Portugal

 

Sociedade de Materias Modernos Para A Construcao Ltde. SOMACO.

Rua Rodrigo da Fonseca,

Lisbon,

Portugal.

 

Executives who represented Somaco over the period of association with Evode were:-

 

Eng. Antonio Simao Leal 1960-1972.

Homem Ferreira Rosado 1972-1982.

Snr. Amorim

Snr. Friere.

Snr. Tomas. 1982-1993.

Snr. Kaden.

Snr. Gerido.

Snra. Cristina Cabal (nee Rosado.

 

All of the documents relating to Somaco are contained in files on Stafford site. There is nothing of reference lodged in the Stafford Records Office.

 

File No.5.

 

This file contains all of the relevant Licensee agreements and amendments over the period 1961-1988.

 

17 January 1961. The original agreement.

20 April 1967. A supplemental agreement.

3 June 1967. A supplemental agreement.

6 February 1976. A letter of amendment.

21 July 1977 A letter of amendment.

1 January 1978. A letter of amendment.

1 January 1982. A new agreement valid until 31 January 1987.

1 April 1986. An unsigned draft presumably to replace the agreement which ends

on 31 January 1987.

16 March 1988. An agreement amending royalty payments on new products.

16 March 1988. A registered users agreement.

18 March 1988. An updated agreement with a duration of 5 years.

 

February 1986. Copies of the presentation prepared for the visit to Somaco of

D.S. Winterbottom and W. Pitchford both in English and

Portuguese.

 

File No.1.

 

The draft of the first agreement was dated 1960 and there was an accompanying letter from Allen & Overy dated 14 November 1960 advising that the Engrossments were available. This was in effect the first agreement dated 17 January 1961. A signed copy was found in File No.2, now lodged in File No.5.

It was a standard agreement, royalties being set at 5% with minima as follows:-

£500 for the fist 12 months

£650 for the second 12 months

£800 for the third 12 months

£950 for the fourth 12 months

£1,100 for the fifth 12 months and subsequently.

 

A covering letter, undated and unsigned, excluded the manufacture of adhesives for the fixing of glazed tiles and mosaics to walls, floors and fireplaces. There is however a letter from A & O dated 16 November 1960 which mentions a Richafix engrossment.

 

Letter dated 13 April 1960.

This was a report from Mr.E. H. Beaumont to Dr. Simon following a visit to Somaco to discuss with Mr. Leal the possibility of a Licensee agreement with Evode. An interest in manufacturing Richafix adhesives was discussed.

 

Letter dated 19 April 1960.

This was from EHB to Mr. Leal advising that if they went ahead with the manufacture of Richafix adhesives there would be a minimum royalty of 6% irrespective of volume of sales.

 

There followed something of a storm in a teacup thrown up by Somaco with the insistence that they had to form a new company in Portugal to manufacture adhesives based on Evode technology. (The letter giving details for this opinion is not on file).

EHB rejected this approach and the signed copies of the Evode Agreement (18 January 1961) and the Richafix Agreement (6 January 1961) were returned to Stafford with a covering letter dated 10 January 1961.

 

Information on manufacturing equipment was sent to Somaco in various letters. Considerable correspondence passed to and fro including suggestions of factory layouts.

 

Somaco experienced considerable difficulty in obtaining suitable manufacturing equipment for start up which was delayed by many months consequently, by letter dated 4 February 1963 the royalty schedule was re-drafted to begin in July 1962 on a twelve monthly basis with minimum royalties as stated and by letter dated 5 May 1964 allowances were made on discounted sales.

 

Letter dated 4 February 1963.

  1. E. Linnel agreed to the following revised royalty schedules:-

18 July 1962-17 July 1963 £500

18 July 1963-17 July 1964 £650

18 July 1964-17 July 1965 £800

18 July 1965-17July 1966 £950

18 July 1966-17 July 1967 £1,100 and the same in subsequent years.


 

Letter dated 19 July 1963.

The letter was translated from the Portuguese and advised that the capital of Somaco was increased on 14 May 1963 from 30,000 Escudos to 600,000 Escudos subscribed by the partners Simao Leal (279,300) and Joaquim Homem Rosado

(290,700) who had long been a sleeping partner.

