BUSINESS RESCUE PLAN
Prepared in terms of Section 150 of the Companies Act, No. 71 of 2008 in respect of
THATA UBEKE MANUFACTURING PROPRIETARY LIMITED (Registration No. 2006/038624/07)
Prepared by DAVE LAKE (Senior Business Rescue Practitioner)
17th April 2015
TABLE OF CONTENTS
1.
Business Rescue Contextualised .................................................................................................... 4
2.
Definitions and Interpretation ....................................................................................................... 6
3.
Actions to be Taken By Affected Persons .................................................................................... 13
4.
Business Rescue - Key Dates ........................................................................................................ 13
5.
Structure of this Business Rescue Plan ........................................................................................ 14
6.
Background to TUB and the Events Leading to its Business Rescue ........................................... 15
7.
Overview of TUB Today................................................................................................................ 17
8.
Trading since the Commencement of Business Rescue .............................................................. 18
9.
Significant Events Subsequent to the Commencement Date ..................................................... 20
10.
Assets and Liabilities of the Company as at 28th February 2015 ............................................ 23
11.
Assets of the Company ............................................................................................................. 24
12.
Liabilities of the Company........................................................................................................ 25
13.
Proof of Claims ......................................................................................................................... 27
14.
Creditors of the Company and their Claims as at the Commencement Date ........................ 27
15.
Other Business Rescue Obligations of the Company .............................................................. 28
16.
Net Asset Value of the Company ............................................................................................. 29
17.
Probable Liquidation Dividend ................................................................................................ 30
18.
Security Held by Creditors........................................................................................................ 31
19.
Informal Proposals from Creditors .......................................................................................... 33
20.
Remuneration of the BRP ........................................................................................................ 33
21.
Order of Distribution ................................................................................................................ 34
22.
Outline of the Business Rescue Plan........................................................................................ 35
23.
Final Instalment of the Investor Loan ...................................................................................... 38
24.
Conversion of the Investor Loan into ordinary shares in the Company ................................. 38
25.
Roll-over of the Banking and Asset Finance Facilities ............................................................. 39
26.
Shareholders’ agreement and memorandum of incorporation ............................................. 40
27.
Securing a Short Term Loan ..................................................................................................... 40
28.
Partial Release from Concurrent Creditor Claims ................................................................... 41
29.
Subordination of the Revised Shareholder Loans ................................................................... 43
30.
Business Rescue Costs .............................................................................................................. 43
31.
Mechanism for the Settlement of Revised Trade Creditor Claims ......................................... 44
32.
Monitoring of the Primary Bank Account................................................................................ 47
33.
Potential Cash Realisations from Other Assets ....................................................................... 48
34.
Ongoing Business of the Company .......................................................................................... 48
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35.
Treatment of Agreements ........................................................................................................ 52
36.
Nature and Duration of the Moratorium ................................................................................ 52
37.
Effect of the Business Rescue Plan on Employees .................................................................. 53
38.
Effect of the Business Rescue Plan on Creditors ..................................................................... 53
39.
Effect of the Business Rescue Plan on Shareholders .............................................................. 54
40.
Benefits of the Adoption of the Business Rescue Plan ........................................................... 55
41.
Creditors’ Consideration of this Business Rescue Plan ........................................................... 58
42.
Projected Profit and Loss Accounts and Balance Sheets ........................................................ 60
43.
Circumstances in which the Business Rescue will End ............................................................ 60
44.
Approval and Adoption of this Business Rescue Plan ............................................................. 61
45.
The Effect of Adoption of this Business Rescue Plan on Creditors ......................................... 61
46.
Conditions for This Business Rescue Plan to Come Into Operation ....................................... 62
47.
Substantial Implementation .................................................................................................... 62
48.
Risks .......................................................................................................................................... 63
49.
Late Proof of Claims ................................................................................................................. 63
50.
Dispute Resolution ................................................................................................................... 64
51.
Governing Law and Jurisdiction ............................................................................................... 65
52.
Disclaimer ................................................................................................................................. 66
53.
Severability ............................................................................................................................... 67
54.
Practitioners Certificate ........................................................................................................... 67
SCHEDULES ........................................................................................................................................... 69 A:
Creditors and voting interests
B:
Trade Creditors
C:
Shareholder loans
D:
Costs treated as Business Rescue Costs
E :
Probable liquidation dividend computation
F:
Profit and Loss projections
G:
Balance Sheet projections
H:
Draft 2015 Annual Accounts
I :
BRP Engagement Agreement
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INTRODUCTION
1.
Business Rescue Contextualised
1.1.
In this Clause and throughout this Business Rescue Plan capitalised words, acronyms and phrases shall have the meanings attributed to them in Clause 2 below.
1.2.
Simply speaking, Business Rescue as a concept was introduced into South African law in 2011 in terms of the new Companies Act to provide Financially Distressed companies, in appropriate circumstances, with the essential breathing space required for them to be able to develop and implement a Business Rescue Plan to achieve the objectives in Clause 1.3 below.
1.3.
The underlying objectives of Business Rescue in accordance with Section 128(1)(b)(iii) of the Act are to restructure the affairs of a company in such a way that it maximises the likelihood of the company continuing in existence on a solvent basis, or, if it is not possible for the company to so continue in existence, results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company.
1.4.
Chapter 6 of the Act in dealing with Business Rescue seeks to facilitate the rehabilitation of Financially Distressed companies by providing for: 1.4.1.
a temporary moratorium on the rights of claimants (e.g. creditors) against the company;
1.4.2.
the temporary supervision of the company by a business rescue practitioner; and
1.4.3.
the “rules of engagement” for entry into, process during, and exit from business rescue proceedings;
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during which proceedings the business rescue practitioner is required to develop and implement, if approved, a business rescue plan to achieve the objectives set out in Clause 1.3 above.
1.5.
The BRP, in relation to the Business Rescue proceedings of TUB, has in addition been guided, inter alia, by Section 7(k) of the Act, which states that the purpose of the Act in respect of Business Rescue is: “to provide for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders” [BRP’s emphasis].
1.6.
The Business Rescue proceedings of TUB and this Business Rescue Plan have therefore been conducted and structured by the BRP in a manner which seeks to achieve the following objectives:
1.6.1.
to rescue the Company by returning it to a state of solvency;
1.6.2.
to recognise and address the interests of Creditors by, inter alia, providing for a substantial settlement of their Claims in a manner that provides a swifter and greater return than would be the case for such Creditors had the Company been liquidated;
1.6.3.
to secure a sustainable future for the Company after the implementation of the Business Rescue Plan - which will ultimately be to the benefit of the Company’s stakeholders (including its employees, suppliers, customers, shareholders, post-commencement funders); and
1.6.4.
to maintain an appropriate balance between the respective rights and interests of each of the Company’s stakeholders.
1.7.
The approach taken in the Business Rescue proceedings of the Company has rested on four legs:
1.7.1. 5|Page
stabilising the Company whilst it is in Business Rescue proceedings; TUB Business Rescue Plan
1.7.2.
resolving the immediate cash flow issues which were at the heart of the Financial Distress which faced the Company at the Commencement Date;
1.7.3.
providing funding and a mechanism to address the Claims against the Company; and
1.7.4.
addressing the future operational sustainability of the Company through: 1.7.4.1. optimising the cost base of the Company; 1.7.4.2. strategically repositioning the Company to drive revenue growth; and 1.7.4.3. providing sufficient working capital to support its recovery.
2.
Definitions and Interpretation
2.1.
In this Business Rescue Plan, unless the context indicates otherwise, the words and expressions below shall have the following meanings (and cognate expressions shall bear corresponding meanings): 2.1.1.
“2015 Audited Accounts” means the annual financial statements of the Company for the year ended 28th February 2015 which have been prepared and audited by the Company’s Auditors during March/April 2015, and which will be presented to the Board of Directors of the Company in the week following the Publication Date, a draft copy of which is attached as Annexure H to this Business Rescue Plan;
2.1.2.
"Act" means the Companies Act, No. 71 of 2008;
2.1.3.
"Adoption Date" means the date upon which the Business Rescue Plan is approved and adopted in accordance with Sections 152(2) and 152(3)(b) of the Act;
2.1.4.
"Affected Persons" shall bear the meaning ascribed thereto in Section 128(1)(a) of the Act, and in relation to the Company shall mean the shareholders,
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creditors and employees of the Company (the employees of the Company not being represented by any trade union); 2.1.5.
“Audit Date” means the date of the 2015 Audited Accounts, being 28th February 2015;
2.1.6.
“Auditors” means Boake Incorporated, being the Company’s auditors;
2.1.7.
"BRP" means David Arthur Charles Lake, Identity Number 580704 5324 186, who has been appointed in accordance with Section 129(3)(b) of the Act as the business rescue practitioner of the Company;
2.1.8.
“BRP Agreement” means the agreement concluded between the Company and the BRP on or about 21st January 2015 in terms of which the BRP was appointed by the Company, the fee related terms of which agreement are described in Clause 20 and a copy of which agreement is attached as Schedule I;
2.1.9.
"Business Day" shall bear the meaning given to that term in Section 1 of the Act;
2.1.10.
"Business Rescue" means the proceedings to facilitate the rehabilitation of the Company as provided for in Chapter 6 of the Act;
2.1.11.
"Business Rescue Costs" means the costs of the Business Rescue including the BRP’s remuneration and expenses, and other claims arising out of the costs of the Business Rescue proceedings as contemplated in Section 135(3) of the Act;
2.1.12.
"Business Rescue Plan" means this document together with all of its Schedules, prepared and published by the BRP in accordance with Section 150 of the Act for consideration and possible approval by the Creditors of the Company;
2.1.13.
"CIPC" means the Companies and Intellectual Property Commission;
2.1.14.
"Claims" means secured, preferent and/or concurrent claims, as envisaged in the Insolvency Act, against the Company, of whatsoever nature and from whatsoever cause, including all claims arising out of any agreements entered into by the Company, the cause of action in respect of which arose prior to or
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on the Commencement Date and which are known to the Company and accepted by the BRP; 2.1.15.
"Claims Period" means the period from the Publication Date to the Effective Date;
2.1.16.
"Commencement Date" means the date on which Business Rescue commenced in accordance with Section 129(2)(b) of the Act, being 20th January 2015;
2.1.17.
"Company" (and/or “TUB”) means Thata uBeke Manufacturing Proprietary Limited, a private limited liability company incorporated in South Africa under registration number 2006/038624/07;
2.1.18.
"Concurrent Creditors" means all Creditors having Claims which would qualify as concurrent claims as envisaged in the Insolvency Act and the Act;
2.1.19.
"Creditors" means all persons having Claims against the Company as at the Commencement Date and for the period of the Business Rescue, excluding any Claims that can be regarded as Post-Commencement Finance or as being Business Rescue Costs, and which are known to the Company and have been accepted by the BRP;
2.1.20.
“Effective Date” means 31st May 2015;
2.1.21.
"Financially Distressed" shall bear the meaning ascribed thereto in Section 128(1)(f) of the Act;
2.1.22.
"First Payment Date" means on or before 8th June 2015;
2.1.23.
“Free Funds” means all funds standing to the credit of the Company’s Primary Bank Account at the close of business on the relevant measurement date;
2.1.24.
"Insolvency Act" means the Insolvency Act No. 24 of 1936;
2.1.25.
“Investor Loan” means the loan in the amount of R3.0 million advanced to the Company by the Strategic Investor as Post-Commencement Finance in terms of the Transaction Agreement;
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2.1.26.
"Lease" means the lease agreement in terms of which the Company is a tenant of (and conducts its business from) an industrial and office property situated in Jet Park, in force as at the Commencement Date;
2.1.27.
“Net Asset Value” means the excess by which the total assets of the Company exceed the total liabilities of the Company (excluding shareholder funds) from time to time in the financial accounts of the Company;
2.1.28.
“Notice of Meeting” means a notice of the S151 Meeting as contemplated in terms of Section 151(2) of the Act;
2.1.29.
"Post-Adoption Date Claims" means any and all Claims which may be lodged with the BRP in writing by a Creditor of the Company during the Claims Period and which Claims are accepted, in whole or in part, in writing by the BRP as being valid and enforceable against the Company by no later than the First Payment Date;
2.1.30.
"Post-Commencement Finance" means post-commencement finance as contemplated in Section 135 of the Act;
2.1.31.
"Preferent Creditors" means those Creditors holding Claims which would qualify as preferent claims as envisaged in terms of the Insolvency Act;
2.1.32.
“Primary Bank Account” means the current account held by the Company with its bankers into which the Company pays its trading receipts and from which it pays its trading expenses, as provided for in Clause 31.
2.1.33.
"Publication Date" means the date on which this Business Rescue Plan is published in terms of Section 150(5) of the Act, being 17th April 2015;
2.1.34.
"Rand" or "R" means the lawful currency of South Africa;
2.1.35.
“Revised Shareholder Loans” means the revised net amount of Claims owing to shareholders of the Company holding shareholder loans as contemplated in Clause 28.6.2;
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2.1.36.
“Revised Trade Creditor Claims” means the revised net amount of Claims owing to the trade creditors of the Company as contemplated in Clause 28.6.1;
2.1.37.
“S151 Meeting” means a meeting convened in terms of Section 151 of the Act, presided over by the BRP, attended by Creditors and any other Affected Persons, and called for the purpose of considering the Business Rescue Plan;
2.1.38.
"Secured Creditors" means those Creditors holding Claims which would qualify as secured claims as envisaged in terms of the Insolvency Act;
2.1.39.
“Short Term Loan” means the proposed short term loan in the amount of approximately R2.0 million being sought by the BRP on behalf of the Company to facilitate the early settlement of the Revised Trade Creditor Claims, as described in Clause 27;
2.1.40.
"South Africa" means the Republic of South Africa;
2.1.41.
“Strategic Investor” means Bokama Trading and Projects Proprietary Limited, a private limited liability company incorporated in South Africa under registration number 2012/012077/07;
2.1.42.
“Subsequent Payment Date” means on or before the 7th day of each calendar month after the month in which the First Payment Date occurs, until such time as the Revised Trade Creditor Claims have been settled in full;
2.1.43.
"Substantial Implementation " means the fulfilment of the conditions set out in Clause 47.1 to the satisfaction of the BRP;
2.1.44.
“Termination Date” means the date on which the Business Rescue proceedings will end in accordance with Clause 43 and at which date the Company will no longer be in Business Rescue;
2.1.45.
"Transaction Agreement" means the loan and investment agreement entered into between the Company, the shareholders of the Company and the Strategic Investor on or about 16th March 2015;
2.1.46.
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“TUB” means the "Company"; and
TUB Business Rescue Plan
2.1.47.
“VAT” means value added tax which is levied in respect of goods and services in terms of the Value Added Tax Act, 1991.
2.2.
Where any term is defined within the context of any particular Clause in this Business Rescue Plan, the term so defined, unless it is clear from the Clause in question that the term so defined has limited application to the relevant Clause, shall bear the meaning ascribed to it for all purposes in terms of this Business Rescue Plan, notwithstanding that that term may not have been defined in this definitions Clause.
2.3.
