<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 19, 1998
INTERFACE SYSTEMS, INC.
(Exact name of registrant as specified in charter)
MICHIGAN 0-10902 38-1857379
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
5855 Interface Drive
Ann Arbor, Michigan 48103
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (734) 769-5900
<PAGE> 2
INTERFACE SYSTEMS, INC.
CURRENT REPORT ON FORM 8-K
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On May 19, 1998, Interface Systems, Inc. (the "Company" or "ISI") completed
the sale of the distribution business of its wholly owned U.K. subsidiary,
Interface Systems International Ltd. (the "ISIL Distribution Business") to
Fayrewood plc, a U.K. company quoted on the Alternative Investment Market of the
London Stock Exchange ("Fayrewood"), pursuant to a Purchase Agreement, dated May
19, 1998, by and among Fayrewood, Doctor Buylines Limited ("Doctor Buylines"),
Interface Systems International Limited ("ISIL") and the Company, and a Deed of
Variation, dated May 19, 1998, by and among Fayrewood, Doctor Buylines, ISIL and
the Company.
The consideration for the sale of the ISIL Distribution Business of $3.6 million
is approximately equal to 83% of the net assets sold and is subject to
post-closing adjustments based upon an audit of the assets sold and the
liabilities assumed at closing. The net assets sold consist of accounts
receivable, inventory and fixed assets, net of accounts payable. An initial
payment of $2.9 million was paid in cash at closing. The balance of the
consideration is due in approximately 60 days upon completion of an audit of
the net assets sold. The consideration paid in the sale was determined through
arms-length negotiations between the Company and Fayrewood.
(b) Not applicable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable.
(b) The pro forma financial information furnished herein reflects the
disposition of the ISIL Distribution Business on the consolidated
financial statements of the Company.
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Unaudited Pro Forma Consolidated Statement of
Operations for the Fiscal Year Ended September 30, 1997 F-2
Unaudited Pro Forma Consolidated Statement of Operations
for the Fiscal Year Ended September 30, 1996 F-3
Unaudited Pro Forma Consolidated Statement of Operations
for the Fiscal Year Ended September 30, 1995 F-4
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1998 F-5
</TABLE>
<PAGE> 3
(c) The exhibits furnished in connection with this Report are as follows:
Exhibit
Number Description
------ -----------
2.1 Purchase Agreement dated as of May 13, 1998 by and
among Fayrewood plc, Doctor Buylines Limited,
Interface Systems International Limited and Interface
Systems, Inc.
2.2 Deed of Variation dated as of May 19, 1998 by and
among Fayrewood plc, Doctor Buylines Limited,
Interface Systems International Limited and Interface
Systems, Inc.
2.3 Deed of Release dated as of May 13, 1998 by and
among The First National Bank of Chicago,
Interface Systems International Limited and
Interface Systems, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 3, 1998 Interface Systems, Inc.
(Registrant)
By: /s/ John R. Ternes
Name: John R. Ternes
Title: Vice president Finance &
Chief Financial Officer
<PAGE> 4
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Statements of Operations of the
Company for the fiscal years ended September 30, 1997, 1996 and 1995 reflect
(i) the ISIL Distribution Business as a discontinued operation and (ii) the
application of the estimated net proceeds of the sale by the Company in May
1998 of the ISIL Distribution Business as if the relevant transactions,
including the loss of $1,791,000 on disposal of the discontinued operations
recognized in the quarter ended March 31, 1998, had occurred at the beginning
of the fiscal year ended September 30, 1995. Pro Forma Consolidated
Statements of Operations for the six months ended March 31, 1998 and 1997 have
not been presented herein because the information that would be presented is
substantially the same as that contained in the Company's previously filed Form
10-Q for the quarter ended March 31, 1998.
The following Unaudited Pro Forma Consolidated Balance Sheet of the Company as
of March 31, 1998 reflects the sale of the ISIL Distribution Business as if it
had occurred on that date.
The pro forma statements do not purport to represent what the Company's
financial position or results of operations would actually have been if the
relevant transactions had occurred at the beginning of the fiscal year ended
September 30, 1995 or on March 31, 1998, or to project the Company's
consolidated results of operations or financial position at any future date or
for any future period.
F-1
<PAGE> 5
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1997
(In thousands)
<TABLE>
<CAPTION>
Discontinuance
of the ISIL
ISI Distribution Pro Forma
Consolidated Business As Adjusted
------------ -------- -----------
<S> <C> <C> <C>
Net revenues $ 81,845 $ (62,761) $ 19,084
Cost of revenues 75,103 (60,462) 14,641
---------- ----------- ---------
Gross profit 6,742 (2,299) 4,443
Expenses:
Product development 3,719 -- 3,719
Selling, general and administrative 15,391 (5,924) (1) 9,467
---------- ----------- ---------
Operating income (loss) from
continuing operations (12,368) 3,625 (8,743)
Interest expense (731) 309 (422)
Other income 119 (3) 116
---------- ----------- ---------
Income (loss) from continuing
operations before income taxes (12,980) 3,931 (9,049)
Income tax benefit (2,101) -- (2,101)
---------- ----------- ---------
Income (loss) from continuing operations $ (10,879) $ 3,931 $ (6,948)
========== =========== =========
Net loss per share $ (2.47) $ (1.58)
========== =========
Weighted average shares outstanding 4,411 4,411
========== =========
</TABLE>
(1) Includes elimination of $520,000 of goodwill amortization and
write-off related to ISI's investment in the ISIL distribution business
and $120,000 of professional fees and other general and administrative
expense incurred by ISI on behalf of ISIL.
F-2
<PAGE> 6
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1996
(In thousands)
<TABLE>
<CAPTION>
Discontinuance
of the ISIL
ISI Distribution Pro Forma
Consolidated Business As Adjusted
------------ -------- -----------
<S> <C> <C> <C>
Net revenues $74,583 $(56,312) $ 18,271
Cost of revenues 63,798 (53,386) 10,412
------- -------- --------
Gross profit 10,785 (2,926) 7,859
Expenses:
Product development 1,956 -- 1,956
Selling, general and administrative 11,621 (2,757)(1) 8,864
------- -------- --------
Operating income (loss) from
continuing operations (2,792) (169) (2,961)
Interest expense (340) 276 (64)
Other income 200 -- 200
------- -------- --------
Income (loss) from continuing
operations before income taxes (2,932) 107 (2,825)
Income tax benefit (969) -- (969)
------- -------- --------
Income (loss) from continuing operations $(1,963) $ 107 $ (1,856)
======= ======== ========
Net loss per share $ (0.44) $ (0.42)
======= ========
Weighted average shares outstanding 4,440 4,440
======= ========
</TABLE>
(1) Includes elimination of $100,000 of goodwill amortization expense incurred
by ISI related to its investment in ISIL.
F-3
<PAGE> 7
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1995
(In thousands)
<TABLE>
<CAPTION>
Discontinuance
of the ISIL
ISI Distribution Pro Forma
Consolidated Business As Adjusted
------------ -------- -----------
<S> <C> <C> <C>
Net revenues $ 70,243 $ (48,009) $ 22,234
Cost of revenues 57,516 (45,434) 12,082
--------- ---------- ---------
Gross profit 12,727 (2,575) 10,152
Expenses:
Product development 1,454 -- 1,454
Selling, general and administrative 10,506 (2,927)(1) 7,579
--------- ---------- ---------
Operating income (loss) from
continuing operations 767 352 1,119
Interest expense (264) 253 (11)
Other income 203 -- 203
--------- ---------- ---------
Income (loss) from continuing
operations before income taxes 706 (605) 1,311
Income tax benefit 540 -- 540
--------- ---------- ---------
Income (loss) from continuing operations $ 166 $ (605) $ 771
========= ========== =========
Net loss per share $ 0.04 $ 0.18
========= =========
Weighted average shares outstanding 4,239 4,239
========= =========
</TABLE>
(1) Includes elimination of $100,000 of goodwill amortization expense incurred
by ISI related to its investment in ISIL.
F-4
<PAGE> 8
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Discontinuance Sale
of the ISIL of the ISIL
ISI Distribution Distribution Pro Forma
Consolidated Business Business As Adjusted
------------ -------- -------- -----------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,049 $ -- $ -- $ 1,049
Accounts receivable, net 12,864 (10,155) -- 2,709
Inventories 5,780 (2,610) -- 3,170
Net assets of discontinued operations -- 5,810 (5,040) 770
Other current assets 2,746 (629) -- 2,117
--------- ---------- ---------- ---------
Total current assets 22,439 (7,584) (5,040) 9,815
Property and equipment, net 4,298 (596) -- 3,702
Other assets 1,478 -- -- 1,478
--------- ---------- ---------- ---------
$ 28,215 $ (8,180) $ (5,040) $ 14,995
========= ========== ========== =========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 7,609 $ -- $ (3,249) (1) $ 4,360
Accounts payable 9,176 (7,748) -- 1,428
Accrued expenses and other 1,588 (432) -- 1,156
--------- ---------- ---------- ---------
Total current liabilities 18,373 (8,180) (3,249) 6,944
Other liabilities 711 -- -- 711
--------- ---------- ---------- ---------
Total liabilities 19,084 (8,180) (3,249) 7,655
Stockholders' equity 9,131 -- (1,791) (2) 7,340
--------- ---------- ---------- ---------
$ 28,215 $ (8,180) $ (5,040) $ 14,995
========= ========== ========== =========
</TABLE>
(1) Represents reduction of notes payable using the $3.6 million estimated
sale proceeds, less sale related expenses.
