Exhibit 10(m)
September 30, 1999
Boundless Technologies, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Re: General Automation LLC
Gentlemen:
This letter sets forth the agreement which has been reached concerning the
satisfaction by General Automation, Inc., a Delaware corporation ("GA"), of all
of its existing obligations to Boundless Technologies, Inc., a Delaware
corporation formerly known as SunRiver Data Systems ("Boundless"), and the
acquisition by GA of Boundless' entire interest in General Automation LLC, a
Delaware limited liability company ("GAL"). That agreement is as follows:
1. Payment by GA. Concurrently with the execution of this letter agreement, GA
has paid to Boundless the amount of $1,500,000, by wire transfer to an
account designated by Boundless (the "Cash Payment").
2. Issuance of Promissory Notes. Concurrently with the issuance of this letter
agreement, GA has executed and delivered to Boundless two Promissory Notes,
one in the original principal amount of $250,000 in the form of Exhibit A
attached to this letter agreement (the "First Note"), and one in the
original principal amount of $500,000 in the form of Exhibit B attached to
this letter agreement (the "Second Note"). The First Note and the Second
Note are at times referred to collectively in this letter agreement as the
"Notes").
3. Issuance of Stock. As soon as is reasonably practicable after the date of
this letter agreement, but in any event within thirty (30) days after the
date of this letter agreement, GA will cause its transfer agent to issue and
deliver to Boundless a stock certificate, standing in the name of Boundless,
representing 1,133,333 shares of GA's common stock (the "Shares").
4. Registration Rights Agreement. Concurrently with the execution and delivery
of this letter agreement, GA and Xxxxxxxxx have executed and delivered a
Registration Rights Agreement pertaining to the Shares in the form of
Exhibit C attached to this letter agreement.
Boundless Technologies, Inc.
September 30, 1999
Page 2
5. Satisfaction of GA's Obligations Under the Second Note. The Second Note
provides that it is due and payable in full upon the earliest to occur of
the date which is one hundred twenty (120) days following the date on which
the Second Note is issued to Boundless (the "Maturity Date"); or the third
business day following the closing of a loan to GA pursuant to that certain
Loan Agreement (the "Loan Agreement") of even date herewith between GA and
Pacific Mezzanine Fund LLP ("PMF"), which loan yields gross proceeds to GA
of not less than One Million Fifty Thousand Dollars ($1,050,000), excluding
the initial $3,150,000 loaned by PMF to GA pursuant to the Loan Agreement;
or the third business day following the closing of any other debt or equity
financing (other than the refinancing of GA's real property in Irvine,
California) which yields gross proceeds to GA of not less than One Million
Fifty Thousand Dollars ($1,050,000); or the third business day following the
closing of any refinancing of GA's real property in Irvine, California,
which yields net proceeds to GA of not less than One Million Dollars
($1,000,000). (For purposes of this letter agreement, each of the financings
described in clauses (ii), (iii) and (iv) above is referred to as a
"Qualifying Financing"). (A copy of the Loan Agreement is attached to this
letter agreement as Exhibit D.) The Second Note also provides, however, that
in the event that a Qualifying Financing has not been consummated on or
before the Maturity Date, GA may, in its sole discretion, elect to satisfy
GA's entire obligation under the Second Note by executing and delivering to
the holder of the Second Note (the "Holder") a Secured Convertible
Promissory Note with an original principal amount equal to the sum of the
then outstanding principal balance of the Second Note and all accrued but
unpaid interest then owed on the Second Note. If GA elects to satisfy its
obligations under the Second Note in the manner referred to in the
immediately preceding sentence, it shall send written notification of that
election to the Holder (the "Notice"), and it is the intent of GA and
Boundless that the Holder of the Second Note shall be issued a Secured Note
(as defined below) and a Warrant (as defined below) and become a "Lender"
under the Loan Agreement with all of the rights and privileges of a Lender
contemplated in the Loan Agreement, upon substantially the same terms as are
applicable to PMF. Accordingly, within ten (10) business days following the
Holder's receipt of the Notice:
(a) GA shall execute and deliver to the Holder, against Xxxxxx's execution
and delivery to GA of the documents and instruments referred to in
Section 5(b) below, the following:
(i) A Secured Convertible Promissory Note in substantially the form
of Exhibit E attached to this letter agreement (the "Secured
Note"), in an original principal amount equal to the sum of the
then outstanding principal balance of the Second Note and all
