Agreements, (ii) any breach of, or failure to perform, any
agreement of Valspar contained in this Agreement or any of the
Ancillary Agreements, (iii) any Claims or threatened Claims
against any of the Coates Indemnified Parties arising out of
the actions or inactions of Valspar or its Affiliates with
respect to the business of any of the Coatings Companies, or
the Real Property, after the respective Closing, or (iv) the
Packaging Coatings Liabilities or Valspar's failure to
discharge any thereof, but only if and to the extent that any
such losses, liabilities, deficiencies, damages, expenses or
costs shall not have been recovered by Coates through the
Post-Closing Adjustment provided for in Section 6.4 and are
not subject to indemnification by Coates under Section 12.2,
disregarding for these purposes any of the limitations set
forth in this section.
(b) Valspar shall be liable to the Coates Indemnified Parties
under Section 12.3(a)(i) or 12.3(a)(ii) only if the aggregate
amount of all indemnified losses, liabilities, deficiencies,
damages, expenses and costs under such sections exceeds
the amount set forth in clause (i) of the definition of Basket
Amount, in which case Valspar shall be obligated to indemnify
the Coates Indemnified Parties with respect to any such
losses, liabilities, deficiencies, damages, expenses and costs
only for the excess of the aggregate amount of all such
losses, liabilities, deficiencies, damages, expenses and costs
over such Basket Amount.
12.4 Indemnified Parties. An Indemnified Party having a Claim hereunder
shall assert it as follows:
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to a Claim, the Notifying Party shall
give the Indemnifying Party prompt notice thereof, including a
reasonably detailed description of the facts and circumstances
relating to such Claim. The failure or delay to give such
notice or to provide such description shall not affect any
Indemnified Party's ability to seek reimbursement except to
the extent such failure or delay has actually prejudiced the
Indemnifying Party's ability to defend successfully a Claim.
The Indemnifying Party shall be entitled to contest and defend
such Claim, provided that the Indemnifying Party (i) has a
reasonable basis for concluding that such defense may be
successful and (ii) diligently contests and defends such
Claim. Notice of the intention so to contest and defend shall
be given by the Indemnifying Party to the Notifying Party
within 20 business days after the Notifying Party's notice of
such Claim (but, in all events, at least five (5) Business
Days prior to the date that an answer to such Claim is due to
be filed). Such contest and defense shall be conducted by
reputable attorneys employed by the Indemnifying Party. The
Notifying Party shall be entitled at any time, at its own cost
and expense (which expense shall not constitute a Loss unless
the Notifying Party reasonably determines that the
Indemnifying Party is not adequately representing or, because
of a conflict of interest, may not adequately represent, any
interests of the Indemnified Parties, and only to the extent
that such expenses are reasonable), to participate in such
contest and defense and to be represented by attorneys of its
or their own choosing. If the Notifying Party elects to
participate in such defense, the Notifying Party will
cooperate with the Indemnifying Party in the conduct of such
defense. Neither the Notifying Party nor the Indemnifying
Party may concede, settle or compromise any Claim without the
consent of the other party, which consents will not be
unreasonably withheld. Notwithstanding the foregoing, (i) if a
Claim seeks relief other than damages or (ii) if the subject
matter of a Claim relates to the ongoing business of any of
the Indemnified Parties, which Claim, if decided against any
of the Indemnified Parties, would materially adversely affect
the ongoing business or reputation of any of the Indemnified
Parties, then, in each such case, the Indemnified Parties
alone shall be entitled to contest, defend and settle such
Claim in the first instance and, if the Indemnified Parties do
not contest, defend or settle such Claim, the Indemnifying
Party shall then have the right to contest and defend, but not
to settle, such Claim.
(b) In the event any Indemnified Party should have a claim against
any Indemnifying Party that does not involve a Claim, the
Notifying Party shall deliver a notice of such claim with
reasonable promptness to the Indemnifying Party. If the
Indemnifying Party disputes its Liability with respect to such
claim, the Chief Executive Officers of each of the
Indemnifying Party and the Notifying Party will proceed in
good faith to negotiate a resolution of such dispute, and if
not resolved through the negotiations of such Chief Executive
Officers within sixty (60) days after the delivery of the
Notifying Party's notice of such claim, such dispute shall be
subject to arbitration pursuant to Section 14.1, and an
Indemnified Party other than the Notifying Party shall have
the right to commence and pursue arbitration thereunder
against the Indemnifying Party in place of the Notifying
Party, provided that such Indemnified Party shall agree in
writing to submit the dispute to arbitration as herein
provided.
