In summary, and in consideration for a full and final settlement of all matters between the parties, it has been agreed that:
· BRK will purchase from Sprue all BRK inventory manufactured from 1 January 2017 for £1.02 million to be paid by way of deduction from payments due by Sprue to BRK under the terms of the DA, save for 3,097 units required by Sprue for its ongoing warranty purposes;
· Sprue will provide warranty support to its customers on all BRK products manufactured before 1 April 2018 and provide transitional support to ensure an orderly handover as part of the settlement agreement;
· Sprue will dispose of all BRK inventory manufactured before 1 January 2017 at its own cost, save for 4,857 units required by Sprue for its ongoing warranty purposes;
· BRK approves the sale by Sprue of excess stock of Sprue's CO products using BRK's brands valued at approximately £300,000 for a period of 6 months;
· Sprue grants BRK a 12 month non-exclusive licence for its relevant intellectual property, including registered patents and design registration; and
· Sprue will pay the outstanding balance of payments, amounting to a total of £10,972,484.88 and $71,071, owed to BRK under the terms of the DA and the MA in monthly instalments by 24 December 2018.
Graham Whitworth, Executive Chairman of Sprue, commented:
“I am pleased to announce that we have reached agreement with BRK following the termination of the DA and MA, which deals with all outstanding matters and enables us both to move on with our respective businesses without the risk of legal claims.”
Publication of audited results
The Company expects to announce its audited final results for the year ended 31 December 2017 on 15 May 2018.
As a result of the settlement agreement reached with BRK, details of which are set out above, in its audited final results for the year ended 31 December 2017, the Company intends to book a £3.8 million exceptional charge as part of cost of sales (2016: £0.2m exceptional restructuring charge in administrative expenses) which includes £3.4 million to write down the book value of the remaining BRK inventory as at 30 April 2018 to £nil (as the Company will no longer be selling BRK inventory), provisions of £0.2 million to cover the disposal (scrappage) costs of the BRK inventory manufactured before 1 January 2017 (referred to in bullet 3 above) and £0.2 million to cover the Group's legal and professional fees incurred since 22 March 2018 in respect of the dispute with BRK.
Further to its announcement released on 19 April 2018, the Company announces that the £3.0 million which was drawn down to increase its available short term cash resources under the 3 year revolving credit facility with HSBC Bank plc has been repaid in full to HSBC as it was not required during the 30 day draw down period.