This Business Rescue Plan shall be interpreted in accordance with the following principles: 2.3.1.
a reference to a “person” includes a reference to an individual, partnership, company, close corporation, other body corporate, a trust, an unincorporated association or a joint venture and that person’s legal representatives, successors and permitted assigns;
2.3.2.
the words "hereof", "herein", "hereto" and "hereunder" and other words of similar import refer to this Business Rescue Plan as a whole and not to any particular part, Clause, sub-section or other sub-division or Schedule unless the context or subject matter so requires;
2.3.3.
a reference to a “Clause” or a “Schedule”, unless the context indicates otherwise, are references to the designated Clause or Schedule of this Business Rescue Plan;
2.3.4.
words importing the masculine shall include a reference to the feminine and vice versa;
2.3.5.
words importing the singular shall include a reference to the plural and vice versa;
2.3.6.
reference to a document or agreement includes any amendment or supplement to, or replacement or novation of that document or agreement;
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2.3.7.
any reference to legislation or a statute shall be a reference to such legislation or statute as at the Publication Date and as amended, varied, re-enacted or replaced from time to time;
2.3.8.
the headings appearing in this Business Rescue Plan are for reference purposes only and shall not affect the interpretation hereof;
2.3.9.
if any provision is a definition and is a substantive provision conferring rights or imposing obligations on any person, notwithstanding that it is only in the definitions Clause (or such other Clause), effect shall be given to it as if it were a substantive provision in the body of this Business Rescue Plan;
2.3.10.
in the event that the day for performance of any obligation to be performed in terms of this Business Rescue Plan should fall on a day which is not a Business Day, the relevant day for performance shall be the immediately succeeding Business Day;
2.3.11.
the use of any expression covering a process available under South African law (such as but not limited to a liquidation) shall, if any of the Affected Persons is subject to the law of any other jurisdiction, be interpreted in relation to that Affected Person as including any equivalent or analogous proceeding under the law of such other jurisdiction;
2.3.12.
where any number of days is prescribed in this Business Rescue Plan, that number shall be determined exclusively of the first day and inclusively of the last day, unless the last day falls on a day which is not a Business Day, in which case the last day shall be the immediately succeeding Business Day;
2.3.13.
where any term (whether capitalised or not) is not expressly defined in this Business Rescue Plan but is defined in the Act, the definition in the Act shall prevail;
2.3.14.
the use of the word "including" followed by specific examples shall not be construed as limiting the meaning of the general wording preceding it and the eiusdem generis rule shall not be applied in the interpretation of such general wording or such specific examples;
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2.3.15.
the words "other" and "otherwise" shall not be construed eiusdem generis with any preceding words if a wider construction is possible;
2.3.16.
all monetary amounts are stated exclusive of VAT and in South African Rand, unless provided otherwise, where that amount is subject to VAT; and
2.3.17.
the expiration or termination of this Business Rescue Plan shall not affect such of the provisions of this Business Rescue Plan as expressly provide that they will operate after any such expiration or termination or which of necessity must continue to have effect after such expiration or termination, notwithstanding that the Clauses themselves do not expressly provide for this.
3.
Actions to be Taken By Affected Persons 3.1.
If any Affected Person is in doubt as to what action should be taken by him/her in respect of this Business Rescue Plan, such Affected Person is advised to consult his/her attorney, accountant or other professional advisor.
3.2.
Creditors will be invited to vote on the approval, rejection or amendment of this Business Rescue Plan at a S151 Meeting of Creditors to be convened by the BRP on 30th April 2015, being within ten days of the Publication Date.
4. Business Rescue - Key Dates 4.1.
The Board of Directors of the Company passed a resolution to voluntarily enter business Rescue proceedings on 19th January 2015. [Section 129(1) of the Act]
4.2.
The Commencement Date for the business rescue proceeding of the Company was 20th January 2015, being the date the appropriate documentation was filed with the CIPC. [Section 129(2)(b) of the Act]
4.3.
The BRP was appointed on 9th February 2015 with condonation for the delayed appointment of the BRP having been granted to the Company by the CIPC on 27th January 2015. [Section 129(3) of the Act]
4.4.
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The first meeting of Employees was held on 12th February 2015. [Section 148 of the Act]
TUB Business Rescue Plan
4.5.
The first meeting of Creditors was held on 23rd February 2015. [Section 147 of the Act]
4.6.
On or about 9th March 2015 the BRP requested written approval from the Creditors for the extension of the period in which this Business Rescue Plan was to be published from 16th March 2015 to 17th April 2015. The requisite majority of Creditors approved the extension with no Creditor having elected to oppose the extension requested. [Section 150(5)(b) of the Act]
4.7.
This Business Rescue Plan will be published on 17th April 2015. [Section 150(5) of the Act]
4.8.
A meeting to consider the Business Rescue Plan and to determine the future of the Company will be held on 30th April 2015, [Section 151 of the Act]
5.
Structure of this Business Rescue Plan
In accordance with Section 150(2) of the Act, this Business Rescue Plan has been divided into three parts as follows: 5.1.
PART A - BACKGROUND
This part sets out the background to the Company and the Business Rescue. This includes, inter alia, information on the Company, the circumstances of its Financial Distress, material assets held by the Company, Claims against the Company, and other information relevant to the Business Rescue process and Business Rescue Plan. 5.2.
PART B - PROPOSALS
This part provides, inter alia, the terms of the Business Rescue Plan and includes, inter alia, proposed actions and relief, the benefits of adopting the Business Rescue Plan as opposed to the Company being placed into liquidation, and the processes and steps required for the Business Rescue Plan to be implemented. 5.3.
PART C – ASSUMPTIONS, CONDITIONS AND GENERAL
This part sets out, inter alia, what conditions need to be fulfilled in order for the Business Rescue Plan to become effective, the circumstances in which the Business Rescue proceedings will end, projected financial information relating to the Company (in terms of the Business Rescue Plan), and general information on the law, process and Business Rescue Plan.
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PART A – BACKGROUND
6.
Background to TUB and the Events Leading to its Business Rescue
6.1.
TUB was established in 2006, and incorporated the operations previously undertaken by Muirlenium Technology, a business which itself commenced business in 1999.
6.2.
TUB’s business activities were initially focused around a land mine detection system which was integrated into mine protected military vehicles. For some time TUB built its business offering around its mine detection solutions (Pulse Induction Systems), providing three generations of technological advancement to the safety of military vehicles in conflict zones.
6.3.
Recognising the vulnerability of being a single product/single customer business, TUB began to widen its product offering to include electro mechanical products, becoming a specialist developer and manufacturer of custom cable assemblies (harnesses) and further developing its expertise beyond conventional wiring solutions to Controller Area Network (CAN bus) applications, integrating multiplexed electronic and electrical controls, monitoring and diagnostics – primarily for the same customer base.
6.4.
The diversification strategy was partially successful, and over time TUB increased both its product set and its customer base. Despite the diversification drive, however, TUB’s customer base was still dominated by local (South African) manufacturers of Land Systems (mine protected military transport vehicles) for export to international markets.
6.5.
Attractive prospects for TUB’s future growth were supported by the growth in the sales pipelines of TUB’s customers. Orders were placed with TUB, and new orders were beckoning if TUB was able to deliver the required capacity. TUB thus elected to invest in new staff, new premises, and capital equipment for a new printed circuit board production facility.
6.6.
It is worth noting the following extract from an article published in the Business Day on 5th March 2015:
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“Global demand for SA’s arms is taking a knock …. Authorised exports of conventional weapons last year declined to less than 10% of what the country sold three years ago, after a two-thirds decline in 2013, according to the National Conventional Arms Control Committee (NCACC). … Last year’s R880m in exports compares with R3.2bn worth of arms sold in 2013 and R10.6bn in 2012.”
6.7.
Whilst not an arms manufacturer, TUB was no exception to this severe market downturn, suffering significant falls in its turnover as its defence related customers’ own orders dwindled in line with world demand – the result of (inter alia) the withdrawal of US troops from combat zones such as Afghanistan and Iraq.
6.8.
TUB’s turnover over this period illustrates the story in graphic terms. For the financial years ended 28th February, TUB’s revenue was:
6.9.
6.8.1.
R105 million in 2010/2011;
6.8.2.
R124 million in 2011/2012;
6.8.3.
R114 million in 2012/2013;
6.8.4.
R65 million in 2013/2014; and
6.8.5.
R42 million in 2014/2015.
TUB therefore found itself squeezed in between the jaws of falling revenues on one side and a high fixed cost base on the other. Whilst the Company was still technically solvent during the 2014/2015 financial year (its balance sheet showing a positive Net Asset Value), cash flow was chronically short and during that year the Company was only kept liquid (commercially solvent) by cash injections from the Company’s shareholders.
6.10. In late December 2014/early January 2015 the Board of Directors of the Company considered its projected cash flow forecasts, and determined that the Company was indeed Financially Distressed in that it appeared to be reasonably unlikely that the company would be able to pay all of its obligations as they became due and payable within the immediately ensuing six months due to cash flow constraints.
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6.11. Having considered the alternatives open to the Company, including liquidation, and having consulted with a number of external parties (including the BRP), the Board of Directors of the Company resolved in January 2015 to voluntarily enter into Business Rescue proceedings. 7.
Overview of TUB Today 7.1. TUB has evolved substantially over the years. TUB today is engaged in many facets of electronic and electro-mechanical innovation and manufacture, and has world class design and manufacturing facilities located at its factory in Boksburg, Johannesburg. 7.2.
7.3.
7.4.
As the business stands today, TUB has competencies in: 7.2.1.
electrical and electronic design and manufacture;
7.2.2.
military and commercial vehicle harness design and manufacture;
7.2.3.
control panel design and manufacture;
7.2.4.
printed circuit board concept, design, assembly and industrialisation;
7.2.5.
Photovoltaic inverter manufacture; and
7.2.6.
turnkey product development.
The directors of TUB at the Commencement Date were: 7.3.1.
James Hinton;
7.3.2.
Warren Muir; and
7.3.3.
Leon Theron.
The only issued securities of the Company at the Commencement Date were ordinary shares in the Company.
The ordinary shareholders of the Company at the
Commencement Date were: 7.4.1.
Warren Muir: 255 shares, representing 65.2% of the issued shares of the company;
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7.4.2.
James Hinton: 67 share shares, representing 17.1% of the issued shares of the company;
7.4.3.
Eben Swanepoel: 46 shares, representing 11.8% of the issued shares of the company; and
7.4.4. 7.5.
Andrew Smit: 23 shares, representing 5.9% of the issued shares of the company.
TUB operates its business from its modern office and factory premises in Jet Park, Boksburg. These premises are leased from its landlord, Blane & Company (Sales) (Pty) Limited.
7.6.
As at the Commencement Date, the Company had 80 full time employees and 15 part time employees.
8.
Trading since the Commencement of Business Rescue 8.1.
Business Rescue is a traumatic time for all of the stakeholders of the company concerned. Generally in such circumstances staff fear for the security of their future employment, customers are nervous that existing orders might not be fulfilled – and are reluctant to place new orders, suppliers are concerned about their claims that have been frozen – and are reluctant to increase their exposure to the company by supplying further goods and services, funders naturally wish to secure their own positions, shareholders are anxious about their investments, and management have to run a business at the same time as they are managing a crisis.
8.2.
In addition to the additional (and significant) administrative and other business rescue related requirements set out in Chapter 6 of the Act, there is an immediate need, therefore, to stabilise the business and, as far as possible, regain the confidence of the stakeholders noted in the previous paragraph. Maintaining and boosting staff and management morale is vital. Retaining existing orders and securing new orders from customers is the lifeblood for the future survival for the Company, as it is for any company. Resolving constraints to the future supply of the raw goods and services required by the Company to produce its products is equally important in this period.
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8.3.
The circumstances of TUB at the commencement of Business Recue proceedings was no different from that described above. Soon after the Commencement Date, the BRP together with the TUB directors set about meeting with and/or contacting as many of these stakeholders as possible – both in order to ensure the continuity of sales orders being placed with the business, and to secure the Company’s ability to produce its products to fulfil these orders.
8.4.
Despite the trying conditions of the Business Rescue proceedings, staff and management excelled, suppliers and customers were very supportive and, as a direct result, January, February and March 2015 were positive trading months for TUB.
8.5.
The Company generated revenue at an average of R2.9 million per month over the first 10 months of the 2014/2015 financial year (March to December 2014). After entering Business Rescue in mid-January 2015, TUB’s turnover for January 2015 was R4.9 million, for February 2015 was R6.9 million, and for March 2015 was R6.8 million.
8.6.
A strong effort has been put into driving sales for the Company. This has included: 8.6.1.
structuring arrangements with existing customers to secure their support, resulting in the retention of existing orders and the generation of new orders;
8.6.2.
reviving orders that had been delayed or cancelled through engagement and negotiation with counterparties;
8.6.3.
a significant effort by the sales team; and
8.6.4.
opening up new markets and customer opportunities for TUB (see Clause 9.1 below).
8.7.
The order book of the Company, as at the Publication Date, shows firm forward orders of approximately R50.9 million.
8.8.
Initiatives to release working capital into the system have been undertaken to balance the cash inflows and outflows during this Business Rescue period where, not surprisingly, credit facilities from suppliers have been virtually non-existent and the Company’s bank account was frozen and its overdraft facilities suspended.
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8.9.
Notwithstanding this, the period from the Commencement Date to the Publication Date in fact saw significant net cash generation by the Company.
8.10. The stabilisation of the Company whilst in Business Rescue can therefore be said to have been predominately achieved and the Company has already enjoyed some measure of revitalisation. 9.
Significant Events Subsequent to the Commencement Date 9.1.
Strategic Investor/Post-Commencement Finance 9.1.1.
A strategic investor into the Company was secured. Bokama Trading and Projects Proprietary Limited (the Strategic Investor) entered into a binding Transaction Agreement with the Company on 16th March 2015.
9.1.2.
The Strategic Investor has subscribed for, and with effect from 18th March became the holder of, 51% of the issued share capital of the Company. This subscription was made for a nominal sum.
9.1.3.
Ms Nana Sabelo, a historically disadvantaged South African female, is the sole shareholder of the Strategic Investor. The Company is now, therefore, 51% “black woman owned and controlled”.
9.1.4.
The Board of Directors of the Company has been restructured in line with the change in shareholding and now has a 50% representation of historically disadvantaged South Africans, with Ms Sabelo being appointed as the company Chairperson.
9.1.5.
Ms Sabelo is an experienced businesswoman with an impressive curriculum vitae. She will lead business development for the Company, and has already applied her proven business development skills to positive effect on TUB.
9.1.6.
The operational management team of the Company has been fully restructured and strengthened. In addition to Ms Sabelo, a new chief operating officer (who is both female and historically disadvantaged) has been appointed, as well as a new divisional general manager for TUB’s Electro Mechanical Division.
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9.1.7.
The empowerment of TUB’s shareholder interests, board composition and management team has opened up a very significant market that was previously not accessible to the Company, in particular amongst the South African government owned and controlled organisations such as Denel, Prasa, Eskom, and Transnet.
9.1.8.
In terms of the Transaction Agreement, the Strategic Investor is obliged to advance a loan in the amount of R3.0 million to the Company. Of this amount, R2.0 million has already been advanced to the Company, and the balance of R1.0 million will be advanced to the Company on or before 30th April 2015.
9.1.9.
The Investor Loan constitutes Post-Commencement Finance.
9.1.10.
The Investor Loan will be converted into ordinary shares in the Company when, inter alia, the Business Rescue Plan for the Company is approved by the Company’s Creditors.
9.1.11.
If the Business Rescue Plan is not approved on or before 30th June 2015, the outstanding amount of the Investor Loan must be repaid by the Company to the Strategic Investor.
9.2.
Asset realisation 9.2.1.
Since the Commencement Date the management team have sought to convert contingent assets and sundry debtors into cash.
9.2.2.
These efforts continue to be fruitful and have yielded approximately R3 million in cash to date. It is anticipated that further proceeds of approximately R2 million is likely to be yielded as part of the Business Rescue Plan implementation.
9.3.
Roll over of existing financing arrangements 9.3.1.
The Company’s overdraft and banking facilities held with Standard Bank, which were suspended shortly after the commencement of Business Rescue, were released and reinstated during March 2015.
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9.3.2.
Discussions have progressed with Standard Bank and My Data to maintain and continue the provision of overdraft and asset finance facilities to TUB on terms consistent with those which were in place at the Commencement Date.
9.4.
Securing Short Term Loan Finance 9.4.1.
The BRP has commenced discussions with potential lenders with a view to securing approximately R2.0 million of short term (approximately one year) financing for the Company.
9.4.2.
The primary purpose of this Short Term Loan will be to provide cash funds to accelerate the repayment of the Revised Trade Creditor Claims of the Company’s trade creditors.
9.4.3.
Finalisation of negotiations with the potential lenders will require, inter alia, a positive review of the 2015 Audited Accounts (which accounts will be available shortly after the Publication Date) and the approval of the Business Rescue Plan by Creditors.
9.4.4.
Whilst the intention would be for the Short Term Loan, if secured, to be advanced prior to the Implementation Date, a later advancement would still be sought if this were not the case. Affected Persons are advised, however, that there can be no certainty that the Short Term Loan will be secured.
9.4.5.
The impact of the Short Term Loan not being secured would be one of timing – lengthening the time that it will take to fully settle the Revised Trade Creditor Claims in terms of this Business Rescue Plan.
9.5.
Necessary Operating Costs of the Company 9.5.1.
Certain costs which were considered to be necessary to the continued operation of the Company during its Business Rescue proceedings, and/or to have been considered to be net positive in their contribution to the Business Rescue proceedings being successful (as defined in the Act), have been treated as part of the Business Rescue Costs in terms of Section 135(3) of the Act.
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9.6.
Suspension of contractual obligations 9.6.1.
Certain obligations contractually due for payment by the Company during Business Rescue were partially suspended by the BRP in order to support the liquidity of the Company during this time.
9.6.2.