(2) Represents the loss on sale of the ISIL Distribution Business.
F-5
<PAGE> 9
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Purchase Agreement dated as of May 13, 1998 by and among
Fayrewood plc, Doctor Buylines Limited, Interface
Systems International Limited and Interface Systems, Inc.
2.2 Deed of Variation dated as of May 19, 1998 by and among
Fayrewood plc, Doctor Buylines Limited, Interface
Systems International Limited and Interface Systems, Inc.
2.3 Deed of Release dated as of May 13, 1998 by and among The First
National Bank of Chicago, Interface Systems
International Limited and Interface Systems, Inc.
<PAGE> 1
EXHIBIT 2.1
Dated 13 May 1998
FAYREWOOD PLC
- and -
DOCTOR BUYLINES LIMITED
- and -
INTERFACE SYSTEMS INTERNATIONAL LIMITED
- and -
INTERFACE SYSTEMS, INC.
---------------------------------------
ACQUISITION
of the business of Interface Systems
International Limited
---------------------------------------
ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 0171-638 1111
Fax: 0171-972 7990
CJA/I33100018
<PAGE> 2
CONTENTS
CLAUSE PAGE
1. INTERPRETATION.....................................................1
2. SALE AND PURCHASE..................................................6
3. CONSIDERATION......................................................6
4. COMPLETION.........................................................8
5. PROPERTIES.........................................................8
6. LIABILITIES AND EXCLUDED LIABILITIES...............................9
7. DEBTORS............................................................9
8. CONTRACTS.........................................................10
9. EMPLOYEES.........................................................10
10. FUTURE TRADING AND TRADE ENQUIRIES................................11
11. VALUE ADDED TAX...................................................11
12. WARRANTIES........................................................12
13. ANNOUNCEMENTS, ETC................................................15
14. COSTS.............................................................15
15. ASSIGNMENT........................................................16
16. ENTIRE AGREEMENT..................................................16
17. WAIVER, AMENDMENT.................................................16
18. FURTHER ASSURANCE.................................................16
19. FAYREWOOD PLC.....................................................16
20. INTERFACE INC.....................................................17
21. PURCHASER'S UNDERTAKING...........................................18
22. ACCESS............................................................18
23. NOTICES...........................................................18
24. COUNTERPARTS......................................................19
25. GOVERNING LAW AND SUBMISSION TO JURISDICTION......................19
26. INVALIDITY........................................................19
27. CONFIDENTIALITY...................................................19
SCHEDULE 1...............................................................20
SCHEDULE 2...............................................................21
SCHEDULE 3...............................................................27
<PAGE> 3
THIS AGREEMENT is made on 13 May 1998
BETWEEN:-
(1) FAYREWOOD PLC (No 03057247) whose registered office is at 1 Pemberton
Row, Fetter Lane, London EC4A 3BA ("FAYREWOOD");
(2) DOCTOR BUYLINES LIMITED (No 3360868) whose registered office is at 1
Pemberton Row, Fetter Lane, London EC4A 3BA (the "PURCHASER");
(3) INTERFACE SYSTEMS INTERNATIONAL LIMITED (No 2100227) whose registered
office is at 959 Weston Road, Slough Trading Estate, Slough, Berkshire,
SL1 4HR (the "VENDOR"); and
(4) INTERFACE SYSTEMS, INC. whose place of business is at 5855 Interface
Drive, Ann Arbor, Michigan 48103, USA ("INTERFACE INC.").
RECITALS
(A) The Vendor carries on the Business (as hereinafter defined) and is the
beneficial owner, or is otherwise able to procure the transfer, of the
Assets (as hereinafter defined).
(B) The Vendor has agreed to sell, and the Purchaser has agreed to purchase,
the Business as a going concern and the Assets on the terms hereinafter
set out.
(C) Interface Inc. has agreed to enter into this agreement to guarantee the
obligations of the Vendor.
(D) Fayrewood has agreed to enter into this agreement to guarantee the
obligations of the Purchaser.
THE PARTIES AGREE AS FOLLOWS:-
1. INTERPRETATION
1.1 The following words and expressions shall, unless the context otherwise
requires, have the following meanings:-
"ACCOUNTS" means the audited financial statements (comprising a balance
sheet, profit and loss account, statement of source and application of
funds, notes and directors' report and auditors' certificates) of the
Vendor for the financial period ended on the Accounts Date;
"ACCOUNTS DATE" means 30 September 1996;
"AGREED FORM" means, in relation to a document, in the form agreed
between the parties on or prior to the date hereof and for the purposes
of identification signed on their behalf;
"ASSETS" means the Goodwill, Books and Records, Contracts, Debtors,
Intellectual Property, Fixed Plant, Loose Plant, Properties and Stock,
together with all other assets and rights and
-1-
<PAGE> 4
the benefit of any claims directly and exclusively relating to the
Business excluding the Excluded Assets;
"ASSUMED EMPLOYEES" means those employees engaged in the Business as at
Completion based at the Birmingham location and the Slough Property;
"BOOKS AND RECORDS" means the lists of customers and suppliers, books of
account, financial records, and all other records exclusively relating to
the Business;
"BUSINESS" means the business of wholesale IT product distribution and
servicing, including personal computers, PC supplier and consumables as
well as spare parts and related products carried on at the date hereof by
the Vendor and wheresoever carried on;
"COMPLETION" means the completion of the sale and purchase of the
Business and Assets in accordance with clause 4;
"CALCULATION DATE" means 12 May 1998;
"COMPLETION DATE" means the date hereof;
"CONSIDERATION" means the consideration for the Business and Assets as
specified or determined in accordance with clause 3;
"CONTRACTS" means all contracts and arrangements which are wholly or
partly unperformed or ongoing at the Completion Date relating to the
Business;
"DEBTORS" means all those amounts owed to the Vendor directly and
exclusively in connection with the Business as at the Completion Date;
"DISCLOSURE LETTER" means the letter of today's date together with the
attachments thereto addressed by the Vendor's Solicitors to the
Purchaser's Solicitors disclosing exceptions to the Warranties;
"ENCUMBRANCE" means any mortgage, charge, pledge, lien, security or other
third party right or interest (legal or equitable) or restriction over or
in respect of the use of any relevant asset, security or right;
"ESCROW ACCOUNT" means the account in the joint names of the Vendor's
Solicitors and the Purchaser's Solicitors which shall hold the Escrow
Amount;
"ESCROW AMOUNT" means (pound)500,000 (five hundred thousand pounds);
"EXCLUDED ASSETS" means any assets or rights and the benefit of any
claims as at the Completion Date consisting of or comprised in the
following:-
(a) fixture and fittings at the Slough Property;
(b) leasehold improvements at the Slough Property;
-2-
<PAGE> 5
(c) the lease of the Slough Property;
(d) all sums due from Interface Inc. to the Vendor;
(e) cash in hand or at banks;
(f) Any credits on the Debtor ledger which were outstanding since
prior to 1 March 1998 and any Debtors (net of relevant credits
relating to that particular Debtor) which have been outstanding
since prior to 1 March 1998;
(g) all rights arising under the Intra-Group Agreement;
(h) all rights arising in respect of the dealings by the Vendor with
Al Mulhoff;
(i) any asset which does not relate to the Business; and
(j) any refund or asset in respect of Taxation.
"EXCLUDED LIABILITIES" means the following liabilities of the Business at
the Completion Date:-
(a) all sums due from the Vendor to Interface Inc.;
(b) any liability due in respect of any period in respect of the
Slough Property;
(c) liabilities of the Vendor to Taxation (excluding liabilities to
PAYE and VAT in respect of the period after the Calculation Date);
(d) amounts owed to any third party by way of overdrafts, loans or
other borrowings;
(e) all obligations arising under the Intra-Group Agreement;
(f) all liabilities which have not been provided for in the Net Asset
Value Statement save for those arising after the Calculation Date;
(g) any liabilities in respect of litigation arising out of any matter
on or before Completion;
(h) all liabilities to Al Mulhoff;
(i) "goods received not invoiced" accrued for stock received prior to
31 December 1997;
(j) any supplier credits on the payables ledger which have been
outstanding since prior to 1 January 1998 and payables which have
been outstanding since prior to 1 January 1998; and
(k) any liabilities which do not relate to the Business.