accrued but unpaid interest then owed on the Second Note (the
conversion
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September 30, 1999
Page 3
rate of which Secured Note shall be $0.73 per share, subject to
adjustment as provided in the Loan Agreement); and
(ii) A Warrant in substantially the form of Exhibit F attached to this
letter agreement, covering a number of shares (rounded to the
nearest whole share) calculated by dividing the original
principal amount of the Secured Note by $8.00 (the exercise price
of which Warrant will be $0.45 per share, subject to adjustment
as provided in the Warrant); and
(iii) Such documents as may reasonably be requested by the Holder for
the purpose of making the Holder a party to the Loan Agreement as
a "Lender" thereunder, with all of the rights and privileges of a
Lender contemplated in the Loan Agreement, upon substantially the
same terms as are applicable to PMF (provided, however, that (A)
in no event shall Boundless become obligated thereby to make any
loan or advance to GA, other than the loan evidenced by the
Secured Note in the original principal amount specified in
Section 5(a)(i) above, and (B) notwithstanding Section 3.01(j) of
the Loan Agreement, no opinion of GA's counsel will be delivered
to Boundless in connection with the transactions contemplated by
this Section 5); and
(iv) Such documents as may reasonably be requested by the Holder for
the purpose of making the Holder a party to, and a "Secured
Party" under, that certain Security Agreement of even date
herewith entered into by PMF and GA, a copy of which is attached
to this letter agreement as Exhibit G; and
(v) Such documents as may reasonably be requested by the Holder for
the purpose of making the Holder a party to, and an "Investor"
under, that certain Investors' Rights Agreement of even date
herewith entered into by PMF and GA, a copy of which is attached
to this letter agreement as Exhibit H; and
(vi) Such other documents and instruments (including but not limited
to amendments to the documents referred to in this Section 5(a))
as
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September 30, 1999
Page 4
may reasonably be requested by the Holder for the purpose of
effectuating the purposes and intent of this Section 5.
(b) The Holder shall deliver to GA for cancellation the original of the
Second Note, and shall also execute and deliver to GA, against GA's
execution and delivery to the Holder of the documents and instruments
referred to in Section 5(a) above, the following:
(i) A Subordination Agreement in favor of each of the Company's
Senior Lenders (as defined in the Loan Agreement), in
substantially the form of Exhibit I attached to this letter
agreement; and
(ii) An Intercreditor Agreement in substantially the form of Exhibit J
attached to this letter agreement; and
(iii) Such other documents and instruments (including but not limited
to amendments to the documents referred to in this Section 5(b)
and Section 5(a) above) as may reasonably be requested by GA for
the purpose of effectuating the purposes and intent of this
Section 5.
(c) GA represents and warrants to Boundless that the documents attached to
this letter agreement as Exhibits D through I are in substantially the
form which have been executed and delivered by GA and PMF in
connection with the consummation of the initial funding under the Loan
Agreement.
6. Investment Representations of Boundless. Boundless understands that the
Shares will be issued to Boundless without registration under the Securities
Act of 1933, as amended (the "Act"), and without qualification or
registration under the applicable securities laws of any state (the "State
Laws") in reliance on exemptions from such registration and qualification
for non-public offerings. Boundless further understands that GA is relying
on the representations and warranties set forth in this letter agreement in
determining that such exemptions are available.
Boundless hereby represents and warrants to GA as follows:
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September 30, 1999
Page 5
(a) Investment Intent. The acquisition of the Shares is for investment for
Boundless' own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof or interest therein.
Boundless will not offer to sell or sell the Shares or any portion
thereof or interest therein to others except in compliance with the
Act and the State Laws. The undersigned does not have any present
intention of distributing or selling any of the Shares.
(b) Lack of Registration; Legend on Certificates. Xxxxxxxxx has been
advised by GA as to the circumstances under which Xxxxxxxxx is
required to take and hold the Shares, including, without limitation,
the following:
(i) The Shares have not been registered with the Securities and
Exchange Commission (the "SEC") under the Act and must be held
for investment unless subsequently registered under the Act or an
exemption from registration is available.
