Item 3. LEGAL PROCEEDINGS

On September 14, 2018, the California Air Resources Board (“CARB”) issued a Notice of Violation to the Company for several aerosol coatings products that were allegedly labeled incorrectly or otherwise violated CARB rules. The Company entered into settlement negotiations with CARB in an attempt to resolve the alleged violations. On January 15, 2019, a settlement conference was held, and an agreement to resolve the alleged violations was reached pursuant to which the Company has agreed to pay a penalty of $220,000 to resolve the matter.

As previously disclosed in the Company’s Form 10-Q for the quarterly period ended September 30, 2018, the Company received a letter dated September 26, 2018 from the South Coast Air Quality Management District (“SCAQMD”) in California alleging excess emissions from non-compliant coatings and seeking a proposed penalty of approximately $1.5 million. Settlement discussions regarding this matter have been unsuccessful to date, and SCAQMD filed a civil Complaint against the Company on November 30, 2018 in the Superior Court of California seeking civil penalties, costs and injunctive relief including an initial demand of $30 million. The Company disputes the allegations in the Complaint and intends to vigorously defend this matter.

For information regarding environmental-related matters and other legal proceedings, see pages 28 and 30 of our 2018 Annual Report under the captions “Environmental-Related Liabilities” and “Litigation” of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 1, 9, 10 and 14 of the Notes to Consolidated Financial Statements on pages 47, 62 through 63, 63 through 67 and 70, respectively, of our 2018 Annual Report, which is incorporated herein by reference.