The most notable of these was rental payments in respect of the Company’s premises in Boksburg (pursuant to the Lease) and certain plant and equipment rented by TUB.
9.7.
Set-off and other arrangements 9.7.1.
The BRP successfully concluded set-off arrangements with two companies (separately), each of which was both a supplier to, and customer of, the Company.
9.7.2.
The BRP also successfully concluded a supply arrangement with a customer of the Company to secure the continuation of sales orders being placed with the Company by such customer.
9.7.3.
As a direct result of these arrangements, material new sales orders have been placed with TUB by these companies, plus the continuity of supply of strategically important input goods and services from these companies (required by TUB to complete sales orders for other customers) was secured.
9.7.4.
In all cases this resulted in positive trading, the stabilisation of TUB whilst in Business Rescue, and a generally favourable net return to the Company and the Affected Persons.
10.
Assets and Liabilities of the Company as at 28th February 2015 10.1. Management accounts for TUB are not reconciled or prepared on a monthly basis in a format that would make the reconstruction of a full and detailed balance sheet for the
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Company as at the Commencement Date practical or necessarily valuable in terms of this Business Rescue Plan. 10.2. The 2015 Audited Accounts were, however, prepared and audited by the Company’s Auditors during March/April 2015 and will be presented to the Board of Directors of TUB for ratification in the week following the Publication Date. 10.3. In this regard, draft 2015 Audited Accounts (awaiting ratification) are attached as Schedule H. It is not anticipated that there will be any material changes to the financial statements in their final approved form. 10.4. As the Audit Date is only five and a half weeks after the Commencement Date, and only six weeks prior to the Publication Date, the BRP respectfully submits that, due to the independent verification by the Auditors as well as the accuracy and reconciliations underlying the 2015 Audited Accounts, the Affected Persons will be better served with the material financial information included in this Business Rescue Plan being compiled with reference to and extracted from the draft 2015 Audited Accounts rather than the financial and other information generated and compiled with reference to the internal management accounts and information systems of the Company. 10.5. This is particularly relevant as the balance sheet of the Company as at 28th February 2015 has been closely scrutinised by management and the Auditors in the light of recent events and a number of relevant balance sheet adjustments have been made. 11.
Assets of the Company 11.1. The table below provides a summary of the assets of the company as extracted from the draft 2015 Audited Accounts.
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ASSETS Plant & Equipment WIP and finished goods Stock Stock & WIP Debtors - Trade Debtors - Other Debtors Cash and Bank Investments Cash & Near Cash Total Assets
Rand 9 616 503 2 676 018 7 167 416 9 843 434 6 296 796 1 452 449 7 749 246 3 478 482 155 887 3 634 369 30 843 551
11.2. Notes 11.2.1.
Plant and equipment is recorded at its depreciated book value. An independent valuation of plant and equipment has been undertaken which supports the value shown above as well as providing the “forced sale” value applied in the probable liquidation dividend computation in Schedule E.
11.2.2.
Inventories are valued at the lower of cost and selling price less costs to complete and sell.
11.2.3.
Other debtors constitute, inter alia, accruals, deposits and a state training authority grant.
12.
Liabilities of the Company 12.1. The table below provides a summary of the liabilities of the Company as extracted from draft 2015 Audited Accounts.
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CREDITORS & EQUITY Bank overdraft Asset finance Bank and asset finance Pre-commencement Trade Creditors Current Trade Creditors Trade creditors Taxation creditors Sundry Creditors & Accruals Capitalised rentals Other liabilities Shareholder loans Total Liabilities Shareholder funds Equity and Liabilities
Rand 2 644 781 4 429 014 7 073 796 8 562 347 1 186 446 9 748 793 1 005 168 645 434 2 219 378 3 869 980 1 898 472 22 591 041 8 252 511 30 843 551
12.2. Notes 12.2.1.
The Standard Bank’s overdraft facility has been secured in terms of a General Notarial Bond over all of the Company’s movable property and effects, including all of the Company’s debtors.
12.2.2.
Both Standard Bank and My Data have provided asset based finance to TUB, in each case having effective security in terms of the asset(s) so financed. Standard Bank’s General Notarial Bond provides further security to the asset finance provided by the bank.
12.2.3.
Pre-commencement trade creditors represent the holders of trade creditor Claims (per Schedule B).
12.2.4.
Other taxes are primarily PAYE and VAT.
12.2.5.
Equipment rentals agreements/commitments have been capitalised in accordance with IFRS.
12.2.6.
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Shareholder loans have not been subordinated in any manner.
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13.
Proof of Claims 13.1. The Act does not expressly set out the manner in which Claims should be adjudicated. 13.2. The value of the Claims against the Company (both trade and other creditors) as at the Commencement Date have been reconciled by the Company (with reference to the Company’s own records) to the satisfaction of the BRP. 13.3. Furthermore the value of the Claims have been communicated to known Creditors and, where differences have arisen, these have been reconciled between the Company and the Creditor(s) in question. 13.4. The BRP has not carried out an audit of the Claims, but has satisfied himself as to processes that have been undertaken by the Company to reconcile the Claims. 13.5. Clause 49 below sets out the process for late claims to be lodged with the BRP by those persons who believe they have a valid claim against the Company as at the Commencement Date which has not been recognised in this Business Rescue Plan.
14.
Creditors of the Company and their Claims as at the Commencement Date 14.1. The Creditors of the Company as at the Commencement Date were R17.58 million in aggregate, as set out in Schedule A. The Creditors can be broken down into those that are Secured Creditors, and those that are not (the latter being Concurrent Creditors). There were no subordinated Creditors. 14.2. The Secured Creditors are:
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14.2.1.
Standard Bank (overdraft)
R2.69 million
14.2.2.
Standard Bank (asset finance)
R2.48 million
14.2.3.
My Data (asset finance)
R1.95 million
14.2.4.
Total Secured Creditors
R7.12 million
TUB Business Rescue Plan
14.3. The Concurrent Creditors are:
15.
14.3.1.
Trade creditors (see Schedule B)
R8.56 million
14.3.2.
Shareholder loans (see Schedule C)
R1.90 million
14.3.3.
Total Concurrent Creditors
R10.46 million
Other Business Rescue Obligations of the Company 15.1. Other Business Rescue obligations of the Company that are required to be addressed in this Business Rescue Plan are those that have arisen (or will arise) subsequent to the Commencement Date, these comprising Post-Commencement Finance and Business Rescue Costs. 15.2. The Post-Commencement Finance obligations of the Company are: 15.2.1.
loan advanced to the Company by the Strategic Investor as at the Publication Date:
15.2.2.
15.2.3.
R2.0 million
loan to be advanced to the Company by the Strategic Investor on or before 30th April 2015:
R1.0 million
Total Post-Commencement Finance obligations
R3.0 million
15.3. Business Rescue Costs comprise the BRP’s remuneration, his expenses, and other costs associated with the Business Rescue proceedings and the preparation of this Business Rescue Plan. 15.3.1.
The costs of the BRP have for the duration of the Business Rescue been charged in accordance with Clause 20.1, and will be substantially settled prior to the S151 Meeting.
15.3.2.
The BRP will continue to charge for his services in accordance with Clause 20.1 until the Termination Date. On the assumption that this Business Rescue Plan is adopted and that there are no unforeseen complications arising, it is estimated that the BRP’s remuneration accruing between the Adoption Date and the Termination Date will be approximately R200,000.
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15.3.3.
In accordance with Section 143(2) of the Act, Schedule I and Clause 20.2, the BRP’s Contingency Fee is anticipated to be R500,000.
15.3.4.
Accrued expenses relating to advisors engaged in respect of the Business Rescue (as provided for is Section 135(3) of the Act) will be substantially settled prior to the S151 Meeting.
15.3.5.
The costs of advisors to be incurred in the period between the Adoption Date and the Termination Date is estimated to be approximately R100,000. These will be paid to the advisors concerned as and when invoiced to the Company.
15.3.6.
Unpaid operating costs of the Company during the Business Rescue proceedings which will be treated as Business Rescue Costs (as provided for is Section 135(3) of the Act) amount to approximately R0.80 million (see Schedule D) and will be settled with the service providers concerned prior to the Effective Date.
15.3.7.
The total of the Business Rescue Cost obligations (actual and estimated) to be addressed in this Business Rescue Plan is therefore anticipated to be approximately:
16.
R1.7 million
Net Asset Value of the Company 16.1. The net asset value of the Company as at 28th February 2015 in accordance with the draft 2015 Audited Accounts, as prepared and audited by the Company’s Auditors, was R8.25 million. 16.2. The draft 2015 Audited Accounts are provided as Schedule H of this Business Rescue Plan. 16.3. Clauses 11 and 12 above reflect the assets and liabilities (respectively) of the Company as at the Audit Date. 16.4. For the purposes of this Business Rescue Plan, the BRP has estimated the Net Asset Value of the Company at the Commencement Date by calculating and applying a simple adjustment (actual turnover less pro-rata costs for the period in question) to the Net Asset Value of the Company at 28th February 2015.
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16.5. Whilst this estimation has been included as a reference point for Affected Persons in their review of the Business Rescue Plan, the BRP does not intend that it will have any material effect on the proposals set out in this Business Rescue Plan as the resulting figures are no more than comparative figures for reference purposes only. 16.6. Noting the above Clauses, the estimated Net Asset Value of the Company as at the Commencement Date was R7.58 million. 17.
Probable Liquidation Dividend 17.1. In terms of Section 150(2)(a)(iii) of the Act, the Business Rescue Plan is required to include a statement of the probable dividend that would be received by Creditors, in their specific classes, if the Company were to have been placed in liquidation. 17.2. In order to take advantage of the independent verification, accuracy and reconciliations underlying the draft 2015 Audited Accounts, the computation of the probable liquidation dividend was made on the assumption that the liquidation occurred on the Audit Date, rather than at the Commencement Date. The BRP respectfully submits that the Affected Persons will be better served with the liquidation dividend being calculated in this manner than using the financial and other information generated and compiled with reference to the internal systems and information of the Company as at the Commencement Date. 17.3. The calculation in support of the probable liquidation dividend has been undertaken by the BRP and reviewed by the Auditors, and by reference to the work that the Auditors have undertaken in the audit of the Company’s records and accounts for the year ended on the Audit Date. 17.4. The computation of the probable liquidation dividend as at the Audit Date is provided in Schedule E. Affected Persons are, however, cautioned to exercise their own judgement in relation to the assumptions implicit in the probable liquidation dividend calculation. 17.5. Schedule E calculates the probable dividend payable to the various classes of Creditor in the event of the liquidation of the Company as at the Audit Date to be as follows: 17.5.1.
to Secured Creditors: 17.5.1.1. Standard Bank (overdraft)
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100 cents in the Rand TUB Business Rescue Plan
17.5.2.
17.5.1.2. Standard Bank (asset finance)
100 cents in the Rand
17.5.1.3. My Data (asset finance)
100 cents in the Rand
to Concurrent Creditors: 17.5.2.1. Trade creditors (per Schedule B)
40 cents in the Rand
17.5.2.2. Shareholder loans (per Schedule C)
40 cents in the Rand
17.6. Noting the Commencement Date Net Asset Value adjustment referred to in Clause 16 above, the BRP is of the opinion that it would be reasonable to adjust the computation of the liquidation dividends payable in Clause 17.5.2 by the same differential to reflect an approximation of the probable liquidation dividend that would have been paid to Concurrent Creditors in the event that the liquidation of the Company had been triggered on the Commencement Date (the Secured Creditors still receiving 100 cents in the Rand). 17.7. This computation indicates that the probable dividend that would have been paid to Concurrent Creditors in the event of the liquidation of the Company on the Commencement Date (as envisaged in the Act) would have been approximately 35 cents in the Rand. 17.8. The BRP further notes that a commonly applied assumption to matters of this nature is that a liquidator could be expected to take two years (or more) to finalise and make payment of the applicable liquidation dividends. Neither the time value of money nor any additional costs incurred in this period have been factored into the above calculations. 17.9. It would not be unreasonable, therefore, to consider a discount factor of approximately 10% to reflect the time value of money related to this two year period. This would result in the present value of the probable liquidation dividend payable to Concurrent Creditors in the event of the liquidation of the Company on the Commencement Date being approximately 32 cents in the Rand. 18.
Security Held by Creditors 18.1. The following Creditors hold security in terms of the Company’s assets as at the Publication Date:
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18.1.1.
The Standard Bank of South Africa Limited (“Standard Bank”): Standard Bank holds a General Notarial Bond (the “GNB”) in terms of which the Company has hypothecated in favour of Standard Bank, inter alia, all of the moveable property and effects of the Company, including all debts of whatever nature owing to the Company, as security in respect of the overdraft, asset finance and other borrowings (including the usual costs and interest provisions related thereto) advanced to the Company from time to time by Standard Bank.
18.1.2.
Standard Bank: Standard Bank has financed equipment (plant and machinery) acquired by the Company valued at approximately R3.2 million, of which approximately R2.5 million of the capital value (excluding interest on future instalments) remained outstanding as at the Commencement Date. Ownership of the equipment financed remains with Standard Bank until such times as the Company has paid all of the instalments due and fulfilled all of its obligations in terms of the applicable financing agreements. The advances made by Standard Bank in these equipment finance facilities are also secured in respect of the GNB.
18.1.3.
My Data Automation AB (“My Data”): My Data has financed equipment (plant and machinery) acquired by the Company valued at approximately US$692,081, of which approximately US$168,992 of the capital value (excluding interest on future instalments) remained outstanding as at the Commencement Date. Ownership of the equipment financed remains with My Data until such times as the Company has paid all of the instalments due and fulfilled all of its duties in terms of the financing agreements.
18.1.4.
Bokama Trading and Projects (Pty) Limited: As security for the Investor Loan the Company has pledged to the Strategic Investor, for as long as the Investor Loan remains outstanding and/or unconverted into TUB equity, the Company’s reversionary rights to all of the Company’s interests of any nature whatsoever in all book and other debts owing to the Company.
18.2. It is also recorded that in terms of the Lease agreement with the Company’s landlord, the landlord is protected by a bank guarantee, issued by Standard Bank on behalf of the Company, which guarantee is only extinguished after all claims of the landlord have been settled on termination of the Lease. The current value of the guarantee is R0.45 million. 32 | P a g e
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19.
Informal Proposals from Creditors 19.1. In Terms of Section 150(2)(a)(vi) of the Act the BRP confirms that this Business Rescue Plan does not include any proposal made informally to the BRP or the Company by a Creditor of the Company. 19.2. The BRP further confirms that, as at the Publication Date, he is not aware of any Creditor planning to make any such proposal.
20.
Remuneration of the BRP 20.1. In terms of the BRP Engagement Agreement, attached as Schedule I, the BRP is entitled to be remunerated by the Company at a rate of R1,500 per hour for the BRP’s services pertaining to the Business Rescue (“Base Fees”). 20.2. In terms of Section 143(2) of the Act the BRP is entitled to propose and receive contingency fees on the attainment of particular outcomes (“Contingency Fee”). In terms of the attached BRP Engagement Agreement, the BRP and the Company have agreed to Contingency Fee arrangements of this nature. 20.3. As a term of this Business Rescue Plan, the Contingency Fee will become effective upon the approval of this Business Rescue Plan by Creditors at the S151 Meeting, noting herewith that the shareholders of the Company have already confirmed their approval of the BRP’s fee proposals. 20.4. The Contingency Fee will become payable subject to Substantial Implementation and on the Termination Date, but will be subject to the payment concessions granted by the BRP in Clause 30.4.
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PART B – PROPOSALS
21.
Order of Distribution 21.1. In term of Chapter 6 of the Act, and as advanced in Merchant West Working Capital Solutions Proprietary Limited v Advanced Technologies and Engineering Company Proprietary Limited and Others [unreported judgment no 13/12406 in the South Gauteng High Court. per: Kgomo J at para 21], creditors in business rescue proceedings are to be paid in the following order of priority: 21.1.1.
the business rescue practitioner, for remuneration and expenses, and other persons (including legal and other professionals) for costs of business rescue proceedings;
21.1.2.
employees for any remuneration which became due and payable after Business Rescue proceedings began;
21.1.3.
secured lenders or other creditors for any loan or supply made after business rescue proceedings began, i.e. Post-Commencement Finance;
21.1.4.
unsecured lenders or other creditors for any loan or supply made after business rescue proceedings began, i.e. Post-Commencement Finance;
21.1.5.
secured lenders or other creditors for any loan or supply made before Business Rescue proceedings began;
21.1.6.
employees for any remuneration which became due and payable before Business Rescue proceedings began; and
21.1.7.
unsecured lenders or other creditors for any loan or supply made before Business Rescue proceedings began
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22.
