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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 16, 1998
KRUG INTERNATIONAL CORP.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 0-2901 31-0621189
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(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
1290 HERCULES DRIVE, SUITE 120, HOUSTON, TEXAS 77058
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (281) 212-1233
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 16, 1998, KRUG International (UK) Limited ("KRUG UK") , a wholly-owned
subsidiary of KRUG International Corp. ("KRUG"), sold all of the shares of
capital stock of its United Kingdom leisure marine subsidiary, Sowester Limited
("Sowester"), to Blakedew Ninety Four Limited, a corporation formed by
Sowester's management. The purchase price was approximately $15.0 million,
comprised of approximately $8.1 million in cash, deferred payments of $0.8
million due within one year and the assumption of approximately $6.1 million of
Sowester debt.
The consideration received by KRUG UK (which is subject to adjustment based in
the audit of Sowester's financial statements for the year ended March 31, 1998)
was based on extensive arms length negotiations and KRUG and KRUG UK believes
the consideration to be fair and adequate.
ITEM 5. OTHER EVENTS
On April 16, 1998, the Board of Directors of the Corporation authorized the
Corporation to repurchase for cash in the open market up to 200,00 Common Shares
of KRUG, approximately 4% of its outstanding shares.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information -
KRUG International Corp. Pro Forma Statement of
Earnings for the year ended March 31, 1997 and the
nine months ended December 31, 1997, attached hereto
as Exhibit 99.1.
KRUG International Corp. Pro Forma Balance Sheet as
of December 31, 1997, attached hereto as Exhibit
99.2.
(c) Exhibits -
10.1 Share Sale and Purchase Agreement between KRUG
International (UK) Limited and Blakedew Ninety Four
Limited , dated April 16, 1998.
10.2 Deed of Tax Covenant between KRUG International (UK)
Limited and Blakedew Ninety Four Limited, dated April
16,1998.
10.3 KRUG International Corp. news release dated April 16,
1998 - "KRUG International Announces Sale of Leisure
Marine Subsidiary and Stock Repurchase Program".
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KRUG International Corp.
Date: May 1, 1998
By: /s/ Mark J. Stockslager
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Mark J. Stockslager
Principal Accounting Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
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<S> <C>
10.1 Share Sale and Purchase Agreement between KRUG
International (UK) Limited and Blakedew Ninety Four
Limited, dated April 16, 1998.
10.2 Deed of Tax Covenant between KRUG International (UK)
Limited and Blakedew Ninety Four Limited, dated April
16, 1998.
10.3 KRUG International Corp. news release dated April 16,
1998 - "KRUG International Announces Sale of Leisure
Marine Subsidiary and Stock Repurchase Program".
99.1 KRUG International Corp. Pro Forma Statement of
Earnings for the year ended March 31, 1997 and the
nine months ended December 31, 1997.
99.2 KRUG International Corp. Pro Forma Balance Sheet as
of December 31, 1997.
</TABLE>
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EXHIBIT 10.1
DATED 16th April 1998
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KRUG INTERNATIONAL (UK) LIMITED
- AND -
BLAKEDEW NINETY FOUR LIMITED
SHARE SALE AND PURCHASE AGREEMENT
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INDEX TO CLAUSES
1 Interpretation
2 Agreement for Sale of the Sale Shares
3 Purchase Consideration
4 Completion Accounts
5 Adjustments to Purchase Consideration
6 Completion
7 Warranties and Undertakings by the Vendor
8 Retention and Joint Account
9 Pensions
10 Restrictive Covenants
11. Announcements
12. Assignment
13. Costs
14 Time
15. Entire Agreement
16. Continuing Effects of Agreement
17. Variations
18. Releases, Waivers etc by Purchaser
19. Further Assurance, Information
20. Law and Jurisdiction
21. Interest
22. Invalidity
23. Counterparts
24. Notices
SCHEDULES
1 The Company
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2. Warranties
3. Trade Names (Clause 10.2.3)
4. Short Particulars of the Property
5. Pension Arrangements [Not Used]
6. Vendor's Protection Provisions
AGREED FORM DOCUMENTS
1. Agreed Form Net Asset Statement
2 Undertaking of KRUG International Corp. (cl.6.2.4)
3 Powers of Attorney (cl. 6.2.9)
4. Loan Notes
5. Escrow Instructions (cl.8.1)
6. Tax Deed
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THIS AGREEMENT is made on 16th, April 1998
BETWEEN
(1) THE "VENDOR" KRUG INTERNATIONAL (UK) LIMITED (registered number:
00516171) whose registered office is at Columbia
Centre Market Street, Bracknell, Berkshire RG12 1PA;
(2) THE "PURCHASER" BLAKEDEW NINETY FOUR LIMITED (registered number:
3516383) whose registered office is at 6 Stinsford
Road, Nuffield Estate, Poole, Dorset BH17 0SW.
IT IS AGREED as follows:
1. INTERPRETATION
In this Agreement, including its Schedules, unless the context otherwise
requires, the following words and expressions have the following meanings:
1.1 Definitions
"AGREED FORM" in relation to any document such document in the
form agreed between the parties and initialled for
the purpose of identification by the parties;
"BANKERS" means National Westminster Bank PLC and any other
bank or financial institution providing banking
facilities to the Company;
"BUSINESS DAY" a day, other than a Saturday on which banks are open
for the transaction of business in England;
"CA" Companies Act 1985 ;
"CAA" Capital Allowances Act 1990;
"COMPANIES ACTS" CA and the former Companies Acts (within the meaning
of CA s 735(1));
THE "COMPANY" Sowester Limited (Registered Number: 00463358)
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whose registered office is at 6 Stinsford Road,
Nuffield Estate, Poole, Dorset BH17 0SW;
"COMPANY'S AUDITORS" Deloitte & Touche Stonecutter Court, 1 Stonecutter
Street, London EC4A 4TR;
"COMPLETION" completion of the sale and purchase of the Sale
Shares in accordance with clause 6;
"COMPLETION ACCOUNTS" the financial statements of the Company for the
period from the Last Accounts Date to 31 March 1998
(each such financial statement comprising a balance
sheet and a profit and loss account (in the form
specified in Clause 4.3);
"COMPLETION DATE" the date of this Agreement;
"CONSIDERATION" the total consideration payable by the Purchaser to
the Vendor for the Sale Shares being the sum
specified in clause 3 (subject to adjustment in
accordance with the provisions of Clause 5);
"DISCLOSURE LETTER" the disclosure letter of the same date as this
Agreement from the Vendor to the Purchaser;
"ENVIRONMENT" means the Environment as defined in Section 1(2) of
the Environmental Protection Act 1990;
"ENVIRONMENTAL LAWS" includes any law or statute of any relevant
jurisdiction relating to Environmental Matters and
any , rule, regulation, treaty, directive,
direction, by-law, code of practice, circular,
guidance note, order, notice, demand, injunction or
judgment issued, promulgated or approved thereunder
or in connection therewith applicable to the Company
and/or the business carried on by the Company;
"ENVIRONMENTAL means any permit, licence, authorisation, consent
LICENCE"
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or other approval required at the date hereof by the
Company or in relation to the business carried on by
the Company pursuant to any Environmental Law;
"ENVIRONMENTAL includes any of the following: (1) any generation,
MATTERS" deposit, disposal, keeping, treatment,
transportation, transmission, handling or
manufacture of any Hazardous Substances; (2)
nuisance, noise, defective premises, health and
safety at work or elsewhere; and (3) the pollution,
conservation or protection of the Environment
whether relating to man or any living organisms
supported by the Environment or to natural resources
or any other matter whatsoever affecting the
Environment or any part of it;
"ESCROW ACCOUNT" the interest bearing account to be opened pursuant
to clause 8.1;
"FA" Finance Act
"HAZARDOUS SUBSTANCES" wastes, pollutants, contaminants or other substances
(including without limitation liquids, solids,
gases, ions, living organisms and noise) that may be
harmful to human health or other life or the
environment or a nuisance to any person or that may
make the use or ownership of any affected land or
property more costly;
"ICTA" Income and Corporation Taxes Act 1988;
"INDEPENDENT
CHARTERED
ACCOUNTANT" the person appointed pursuant to Clause 4.9;
"INTELLECTUAL
PROPERTY RIGHTS" includes any patent, patent application, know-how,
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trade mark, trade mark application, trade name,
registered design, copyright, trade secret and other
confidential information, design rights, topography
rights, service mark, service mark application,
business name, moral rights, registrations of and
applications to register any of the aforesaid items,
rights in the nature of any of the aforesaid items
in any country, rights in the nature of unfair
competition rights and rights to sue for passing off
rights to access databases or other similar
intellectual or commercial right;
"LAST ACCOUNTS" the audited financial statements of the Company for
the accounting reference period which ended on the
Last Accounts Date (each such financial statement
comprising a balance sheet, profit and loss account,
cash flow statement, notes and directors' and
auditors' report);
"LAST ACCOUNTS DATE" 31st March 1997;
"LOAN NOTES" the unsecured interest free loan notes in the Agreed
Form to be issued by the Purchaser to the Vendor in
accordance with clause 3.1.1;
"MANAGEMENT ACCOUNTS" the unaudited management accounts of the Company as
at 31st March 1998 in the Agreed Form;
"NET ASSETS" the issued share capital of the Company plus or
minus the amount standing to the credit of or
debited to reserves (including profit and loss
account), as determined from the Completion Accounts
and shown in the Certificate of the
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Purchaser's Auditors delivered pursuant to Clause 4
in the Agreed Form;
"PENSION SCHEME(S)" the Sowester Limited Pension and Life Assurance
Scheme (and the plural means the Pension Scheme and
any other pension scheme or schemes of the Company
in force at the Completion Date);
"PROPERTY" the property of the Company shortly described in
Schedule 4;
"PURCHASER'S AUDITORS" Deloitte & Touche of Mountbatten House, 1 Grosvenor
Square, Southampton, Hampshire SO15 2BZ;
"PURCHASER'S GROUP means the Purchaser, any holding company of the
Purchaser, any subsidiary of the Purchaser and any
subsidiary of any such holding company;
"PURCHASER'S
SOLICITORS" Blake Lapthorn of New Court, 1 Barnes Wallis Road,
Segensworth, Hampshire PO15 5UA;
"RETENTION" the sum referred to in clause 3.1.1;
"SALE SHARES" the 50,000 ordinary shares of L.1 each in the
capital of the Company comprising the whole of its
issued share capital;
"TAX" OR "TAXATION" includes all forms of taxes, charges, imposts,
duties, levies, liabilities or sums of whatsoever
kind payable in respect of income, profits,
distributions, gains and receipts of all kinds or
otherwise at the instance of the Inland Revenue,
Customs and Excise, Department of Health and Social
Security, fiscal, Governmental or local Authorities
or any other competent taxing authority of the
United Kingdom or elsewhere and all penalties,
charges
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and interest relating to any Tax assessment,
including (without limitation) income tax, surtax,
corporation tax, advance corporation tax, capital
gains tax, development gains tax, development land
tax, value added tax, withholding tax, special
charge, petroleum revenue tax, customs and other
import duties, stamp duty, stamp duty reserve tax,
estate duty, capital transfer tax, inheritance tax,
capital duty, payments to be made by the Company
under the Pay As You Earn system and national
insurance contributions regardless of whether such
tax is directly or primarily chargeable against or
attributable to the Company or any other person firm
or company and references to:-
(a) income or profits or gains earned, accrued,
or received on or before a particular date or
in respect of a particular period shall
include income or profits or gains which have
been deemed to have been earned, accrued or
received at or before that date or in respect
of that period;
(b) any payment or distribution made on or before
a particular date shall include:-
(i) any payment or distribution which on
or before that date has fallen due
to be made; and
(ii) any act or transaction which has
occurred on or before that date and is
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or has been deemed to be a payment or
distribution for the purposes of any
Tax assessment; and
(c) any dividend shall include anything which has
been deemed to be a dividend or distribution
to shareholders or others for the purposes of
any Tax assessment;
"TAX DEED" the deed of indemnity against Taxation in the Agreed
Form;
"TAXATION STATUTE" any statute, enactment, law, regulation or
arrangement wheresoever enacted or issued, coming
into force or entered into providing for or imposing
any Taxation;
"TAX WARRANTIES" the Warranties relating to Taxation set out at
Warranty 5 of Schedule 2;
"TCGA" Taxation of Chargeable Gains Act 1992;
"TMA" Taxes Management Act 1970;
"VATA" Value Added Tax Act 1994;
"VENDOR'S GROUP" means the Vendor, any holding company of the Vendor,
any subsidiary of the Vendor and any subsidiary of
any such holding company (but excluding the
Company);
"VENDOR'S SOLICITORS" Linklaters & Paines, 1 Silk Street, London EC2Y 8HQ;
"WARRANTIES" the warranties and representations of the Vendor set
out in clause 7 and Schedule 2;
"WARRANTY CLAIM" any claim made by the Purchaser for breach of any of
the Warranties.
1.2 All references to a statutory provision shall be construed as including
references to:
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1.2.1 any statutory modification, consolidation or re-enactment (whether
before or after the date of this Agreement) for the time being in
force;
1.2.2 all statutory instruments or orders made pursuant to a statutory
provision;
1.2.3 any statutory provisions of which a statutory provision is a
consolidation, re-enactment or modification.
save to the extent that any such statutory modification, consolidation or
re-enactment, instruments orders and statutory provisions are made or
effected after the date of this Agreement and would create or increase the
liability of the Vendor or the Purchaser under this Agreement.
1.3 A reference to an SSAP is a reference to a Statement of Standard Accounting
Practice and a reference to an FRS is a reference to a Financial Reporting
Standard both established by the Accounting Standards Board in England and
Wales.
1.4 Words denoting the singular include the plural and vice versa; words
denoting any one gender include all genders; words denoting persons include
firms and corporations and vice versa.
1.5 Unless otherwise stated, a reference to a clause or sub-clause or a
Schedule is a reference to a clause or a sub-clause of or a Schedule to
this Agreement and a reference to a paragraph is a reference to a paragraph
of a Schedule.
1.6 The words "subsidiary" and "holding company" shall have the same meanings
in this Agreement as their respective definitions in CA.
1.7 A person shall be deemed to be connected with another if that person is
connected with another within the meaning of s 839 ICTA.
1.8 Headings in this Agreement and in the Schedules are inserted for ease of
reference only and do not affect the construction of this Agreement.
2. AGREEMENT FOR SALE OF THE SALE SHARES
2.1 Subject to the terms and conditions of this Agreement, the Vendor shall
sell or
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procure to be sold and the Purchaser in reliance upon the representations,
Warranties and undertakings set out in this Agreement and the Tax Deed
shall purchase the Sale Shares.