13 DEFAULT
13.1 Definition. Except where otherwise indicated by the context or where
the term is otherwise defined for a specific purpose, the term
"Default" shall mean any of the following described events involving or
affecting either Party (including, as to Coates, any Coatings Company),
such Party being considered the Party in Default for purposes hereof:
(a) failure of such Party or any of its Affiliates to perform any
material obligation under or pursuant to this Agreement or any
Ancillary Agreement for any reason other than Force Majeure;
(b) in the case of such Party, (i) the filing by such Party of a
petition in voluntary bankruptcy or liquidation or the making
of a general assignment for the benefit of its creditors, or
the consenting to the appointment of one or more receivers,
trustees or liquidators with respect to all or any substantial
part of its property under any applicable law or statute; (ii)
the filing by such Party of a petition or answer seeking
reorganization, readjustment, arrangement, composition or
similar relief under the applicable bankruptcy laws or any
other applicable law or statute; (iii) such Party's becoming
unable to pay its debts generally as they become due; or (iv)
the filing of an involuntary petition in bankruptcy against
such Party, or for the appointment of one or more trustees,
liquidators or receivers of such Party, which petition shall
remain unstayed and in effect for a period of thirty (30)
days;
(c) any sale, transfer, or other disposition or issuance of shares
or any other event, including, without limitation, merger or
consolidation, as a result of which any person or entity not
having, as of the date of this Agreement, effective ultimate
control, either directly of indirectly, of the management (i)
of such Party or (ii) as to Coates, of any Coatings Company or
of the Packaging Coatings Business of any Coatings Company,
shall acquire such ultimate control, provided that a change in
control of Total SA shall not be deemed to constitute a change
in ultimate control of Coates, any Coatings Company or the
Packaging Coatings Business of any Coatings Company for
purposes of this subsection, and provided further that such a
change in ultimate control shall not constitute a Default if
prior written notice thereof shall have been given by such
Party to the other Party and the other Party shall have given
its consent in writing thereto;
(d) the cessation by Coates of the conduct of the Packaging
Coatings Business of any of the Coatings Companies; or
(e) the exercise by Valspar or its Affiliates of its right to
convert any exclusive license under a Valspar Technology
License Agreement with any Coatings Company or the Valspar
Technology Sub-License Agreement referred to in Section
2.3(b)(iv) to a non-exclusive license in accordance with the
terms of such license.
13.2 Notice and Cure. No Default under Sections 13.1(a) or (d) hereof shall
be deemed to have occurred until the Party not in Default shall first
have given written notice of such Default to the Party in Default and
the Party in Default shall have failed to cure such Default through
specific performance within sixty (60) days after dispatch of such
written notice. In the event of Default under Sections 13.l(b) or (c)
hereof, no such notice need be dispatched and remedies in respect
thereof as provided in Section 13.3 hereof shall be available from and
after the time at which such events occur or, if applicable, from and
after the receipt by Valspar of the notice required by Section 9.13(b).
13.3 Rights Upon Default. If a Default shall occur, the Party not in Default
shall have the right, upon giving written notice to the other Party no
earlier than the date on which the notice period provided in Section
13.2 terminates, at any time for so long as such Default continues and
remains uncured, to accelerate any and all of the Closings that have
not theretofore occurred to a date no earlier than three (3) months
from the date of the giving of such written notice; provided, however,
that in the event of a Default on the part of or affecting Coates under
Sections 13.1(b), (c) or (d), or of a Default on the
part of Valspar under Section 13.1(e), the right to accelerate shall
apply only to the Closings at which the Shares or Assets of the
Coatings Companies that have experienced or been affected by the event
of Default are to be purchased. For purposes of this Section 13.3, the
right to accelerate a Closing means the right to accelerate the Nominal
Closing Date of the relevant Closing to a date within the time period
provided above and, if and as necessary for that purpose, the right to
accelerate the exercise of all relevant options of the Party not in
Default to purchase or sell Shares or Assets of the relevant Coatings
Companies on notice as provided above. If and to the extent that a
Default on the part of Valspar under Section 13.1(e) shall affect any
of the Coatings Companies referred to in Section 5.1(b), Coates shall
have a "put" option in respect of the said Coatings Companies which
shall be exercisable in the same manner as provided under Section
5.1(a), subject to acceleration as provided above.