 During the course of 1963/4 sales showed a steady increase and by letter dated

16 June 1964 HS agreed to extend the license range to Surface Coatings, Building Chemicals and Sealants as mutually agreed.

 

Letter dated 10 December 1964.

HS formally agreed to the inclusion of products made and sold by the Building Chemicals and Surface Coatings Divisions of the Evode Group. By return letter dated 14 December 1964 this proposal was accepted by Somaco.

 

File No.2.

Letter dated 16 December 1966.

Somaco advised Evode that the Portuguese government had imposed a sales tax of 7%. This letter was not very explicit and Evode attempted to clarify the situation by letter dated 30 January 1967. It transpired that, as a manufacturer, Somaco was not subject to this tax.

 

A review of the royalty situation took place about September 1967 and it was concluded that the minimum royalty set in the agreements had not been met over a 4 year period.

 

By a series of letters in October 1967 the licensee agreement was extended to cover the manufacture of Building Adhesives products at a royalty of 6% to be split between Evode and Building Adhesives. A letter dated 28 December 1967 advised Somaco that a supplemental agreement covering the manufacture of Building Adhesives products dated 28 November 1966, was being sent. This document is on file signed by both parties. The products were to be sold only under the Bal-Tad name. By letter dated 20 January 1967, Somaco advises that they have begun to manufacture the Bal-Tad products.

 

Letter dated 27 February 1970.

This letter accompanied letters of agreement dated 3 June 1970 to allow Somaco to manufacture Allweather Evode products. Signed copies were returned to Evode with a letter of agreement dated 1 June 1970.

 

A series of letters prepared in February 1970 came to light. There was a draft agreement dated 20 April 1970, made as a supplement to the agreement dated 20 April 1967, which itself was supplemental to the agreement dated 18 January 1961.

This was to add to the licensing agreement a number of products made by Allweather Evode Paints Ltd.

Pitan Moist Concrete Primer

Pitakote Epoxy Concrete Floor Paint.

Evoflor.

Pitanex-Sankote.

Pitan Bitumen Sealer.

Pitakote.

Pitalac.

Pitan Chlorinated Rubber Paint.

Sales territories were confined to the areas specified by AWE and royalty was set at 5% on invoiced sales. Termination date as set in the principal agreement.

 

During 1971 there was a considerable delay in the payment of royalties. Mr. Leal advised that Somaco was in the process of going public and that they had taken on the distributorship of Johnsons Tiles which had involved a considerable investment and hence capital flow was tight.

 

Letter dated 12 October 1972.

This letter advised of the death of Eng. Antonio Simao Leal on 21 September 1972. Snr. Joaquim Homem Rosado assumed control of the company.

The event was to prove a considerable set back for Somaco as Mr. Leal was the only technically qualified person in the company and the only fluent English speaker. Until Cristina Rosado joined the company as a qualified chemical engineer and an English speaker there was a problem which manifested itself in a number of ways.

 

Letter dated 9 March 1973.

Mr. Rosado advises that he has engaged a chemical engineer who speaks good English and suggests a visit to Stafford or for someone from Evode to visit Somaco.

 

Letter dated 24 June 1974.

From SBK to Somaco advising that Evode was receiving enquiries from former Portuguese colonial territories for the supply of products to be bought through confirming houses. Advice was requested from Mr. Rosado on a course of action. A reply dated 26 July 1974 agreed to the direct supply of products as described adding a 10% commission for Somaco, retaining 5% of the commission in UK.

 

Report dated 25 October 1974.

This report was written by SBK following a visit to Somaco.

It highlights the difficulties Somaco are having in obtaining clearance to pay royalties owed to Evode following the takeover by the new government. This was a very difficult time for Portugal politically and business suffered due to the Marxist complexion of the new government. Consequently the royalty payments were at times many months in arrears.

  

Letter dated 27 May 1977.

This letter points out to Somaco that the original licensee agreement dated 18 January 1961 and subsequent supplemental agreements lapsed in January 1977 and a new agreement must now be entered into.

 

Letter dated 21 July 1977.

EJ obtained agreement from Somaco to extend the current agreement to January 1978.