2.2 The Vendor shall sell the Sale Shares free from all liens, claims, charges,
equities and encumbrances and with full title guarantee and so that the
provisions of ss 6(1) and 6(2) of the Law of Property (Miscellaneous
Provisions) Act 1994 shall not apply to the Purchaser.
2.3 Title to and beneficial ownership of the Sale Shares shall pass to the
Purchaser on Completion and the Sale Shares shall be sold and purchased
together with all rights and benefits attaching to them at the Completion
Date (including the right to receive all dividends, distributions or any
return of capital declared made or paid by the Company on or after the
Completion Date).
2.4 The Purchaser shall not be obliged to complete the purchase of any of the
Sale Shares unless the purchase of all the Sale Shares is completed
simultaneously.
3. PURCHASE CONSIDERATION
3.1 The Consideration shall (subject to adjustment pursuant to the provisions
of clause 5) be the sum of L.5,295,000 (five million two hundred and ninety
five thousand pounds) which the Purchaser shall pay or satisfy by:
3.1.1 the sum of L.250,000 being paid and applied in the manner provided in
clause 8.1 (such sum being the Retention);
3.1.2 the issue to the Vendor at Completion of the Loan Notes credited as
fully paid having an aggregate par value of L.250,000;
3.1.3 the sum of L.4,795,000 (four million seven hundred and ninety-five
thousand pounds) being paid to the Vendor in cash at Completion CHAPS
payment to it at its Account with the National Westminster Bank Plc,
Guildford Branch address: PO Box 299, 151 High Street, Guildford,
Surrey GU1 3ZU Sort Code: 60-09-21 Account No. 59954841 or by such
other means of payment in immediately available funds as the Vendor
may request.
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4. COMPLETION ACCOUNTS
4.1 The Purchaser shall procure as soon as practicable and in any event within
60 days after Completion, the preparation of the Completion Accounts in
accordance with the requirements of this Clause 4 by the Purchaser's
Auditors, who shall also be instructed to certify the amounts of the Net
Assets in the Agreed Form.
4.2 In respect of the preparation of the Completion Accounts and the
determination of the Net Assets the Parties shall respectively:
(a) give or procure that the Purchaser's Auditors and any Independent
Chartered Accountant upon reasonable notice are given prompt access at
all reasonable times to and to take copies of all books and records
relating to the Company which are in the possession or under the
control of the Vendor or the Purchaser or the Company as the case may
be; and
(b) generally provide the Purchaser's Auditors and any Independent
Chartered Accountant promptly with such other information and
assistance as they may reasonably require including access to and
assistance at reasonable times from personnel employed by the Vendor
or the Purchaser or the Company as the case may be.
4.3 The Completion Accounts shall be prepared in accordance with all applicable
law FRS's and SSAP's and generally accepted United Kingdom accounting
principles and (so far as not inconsistent therewith) on the same
principles methods and bases as adopted in drawing up the Last Accounts
consistently applied.
4.4 The Purchaser's Auditors shall be instructed to state in writing to the
Vendor and the Purchaser whether in their opinion the Completion Accounts
give a true and fair view of the state of affairs of the Company as at such
date and to report directly to the Purchaser and the Vendor if and to the
extent that there have been any changes in accounting principles used in
the Completion Accounts (whether as a result of changes in the law or UK
accounting principles or otherwise).
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4.5 The Purchaser's Auditors shall (as soon as practicable, and in any event
within 60 days after Completion) deliver contemporaneously to the Vendor
and the Purchaser copies of the Completion Accounts and the certificate of
the Purchaser's Auditors as to the amount of the Net Assets in the Agreed
Form.
4.6 Either Party shall be entitled to object to the Completion Accounts by
written notice to the other within 28 days of receipt of the Completion
Accounts pursuant to Clause 4.5 and if no such objection is made the
Parties shall be deemed to accept the Completion Accounts at the end of
such 28 day period.
4.7 The Purchaser shall procure that the Vendor and the Company's Auditors
shall be given such information and assistance as they may reasonably
require including access to the Purchaser's Auditors and to the books,
records, papers and other documents relating to the Company, and to take
copies of all such books, records, papers and other documents which are in
the possession of the Company or the Purchaser's Auditors, for the purpose
of verifying the Completion Accounts and the certificate of the Purchaser's
Auditors as to the amount of Net Assets provided that any information
obtained by the Vendor or the Company's Auditors pursuant to this Clause
4.7 shall be kept strictly confidential by the Vendor or the Company's
Auditors.
4.8 In the event that notice of objection is given pursuant to clause 4.6 the
Vendor and the Purchaser shall use their reasonable endeavours to agree any
amendments to the Completion Accounts within 14 days after the giving of
such notice of objection.
4.9 In the event that agreement cannot be reached within the said period of 14
days the matter in dispute shall be referred to an independent chartered
accountant (being the "Independent Chartered Accountant") to be agreed
between the parties or, in the absence of agreement as to the identity of
the Independent Chartered Accountant within 7 days after the expiry of such
14 day period, to be nominated by the President for the time being of the
Institute of Chartered Accountants in England and Wales on application of
either party. Such Independent Chartered
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Accountant shall act as an expert and not as an arbitrator and his decision
shall (in the absence of manifest error) be final and binding on the
parties. The cost of his appointment shall be borne equally by the parties.
5. ADJUSTMENT TO PURCHASE CONSIDERATION
5.1 The Consideration shall be reduced by the aggregate of:
5.1.1 the amount of any indebtedness (exceeding in aggregate L.7,500)
(other than any indebtedness owed to National Westminster Bank Plc by
way of overdraft or pursuant to the Medium Term Loan relating to the
Property) incurred by the Company otherwise than in the ordinary
course of business prior to the Completion Date;
5.1.2 the amount by which any indebtedness owed by the Company to the any
member of Vendor's Group exceeds 10,000 in aggregate (excluding
management fees not exceeding 13,000 in any month and the proportion
of interest costs relating to the Group Facilities listed in the
Disclosure Letter which is attributable to the Company, calculated on
the same bases as were applied in the Last Accounts as at the
Completion Date); and
5.1.3 the net amount of any dividend paid by the Company since 23rd
February 1998 and prior to the Completion Date but excluding the
dividend of L.1,500,000 paid on 30 March 1998.
5.2
5.2.1 The "Net Assets Threshold" shall be L.4,200,000 (four million two
hundred thousand pounds) minus the amounts specified in Clause 5.1.1,
5.1.2, and 5.1.3 to the extent that each of such amounts exceed
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the amount or value of any asset attributable respectively thereto
and included in the Net Assets).
5.2.2 If the Net Assets are less than the Net Assets Threshold, the
Consideration shall be reduced by the amount of the shortfall (which,
together with the amounts specified in Clause 5.1.1, 5.1.2 and 5.1.3
is hereinafter referred to as the "Adjustment").
5.2.3 In any event, the Consideration shall not be reduced by any payment,
provision or reserve relating to the claim by Helen Caple against the
Company in respect of injuries sustained whilst travelling on a jet
propelled boat owned by the Company.
5.3 The amount of the Adjustment shall in aggregate be limited to the amount or
value of the Consideration paid or payable pursuant to Clause 3.1.
5.4 Any Adjustment shall be paid first out of the Retention in accordance with
this Clause 5;
5.5 If the Adjustment is less than the amount of the Retention, the Purchaser
shall pay (subject to and in accordance with Clause 8.3) to the Vendor the
difference between the amount of the Adjustment and the amount of the
Retention;
5.6 if the Adjustment exceeds the amount of the Retention, the amount by which
the Adjustment exceeds the Retention shall be paid (subject to and in
accordance with Clause 8.3) by the Vendor to the Purchaser and the
Purchaser shall be entitled to retain the Retention;
5.7 payments required under this Clause 5 shall be made on the seventh Business
Day after the later of:
5.7.1 the end of the 28 day period referred to in clause 4.6 or;
5.7.2 agreement pursuant to clause 4.8 or;
5.7.3 determination by an Independent Chartered Accountant pursuant to
clause 4.9;
6. COMPLETION
6.1 Completion shall take place at the offices of the Purchasers' Solicitors on
the
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Completion Date when, subject to clause 6.5, all the transactions mentioned
in the following provisions of this clause 6 shall take place.
6.2 The Vendor shall deliver to the Purchaser:
6.2.1 duly completed and signed transfers in favour of the Purchaser (or
such person or persons as the Purchaser may direct) in respect of the
Sale Shares together with all share certificates relating to the Sale
Shares in the name of the Vendor or any nominee of the Vendor;
6.2.2 Certified copies of Minutes of Meetings of the Board of Directors of
the Vendor at which the entry into and execution of this Agreement,
the Tax Deed, the Power of Attorney referred to in Clause 6.2.9 and
any other documents required to be executed in relation to this
Agreement and the performance by the Vendor of the obligations
expressed to be binding on it hereunder was authorised and approved.
6.2.3 the Tax Deed duly executed by the Vendor;
6.2.4 an undertaking by KRUG International Corp. (an Ohio Corporation) in
the Agreed Form;
6.2.5 the written resignations of each of the directors, other than John
Pattinson Buck and Robert Maurice Edmond, from their respective
offices in the Company, with a written acknowledgement executed as a
deed by each of them in such form as the Purchaser requires that he
has no claim against the Company in respect of breach of contract,
compensation for loss of office, redundancy or unfair dismissal or on
any other grounds whatsoever save only for the amounts in respect of
accrued but unpaid remuneration and reimbursable expenses incurred
down to the Completion Date specified in such written resignation;
6.2.6 a letter from the Company's Bankers to the Company undertaking to
release and discharge all guarantees or security granted by the
Company (other than the mortgage relating to the Property) in
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respect of the liabilities of any member of the Vendor's Group
and the Company against receipt of the sum of L.2,940,570.80;
6.2.7 certified copies of any powers of attorney under which any of
the documents referred to in this clause 6.2 is executed or
evidence satisfactory to the Purchaser of the authority of any
person signing pursuant thereto;
6.2.8 irrevocable powers of attorney (in the Agreed Form) executed by
the Vendor in favour of the Purchaser, or its nominees, enabling
the Purchaser or its nominees, pending registration of the
transfers of the Sale Shares to exercise all voting and other
rights attaching to the Sale Shares and to appoint proxies for
such purpose;
6.2.9 waivers of all options to subscribe for shares in the Company
duly executed by the holders of such options;
6.2.10 the statutory books of the Company complete and up to date and
its certificate of incorporation (including certificates of
incorporation on change of name), cheque books, common seals,
minute books and any unused share certificate forms or any of
the same which are in the possession of the Vendor;
6.2.11 the title deeds relating to the Property;
6.2.12 the appropriate forms to amend the mandates given by the Company
to its bankers;
6.2.13 the written notice relating to the Pension Scheme referred to in
Clause 9.2.
6.3 The Vendor shall procure the passing of Resolutions of the Board of
Directors of the Company pursuant to which:
6.3.1 such persons as the Purchaser may nominate shall be appointed
additional directors;
6.3.2 the transfers referred to in clauses 6.2.1 shall be approved
(subject to stamping);
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6.3.3 the resignations referred to in clause 6.2.5 shall be submitted and
accepted;
6.3.4 all authorities to the bankers of the Company shall be revoked and
authority given to such persons as the Purchaser may nominate to
operate the account;
6.3.5 the execution and delivery of the Tax Deed shall be authorised;
The Vendor shall hand to the Purchaser duly certified copies of such Board
Resolutions.
6.4 Upon completion of the matters referred to in clauses 6.2 and 6.3 the
Purchaser shall:
6.4.1 deliver a banker's draft drawn on a London Clearing Bank payable to
the Vendor or provide a CHAPS payment for the sum of L.4,795,000 to
the Vendor's account with National Westminster Bank Plc as specified
in Clause 3.1.3 and such receipt (as good funds) by the Vendor shall
be an absolute discharge therefor to the Purchaser;
6.4.2 provide a CHAPS payment for the Retention to be dealt with as
provided in clause 8.1;
6.4.3 deliver to the Vendor's Solicitors certified copies of any powers of
attorney under which any of the documents referred to in this clause
6.5 is executed or other evidence satisfactory to the Vendor's
Solicitors of the authority of the person signing on its behalf;
6.4.4 issue Loan Notes having an aggregate par value of L.250,000 to the
Vendor.
6.5 The Purchaser may in its absolute discretion waive any requirement
contained in clauses 6.2 and 6.3.
6.6 Following Completion, the Purchaser shall so far as reasonably practicable
co-operate with the Vendor in procuring the release of the Vendor from all
liability arising after Completion under any guarantees and collateral
security given by the Vendor on behalf of the Company and listed in the
Disclosure Letter
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and pending such release or if such release proves unobtainable except on
unreasonable terms the Purchaser shall indemnify the Vendor against all
losses, costs, claims, demands, expenses proceedings or payment which may
be incurred by the Vendor pursuant to the terms of any or all such
guarantees or collateral security.
6.7 The Vendor hereby irrevocably undertakes that, following Completion and
pending registration of the transfers referred to in Clause 6.2.1 it will
not exercise any of the rights conferred on it by Article 22 of the
Company's Articles of Association
6.8 The Purchaser shall ensure that all amounts due or owing by the Company by
way of overdraft to National Westminster Bank Plc shall be paid and
discharged by the Company on the Completion Date.
6.9 The Purchaser shall procure that all amounts due or owing to National
Westminster Bank Plc in respect of the Medium Term Loan relating to the
Property shall be paid or discharged by the Company on the Completion Date.
6.10 UNDERTAKING
The Vendor undertakes to provide to the Purchaser within 6 months from
Completion any information which is not within the possession or control of
the Company and which the Company requests to ascertain whether or not it
is subject to any liability to Tax or entitled to any relief (as defined in
the Tax Deed) or to calculate any liability to Tax or the amount of any
relief (as defined in the Tax Deed).
6.11 John Buck and Robert Edmond agree that no Share Appreciation Rights (if
any) granted to them under the Sowester Share Appreciation Rights Plan 1997
(the "Plan", and "Share Appreciation Rights" shall have the meaning
ascribed to that term in the Plan) are or will be outstanding at
Completion. John Buck and Robert Edmond further agree that they hereby
waive any rights (if any) to exercise any Share Appreciation Rights they
possess or any other rights under the Plan and that any such Share
Appreciation Rights or other rights under the Plan
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will lapse upon Completion. The provisions of this Clause 6.11 shall
satisfy the requirements of Clause 6.2.9.
7. WARRANTIES BY THE VENDOR
7.1 The Vendor represents and warrants to and with the Purchaser for itself and
as trustee for the Company and its successors in title in the terms set out
in Schedule 2 as at Completion .
7.2 The Warranties are given subject to matters fairly and accurately disclosed
in the Disclosure Letter and save as expressly qualified under the terms of
this Agreement.
7.3 To the extent that any particular item of Disclosure contained in the
Disclosure Letter is not fair and accurate no disclosure shall be deemed to
have been made in respect of each particular Warranty to which that item of
disclosure relates.