Outline of the Business Rescue Plan 22.1. A straightforward company liquidation is relatively easy to understand in concept: practically the business stops trading altogether; all contracts stop; all employment is terminated; all of its assets are sold over a period; liquidation expenses are met; and what is left is paid to creditors at the end of that period based upon the security they hold and/or their place in the pecking order of payment priority. 22.2. Providing a Business Rescue proposal for a company, such as this, where an implicit component of the proposal is the continued existence and trading of the company, is a little less easy to conceptualise. Throughout the process the business continues to trade, assets and liabilities therefore change daily in the normal course of business, and there is no firm point of suspended animation at which one can measure or direct which assets will be utilised to meet the outstanding claims. For example the bank balance changes daily as the business receives payment from its customers and makes payments to its suppliers (etc.). 22.3. To provide for an understandable and workable solution in the fluid circumstances of the Company, this Business Rescue Plan has been structured based on the following principles (assuming the adoption of the Business Rescue Plan): 22.3.1.
The Company will continue in business, trading as a going concern as it has since the Commencement Date, notwithstanding the concurrent process to implement this Business Rescue Plan;
22.3.2.
31st May 2015 will become the “Effective Date” for the Business Rescue Plan;
22.3.3.
7th June 2015 shall become the “First Payment Date” for the Business Rescue Plan;
22.3.4.
Prior to the Effective Date the BRP and/or the Company (as the case may be) will endeavour, inter alia, to: 22.3.4.1.
receive the outstanding balance of R1.0 million of the Investor Loan from the Strategic Investor (as described in Clause 23);
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22.3.4.2.
convert the R3.0 million Investor Loan into ordinary shares in the Company (as described in Clause 24);
22.3.4.3.
reach written confirmation on the roll-over of the Standard Bank and Mydata funding facilities (as described in Clause 25);
22.3.4.4.
adopt and implement a new shareholders’ agreement and memorandum of incorporation for TUB (as described in Clause 26);
22.3.4.5.
settle the relevant Business Rescue Costs (as described in Clause 30);
22.3.4.6.
secure the Short Term Loan in the amount of approximately R2.00 million (as described in Clause 27);
22.3.4.7.
settle the Company’s normal monthly trading expenses, operational expenses, and/or other obligations as they become due and payable; and
22.3.4.8. 22.3.5.
collect all debts due owing and payable to the Company.
25% of all Concurrent Creditor Claims (trade creditors and shareholder loans) will be compromised and the Company permanently released therefrom (as described in Clause 28).
22.3.6.
Shareholder loans will, in addition, be subordinated to the Claims of trade creditors and will not be eligible for repayment until such times as the Claims of trade creditors have been extinguished in full (as described in Clause 29).
22.3.7.
On the First Payment Date, the Company shall utilise the Free Funds available as at the close of business on the Effective Date to settle some or all of the remaining Claims of the trade creditors. Payments shall be made to such Creditors pro-rata to the value of their Claims (as described in Clause 31).
22.3.8.
On or before the 7th day of each month after the month in which the First Payment Date occurs (each being a “Subsequent Payment Date”) and until such time as the Claims of the trade creditors have been extinguished, the Company
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shall pay to the trade creditors the Free Funds available as at the close of business on the last Business Day of the month immediately prior to the Subsequent Payment Date (as described in Clause 31). 22.4. Once the BRP is satisfied that the above steps, processes and/or procedures have been successfully implemented, waived and/or are operating appropriately, as the case may be, the BRP will declare that the Business Rescue Plan has been substantially implemented and, subject to the other components of the Business Rescue Plan having been implemented, shall terminate the Business Rescue Proceedings of TUB. 22.5. The BRP is cognisant of the need to balance the additional time that may be invested in further securing the matters set out in Clauses 22.3.4 above - against the competing requests for a Business Rescue Plan to be published and implemented as soon as possible by: 22.5.1.1. the Company in order to relieve itself of the negative connotations of being in Business Rescue proceedings; 22.5.1.2. the Creditors who are anxious for a resolution of their outstanding Claims against the Company; 22.5.1.3. the Act which encourages a swift resolution of Business Rescue proceedings; and 22.5.1.4. the directors, employees, shareholders, customers, bankers and other stakeholders who are anxious to return to “business as usual”. It is a judgement call as to when is the right time to stop the stabilisation/planning process within Business Rescue and to give Creditors the opportunity to vote on the proposed Business Rescue Plan. The BRP is of the view that the timing implicit in this Business Rescue Plan strikes an appropriate balance in this regard, granting the Claims of trade creditors the appropriate priority to benefit from Free Funds generated by the Company.
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23.
Final Instalment of the Investor Loan 23.1. The Strategic Investor, the shareholders of the Company and the Company have concluded the Transaction Agreement in terms of which the Strategic Investor agreed to advance a Post-Commencement Finance loan of R3.0 million to the Company. 23.2. In terms of the Transaction Agreement: 23.2.1.
R2.0 million of this Investor Loan was paid to the Company during March 2015; and
23.2.2.
The balance of R1.0 million of the Investor Loan is to be advanced on or before 30th April 2015.
23.3. All conditions relating to the advancement of this R1.0 million have been fulfilled. 23.4. The BRP has no reason to believe that this commitment will not be met. 24.
Conversion of the Investor Loan into ordinary shares in the Company 24.1. The Transaction Agreement provides further that the full amount of the Investor Loan (including 72% of any interest accrued thereon) shall be converted into ordinary shares in TUB subject to the fulfilment (or waiver) of the conditions below: 24.1.1.
the Net Asset Value of the Company as reflected in the 2015 Audited Accounts being at least R8.0 million;
24.1.2.
a business rescue plan prepared by the BRP and published by the Company in terms of Section 150 of the Act having been approved at a meeting of Creditors and any other holders of a voting interest, called for the purpose of considering the business rescue plan in terms of Section 151 of the Act (and any suspensive conditions contained in such business rescue plan applicable to the conversion having been fulfilled and/or waived); and
24.1.3.
the Strategic Investor having advanced the full amount of the Investor Loan to the Company.
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24.2. The first of these conditions (Clause 24.1.1) will be satisfied subject to there being no material adjustment to the draft 2015 Annual Accounts attached as Schedule H. The third condition (Clause 24.1.3) has been partially satisfied (the Company has already received R 2.00 million into its bank account) and the balance of R1.0 million is contractually bound to be received from the Strategic Investor by the end of April 2015. The fulfilment of the second condition (Clause 24.1.2) will be determined by the Creditors in terms of their approval, or not, of the Business Rescue Plan for TUB. 24.3. The conversion of the Investor Loan will be achieved by way of a subscription for one additional share in the Company by the Strategic Investor, the subscription price being equal to the conversion value of the Investor Loan (being R3.0 million plus 72% of the accrued interest thereon). 24.4. The conversion of the Investor Loan into ordinary shares in TUB will: 24.5.
increase the Net Asset Value of the Company by R3.0 million;
24.6.
provide working capital for the Company;
24.7.
deliver greater financial security to all Creditors; and
24.8.
provide funding that will contribute to the timely settlement of Creditor Claims.
24.9. The BRP will endeavour to complete and implement the conversion of the Investor Loan before the Effective Date. 24.10. If the Business Rescue Plan is not approved on or before 30th June 2015, the outstanding amount of the Investor Loan must be repaid by the Company to the Strategic Investor. 25.
Roll-over of the Banking and Asset Finance Facilities 25.1. The Standard Bank facilities that were suspended shortly after the Commencement Date have been released and reinstated:
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25.1.1.
an overdraft facility in the amount of R2.7 million has been confirmed; and
25.1.2.
asset finance facilities of in the amount of R2.48 million have been reinstated.
TUB Business Rescue Plan
25.2. Discussions have commenced with Standard Bank to review all funding facilities and seek a more attractive funding package for the Company, including an increase of the overdraft level to R3.0 million. 25.3. Discussions are underway with My Data to confirm to the reinstatement of the preCommencement Date facilities: 25.3.1.
the final instalment of R0.39 million relating to an asset finance facility was settled in April 2015; and
25.3.2.
the remaining asset finance facility of R1.56 million will remain in place on unchanged terms.
25.4. Rolling over these secured facilities will mean that Free Funds generated will not be required to provide for an early settlement of these obligations, and the security underlying these obligations remains in place. Servicing of these facilities in the normal course of business has been budgeted for in the Company’s projected cash flow forecasts. 25.5. The BRP will endeavour to complete the confirmation of the roll-over of the Standard Bank and Mydata funding facilities by the Effective Date. 26.
Shareholders’ agreement and memorandum of incorporation 26.1. The BRP will oversee the adoption and implementation of a new shareholders’ agreement and memorandum of incorporation for TUB. 26.2. It is anticipated that these documents will be completed and implemented before the Effective Date.
27.
Securing a Short Term Loan 27.1. The BRP and the Company have commenced discussions with potential lenders with regards to the advancement to the Company of a Short Term Loan (one year duration) of approximately R2.0 million to TUB. 27.2. The sole purpose of the Short Term Loan will be to accelerate the repayment of the Concurrent Creditor Claims of the Company’s trade creditors.
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27.3. Finalisation of negotiations with regards to the Short Term Loan require (inter alia) the potential lenders’ positive review of the 2015 Financial Statements (which accounts will be provided to the financial institutions shortly after the Publication Date) and the approval of the Business Rescue Plan by Creditors. 27.4. Whilst the intention would be for the Short Term Loan, if secured, to be advanced to TUB prior to the Implementation Date, a later advancement would still be sought if this were not the case. 27.5. Affected Persons are advised, however, that there can be no certainty that the Short Term Loan will be secured. The impact of the Short Term Loan not being secured would be one of timing, resulting only in the lengthening of the anticipated time that it would take for the Claims of trade creditors to be fully extinguished in terms of this Business Rescue Plan. 28.
Partial Release from Concurrent Creditor Claims 28.1. The restructuring and rehabilitative measures that have been undertaken to restore the Company to commercial solvency and to reposition the Company strategically will still take some time to become fully effective and embedded. 28.2. The BRP is of the opinion that it is important to provide the Company with sufficient financial and cash flow flexibility to fully recover from the Financial Distress which was the root cause of its voluntary entry into Business Rescue proceedings. 28.3. Not to provide such flexibility could undermine the sustainability of the Business Rescue, and could contribute to a return to the Financial Distress originally faced by the Company. 28.4. Negotiations with regard to the Short Term Loan have been premised on the strengthening of the balance sheet of TUB as envisaged in this Clause 28. 28.5. In order to secure the sustainable solvency of TUB and to balance the interests of all stakeholders in terms of this Business Rescue Plan, 25% of all Claims owing to Concurrent Creditors will be compromised and the Company permanently released therefrom. 28.6. In effect this will result in:
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28.6.1.
a reduction in the total of trade creditor Claims owing and payable by the Company, as currently set out in Schedule B, from a current amount owing of R8.56 million to a revised amount owing of R6.42 million (the “Revised Trade Creditor Claims”); and
28.6.2.
a reduction of the total of shareholder loan Claims owing and to be repaid by the Company, as currently set out in Schedule C, from a current amount owing of R1.90 million to a revised amount owing of R1.42 million (the “Revised Shareholder Loans”).
28.7. Furthermore this Business Rescue Plan requires that the Revised Shareholder Loans be subordinated to the Revised Trade Creditor Claims, and will not be eligible for servicing or repayment until such times as, inter alia, the Revised Trade Creditor Claims have been paid in full. 28.8. The Revised Trade Creditor Claims (being 75% of the original Claims) will be settled from the Free Funds of the Company with effect from the Effective Date in terms of the mechanism set out in Clause 31. 28.9. The Claims in Schedule B will bear no interest in the period from the Commencement Date until the Adoption Date, and the Revised Trade Creditor Claims will bear no interest in the period from the Adoption Date until the date that the Revised Trade Creditor Claims are settled in full. 28.10. For the sake of clarity it is recorded that each Concurrent Creditor listed in Schedules B or C can calculate the net amount of the revised Claim that will be owing and paid to him/her by multiplying the Rand amount of the Claim shown against his/her name in the relevant Schedule by a factor of 75%. 28.11. It is expressly recorded that this Clause, once the Business Rescue Plan has been approved by Creditors in terms of Section 152(2) of the Act, becomes binding in respect of all Concurrent Creditor Claims against the Company (where the cause of action in respect of which arose prior to or on the Commencement Date) whether actual or contingent, known or unknown, from whatsoever cause and howsoever arising, whether recorded in Schedules B and C or not.
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29.
Subordination of the Revised Shareholder Loans 29.1. As noted above, the Revised Shareholder Loans will be subordinated to the Revised Trade Creditor Claims and will not be eligible for repayment or any other form of servicing until such times (inter alia) as the Revised Trade Creditor Claims have been repaid in full. 29.2. The Revised Shareholder Loans will bear no interest during this period.
30.
Business Rescue Costs 30.1. The further Base Fees payable to the BRP and incurred in the period between the Adoption Date and the Termination Date are estimated to be R200,000. These fees will be paid to the BRP as and when they arise and are invoiced to the Company in accordance with the BRP Engagement Agreement. 30.2. The further costs of advisors to be incurred in the period between the Adoption Date and the Termination Date is estimated to be R100,000. These costs will be paid to the advisors in question as and when they are incurred and are invoiced to the Company. 30.3. The outstanding necessary operating costs of TUB which will be treated as Business Rescue Costs (as set out in Schedule D) amount to approximately R0.80 million and will be settled with the service providers concerned prior to the Effective Date. 30.4. Whilst the BRP’s Contingency Fee (see Clause 20.2) is technically an obligation of the Company that is prioritised for payment in terms of the Act, the BRP has agreed for this fee to be paid to him in five equal monthly instalments, the first payment date being 5 Business Days after the Termination Date, and the following four payment dates being at one month intervals thereafter. 30.5. The reason for this concession, without the BRP in any other way waiving the prioritisation rights to which the BRP is entitled in terms of the Act, is to relieve early cash flow pressure on the company, to demonstrate the BRP’s own confidence in the Business Rescue Plan, and to allow for a greater cash payment in respect of Revised Trade Creditor Claims in those early months.
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31.
Mechanism for the Settlement of Revised Trade Creditor Claims 31.1. The Company shall, until such times as the Revised Trade Creditor Claims have been settled in full, maintain a single trading bank account with its then primary banker (the “Primary Bank Account”). 31.2. As at the Publication Date the Company’s Primary Bank Account is a current account held with Standard Bank with an approved overdraft limit of R2.7 million. 31.3. The consolidated balance currently held in the bank accounts of the Company as at the close of business two days prior to the Publication Date was R4.4 million. The balances held in the various bank accounts will be consolidated into the Primary Bank Account before the Implementation Date. 31.4. It is recorded that the following amounts will be specifically excluded from the Primary Bank Account: 31.4.1.
A deposit held by Standard Bank on behalf of the Company in the amount of approximately R0.46 million relating to the rental guarantee given by Standard Bank to the Company’s landlord.
31.4.2.
Balances of R10,000 or less held by the Company in various foreign exchange, savings or other such bank accounts.
31.5. In the period from the Adoption Date until the First Payment Date the Company: 31.5.1.
shall pay into the Primary Bank Account any and all receipts from: 31.5.1.1. trade debtors of the Company; 31.5.1.2. sundry debtors of the Company; 31.5.1.3. the Strategic Investor; 31.5.1.4. other bank accounts held by the Company (in terms of Clauses 31.3 and 31.4); 31.5.1.5. the Short Term Loan; and
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31.5.1.6. any cash realisations from the disposal of assets of the Company in the ordinary and regular course of business. 31.5.2.
shall pay from the Primary Bank Account: 31.5.2.1. any Business Rescue Costs arising in respect of Clauses 30.1 and 30.2; 31.5.2.2. all Business Rescue Costs as provided for in Clause 30.3; and 31.5.2.3. the Company’s normal monthly trading expenses, operational expenses, and other obligations as they become due and payable.
31.5.3.
shall not be entitled to pay from the Bank Account: 31.5.3.1. any ex gratia or bonus payments to employees or directors of the Company (except to the extent that Section 136 of the Act requires otherwise); 31.5.3.2. any dividends to the Company Shareholders; 31.5.3.3. any amount relating to outstanding shareholders loans; and /or 31.5.3.4. the cost of any asset acquired outside the ordinary course of business.