By a letter from the Bank of Portugal dated 14 October 1977 the extension to the existing agreement was approved.

 

A new draft agreement dated 1 February 1979 is on file. It is unsigned. This agreement was to last until 31 January 1989.

 

 

A proposal was made by Mr. Rosado to SBK during a meeting that he was looking for a financial partner in Somaco. He was advancing in years and lacked technical expertise in the company to allow expansion of the product range. The proposal was put to HS who declined to become involved.

 

There is on file a draft agreement dated 1978 unsigned by any of the parties. In an accompanying letter from Evode`s solicitors they express the opinion that the original agreement of 18 January 1961 and the supplemental agreement of 20 April 1967 still provide adequate cover and the new agreement would consolidate these. Only a revision of the royalty payments and the length of term of the agreement need to be addressed. It was pointed out that, should Portugal join the EEC certain terms may have to be revised. A letter dated 8 June 1978 from EJ to Allen & Overy advised that the current extension expired on 31 January 1978.

  

Letter dated 25 May 1979.

This letter advised that an agreement had been signed between Somaco and Renault-Regie (presumably for the supply of adhesives and sealants). This would be quite a coup for Somaco as to break into any French controlled company was an extremely difficult thing to do as we knew to our cost in Stafford.

 

In July 1980 there was obviously a long delay in getting royalties freed for payment in Portugal.

Letter dated 2 July 1980.

EJ suggested to Mr. Rosado that royalties should be paid in Escudos which Evode could then negotiate. An exchange of memos between EJ, Brian Fletcher and VV concerning the royalties tied up in Portugal estimated that they amounted to about £21,000 at April 1980. BPF suggested that this money could be used to rent villas on behalf of Evode staff to take holidays on a paying basis. VV approved.

DSW advised AHS on 13 May 1980 that a transfer could be made but at a substantial discount (30%).

 

 

Letter dated 15 October 1980.

Mr. Rosado advised that he now had clearance from the Bank of Portugal to pay the outstanding royalties and would do so as soon as possible.

The new agreement was approved until 31 December 1980 but any further extension would be subject to a lower royalty payment.

 

Referring to the comment above by DSW concerning freeing royalties but at a substantial discount this was to be done by Somaco paying Escudos into the account of a Mr. H. M. Barlow at the Banco Portugues do Atlantico in Faro and thence transferred, minus the discount, to an Evode account in Sterling. Mr. Rosado was informed by letter from EJ dated 16 December 1980 that this course of action was being seriously considered as explained in a letter dated 7 November 1980 from DSW to Mr. Rosado. It would appear that Mr. Rosado had been ill for some time judging by remarks made in the correspondence.

 

It would appear that DSW was having second thoughts about the above arrangement. Payments had already been made into the account of Mr. Barlow and DSW suggests that the next instalment of Esc.300,000 should similarly be transferred. However he states that it is his intention to negotiate his way out of this arrangement. It obviously had not worked out as he had intended and suggests that future payments should be made to Evode direct.

 

Letter dated 4 December 1980.

This letter was addressed to DSW from Philip Shapiro Financial Consultants advising that Esc.300,000 equating to £2,423.26 was paid in on 20 November. The amount due to Evode Ltd. was £1,696.28, which suggests that it was, in fact, costing Evode a 30% mark down on the royalty payments to work this system.

 

It would appear that a new draft agreement had been submitted to Somaco with covering letter dated 22 December 1980 from EJ.

 

Letter dated 9 January 1981.

This letter was addressed to SBK from Mr. Rosado advising that difficulties continued with the Bank of Portugal in getting royalties released. The new signed agreement was returned. Mr. Rosado also requests permission to pay royalties every two months which he claimed would be more convenient from his point of view. Judging by the signature on this letter he was now quite infirm.

 

Letter dated 15 January 1981.

In the new agreement a flat rate of 4% royalties on invoiced sales was proposed and accepted by the authorities in Portugal.

 

Letter dated 16 February 1981.

From Philip Shapiro advising that Esc. had been transferred amounting to £2,264.15.

Amount due to Evode £1,584.91.

 

Letter dated 22 April 1981.

From Philip Shapiro advising that Esc. had been transferred amounting to £2,371.54.