7.4 Where any Warranty is expressed to be given "so far as the Vendor is
aware", such term shall mean only that actual awareness of relevant facts,
matters or circumstances covered by the relevant Warranty as is held by any
of Charles Linn Haslam, Robert Mitchell Thornton Jnr and William Edwards
Greenhalgh, being directors of the Vendor at the date hereof, and for the
avoidance of doubt, none of such persons shall be required to undertake, or
shall be deemed to have undertaken, any enquiries in relation to the
subject matter of such Warranty.
7.5 Each of the Warranties is without prejudice to any other Warranty .
7.6 The rights and remedies of the Purchaser in respect of any breach of the
Warranties shall not be affected by Completion, or by the Purchaser failing
to exercise or delaying the exercise of any right or remedy or by any other
event or matter whatsoever save to the extent expressly provided in this
Agreement and, except by the Purchaser giving to the Vendor a specific and
duly authorised written waiver or release, and no single or partial
exercise of any right or remedy shall preclude any further or other
exercise.
7.7 None of the information supplied by the Company and/or any of its directors
or employees or its professional advisers prior to the date of this
Agreement to any
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of the Vendor or its agents, representatives or advisers in connection with
the Warranties and the Tax Deed and the contents of the Disclosure Letter,
or otherwise in relation to the business or affairs of the Company, shall
be deemed a representation, warranty or guarantee of its accuracy by the
Company and or any of its directors or employees to the Vendor, and the
Vendor waives any claims against the Company and or any of its directors or
employees which it might otherwise have in respect of it except to the
extent that the same arises as the result of the fraud wilful default or
fraudulent misrepresentation of any such person.
7.8 Notwithstanding the provisions of this Clause 7, the Vendor shall not be
liable in respect of any breach of the Warranties if and to the extent that
the losses occasioned thereby have been recovered under the Tax Deed.
7.9 No information relating to the Company of which the Purchaser has knowledge
whether actual or constructive shall prejudice any claim made by the
Purchaser under the Warranties or operate to reduce any amount recoverable
save to the extent that at or prior to the Completion the Purchaser or its
Directors has actual knowledge that any fact or matter within its actual
knowledge constitutes or will constitute upon Completion a breach of any
Warranties and, save as provided in this Clause 7.10, liability in respect
of the Warranties shall not be confined to matters discovered after
Completion.
7.10 The parties agree that any Warranty Claim shall be limited in accordance
with the provisions of this Clause 7 and Schedule 6 save in respect of any
Warranty Claim arising as a consequence of the fraud, wilful concealment or
wilful default of the Vendor, its officers or employees.
7.11 This Agreement and the Tax Deed contains the whole agreement between the
parties relating to the subject matter of this Agreement at the date hereof
to the exclusion of any terms implied by law which may be excluded by
contract. The Purchaser acknowledges that it has not been induced to enter
into this Agreement by, and so far as is permitted by law and except in the
case of fraud, wilful
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default or fraudulent misrepresentation, waives any remedy in respect of,
any Warranties, representations and undertakings not incorporated into this
Agreement.
7.12 So far as is permitted by law and except in the case of fraud, the parties
agree and acknowledge that the only right and remedy which shall be
available to the Purchaser in connection with or arising out of or related
to any of the statements contained in the Warranties shall be damages in
contract for breach of this Agreement and not rescission of this Agreement,
nor damages in tort or under statute (whether under the Misrepresentation
Act 1967 or otherwise), nor any other remedy (except, where relevant, under
the Tax Deed).
8. RETENTION AND JOINT ACCOUNT
8.1 The Retention shall on Completion be paid by the Purchaser into the Escrow
Account, which shall be opened in the name of the Purchaser's Solicitors as
escrow agent pursuant to instructions to the Purchaser's Solicitors to act
as such to be issued jointly by the Vendor and the Purchaser at Completion
in the Agreed Form. The Retention, together with interest earned thereon
shall be dealt with in accordance with the following sub-clauses.
8.2 If there is no reduction in the Consideration pursuant to Clause 5, the
Purchaser's Solicitors shall pay the Retention to the Vendor on the date
specified for payment in Clause 5.7.
8.3 If there is a reduction in the Consideration pursuant to Clause 5, the
Purchaser's Solicitors shall pay on the date specified for such payment in
Clause 5.7:-
8.3.1 to the Purchaser the Retention or, if less, the Adjustment; and
8.3.2 to the Vendor the balance (if any) of the Retention after deduction
of the amounts referred to in Clause 8.3.1.
8.4 The interest accrued on the Retention shall belong to the Vendor and the
Purchaser in proportion to the respective amounts of the Retention released
to each of them in accordance with Clauses 8.2 and 8.3 and shall be paid
(subject to deduction of any Taxation as may be required by law) to each of
them together
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with the relative portions of the Retention.
8.5 Any bank charges in respect of the Retention shall be paid by the Vendor or
the Purchaser as the case may be in proportion to the respective amounts of
the Retention received by the Vendor or the Purchaser in accordance with
Clauses 8.2 or 8.3 and such bank charges shall be paid by the Vendor or the
Purchaser as the case may be at the same time as the Vendor or the
Purchaser receive amounts of the Retention in accordance with Clauses 8.2
or 8.3.
8.6 The Vendor and the Purchaser shall as and when necessary give written
instructions signed by or on behalf of each of them to the Purchaser's
Solicitors in order to procure compliance with this clause 8. Save as
provided in Clause 8.7 the Purchaser's Solicitors shall not be required to
take any action with respect to the Escrow Account except on the joint
written instructions of the Vendor and the Purchaser.
8.7 Any payment to be made out of the Escrow Account to the Vendor or the
Purchaser pursuant to Clause 8.2 or 8.3 shall be made to the Vendor or the
Purchaser (as the case may be) in accordance with such written instructions
as may be given by the Vendor or the Purchaser (as the case may be).
9. PENSIONS
9.1 The Vendor accepts that on or as soon as practicable after Completion the
Company shall execute a deed under Rule 21.1 of the Rules governing the
Pension Scheme removing as Trustees of the Pension Scheme those persons who
are not directors or employees of the Company.
9.2 At Completion the Vendor shall give a written notice to the Trustees of the
Pension Scheme under Rule 24.2 of the said Rules that the Vendor is ceasing
to participate in the Pension Scheme with effect from the Completion Date,
such notice to be in the Agreed Form.
10. RESTRICTIVE COVENANTS
10.1 The Vendor undertakes with the Purchaser (for itself and as trustee for the
Company) that, except with the consent in writing of the Purchaser it will
not
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and will procure that no member of the Vendor's Group will, for a period
of twelve months from the Completion Date;
10.1.1 either on its own account or for or on behalf of or through or in
conjunction, association or by arrangement with any person whether
for its own benefit or that of others, directly or indirectly,
carry on or be engaged, concerned or interested in or in the
carrying on of any business which competes with the business of
the distribution and supply of marine equipment, engines, steering
control systems, personal watercraft and related products both
within the United Kingdom and the Republic of Ireland as carried
on by the Company at the date of this Agreement ("Restricted
Business") but this sub clause will not prevent the Vendor or any
member of the Vendor's Group from holding for investment up to 3%
of the issued share capital of a company the shares of which are
listed on any recognised stock exchange;
10.1.2 either on its own account or for or on behalf of or through or in
conjunction, association or by arrangement with any person whether
for his own benefit or that of others, directly or indirectly in
relation to the Restricted Business solicit, canvass or approach
any person, who, at any time during the 12 months prior to the
Completion Date:
(a) was provided with goods or services by the Company from
time to time; or
(b) had negotiations with the Company from time to time
relating to the provision of such goods or services;
for the purpose of offering to that person goods or services
similar to those with which he was so provided or otherwise to
entice away the custom or business of that person from the
Company;
10.1.3 either on its own account or for or on behalf of or through or in
conjunction, association or by arrangement with any person,
whether
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<PAGE> 26
for his own benefit or that of others, directly or indirectly
supply to any person specified in clause 10.1.2 goods or services
similar to those with which such person was so provided at any
time during the 12 months prior to the Completion Date or enter
into any transaction with such person in relation to such goods or
services;
10.1.4 either on its own account or for or on behalf of or through or in
conjunction, association or by arrangement with any person,
whether for his own benefit or that of others, directly or
indirectly, solicit or entice away or endeavour to entice away
from the Company any director holding executive office, manager,
or employee earning in excess of L.20,000 per annum who worked for
the Company at any time during the 12 months prior to the
Completion Date (whether or not such persons would commit any
breach of contract by reason of his leaving service);
10.2 The Vendor undertakes with the Purchaser (for itself and as trustee for
the Company) that, except with the prior consent in writing of the
Purchaser:
10.2.1 it will not and will procure that no member of the Vendor's Group
will use to the detriment of the Company or of any customer of the
Company or disclose divulge or communicate directly or indirectly
to any person any secret or confidential knowledge or secret or
confidential information relating to the business, transactions,
products or affairs of the Company or of any customer of the
Company (including but not limited to operations, processes,
plans, inventions, product information, know-how, design rights,
trade secrets, software, market opportunities, customers and
business affairs) or supply or disclose to any person the names or
addresses of any customers of the Company or details of any
contracts or negotiations to which the Company is a party or of
any tenders offers or proposals submitted or to be submitted by
the Company in
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connection with its business;
10.2.2 notwithstanding the provisions of Clause 10.2.1, the Vendor may
disclose information which would otherwise be confidential if and
to the extent:
(i) required by law;
(ii) necessary in the reasonable opinion of the Vendor's legal
advisers to comply with the requirements of any regulatory
authority or any stock exchange, whether in the United
Kingdom or elsewhere;
(iii) reasonably required to be disclosed to the legal advisers,
auditors, insurers and bankers of the Vendor provided that
such disclosure is made on a strictly confidential basis;
(iv) the information has come into the public domain through no
fault of the Vendor; or
(v) the Purchaser has given prior written approval to the
disclosure such approval not to be unreasonably withheld or
delayed.
10.2.3 it will not, and will procure that no member of the Vendor's Group
shall, at any time hereafter in relation to any trade, business,
firm, company or organisation use a name (whether registered or
not) or any trade mark or design the same as or confusingly
similar to the Sowester name or any name or trade mark of the
Company listed in Schedule 3.
10.3 Each of the covenants contained in clauses 10.1 and 10.2 shall be deemed
to be separate covenants and independent of each other.
10.4 While the parties hereto consider that the covenants contained in
clauses 10.1 and 10.3 are reasonable in order to protect the interests
of the Purchaser, it is agreed by and between the parties that if any
such restrictions shall be adjudged by a Court of competent jurisdiction
to be void or unenforceable but would be valid
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<PAGE> 28
and enforceable if deleted in part or reduced in application, such
restrictions shall apply with such deletion or modification as may be
necessary to make it valid and enforceable.
11. ANNOUNCEMENTS
11.1 If either of the Parties shall make any announcement of any kind in
respect of the subject matter of the Agreement, that Party shall procure
that a copy of the announcement is provided to the other as soon as
reasonably practicable after the making of such announcement.
12. ASSIGNMENT
12.1 This Agreement shall be binding on and shall enure for the benefit of
the successors in title of each party.
12.2 Save as provided in clause 12.3, neither of the parties hereto shall be
entitled to assign the benefit of any rights under this Agreement or the
Tax Deed.
12.3 The benefit of this Agreement and the Tax Deed shall be assignable by
the Purchaser by way of security to any bank or other institutional
lender or investor which has lent money to or subscribed for shares in
the Purchaser for the purpose of the acquisition of the Sale Shares, and
in the event of any such assignment, all references in this Agreement
and the Tax Deed to the Purchaser shall be deemed to include such
assignee.
13. COSTS
13.1 All expenses incurred by or on behalf of the parties, including all fees
of agents, representatives, solicitors, accountants and actuaries
employed by either of them in connection with the negotiation,
preparation or execution or this Agreement shall be borne solely by the
party who incurred the liability and the Company shall not have any
liability in respect of them.
14. TIME
14.2 Time shall be of the essence of this Agreement, both as regards the
dates and periods specifically mentioned and as to any dates and periods
which may by agreement in writing between or on behalf of the Vendor and
the Purchaser be
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substituted for them.
15. ENTIRE AGREEMENT
This Agreement (together with the Tax Deed) constitutes the whole
agreement between the parties hereto and supersedes any previous
agreements or arrangements between them relating to the subject matter
contained herein.
16. CONTINUING EFFECT OF AGREEMENT
16.1 No provisions of this Agreement or of any agreement or arrangement of
which it forms part, by virtue of which the agreement constituted by all
of the foregoing is subject to registration (if such be the case) under
the Restrictive Trade Practices Act 1976 shall take effect until the day
after particulars of such agreement have been furnished to the Director
General of Fair Trading pursuant to the terms of that Act.
16.2 Subject to Clause 16.1 all of the provisions of this Agreement, except
in so far as they set out obligations which have been fully performed at
Completion, shall remain in full force and effect notwithstanding
Completion or any other event or matter whatsoever, and shall not be
deemed to be waived or released except by a specific and duly authorised
written waiver or release by the Purchaser.
17. VARIATIONS
17.1 No variation of this Agreement shall be effective unless made in writing
and executed by or on behalf of each of the parties hereto.
18. RELEASES, WAIVERS ETC BY THE PURCHASER
18.1 The Purchaser may release or compromise any liability of the Vendor
hereunder or under the Tax Deed in whole or in part or grant to the
Vendor time or other indulgence in its absolute discretion without in any
way affecting or prejudicing its rights against the Vendor under the same
or a like liability whether joint and several or otherwise.
19. FURTHER ASSURANCE, INFORMATION
19.1 At any time after the date hereof the Vendor shall at the request and
cost of the Purchaser execute such documents and do such acts and things
as the Purchaser
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may reasonably require for the purpose of vesting the Sale Shares in the
Purchaser or its nominee and giving to the Purchaser the full benefit of
all the provisions of this Agreement or any agreement referred to herein
or executed in connection herewith.
19.2 Each of the parties agrees and undertakes to the other that it will upon
reasonable request by the other provide it with such information and
assistance, including reasonable access to premises and personnel and a
right to examine and copy such accounts, documents and records as may be
required by the other for the purposes of complying with any law or the
requirements of any regulatory authority or Stock Exchange provided that
no obligation to provide information or assistance shall arise if and to
the extent that the party requested to provide such information or
assistance considers that to provide such information or to give such
assistance would be damaging to its commercial interests. Any and all
information obtained by either party pursuant to this Clause 19.2 shall
be and remain at all times strictly confidential provided that such
information may be used by the party obtaining the same for the
disclosed purpose for which it was requested but not otherwise.
20. LAW AND JURISDICTION
20.1 This Agreement shall be governed by and construed in accordance with
English law and the parties shall submit to the exclusive jurisdiction of
the English Courts.