-3-
<PAGE> 6
"FIXED PLANT" means the fixed plant, machinery, equipment and tooling
used or intended for use directly and exclusively in the Business
attached or fixed to the Properties and at the Slough Property to the
extent not Excluded Assets;
"GOODWILL" means the goodwill relating to the Business together with the
exclusive right for the Purchaser to represent itself as carrying on the
Business in succession to the Vendor;
"HOLDING COMPANY" has the meaning given to it in section 736 Companies
Act 1985;
"INITIAL CONSIDERATION" has the meaning set out in clause 3.2 below;
"INTELLECTUAL PROPERTY" means the registered intellectual property
together with:-
(a) all know-how directly and exclusively connected with the Business;
(b) all copyright, moral rights, design rights, unregistered trade
marks, logos, drawings, designs and all other intellectual
property rights directly and exclusively relating to the Business
and all rights of the Vendor against third parties in respect of any of
the foregoing;
"INTRA-GROUP AGREEMENT" means the agreement dated 30 December 1997
between the Vendor and Interface Inc. providing for the sale of the
business of the Vendor of selling and marketing connecting and document
management software and IBM plug compatible printer hardware as well as
the related assets as of 30 June 1997, being the document in the Agreed
Form;
"LEASED ASSETS" means those of the Assets which are subject to lease,
hire, hire-purchase and other such agreements;
"LIABILITIES" means all liabilities of the Business but excluding the
Excluded Liabilities;
"LOOSE PLANT" means the moveable plant, machinery, equipment, tooling and
vehicles used or intended for use directly and exclusively in the
Business;
"NET ASSET VALUE" means the sum derived by subtracting the amount
attributable to the Liabilities as at the Calculation Date from the
amount attributable to the Assets at the Calculation Date, each as shown
in the Net Asset Value Statement as at the Calculation Date;
"NET ASSET VALUE STATEMENT" means the statement of net assets or, as the
context may require, the draft thereof, to be produced and confirmed in
accordance with clause 3 showing the Net Asset Value as at the
Calculation Date;
"PROPERTIES" means the properties brief particulars of which are set out
in schedule 3;
"PURCHASER'S ACCOUNTANTS" means Ernst & Young, 7 Roll Buildings, Fetter
Lane, London EC4A 1N13;
-4-
<PAGE> 7
"PURCHASER'S GROUP" means the Purchaser, its ultimate holding company and
any subsidiary of such holding company;
"PURCHASER'S SOLICITORS" means Matheson Ormsby Prentice of 1 Pemberton
Row, Fetter Lane, London EC4A 3BA;
"REGULATIONS" means the Transfer of Undertakings (Protection of
Employment) Regulations 1981;
"SLOUGH PROPERTY" means the lease of property of the Vendor at 959 Weston
Road, Slough, Berkshire and for the avoidance of doubt the telephone
system is part of the Slough Property;
"STOCK" means the stock in trade, raw materials, packing materials, work
in progress and finished goods acquired or produced in the course of the
Business at the Properties or elsewhere;
"SUBSIDIARY" has the meaning given to it in section 736 Companies Act
1985;
"TAXATION" means any tax and any duty, impost, levy or governmental
charge in the nature of tax whether domestic or foreign and any fine,
penalty or interest connected therewith (including Customs Duties and
Value Added Tax) but excluding any stamp duty or stamp duty reserve tax
payable on this agreement or any instrument executed pursuant to this
agreement or any assignment relating to this agreement;
"TRADE PAYABLES" means those of the Liabilities, as described in the Net
Asset Value Statement;
"VENDOR'S ACCOUNTANTS" means Arthur Andersen, 20 Old Bailey, London EC4M
7AN;
"VENDOR'S GROUP" means the Vendor, its ultimate holding company and any
subsidiary of such holding company;
"VENDOR'S SOLICITORS" means Ashurst Morris Crisp, Broadwalk House, 5
Appold Street, London, EC2A 2HA;
"WARRANTIES" means the warranties given pursuant to clause 14 and
schedule 2.
1.2 The words and expressions defined in schedule 2 shall have the meanings
set out therein.
1.3 References to the parties hereto include and in the case of individuals
their respective successors in title, personal representatives, heirs and
estates and references to the masculine gender shall include the feminine
and vice versa.
1.4 References to statutes or statutory provisions include references to any
orders or regulations made thereunder and references to any statute,
provision, order or regulation include references to that statute,
provision, order or regulation as re-enacted from time to time before the
date hereof (subject as otherwise expressly provided herein) and to any
previous statute, statutory provision, order or regulation amended,
modified, re-enacted or replaced by such statute, provision, order or
regulation before the date hereof.
-5-
<PAGE> 8
1.5 References to persons shall include bodies corporate and unincorporated,
associations, partnerships and individuals.
1.6 Headings to clauses, sub-clauses and paragraphs are for information only
and shall not form part of the operative provisions of this agreement and
shall be ignored in construing the same.
1.7 References to recitals, clauses or schedules are to recitals to, clauses
of and schedules to this agreement.
1.8 The recitals, the schedules and documents in the Agreed Form form part of
the operative provisions of this agreement and references to this
agreement shall, unless otherwise expressly stated, include references to
the recitals, the schedules and documents in the Agreed Form.
1.9 Time shall be of the essence for all payments under this agreement.
2. SALE AND PURCHASE
2.1 Subject to the terms and conditions of this agreement and so that the
Vendor shall sell and the Purchaser shall purchase with effect from the
Completion Date and the Vendor shall sell with full title guarantee (save
in the case of the Leased Assets in respect of which the Vendor shall
sell with whatever right title and interest it has in such Assets) and
the Purchaser shall purchase free from all Encumbrances the Assets and
the Business as a going concern with effect from the commencement of
business on the Completion Date and together with all accrued benefits
and rights attaching thereto.
2.2 The Excluded Assets and the Excluded Liabilities are not included in the
sale and purchase pursuant to clause 2.1.
2.3 The consideration for such sale and purchase shall be as specified in
clause 3.
3. CONSIDERATION
3.1 The Consideration shall be a sum equivalent to 80% of the Net Asset Value
as specified in the Net Asset Value Statement, plus (pound)75,000
provided that if any adjustments upwards to the Consideration shall
result in the Consideration being more than (pound)2,750,000, then the
Purchaser shall pay only (pound)2,750,000 and the Vendor shall retain
further receivables (taking receivables in order of the oldest
receivables first) to those in the Excluded Assets to the extent the
Consideration would otherwise have exceeded (pound)2,750,000.
3.2 (pound)2,400,000 (less the Escrow Amount) (the "INITIAL CONSIDERATION")
shall be paid on Completion on account of the Consideration and the
Escrow Amount shall be paid into the Escrow Account.
3.3 As soon as practicable and in any event within forty five days of the
Completion Date the Vendor shall procure, using the Vendor's Accountants
for this purpose, that the Net Asset Value Statement is prepared on a
basis consistent with the accounting principles and policies on which the
Accounts have been prepared or would have been prepared using the same
basis
-6-
<PAGE> 9
for provisions on debts and valuation of stock (save that any Debtors
(net of the relevant credit notes) which have been outstanding since
prior to 1 March 1998 are excluded from the purchase as are payables
which have been outstanding since prior to 1 January) as were used for
the preparation of the Accounts.
3.4 When the Net Asset Value Statement shall have been prepared the Vendor
shall deliver a copy thereof to the Purchaser's Accountants for review.
The Purchaser's Accountants shall be entitled to examine all the accounts
and working papers relating to the Net Asset Value Statement or otherwise
reasonably required for the purposes of such review and discuss the sums
with the Vendor's Accountant.
3.5 Within fifteen working days after the Vendor has delivered the Net Asset
Value Statement pursuant to clause 3.4 the parties shall procure that the
Vendor's Accountants and the Purchaser's Accountants meet to review and
examine the Net Asset Value Statement to satisfy themselves that it has
been duly prepared in accordance with this agreement and that the Net
Asset Value has been correctly derived therefrom. The Vendor's
Accountants and the Purchaser's Accountants shall then either:-
(a) confirm in writing to the parties that the Net Asset Value
Statement has been so prepared and the Net Asset Value correctly
derived; and/or
(b) give notice in writing to the parties detailing why they are
unable so to confirm.
If the Vendor's Accountants or the Purchaser's Accountants fail so to
confirm or fail to give such notice as aforesaid within the said fifteen
working days the Net Asset Value Statement and the Net Asset Value shall
be conclusively deemed to have been accepted and confirmed by the Vendor
and the Purchaser.
3.6 If the Vendor's Accountants or the Purchaser's Accountants have given
notice in accordance with clause 3.5(b) the parties will endeavour to
resolve all matters in dispute as soon as practicable. In the event of
their failing to resolve such matters within ten working days of the
giving of such notice by the Vendor's Accountants and the Purchaser's
Accountants, either party may refer any dispute for resolution to an
independent chartered accountant appointed by the Vendor and the
Purchaser or, in default of agreement on such appointment within three
working days, on the application of either party by the President for the
time being of the Institute of Chartered Accountants in England and
Wales. In making such determination such accountant shall act as an
expert and not as an arbitrator and his decision shall (in the absence of
manifest error) be final and binding on the parties hereto. The costs of
such accountant shall be borne by the parties in the proportions he may
direct or, in the absence of direction, equally.
3.7 Within 3 working days of the Net Asset Value Statement being confirmed or
deemed to have been confirmed in accordance with Clause 3.5 or being
determined in accordance with Clause 3.6, an adjusting payment to the
Initial Consideration should be made to reflect the final Consideration
by either the Purchaser or the Vendor, as the case may be. Such payment
will be calculated on the basis of the Net Asset Value Statement,
together in each case with interest flowing on such amount due at a rate
equal to Lloyds Bank plc base rate for the time being in force on such
matter accruing on a daily basis from the Completion Date to the date of
payment.