14 DISPUTES
14.1 Arbitration. Any disputes arising out of or in connection with this
Agreement shall be finally settled by arbitration under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce
by one or more arbitrators appointed in accordance with the said Rules.
The arbitration shall be conducted at New York, New York in the English
language.
14.2 Governing Law. This Agreement shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York, USA,
which shall be the proper law of this Agreement notwithstanding any
rules of conflict of laws or private international law therein
contained under which any other law would be made applicable, provided
that the operation of the arbitration agreement contained in Section
14.1 and the enforcement of any award rendered pursuant thereto shall
be governed by United States federal law to the exclusion of state law.
15 MISCELLANEOUS
15.1 Press Releases and Announcements. From the date of execution of this
Agreement until the Phase I Closing, neither Party shall issue any
press release (or make any other public announcement) related to this
Agreement or the transactions contemplated hereby or make any
announcement to the employees, customers or suppliers of the Coatings
Companies without prior written approval of the other party hereto,
except as may be necessary, in the opinion of counsel to the Party
seeking to make disclosure, to comply with the requirements of this
Agreement or applicable law. If any such press release or public
announcement is so required, the Party making such disclosure shall
consult with the other Party prior to making such disclosure, and the
parties shall use all reasonable efforts, acting in good faith, to
agree upon a text for such disclosure which is satisfactory to both
Parties.
15.2 Expenses; Transfer Taxes. Except as otherwise expressly provided for
herein, the Parties will pay all of their own expenses (including
attorneys' and accountants' fees) in connection with the negotiation of
this Agreement, the performance of their respective obligations
hereunder and the consummation of the transactions contemplated by this
Agreement (whether consummated or not), provided that the reasonable
fees of attorneys, notaries, surveyors and appraisers paid by either
Party in connection with the transfer of the real property at Nantes
and with the attorney's fees incurred by both Parties in connection
with the preparation and conclusion of the Nantes Lease Agreement shall
be shared equally between them. The Parties shall share equally any
transfer taxes or fees arising out of the transactions contemplated by
this Agreement, regardless of whether such taxes or fees are imposed by
law on one party or its Affiliates.
15.3 Further Assurances. On and after the Phase I Closing Date, each Party
shall, at the request of the other Party, take and cause its Affiliates
to take all appropriate action and execute any documents, instruments
or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the provisions hereof.
15.4 Amendment and Waiver. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment
or waiver is sought to be enforced. No course of dealing between or
among any persons having any interest in this Agreement will be deemed
effective to modify or amend any part of this Agreement or any rights
or obligations of any person under or by reason of this Agreement.
15.5 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally
delivered or mailed by first class mail, return receipt requested, or
when receipt is acknowledged, if sent by facsimile, telecopy or other
electronic transmission device. Notices, demands and communications to
Valspar and Coates will, unless another address is specified in
writing, be sent to the address indicated below:
Notices to Valspar: with a copy (which shall not
constitute notice) to:
The Valspar Corporation Dorsey & Whitney
1101 South Third Street Pillsbury Center South
Minneapolis, Minnesota 55402 220 South Sixth Street
USA Minneapolis, Minnesota 55402
USA
Attention: General Counsel Attention: Steven C. Nelson
Facsimile: (612) 375-7313 Facsimile: (612) 340-8738
Notices to Coates: with a copy (which shall not
constitute notice) to:
Coates Lorilleux SA Proskauer Rose Goetz & Mendelsohn
Immeuble le Diamant 1585 Broadway
16 rue de la Republique New York, NY 10036-8299
92800 Puteaux USA
FRANCE
Attention: General Counsel Attention: Ronald R. Papa
Facsimile: 33 1 41 35 69 40 Facsimile: (212) 969-2900
15.6 Assignment. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns, except that neither this
Agreement nor any of the rights, interests or obligations hereunder may
be assigned by either Party hereto without the prior written consent of
the other Party hereto.