21. INTEREST
21.1 If the Vendor or the Purchaser defaults in the payment when due of any
sum payable under this Agreement (whether determined by agreement or
pursuant to an order of a court or otherwise) the liability of the Vendor
or the Purchaser (as the case may be) shall be increased to include
interest on such sum from the date when such payment is due until the
date of actual payment (as well after as before judgment) at a rate per
annum of 3 per cent above the base rate from time to time of (Bank of
Scotland). Such interest shall accrue from day to day.
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22. INVALIDITY
22.1 Each provision of this Agreement is severable and distinct from the
others. The parties intend that every such provision shall be and
remain valid and enforceable to the fullest extent permitted by law. If
any such provision is or at any time becomes to any extent invalid,
illegal or unenforceable under any enactment or rule of law, it shall to
that extent be deemed not to form part of this Agreement but (except to
that extent in the case of that provision) it and all other provisions
of this Agreement shall continue in full force and effect and their
validity, legality and enforceability shall not be thereby affected or
impaired, provided that the operation of this clause would not negate
the commercial intent and purpose of the parties under this Agreement.
22.2 If any provision of this Agreement is illegal or unenforceable as a
result of any time period being stated to endure for a period in excess
of that permitted by relevant law or a regulatory authority, that
provision shall take effect with a time period that is acceptable to the
relevant regulatory authorities subject to it not negating the
commercial intent of the parties under this Agreement.
23. COUNTERPARTS
23.1 This Agreement may be entered into in any number of counterparts and by
the parties to it on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
24. NOTICES
24.1 All notices, claims, demands or proceedings served by the parties with
respect to this Agreement or the Tax Deed shall be in writing and shall
be sufficiently served if delivered by hand or facsimile transmission or
sent by pre-paid first class recorded delivery post to the address of
the addressee as set out in this Clause 24, or to such other address
(being in Great Britain) as the addressee may from time to time have
notified in writing to the other party for the purpose of this clause
and shall be deemed to have been received:
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24.1.1 if sent by first class post 2 business days after posting
exclusive of the day of posting;
24.1.2 if delivered by hand on the day of delivery;
24.1.3 if sent by facsimile transmission at the time of transmission.
24.2 Communications addressed to the Vendor shall be sent to it at:
address: c/o Deloitte & Touche, Columbia Centre, Market Street,
Bracknell, Berkshire RG12 1PA
fax: 01344 303429
and marked for the attention of the Company Secretary. Communications
addressed to the Purchaser shall be sent to it at:
address: 6, Stinsford Road, Nuffield Estate, Poole, Dorset BH17 0SW
fax: 01202 669 245
and marked for the attention of R Edmond.
Notices addressed to the Vendor and given under Clause 6 of the Tax Deed
shall additionally be sent by facsimile to the following persons:
SunLink Services Inc
fax: USA 770-933-7010
and marked for the attention of Robert M Thornton Jnr;
and to: Bradley International Ltd
fax: UK (01902) 354 266
and marked for the attention of Michael Dell.
24.3 In proving service:
24.3.1 by delivery by hand it shall be necessary only to produce a
receipt for the communication signed by or on behalf of the
addressee;
24.3.2 by post it shall be necessary only to prove that the communication
was contained in an envelope which was duly addressed and posted
in accordance with this clause;
24.3.3 by facsimile transmission it shall be necessary only to produce a
transmission report showing full and correct transmission.
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<PAGE> 33
AS WITNESS the hands of the parties
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<PAGE> 34
SCHEDULE 1
THE COMPANY
Company Name: Sowester Limited
Company Number: 00463358
Date of Incorporation: 10 January 1949
Share Capital:
authorised L.50,000
issued L.50,000
Registered Office: 6 Stinsford Road
Nuffield Estate
Poole, Dorset
BH17 0SW
Directors: John Pattinson Buck
Robert Maurice Edmond
William Edwards Greenhalgh
Charles Linn Haslam
Robert Mitchell Thornton Jnr
Secretary: Robert Maurice Edmond
Shareholders and Number of Shares:
KRUG International (UK) Limited : 49,999
Mark Stockslager : 1
Latest Accounts on file at Companies House: 31 March 1997
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<PAGE> 35
SCHEDULE 2
WARRANTIES
1. INFORMATION
GENERAL INFORMATION
1.1 The information in Schedule 1 relating to the Company is true, complete and
accurate in all respects.
1.2 The Company has no, and has not previously had, any subsidiary or
subsidiary undertaking other than Sea Sales Limited and South Western
Marine Factors Limited.
1.3 The Sale Shares constitute the whole of the issued and allotted share
capital of the Company.
1.4 There is no option, right to acquire, pledge, lien or other encumbrance on,
over or affecting the Sale Shares or any of them and there is no agreement
or arrangement to give or create any such encumbrance and no claim has been
or will be made by any person to be entitled to any of the foregoing.
2. POWER TO CONTRACT
POWER OF THE VENDOR
2.1 The Vendor has and will have full power and authority to enter into and
perform this Agreement and the Tax Deed which constitutes or when executed
will constitute its legal, valid and binding obligations enforceable in
accordance with their respective terms.
2.2 The Vendor will be entitled to transfer the full legal and beneficial
ownership of the Sale Shares to the Purchaser on the terms of this
Agreement without the consent of any third party.
2.3 The execution and delivery of, and the performance of the obligations of
the Vendor, under this Agreement and the Tax Deed have been duly authorised
by all necessary corporate action on the part of the Vendor whether under
its Articles of Association or otherwise.
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<PAGE> 36
2.4 The execution and delivery of, and the performance by the Vendor of its
obligations under, and compliance with the provisions of, this Agreement
and the Tax Deed by the Vendor will not:
(a) result in a violation of any provision of the Memorandum or Articles
of Association of the Vendor; or
(b) result in a breach of, or constitute a default under, any instrument
to which the Vendor is a party or by which the Vendor is bound; or
(c) result in a violation of any law or regulation in the United Kingdom
having the force of law or of any order, judgment or decree of any
court or governmental agency or agreement to which the Vendor is a
party or by which the Vendor is bound.
2.5 No consent, authorisation, licence or approval of the Vendor's shareholders
or of any governmental, administrative, judicial or regulatory body,
authority or organisation is required to authorise the execution, delivery,
validity, enforceability or admissibility in evidence of this Agreement or
the Tax Deed or the performance by the Vendor of its obligations under this
Agreement or the Tax Deed.
2.6 KRUG International Corp. has and will have full power and authority to give
the undertaking referred to at Clause 6.2.4 which constitutes or when
executed will constitute its legal valid and binding obligations
enforceable in accordance with their respective terms.
3. ACCOUNTS
THE LAST ACCOUNTS
3.1 So far as the Vendor is aware (but so that (notwithstanding Clause 7.4),
for the purposes of this Warranty 3.1 the Vendor shall be deemed to have
actual knowledge of all facts or matters contained or referred to in any
communication relating to the Last Accounts addressed or copied to the
Vendor in writing) the Last Accounts were prepared in accordance with the
historical cost convention; and the bases and policies of accounting
adopted for the
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purpose of preparing the Last Accounts are materially the same as those
adopted in preparing the audited accounts of the Company in respect of the
three last preceding accounting periods.
3.2 So far as the Vendor is aware (but so that, (notwithstanding Clause 7.4)
for the purposes of this Warranty 3.2 the Vendor shall be deemed to have
actual knowledge of all facts or matters contained or referred to in any
communication relating to the Last Accounts addressed or copied to the
Vendor in writing) the Last Accounts:
3.2.1 give a true and fair view of the assets and liabilities of the
Company at the Last Accounts Date and its profits for the financial
period ended on that date;
3.2.2 comply with the requirements of the Companies Act and other relevant
statutes;
3.2.3 are not affected by any extraordinary item;
3.2.4 make fair and reasonable provision or reserve for all liabilities
and capital commitments of the Company in the Last Accounts;
3.3 So far as the Vendor is aware the accounting reference date of the Company
is and has at all times during the last 5 years been 31 March.
4. CORPORATE MATTERS
OPTIONS
4.1 The Vendor has not entered into any agreements or arrangements which
provide for the present or future issue, allotment or transfer of or grant
to any person the right (whether conditional or otherwise) to call for the
issue, allotment or transfer of any share or loan capital of the Company
(including any option or right of pre-emption or conversion).
NEW ISSUES OF CAPITAL
4.2 The Vendor is not party to any agreement or arrangement pursuant to which
any share or loan capital has been issued or allotted, or agreed to be
issued or allotted, by the Company since the Last Accounts Date.
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<PAGE> 38
COMMISSIONS
4.3 The Vendor is not entitled to receive from the Company any finder's fee,
brokerage or other commission in connection with the sale and purchase of
the Sale Shares under this Agreement.
COMPANY RECORDS
4.4 No notice or allegation that any of the Statutory Books of the Company or
the Memorandum and Articles of Association is incorrect or should be
rectified has been received by the Vendor.
4.5 No resolution of any kind of the Vendor as the sole beneficial shareholder
of the Company has been passed which has not been duly notified to the
Company and the Vendor has not exercised any right conferred on it by
virtue of Article 22 of the Company's Articles of Association.
4.6 So far as the Vendor is aware all charges in favour of the Company have
been registered in accordance with the provisions of CA.
INVESTIGATIONS
4.7 So far as the Vendor is aware (but so that, (notwithstanding Clause 7.4)
for the purposes of this Warranty 4.7, the Vendor shall be deemed to have
actual knowledge of all facts or matters which are known or which ought
reasonably to have been known by Charles Linn Haslam, Robert Mitchell
Thornton Jnr, or William Edwards Greenhalgh in their capacity as
non-executive directors of the Company) there are not pending, or in
existence, any investigations or enquiries by, or on behalf of, any
governmental or other body in respect of the affairs of the Company and so
far as the Vendor is aware (but so that, (notwithstanding Clause 7.4) for
the purposes of this Warranty 4.7, the Vendor shall be deemed to have
actual knowledge of all facts or matters which are known or which ought
reasonably to have been known by Charles Linn Haslam, Robert Mitchell
Thornton Jnr, or William Edwards Greenhalgh in their capacity as
non-executive directors of the Company) there are no circumstances which
are likely to give rise to such investigation or enquiry.
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SUBSIDIARIES, ASSOCIATIONS AND BRANCHES
4.8 So far as the Vendor is aware the Company is not the holder or beneficial
owner of and has not agreed to acquire any share or loan capital of any
company (whether incorporated in the United Kingdom or elsewhere).
5. TAX MATTERS
5.1 RETURNS INFORMATION PAYMENT COMPLIANCE AND CLEARANCES
No Event has been effected or occurred in the six years ending with
Completion by the Company in respect of which any consent or clearance from
the Inland Revenue or other Taxation authority was required sought or could
have been obtained (i) without such consent or clearance having been
validly obtained before the Event was effected or occurred and (ii)
otherwise than in accordance with the terms of and so as to satisfy any
conditions attached to such consent or clearance (iii) otherwise than at a
time when and in the circumstances in which such consent or clearance was
valid and effective; and (iv) in which the particulars furnished fully and
accurately disclosed all facts and circumstances material to the decision
of such Taxation authority provided that this paragraph 5.1 shall not apply
to Value Added Tax, PAYE or National Insurance Contributions.
5.2 SHARE CAPITAL, DISTRIBUTIONS AND SIMILAR PAYMENTS
5.2.1 The Company has not since incorporation repaid or agreed to repay or
redeemed or agreed to redeem or purchase or agreed to purchase any
of its share capital or capitalised, or agreed to capitalise in the
form of debentures or redeemable shares, any profits or reserves of
any class or description or passed any resolution so to do.
5.2.2 The Company has not issued any stock dividends nor does the Company
own any such share capital.
5.3 LOSSES, CARRY FORWARD OF LOSSES, SURPLUS ACT
The Company has no trading or capital losses whether carried forward,
deemed or actual or otherwise neither has it any surplus advance
corporation tax.
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5.4 GROUP RELIEF CONSORTIUM RELIEF AND ACT SURRENDER
The Disclosure Letter contains particulars of all arrangements and
agreements relating to group relief (as defined by S402 ICTA 1988) to which
the Company is or has been a party for the last 3 years ending on the
Completion Date and
5.4.1 all claims by the Company for group relief were when made and are now
valid and have been or will be allowed by way of relief from
corporation tax;
5.4.2 the Company has not made nor is liable to make any payment under any
arrangement or agreement save in consideration for the surrender of
group relief allowable to the Company by way of relief from
corporation tax; and
5.4.3 the Company has received all payments due to it under any arrangement
or agreement for any surrender of group relief made by it and the
payments are not liable to be refunded in whole or in part
5.5 SURRENDER OF ADVANCE CORPORATION TAX
The Disclosure Letter contains full particulars of all arrangements and
agreements to which the Company is or has been a party relating to the
surrender of advance corporation tax made or received by the Company under
s 240 ICTA 1988 and:-
5.5.1 the Company has not paid nor is liable to pay for the benefit of any
advance corporation tax which is or may become incapable of set-off
against the Company's liability to corporation tax; and
5.5.2 the Company has received all payments due to it under any
arrangements or agreement for any surrender of advance corporation
tax made by it and the payments are not liable to be refunded in
whole or in part.
5.6 SECONDARY LIABILITY
No transaction or event has occurred in consequence of which the Company is
or may be held liable for any Taxation under s 190 TCGA, s 767A ICTA, s
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<PAGE> 41
247(7) ICTA, s 179(11) TCGA, s 137(4) TCGA, s 191 TCGA, s 96(8) FA
1990, s 43 VATA.
5.7 VALUE ADDED TAX ("VAT")
The Company has not at any time been or been treated as being a
member of a group registration made pursuant to Section 43 of VATA
nor are there any circumstances whereby it could be deemed to be a
member of such a group for any of the purposes of VAT.
5.8 RESIDENCE
The Company is incorporated in the UK and is and has always been
resident in the UK for the purposes of Taxation and is and has not
and has never been deemed to be resident elsewhere in the world.
5.9 LEAVING THE GROUP
The exclusion or completion of this Agreement will not result in any
profit or gain being deemed to accrue to the Company for Taxation
purposes pursuant to s 179 TGCA.
6. FINANCING
BANK AND OTHER BORROWINGS
6.1 So far as the Vendor is aware accurate details of all limits on the
Company's bank overdraft facilities are set out in the Disclosure
Letter.
LIABILITIES
6.2 So far as the Vendor is aware there are no liabilities (including
contingent liabilities) which are outstanding on the part of the
Company other than those liabilities disclosed in the Last Accounts
or incurred in the ordinary and proper course of trading since the
Last Accounts Date.
BANK ACCOUNTS
6.3 The Vendor has not opened any Bank accounts in the name of or for the
benefit of the Company.