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3.8 The Vendor and the Purchaser shall procure the Escrow Account shall be
opened in the names of the Vendor's Solicitors and the Purchaser's
Solicitors into which the Escrow Amount shall be paid which shall be
retained in the Escrow Account being on deposit in such manner as the
parties agree until final settlement of the Consideration in accordance
with clause 3.7 when such payment will be made out of the Escrow Account
to the extent that the Purchaser is entitled to receive payment by way
reduction in the overall consideration together with interest thereon and
any sums remaining shall be paid to the Vendor together with interest
thereon, the Vendor's Solicitors and the Purchaser's Solicitors being
instructed accordingly by the Vendor and the Purchaser.
4. COMPLETION
4.1 Completion shall take place at the offices of the Vendor's Solicitors on
the Completion Date or at such other place or time as the Vendor and the
Purchaser shall agree in writing.
4.2 On Completion the Vendor shall deliver or, in the case of clauses 4.2(a)
and 4.2(b) make available to the Purchaser:-
(a) the Books and Records;
(b) list of all Debtors and a list of all creditors as at the close of
business on the business day immediately preceding the Calculation
Date;
(c) at the Properties the Loose Plant and all other Assets hereby
agreed to be sold title to which can be transferred by delivery
and shall permit the Purchaser to enter into and take possession
of the Assets;
(d) releases under seal or confirmation of releases of any
Encumbrances to which any of the Assets are subject duly executed
by those entitled to the benefit thereof;
4.3 The Purchaser shall deliver to the Vendor's Solicitors a banker's draft
drawn on a town clearing bank for immediately available funds or
telegraphic transfer in favour of the Vendor's Solicitors for an amount
equivalent to the Initial Consideration and the receipt of the Vendor's
Solicitors therefor shall be a good discharge to the Purchaser.
4.4 Save as otherwise agreed in writing by the parties, at Completion the
Purchaser shall procure that Interface Inc. and each of its subsidiaries,
will be released from any guarantee, indemnity, bond, letter of comfort,
or encumbrance or similar obligation given or incurred in relation to or
which relates to the Liabilities (other than the Excluded Liabilities)
and shall in the meantime indemnify the Vendor, Interface Inc. and each
of its subsidiaries against any liability in relation thereto.
5. PROPERTIES
5.1 The provisions of schedule 3 shall apply in relation to the Properties.
5.2 In respect of the Slough Property the Purchaser shall procure that any
rent and rates due are paid to the Vendor on such property from the
Calculation Date until the part of the Slough
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Property used by the business is vacated by the Purchaser within 30 days
of completion and otherwise the provision of Schedule 3 shall not apply
to the Slough Property.
5.3 Within three working days of the Completion Date the Vendor and the
Purchaser shall agree to appoint an independent surveyor (the "SURVEYOR")
and in default of agreement on such appointment within three working days
from the Completion Date, the Surveyor shall be appointed on the
application of either party by the President of the Royal Institution of
Chartered Surveyors, and the Surveyor shall be instructed to review the
Properties to determine what, if any, repairs are required at the
Properties in order to bring the Properties up to a standard of repair
sufficient only to satisfy the Tenant's repairing obligations contained
in the relevant leases. In making such determination the Surveyor shall
act as an expert and not as an arbitrator and his decision shall be final
and binding upon the Vendor and the Purchaser. The whole cost of the
Surveyor's determination shall be borne by the Purchaser. To the extent
that the Surveyor determines that repairs are required to the Properties
in accordance with this clause, he shall estimate the cost of such
repairs (the "ESTIMATE") and the Vendor shall pay to the Purchaser (upon
receipt by the Vendor of satisfactory evidence of the Purchaser's payment
for the repairs) the costs of such repairs in excess of (pound)50,000. To
the extent that the Estimate exceeds (pound)50,000, such excess shall be
reserved in the Escrow Account for payment to the Purchaser pursuant to
this clause and when a receipted bill is produced, such sum will be
released from the Escrow Account to the Purchaser, Provided That the
Vendor shall only be liable to the extent of receipted bills showing such
repairs have been carried out and only to the extent that such repairs
are completed within six months from the Completion Date.
6. LIABILITIES AND EXCLUDED LIABILITIES
6.1 The Purchaser shall:-
(a) with effect from the Completion Date assume liability for and
indemnify the Vendor against the Liabilities and any and all
obligations, liabilities, costs, claims, demands and expenses
arising therefrom;
(b) (save as otherwise agreed in writing by the parties) procure the
substitution of any securities or guarantees given in respect of
the Liabilities by any member of the Vendor's Group;
(c) pay, satisfy and discharge all debts, liabilities and obligations
incurred by the Vendor or the Purchaser in connection with the
Business after the Completion Date.
6.2 The Vendor shall pay satisfy and discharge the Excluded Liabilities and
with effect from the Completion Date indemnify the Purchaser in respect
thereof and against any and all obligations, debts, costs, claims,
demands and expenses arising therefrom.
7. DEBTORS
7.1 At any time on or after Completion as and when required by the Purchaser,
the Vendor shall deliver to the Purchaser the assignments of such of the
Debtors as the Purchaser may specify in such form as the Purchaser shall
require.
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<PAGE> 12
7.2 Notwithstanding clause 7.1 the Vendor undertakes to hold on trust in a
separate bank account in England and Wales for the benefit of the
Purchaser any Debtors included in the Assets received by it and to pay
the same to the Purchaser forthwith on receipt.
8. CONTRACTS
8.1 If any of the Contracts cannot be transferred to the Purchaser without
the consent of a third party then the Vendor shall use all reasonable
endeavours to obtain such consent.
8.2 In any case where the consent in clause 8.1 above is refused or otherwise
not obtained and until it is obtained or where any of the Contracts are
incapable of transfer by assignment or by other means to the Purchaser:-
(a) the Vendor shall hold the Contracts and any monies, goods or other
benefits received thereunder as agent of and trustee for the
Purchaser and shall forthwith upon receipt of the same account for
and pay or deliver to the Purchaser such monies, goods and other
benefits;
(b) the Purchaser shall perform the Contracts in accordance with their
terms and conditions as sub-contractor to the Vendor provided that
sub-contracting is permissible under the terms of the Contract in
question, and where sub-contracting is not permissible, the
Purchaser shall perform the Contracts in accordance with their
terms and conditions as agent for the Vendor and indemnify and
keep indemnified the Vendor against all costs, claims and damages
in respect thereof; and
(c) the Vendor shall give all reasonable assistance to the Purchaser
at the cost of the Purchaser to enable it to enforce the rights of
the Vendor under the Contracts and shall at all times act with
regard to the Contracts in accordance with the Purchaser's
reasonable instructions from time to time.
9. EMPLOYEES
9.1 The Vendor shall use its reasonable endeavours to retain the services of
the Assumed Employees to the intent that their contracts of employment
shall continue in force until Completion and then be transferred to the
Purchaser under the Regulations and shall comply with all its obligations
under the said contracts of employment, under statute and under any
agreement with any trade union in relation to the Business.
9.2 Save in respect of any failure by the Vendor to comply with its
obligations under the Transfer of Undertakings (Protection of Employment)
Regulations 1981 in connection with the sale of the Business hereunder,
the Purchaser shall discharge and hereby undertakes to indemnify the
Vendor against all liabilities, obligations, costs, claims and demands
arising from or in respect of any of the Assumed Employees after
Completion.
9.3 If the Purchaser shall so determine and shall serve notice on the Vendor
within 7 days after the Completion Date, such notice having been signed
by Debbie Pegler, specifying the Assumed Employees that the Purchaser has
determined to make redundant, the Vendor shall indemnify the Purchaser
against redundancy payments and other contractual termination
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<PAGE> 13
payments, together with the costs of terminating any car lease in
relation to such employee to such Assumed Employees up to a maximum
aggregate payment of (pound)100,000.
10. FUTURE TRADING AND TRADE ENQUIRIES
The Vendor shall promptly refer to the Purchaser all enquiries relating
to the Business and assign to the Purchaser all orders directly and/or
exclusively relating to the Business.
11. VALUE ADDED TAX
11.1 All amounts expressed in this agreement as being payable by any party
hereto are expressed exclusive of any value added tax which may be
chargeable thereon and the amount of any such value added tax shall be
payable in addition thereto subject as hereinafter provided.
11.2 The Vendor and the Purchaser shall use all reasonable endeavours to
secure that the conditions of article 5(1) of the Value Added Tax
(Special Provisions) Order 1995 SI 1268 and of section 49 of the Value
Added Tax Act 1994 are fulfilled so that the sale of the Business and
Assets hereunder is properly treated as neither a supply of goods nor a
supply of services for the purposes of value added tax.
11.3 The Vendor and the Purchaser shall each give notice of the transfer to
H.M. Customs and Excise.
