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Item 1.01.
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Entry into a Material Definitive Agreement
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Share Purchase Agreement
On April 4, 2017, Quaker Chemical Corporation, a Pennsylvania
corporation (the “
Company
”), entered into a Share Purchase Agreement (the “
Share Purchase Agreement
”)
with Gulf Houghton Lubricants, Ltd., an exempted company incorporated under the laws of the Cayman Islands (“
Gulf Houghton
”),
Global Houghton Ltd., an exempted company incorporated under the laws of the Cayman Islands (“
Global Houghton
”),
and certain members of the management of Global Houghton (collectively with Gulf Houghton, the “
Sellers
”) and
Gulf Houghton Lubricants, Ltd., as agent for the Sellers (the “
Sellers’ Representative
”).
Upon the terms and subject to the conditions set forth in the
Share Purchase Agreement, the Company has agreed to purchase (the “
Acquisition
”) the entire issued and outstanding
share capital (the “
Shares
”) of Global Houghton from the Sellers. The Shares will be sold for an aggregate
purchase price (subject to possible adjustment pursuant to the terms of the Share Purchase Agreement) consisting of: (1) $172,500,000
in cash; and (2) a number of shares (the “
Consideration Shares
”) of common stock, $1.00 par value per share,
of the Company (the “
Common Stock
”) comprising 24.5% of the Common Stock outstanding as of the closing of the
Acquisition (the “
Closing
”). However, if the proposed Charter Amendment, as described below, is not approved
by the Company’s shareholders at the Meeting (defined below), the Company will instead issue, as Consideration Shares, shares
of a new series of voting preferred stock of the Company (the “
Preferred Stock
”) with equivalent rights. A
portion of the cash consideration and the Consideration Shares totaling in the aggregate $100,000,000 (the “
Cap
”)
will at the Closing be placed in escrow to secure the Sellers’ representations warranties and covenants in the Share Purchase
Agreement. If the Company or Global Houghton is required, in order to obtain the necessary regulatory approvals, to commit to
any divestiture, license, hold separate, sale or other disposition of or with respect to the businesses, assets, properties or
product lines of the Company, Global Houghton or any of their respective subsidiaries, representing a certain amount of pro forma
combined net sales of the Company and Global Houghton (which commitment we refer to as a “
triggering divestiture
”),
the purchase price may be reduced subject to the terms of the Share Purchase Agreement. In addition to the purchase of the shares
as described above, at the Closing, the holders of certain stock options and stock appreciation rights (“
SARs
”)
of Global Houghton will surrender their stock options and SARs for cancellation, in exchange for a portion of the cash portion
of the purchase price, as described above.
The Company and the Sellers have each made representations and
warranties to each other that are customary for transactions of this nature and which generally survive for a limited period. Subject to certain exceptions, both the Company’s and the
Sellers’ liability under the Share Purchase Agreement are subject to caps and deductible amounts.
The Company, the Sellers and Global Haughton have agreed to
customary covenants between the date of the Share Purchase Agreement and the Closing, including an agreement by the Sellers
that the business of Global Houghton will be conducted in the normal course consistent with past practices, and not to take certain
actions specified in the Share Purchase Agreement. Gulf Houghton and certain of its affiliates have each also agreed at Closing
to enter into an agreement under which they would not, subject to certain exceptions, (a) for a period of two years from the Closing, (i) own, manage, operate or control any business which competes with the Company (as combined with Global Houghton and including
subsidiaries) or (ii) become a shareholder, partner, member or owner of any Person who is engaged in the same business as the Company
(as combined with Global Houghton and including subsidiaries) or (b) for a period of three years, employ or solicit any employee
of the Company or any of its subsidiaries.
The issuance of the Consideration Shares at Closing
is subject to the approval by the stockholders of the Company under the rules of the New York Stock Exchange (the “
Company
Stockholder Approval
”). The Company expects to seek the Company Stockholder Approval at a meeting of the Company’s
shareholders (the “
Meeting
”), at which the Company will also seek shareholder approval for an amendment (the
“
Charter Amendment
”) to the Company’s articles of incorporation to provide that every holder of Common
Stock is entitled to one vote for each share of Common Stock. The Closing is subject to the receipt of the Company Stockholder
Approval, as well as satisfaction of other conditions, including certain regulatory approvals. The Share Purchase Agreement may
be terminated by the Company or the Sellers’ Representative if any of the closing conditions applicable to the other party
have not been, or if it becomes apparent that any of such conditions will not be, fulfilled by the date that is twelve (12) months
from the date of Share Purchase Agreement, or if triggering divestitures in excess of a certain level of pro forma 2016 net sales
of the combined entity are required by regulatory authorities.
Shareholder Agreement
In connection with the Share Purchase Agreement, the Company
has agreed, at the Closing, to enter into the Shareholder Agreement (the “
Shareholder Agreement
”) with Gulf
Houghton, Gulf Oil International, Ltd., and GOCL Corporation Limited (each, a “
Shareholder
” and together, the
“
Shareholders
”) substantially in the form attached as an exhibit to the Share Purchase Agreement.
Pursuant to the terms of the Share Purchase Agreement, in connection
with the Closing, the Company will set the size of the Board of the Company (the “
Board
”) at 12 directors (or,
if the Company and the Sellers’ Representative mutually agree, nine directors). Under the terms and subject to the conditions
of the Shareholder Agreement, including qualification standards under the Company’s corporate governance policies and the
requirements of the New York Stock Exchange, the Shareholders will have the right to nominate three individuals for election to the
Board (each a “
Shareholder Designee
”), subject to reduction if the Shareholders’ ownership percentage
decreases. Each Shareholder Designee would serve on a different class of the Board and, for so long as a Shareholder Designee serves
on the Board, a Shareholder Designee would have the right to be a member of each Board committee.
Under the Shareholder Agreement, the Shareholders would agree
to vote all of the Consideration Shares held by them in accordance with the recommendation of the Board with regard to each slate
of individuals nominated for election to the Board until the date that is six months after the first day on which no Shareholder
Designee is serving on the Board (the “
Governance Restricted Period
”). Additionally, during the Governance Restricted
Period, each Shareholder would not, except to the extent approved by the Board, directly or indirectly, participate in a hostile
transaction or change in control proposal.
During the Governance Restricted Period, the Shareholders would
have preemptive rights if the Company offers or sells any new securities, subject to customary exceptions. Other than pursuant
to the foregoing participation right, however, the Shareholders may not, for a period of two years following the Closing,
acquire any equity securities of the Company.
The Consideration Shares held by each Shareholder may not be
transferred within the first six months after the Closing and transfers thereafter are subject to certain restrictions. However,
beginning six months after the Closing, the Shareholders would have certain demand and piggyback registration rights, related to
sales and pursuant to registration under the Securities Act of 1933.
The foregoing description of the Share Purchase Agreement and
the Shareholder Agreement, and the transactions and agreements contemplated thereby does not purport to be complete and is subject
to and qualified in their entirety by the full text of the Share Purchase Agreement and the Shareholder Agreement, which are attached
to this Current Report on Form 8-K as Exhibit 10.1 (with the form of Shareholder Agreement attached to the Share Purchase Agreement
as Exhibit E thereto) and incorporated herein by reference.