CONTINUATION OF FACILITIES
6.4 So far as the Vendor is aware there are no debentures, acceptance
credits,
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overdrafts, loans or other financial facilities (other than the Bank
overdraft referred to at Warranty 6.1 above and any leases in the
ordinary course of business) outstanding to the Company which will not
be repaid or discontinued at Completion.
6.5 No member of the Vendor's Group is the beneficiary of any guarantee,
cross-guarantee, netting arrangement, indemnity or suretyship given
by the Company in respect of the liabilities of any member of the
Vendor's Group and in respect of any such guarantee, cross guarantee,
netting arrangement indemnity or suretyship existing prior to the
date hereof there are no circumstances in existence in respect of any
member of the Vendor's Group which could result in any such claim or
liability being made or arising.
7. TRADING
7.1 Since 1 April 1996 neither the Vendor nor Charles Linn Haslam,
William Edwards Greenhalgh or Robert Mitchell Thornton Jnr have at
any time entered into any arrangement or commitment which binds or
purports to bind the Company to any transaction, arrangement,
omission or commitment whatsoever which has not been expressly
approved by the Board of Directors of the Company at a meeting of the
Board of Directors at which John Pattinson Buck and Robert Maurice
Edmond were present.
VENDOR'S OTHER INTERESTS AND LIABILITIES TO THE COMPANY
7.2 There is no outstanding indebtedness of the Vendor or any member of
the Vendor's Group to the Company.
SHARES
7.3 So far as the Vendor is aware compliance with the terms of this
Agreement does not and will not:
7.3.1 result in the creation imposition crystallisation or
enforcement of any encumbrance whatsoever on any of the
assets of the Company;
7.3.2 result in any indebtedness of the Company becoming due and
payable or capable of being declared due and payable prior
to its stated maturity.
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<PAGE> 43
LITIGATION, DISPUTES AND WINDING UP
7.4 So far as the Vendor is aware there are no proceedings pending or
threatened either by or against the Company and so far as the Vendor
is aware there are no circumstances which are likely to give rise to
any litigation or arbitration.
7.5 The Vendor is not engaged in any dispute with any revenue or other
official department in the United Kingdom or elsewhere, in relation
to the affairs of the Company and so far as the Vendor is aware there
are no facts which may give rise to any dispute with regard to the
Company.
7.6 So far as the Vendor is aware, no order has been made or petition
presented or resolution passed for the winding up of the Company; nor
has any distress, execution or other process been levied in respect
of the Company which remains undischarged; nor is there any
unfulfilled or unsatisfied judgment or court order outstanding
against the Company.
COMPLIANCE WITH STATUTES
7.7 Neither the Vendor nor any of Charles Linn Haslam, Robert Mitchell
Thornton Jnr and William Edwards Greenhalgh (during the course of
their duties in relation to the Company) has committed or omitted to
do any act or thing the commission or omission of which to their
respective knowledge is or could be in contravention of any act,
order, regulation or the like (whether of the United Kingdom or
elsewhere) giving rise to any fine, penalty, default proceedings or
other liability on the part of the Company.
BUSINESS NAMES
7.8 No member of the Vendor's Group has at any time carried on business
in the name of the Company or any name incorporating or similar to
the Company name.
INSIDER CONTRACTS
7.9 There is not now outstanding and there has not at any time during the
three years prior to the date of this Agreement been outstanding any
contract or
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<PAGE> 44
arrangement with the Company in which the Vendor or any of Charles
Linn Haslam, Robert Mitchell Thornton Jnr and William Edwards
Greenhalgh is or has been interested whether directly or indirectly
(save by virtue of being a shareholder in the Company) which was not
duly disclosed at the relevant Board Meeting at which the matter in
question was approved. For the purposes of this Warranty 7.9, the
expression "interested" shall:
(i) as regards the Vendor mean that the Vendor or any member of the
Vendor's Group is the legal or beneficial owner of shares of a
company or firm which is a party to any contract or arrangement
with the Company (a "counterparty") or that the Vendor or any
member of the Vendor's Group has entered into an agreement or
arrangement with a counterparty such that the Vendor or a member
of the Vendor's Group might be expected to benefit or suffer loss
as a consequence of the contract or arrangement between the
Company and the counterparty;
(ii) as regards Charles Linn Haslam, Robert Mitchell Thornton Jnr and
William Edwards Greenhalgh have the meaning given to that
expression for the purposes of Section 317 CA.
MANAGEMENT REPORTS
7.10 All written reports, concerning the Company by external financial or
management consultants commissioned by or addressed to the Vendor
within the period from 1st April 1996 to the date of this Agreement
are listed in the Disclosure Letter.
8. EMPLOYMENT
EMPLOYEES AND TERMS OF EMPLOYMENT
8.1 Neither the Vendor nor any member of the Vendor's Group has at any
time entered into any agreement or arrangement (whether or not
legally binding) or made any offer or payment to any officer or
employee of the Company of any emolument, incentive bonus or other
material benefit whatsoever.
DISPUTES AND NEGOTIATIONS
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<PAGE> 45
8.2 So far as the Vendor is aware, there are no facts which might suggest
that there may be any industrial dispute involving the Company.
PENSIONS
8.3 No undertaking or assurance has been given to employees of the
Company by the Vendor or any of Charles Linn Haslam, William Edwards
Greenhalgh or Robert Mitchell Thornton Jnr as to the continuance or
introduction or increase or improvement of any pension rights or
entitlements.
8.4 Since the date of the last actuarial valuation of the Scheme no power
or discretion has been exercised by any Trustee of the Scheme who is
an officer of the Vendor to augment or improve any benefit under the
Scheme nor has any promise or announcement been made to do so.
8.5 No employee or director of any member of the Vendor's Group has any
entitlement to benefits under the Pension Scheme.
8.6 Since 1 April 1996 none of the Company's employees receive benefits
under or have an entitlement to receive benefits under any pension
scheme of any member of the Vendor's Group.
9. ASSETS
9.1 The Vendor has not since 1 April 1996 disposed or otherwise dealt
with or purported to dispose or otherwise deal with any asset
(including Intellectual Property) owned by the Company or used by it
in its business.
INSURANCE
9.2 So far as the Vendor is aware, insofar as any of the insurances
maintained by or on behalf of the Company are group insurance
policies maintained for the benefit of the Company and/or other
members of the Vendor's Group no member of the Vendor's Group has
done or permitted to be done or omitted to be done anything which
would result in such policies of insurance, insofar as they are for
the benefit of the Company, be void or voidable (other than as a
result of the Vendor entering into this Agreement).
9.3 All group insurance policies under which the Company is an insured
are
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<PAGE> 46
attached to the Disclosure Letter.
INTELLECTUAL PROPERTY RIGHTS AND TRADE SECRETS
9.4 Neither the Vendor nor any member of the Vendor's Group owns or
otherwise uses any Intellectual Property Right used or required by
the Company in connection with its business.
9.5 Neither the Vendor nor any member of the Vendor's Group has at any
time done or omitted to do anything which would in any way prejudice
the Intellectual Property Rights or any application therefor or the
Company's interest in them.
9.6 Neither the Vendor nor any member of the Vendor's Group has since 1st
April 1996 disclosed or permitted to be disclosed or undertaken or
arranged to disclose and is not obliged to disclose to any person
other than the Purchaser any of the Company's know-how, trade
secrets, confidential information, price lists or lists of customers
or suppliers save to the extent that the same are already in the
public domain.
9.8 So far as the Vendor is aware there exists no actual or threatened
infringement (including misuse of confidential information) or breach
by any third party of any of the Intellectual Property Rights owned
by, licensed to or used by the Company.
10. PROPERTY
TITLE
10.1 So far as the Vendor is aware the Property comprises all the property
owned occupied or otherwise used by the Company.
CONDITION OF THE PROPERTY
10.2 Neither the Vendor nor any member of the Vendor's Group have since 1
April 1996 commissioned or received any valuations, surveys or other
investigations in relation to the Property.
11. ENVIRONMENTAL
11.1 Neither the Vendor nor any member of the Vendor's Group has in its
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<PAGE> 47
possession any environmental reports, surveys and audits (if any),
correspondence or data specifically relating to the application of
Environmental Laws to the Property which have not been delivered to
the Company.
11.2 The Vendor has received no written notice of any civil, criminal or
administrative claim, accusation, allegation, notice of violation,
remediation notice, demand, cause of action, abatement or other order
or notice (conditional or otherwise) in the relevant jurisdiction in
which the Property is situated or the Company's business is conducted
and no such notice has been made or brought against or served on the
Vendor in relation to any Environmental Matters relating to the
Company .
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<PAGE> 48
SCHEDULE 3
TRADE NAMES (CLAUSE 10.2.3)
SOWESTER
WESTCO
SOUTH WESTERN MARINE FACTORS LIMITED
SWMF
THE NAME TO GO TO SEA WITH
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<PAGE> 49
SCHEDULE 4
SHORT PARTICULARS OF THE PROPERTY
PART 1: FREEHOLD PROPERTY
<TABLE>
<CAPTION>
DESCRIPTION LEGAL OWNER ROOT OF TITLE/TITLE NUMBER
<S> <C> <C>
6, Stinsford Road The Company DT 184942
Nuffield Estate, Poole,
Dorset BH17 0SW
</TABLE>
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<PAGE> 50
SCHEDULE 5
PENSION ARRANGEMENTS
[Not Used]
-47-
<PAGE> 51
SCHEDULE 6
VENDOR'S PROTECTION PROVISIONS
1. LIMITATION OF LIABILITY
Notwithstanding the provisions of Clauses 7.1 to 7.7, the Vendor shall
not be liable under [the Warranties or, where expressly stated, under
the Tax Deed]:
1.1 TIME LIMITS
In respect of any claim unless notice of such claim is given
in writing by the Purchaser to the Vendor setting out such
reasonable details as are then available of the matter in
respect of which the claim is made including an estimate if
practicable of the amount of such claim within 18 months
following Completion or in respect of any claim under the Tax
Deed or Tax Warranties on or before the sixth anniversary of
Completion and any such claim shall (if it has not been
previously satisfied, settled or withdrawn) be deemed to be
withdrawn six months after the relevant time limit set out
above unless legal proceedings in respect of it have been
commenced by being both issued and served.
1.2 MINIMUM CLAIMS
In respect of any Warranty Claim arising from any single
circumstance if the amount of the claim does not exceed
L.10,000 (save that claims relating to a series of connected
matters shall be aggregated for this purpose) but the Vendor
shall not be liable for a claim exceeding the limit specified
in this paragraph 1.2 unless the liability determined by a
competent court or agreed between the parties in respect of
any such claim (excluding interest but including costs and
expenses) also exceeds that amount.
1.3 AGGREGATE MINIMUM CLAIMS
In respect of any Warranty Claim unless the aggregate amount
of all claims for which the Vendor would otherwise be liable
under the Warranties and the Tax Deed exceeds L.60,000,
whereupon, subject to
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Clause 1.2, the Vendor shall be liable for the whole of such
amount and not merely the excess.
1.4 MAXIMUM CLAIMS
In respect of any claim under the Warranties or the Tax Deed
to the extent that the aggregate amount of the liability of
the Vendor for all claims made under the Warranties and the
Tax Deed would exceed L.6,500,000.
1.5 CONTINGENT LIABILITIES
In respect of any Warranty Claim relating to a liability which
is contingent unless and until such contingent liability
becomes an actual liability provided that the time limit
specified in paragraph 1.1 above shall not apply in respect of
a Warranty Claim made in relation to such a liability if
notification in accordance with paragraph 1.1 was made to the
Vendor in relation to the matters giving rise to the
contingent liability within the time period specified therein
and provided further that the six month period for the
commencement of proceedings shall commence on the date on
which it comes to the knowledge of the Purchaser that the
contingent liability in question has ceased to be contingent
and PROVIDED FURTHER THAT if the contingent liability has not
become an actual liability within 12 years of notification of
such contingent liability then the Vendor shall not be liable
in respect of such contingent liability.
1.6 PROVISIONS IN THE ACCOUNTS
In respect of any Warranty Claim if and to the extent that any
specific provision or reserve is made for the matter giving
rise to the claim in the Last Accounts as updated by any
reserves in the Management Accounts relating to the Company as
at 31 March 1998.
1.7 In respect of any Warranty Claim arising from any matter, act,
omission or circumstance (or any combination thereof)
(including the aggravation
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<PAGE> 53
of a matter or circumstance) to the extent that the same would
not have occurred but for:
(i) Voluntary acts of the Purchaser
any voluntary act, omission or transaction of the
Purchaser or any member of the Purchaser's Group or
their respective directors (in their capacity as
such) or their successors in title after Completion
done or omitted to be done by such person in the
actual knowledge that such act omission or
transaction will result in or exacerbate a breach of
any Warranty;
(ii) Changes in Legislation
the passing of, or any change in, (made after the
date of this Agreement), any law, rule, regulation,
interpretation of the law by any court or tribunal,
any published administrative practice of any
government, governmental department, agency or
regulatory body including (without prejudice to the
generality of the foregoing) any increase in the
rates of Taxation or any imposition of Taxation or
any withdrawal of relief from Taxation not actually
in effect at the Completion Date;
(iii) Accounting and Taxation Changes
any change in accounting or Taxation policy, bases
or practice of the Purchaser introduced or having
effect after Completion.
1.8 INSURANCE
In respect of any Warranty Claim to the extent that
(i) the losses arising from such claim are covered by a
policy of insurance and recovery is made thereunder;
or
(ii) the Purchaser would have been entitled to recover
the losses arising from such claim under any policy
of insurance in effect in the name of the Company as
at the Completion Date and as such has been
terminated or otherwise allowed to lapse by the
Company.
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<PAGE> 54
1.9 PURCHASER'S KNOWLEDGE
In respect of any Warranty Claim to the extent that the
relevant facts, matters or circumstances giving rise to the
claim were within the actual knowledge of the Purchaser or its
directors and were actually known by the Purchaser or its
directors to constitute a breach of the Warranties prior to
the Completion Date.
1.10 NET BENEFIT
In respect of any claim for any losses suffered by the
Purchaser as a consequence of any breach of the Warranties to
the extent of any corresponding savings by or net benefit to
the Purchaser or any subsidiary or holding company of the
Purchaser arising from the facts or matters giving rise to
such breach.
2. MITIGATION OF LOSS
The Purchaser shall procure that all reasonable steps are taken and all
reasonable assistance is given to avoid or mitigate any losses which in
the absence of mitigation might give rise to a liability in respect of
any claim under this Agreement.