31.6. On the First Payment Date, the Company shall pay to the holders of Revised Trade Creditor Claims the Free Funds held in the Primary Bank Account as at the close of business on the Effective Date. Payments shall be made to holders of Revised Trade Creditor Claims pro-rata to the value of their Claims. 31.7. In the period between the First Payment Date and the first Subsequent Payment Date, and in any period between sequential Subsequent Payment Dates until such times as the Revised Trade Creditor Claims have been settled in full, the Company: 31.7.1.
shall pay into the Primary Bank Account any and all receipts from: 31.7.1.1. trade debtors of the Company; 31.7.1.2. sundry debtors of the Company;
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31.7.1.3. the Short Term Loan (if not already received); 31.7.1.4. any cash realisations from the assets of the Company. 31.7.2.
shall pay from the Primary Bank Account: 31.7.2.1. any Business Rescue Costs arising in respect of Clauses 30.1 and 30.2; 31.7.2.2. any Business Rescue Cost as provided for in Clause 30.4 (for five Subsequent Payment Dates only); and 31.7.2.3. the Company’s normal monthly trading expenses, operational expenses, and other obligations as they become due and payable.
31.7.3.
shall not be entitled to pay from the Bank Account: 31.7.3.1. any dividends to the Company Shareholders; 31.7.3.2. any amount relating to outstanding shareholders loans; and /or 31.7.3.3. the cost of any asset acquired outside the ordinary course of business.
31.8. On each Subsequent Payment Date, and until such time as the Revised Trade Creditor Claims have been settled in full, the Company shall pay to the holders of Revised Trade Creditor Claims the Free Funds held in the Primary Bank Account as at the close of business on the final Business Day of the month immediately prior to the relevant Subsequent Payment Date. Payments shall be made to the holders of Revised Trade Creditor Claims pro-rata to the value of their Claims. 31.9. The Company will advise the holders of Revised Trade Creditor Claims of each payment made to them in respect of such Claims, and shall maintain an account of payments made and balances outstanding in respect of each such Creditor. 31.10. For the sake of clarity it is recorded that the underlying intention of the relevant subClauses in this Clause 31 relating to the Primary Bank Account is to provide a fair measure of the Free Funds that have been generated by the Company in the normal course of its business during the period in question such that all relevant Free Funds, less the costs of 46 | P a g e
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Business Rescue, can be quantified and made available to settle outstanding Revised Trade Creditor Claims until such time as the Revised Trade Creditor Claims have been settled in full. 31.11. For indicative purposes only, the current cash flow forecasts prepared by the Company and reviewed by the BRP indicate that the settlement of Revised Trade Creditor Claims, assuming that the Short Term Loan is only secured after the Effective Date, is anticipated to be achieved in the following manner: 31.11.1.1.
approximately c.7% settled on First Payment Date;
31.11.1.2.
approximately c.48% (cumulatively) settled by 7th July 2015;
31.11.1.3.
approximately c.61% (cumulatively) settled by 7th August 2015;
31.11.1.4.
the balance settled monthly thereafter, with full settlement anticipated before the end of the 2015 calendar year.
31.12. It is stressed that the above forecasts have not been audited, are for information purposes only, are not undertakings made on behalf of the Company or the BRP, will be entirely dependent on actual events and outcomes between the Publication Date and each of the payment dates in question, and therefore should be treated by Creditors with the appropriate level of caution. 32.
Monitoring of the Primary Bank Account 32.1. Until the Termination Date the BRP will monitor the activities of the Company to satisfy himself that all relevant funds are collected as expeditiously as is practical in the circumstances and are deposited in the Primary Bank Account, that inappropriate payments are not made from the funds held in the Primary Bank Account, and that the underlying intention set out in Clause 31.10 is met. 32.2. For any Subsequent Payment Date falling after the Termination Date, and therefore after the BRP has completed his role as the practitioner in terms of the Business Rescue, prior to each payment date the Chief Executive Officer of the Company will:
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32.2.1.
review the material payments and receipts to and from the Primary Bank Account over the previous month;
32.2.2.
confirm that Primary Bank Account has been managed in accordance with Clause 31;
32.2.3.
measure the Free Funds available for the payment date in question;
32.2.4.
provide the holders of Revised Trade Creditor Claims with written confirmation of the findings of Clauses 32.2.2 and 32.2.3 above, to be sent to such Creditors together with the relevant payment notification.
33.
Potential Cash Realisations from Other Assets 33.1. The Company is seeking to generate and/or release cash into the Primary Bank Account through a number of initiatives in addition to those already described elsewhere in this Business Rescue Plan. 33.2. The purpose of these initiatives is to increase the amount of Free Funds available to settle the holders of Revised Trade Creditor Claims. 33.3. Included in these initiatives are: 33.3.1.
the settlement of legacy obligations and entitlements relating to work undertaken with a key customer over a period of the previous two years; and
33.3.2.
realising investment assets held by the Company.
33.4. Any funds realised in this manner will be paid into the Primary Bank Account. 34.
Ongoing Business of the Company 34.1. There are a number of changes, initiatives and developments which the BRP considers have and will contribute to the rehabilitation of TUB. The more significant of these are discussed below in order that they may be considered by Affected Persons in the context of “the likelihood of the company continuing in existence on a solvent basis” (Section 128(1)(B)(iii) of the Act).
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34.2. The inherent potential of the Company has been significantly transformed through the introduction, during the Business Rescue process, of the Strategic Investor. The Company is now 51% black female owned and controlled. The Board of Directors of the Company now has a 50% representation of historically disadvantaged South Africans, with Ms Sabelo being the company Chairperson. The operational management team of the Company has been fully restructured and strengthened with the addition of Ms Sabelo as well as a new chief operating officer and a new divisional general manager for the Electro Mechanical Division. 34.3. The empowerment of TUB’s shareholder interests, board composition and management team has opened up a market that was previously not previously accessible to the Company, in particular amongst the South African government owned and controlled organisations such as Denel, Prasa, Eskom, and Transnet. 34.4. A review of the financial and operational records of TUB would indicate that the Company began its recovery in late 2014, but not in time to avoid the Financial Distress that was the trigger for the Business Rescue proceedings. The three months whilst the Company has been in Business Rescue proceedings have been, notwithstanding the burden of the Business Rescue proceedings, positive trading months for the Company. 34.5. After averaging monthly sales of R2.9 million over the first 10 months of the 2014/2015 financial year (March to December 2014), TUB’s turnover for the period January to March 2015 averaged R6.2 million. Revenue for the full 2015/2016 financial year has been forecast by management to be R73.9 million. The forward order book for the Company as at the Publication Date shows firm forward orders of some R50.9 million, of which R24.2 million will fall in the current financial year. 34.6. Structuring arrangements with a number of existing customers has resulted in the retention of existing orders and the generation of new orders from those customers. Material orders on a project that had been delayed/cancelled have been brought back on stream and are anticipated to commence in the second half of the current financial year. Most significantly the empowerment of TUB (see Clause 9.1 above) has opened up a new market for TUB in amongst the government controlled entities. As a first step in this regard significant progress has already been made to secure TUB’s supplier status with Denel.
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34.7. TUB has addressed its cost base. Whilst broadly maintaining its gross profit margins, overhead costs reduced from R42.5 million in 2013/2014 to R37.9 million in 2014/15 (notwithstanding the impact of inflation over that period). Significant further cost cutting has been achieved. The forecast for overhead costs for 2015/2016 is approximately R31.1 million. 34.8. The staff compliment in the period from 2011/2012 to 2014/2015 reduced from approximately 109 members of staff to approximately 91 members of staff. During the Business Rescue proceedings permanent staff numbers have fallen by a further 8 people. The Company has managed this loss of staff through reorganisation and has not sought to replace each departing member of staff. It is considered that staff numbers are now appropriate for the business plan envisaged for 2015/2016. 34.9. A material asset finance agreement was completed and the final payment in relation to that agreement will be settled prior to the Effective Date. The Company is considering options to replace two equipment rental agreements with asset finance arrangements which will be cash flow neutral, but financially beneficial to the Company. 34.10. The Company occupies two floors of a mixed office and factory floor premises in Jet Park, Boksburg in terms the Lease which was in force at the Commencement Date. 34.10.1. The Lease was entered into during 2012/2013 when the prospects and turnover of TUB were booming. 34.10.2. The premises now occupied by TUB are well in excess of those which are required to effectively operate and manage the current business of TUB. The financial drain relating to this “excess” expenditure is considered by the BRP to be material in the context of this Business Rescue Plan. 34.10.3. The landlord was approached by the BRP shortly after the Commencement Date and advised of the above, with a request that if they were able to separately let a portion of the property then occupied by TUB, the BRP and the Company would be pleased to accommodate that. An amicable solution to the matter was, and indeed remains, the intention of both parties.
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34.10.4. During the Business Rescue proceedings, the payment obligations of TUB in terms of the Lease were partially suspended by the BRP in terms of Section 136(2)(a) of the Act. 34.10.5. Certain potential occupiers of space within the leased premises were approached by TUB and the landlord, but none of these potential tenants took up the opportunity to sub-let space in the leased premises. 34.10.6. The BRP caused the Company to fully vacate the entire first floor of the leased premises before the end of March, this area constituting approximately 40% of the leased premises by value. The landlord was advised of this, and the BRP reengaged with the landlord to propose and negotiate a just and reasonable solution in the circumstances. 34.10.7. The BRP has made what he considers to be a fair proposal to the landlords. If accepted, this proposal will be formalised in the period between the Adoption Date and the Substantial Implementation Date. 34.10.8. If the BRP’s proposal is not accepted by the landlord, an application will be made to court in terms of Section 136(2)(b) of the Act for an order that the Company’s obligations in terms of the first floor be cancelled in the Lease as proposed. 34.11. The directors of TUB at the Publication Date are: 34.11.1. Nana Sabelo; 34.11.2. Mauwane Kotane; 34.11.3. Thuthu Khumalo; 34.11.4. James Hinton; 34.11.5. Warren Muir; and 34.11.6. Leon Theron. 34.12. The ordinary shareholders of the Company at the Publication Date are: 51 | P a g e
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34.12.1. Nana Sabelo: 406 Shares representing 51.0% of the issued shares of the Company; 34.12.2. Warren Muir: 255 shares representing 32.0% of the issued shares of the Company; 34.12.3. James Hinton:
67 shares representing 8.4% of the issued shares of the
Company; 34.12.4. Eben Swanepoel: 46 shares representing 5.7% of the issued shares of the Company; and 34.12.5. Andrew Smit: 23 share representing 2.9% of the issued shares of the Company. 35.
Treatment of Agreements 35.1. Other than as specifically provided for in this Business Rescue Plan, in particular in respect of the Lease, the existing memorandum of association and shareholders’ agreement, and the arrangements contemplated in Clauses 28 and 29, this Business Rescue Plan is not anticipated to have any material impact on the Agreements to which the Company is known by the BRP to be a Party.
36.
Nature and Duration of the Moratorium 36.1. In terms of Section 150(2)(b)(i) of the Act, the Business Rescue Plan must include the nature and duration of any moratorium for which the Business Rescue Plan makes provision. 36.2. The moratorium imposed by Section 133 of the Act in respect of any legal proceedings, including enforcement action, against the Company, or in relation to any property belonging to the Company or in its possession, shall remain in force until the Termination Date, and shall terminate when the Business Rescue proceedings end in accordance with the provisions of Section 132(2) of the Act.
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37.
Effect of the Business Rescue Plan on Employees 37.1. During the Business Rescue proceedings, 8 employees resigned from the Company and were not replaced. 37.2. If this Business Rescue Plan is approved and implemented as envisaged, and the Company performs broadly in line with its expectations, it is not envisaged that there will be any further requirement for job losses related to the Business Rescue.
38.
Effect of the Business Rescue Plan on Creditors 38.1. For the Secured Creditors of the Company: 38.1.1.
the Company will be returned to a state of commercial solvency, the strategic repositioning of the Company will have been achieved, the Claims of Secured Creditors will be rolled over in full, and such Claims will be serviced and met in full by TUB in the normal course of business and as was anticipated prior to Business Rescue;
38.1.2.
any arrears relating to the contractual arrangements between Secured Creditors and the Company which arose before or during Business Rescue will be settled prior to the Effective Date;
38.1.3.
security held by the Secured Creditors will remain in place and undiminished (other than in the ordinary course of business); and
38.1.4.
the balance sheet of the Company, and therefore its Net Asset Value relative to the Claims of Secured Creditors, will be enhanced by the conversion of the Investor Loan into equity and the partial release of the Company in respect the Claims of all Concurrent Creditors.
38.2. For the Concurrent Creditors of the Company: 38.2.1.
the Company will be returned to a state of commercial solvency, the strategic repositioning of the Company will have been achieved, and 75% of the Claims of Concurrent Creditors will be maintained and ultimately settled by the Company;
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38.2.2.
for trade creditors, their Revised Trade Creditor Claims will be repaid from the Free Funds of the Company with effect from the Effective Date;
38.2.3.
Free Funds available to settle Revised Trade Creditor Claims will be boosted by the receipt of the Investor Loan and the conversion of the same into TUB equity;
38.2.4.
Free Funds available to settle Revised Trade Creditor Claims may be further boosted if and when the Short Term Loan is secured and received;
38.2.5.
the balance sheet of the Company and therefore its Net Asset Value relative to all Creditor Claims will be strengthened by the conversion of the Investor Loan into equity and the partial release proposed in respect the Claims of Concurrent Creditors; and
38.2.6.
the Claims of shareholders in respect of shareholder loans will be subordinated to the Claims of trade creditors. Shareholder loans will not be eligible for servicing or repayment until such times as the Residual Trade Creditor Claims have been settled in full.
39.
Effect of the Business Rescue Plan on Shareholders 39.1. The shareholdings of the shareholders of the Company at the Commencement Date will, as a result of the introduction of the Strategic Investor, be diluted by 51%. 39.2. The shareholders of the Company at the Commencement Date, the Strategic Investor and the Company will, prepare, negotiate and finalise: 39.2.1.
a Shareholders’ Agreement to be concluded between the Company, the Strategic Investor and the Company’s shareholders; and
39.2.2.
a Memorandum of Incorporation to be adopted by the Company in substitution for its existing memorandum of incorporation as contemplated in Section 16(5)(a) of the Act.
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shareholders of the Company at the Commencement Date will participate in all of these benefits, albeit in smaller proportions than was the case prior to Business Rescue. 39.4. Those shareholders of the Company at the Commencement Date having Claims in terms of shareholder loans will maintain 75% of the value of such Claims, but will be required to subordinate their remaining Claims in favour of the Residual Trade Creditor Claims. 40.
Benefits of the Adoption of the Business Rescue Plan 40.1. Section 150(2)(b)(iv) of the Act requires that the Business Rescue Plan sets out the benefits of adopting the Business Rescue Plan as opposed to the benefits that would be received by Creditors if the Company were to be placed into liquidation. 40.2. As has been recorded elsewhere in this Business Rescue Plan, the BRP has sought (in accordance with Section 7(k) of the Act) to maintain a balance between the rights of all of the relevant stakeholders in the Business Rescue proceedings and in this Business Rescue Plan. This section therefore considers all such stakeholders. 40.3. The Clauses below contrast the outcome of the Company theoretically being placed into liquidation on the Commencement Date against the outcome of the Company voluntarily entering into Business Rescue proceedings and having this Business Rescue Plan approved and implemented, taking into account the probable liquidation dividend computation set out in Clause 17. 40.4. The Company 40.4.1.
Liquidation of the Company would have resulted in an immediate termination of the business of TUB with negative consequences for all stakeholders, including creditors, suppliers, customers, employees, SARS and shareholders.
40.4.2.
This Business Rescue Plan provides for the continuation of the Company, to the benefit of all stakeholders. Furthermore the Business Rescue Plan (coupled with the initiatives completed prior to its adoption): 40.4.2.1.
strengthens the balance sheet of the Company (enhancing its technical solvency);
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40.4.2.2.
addresses the cash flow crisis which faced the Company at the Commencement Date (enhancing its commercial solvency); and
40.4.2.3.
addresses the strategic positioning of the Company (primarily through the introduction of the Strategic Investor, but also through other initiatives to drive revenue and reduce costs).
40.4.3.
The Business Rescue Plan therefore achieves the first stated aim of business rescue, being the maximisation of “the likelihood of the company continuing in business on a solvent basis” (Section 128(1)(b)(iii) of the Act).
40.5. Returns to Creditors 40.5.1.
In a liquidation scenario: 40.5.1.1.