15.7 Severability. In the event that any provision of this Agreement or any
Ancillary Agreement shall be deemed or declared to be unenforceable,
invalid or void, the same shall not impair any other provision of this
Agreement or such Ancillary Agreement but the Parties shall negotiate a
substitute provision or amend the other provisions of this Agreement or
such Ancillary Agreement so as to produce a result which preserves as
nearly as possible the economic balance of the Agreement or Ancillary
Agreement, as the case may be, provided that neither Party shall be
obligated to accept an amendment which substantially departs from the
essential intent or effect of this Agreement or any Ancillary
Agreement. Wherever in this Agreement provision is made for the
conclusion of an Ancillary Agreement substantially on the terms of an
Exhibit or Appendix subject to any requirements of applicable law, in
the event that any of such terms would be unenforceable, invalid or
void under such law, the provisions of this section shall apply, it
being understood, however, that except as otherwise required or agreed
all Ancillary Agreements shall by their terms be governed by the law
referred to in Section 14.2.
15.8 Complete Agreement. This Agreement, the Ancillary Agreements, the
Exhibits, the Disclosure Schedule and the other documents referred to
herein contain the complete agreement between the Parties with respect
to the subject matter hereof and thereof and supersede any prior
understandings, agreements or representations by or between the
Parties, written or oral, which may have related to the subject matter
hereof and thereof in any way.
15.9 Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more
than one Party, but all such counterparts taken together shall
constitute one and the same instrument.
15.10 Entry into Force. This Agreement shall enter into force upon the later
to occur of (i) its execution and delivery by both Parties or (ii) the
execution and delivery by Total SA of the Guaranty substantially in the
form set forth in Appendix 14.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
day and year first above written.
COATES BROTHERS PLC THE VALSPAR CORPORATION
BY ____________________________ BY _____________________________
ITS ___________________________ ITS ____________________________
Exhibit 2.1 (continued)
AMENDMENT NO. 1 TO
ACQUISITION AGREEMENT
THIS AMENDMENT is made and entered into as of the 2nd day of May, 1996 by and
between:-
(1) COATES BROTHERS PLC, a public limited company organized under English
law having its registered office at Cray Avenue, St. Mary Cray,
Orpington, Kent BR5 3PP, England (hereinafter referred to as "Coates");
and
(2) THE VALSPAR CORPORATION, a corporation organized under the laws of the
State of Delaware, United States of America having its principal
offices at 1101 Third Street South, Minneapolis, Minnesota 55415, USA
(hereinafter referred to as "Valspar").
RECITALS:
(A) Valspar and Coates (the "Parties") are parties to that certain
Acquisition Agreement dated the 26th day of February, 1996 (the
"Acquisition Agreement").
(B) The Parties mutually desire to amend the Acquisition Agreement as
hereinafter provided.
NOW THEREFORE, in consideration of the premises, the Parties agree as follows:
1 AMENDMENTS
1.1 Definitions. Section 1.1 of the Acquisition Agreement is hereby amended
as follows:
(a) The following additional definitions are added in the
appropriate locations in alphabetical order, all subsections
and cross-references thereto being renumbered accordingly:
(i) "Effective Date" shall mean the earlier of (A) the
Closing Date or (B) a date prior to the Closing Date
if the Parties shall have agreed that the
transactions to be completed at the Closing are to be
treated for purposes of Section 6.4 hereof as if they
had occurred with effect as of such prior date.
(ii) "Lessor" shall mean the Affiliate of Coates which
shall acquire the land at the Nantes Site from Coates
Coatings SA under the terms of the Nantes Deed of
Sale and lease the land back to Coates Coatings SA
under the terms of the Nantes Lease Agreement.
(iii) "Nantes Agreements" shall mean the Nantes Deed of
Sale, the Nantes Facility Sale Agreement, the Nantes
Lease Agreement and the Nantes Cross-Guaranty
Agreement.
(iv) "Nantes Cross-Guaranty Agreement" shall mean an
agreement between the Parties substantially in the
form set forth as Exhibit 2.3(g)(iv) appended to
Amendment No. 1 to this Agreement.
(v) "Nantes Deed of Sale" shall mean the deed of sale of
the land at the Nantes Site in substantially in the
form (forme authentique) set forth as Exhibit
2.3(g)(i) appended to Amendment No. 1 to this
Agreement.
(vi) "Nantes Facility Sale Agreement" shall mean the
conditional agreement to sell the buildings (promesse
de vente) substantially in the form set forth as
Exhibit 2.3(g)(iii) appended to Amendment No. 1 to
this Agreement.