3. CONDUCT OF CLAIMS
3.1 If the Purchaser becomes aware that any matter may give rise
to a claim against the Vendor under the Warranties notice of
that fact shall be given as soon as reasonably practicable to
the Vendor and in any event within ten working days of
becoming so aware;
3.2 Without prejudice to the validity of the claim or alleged
claim in question, the Purchaser shall, and shall procure that
the Company shall, for the purpose of investigating the matter
or circumstances alleged to give rise to such claim, and
whether and to what extent any amount is payable in respect of
such claim give the Vendor and its accountants and
professional advisers all such information and assistance as
the Vendor or
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<PAGE> 55
its accountants or professional advisers may reasonably
request, including (upon reasonable notice and at reasonable
times) access to premises and personnel and the right to
examine and copy or photograph any assets, accounts, documents
and records in relation to the matter or circumstance alleged
to give rise to such claim or in relation to the issue of
whether and to what extent any amount is payable in respect of
such claim provided that nothing in this paragraph 3 shall
require disclosure to the Vendor of or the giving of access to
any information protected by legal privilege or which is advice
relating to the validity of a claim by the Purchaser under this
Agreement or the Tax Deed.
3.3 If the claim in question is a result of or in connection with
a claim by or liability to a third party then:
(i) subject as provided in paragraph (ii) below no admission
of liability shall be made by or on behalf of the
Purchaser or the Company and the claim shall not be
compromised, disposed of or settled without the consent
of the Vendor (such consent not to be unreasonably
withheld or delayed);
(ii) the Vendor shall be entitled at its own expense in its
absolute discretion to take such action as it shall deem
necessary to avoid, dispute, deny, defend, resist,
appeal, compromise or contest such claim or liability
(including, without limitation, making counterclaims or
other claims against third parties) in the name of and
on behalf of the Purchaser or the Company and to have
the conduct of any related proceedings, negotiations or
appeals; PROVIDED ALWAYS THAT if the Purchaser is able
to produce reasonable evidence that commencement of
proceedings would materially prejudice the goodwill of
the Company, the Vendor shall not be entitled to proceed
unless the Vendor is able to produce evidence in the
form of an opinion of a leading counsel
-52-
<PAGE> 56
who is reasonably acceptable to the Purchaser that, on
the evidence then available to him, the claim in
question has a prima facie chance of success and
provided further that in the event that the case is
decided against the Vendor (or the person on whose
behalf it has pursued such claim), the Vendor shall be
liable for the full amount of any award or judgment
made; and
(iii) the Purchaser will give, subject to an undertaking by
the Vendor to pay all reasonable costs and expenses
thereof, all such information and assistance, including
access to premises and personnel, and the right to
examine and copy or photograph any assets, accounts,
documents and records, for the purpose of avoiding,
disputing, denying, defending, resisting, appealing,
compromising or contesting any such claim or liability
as the Vendor or its professional advisers reasonably
request. The Vendor agrees to keep all such information
confidential and only to use it for such purpose;
(iv) in connection with any proceedings conducted by the
Vendor pursuant to sub-paragraph (ii) above, the Vendor
shall
(a) give to the Purchaser all such information and
assistance as the Purchaser may reasonably
request, for the purpose of monitoring the
progress of such action provided that nothing in
this paragraph 3 shall require disclosure to the
Purchaser of any information protected by legal
privilege or which is advice relating to the
validity of a claim by the Vendor under this
Agreement or the Tax Deed and provided further
that any information disclosed to the Purchaser
pursuant to this paragraph (iv)(a) shall be and
shall be kept by the Purchaser, strictly
confidential; and
(b) consult with the Purchaser on a regular basis and
as
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<PAGE> 57
and when the Purchaser may reasonably request on the
progress of the proceedings in question and any steps to
be taken in connection therewith.
4. PRIOR RECEIPT
If the Vendor pays an amount in discharge of any Warranty Claim and the
Purchaser subsequently recovers (whether by payment, discount, credit,
relief or otherwise) from a third party a sum which is referable to the
subject matter of the claim and which would not otherwise have been
received by the Purchaser, the Purchaser shall notify the Vendor of that
fact as soon as reasonably practicable giving reasonable details of the
amounts recovered, shall give to the Vendor such further information as
the Vendor may reasonably request in relation to such recovery and shall
pay to the Vendor an amount equal to (i) the sum recovered from the third
party less any costs and expenses incurred in obtaining such recovery and
any Taxation thereon or (ii) if less, the amount previously paid by the
Vendor to the Purchaser.
5. DOUBLE CLAIMS
The Purchaser shall not be entitled to recover from the Vendor under
this Agreement or the Tax Deed to the extent that recovery has already
been made in respect of the same damage suffered, and accordingly the
Vendor shall not be liable in respect of any breach of the Agreement if
and to the extent that the losses are or have been included in a claim
under the Tax Deed which has been satisfied, nor shall the Vendor be
liable in respect of a claim under the Tax Deed if and to the extent
that the losses are or have been included in a claim for breach of the
Agreement which has been satisfied.
6. TAX
In calculating the liability of the Vendor for any breach of the
Warranties there shall be taken into account the amount (if any) by
which any Taxation for which the Purchaser would otherwise have been
accountable or liable to be assessed in respect of the matter giving
rise to the breach in question had no such breach
-54-
<PAGE> 58
occurred is actually reduced or extinguished as a direct result of the
matter giving rise to such breach.
7. TAX DEED
In respect of any claim under the Tax Deed not being a claim in respect
of Taxation which is not the primary liability of the Company if the
amount of the claim does not exceed L.5,000 (save that claims relating to
a series of connected matters shall be aggregated for this purpose) and
the Vendor shall not be liable for a claim exceeding the limit specified
in this paragraph 7 unless the liability determined by the Relevant Tax
Authority or a competent court or agreed between the Parties in respect
of such claim (excluding interest but including costs, expenses, fines
and penalties) also exceeds that amount.
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<PAGE> 59
SIGNED BY )
for and on behalf of ) /s/ C.L. HASLAM
KRUG INTERNATIONAL (UK) LIMITED )
in the presence of /s/ J.M. CLAMP
SOLICITOR
SIGNED BY J.P. BUCK )
for and on behalf of ) /s/ JOHN P. BUCK
BLAKEDEW NINETY FOUR LIMITED ) /s/ H.P. BARRETT-HAUGE
SOLICITOR
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<PAGE> 1
EXHIBIT 10.2
DATED 16th April 1998
KRUG INTERNATIONAL (UK) LIMITED
- AND -
BLAKEDEW NINETY FOUR LIMITED
---------------------------------------
DEED OF TAX COVENANT
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NEW COURT, 1 BARNES WALLIS ROAD
SEGENSWORTH, HAMPSHIRE PO15 5UA
REF: ELY.79
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TABLE OF CONTENTS
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CLAUSE HEADING PAGE NUMBER
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1. Definitions and interpretation
2. Covenant
3. Exclusions
4. Overprovisions and savings
5. Recovery from other persons
6. Disputes and conduct of claims
7. Tax returns
8. Due date of payment and interest
9. Deductions and Withholdings
10. Enforceability
11. Release
12. Assignability
13. General
14. Notices
15. Governing Law and Jurisdiction
The First Schedule
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THIS DEED made the 16th day of April 1998
BETWEEN :
(1) THE PERSON whose name and address is set out in the First Schedule
hereto (the "Covenantor"); and
(2) BLAKEDEW NINETY FOUR LIMITED a company registered under number
3516383 and whose registered office is at New Court, 1 Barnes Wallis
Road, Segensworth, Fareham, Hampshire PO15 5UA (the "Purchaser" which
expression shall, unless the context does not so permit, include its
successors in title).
WITNESSES as follows
1. DEFINITIONS AND INTERPRETATION
In this Deed
1.1 except where otherwise provided or unless there is something in the
subject matter or context inconsistent therewith, words and
expressions defined in the Agreement have the same meaning:-
1.2 the following words and expressions have the meanings set under
them:-
"AGREEMENT"
1.2.1 the agreement of even date herewith between the Covenantor and the
Purchaser for the sale and purchase of the Sale Shares;
"BUSINESS DAY"
1.2.2 a day (other than a Saturday) when banks are open for transaction of
normal banking business in London;
"CLAIM"
1.2.3 any assessment, notice, demand, letter or other document issued or
action taken on behalf of any Tax Authority from which it appears
that the Company is or
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may be placed under a Liability for Taxation (as hereinafter
defined);
"COMPANY"
1.2.4 Sowester Limited a company registered under number 463358 whose
registered office is at Stinsford Road, Nuffield Industrial Estate,
Poole BH17 0SW;
"COMPLETION"
1.2.5 completion of the sale and purchase of the Sale Shares under the
Agreement;
"COMPLETION ACCOUNTS DATE"
1.2.6 means 31 March 1998;
"DISTRIBUTION"
1.2.7 includes anything which is or is deemed to be a dividend or
distribution for the purposes of any Taxation and shall also include
any other Event which gives rise to an obligation to account for
advance corporation tax or amounts corresponding to or similar to
advance corporation tax;
"EVENT"
1.2.8 includes (without limitation) any payment, transaction act omission
any change in the residence of any person for the purpose of any tax,
the death of any person and a failure to take any action which would
avoid an apportionment or deemed distribution of income whether or
not the Company or the Purchaser is a party thereto and including
Completion and references to an Event occurring on or before any date
or time shall include an Event deemed pursuant to any Taxation
Statute, to occur or be treated or regarded as occurring on or before
that date or time;
"LIABILITY FOR TAXATION"
1.2.9 any liability of the Company to make a payment of or in respect of
Taxation and also:-
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1.2.9.1 the loss, counteraction, nullification, disallowance or
clawback for whatever reason of any relief, to the
extent that such relief is treated as an asset in
preparing the Completion Accounts or is taken into
account in computing (and so reducing or eliminating)
any provision which appears, or which but for the
presumed availability of the relief in question would
have appeared, in the Completion Accounts (an "Accounts
Relief");
1.2.9.2 the nullification, cancellation or set-off of a right
to repayment of Taxation to the extent that such
repayment is treated as an asset in preparing the
Completion Accounts or is taken into account in
computing (and so reducing or eliminating) any
provision which appears, or which but for the presumed
availability of the relief in question would have
appeared in the Completion Accounts (an "Accounts
Relief"); and
1.2.9.3 the set-off against, income profit or gains earned
accrued or received on or before the date hereof of any
relief to the extent that such was treated as an asset
in the Completion Accounts or any relief, allowance or
credit which is not available before the date hereof
but arises after the date hereof in circumstances
where, but for such set-off the Company would have had
an actual Taxation liability in respect of which the
Purchaser would have been able to make a claim against
the Covenantor under this Deed;
and:-
in a case within paragraph 1.2.9.1 and 1.2.9.3 above
the amount of the relief, allowance or credit or if
such relief allowance or credit is a deduction from or
set-off against gross income profits or against the
amount of Taxation which would on the basis of tax
rates current at the date of such loss counteraction
nullification disallowance or clawback have been saved
thereby but for such loss, counteraction nullification
disallowance or clawbacks;
or:-
in a case within paragraph 1.2.9.2 above the amount of
the repayment which would otherwise have been obtained
shall be treated as an amount of Taxation for which a liability on
the Company has arisen and fallen due; and in this Deed references to
"relief" means any
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loss, allowance, exemption, set-off, deduction, credit or other
relief from or relating to Taxation or to the computation of income,
profits, or gains for the purposes of any Taxation and or right to
repayment of Tax.
"TAX AUTHORITY"
1.2.10 any taxing or other authority (whether within or outside the United
Kingdom) competent to impose any Liability for Taxation.
"TAXATION STATUTE"
1.2.11 any statute, enactment, law, regulation or arrangement wheresoever
enacted or issued coming into force or entered into providing for or
imposing any Taxation;
1.3 headings are for convenience only and shall not affect the
interpretation hereof;
1.4 references to any statutory provisions shall include any statute or
statutory provision which amends extends consolidates or replaces the
same or which has been amended extended consolidated or replaced by
the same and shall include orders regulations instruments bye-laws
and other subordinate legislation made under the relevant statute or
statutory provision;
1.5 references to any income profits or gains earned accrued or received
on or before a particular date or time or in respect of a particular
period shall include any income profits or gains deemed pursuant to
any relevant Taxation Statute to have been or treated or regarded as
earned, accrued or received on or before that date or time or in
respect of that period of the purpose of any Taxation;
1.6 unless the context otherwise requires the singular shall include the
plural and vice versa, the masculine shall include the feminine and
references to persons shall include bodies corporate, unincorporated
and associations and partnerships.
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2. COVENANT
Subject as hereinafter provided the Covenantor hereby covenants with
the Purchaser to pay to the Purchaser (so far as possible by way of
repayment of the consideration payable under the Agreement) an amount
equal to any of the following:-
2.1 any Liability for Taxation of the Company arising:-
2.1.1 as a consequence of or by reference to any Event which
occurred on or before Completion or was deemed to
occur on or before Completion for the purposes of any
Taxation; or
2.1.2 in respect of or by reference to any income, profits or
gains which were earned, accrued or received on or
before Completion or in respect of a period ending on
or before Completion;
2.2 any liability for Taxation of the Company arising as a consequence of
or by reference to either of the following occurring or being deemed
to occur at any time after Completion:-
(i) the disposal by any Relevant Company of any asset or of
any interest in or right over any asset which could
arise under s.189 and s.191 TCGA 1992; or
(ii) any Relevant Company ceasing to be resident in the
United Kingdom for the purposes of any tax which could
arise under s.132 FA 1988; or
(iii) the making by any Relevant Company of any such payment
or deemed payment as constitutes a chargeable payment
for the purposes of section 214 ICTA; or
(iv) the failure by any Relevant Company to pay such
Taxation if the Company is liable therefor by reason of
the operation of Sections 767A or 767B or Section 767AA
of the ICTA.
and for the purposes of this sub-clause, the term "Relevant Company"
shall mean the Covenantor and any company other than the Company or
the
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Purchaser or any company which the Company or the Purchaser comes to
control at any time after Completion;
2.3 any liability of the Company to repay or the loss of the right to
receive in whole or in part any payment for the surrender of group
relief or of the benefit of any surplus advance corporation tax
received or receivable by the Company pursuant to any agreement or
claim made on or before the date hereof;
2.4 any Liability for Taxation for which the Company is liable as a
result of being treated as a member of the same group with any body
corporate for the purposes of Section 43 of the Value Added Tax Act
1994 during any prescribed accounting period (as defined in Section
25(1) of the Value Added Tax Act 1994) which ended on or prior to or
was current on the date hereof and (so far as any such other bodies
corporate are concerned with which it was on the date hereof or has
previously been in such a group) the next following prescribed
accounting period; and
2.5 all reasonable costs and expenses properly incurred by the Company or
the Purchaser in connection with any Liability for Taxation, Claim or
any liability or loss under this clause or successfully taking or
defending any action under this Deed.