Amount due to Evode £1,660.08.

From the closing remarks in this letter it would appear that this arrangement was now terminated.

 

File No.4.

 

As with all bank transfers the cost of conversion to Sterling was high and it was very easy to get into problems with national and local tax authorities.

 

Visit report by R. C. Spooncer. 8-14 October 1985.

 

From this report it can be assumed that Mr. Rosado had passed away although his daughter, Cristina, was still with the company now run from late 1982 by the new consortium of owners, Messrs. Amorim, Friere, Tomas, Kaden and Gerido.

Proposals were put to RCS that Evode should consider taking a financial interest in Somaco which could result in mutual benefit. This proposal received a welcome and subsequently DSW and WP organised a visit to discuss the matter.

 

Visit report by W. J. Langford dated 2-4 December 1985.

This report covered a visit to Stafford of Cristina Cabal (nee Rosado) and Mr. Vasconcelos.

 

Evode had received the following payments from Somaco:-

 

Fiscal year 1982/83 £500

Fiscal year 1983/84 £7,299

Fiscal year 1984/85 £3,241

 

Additionally in November 1982 Evode received £1,595.70 as royalties for the second quarter of 1982.

 

DSW and WP visited Somaco on 18/19 February 1986. Following this visit WP drew up the following proposals:-

 

  1. A new licensee agreement is to be prepared to begin 1 May 1986.
  2. A royalty of 3% is to be imposed.
  3. A new agreement to cover Trade Marks will be prepared which will be subject to a 2% royalty.
  1. There would be a final payment by Somaco to Evode of £2,000 for the use of the old technology.
  1. Somaco to produce a statement of royalties owed.
  2. Somaco to provide a fiscal breakdown of the company.
  3. Evode to forego owed back royalties in exchange for a 10% equity in Somaco.
  4. Evode to be given options to acquire up to 25% equity in Somaco at a future date.
  5. Evode to provide technical assistance in setting up a new manufacturing facility at Sintra.
  6. Evode (Export) to source products from Somaco where feasible.
  7. An Evode employee to be given the right to attend all Somaco Management Board meetings with access to all financial data.

There are copies of the Somaco presentation prepared for the visit of DSW and WP on file in both English and Portuguese.

 

By a letter dated 4 March 1986 Mr. Amorim agreed to all of the proposals.

 

There is no further data in these files. Obviously the proposal for Evode to acquire equity in Somaco did not come to fruition.

 

Another agreement dated 18 March 1988 signed by all parties is on file. At this stage licensee agreements were more closely drafted by Evode (Export) than hitherto with a schedule of products which the licensee had a right to manufacture. Also closer control was exercised over the duration of the license, in this case 5 years. The royalty payment was set at 4% of invoiced sales on new products, which are not specified.

(See point 4 above but there is no evidence on file that any sum of money was paid to Evode to offset old technology).

 

Also on 16 March 1988 a Registered Users Agreement was signed with Somaco for the use of Evode registered Trade marks. A royalty of 1% was agreed. This is the first occasion that this type of agreement had been used.

 

There is no further correspondence until12 January 1993 when Mr. Friere seeks to establish contact and pursue continued co-operation with Evode. In his reply to Somaco R. A. Read points out that due to an impending take-over situation this is not the best time to enter into discussions.

 

At this point the files close.

  

Addendum to the Somaco File.

 

A further file containing correspondence from 14 October 1964 to 28 September 1966 came to light. This has been designated File No.5.

 

In July 1965 Somaco became aware that that Bostik had the intention to begin the manufacture of adhesives in Portugal to supply mainly in the automobile industry. These series of letters covering a wide range of industries and types of adhesives is indicative of the licensees attitudes of wanting to move too quickly with the technology provided by Evode into industrial spheres which they did not understand and in which they had no expertise. This approach by the licensees never changed no matter how competent the licensee was or the scale of the manufacturing capability possessed .

 

In this instance, bearing in mind the size of the Somaco operation, the correspondence ranged over the construction industry, shoe trade, automobile assembly, roofing and the technical expertise, or lack of it, required to service these outlets. Problems of manufacturing equipment and delivery systems for solvents also arose as topics for discussion.