11.4 The Vendor shall on the Completion Date deliver to the Purchaser all
records referred to in section 49(1) of the Value Added Tax Act 1994 and
shall not make any request to H.M. Customs and Excise for such records to
be retained by the Vendor and the Purchaser hereby undertakes to preserve
such records for such periods as may be required by law and shall during
that period afford reasonable access to them at the request of the
Vendor.
11.5 In the event H.M. Customs and Excise determine that value added tax is
chargeable on the sale of the Business and Assets hereunder or any of
them then the Vendor shall immediately notify the Purchaser of such
determination and the Purchaser agrees that such value added tax shall be
in addition to the sum specified in clause 3 and the Purchaser shall
(against production by the Vendor of tax invoices in respect thereof) pay
the amount of any such value added tax forthwith to the Vendor but such
payment shall be without prejudice to the right of the Purchaser under
this agreement to call upon the Vendor to make or join an Appeal against
the aforesaid determination.
11.6 All value added tax payable in respect of goods and services supplied or
deemed to be supplied by the Vendor in connection with the Business prior
to Completion, and all interest payable thereon and penalties
attributable thereto, shall be paid to H.M. Customs and Excise by the
Vendor, and the Vendor shall be entitled to receive and to retain for its
own benefit all reimbursement or credit from H.M. Customs and Excise for
value added tax borne by the Vendor on goods and services supplied to the
Vendor prior to Completion and any payments received in respect of value
added tax overpaid to H.M. Customs and Excise prior thereto.
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12. WARRANTIES
12.1 The Vendor warrants to the Purchaser in the terms of the Warranties and
so that the remedies of the Purchaser in respect of any breach of any of
the Warranties shall continue to subsist notwithstanding completion of
the sale and purchase hereunder.
12.2 Save in the case of any fraudulent misrepresentation, the Purchaser
agrees that the Purchaser will have no remedy against the Vendor, and the
Vendor shall have no liability of whatsoever nature to the Purchaser, in
respect of any statement of fact or opinion whatsoever, including any
untrue or misleading statement, warranty or representation, express or
implied, made to the Purchaser or its agents, officers or employees upon
which the Purchaser relied or may have relied in entering into this
agreement and that the Purchaser's sole remedy (save in the case of any
fraudulent misrepresentation) is for breach of contract in respect of the
Warranties, undertakings, covenants or indemnities expressly set out in
this agreement subject to the limitations contained in this agreement.
12.3 Each of the Warranties shall be construed as a separate Warranty and
(save as expressly provided to the contrary) shall not be limited by the
terms of any of the other Warranties.
12.4 Save in the case of fraud or wilful non-disclosure by the Vendor, the
Vendor shall be under no liability in respect of any claim under the
Warranties and any such claim shall be wholly barred and unenforceable
unless written notice of such claim setting out full details of the
relevant claim (including the grounds on which such claim is based and
the amount claimed to be payable in respect thereof) shall have been
served upon the Vendor by the Purchaser by not later than 5.00 p.m. up to
twelve months after the Completion Date and either:-
(a) the amount payable in respect of the relevant claim has been
agreed by the Vendor within 3 months of the date of such written
notice; or
(b) legal proceedings have been instituted in respect of such claim by
the due service of process on the Vendor within 3 months of the
later of:-
(i) the date of such written notice; and
(ii) in the event that the Vendor shall make a request pursuant
to clause 12.10(b)(i) in respect thereof the date on which
judgment is given by a court of competent jurisdiction or
the date settlement is reached (with the consent of the
Vendor) in respect of such proceedings or the date on which
the Vendor and the Purchaser agree that proceedings or
other action against the third party shall be abandoned.
12.5 Save in the case of fraud or wilful non-disclosure the Vendor shall be
under no liability in respect of any claim under the Warranties:-
(a) where the liability of the Vendor in respect of that claim would
(but for this paragraph) have been less than (pound)30,000; or
(b) unless and until and only to the extent that the liability in
respect of that claim (not being a claim for which liability is
excluded under clause 12.5(a) above) when
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<PAGE> 15
aggregated with the liability of the Vendor in respect of all
other claims shall exceed (pound)100,000.
12.6 Save in the case of fraud or wilful non-disclosure the aggregate
liability of the Vendor in respect of all such claims under this
agreement shall not in any circumstances exceed (pound)500,000.
12.7 The Vendor shall be under no liability in respect of any claim under the
Warranties if the facts or circumstances giving rise thereto are clearly
disclosed or referred to in the Disclosure Letter or provided for or
stated to be exceptions under the terms of this agreement.
12.8 No liability (whether in contract, tort or otherwise) shall attach to the
Vendor in respect of any claim under the Warranties to the extent that:-
(a) the claim or the events giving rise to the claim would not have
arisen but for an act, omission or transaction of the Purchaser's
Group otherwise than in the ordinary and proper course of the
Business as at present carried on or which would not have arisen
but for any claim, election or surrender or disclaimer made or
omitted to be made or notice or consent given or omitted to be
given by the Purchaser's Group under the provisions of any
statutes relating to taxation;
(b) the claim is based upon a liability which is contingent only,
unless and until such contingent liability becomes an actual
liability or until the same is finally adjudicated;
(c) provision or reserve in respect of the matter giving rise to the
claim shall have been made in the Net Asset Value Statement or to
the extent that the matter giving rise to the claim shall have
been noted in the Net Asset Value Statement;
(d) the claim occurs wholly or partly out of or the amount thereof is
increased as a result of:-
(i) any change in the accounting principles or practices of the
Purchaser's Group introduced or having effect after the
date of this agreement; or
(ii) any increase in the rates of taxation made after the date
hereof; or
(iii) any change in law or regulation or in its interpretation or
administration by the English courts, by the Inland Revenue
or by any other fiscal, monetary or regulatory authority
(whether or not having the force of law);
(e) the loss or damage giving rise to the claim is recoverable by the
Purchaser's Group under any policy of insurance or would have been
so recoverable but for any change in the terms of insurance since
the date of this agreement.
12.9 No liability will arise and no claim may be made under any of the
Warranties to the extent that the matter giving rise to such claim is
remediable unless within the period of 60 days following the Purchaser
becoming aware of such matter the Purchaser shall have given written
notice thereof to the Vendor and such matter shall not have been remedied
to the
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reasonable satisfaction of the Purchaser within the period of 60 days
following the date of service of such notice.
12.10 (a) This clause shall apply in circumstances where:-
(i) any claim is made against the Purchaser's Group which may
give rise to a claim by the Purchaser against the Vendor
under the Warranties; or
(ii) the Purchaser's Group is or may be entitled to make
recovery from some other person of any sum in respect of
any facts or circumstances by reference to which the
Purchaser has or may have a claim against the Vendor under
the Warranties; or
(iii) the Vendor shall have paid to the Purchaser an amount in
respect of a claim under the Warranties and subsequent to
the making of such payment the Purchaser's Group becomes or
shall become entitled to recover from some other person a
sum which is referable to that payment.
(b) The Purchaser shall and shall procure that:-
(i) (prior to taking any action against the Vendor under the
Warranties in the case of clause 12.10(a)(i) and clause
12.10(a)(ii) and subject to the Purchaser being indemnified
to the reasonable satisfaction of the Purchaser by the
Vendor against all reasonable costs and expenses which may
properly be incurred by reason of such action) promptly and
diligently take all such action as the Vendor may
reasonably request (including the institution of
proceedings and the instruction of professional advisers
approved by the Vendor to act on behalf of the Purchaser to
avoid, dispute, resist, compromise, defend or appeal
against any such claim against the Purchaser's Group as is
referred to in clause 12.10(a)(i) or to make such recovery
by the Purchaser's Group as is referred to in clause
12.10(a)(ii) or clause 12.10(a)(iii), as the case may be;
and
(ii) not settle or compromise any liability or claim to which
such action is referable without the prior written consent
of the Vendor which consent shall not be unreasonably
withheld or delayed; and
(iii) in the case of clause 12.10(a)(iii) only, promptly repay to
the Vendor an amount equal to the amount so recovered or,
if lower, the amount paid by the Vendor to the Purchaser.
12.11 The Purchaser shall promptly:-
(a) inform the Vendor in writing of any fact, matter, event or
circumstance which comes to its notice or to the notice of the
Purchaser's Group whereby it appears that the Vendor is or may be
liable to make any payment in respect of any claim under the
Warranties or whereby it appears the Purchaser's Group shall
become or may become entitled to recover from some other person a
sum which is referable to a payment already made by the Vendor in
respect of such a claim; and
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<PAGE> 17
(b) thereafter keep the Vendor fully informed of all developments in
relation thereto; and
(c) provide all such information and documentation (no matter how it
is recorded or stored) as the Vendor shall reasonably request in
connection therewith and also in connection with any proceedings
instituted by or against the Purchaser's Group under clause 12.10.
provided that the Vendor shall keep such information and documentation
confidential.
12.12 The Warranties shall remain in full force and effect after Completion but
(save in the case of any fraudulent misrepresentation or wilful
non-disclosure) the Purchaser shall have no right to rescind or terminate
this agreement after Completion for breach of any of the Warranties or
under the provisions of the Misrepresentation Act 1967 or for any other
reason whatsoever and the Purchaser's sole remedy (save as aforesaid) in
respect of a claim under the Warranties or otherwise shall be against the
Vendor in damages subject to the limitations contained in this agreement.