(vii) "Nantes Site" shall mean the land and buildings owned
by Coates Coatings SA and located at Nantes, France.
(viii) "TOM" shall mean Total Oil Marine PLC, a public
limited company organized under English law and
registered in England under number 811900, having its
registered office at 33 Cavendish Square, London W1M
0HX, England.
(ix) "TOM Agreement" shall mean the agreement dated as of
February 26, 1996 by and between Coates and TOM
whereby Coates has transferred to TOM substantially
all of the Packaging Coatings Business, including the
Packaging Coatings Assets, Packaging Coatings
Liabilities and Packaging Coatings Employees of
Coates.
(x) "TOM Closing" shall mean the completion of the
transactions contemplated by the TOM Agreement.
(b) The following definitions are revised to read as follows:
(i) Section 1.1(g), defining the term Ancillary
Agreements, is revised to read in its entirety as
follows:
"Ancillary Agreements" shall mean the
Guaranty, the Nantes Agreements and the
agreements to be entered into at various
Closings as described in Section 2.3,
Section 3.4, Section 4.5 and Section 5.4.
(ii) Section 1.1(q), defining the term "Closing Balance
Sheet", is amended by deleting the phrase "Closing
Date" and inserting in lieu thereof the phrase
"Effective Date".
(iii) Section 1.1(t), defining the term "Closing Statement
of Financial Indebtedness", is amended by deleting
the phrase "Closing Date" and inserting in lieu
thereof the phrase "Effective Date".
(iv) Section 1.1(qqq), defining the term "Nantes Lease
Agreement", is revised to read in its entirety as
follows:
"Nantes Lease Agreement" shall mean the
agreement for lease (bail) of the land at
the Nantes Site substantially in the form
set forth as Exhibit 2.3(g)(ii) appended to
Amendment No. 1 to this Agreement.
(v) Section 1.1(zzz), defining the term "Packaging
Coatings Assets", is revised by replacing the period
at the end thereof with a comma and adding
immediately thereafter the following additional
phrase:
provided that such term when used with
reference to Coates shall mean all such
assets of Coates immediately prior to the
TOM Closing.
(vi) Section 1.1(aaaa), defining the term "Packaging
Coatings Business", is revised by replacing the
period at the end thereof with a comma and adding
immediately thereafter the following additional
phrase:
provided that such term when used with
reference to Coates shall mean all such
operations, revenues, expenses, assets and
liabilities of Coates immediately prior to
the TOM Closing.
(vii) Section 1.1(bbbb), defining the term "Packaging
Coatings Employees", is revised by replacing the
period at the end thereof with a comma and adding
immediately thereafter the following additional
phrase:
provided that such term when used with
reference to Coates shall mean all such
employees of Coates immediately prior to the
TOM Closing.
(viii) Section 1.1(cccc), defining the term "Packaging
Coatings Liabilities", is revised by replacing the
period at the end thereof with a comma and adding
immediately thereafter the following additional
phrase:
provided that such term when used with
reference to Coates shall mean all such
liabilities of Coates immediately prior to
the TOM Closing.
(ix) Section 1.1(ffff), defining the term "Phase I
Coatings Companies", is revised to read in its
entirety as follows:
"Phase I Coatings Companies" shall mean
Coates, including TOM in its capacity as
successor in interest to the Packaging
Coatings Business of Coates under the
provisions of the TOM Agreement; Coates
Brothers, Australia Pty Limited; Coates
Coatings AS; Coates Coatings GmbH; Coates
Coatings, Inc.; Coates Coatings SA and
Coates Lorilleux SA; and "Phase I Coatings
Company" shall mean any of them.
1.2 Assets and Liabilities. Section 1.2 of the Acquisition Agreement is
hereby amended as follows:
(a) Section 1.2(a)(i) is revised to read in its entirety as
follows:
as to Coates, the real property owned prior to the
TOM Closing by Coates and thereafter by TOM and
located at Witney, England, together with all
buildings and improvements thereon and all rights,
privileges, easements and licenses relating to that
property;
(b) A new Section 1.2(d) is inserted after Section 1.2(c) reading
in its entirety as follows:
For all purposes of this Agreement, the Packaging
Coatings Assets and Packaging Coatings Liabilities of
TOM will be deemed to be those of Coates, and vice
versa, as may be necessary to give effect to the
intents and purposes of this Agreement in the same
manner as if the TOM Agreement had not been entered
into.