3. Exclusions
3.1 The Covenantor shall not be liable under clause 2 above in respect of
any Liability for Taxation payable or which may become payable as is
mentioned in clause 2 above to the extent that:-
3.1.1 such Liability for Taxation was discharged (whether by
payment or by the utilisation of any relief allowance
or credit in respect of Taxation) prior to 31 March
1998; or
3.1.2 recovery has been made in respect of the matter giving
rise to such Liability for Taxation by the Purchaser
under the Warranties; or
3.1.3 such Liability for Taxation would not have arisen but
for or is increased by any voluntary act, omission,
transaction or
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arrangement of the Company or any company controlled by
the Purchaser or a person or persons controlling the
Purchaser (construing "controlled" and "controlling" in
accordance with section 416 of the ICTA) after
Completion but only where the Company or the Purchaser
knew or ought to have known that such act omission,
transaction or arrangement would give rise to such
Liability for Taxation or the extent of such Liability
for Taxation and provided that this exclusion shall
apply only to the amount of the increase and not to the
Taxation which would otherwise have arisen and shall
not apply to anything done or omitted to be done with
the written request of the Covenantor or its
professional representatives; or
3.1.4 such Liability for Taxation would not have arisen but
for or has been increased by:
(i) a disclaimer, claim or election made or
notice or consent given after Completion by
the Purchaser or the Company otherwise than
at the request of the Covenantor under the
provisions of this Deed; or
(ii) a failure or omission by the Company to make
any claim, election, surrender or disclaimer
or give any notice or consent or do any other
thing after Completion the making giving or
doing of which was taken into account in
computing any provision for Taxation in the
Completion Accounts and the making giving or
doing of which the Covenantor disclosed to
the Purchaser in the Disclosure Letter or in
writing a reasonable time before the claim
etc is required to be made or done; or
3.1.5 such Liability for Taxation would not have arisen but
for some Event occurring prior to Completion with the
written approval of the Purchaser or its
representative; or
3.1.6 such Liability for Taxation arises from any change in
accounting or Taxation policy or practice of or
affecting the Company, including the method of
submission of Taxation returns, introduced or having
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effect on or after Completion except where such change
in accounting policy is to bring the policy into line
with generally accepted accounting principles; or
3.1.7 such Liability for Taxation consists of any amount
payable to the Commissioners of Customs & Excise other
than an amount payable under clause 2.5 of this Deed;
or
3.1.8 such Liability for Taxation is on or in respect of any
prepayments received by the Company in the ordinary
course of business; being payments which are not taken
into account in computing profits in the Completion
Accounts; or
3.1.9 specific provision or reserve in respect of such
Liability for Taxation was made in the Completion
Accounts; or
3.1.10 such Liability for Taxation arises from an Event
(including the disposal of a capital asset) in the
ordinary course of business of the Company since the
Completion Accounts Date provided that the following
shall not be treated for these purposes as Taxation
arising from an Event in the ordinary course of
business:-
(a) any Distribution;
(b) the disposal or acquisition of any asset
(including trading stock) or the supply of
any services or business facility of any kind
(including a loan of money or the letting,
hiring or licensing of any tangible or
intangible property) in circumstances where
the consideration actually received (if any)
for such disposal or acquisition or supply is
less than or greater than the consideration
deemed to have been received or paid for the
purposes of any Tax where such disposal,
acquisition or supply was:-
(i) made at the request of the Vendor or
a member of the Vendor's Group; or
(ii) made to or by the Vendor or a
member of the Vendor's Group;
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(c) the Company ceasing or being deemed to cease
to be a member of any group of companies or
associated with any other company for the
purposes of any Tax; or
(d) any Event or the earning of any income
profits or gains which results in the Company
becoming liable to pay or bear a tax
liability chargeable directly or primarily
against or attributable directly or primarily
to another person (not being the Company); or
(e) any other Event which gives rise to a tax
liability on deemed (as opposed to actual)
income, profits or gains being an Event;
(i) which occurred at the request of the
Vendor or a member of the Vendor's
Group; or
(ii) which involved a transaction or
arrangement to which the Vendor or a
member of the Vendor's Group was a
party.
3.1.11 save where such Liability for Taxation in question
falls within clause 2.2 of this Deed by virtue of the
operation of clause 10.4 of this Deed; such Taxation
arises or is increased as a result of any increase in
rates of Taxation or the imposition of new Taxation
legislation or any change in applicable law regulation
or regulatory requirements or published practice of a
Tax Authority made after Completion whether with or
without retrospective effect.
3.2 The provisions of paragraphs 1.1, 1.4, and 7 of Schedule 6 and clause
24 in the Share Purchase Agreement shall have effect as if expressly
incorporated into this Deed but the provisions of such Schedule shall
not apply to any claim under this Deed which arises in consequence of
the fraud wilful concealment or wilful default of the Covenantor its
officers or employees.
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3.3 It is hereby agreed that the Purchaser shall not have any claim
hereunder if any unutilised relief (not being an Accounts Relief as
defined in clause 1.2.9.1) of the Company as at or arising before
Completion shall prove to be unavailable or otherwise incapable of
being utilised in reducing the profits of the Company earned, accrued
or received on or after Completion or the Taxation liabilities of the
Company in respect of any period after Completion.
4. OVERPROVISIONS AND SAVINGS
4.1 If:-
4.1.1 any provision for Tax (including deferred Tax)
contained in the Completion Accounts shall at the date
of any payment by the Covenantor pursuant to clause 2
be or have been (at the Covenantor's request and
expense) certified by the Company's auditors for the
time being to be an over-provision (hereinafter
referred to as an "Over-provision"); or
4.1.2 the Liability for Taxation which has resulted in such
payment by the Covenantor shall give rise to a
corresponding saving for the Company (hereinafter
referred to as a "Saving");
the value (as certified by the Company's auditors for the time being)
of such Over-provision or Saving shall be set-off first against the
payment then due from the Covenantor under this Deed and secondly (to
the extent there is any excess) against any further such payment(s)
in chronological order until exhausted PROVIDED THAT if it shall
subsequently be found that an Over-provision or Saving so certified
by the relevant Company's auditors was not in fact an Over-provision
or Saving or the certified amount or value thereof was excessive,
any amount which has been set-off under this clause in respect of
such purported Over-provision or Saving shall on demand forthwith be
paid by the Covenantor to the Purchaser .
4.2 If the Company or the Purchaser shall discover that there has been an
Over-provision or Saving the Purchaser shall or shall procure that
the Company concerned shall forthwith give such details as are then
available thereof to the Covenantor and the Purchaser shall or shall
procure that the Company concerned shall supply to the Covenantor
such information as it may reasonably require to verify the amount of
the Over-provision or Saving.
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4.3 For the purposes of clause 4.1 the Company obtains a Saving if as a
result of the Taxation which results in a claim by the Purchaser
hereunder the Company is relieved in whole or in part of a liability
to make some other payment of Taxation which it would otherwise have
been liable to make or obtains a right to repayment of Taxation which
would not otherwise have been available.
5. RECOVERY FROM OTHER PERSONS
5.1 If, in the event of any payment becoming due from the Covenantor
pursuant to clause 2, the Company either is immediately entitled at
the due date for the making of that payment to recover from some
other person (not being the Company but excluding any Tax Authority)
any sum in respect of the Liability for Taxation that has resulted in
that payment becoming due from the Covenantor, or at some subsequent
date becomes entitled to make such recovery then the Purchaser shall
or shall procure that the Company shall (in either of those cases)
promptly notify the Covenantor of its entitlement and shall, if so
required by the Covenantor and at the Covenantor's sole expense,
procure that the Company take all appropriate steps to enforce that
recovery (keeping the Covenantor fully informed of the progress of
any action taken) and shall account within 14 Business Days to the
Covenantor for whichever is the lesser of:-
5.1.1 any sum so recovered (including any interest or
repayment supplement paid by the Tax Authority or other
person on or in respect thereof less all costs of
recovery to the extent not previously paid by the
Covenantor and after deducting any Taxation chargeable
on the Company in respect of the recovery in question);
and
5.1.2 the amount paid by the Covenantor or pursuant to clause
2 in respect of the Liability for Taxation and not
previously repaid to the Covenantor.
6. DISPUTES AND CONDUCT OF CLAIMS
6.1 If the Purchaser or (after Completion) the Company shall become aware
of a Claim which could give rise to a liability on the Covenantor to
make a payment under clause 2 of this Deed the Purchaser shall or
shall procure that the
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Company shall as soon as reasonably practicable and in any event
within 15 days of becoming aware of that Claim give written notice
thereof to the Covenantor.
6.2 If the Covenantor shall
(a) indemnify the Company and the Purchaser to the
reasonable satisfaction of the Purchaser against all
liabilities, costs, damages or expenses which may be
incurred thereby including any additional Liability for
Taxation; and
(b) secure the Company and the Purchaser to the reasonable
satisfaction of the Purchaser against all liabilities,
costs, damages or expenses which may be incurred
thereby including any additional Liability for Taxation
which consists of interest on any unpaid Taxation;
then the Purchaser shall procure that the Company shall take such
action to avoid, dispute, defend, resist appeal or compromise the
Claim as the Covenantor may by written notice reasonably request.
6.3 Subject as mentioned in clause 6.2 and subject to clauses 6.5 and 6.8
below and to the Covenantor complying with clause 6.4 below, the
Covenantor may elect to have any action referred to in clause 6.2
conducted by professional advisers acting in the name of the Company
but reporting to the Covenantor.
6.4 The Covenantor hereby undertakes to the Purchaser to:
(a) keep the Purchaser informed of all matters relating to
the action and deliver to the Purchaser copies of all
material correspondence relating to the action;
(b) obtain the prior written approval of the Purchaser (not
to be unreasonably withheld or delayed) to the content
and sending of written communications relating to the
action to a Tax Authority; and
(c) obtain the prior written approval of the Purchaser (not
to be unreasonably withheld or delayed) to:
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(i) the settlement or compromise of the Claim
which is the subject of the action; and
(ii) the agreement of any matter in the conduct of
the action which is likely to increase the
amount of the Claim.
6.5 The Purchaser shall not be obliged to procure that the Company take
any action under this clause (and the Covenantor shall not be
entitled to take any action in the name of the Company) which
(a) involves contesting any matter beyond the first
appellate body (excluding the Tax Authority which has
or shall have made the Claim in question and the
general and special commissioners) unless the
Covenantor furnishes the Purchaser with the written
opinion of Counsel who has been practising in Taxation
matters for at least five years to the effect that an
appeal in respect of the matter in question has a
reasonable prospect of being won; or
(b) is likely to increase the liability of the Company to
any Taxation
without the prior written approval of the Purchaser and in a case
falling within 6.5(b) above, the Purchaser shall not unreasonably
withhold or delay its approval.
6.6 If there is a dispute between the Covenantor and the Purchaser as to
whether any action requested by the Covenantor under clause 6.2 is
reasonable or whether the withholding or delay of any approval
required pursuant to clause 6.4(b) or 6.4(c) or clause 6.5(b) is
reasonable and the dispute is not resolved between the Covenantor and
the Purchaser, such dispute shall be referred for determination to an
independent member of the Chartered Institute of Taxation or to an
independent accountant specialising in Tax matters in either case of
at least 10 years' experience, appointed by agreement between the
Covenantor and the Purchaser or (if they do not agree) upon the
application made by either party to the President for the time being
of the Chartered Institute of Taxation who shall also be authorised
to determine how the costs of obtaining his opinion should be
allocated between the parties hereto.
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6.7 If any time the Covenantor has not exercised its right referred to in
clause 6.3 in respect of any Claim but requests that the Purchaser
take, or procure that the Company take, any action referred to in
clause 6.2, the provisions of clause 6.4 shall apply as if references
to "the Covenantor" are references to "the Purchaser" and reference
to "the Purchaser" are references to "the Covenantor".
6.8 If the Covenantor does not request the Purchaser or the Company to
take any action under clause 6.2 or 6.3 in respect of any Claim
within 35 days of notice in writing from the Purchaser requesting it
to indicate what action is required to be taken in respect of the
relevant Claim or if Covenantor shall fail to indemnify or secure the
Purchaser and the Company to their reasonable satisfaction in
accordance with clause 6.2 within fifteen days of written notice
having been given to the Covenantor requesting it to give such
indemnity or security, the Purchaser or Company shall (without
prejudice to its rights under this Deed) be free to pay or settle the
Claim on such terms as the Purchaser or the Company may in its
absolute discretion consider fit.
6.9 Neither the Purchaser nor the Company shall be subject to any claim
by or liability to the Covenantor for non compliance with any of the
foregoing provisions of this Clause 6 if the Purchaser or the Company
has bona fide acted in accordance with the instructions of the
Covenantor.
7. TAX RETURNS
7.1 The Covenantor or its duly authorised agents shall prepare the tax
returns of the Company for all accounting periods ended on or prior
to the Completion Accounts Date, to the extent that the same shall
not have been prepared before Completion.
7.2 The Purchaser shall procure that the Company shall cause the returns
mentioned in sub-clause 7.1 of this clause to be authorised, signed
and submitted without delay to the appropriate authority without
amendment or with such amendments as the Covenantor shall agree, and
shall give the Covenantor or its agents all such assistance as may be
required to agree those returns with the appropriate authorities;
PROVIDED THAT the Company shall not be obliged to take and the
Purchaser shall not be obliged to procure that the Company takes any
such action as is mentioned in this sub-clause in relation to any tax
return which is in the opinion of the Purchaser or directors of the
Company is not full, true and accurate in all material respects.
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7.3 Nothing done by the Purchaser or the Company pursuant to this clause
shall in any respect restrict or reduce any rights the Purchaser may
have to make a claim against the Covenantor under this Deed in
respect of any such tax liability as is mentioned in clause 2.
8. DUE DATE OF PAYMENT AND INTEREST
8.1 Where the Covenantor is liable to the Purchaser pursuant to the
covenant contained in clause 2 above the following provisions shall
apply in determining when a payment in respect of such liability
shall be made.
8.1.1 In a case which involves and to the extent that it
involves an actual payment of or in respect of Taxation
by the Company the date that is three Business Days
prior to the date on which the Taxation in question
would have had to have been paid in order to prevent a
liability to interest or a fine charge or penalty from
arising in respect of the Liability to Taxation in
question or as the case may be three Business Days
prior to the date on which the Taxation in question
must be paid in order to entitle the Company or the
Purchaser to make an appeal against an assessment to
the Taxation in question.
8.1.2 In a case falling within any of sub-paragraphs 1.2.9.1
to 1.2.9.3 or clause 2.3 the date falling fourteen days
after the date when the Covenantor has been notified by
the Company or the Purchaser that the auditors for the
time being of the Company have certified, at the
request of the Purchaser or the Company that the
Covenantor has a liability for a determinable amount
under clause 2.
8.1.3 In a case not falling within clauses 8.1.1 or 8.1.2
fourteen days after notice from the Purchaser of the
liability to make the payment in question.