12.13 In the event that the Vendor at any time after the date hereof shall wish
to take out insurance against its liability hereunder the Purchaser
undertakes to provide such information as the prospective insurer may
reasonably require before effecting such insurance provided that the
Purchaser can do so without breaching any of its legal obligations to
third parties.
12.14 The Purchaser confirms that it has no knowledge at the date hereof of any
facts which it currently believes (acting reasonably) may lead to claims
against the Vendor under the Warranties.
12.15 The Purchaser's Group will take or procure the taking of all such steps
and action as are necessary or as the Vendor may reasonably require in
order to mitigate any claim under the Warranties and the Purchaser's
Group shall act in accordance with such request. Nothing in this
agreement shall or shall be deemed to relieve the Purchaser of any common
law or other duty to mitigate any loss or damage incurred by it.
13. ANNOUNCEMENTS, ETC.
Neither the making of this agreement nor its terms shall be disclosed by
any party hereto without the prior consent of the other parties unless
disclosure is required by law or by any Stock Exchange or any regulatory
authority.
14. COSTS
14.1 Save as expressly otherwise provided in this agreement each of the
parties hereto shall bear its own legal, accountancy and other costs,
charges and expenses connected with the negotiation, preparation and
implementation of this agreement and any other agreement incidental to or
referred to in this agreement.
14.2 The Vendor and Interface Inc. confirm to the Purchaser that all
outstanding payments to its advisors will be paid at the Completion Date.
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15. ASSIGNMENT
15.1 This agreement and all rights and benefits hereunder are personal to the
parties hereto and may not be assigned at law or in equity without the
prior written consent of the other party/parties hereto save that rights
and benefits may be assigned by the Purchaser (i) within the Purchaser's
Group (and assigned back if the relevant assignee subsequently leaves the
Purchaser's Group) and (ii) solely by way of security in respect of
borrowing incurred by the Purchaser for the purpose of this sale and
purchase.
16. ENTIRE AGREEMENT
This agreement (together with any documents referred to herein)
constitutes the entire agreement between the parties hereto in connection
with the subject matter of this agreement.
17. WAIVER, AMENDMENT
17.1 There shall be no waiver of any term, provision or condition of this
agreement unless such waiver is evidenced in writing and signed by the
waiving party.
17.2 No omission or delay on the part of any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or of any other
right, power or privilege. The rights and remedies herein provided are
cumulative with and not exclusive of any rights or remedies provided by
law.
17.3 No variation to this agreement shall be effective unless made in writing
and signed by all the parties.
18. FURTHER ASSURANCE
18.1 At any time after Completion the Vendor shall at the Purchaser's expense
execute all such documents and do such acts and things as the Purchaser
may reasonably require for the purpose of vesting in the Purchaser the
full legal and beneficial title to the Assets and giving to the Purchaser
the full benefit of this agreement.
18.2 The Vendor and the Purchaser each covenants that it will give all
assistance and accord every facility reasonably required by the
Purchaser's Accountants, the Vendor's Accountants or any valuer or
accountant appointed in accordance with clause 4 for the purposes of
preparing any certificate, statement, accounts or making any
determination necessary or desirable for the purpose of this agreement,
and shall allow them or him access to any assets, accounts, books,
records or other information relating to the Business held by the
Purchaser or the Vendor.
18.3 The terms of this agreement shall insofar as they are not performed at
Completion and subject as specifically otherwise provided in this
agreement continue in force after and notwithstanding Completion.
19. FAYREWOOD PLC
Fayrewood hereby guarantees and covenants to and with the Vendor that in
the event of:-
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(a) the Purchaser being deemed unable to pay its debts within the
meaning of Section 123(1) (a) (b) (e) or (2) of the Insolvency Act
1986 or otherwise becomes insolvent or suspends making payment
with respect to all or any class of its debts or announces an
intention so to do and/or
(b) a petition being presented for the winding up of the Purchaser
(not being a petition that the Purchaser can demonstrate is
frivolous, vexatious or an abuse of the process of court or
relates to a claim to which the Purchaser has a good defence and
is being vigorously contested by the Purchaser) or an order is
made or resolution passed for the winding up of the Purchaser or a
notice is issued convening a meeting for the purpose of passing
any such resolution and/or
(c) any petition is presented or other step is taken for the purposes
of the appointment of an administrator or an administration order
is made and/or
(d) any administrative or other receiver is appointed of the Purchaser
or any part of its assets or any other steps are taken to enforce
any encumbrance over its assets and/or
(e) any composition compromise or other arrangement is made by the
Purchaser with its creditors and/or
(f) the Purchaser being unable to or failing to pay its debts or other
monies due hereunder to the Purchaser
Fayrewood will hold the Vendor harmless therefrom and the consequences
thereof and will fulfil on demand by the Vendor all or any of the
obligations of the Purchaser under this agreement as if Fayrewood had
entered into such obligations directly with the Vendor and was and is the
primary obligor in place of and/or in addition to the Vendor.
20. INTERFACE INC.
Interface Inc. hereby guarantees and covenants to and with the Purchaser
that in the event of:-
(a) the Vendor being deemed unable to pay its debts within the meaning
of Section 123(1) (a) (b) (e) or (2) of the Insolvency Act 1986 or
otherwise becomes insolvent or suspends making payment with
respect to all or any class of its debts or announces an intention
so to do and/or
(b) a petition being presented for the winding up of the Vendor (not
being a petition that the Vendor can demonstrate is frivolous,
vexatious or an abuse of the process of court or relates to a
claim to which the Vendor has a good defence and is being
vigorously contested by the Vendor) or an order is made or
resolution passed for the winding up of the Vendor or a notice is
issued convening a meeting for the purpose of passing any such
resolution and/or
(c) any petition is presented or other step is taken for the purposes
of the appointment of an administrator or an administration order
is made and/or
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(d) any administrative or other receiver is appointed of the Vendor or
any part of its assets or any other steps are taken to enforce any
encumbrance over its assets and/or
(e) any composition compromise or other arrangement is made by the
Vendor with its creditors and/or
(f) the Vendor being unable to or failing to pay its debts or other
monies due hereunder to the Purchaser
Interface Inc. will hold the Purchaser harmless therefrom and the
consequences thereof and will fulfil on demand by the Purchaser all or
any of the obligations of the Vendor under this agreement as if Interface
Inc. had entered into such obligations directly with the Purchaser and
was and is the primary obligor in place of and/or in addition to the
Vendor and Interface Inc. hereby agrees that all court orders obtained in
the High Court of Justice in London shall be fully enforceable in the
State of Michigan, USA and any other jurisdiction in which Interface Inc.
carries on business or has assets wheresoever in the world.
21. PURCHASER'S UNDERTAKING
21.1 The Purchaser undertakes to use best endeavours to collect Debtors from
Completion included in the Excluded Assets on behalf of the Vendor for a
commission of 2.5% per amount received by the Purchaser in respect of
such Debtor.
21.2 The Purchaser undertakes to hold on trust in a separate bank account in
England and Wales for the benefit of the Vendor any Debtors included in
the Excluded Assets received by it and to pay the same less a commission
of 2.5% per amount received to the Vendor forthwith on receipt providing
that no commission will be paid in respect of Debtors being collected by
Trade Indemnity or the Vendor.
22. ACCESS
Each of the Vendor and the Purchaser agree to give access to all books
and records held by the other after Completion which in any way relate to
the Business, the Assets, the Liabilities, the Excluded Assets or the
Excluded Liabilities which each may reasonably request of the other in
order to fulfil any of the obligations or rights set out in this
agreement including clause 3, 4.4, 6, 7, 8, 9 or 21.
23. NOTICES
23.1 Save as specifically otherwise provided in this agreement any notice,
demand or other communication to be served under this agreement may be
served upon any party hereto only by posting by first class post or
delivering the same or sending the same by facsimile transmission to the
party to be served at its address above, or facsimile number given below
or at such other address or number in the United Kingdom as he or it may
from time to time notify in writing to the other parties hereto:-
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<PAGE> 21
The Vendor - Fax no: +00 1 734 769 5589
Marked for the attention of Robert Nero
The Purchaser - Fax no: 0171 831 6017
Marked for the attention of: Paul Griffiths
23.2 A notice or demand served by first class post shall be deemed duly served
48 hours after posting and a notice or demand sent by facsimile
transmission shall be deemed to have been served at the time of
transmission and in proving service of the same it will be sufficient to
prove, in the case of a letter, that such letter was properly stamped or
franked first class, addressed and placed in the post and, in the case of
a facsimile transmission, that such facsimile was duly transmitted to a
current facsimile number of the addressee at the address referred to
above.
24. COUNTERPARTS
This agreement may be executed in any number of counterparts and by the
several parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
25. GOVERNING LAW AND SUBMISSION TO JURISDICTION
25.1 This agreement shall be governed by and construed in accordance with
English law.
25.2 The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of the High Court of Justice in London for the purpose of
hearing and determining any dispute arising out of this agreement and for
the purpose of enforcement of any judgment against their respective
assets.