1.3 Packaging Coatings Assets and Liabilities. Exhibits 2.1(f) and 2.1(g)
of the Acquisition Agreement are hereby deleted and replaced with the
revised versions appended to this Amendment.
1.4 Nantes Site. In implementation of Sections 2.3(g) and 9.15 of the
Acquisition Agreement relating to the Nantes Site, the Parties agree
that the Nantes Lease Agreement shall be substantially in the form set
forth in Exhibit 2.3(g)(ii) appended to this Amendment. The Parties
further agree to take, and to cause their respective Affiliates
referred to below to take, the following actions as expeditiously as
possible after the Phase I Closing:
(a) The Parties shall take such actions as shall be required to
ensure the completion of the formalities required for the
legal separation of title to the buildings at the Nantes Site
from title to the land on which they are located.
(b) Within thirty (30) days after the completion of the aforesaid
formalities, the following transactions shall be completed
contemporaneously:
(i) Coates Coatings SA and the Lessor shall each execute
and deliver the Nantes Deed of Sale, the Nantes Lease
Agreement and the Nantes Facility Sale Agreement.
(ii) Valspar and Coates shall each execute and deliver the
Nantes Cross-Guaranty Agreement.
(c) Coates shall, with the active cooperation of Coates Coatings
SA, use its best efforts to obtain from the Societe Nationale
de Chemin de Fer (SNCF) in favor of Coates Coatings SA any and
all easements, servitudes and other rights that may be
necessary to enable Coates Coatings SA to have quiet use and
enjoyment of the buildings at the Nantes Site, including those
portions thereof that obtrude on the lands presently owned by
or otherwise in the possession of SNCF, during the term of the
Nantes Lease Agreement. Coates shall pay any expenses
associated with the obtaining of such rights, as well as any
rents or other charges levied by SNCF at any time during the
term of the Nantes Lease Agreement in connection with the
grant of such rights or the use of its land. In the event that
Coates shall be unable to obtain the aforesaid rights within
one (1) year after the Phase I Closing, and that SNCF
thereafter shall require Coates Coatings SA to remove the
encroachment or shall impose such conditions on the
non-removal thereof, other than the payment of rents or
charges, as to restrict or encumber access to or use of any
portion of the Nantes Facility or expose Coates Coatings SA,
in its reasonable judgment, to any risk of loss, damage or
liability in connection with such access or use, Coates
Coatings SA shall have the right to reconfigure the buildings
so that they continue to afford the same functional utility
and space as theretofore, and Coates shall reimburse Coates
Coatings SA for all expenses reasonably incurred by the latter
for such purpose, provided that Coates Coatings SA shall have
given Coates notice in advance of any such action and shall
furnish appropriate documentation of such expenses upon
completion of such action.
1.5 Phase I Ancillary Agreements. Section 2.3 of the Acquisition Agreement
is hereby amended as follows:
(a) Section 2.3(a) is revised to read in its entirety as follows:
TOM and an Affiliate of Valspar will enter into the
Assignment and Assumption Agreement, whereby TOM will
assign to Valspar all rights, and Valspar will assume
all obligations, of TOM under the Machen Lease
Agreement and the Wythenshawe Lease Agreement, in
each case as assigned to TOM by Coates under and
pursuant to the TOM Agreement.
(b) Section 2.3(b) is revised by deleting subsection (i) thereof
and renumbering subsections (ii) through (v) accordingly.
(c) Section 2.3(h) is revised by deleting the phrase "the Phase II
Coatings Companies, the Phase III Coatings Companies and".
(d) Section 2.3(i) is revised by deleting the phrase "and Valspar
Coates (India) Ltd."
(e) Section 2.3(j) is renumbered Section 2.3(k) and a new Section
2.3(j) is inserted in lieu thereof reading in its entirety as
follows:
Valspar and Coates of India Ltd. will enter into a
Valspar Sales Representation Agreement, substantially
in the form set forth in Appendix 11A, subject to any
requirements of applicable law, under which Valspar
will grant to Coates of India Ltd. exclusive sales
rights for Packaging Coatings in respect of the Union
of India.
(f) Former Section 2.3(j), now renumbered as Section 2.3(k), is
revised by deleting the phrase "Appendix 11" and inserting in
lieu thereof the phrase "Appendix 11B".