Secured Creditors would be likely to receive a full return on their Claims in accordance with Clause 17.5.1;
40.5.1.2.
trade Creditors, being Concurrent Creditors, would be anticipated to receive 35 cents in the Rand in respect of their Claims, which if discounted for the time value of money implicit in a two year liquidation would be worth approximately 32 cents in the Rand at the Commencement Date; and
40.5.1.3.
shareholder loan Creditors, being Concurrent Creditors, would be anticipated to receive 35 cents in the Rand in respect of their Claims, which if discounted for the time value of money implicit in a two year liquidation would be worth approximately 32 cents in the Rand at the Commencement Date.
40.5.2.
In a Business Rescue Plan scenario: 40.5.2.1.
Secured Creditors will receive a full return on their Claims, in addition to which the security of their position is enhanced by the strengthening of TUB’s balance sheet;
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40.5.2.2.
trade Creditors, being Concurrent Creditors, will receive 75 cents in the Rand in respect of their Claims, compared to the 32 to 35 cents in the Rand value of their probable liquidation dividend; and
40.5.2.3.
shareholder loan Creditors, being Concurrent Creditors, will receive 75 cents in the Rand in respect of their Claims, compared to the 32 to 35 cents in the Rand value of their probable liquidation dividend.
40.5.3.
The Business Rescue Plan therefore achieves the first half of the second stated aim of business rescue, being that it results in “a better return for the company’s creditors …” (Section 128(1)(b)(iii) of the Act).
40.6. Returns to Shareholders 40.6.1.
In a liquidation scenario shareholders would receive no value on their shares.
40.6.2.
In a Business Rescue Scenario, the Company will be returned to a state of commercial solvency, its balance sheet will be strengthened, and its strategic positioning will be significantly enhanced. The shareholders of the Company will continue to participate in all of these benefits.
40.6.3.
The Business Rescue Plan therefore achieves the second half of the second stated aim of business rescue, being that it results in “a better return for the company’s [creditors or] shareholders” (Section 128(1)(b)(iii) of the Act).
40.7. Employees 40.7.1.
In a liquidation scenario all 90 of the current employees (permanent and temporary) of TUB would, unless the Company was sold as a going concern and employees were transferred in accordance Section 197 of the Labour Relations Act, lose their jobs.
40.7.2.
In a Business Rescue Scenario all 90 of the current employees of TUB will retain their jobs, and if the initiatives put in place to enhance the sales of TUB are fully successful, there is a reasonable likelihood of further employment opportunities arising within TUB.
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40.8. Timing 40.8.1.
Liquidation of the Company can be anticipated to take around two years to complete, depending on the complexity of the estate.
40.8.2.
This Business Rescue, if this Business Rescue Plan is approved and Substantial Implementation is achieved by mid June 2015, which is the BRP’s aim and expectation, will have taken less than five months to complete from the Commencement Date until the Termination Date.
40.9. Fees and Costs 40.9.1.
The BRP submits that the entire costs of Business Rescue, constituted by the fees of the BRP and the costs of advisors in respect of the Business Rescue process, will be significantly lower than the equivalent costs should the Company be liquidated.
41. Creditors’ Consideration of this Business Rescue Plan 41.1. As noted, the BRP is required to develop and implement a Business Rescue Plan in a manner that maximises the likelihood of the Company continuing in existence on a solvent basis, or results in a better return for the Company’s Creditors than would result from the immediate liquidation of the Company. 41.2. This Business Rescue Plan seeks to both secure a continued existence for the Company on a solvent basis, and to give a substantially better return to Creditors than would result from an immediate liquidation. 41.3. It stands to reason, therefore, that this Business Rescue Plan should be assessed by each Creditor by considering, inter alia: 41.3.1.
the timing and monetary value of the settlement of the Creditor’s Claim as proposed in this Business Rescue Plan versus the estimated timing and monetary value of the settlement of the Creditor’s Claim in a liquidation scenario;
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41.3.2.
the value to the Creditor of future business with the Company on the assumption that TUB is indeed rescued and continues to trade in a solvent manner;
41.3.3.
the social and economic value of rescuing the Company, its jobs, its exports, its dependent companies, and its taxes;
41.3.4.
the likelihood of the Business Rescue Plan achieving these aims; and
41.3.5.
the short timeframe in which this Business Rescue will have been concluded from the Commencement Date until the anticipated Termination Date.
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PART C – ASSUMPTIONS, CONDITIONS AND GENERAL
42.
Projected Profit and Loss Accounts and Balance Sheets 42.1. Projected profit and loss accounts for TUB for the three years ending 28th February 2016, 2017 and 2018 are provided in Schedule F. 42.2. Projected balance sheets of TUB as at 28th February 2016, 2017 and 2018 are provided in Schedule G. 42.3. These projected financial statements have been prepared on the basis that this Business Rescue Plan is approved and implemented. 42.4. The projected financial statements assume, inter alia, that: 42.4.1.
recent trends in sales within the Electronic Division (PCB) will be maintained;
42.4.2.
orders received from and/or revived by customers will be fulfilled;
42.4.3.
the Strategic Investor and the empowerment initiatives undertaken by the Company will over time have a positive impact on the Company’s revenue line. A relatively conservative approach has, in the Company’s projections, been taken in this regard.
43.
Circumstances in which the Business Rescue will End 43.1. This Business Rescue will end when: 43.1.1.
this Business Rescue Plan, or any amended version of this Business Rescue Plan, has been approved by Creditors in terms of Section 152(2) of the Act and duly adopted in terms of Section 152(3)(b) of the Act AND in the opinion of the BRP, Substantial Implementation (as provided for in Clause 47.1 below) has been achieved AND the BRP files a notice of substantial implementation with the CIPC in accordance with Section 132(2)(c)(ii) of the Act; or
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43.1.2.
this Business Rescue Plan, or any amended version of this Business Rescue Plan, has been rejected by Creditors and neither the BRP nor any Affected Person has acted to extend the Business Rescue proceedings in terms of Section 153 of the Act; or
43.1.3.
a court orders the conversion of these Business Rescue proceedings into liquidation proceedings.
43.2. The date on which the Business Rescue proceedings of TUB end in accordance with Clause 43.1 above will be the Termination Date. 44.
Approval and Adoption of this Business Rescue Plan 44.1. Within 10 business days of the Publication Date, the BRP will convene and preside over a S151 Meeting scheduled for 30th April 2015 and called for the purpose of considering this Business Rescue Plan. 44.2. At the S151 Meeting, this Business Rescue Plan will be approved, in accordance with the provisions of Section 152(2) of the Act, if: 44.2.1.
it is supported by the holders of more than 75% of the Creditors' voting interests that are voted; and
44.2.2.
the votes in support of this Business Rescue Plan include at least 50% of the independent creditors' voting interests that are voted.
44.3. The voting interests of Creditors, both full and independent, are provided in Schedule A. 44.4. As this Business Rescue Plan does not envisage any alteration to the rights of the holders of any class of the Company’s securities, the approval of the plan in accordance with Clause 44.2 above will also constitute the final adoption of the plan in accordance with Section 152(3)(b) of the Act. 45.
The Effect of Adoption of this Business Rescue Plan on Creditors 45.1. Following the adoption of this Business Rescue Plan the BRP, having been authorised to do so by the holders of the requisite majority of the Creditors' voting interests, shall take
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the necessary steps, or require that the Company take such steps, to implement this Business Rescue Plan. 45.2. In Accordance with Section 154(2) of the Act, once a Business Rescue Plan has been approved and implemented in accordance with Chapter 6 of the Act, a Creditor is not entitled to enforce any debt owed by the Company immediately before the beginning of the Business Rescue proceedings, except to the extent provided for in the Business Rescue Plan. 45.3. The BRP notes that Section 152(4) of the Act provides further that a Business Rescue Plan that has been adopted in accordance with the Act is binding on the Company, on each of the Creditors of the Company, and every holder of the Company's securities, whether or not such a person:
46.
45.3.1.
was present at the S151 Meeting to approve the Business Rescue Plan;
45.3.2.
voted in favour of adoption of the Business Rescue Plan; or
45.3.3.
in the case of Creditors, had proven their Claims against the Company.
Conditions for This Business Rescue Plan to Come Into Operation 46.1. For this Business Rescue Plan to come into operation, it needs to be approved by the Creditors of the Company in accordance with Clause 44.2, and thereby be adopted in accordance with Clause 44.4.
47.
Substantial Implementation 47.1. This Business Rescue Plan will be substantially implemented when the following conditions have been met: 47.1.1.
the outstanding balance of the Investor Loan has been received by the Company;
47.1.2.
the Investor Loan plus interest (as provided for in the Transaction Agreement) has been converted into TUB equity;
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47.1.3.
the BRP has received written confirmation from Standard Bank and Mydata confirming the roll-over of the funding facilities provided to the Company by those lenders, to the satisfaction of the BRP;
47.1.4.
the shareholders and the Company have adopted and implemented the new shareholders’ agreement and memorandum of incorporation for TUB;
47.1.5.
the Company has settled the relevant Business Rescue Costs as provided for in Clauses 30.1 to 30.3; and
47.1.6.
the Company has made its first payment to trade creditors in terms of the arrangements contemplated in Clause 31.
47.2. When the BRP is satisfied that the conditions set out in Clause 47.1 have been met, the Substantial Implementation of the Business Rescue Plan shall be deemed to have been achieved, and the BRP will file a notice of substantial implementation with the CIPC in accordance with Section 132(2)(c)(ii) of the Act whereupon the Business Rescue Proceedings of TUB will be terminated. 48.
Risks 48.1. The primary risks associated with this Business Rescue Plan are: 48.1.1.
that any of the conditions set out in Clause 47.1 are not achieved;
48.1.2.
that the Company does not secure the Short term Loan, thus lengthening the period taken to repay in full the Revised Trade Creditor Claims;
48.1.3.
that despite the steps taken (inter alia) to reposition the company strategically, strengthen its management, address its cost and revenue drivers, strengthen its balance sheet, and address its working capital, it is still unable for whatever reason to maintain its current solvent trading status.
49.
Late Proof of Claims 49.1. Any person with a potential claim which does not appear in Schedules A to C, and/or any Creditor who/which disputes the Claim amount attributed to that Creditor in Schedules A to C, is invited to submit his/her/its application to the BRP for his/her/its new or
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supplementary Claim to be approved as a Post-Adoption Date Claim and included in the implementation of the Business Rescue Plan. 49.2. The BRP will accept applications for Post-Adoption Date Claims to be approved during the Claims Period. 49.3. The BRP will promptly adjudicate on such applications and shall advise any such applicants of his approval or not of such applications before the First Payment Date. 49.4. Post-Adoption Date Claims which are approved by the BRP will be treated as Claims in accordance with this Business Rescue Plan. 49.5. The BRP’s decision to approve, or not to approve, applications for Post-Adoption Date Claims shall be made entirely at the discretion of the BRP. The BRP shall make such decisions in good faith and based upon the evidence and representations relating to such claims made to him by the applicant and, if appropriate in the circumstances, the Company. 49.6. Applications for Post-Adoption Date Claims to be approved will not be accepted after the Claims Period. 49.7. The BRP again notes that Section 152(4) of the Act provides that a Business Rescue Plan that has been adopted in accordance with the Act is binding on each of the Creditors of the Company, whether or not such a Creditor was present at the S151 Meeting to approve the Business Rescue Plan, voted in favour of adoption of the Business Rescue Plan, or had proven its Claim against the Company. 50.
Dispute Resolution 50.1. Should a dispute occur between the BRP, the Company, any Affected Party and/or any other person in relation to this Business Rescue Plan, and/or its interpretation, and/ or its implementation, and/or the respective rights and obligations of the aforementioned persons in terms of this Business Rescue Plan, then the matter shall be referred to and decided by arbitration in accordance with this Clause 50. 50.2. Arbitration between the Parties shall be subject to the following terms and conditions:
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50.2.1.
there shall be 1 arbitrator who shall be, if the question in issue is: 50.2.1.1. primarily an accounting matter, an independent chartered accountant of not less than ten years' standing; 50.2.1.2. primarily a legal matter, a practising attorney or advocate of not less than ten years' standing; and 50.2.1.3. any other matter, a suitably qualified and independent person;
50.2.2.
the appointment of the arbitrator shall be agreed upon between the parties, but failing agreement between them within a period of five Business Days after the arbitration has been demanded, any of the parties shall be entitled to request the chairperson for the time being of the Arbitration Foundation of Southern Africa to make the appointment and, in making his appointment, to have regard to the nature of the dispute;
50.2.3.
subject to the other provisions of this Clause 50, each arbitration shall be submitted to and determined by arbitration in accordance with the Commercial Arbitration Rules of the Arbitration Foundation of Southern Africa (as amended), and the costs of any such arbitration shall be determined by the arbitrator as part of his or her finding;
50.2.4.
the decision of the arbitrator shall be final and binding on the parties concerned, and may be made an order of any Court of competent jurisdiction.
50.3. The provisions of this Clause 50 will not preclude any Party from approaching any Court with the relevant jurisdiction and authority for urgent and/or interim relief pending the outcome of an arbitration in terms hereof or in respect of arbitration proceedings in terms hereof. 51.
Governing Law and Jurisdiction 51.1. This Business Rescue Plan shall in all respects be governed by and construed in accordance with the law of South Africa, exclusive of any conflicts of laws principles that could require the application of any other law, and all disputes, actions and other matters in connection therewith shall be determined in accordance with such law.
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51.2. Subject to Clause 50 (arbitration), the courts of South Africa shall have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this Business Rescue Plan (including a dispute relating to the existence, validity or termination of this Business Rescue Plan or any non-contractual obligation arising out of or in connection with this Business Rescue Plan (whether in whole or in part)). 51.3. Nothing in this Business Rescue Plan shall prevent any Affected Party from seeking relief on an urgent or interlocutory basis from any Court with the relevant jurisdiction and authority. 52.
Disclaimer
52.1. The BRP in the preparation of this Business Rescue Plan has relied on information obtained from the books and records of the Company and meetings held with relevant persons including the Company’s directors, management, staff, Auditors, suppliers, customers, bankers, landlords, advisors and other service suppliers of the Company. 52.2. Whilst the BRP has made certain efforts to ensure the accuracy of the information contained herein, it should be noted that the BRP’s investigations have been limited in nature due to: 52.2.1.
time constraints placed on practitioners by the Act;
52.2.2.
pressure from Affected Persons to effect a reasonably paced rescue;
52.2.3.
limited financial resources available to the Company (and therefore the BRP); and
52.2.4.
the negative consequences that would arise were the Company to be restrained in Business Rescue proceedings for a protracted period of time.
52.3. The BRP has not carried out an audit of the Company’s documents, nor has he had adequate opportunity to independently verify information provided to him by the Company and/or third parties.
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52.4. The BRP can therefore give no warranty or representation as to the accuracy of the information contained in this Business Rescue Plan, save as to confirm, to the best of his knowledge and belief, that: 52.4.1.
such information is reasonably accurate and up to date; and
52.4.2.
any projections provided are reasonable estimates made in good faith on the basis of factual information and reasonable assumptions as set out in this Business Rescue Plan.
52.5. Statements and judgements made and opinions given in this Business Rescue Plan have been made and given in good faith and in the belief that such statements, judgements and opinions are not erroneous, false or misleading. 52.6. Neither the BRP nor any person engaged to assist in the Business Rescue process or in the production of this Business Rescue Plan undertake any responsibility in any way whatsoever to any person in respect of any errors in this Business Rescue Plan arising from incorrect information that may have been provided to them.
53.
Severability
53.1. Each of the provisions of this Business Rescue Plan shall be considered as separate terms and conditions and in the event that this Business Rescue Plan is affected by any legislation or any amendment thereto, or if the provisions herein contained are by virtue of that legislation or otherwise, held to be illegal, invalid, prohibited or unenforceable, then any such provisions shall be ineffective only to the extent of the illegality, invalidity, prohibition or unenforceability and each of the remaining provisions hereof shall remain in full force and effect as if the illegal, invalid, prohibited or unenforceable provision was not a part hereof.
54.
Practitioners Certificate 54.1. I, David Arthur Charles Lake, being the BRP of TUB and in accordance with Section 150(4) of the Act confirm that:
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54.1.1.
the information contained herein and upon which I have relied is based on information provided to me by the Company and persons related thereto (as is more completely set out in Clause 52 above) and such information appears to me to be reasonably accurate, complete and up to date;
54.1.2.
all projections provided herein are considered by me to be reasonable estimates made in good faith and on the basis of factual information and reasonable assumptions as set out in this Business Rescue Plan; and
54.1.3.
subject to this Business Rescue Plan being approved by the Creditors in terms of Section 152 of the Act, and duly implemented in accordance with this document, I believe that TUB can be rescued (as defined in the Act).