 

 

3rd.DRAFT.

 

SOME BACKGROUND ON PORTUGAL AND THE PORTUGUESE LICENSEE.

 

Portugal occupies the western part of the Iberian peninsula, bounded by Spain to the north and east and the Atlantic Ocean to the south and west having the western most point of land in continental Europe at Cabo da Roca.

Metropolitan Portugal which includes The Azores and Madeira has a total land mass of 34,500 square miles (compared to that of the UK at 50,300 square miles) and, at the time when the first license was granted in the 1960`s, a population of 8.65 million which had increased to 9.86 million by the mid 1990`s.

Economically it does not have a strong manufacturing tradition, its gross domestic product coming from agriculture (potatoes, grapes, tomatoes and wine), forestry (it is the worlds leading producer of cork) and fisheries (its sardines have a world reputation). The pattern has remained substantially the same over the past 40 years although as a nation it has prospered since joining the European Union in 1986. No specific data is available on imports/exports for the early 1960s but in 1958 domestic expenditure was estimated at Esc.9,743,000,000 and Esc.4,828,000,000 in the overseas provinces. (Esc.80 = £1.00).

Like Spain, Portugal was subject to occupation by the Moors until the 15th. century when a monarchy was installed and survived until the early 20th. century. It was during this time that, through maritime expertise and conquest, that the Portuguese empire was established in Africa, South America, the Caribbean, India and the Far East.

As a result of a military coup, a republic was declared in 1910. But the political situation was completely unsettled until 1926 when another military coup took place, which established a virtual dictatorship under Antonio Salazar. He put Portugal on a sound economic footing and he remained in power until health forced his retirement in 1968.

In the 1960s and 1970s Portugal became involved in a number of “colonial wars” in order to retain control, particularly, of her African empire. The conscription of young men to fight in these wars denuded the economy of labour and social and political unrest resulted fomenting another military coup on 25 April 1974. Throughout the 1970s severe economic problems resulted as reported in the inability of Somaco to meet its financial obligations. The economy showed no signs of regeneration until conservative governments were elected in the 1980s which allowed Portugal to apply for membership of the European Union joining in 1986 and entering the Economic and Monetary Union in 1999.

Portugal was a natural choice of country, amongst others, where licensees were appointed to expand Evode`s business and generate profit. But why Somaco was chosen was known only to Dr. Simon as he alone appointed licensees.

Somaco`s premises at Rua Rodrigo da Fonseca was quite a large showroom from which a wide range of building materials was sold, particularly for floor and wall coverings. The manufacturing plant was situated in a small town called Sintra (which was the old seat of the Portuguese monarchy) situated about 15km. to the north west of Lisbon. Originally this was a farm and the buildings, although in good condition, belied its origins. Much of the manufacturing equipment installed was purchased second hand in good working condition. Certain innovations had taken place with other pieces of kit in order to achieve the desired ends but, for a limited market as Portugal was, it served its purpose.

Mr. Antonio Simao Leal was a chemical engineer by profession and was the only qualified person in the company until very much later when Cristina Rosado joined after completing her university studies. At times he was stretched to the limit, complaining in one letter that “…the boss has to take all the decisions…”, which, when he was unavailable, slowed down the communications between the companies as he was the only English speaker. This pressure possibly contributed to his untimely death in 1972.

It was not until Mr. Leal`s passing that the majority of people at Evode realised that, for many years, Mr. Homem Ferriera Rosado had been a sleeping partner in the company and the contributor of much of the funding. He had been engaged for many years in business in Portugal`s African colonies. He had to assume control of the company and, as he had no chemically qualified staff available at this time, the prosperity of the company suffered. He had a number of false starts with chemists he appointed only to be let down by them. He struggled and, not being a man of robust constitution his health suffered. It was also at this period that considerable social and political unrest was taking place making it difficult for Somaco to meet their obligations to Evode.

Mr. Rosado retired in 1982 selling out to a consortium of new owners who continued their association with Evode by signing a new agreement dated 18 March 1988. As late as 1993 they still expressed a desire to continue with the link but the situation with Evode was not conducive to progress the situation.

  

April 2004.