1.6 Phase II Ancillary Agreements. Section 3.3 of the Acquisition Agreement
is hereby amended by replacing the phrase "Appendix 8" in Section
3.3(c) with the phrase "Appendix 9".
1.7 Withholding Taxes. Section 6.4 (d) of the Acquisition Agreement is
hereby amended by replacing the period at the end thereof with a comma
and inserting the following additional phrase:
provided, however, that any amounts that Valspar and/or its
Affiliates shall be required by law to withhold from the Final
Purchase Price in respect of income or other taxes for which
Coates and/or its Affiliates are liable shall, subject to the
provisions of Section 15.2, be taken into account in
determining the amount of any payment pursuant to this Section
6.4(d), and Valspar and/or its Affiliates shall notify Coates
promptly upon its becoming aware of any such requirement and
shall, contemporaneously with the final payment by either
Party to the other under this Section 6.4(d), provide to
Coates and/or its Affiliates, as the case may be, certificates
from the relevant tax authorities evidencing payment of any
tax liabilities of Coates and/or its Affiliates that shall
have been so withheld out of the Final Purchase Price.
1.8 Closings with Effect as of An Earlier Date. Section 9.1 of the
Acquisition Agreement is hereby amended by inserting after Section
9.1(h) a new Section 9.1(i) reading in its entirety as follows:
In the event that, at any Closing, the Shares or Assets of any
Coatings Company shall be sold, assigned and transferred to
Valspar or any of its Affiliates with effect as of an
Effective Date prior to the Closing Date, Coates shall during
the period from and after such Effective Date through and
including the Closing Date manage the Packaging Coatings
Business of such Coatings Company for the account and benefit
of Valspar. Coates shall render to Valspar, if and as
reasonably requested by Valspar, an accounting for the
operations of such business during the said period and shall
hold for the account of Valspar, and shall transfer to Valspar
at the Closing, all cash and other assets, if any,
representing the proceeds of the sale or other disposition of
any Packaging Coatings Assets that shall not have been used
for the discharge of Packaging Coatings Liabilities.
1.9 Inventory Valuation. Section 9.5 of the Acquisition Agreement is hereby
amended by inserting prior to the final sentence thereof the following
new sentence:
If Valspar shall proceed with any Closing on the basis of a
Provisional Purchase Price determined in accordance with the
inventory valuations reflected in the books, records and
financial statements of the relevant Coatings Companies, such
action shall not be deemed to constitute agreement on the
valuation of such inventories for purposes of determining the
Final Purchase Price.
1.10 Transitional Use of Packaging, Containers and Labels. Section 9 of the
Acquisition Agreement is is hereby further amended by adding a new
Section 9.17 reading in its entirety as follows:
Covenant Not to Sue. Coates shall not assert any claim against
Valspar or any of its Affiliates by reason of any infringement
of Coates' trademarks, trade names, logotypes, trade dress or
other intellectual property rights resulting from or inherent
in the use by Valspar or any of its Affiliates of packaging,
containers, labels and other identifying materials of Coates
or its Affiliates on or in connection with the sale of
Packaging Coatings manufactured prior to the date which shall
be one (1) month following the date of the Phase I Closing.
1.11 Indemnities. Section 12 of the Acquisition Agreement is hereby amended
as follows:
(a) The phrase "or any of its Affiliates" is inserted after
"Coates" in Section 12.2(a)(ii).
(b) The phrase "or any of its Affiliates" is inserted after
"Valspar" in each of Sections 12.3(a)(i) and 12.3(a)(ii).
1.12 Further Assurances. Section 15.3 is amended by adding a new second
sentence thereof to read in its entirety as follows:
Without limiting the generality of the foregoing, Coates shall
cause TOM to take any and all actions, in its capacity as
successor in interest to the Packaging Coatings Business of
Coates, that may be required in order to perform and discharge
the obligations of Coates hereunder.
1.13 Coates Trademark License Agreement. Appendix 3 to the Acquisition
Agreement is hereby deleted and replaced with the revised version
appended to this Amendment.
1.14 Valspar Technology Sublicense Agreement. Appendix 4 to the Acquisition
Agreement is hereby deleted and replaced with the revised version
appended to this Amendment.
1.15 Coates of India Sales Representation Agreement. The new Appendix 11A
appended to this Amendment is hereby inserted after Appendix 11.