Signed in Johannesburg on 17th April 2015
______________________________________ Dave Lake (in his capacity as Business Rescue Practitioner)
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SCHEDULES A:
Creditors and voting interests
B:
Trade Creditors
C:
Shareholder Loans
D:
Costs treated as Business Rescue Costs
E:
Probable liquidation dividend computation
F:
Profit and Loss projections
G:
Balance sheet projections
H:
Draft Annual Accounts (as at 28th February 2015)
I:
BRP Engagement Agreement
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SCHEDULE A : Creditors and voting interests
Creditor Name
AAD Drivetrain Systems (Pty) Ltd Advanced Product Technology Adams & Adams Airsep Labs Arrow Stationers CC T/A Arrow Office National Avnet Kopp (Pty) Ltd Bircraft cc Blane & Co (Sales) (Pty) Ltd Boake Incorporated Bosco Printed Circuits (Pty) Ltd Brabek (Pty) Ltd BVH Electronics (Pty) Ltd Central Circuits cc Central Electronic Technologies CC Composite Dimensions (Pty) Ltd Computron Electronic Supplies CC Community Monitoring Services (Pty) Ltd Connector & Wire Services cc Connector Technology (Pty) Ltd Cox & McKay Electrical (Pty) (Ltd) Crystal Signs CC Dave Wauchope (Pty) Ltd Delta Heavy Equipment cc Diesel Electric DS Communications EBV Electrolink (Pty) Ltd EDA Technologies Electrocomp (Pty) Ltd Electrocomp Express Electro Mechanica (Pty) Ltd Electronic Research & Design CC The ERP Company Festo Fintech Foampak Zarlit Pty Ltd Geral Mcgowan Design Group Green Gain Consulting (Pty) Ltd GT Electronics CC HellermannTyton Hiconnex (Pty) Ltd Hydraulic Pneumatic Supplies
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Claim in respect of TUB's Business Rescue Proceedings Rands 70 369.87 12 909.36 9 955.20 5 814.00 8 792.65 130 170.89 608 423.70 1 255 132.59 117 457.73 21 944.68 45 478.31 3 086.66 25 704.72 31 542.66 251 210.51 18 145.27 1 470.00 99 311.10 19 506.16 10 328.40 2 451.00 13 577.74 14 544.19 128 071.26 27 317.25 213 717.66 32 312.81 27 524.84 10 781.68 1 091.09 5 700.00 5 700.00 14 435.04 4 556.74 4 136.59 1 778.19 6 178.80 1 154.05 23 616.65 536 857.48 2 473.80
Voting Interest in respect of Total Creditors
Voting Interest in respect of Independent Creditors
% 0.400% 0.073% 0.057% 0.033% 0.050% 0.741% 3.461% 7.140% 0.668% 0.125% 0.259% 0.018% 0.146% 0.179% 1.429% 0.103% 0.008% 0.565% 0.111% 0.059% 0.014% 0.077% 0.083% 0.729% 0.155% 1.216% 0.184% 0.157% 0.061% 0.006% 0.032% 0.032% 0.082% 0.026% 0.024% 0.010% 0.035% 0.007% 0.134% 3.054% 0.014%
% 0.455% 0.084% 0.064% 0.038% 0.057% 0.842% 3.938% 8.123% 0.760% 0.142% 0.294% 0.020% 0.166% 0.204% 1.626% 0.117% 0.010% 0.643% 0.126% 0.067% 0.016% 0.088% 0.094% 0.829% 0.177% 1.383% 0.209% 0.178% 0.070% 0.007% 0.037% 0.037% 0.093% 0.029% 0.027% 0.012% 0.040% 0.007% 0.153% 3.474% 0.016%
TUB Business Rescue Plan
ICORP Incight OD Itec Shared Services (Pty) Ltd Interference Testing & Consultancy Services (Pty) Ltd IS Electronics (Pty) Ltd Jaycor International (Pty) Ltd Jojap Manufacturing CC K.H. Distributors CC Kraus & Naimer Pty Ltd Lapp Southern Africa (Pty) Ltd Laser Stencil Technology (Pty) Ltd Lido Electrical (East Rand) (Pty) Ltd Mantech Electronics (Pty) Ltd Mavtech CC Mechatrans CC Mercedes-Benz Commercial Vehicles, East Rand Metrofile (Pty) Ltd Mica Paint & Hardware (Parkrand) M.I.M. Stationers CC Membrane Switch Technologies Pty Ltd Muirlenium Technology (Pty) Ltd W.Muir Mydata Automation AB Mykay Tronics CC Nuvision Electronics Oasis Water Benoni Orapi Africa (Pty) Ltd Phambili Interface Phoenix Contact (Pty) Ltd Midas Group (Pty) Ltd T/A Parts Incorporated Africa Plastic Concepts (Pty) Ltd Proactive Packaging CC Quality Systems Improvement cc Igmar Grewer t/a Quamba Tech Service Radel (Pty) Ltd Ricoh South Africa (Pty) Ltd Ronelda Van Staden Attorneys (Re Errol Liesering) RS Components SA Sanral Saftronics (Pty) Ltd Semi Worldwide Distributors (Pty) Ltd SES Sivan Electronic Supplies c.c. A.Smit Sondor Industries (Pty) Ltd Spectrum Concepts Splash Paints Standard Bank Star Tech E.Swanepoel Tank Industries A Division of ATC (Pty) Ltd
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16 418.80 1 140.00 1 344.38 9 120.00 45 077.39 9 646.80 33 988.00 21 777.52 26 125.24 25 557.55 19 489.44 5 572.18 25 726.27 30 291.83 23 573.83 2 387.05 1 368.00 2 133.38 4 402.03 14 427.38 228 000.00 1 027 926.25 1 947 431.67 266 164.45 26 937.05 2 193.49 2 742.73 40 097.23 60 566.10 8 472.75 1 071 780.32 2 515.07 19 750.50 1 636.60 1 050 692.06 11 721.60 10 510.50 226 090.75 405.73 17 587.35 106 057.62 25 122.27 24 788.59 1 407.90 29 247.27 18 946.80 5 170 048.48 8 920.50 845 757.22 33 078.75
0.093% 0.006% 0.008% 0.052% 0.256% 0.055% 0.193% 0.124% 0.149% 0.145% 0.111% 0.032% 0.146% 0.172% 0.134% 0.014% 0.008% 0.012% 0.025% 0.082% 1.297% 5.848% 11.079% 1.514% 0.153% 0.012% 0.016% 0.228% 0.345% 0.048% 6.097% 0.014% 0.112% 0.009% 5.977% 0.067% 0.060% 1.286% 0.002% 0.100% 0.603% 0.143% 0.141% 0.008% 0.166% 0.108% 29.412% 0.051% 4.811% 0.188%
0.106% 0.007% 0.009% 0.059% 0.292% 0.062% 0.220% 0.141% 0.169% 0.165% 0.126% 0.036% 0.166% 0.196% 0.153% 0.015% 0.009% 0.014% 0.028% 0.093% 0.000% 0.000% 12.603% 1.723% 0.174% 0.014% 0.018% 0.259% 0.392% 0.055% 6.936% 0.016% 0.128% 0.011% 6.800% 0.076% 0.068% 1.463% 0.003% 0.114% 0.686% 0.163% 0.000% 0.009% 0.189% 0.123% 33.459% 0.058% 0.000% 0.214%
TUB Business Rescue Plan
Techmet (Pty) Ltd Telkom Technical & General Distribution Thys Redelinghuys Business Solutions Trax Interconnect (Pty) Ltd TRX Electronics CC Tsoho Turbo Fasteners (Pty) Ltd Wabco Warrens Way Engineering (Pty) Ltd. Zetech CC TOTAL
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25 472.87 281 308.95 2 622.00 11 250.00 51 500.49 143 809.11 537 969.52 44 892.88 2 017.80 35 923.73 10 635.74 17 578 299.08
0.145% 1.600% 0.015% 0.064% 0.293% 0.818% 3.060% 0.255% 0.011% 0.204% 0.061% 100.000%
0.165% 1.821% 0.017% 0.073% 0.333% 0.931% 3.482% 0.291% 0.013% 0.232% 0.069% 100.000%
TUB Business Rescue Plan
SCHEDULE B : Trade Creditors (pre-Commencement)
Supplier Name
AAD Drivetrain Systems (Pty) Ltd Advanced Product Technology Adams & Adams Airsep Labs Arrow Stationers CC T/A Arrow Office National Avnet Kopp (Pty) Ltd Bircraft cc Blane & Co (Sales) (Pty) Ltd Boake Incorporated Bosco Printed Circuits (Pty) Ltd Brabek (Pty) Ltd BVH Electronics (Pty) Ltd Central Circuits cc Central Electronic Technologies CC Composite Dimensions (Pty) Ltd Computron Electronic Supplies CC Community Monitoring Services (Pty) Ltd Connector & Wire Services cc Connector Technology (Pty) Ltd Cox & McKay Electrical (Pty) (Ltd) Crystal Signs CC Dave Wauchope (Pty) Ltd Delta Heavy Equipment cc Diesel Electric DS Communications EBV Electrolink (Pty) Ltd EDA Technologies Electrocomp (Pty) Ltd Electrocomp Express Electro Mechanica (Pty) Ltd Electronic Research & Design CC The ERP Company
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Claim recognised by the BRP to be a Concurrent Creditor of TUB (and a trade creditor of the Company) Rands 70 369.87 12 909.36 9 955.20 5 814.00 8 792.65 130 170.89 608 423.70 1 255 132.59 117 457.73 21 944.68 45 478.31 3 086.66 25 704.72 31 542.66 251 210.51 18 145.27 1 470.00 99 311.10 19 506.16 10 328.40 2 451.00 13 577.74 14 544.19 128 071.26 27 317.25 213 717.66 32 312.81 27 524.84 10 781.68 1 091.09 5 700.00 5 700.00
TUB Business Rescue Plan
Festo Fintech Foampak Zarlit Pty Ltd Geral Mcgowan Design Group Green Gain Consulting (Pty) Ltd GT Electronics CC HellermannTyton Hiconnex (Pty) Ltd Hydraulic Pneumatic Supplies ICORP Incight OD Itec Shared Services (Pty) Ltd Interference Testing & Consultancy Services (Pty) Ltd IS Electronics (Pty) Ltd Jaycor International (Pty) Ltd Jojap Manufacturing CC K.H. Distributors CC Kraus & Naimer Pty Ltd Lapp Southern Africa (Pty) Ltd Laser Stencil Technology (Pty) Ltd Lido Electrical (East Rand) (Pty) Ltd Mantech Electronics (Pty) Ltd Mavtech CC Mechatrans CC Mercedes-Benz Commercial Vehicles, East Rand Metrofile (Pty) Ltd Mica Paint & Hardware (Parkrand) M.I.M. Stationers CC Membrane Switch Technologies Pty Ltd Muirlenium Technology (Pty) Ltd Mykay Tronics CC Nuvision Electronics Oasis Water Benoni Orapi Africa (Pty) Ltd Phambili Interface Phoenix Contact (Pty) Ltd Midas Group (Pty) Ltd T/A Parts Incorporated Africa Plastic Concepts (Pty) Ltd Proactive Packaging CC Quality Systems Improvement cc Igmar Grewer t/a Quamba Tech Service Radel (Pty) Ltd
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14 435.04 4 556.74 4 136.59 1 778.19 6 178.80 1 154.05 23 616.65 536 857.48 2 473.80 16 418.80 1 140.00 1 344.38 9 120.00 45 077.39 9 646.80 33 988.00 21 777.52 26 125.24 25 557.55 19 489.44 5 572.18 25 726.27 30 291.83 23 573.83 2 387.05 1 368.00 2 133.38 4 402.03 14 427.38 228 000.00 266 164.45 26 937.05 2 193.49 2 742.73 40 097.23 60 566.10 8 472.75 1 071 780.32 2 515.07 19 750.50 1 636.60 1 050 692.06
TUB Business Rescue Plan
Ricoh South Africa (Pty) Ltd Ronelda Van Staden Attorneys (Re Errol Liesering) RS Components SA Sanral Saftronics (Pty) Ltd Semi Worldwide Distributors (Pty) Ltd SES Sivan Electronic Supplies c.c. Sondor Industries (Pty) Ltd Spectrum Concepts Splash Paints Star Tech Tank Industries A Division of ATC (Pty) Ltd Techmet (Pty) Ltd Telkom Technical & General Distribution Thys Redelinghuys Business Solutions Trax Interconnect (Pty) Ltd TRX Electronics CC Tsoho Turbo Fasteners (Pty) Ltd Wabco Warrens Way Engineering (Pty) Ltd. Zetech CC TOTAL
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11 721.60 10 510.50 226 090.75 405.73 17 587.35 106 057.62 25 122.27 1 407.90 29 247.27 18 946.80 8 920.50 33 078.75 25 472.87 281 308.95 2 622.00 11 250.00 51 500.49 143 809.11 537 969.52 44 892.88 2 017.80 35 923.73 10 635.74 8 562 346.87
TUB Business Rescue Plan
SCHEDULE C : Shareholder loans
Shareholder Name
W.Muir A.Smit E.Swanepoel TOTAL
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Claim recognised by the BRP to be a Concurrent Creditor of TUB (and a shareholder loan in respect of the Company) Rands 1 027 926.25 24 788.59 845 757.22 1 898 472.06
TUB Business Rescue Plan
SCHEDULE D : Costs treated as Business Rescue Costs
Supplier Name
Costs incurred during Proceedings and treated as "costs of the business rescue proceedings" in accordance with S.135(3) of the Act Rand
Blane & Co (Sales) (Pty) Ltd Fintech Underwriting (Pty) Limited Muirlenium Technology (Pty) Ltd Mykay Tronics CC Total
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532 237.00 6 835.11 114 000.00 144 272.05 797 344.16
TUB Business Rescue Plan
SCHEDULE E : Probable Liquidation Dividend Computation
1.
In accordance with Section 150(2)(a)(iii) of the Act, this Business Rescue Plan is required to include the probable “dividend” that would be received by Creditors, in their specific classes, if the Company were to be placed in liquidation.
2.
The calculation below in support of the probable liquidation dividend in relation to the Company is based on the judgement of the BRP, and has been reviewed (but not audited) by the Company’s Auditors.
3.
Affected Persons are cautioned to exercise his/her/its own due diligence in relation to the assumptions and calculations employed by the BRP to calculate the probable liquidation dividend.
4.
As noted in the body of this Business Rescue Plan, the probable liquidation dividend has initially been calculated as if the immediate liquidation had been triggered at 28th February 2015 (the Audit Date) in order to take advantage of the accuracy of the independent verification by the Auditors as well as the accuracy and reconciliations underlying the financial statements for the year ended on that date, and the adjustments that were made in those financial statements by the Auditors. The BRP respectfully submits that the Affected Persons will be better served with the liquidation dividend being calculated in this manner than using the financial and other information generated and compiled with reference to the internal management accounts and information of the Company as at the Commencement Date.
5.
The draft financial statements of the Company as at the Audit Date have been provided in Schedule H.
6.
The following derivations and assumptions were made in determining the liquidation sale valuation of the Company's assets: 6.1.
the value ascribed to fixed assets was extracted from an independent valuation carried out on the major plant and equipment held by the Company. The valuation was undertaken by a qualified appraiser engaged by Standard Bank, and is dated 26th February 2015. The valuation assessed the “forced sale” value of the assets assessed to be R5.03 million. The BRP has added a further R0.25 million to this to reflect assets held by the Company which were not included in the assessor’s valuation.
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6.2.
stock, work in progress and finished goods inventory have been anticipated to realise 20% of the book value thereof, a not unreasonable figure given the specialist nature of much of this stockholding;
6.3.
trade debtors have been anticipated to realise 80% of the book value thereof, taking into account potential claims from customers were the Company to close its doors and default on firm orders;
6.4.
sundry debtors and accruals have been anticipated to realise 75% of the book value thereof, taking into account the accrual nature of a portion of these assets;
6.5.
cash, cash at bank and investments have been anticipated to realise 100% of the accounting value thereof.
7.
The costs of liquidation in terms of Section 89 of the Insolvency Act have been estimated at 15% of the realisable value of the assets to estimate the aggregate of liquidator’s fees, auctioneers’ fees, master’s fee, bond of security, advertising costs, admin costs and legal costs over an approximate two year liquidation period.
8.