25.3 The parties hereto agree that service of any writ, notice or other
document for the purpose of any proceedings in such court shall be duly
served upon it if delivered or sent by registered post, in the case of
Interface Inc. to Ashurst Morris Crisp (marked for the attention of Chris
Ashworth) as specified in clause 20.1.
26. INVALIDITY
If at any time any one or more of the provisions hereof is or becomes
invalid, illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining provisions hereof
shall not be in any way affected or impaired thereby.
27. CONFIDENTIALITY
The Vendor undertakes to keep confidential any information relating to
the Business in its possession.
IN WITNESS whereof this agreement has been executed as a deed on the date first
above written.
-19-
<PAGE> 22
SCHEDULE 1
ALLOCATION OF CONSIDERATION
The Consideration shall be apportioned among the Assets as follows:-
(pound)
1. Goodwill 1
2. Books and Records 1
3. Contracts 1
4. Debtors 80% of amount as provided in Net Asset
Value Statement less the Liabilities
5. Fixed Plant 80% of amount as provided in Net Asset
Value Statement less the Liabilities
6. Loose Plant 80% of amount as provided in Net Asset
Value Statement less the Liabilities
7. Intellectual Property (pound)1
8. Properties 80% of amount in Net Asset Value
Statement
9. Stock 80% of amount in Net Asset Value
Statement
-20-
<PAGE> 23
SCHEDULE 2
WARRANTIES
1. Capacity
2. Accounts
3. The Business
4. Employees
-21-
<PAGE> 24
1. CAPACITY
1.1 STATUS AND POSITION OF THE VENDOR
The Vendor is a limited liability company, duly incorporated and
subsisting under the laws of England and is not in liquidation,
administration or administrative receivership, nor has any resolution
been passed by the shareholders or creditors to put the Vendor into
liquidation, administration or administrative receivership.
1.2 POWERS AND AUTHORITY
The Vendor has all requisite corporate power to enter into and perform
this agreement and the transactions and matters contemplated thereby
and has taken all necessary action to authorise the entry into and
performance of this agreement and the transactions and matters
contemplated thereby.
1.3 VALIDITY
Each of the obligations expressed to be assumed by the Vendor under
this agreement and any agreement hereby contemplated constitutes a
valid and binding obligation of the Vendor respectively.
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<PAGE> 25
2. ACCOUNTS
2.1 ACCOUNTS WARRANTY
The Accounts comply with the provisions of the Companies Act 1985 as
applicable and have been prepared in accordance with the requirements
of United Kingdom generally accepted accounting principles and
practices and give a true and fair view of all the assets and
liabilities and of the state of affairs, financial position and
results of the Vendor as at and up to the Accounts Date.
2.2 So far as Interface Inc. is aware having made reasonable enquiries at
that time the information in the letter to the Purchaser from Barons
Financial Services Limited of 7 May 1998 with respect to the overheads
and costs is correct in all material respects.
2.3 So far as Interface Inc is aware, the revenue figures for the months
of October 1995 to March 1998 on the attached schedule have been
extracted from the books and records of the Business.
2.4 So far as Interface Inc. is aware:-
(a) there is no stock in consignment at the Properties or with
customers;
(b) there has been no investigation by Customs and Excise into the
Business; and
(c) the Vendor has no material warranty liabilities that are not
covered by manufacturers' warranties.
-23-
<PAGE> 26
3. THE BUSINESS
3.1 BUSINESS SINCE THE ACCOUNTS DATE
(a) Since the Accounts Date there has been no material adverse change
in the financial position of the Business and the Business has
been carried on on a normal basis and the Vendor has not disposed
of any material assets used in connection with the Business other
than in the normal course of business.
(b) So far as the Vendor is aware since the Accounts Date no
substantial customer or supplier of the Business has ceased
purchasing from or supplying to the Vendor in connection with the
Business.
3.2 CHARGES AND TITLE TO ASSETS
The Vendor has not (other than in the ordinary course of trading) created
or agreed to create or suffered to arise any debenture, mortgage, charge,
lien or encumbrance over any part of the Assets.
3.3 LITIGATION
There is no litigation, arbitration, prosecution or other legal
proceedings relating to the Business which is material and so far as the
Vendor is aware there are no claims, facts or events which are likely to
give rise to any such proceedings.
3.4 BUSINESS NAME
The Business is not carried on under any name other than Interface
Systems International Limited and ISI.
3.5 INTELLECTUAL PROPERTY
The Disclosure Letter contains brief details, so far as are known by the
Vendor, of any agreements, licences or other rights granted in respect of
the Intellectual Property and the Vendor is not a party to any user,
licence, know-how, information or assistance or development agreement
which relates to the Business or under any liability to pay royalties in
respect of any such matter.
3.6 EFFECT OF SALE OF THE BUSINESS
The Vendor has not been notified that after Completion (whether by reason
of an existing agreement or arrangement or otherwise) or as a result of
the proposed acquisition of the Business and Assets by the Purchaser:-
(a) any supplier of the Business will cease supplying the Business or
may substantially reduce its supplies to the Business;
(b) any customer of the Business will cease to deal with the Business
or may substantially reduce its existing level of business with
the Business;
-24-
<PAGE> 27
(c) any officer or senior employee included in the Assumed Employees
will leave.
3.7 INSURANCE
The Vendor has produced to the Purchaser all insurance policies in effect
in relation to the Business and Assets and the premiums due on all such
policies have been paid up to date.
3.8 LICENCES
The Vendor has all licences and permissions required for the carrying on
of the Business and is not materially in breach of the terms or
conditions of such licences and permissions and the Vendor is not aware
of any reason why any of them should be suspended or revoked.
3.9 TERMS OF TRADE
During the 12 months preceding the date of this agreement the Company has
paid its suppliers in the normal course of the Business.
3.10 GRANTS AND ALLOWANCES
In relation to the Business, no grant, allowance, aid or subsidy has been
applied for and received from any supernational, national or local
authority or government agency which is liable to be repaid.
3.11 GUARANTEES
All guarantees, indemnities, bonds, letters of comfort, or encumbrance or
similar obligation given or incurred in relation to or which relate to
the Liabilities (other than the Excluded Liabilities) have been
disclosed.
MISCELLANEOUS
3.12 The Assets are (save for the Excluded Assets) all the assets used by the
Vendor in the Business as currently conducted.
3.13 The Vendor has not received written notice from any third party alleging
that it is in material breach of any Contract.
3.14 The Vendor has not received written notice from any third party alleging
that the operation of the Business infringes the intellectual property
rights of any person.
3.15 So far as the Vendor is aware, all rent in respect of the Properties
where due has been paid.
3.16 The Debtors are properly due and payable in the ordinary course of
business.
3.17 At the date of this agreement no liability is outstanding for pension
contributions in respect of any Assumed Employee relating to any period
prior to the Completion Date.
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<PAGE> 28
4. EMPLOYEES
4.1 The particulars of the Assumed Employees annexed to the Disclosure Letter
show all remuneration and other benefits which the Vendor is bound to
provide to each Assumed Employee.
4.2 The terms of employment or engagement of all Assumed Employees are such
that their employment or engagement may be terminated by not more than
three month's notice given at any time without liability for any payment
including by way of compensation or damages (except for unfair dismissal
or a statutory redundancy payment) and the Vendor has not entered into
any agreement or arrangement for the management of the Business or any
part thereof other than with the Assumed Employees engaged in the
Business.
4.3 Since the Accounts Date the Vendor has not paid or given any increase in
or improvement to the emoluments of any Assumed Employee and the Vendor
has not made any announcement or proposal concerning any such emoluments
with or without retrospective operation.
4.4 Since the Accounts Date the Vendor has not been engaged or involved in
any material dispute with any Assumed Employee or any labour troubles
involving the Business which are material and no industrial action
involving such employees, official or unofficial, is now occurring.
4.5 There is no pension scheme of the Company save for the disclosed payments
by the Company.
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<PAGE> 29
SCHEDULE 3
PROPERTIES
PART 1
Unit 2, Unit 4, Unit 5
9 Waterloo Avenue
Chemsley Wood
Birmingham
PART 2
5.1 The Vendor shall use all reasonable endeavours to obtain landlord's
consent ("Landlord's Consent") to the assignment of the leases of the
Properties by virtue of which the Vendor is the tenant of the Properties
(the "Leases" and "Lease" shall mean any one of them).
5.2 The Purchaser shall use all reasonable endeavours to assist the Vendor in
obtaining Landlord's Consent including supplying accounts, references and
financial information reasonably required by the landlords under the
Leases for the purposes of granting Landlord's Consent, including
providing such security as may reasonably be required by the landlords
either under the Leases or otherwise.
5.3 The Purchaser shall occupy the Properties from Completion until the date
each assignment is completed (the "Assignment Date") as licensee of the
Vendor subject to the following provisions:-
(i) The Purchaser shall pay or indemnify the Vendor against all rent
outgoings and expenses relating to each of the Properties after
Completion until the Assignment Date.