1.16 Philippines Sales Representation Agreement. The new Appendix 11B
appended to this Amendment is hereby inserted after Appendix 11A.
2 PROVISIONS RELATING TO TOM AGREEMENT
2.1 Valspar Consent. Upon and subject to the terms and conditions set forth
in this Amendment, Valspar hereby gives its written consent, in
accordance with Section 9.1(b) of the Acquisition Agreement, to the
transfer of the Packaging Coatings Assets subject to the Packaging
Coatings Liabilities of Coates to TOM in accordance with the provisions
of the TOM Agreement.
2.2 Indemnity in Respect of Employment Rights. Without prejudice to any
other rights of the Valspar Indemnified Parties under the provisions of
Section 12.2 of the Acquisition Agreement, Coates shall indemnify and
hold harmless Valspar and its Affiliates from and against any and all
losses, damages, liabilities, costs and expenses (including reasonable
fees and expenses of counsel) that they may incur or to which they may
become subject by reason of any claims that may be asserted by
employees of Coates or any of its Affiliates under the Transfer of
Undertakings (Protection of Employment) Regulations 1981 as amended by
the Collective Redundancies and Transfer of Undertakings (Protection of
Employment) (Amendment) Regulations 1995 that are predicated in whole
or in part upon any alleged or actual failure to inform or consult in
relation to the transactions provided for under the TOM Agreement,
without regard to any applicable Basket Amount, Limit Amount or time
limit provided for in Section 12 of the Acquisition Agreement but
subject to the procedures set forth in Section 12.4 thereof.
3 RELATIONSHIP TO ACQUISITION AGREEMENT
3.1 Definitions. All terms used in capitalized form in this Amendment which
are defined in the Acquisition Agreement, including those added by
Section 1.1 hereof, shall have the same meanings as in the Acquisition
Agreement.
3.2 Effect of Amendment. This Amendment constitutes an integral part of the
Acquisition Agreement and, as such, shall be subject to all provisions
thereof, including but not limited to those of Articles 12, 14 and 15
thereof, except to the extent that such provisions are expressly
modified by this Amendment. All obligations of either Party hereunder
shall be deemed to be obligations of such Party under the Acquisition
Agreement. In the event of any conflict between the Acquisition
Agreement and this Amendment, this Amendment shall prevail. All
references to the Acquisition Agreement shall mean the said agreement
as modified by this Amendment.
3.3 Savings Provision. Nothing contained in any of the Nantes Agreements
shall be construed as superseding, or as modifying or limiting in any
way, any of the obligations of Coates under the provisions of the
Acquisition Agreement, including but not limited to those contained in
Section 9.15 and Section 12.2 thereof.
3.4 Exhibits. The Exhibits appended to this Agreement shall be deemed to be
Exhibits to, and an integral part of, the Acquisition Agreement for all
purposes thereof.
3.5 Phase I Closing Date. The Parties have agreed that the Closing Date for
the Phase I Closing shall be May 2, 1996 but that the Effective Date
shall be April 30, 1996.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the day
and year first above written.
COATES BROTHERS PLC THE VALSPAR CORPORATION
BY __________________________ BY ____________________________
ITS _________________________ ITS ___________________________
ACKNOWLEDGEMENT:
TOTAL S.A., a stock company organized under the laws of the Republic of France
having its registered office at Tour Total, 24, Cour Michelet, 92069 Paris La
Defense Cedex, France ("Total") hereby acknowledges notice of the foregoing
Amendment No. 1 to the Acquisition Agreement and agrees that the Nantes
Agreements, as therein defined, constitute Ancillary Agreements for the purposes
of Section 12 of the Acquisition Agreement and that any breach or failure of
performance by Coates of its obligations under or in respect of any of the
Nantes Agreements would be subject to indemnification by Coates under the said
Section 12 and that such indemnification would constitute an Obligation as
defined in, and subject to, the Guaranty given by Total to Valspar dated the
26th day of February, 1996 (the "Guaranty"); provided, however, that the
Guaranty shall not extend to any breach of or failure to perform any agreement
of an Affiliate of Coates contained in any Ancillary Agreement, as distinguished
from any obligation of Coates in respect thereof.
TOTAL S.A. THE VALSPAR CORPORATION
BY __________________________ BY ____________________________
ITS _________________________ ITS ___________________________