8.2 Any sums not paid by the Covenantor on the date specified in this
Deed ("the Due Date") shall bear interest (which shall accrue day to
day from the Due Date until the payment is actually made at the rate
of 3% per annum over the
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base rate from time to time of The Governor and Company of the Bank
of Scotland.
9. DEDUCTIONS AND WITHHOLDINGS
9.1 All sums payable by the Covenantor to the Purchaser under this Deed
shall be paid free and clear of all counterclaims deductions or
withholdings whatsoever save only as may be required by law.
9.2 If any deductions or withholdings are required by law to be made from
any of the sums payable as mentioned in sub-clause 9.1 of this
clause, the Covenantor shall be obliged to pay to the relevant person
such sum as will, after the deduction or withholding has been made
leave that person with the same amount as it would have been entitled
to receive in the absence of any such requirement to make a deduction
or withholding.
9.3 If any sum payable by the Covenantor to the Purchaser under this Deed
(other than interest under clause 8.2) shall be subject to a tax
liability in the hands of the Purchaser the Covenantor shall be
under the same obligation to make an increased payment in relation to
the tax liability as if the liability were a deduction or withholding
required by law.
10. PURCHASER'S COVENANTS
10.1 The Purchaser hereby covenants with the Covenantor to pay to the
Covenantor, by way of adjustment to the consideration for the Sale
Shares an amount equivalent to:-
10.1.1 any Taxation for which the Covenantor, or any other
person connected with the Covenantor falling within
section 767A(2) or section 767AA(4) of the Taxes Act,
becomes liable by virtue of the operation of sections
767AA, 767A and 767B of the Taxes Act in circumstances
where the tax-payer company (as referred to in section
767(1)) or the transferred company (as referred to in
section 767AA(1)) is the Company; and
10.1.2 any Taxation for which the Covenantor or any person
connected with the Covenantor becomes liable under
Section 179(11)or Section 190(1)TCGA as a result of the
failure by the Company to discharge such Taxation.
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10.2 The covenant contained in clause 10.1 shall:
10.2.1 extend to any reasonable costs properly incurred by the
Covenantor or such other person in connection with such
Taxation or a claim under clause 10.1;
10.2.2 not apply to Taxation to the extent that the Purchaser
is entitled to claim payment in respect of it under
clause 2; and
10.2.3 not apply to Taxation which has been recovered under
section 767(B)(2) of the Taxes Act or any other
relevant statutory provision (and the Covenantor shall
procure that no such recovery is sought to the extent
that payment is made hereunder).
10.3 Clauses 6 and 8 (conduct of disputes and due date for payment) shall
apply to the covenant contained in clause 10.1 as they apply to the
covenants contained in clause 2, replacing references to the
Covenantor by the Purchaser (and vice versa) and making any other
necessary modifications.
10.4 For the purposes of this clause 10 and clause 2.2, it is assumed that
section 767AA of the Taxes Act and the consequential amendments to be
made on its enactment, are enacted in the form proposed in the Inland
Revenue Press Release 16/98, dated 17 February 1998. If those
provisions are amended before enactment, it is the intention of the
parties that clause 10 and clause 2.2 shall still apply in relation
to the enacted legislation in the same manner as it would apply in
relation to the draft legislation in Press Release 16/98, mutatis
mutandis.
11. ENFORCEABILITY
For the avoidance of doubt the indemnity herein contained shall be
enforceable before as well as after any payment covered by such
indemnity has been made and in the event that any indemnity herein
contained shall be found void but would be valid if the application
thereof to a particular Claim, Event or form of Taxation were limited
or deleted such indemnity shall apply with such modification as may
be necessary to make it valid and effective.
-17-
<PAGE> 20
12. GENERAL
12.1 This Deed shall be binding upon and enure for the benefit of the
successors in title of each of the parties hereto.
12.2 No variation hereof shall be effective unless in writing and executed
as a Deed by the parties hereto.
12.3 This Deed may be executed in any number of counterparts all of which
taken together shall constitute one and the same agreement and any of
the parties hereto may execute this Deed by executing such a
counterpart.
12.4 The rights and remedies of the Purchaser and the Company and/or the
Covenantor under this Deed at law or in equity shall not be
diminished or extinguished or deemed to be waived by the granting of
any indulgence, forbearance or extension of time by any of them or by
the failure of or delay by any of them in asserting any such rights
or remedies.
12.5 The provisions of clause 12 (Assignment) 18 (Releases, Waivers etc by
Purchaser), clause 20 (Law and Jurisdiction) and clause 24 (Notices)
of the Agreement shall apply as if set out in full in this Deed.
IN WITNESS whereof the parties hereto have executed this document as a Deed the
day and year first above written.
-18-
<PAGE> 21
SCHEDULE 1
THE COVENANTOR
<TABLE>
<CAPTION>
Name Address
- ---- -------
<S> <C>
Krug International Columbia Centre
(UK) Limited Market Street
Bracknell
Berkshire RG12 1PA
</TABLE>
-19-
<PAGE> 22
EXECUTED AS A DEED (AND DELIVERED ) [/s/ C.L. HASLAM
when dated) ) -------------------------------
KRUG INTERNATIONAL (UK) LIMITED ) DIRECTOR
)
) [/s/ ROBERT M. THORNTON, JR.
-------------------------------
DIRECTOR
EXECUTED AS A DEED (AND DELIVERED ) [/s/ JOHN P. BUCK
when dated) ) -------------------------------
BLAKEDEW NINETY FOUR LIMITED ) DIRECTOR
on behalf of )
) [/s/ ROBERT M. EDMOND
in the presence of:- ) -------------------------------
SECRETARY
-------------------------------
-------------------------------
-20-
<PAGE> 1
EXHIBIT 10.3
[KRUG INTERNATIONAL LETTERHEAD]
FOR IMMEDIATE RELEASE NEWS RELEASE
CONTACT:
C. L. HASLAM, CHAIRMAN & CEO
(202) 537-5900
ROBERT M. THORNTON, JR., PRESIDENT
(770) 933-7000
KRUG INTERNATIONAL ANNOUNCES SALE OF LEISURE MARINE SUBSIDIARY
AND STOCK REPURCHASE PROGRAM
Houston, Texas (Apr 16, 1998) -- KRUG International Corp. (AMEX:KRG)
today announced that it sold its U.K. leisure marine subsidiary, Sowester
Limited, to Sowester's management for approximately $15,000,000, comprised of
approximately $8,100,000 in cash, deferred payments of approximately $800,000
due within one year and the assumption of approximately $6,100,000 of Sowester
debt. KRUG expects to realize no material gain or loss from the transaction,
which is subject to adjustment based on the audit of Sowester's financial
statements for the year ended March 31, 1998.
KRUG also announced that its Board of Directors has authorized the
Corporation to repurchase for cash in the open market up to 200,000 shares of
the Corporation's common stock, approximately 4% of its outstanding shares.
C.L. Haslam, Chairman and CEO of the Corporation commented, "Sowester,
which contributed approximately 25% of our 1997 annual revenues, is a very
specialized business requiring substantial industry expertise and management
effort. The sale of Sowester allows us to redeploy capital and continue our
efforts to redefine KRUG's focus. We believe the sale, together with our share
buyback program and continuing search for suitable acquisitions, is a
significant step toward our objective of increasing shareholder value."
This press release contains forward-looking information. The
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
may be significantly impacted by certain risks and uncertainties described
herein and in KRUG's Annual Report on Form 10-K filed with the Securities and
Exchange commission for the year ended March 31, 1997.
-30-
<PAGE> 1
EXHIBIT 99.1
KRUG INTERNATIONAL CORP.
PRO FORMA STATEMENT OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
The following pro forma statements of earnings reflect the sale of the
Corporation's U.K. subsidiary Sowester Limited and the merger of the
Corporation's U.S. subsidiaries KRUG Life Sciences Inc. and Technology
Scientific Services, Inc. with Wyle Laboratories, Inc. as if such sale and
merger had occurred on April 1, 1996. Pro forma adjustments exclude nonrecurring
credits and charges and related tax effects. Specifically, the pre-tax gain on
the merger transaction with Wyle Laboratories, Inc. of approximately $3.0
million, merger cost of approximately $0.03 million and any gain on sale of
Sowester (which the Corporation believes will be immaterial) have been excluded.
These statements should be read in conjunction with the attached pro forma
balance sheet and notes thereto, and the financial statements and notes thereto
contained in the Corporation's Annual Report on Form 10-K for the year ended
March 31, 1997 and Report on Form 10-Q for the quarterly period ended December
31, 1997, which are incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1997
-------------------------
SUBSIDIARIES
MERGED ADJUST-
AS WITH WYLE SOWESTER MENTS AS
REPORTED LABORATORIES LIMITED (1) ADJUSTED
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 111,739 $ (49,933) $ (28,658) $ 33,148
Cost of goods sold 96,930 (45,290) (22,257) 29,383
Selling and administrative 9,448 (1,126) (3,676) 4,646
Restructuring charge 530 530
Interest 995 (387) (59) 549
Other income - net 75 75
Equity in Earnings of Wyle Laboratories, Inc. 877 877
----------------------------------------------------------------------------
Earnings (loss) from Continuing Operations
before Income Taxes 3,911 (3,130) (2,666) 877 (1,008)
Income Taxes 1,359 (1,064) (820) (525)
----------------------------------------------------------------------------
Earnings (loss) from Continuing Operations $ 2,552 $ (2,066) $ (1,846) $ 877 $ (483)
============================================================================
Net Earnings (loss) per Share from
Continuing Operations - Basic $ 0.50 $ (0.09)
============== =============
Net Earnings (loss) per Share from
Continuing Operations - Diluted $ 0.49 $ (0.09)
============== =============
Share used in computing Net Earnings (loss)
per Share from Continuing Operations
- Basic 5,134 5,134
============== =============
Share used in computing Net Earnings (loss)
per Share from Continuing Operations
- Diluted 5,192 5,192
============== =============
</TABLE>
(1) Adjustments reflect pro-forma earnings, after taxes, on equity investment
in Wyle Laboratories, Inc. for the twelve months ended December 31, 1996.
<PAGE> 2
KRUG INTERNATIONAL CORP.
PRO FORMA STATEMENT OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31, 1997
-----------------------------------
SUBSIDIARIES
MERGED ADJUST-
AS WITH WYLE SOWESTER MENTS AS
REPORTED LABORATORIES LIMITED (1) ADJUSTED
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 93,303 $ (35,987) $ (23,732) $ 33,584
Cost of goods sold 81,240 (32,902) (18,087) 30,251
Selling and administrative 9,009 (733) (3,284) 4,992
Restructuring charge 547 547
Interest 886 (255) (46) 585
Other income - net 855 (1) 854
Equity Earnings of Wyle Laboratories, Inc. 1,253 1,253
----------------------------------------------------------------------------
Earnings (loss) from Continuing Operations
before Income Taxes 2,476 (2,098) (2,315) 1,253 (684)
Income Taxes 1,016 (714) (741) (439)
-----------------------------------------------------------------------------
Earnings (loss) from Continuing Operations $ 1,460 $ (1,384) $ (1,574) $ 1,253 $ (245)
=============================================================================
Net Earnings (loss) per Share from
Continuing Operations - Basic $ 0.28 $ (0.05)
============== ==============
Net Earnings (loss) per Share from
Continuing Operations - Diluted $ 0.28 $ (0.05)
============== ==============
Share used in computing Net Earnings (loss)
per Share from Continuing Operations
- Basic 5,160 5,160
============== ==============
Share used in computing Net Earnings (loss)
per Share from Continuing Operations
- Diluted 5,195 5,195
============== ==============
</TABLE>
(1) Adjustments reflect pro-forma earnings, after taxes, on equity investment
in Wyle Laboratories, Inc. for the nine months ended December 31, 1997.
<PAGE> 1
EXHIBIT 99.2
KRUG INTERNATIONAL CORP.
PRO FORMA BALANCE SHEET
(in thousands, except per share amounts)
(unaudited)
The following pro forma unaudited balance sheet reflects the sale of the
Corporation's U.K. subsidiary Sowester Limited and the merger of the
Corporation's U.S. subsidiaries KRUG Life Sciences Inc. and Technology
Scientific Services, Inc. subsidiaries with Wyle Laboratories, Inc. as if such
sale and the merger had occurred on December 31, 1997. This statement should
be read in conjunction with the attached pro forma statements of earnings and
notes thereto, and the financial statements and notes thereto contained in the
Corporation's Annual Report on Form 10-K for the year ended March 31, 1997 and
Report on Form 10-Q for the quarterly period ended December 31, 1997, which are
incorporated by reference herein.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------------------------
SUBSIDIARIES
MERGED ADJUST- ADJUST-
AS INTO WYLE SOWESTER MENTS MENTS
REPORTED LABORATORIES LIMITED (1) (2) AS ADJUSTED
-------------------------------------------------------------------------------------
CURRENT ASSETS:
<S> <C> <C> <C> <C> <C> <C>
CASH $ 2,101 $ (22) $ (1,596) $ 3,052 $ 11,273 $ 14,808
RECEIVABLES 22,860 (11,069) (3,199) 825 9,417
INVENTORIES 13,347 (110) (8,226) 5,011
PREPAID EXPENSES 1,401 (349) (132) 920
------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 39,709 (11,550) (13,154) 3,052 12,098 30,156
PROPERTY, PLANT AND
EQUIPMENT, NET 11,059 (238) (5,500) 5,321
OTHER LONG TERM ASSETS 6,151 298 11,065 (930) (12,044) 4,540
------------------------------------------------------------------------------------
TOTAL ASSETS $ 56,919 $ (11,490) $ (7,589) $ 2,122 $ 54 $ 40,016
====================================================================================
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 12,614 $ (2,759) $ (2,714) 7,141
OTHER CURRENT LIABILITIES 9,791 (2,674) (2,413) $ 130 $ 54 4,888
------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 22,405 (5,433) (5,127) 130 54 12,029
LONG-TERM DEBT 14,882 (6,057) (2,461) -- 6,364
SHAREHOLDERS' EQUITY:
COMMON SHARES 2,593 2,593
ADDITIONAL PAID-IN CAPITAL 4,523 34 4,557
RETAINED EARNINGS 11,426 1,958 13,384
FOREIGN CURRENCY -
TRANSLATION ADJUSTMENT 1,090 1,090
------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 19,632 -- -- 1,992 -- 21,624
------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 56,919 $ (11,490) $ (7,589) $ 2,122 $ 54 $ 40,017
====================================================================================
</TABLE>
(1) Adjustments reflect cash received from Wyle Laboratories, Inc. pursuant to
the merger and the gain recognized, net of applicable taxes and merger costs
accrued by KRUG.
(2) Adjustments reflect cash received from sale of Sowester, taxes payable on
the sale and deferred sales proceeds. Approximately $6.1 million cash from
the Sowester sale is held as collateral under the Corporation's U.K.
credit facility.