(ii) The Purchaser shall indemnify the Vendor against all costs losses
liabilities actions proceedings claims or demands arising from the
possession or occupation of any of the Properties by the Purchaser
or any of its subsidiary companies and the Purchaser shall observe
and perform all the covenants and conditions contained or referred
to in the Leases deeds and agreements affecting the Properties or
relating to them.
5.4 The Vendor and the Purchaser shall complete each assignment as soon as
reasonably practicable after Landlord's Consent has been obtained and in
any event within the time specified in the Landlord's licence. The
Purchaser shall comply with all registration provisions under the Leases
and serve all notices and make all applications (including to H M Land
Registry where appropriate) in order to vest the legal title in each
Lease in the Purchaser.
5.5 If Landlord's Consent has not been obtained in relation to any of the
Leases within six months of Completion the Vendor shall on that date
assign the Leases to the Purchaser and the Purchaser shall accept
assignments of the Leases on that date which shall be deemed the
Assignment Date for the purpose of each Lease so assigned.
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<PAGE> 30
Signed as a deed by ) John R. Ternes
for and on behalf of )
INTERFACE SYSTEMS INTERNATIONAL LIMITED )
in the presence of:- ) Christopher J. Ashworth
Signed as a deed by ) Pierce Casey
) David Kleeman
for and on behalf of )
FAYREWOOD PLC in the presence of:- ) Patrick Spicer
Signed as a deed by ) John R. Ternes
)
for and on behalf of )
INTERFACE SYSTEMS, INC. in the presence of:- ) Christopher J. Ashworth
Signed as a deed by ) Pierce Casey
) Paul Griffiths
for and on behalf of DOCTOR BUYLINES LIMITED )
in the presence of:- ) Patrick Spicer
-28-
<PAGE> 1
EXHIBIT 2.2
Dated 19th May 1998
FAYREWOOD PLC
- and -
DOCTOR BUYLINES LIMITED
- and -
INTERFACE SYSTEMS INTERNATIONAL LIMITED
- and -
INTERFACE SYSTEMS, INC.
DEED OF VARIATION
ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 0171-638 1111
Fax: 0171-972 7990
[CJA/I33100018]
<PAGE> 2
THIS DEED OF VARIATION is made on 19 May 1998
BETWEEN:-
(1) FAYREWOOD PLC (No.03057247) whose registered office is at 1
Pemberton Row, Fetter Lane, London EC4A 3BA (the "FAYREWOOD");
(2) DOCTOR BUYLINES LIMITED (No.3360868) whose registered office is
at 1 Pemberton Row, Fetter Lane, London EC4A 3BA (the "PURCHASER");
(3) INTERFACE SYSTEMS INTERNATIONAL LIMITED (No.2100227) whose registered
office is at 959 Weston Road, Slough Trading Estate, Slough,
Berkshire, SL1 4HR (the "VENDOR"); and
(4) INTERFACE SYSTEMS, INC. (whose place of business is at 5855
Interface Drive, Ann Arbor, Michigan 48103, USA ("INTERFACE INC.");
RECITALS
This deed is supplemented to, and where applicable supersedes certain provisions
of the acquisition agreement dated 13 May 1998 and made between Fayrewood, the
Purchaser, the Vendor and Interface Inc. (the "AGREEMENT").
THE PARTIES AGREE AS FOLLOWS:-
1. INTERPRETATION
Words and expressions used in this deed have the meaning given to them
in the Agreement unless the context requires otherwise or unless
expressly provided otherwise herein.
2. DEFINITIONS
2.1 The definitions in clause 1 of the Agreement shall be amended as
follows:-
(a) Under the definition of "Escrow Amount", the sum of
(pound)500,000 shall be replaced with the sum of
(pound)50,000;
(b) A new definition shall be inserted as follows:-
"WITHHELD AMOUNT" means the sum of (pound)350,000.
3. CONSIDERATION
3.1 The words "provided that if any adjustments upwards to the
Consideration shall result in the Consideration being more than
(pound)2,750,000, then the Purchaser shall pay only (pound)2,750,000
and the Vendor shall retain further receivables (taking receivables in
order of the oldest receivables first) to those in the Excluded Assets
to the extent the Consideration would otherwise have exceeded
(pound)2,750,000" in clause 3.1 of the Agreement shall be deleted.
-1-
<PAGE> 3
3.2 Clause 3.2 of the Agreement shall be deleted and in its place the
following words shall be substituted:-
"(pound)1,770,000 (being (pound)2,170,000 less the Escrow Amount and
the Withheld Amount) (the "INITIAL CONSIDERATION") shall be paid on
Completion on account of the Consideration and the Escrow Amount shall
be paid into the Escrow Account".
IN WITNESS whereof this deed has been duly executed the day and year first above
written.
-2-
<PAGE> 4
Signed as a deed by ) Pierce Casey
) Paul Griffiths
for and on behalf of )
FAYREWOOD PLC in the presence of:- ) Patrick Spicer
Patrick Spicer
Solicitor
1 Pemberton Row
Fetter Lane
London EC6A 3BA
Signed as a deed by
) Pierce Casey
for and on behalf of ) Paul Griffiths
DOCTOR BUYLINES LIMITED )
in the presence of:- ) Patrick Spicer
Patrick Spicer
as above
Signed as a deed by
) John R. Ternes
for and on behalf of )
INTERFACE SYSTEMS INTERNATIONAL LIMITED )
in the presence of:- ) Christopher J. Ashworth
Signed as a deed by
) John R. Ternes
for and on behalf of )
INTERFACE SYSTEMS, INC. )
in the presence of:- ) Christopher J. Ashworth
-3-
<PAGE> 1
EXHIBIT 2.3
Dated 13th May 1998
THE FIRST NATIONAL BANK OF CHICAGO
-and-
INTERFACE SYSTEMS
INTERNATIONAL LIMITED
-and-
INTERFACE SYSTEMS, INC.
--------
DEED OF RELEASE
--------
Ashurst Morris Crisps
Broadwalk House
5 Appold Street
London EC2A 2HA
<PAGE> 2
Tel: 0171-638-1111
Fax: 0171-972-7990
THIS DEED OF RELEASE is made on 13th May 1998
BETWEEN:-
(1) THE FIRST NATIONAL BANK OF CHICAGO acting through its office at 1
Triton Square, London, NW1 3FN (the "BANK");
(2) INTERFACE SYSTEMS INTERNATIONAL LIMITED (No: 2100227) whose registered
office is at 959 Weston Road, Slough Trading Estate, Slough,
Berkshire, SL1 4HR (the "COMPANY"); and
(3) INTERFACE SYSTEMS, INC. whose principal place of business is at 5855
Interface Drive, Ann Arbor, MI 48103 USA (the "PARENT").
WHEREAS:-
(A) By a Debenture dated 10 March 1997 made between the Company and the
Bank ( the "DEBENTURE") the Company charged all its assets to the Bank
for the payment and discharge of all monies, obligations and
liabilities thereby covenanted to be paid (the "LIABILITIES").
(B) The Bank has agreed to discharge the Debenture and release all the
charges therein contained.
(C) "NET PROCEEDS OF SALE" means the amount of money to be paid to the
Vendor pursuant to clause 3 of the acquisition agreement in respect of
the Company to be made on or about the date hereof between Fayrewood
plc, the Company and the Parent, less:-
(a) the amount withheld by Ashurst Morris Crisp in respect of
their professional fees, costs and disbursements: and
(b) an amount representing the professional fees, costs and
disbursements of Barons Financial Services (UK) Limited.
(c) (pound)50,000 to be paid to the Company.
in relation to the disposal of the Company.
NOW THIS DEED WITNESSES as follows:-
1. RELEASE OF CHARGES
The Bank hereby irrevocably releases and discharges all of the charges
and other security constituted by the Debenture and irrevocably
releases and discharges the
2
<PAGE> 3
Company from all claims and demands it may have against the Company
pursuant to the terms of the Debenture.
2. PAYMENT TO THE BANK
2.1 The Parent and the Company hereby give absolute and irrevocable
instruction to Ashurst Morris Crisp on the date hereof to pay to the
bank from the Net Proceeds of Sale as soon as reasonably practicable
such sum as represents the total indebtedness of the Company to the
Bank secured by the Debenture.
2.2 The Parent hereby undertakes to the Bank that on the date hereof if
there is a shortfall between the sum paid under clause 2.1 above and
the total indebtedness of the Company to the Bank secured by the
Debenture (the "Shortfall"), it will pay, or it will procure that
there shall be paid as soon as reasonably practicable the Shortfall to
the Bank.
3. RE-ASSIGNMENT
The Bank hereby reassigns and re-conveys to the Company all assets and property
of the Company which were assigned and/or conveyed to the Bank by way of
security pursuant to the terms of the Debenture.
IN WITNESS whereof this Deed has been duly executed the day and year first
before written.
Signed by: ) J. E. Barling
Authorized signatory for and on behalf of )
THE FIRST NATIONAL BANK OF CHICAGO )
Executed as a deed by ) John R. Ternes
INTERFACE SYSTEMS INTERNATIONAL LIMITED )
Acting by and )
Executed as a deed by ) John R. Ternes
INTERFACE SYSTEMS INC. )
Acting by and )
3