The secured and guaranteed creditors of the Company as at 28th February 2015 comprised Standard Bank, My Data and the landlord (Blane and Company (Sales) (Pty) Ltd).
9.
The table below sets out the computation of the net proceeds that it is estimated would be available for distribution to the creditors and shareholders of the Company in the event of the liquidation of the Company as at the Audit Date.
10.
This calculates that the probable liquidation dividends payable would be: 10.1.
to preferred creditors: 100 cents in the Rand;
10.2.
to secured creditors: 100 cents in the Rand;
10.3.
to concurrent creditors: 40 cents in the Rand; and
10.4.
to shareholders: 0 cents in the Rand
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Assets per Balance Sheet as at 28th February 2015 Plant & Equipment WIP and finished goods Stock Debtors - Trade Debtors - Other Cash and Bank Investments Total Assets
Rand
Valuation per probable liquidation scenario
Rand
9 616 503
Forced sale value per independent valuation
5 277 000
2 676 018 7 167 416 6 296 796 1 452 449 3 478 482 155 887 30 843 551
Valued at 20% of book value Valued at 20% of book value Valued at 80% of book value Valued at 75% of book value Valued at 100% of book value Valued at 100% of book value Total asset realisation Liquidation costs at 15% of realised asset value Balance available
(2 551 025) 14 455 806
Preferred creditors Employees SARS Balance available
(960 000) (1 005 168) 12 490 638
Secured & guaranteed creditors
(7 523 796)
Balance available for payment to concurrent creditors
4 966 842
Concurrent creditors at 20/02/2015 Trade creditors Sundry Creditors Shareholder loans Total concurrent creditors Cents in the Rand payable to concurrent creditors
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535 204 1 433 483 5 037 437 1 089 337 3 478 482 155 887 17 006 830
9 748 793 645 434 1 898 472 12 292 699 40
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SCHEDULE F : Profit and Loss Projections
That uBeke Manufacturing (Pty) Limited Projected Profit And Loss Accounts For the three years ended 28th February 2016, 2017 & 2018 2016 Rand
2017 Rand
2018 Rand
Revenue
75 164 000
88 756 800
102 070 320
Cost of Sales
36 690 513
46 597 320
53 586 918
Gross Profit
38 473 487
42 159 480
48 483 402
39 473 487
42 159 480
48 483 402
Operating expenses
28 694 937
31 564 430
34 720 873
Operating Profit
10 778 550
10 595 050
13 762 529
Depreciation Finance costs
3 700 000 591 000
3 250 000 413 000
2 630 000 275 000
Profit (Loss) before taxation
6 487 550
6 932 050
10 857 529
Other Income
1 000 000
Taxation Profit (Loss) for the year
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2 108 400 6 487 550
6 932 050
8 749 129
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SCHEDULE G : Balance Sheet Projections
That uBeke Manufacturing (Pty) Limited Projected Balance Sheets As at 28th February 2016, 2017 & 2018 2016 Rand
2017 Rand
2018 Rand
Assets Non-Current Assets Propery, plant and equipment
7 916 503
4 666 503
2 036 503
7 916 503
4 666 503
2 036 503
Current Assets Inventories
10 500 000
12 600 000
14 490 000
Trade and other receivables
11 550 000
13 860 000
15 939 000
1 413 039
2 851 017
10 995 045
23 463 039
29 311 017
41 424 045
31 379 542
33 977 520
43 460 548
Equity Share capital
28 000 596
28 000 596
28 000 596
Accumulated Profit / (Loss)
-10 260 126
-3 328 076
5 421 052
Shareholder funds
17 740 470
24 672 520
33 421 648
Liabilities Finance lease liabilities
3 850 000
2 100 000
1 000 000
Non-current Liabilites
3 850 000
2 100 000
1 000 000
Trade and other payables
3 750 000
4 500 000
5 175 000
Loans from shareholders
1 898 472
Finance lease laibilities
1 670 000
1 535 000
1 100 000
Operating lease liability
1 300 000
600 000
Current tax payable
225 000
270 000
2 418 900
Provisions
250 000
300 000
345 000
Bank loan
695 600 9 789 072
7 205 000
9 038 900
Total Liabilities
13 639 072
9 305 000
10 038 900
Total Equity and Liabilities
31 379 542
33 977 520
43 460 548
Cash and cash equivalents Total Assets Equity and Liabilities
Current Liabilities
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SCHEDULE H : Draft 2015 Annual Accounts
(Provided separately)
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SCHEDULE I : BRP Engagement Agreement
The Board of Directors Thata uBeke Manufacturing (Pty) Ltd 5 Estee Ackerman Street Jet Park X62 Boksburg Johannesburg, 1459
Attention: James Hinton & Warren Muir 21st January 2015
Dear James and Warren, Letter of Agreement in terms of the Appointment of David Lake as the Business Rescue Practitioner for Thata uBeke Manufacturing (Pty) Limited 1.
2.
General 1.1.
The Board of Directors (the “Board”) of Thata uBeke Manufacturing (Pty) Limited (the “Company”) adopted a resolution placing the Company under voluntary business rescue in terms of the provisions of Chapter 6 of the Companies Act, 71 of 2008 (as amended) (“the Act”) on 19th January 2015 and filed the resolution with the Company and Intellectual Property Commission (the “CIPC”) on 20th January 2015.
1.2.
Subject to the terms and conditions as set out in this letter of agreement (“this Letter”), and the approvals as required of the CIPC, the Company has appointed David Lake (trading as Lake Strategic Solutions) as its Business Rescue Practitioner (the “BRP”) in terms of the provisions of the Act.
1.3.
This Letter sets out the terms and conditions of the appointment of David Lake as BRP to the Company during the Company’s Business Rescue proceedings (the “Proceedings”).
BRP’s Role, Duties and Powers 2.1.
During the Proceedings, and in accordance with the Act, the BRP: 2.1.1. will assume full management control of the Company in substitution for its Board and pre-existing management; 2.1.2. may delegate any power or function to any person or body who or which was part of the Board or pre-existing management structure of the Company;
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2.1.3. may: 2.1.3.1.
remove from office any person who forms part of the preexisting management of the Company; or
2.1.3.2.
appoint a person as part of the management of the Company, whether to fill a vacancy or not, subject to certain conditions (Section 140 (2) of the Act); and
2.1.4. will be responsible to:
3.
2.1.4.1.
develop a business rescue plan to be considered by “Affected Persons” (as defined in the Act), in accordance with the Act; and
2.1.4.2.
implement any business rescue plan that has been adopted in accordance with the Act.
2.2.
In terms of the Act the BRP must (inter alia) investigate the Company’s affairs, business, property and financial situation to assess whether there is a reasonable prospect of the Company being rescued as contemplated in the Act.
2.3.
The BRP has an obligation to report any contravention of any law, reckless trading, fraud, misappropriation of assets or any other criminal activity and is further obliged to rectify any identified contraventions, including recovering misappropriated assets.
2.4.
The BRP will be responsible for all payments made from the bank accounts of the Company, and payments to third parties may only be made after the BRP has approved payment schedules together with supporting documents. The BRP has the right to delegate these powers to any person who was part of the pre-existing Board or management of the Company.
2.5.
Should the BRP conclude at any time that the Company cannot be rescued, or fail to have the business rescue plan as published by the BRP adopted by creditors, then the BRP has the right to place the Company in liquidation and the directors will remain responsible for the affairs of the Company.
2.6.
The role, duty and powers of the BRP are not limited to those as set out above in this paragraph 2, and may include any other duties and powers as prescribed in Chapter 6 of the Act or as specifically provided for in this Letter.
Directors and Management’s Duties and Responsibilities 3.1.
The Board and directors of the Company record that they understand their duties and obligations as set out in Chapter 6 of the Act and hereby undertake (inter alia) to :
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3.1.1. execute their fiduciary duties and responsibilities as directors in terms of the provisions of the Act under the direction and supervision of the BRP; 3.1.2. assist and co-operate fully with the BRP during the Proceedings; 3.1.3. provide all information as prescribed in Section 142 (3) of the Act fully, timeously and in the manner as requested by the BRP; 3.1.4. be transparent in all their dealings with the BRP and understand that withholding any relevant information, which becomes apparent later, could compromise the success of the Proceedings; 3.1.5. continue to manage and control the day-to-day operations of the Company and motivate employees to give their full support during the Proceedings and implementation of any adopted rescue plan; 3.1.6. not to enter into negotiations or conclude or amend contracts of whatsoever nature binding the Company without the written approval of the BRP; 3.1.7. communicate to the BRP any matter that could have a bearing on or consequences for the Proceedings, whether it be a positive or adverse effect for the Company; 3.1.8. direct to the BRP any enquiries from any third party regarding the Proceedings or any relevant aspect of the affairs of the Company. 4.
Business Rescue Proceedings 4.1.
The BRP will initially engage with the management team to understand and assess the immediate impact of the Proceedings on the Company, and its ability to continue to operate on a day to day basis whilst the Proceedings are underway. The BRP will agree with the Board and management team any immediate steps that may need to be taken to preserve value and the interests of Affected Persons in the Company during the period that the Proceedings are underway.
4.2.
The BRP will thereafter undertake a detailed initial investigation of the affairs of the Company to fully understand the extent and impact of the financial distress facing the company, and to confirm that there is a reasonable prospect of the Company being rescued (as defined in the Act). This investigation will include (inter alia): an analysis of the financial, legal and other records of the Company; meetings with the Company’s Board and management team; meetings with other Affected Persons (including those persons with claims against the Company); a review of the Company’s strategy, operations, premises, assets, order book, capabilities; and any other process, analysis, inquiry or meeting that the BRP considers to be appropriate to the investigation. If at the conclusion of this initial investigation the BRP considers:
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4.2.1. that there is a reasonable prospect of the business being rescued, the BRP will proceed with the development of a business rescue plan as provided for in 4.3 hereunder; or 4.2.2. that there is no reasonable prospect of a successful rescue, BRP must in terms of Section 141 (2) of the Act so inform the Company and all Affected Persons and apply to the court for an order discontinuing the Proceedings and placing the Company into liquidation. 4.3.
If the BRP concludes that there is reasonable prospect of the Company being rescued, he will proceed with the development and publishing of a workable business rescue plan (whilst overseeing the on-going operations of the Company). The rescue plan will be formulated in consultation with all and any parties that the BRP considers can positively contribute to a successful plan, including (without limitation) the Board, shareholders, management, employees, creditors, suppliers, regulators, potential funders, potential investors and/or potential business partners. The plan may consider any or all of the affairs, business, property, debts, liabilities, rights, obligations, assets and/or equities of the Company.
4.4.
Upon having concluded and published a business rescue plan, the BRP will convene a meeting/meetings in terms of Section 151 of the Act at which the proposed business rescue plan will be considered and, if deemed necessary, amended and voted upon and deal with the outcome of the meeting in terms of Sections 152 or 153 of the Act, as the case may be.
4.5.
The BRP will manage the process of implementation of an adopted business rescue plan in conjunction with the Board, management team and involved third parties as the case may be.
4.6.
The Proceedings and the BRP’s mandate as set out in this letter will end when either: 4.6.1. The court sets aside the resolution that began the Proceedings, or converts the Proceedings into liquidation proceedings; or 4.6.2. The BRP elects to terminate the Proceedings and files a notice of termination with the CIPC; or 4.6.3. A business rescue plan has been proposed and rejected (in a vote) and no relevant party has elected to extend the Proceedings; or 4.6.4. A business rescue plan has been proposed, approved and implemented - and the BRP has filed a notice confirming that the rescue plan has been substantially implemented.
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4.7.
5.
It is recorded that the Proceedings could take a number of months to complete, depending on the complexity of the problems facing the Company and the level of co-operation given to the BRP by creditors, the Board, management, potential investors and other Affected Parties.
Remuneration of the BRP 5.1.
The Company agrees to pay the BRP a base fee (excluding VAT) at a rate of R1,500.00 per hour (“Base Fees”).
5.2.
Where relevant services/expenses are not directly engaged/incurred by the Company itself, the Company agrees to reimburse the BRP for the actual cost of any disbursements made and/or expenses incurred on behalf of the Company in the normal course that are reasonably made/incurred in the execution of the BRP’s functions and duties during the Proceedings, including (but not limited to): 5.2.1. the hire of venues, if deemed necessary, for prescribed meetings with Affected Parties; 5.2.2. advisory and/or administrative support at an hourly rate agreed upon between the BRP and the Board; 5.2.3. professional fees for the services of any other professionals that may be required during Proceedings; and 5.2.4. costs of travel (outside of Johannesburg) for matters directly related to the Proceedings.
5.3.
In terms of Section 143 (2) of the Act the BRP is entitled to propose and receive contingency fees on the attainment of particular outcomes. The BRP in terms of his appointment by the Company for the Proceedings as set out in this Letter proposes, and the Company agrees, to the following contingency fee arrangements: 5.3.1. subject to the terms set out below in this paragraph 5.3, the BRP will receive a “Contingency Fee” (excluding VAT) equal to: the aggregate total of hours charged in respect of Base Fees by the BRP during the course of the Proceedings multiplied by R3,500.00, minus the aggregate total of Base Fees (in Rands) paid to the BRP during the course of the Proceedings. The motivation and computation behind the Contingency Fee is to bring the aggregate of Base Fees and Contingency Fees paid to a level equal to R3,500.00 per hour, which would be an acceptable risk related hourly fee rate for a transaction of this nature undertaken by the BRP; 5.3.2. the Contingency Fee (excluding VAT) will, however, be limited to a minimum fee of R200,000.00 and a maximum fee of R500,000.00 in the event that the
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Proceedings are completed within a period of six completed calendar month of their commencement. In the event that the Proceedings take a period greater than six calendar months to complete, the maximum of R500,000.00 stated above will be reduced by R100,000.00 per month for each complete calendar month over and above the six calendar months that it takes for the Proceedings to be completed, subject however to the maximum fee never falling below the minimum fee (i.e. R200,000.00); 5.3.3. the Contingency Fee becomes payable upon and subject to the successful implementation of an approved business rescue plan for the Company, as set out in paragraph 62 below; 5.3.4. the Board and the directors in their individual capacities have agreed to use its/their best endeavours to procure that these contingency fee arrangements are approved by the holders of the majority voting rights attached to the issued shares of the Company; 5.3.5. the Board and the directors in their individual capacities have agreed to use its/their best endeavours to procure that these contingency fee arrangements are approved by the holders of the requisite voting rights at any meeting of the creditors of the Company called for the purpose of considering these fee arrangements. 5.4.
6.
7.
Should the Company request that the BRP provide additional services after completion of the Proceedings, a separate contract for such consulting services will be negotiated between the parties.
Terms of Payment 6.1.
The BRP will issue tax invoices on a bi-weekly basis for Base Fees, disbursements and expenses in terms of paragraphs 5.1 and 5.2 above, which fees and/or expenses will be payable within 5 business days of invoice presentation.
6.2.
The Contingency Fee provided for in paragraph 5.3 will become payable on the date the BRP files, in terms of Section 132 (c) (ii) of the Act, for substantial implementation of the Company’s business rescue plan.
Indemnity 7.1.
The BRP shall not be liable for any loss or damages, of whatsoever nature, due to any act of omission, dishonesty, misrepresentation, and/or negligence on behalf of the Company, its directors, employees or any third party in furnishing the BRP with information which was used by the BRP in good faith.
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8.
7.2.
The company indemnifies the BRP against any and all claims made against the BRP by any party whatsoever in connection with the Proceedings and holds the BRP harmless in respect of all costs and expenses, damages or loss in defence of such claims.
7.3.
Should any litigation arise against the Company and/or the BRP during the Proceedings, for whatsoever reason, the Company will advance the BRP all necessary expenses in order to defend such litigation and indemnify the BRP against any expense or liability that may arise from such litigation.
Governing law and jurisdiction 8.1.
9.
This engagement shall be governed by and interpreted in accordance with the laws of the Republic of South Africa. The Courts of the Republic of South Africa shall have exclusive jurisdiction in relation to any claim, dispute or difference concerning the engagement and any matter arising from it.
Agreement of terms 9.1.
This Letter sets out the entire terms agreed between the parties (being the Company, the Board and the BRP) relating to this engagement. Any amendments, additions or alterations to this agreement shall not be effective unless in writing and signed by a duly authorised representative of each party.
9.2.
By signing and returning the enclosed copy of this Letter you and the Company confirm your agreement to the terms and conditions relating to the appointment of David Lake as BRP to the Company as set out in this Letter.
Yours faithfully,
Dave Lake
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