(ii) Any and all certificates representing the Shares and any and all
replacements thereof shall bear and be subject to a legend in
substantially the following form affecting the transferability of
the Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE ACT OF 1933 (THE "FEDERAL ACT") OR QUALIFIED UNDER
THE SECURITIES LAWS OF ANY STATE, IN RELIANCE ON EXEMPTIONS
FROM SUCH REGISTRATION AND QUALIFICATION FOR NONPUBLIC
OFFERINGS. ACCORDINGLY, THE SALE, TRANSFER OR OTHER
DISPOSITION OF SUCH SECURITIES OR ANY INTEREST THEREIN MAY
NOT BE ACCOMPLISHED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE FEDERAL ACT AND
QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT
THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
(c) Documents Reviewed by Xxxxxxxxx. Xxxxxxxxx has reviewed the following
documents pertaining to GA (collectively, the "GA SEC Reports"):
(i) GA's Report on Form 10-K for the fiscal year ended September 30,
1998, as filed with the SEC; and
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September 30, 1999
Page 6
(ii) GA's Proxy Statement relating to the Annual Meeting of GA's
shareholders held on March 25, 1999; and
(iii) GA's Reports on Form 10-Q for the quarters ended December 31,
1998, March 31, 1999 and June 30, 1999, as filed with the SEC;
and
(iv) GA's Reports on Form 8-K filed with the SEC on February 19, 1999
and July 14, 1999, respectively.
(d) Accuracy of GA SEC Reports. At the time of their respective filing, the GA
SEC Reports did not contain any untrue statement of any material fact
contained therein nor omitted to state therein a material fact required to
be stated or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. The information in
any document, certificate or written statement furnished to Boundless by or
on behalf of GA with respect to the business, assets, results of operation,
financial condition or prospects of GA for use in connection with the
transactions contemplated by this letter agreement is, when considered as a
whole, true and correct and does not omit to state any material fact
required to be stated therein to make the furnished information not
misleading. Except as disclosed on Schedule 6(d) attached to this letter
agreement, to GA's best knowledge, there is no fact (other than matters of
a general economic nature) that has materially and adversely affected or
could reasonably be expected to have a material adverse effect, which has
not been disclosed herein, in such other documents, certificates and
statements, or the GA SEC Reports.
(e) Availability of Additional Information. Boundless acknowledges that
inquiries with respect to GA or the documents referred to in Section 6(c)
above may be made by Xxxxxxxxx to Mr. Xxxxxxx Xxxxx, GA's Chief Financial
Officer, in writing at 17731 Xxxxxxxx North, Irvine, California 92714, or
by telephone at (000) 000-0000. Xxxxxxxxx has been afforded the opportunity
to make inquiries of, and has received answers from, the officers and
directors of GA concerning its operations, plans and financial condition,
and has further been afforded the opportunity to obtain any additional
material necessary to verify the information so obtained (to the extent GA
possesses such material or could acquire it without unreasonable effort or
expense.)
(f) No Reliance on Other Information. Boundless has not been furnished with any
oral or written information concerning GA other than the documents referred
to in Section 6(c) above, and the information furnished or made available
to Boundless by GAI described in Section 6(e) above, and Xxxxxxxxx has
relied solely on the foregoing in connection with its decision to acquire
the Shares.
Boundless Technologies, Inc.
September 30, 1999
Page 7
(g) Accredited Investor. Boundless is an "accredited investor" within the
meaning of Rule 501(a)(3) promulgated by the SEC under the Act.
7. Transfer of Interest in GAL. Boundless hereby conveys, transfer, assigns
and sells to GA all of Boundless' right, title and interest in and to GAL,
including but not limited to, Xxxxxxxxx' entire membership interest in GAL
(the "GAL Interest"), and relinquishes any and all claims to all of GAL's
assets and properties, tangible and intangible . Boundless hereby
represents and warrants to GA that Boundless has, and hereby conveys,
transfers, assigns and sells to GA, good and marketable title to the GAL
Interest, free and clear of any and all security interests, pledges, liens,
claims, encumbrances or defects in title of any nature whatsoever.
8. Satisfaction of Indebtedness and Release of Other Obligations.
(a) Acknowledgment of Satisfaction; Release of Claims. Boundless
acknowledges that payment of the Cash Payment to Boundless and the
issuance of the Notes and the Shares to Boundless will constitute
satisfaction in full of all indebtedness of GA and/or GAL to Boundless
and satisfaction in full of all other obligations of GA and/or GAL to
Boundless, known or unknown, excluding only (i) the obligations,
representations and warranties of GA and/or GAL under this letter
agreement, including those obligations expressly undertaken by GA
under Sections 1, 2, 3, 4, 5 and 10 hereof and under the Notes, and
(i) the obligations, representations and warranties of GA under the
Registration Rights Agreement. GA and GAL acknowledge that other than
the obligations, representations and warranties of Boundless set forth
in this letter agreement, including that set forth in Section 9 hereof
and in the Registration Rights Agreement, Boundless owes no
obligations to GA or GAL known or unknown. Accordingly, excluding only
those obligations described in the two immediately preceding
sentences, Boundless hereby releases and discharges GAL and GA, as
well as all of their respective officers, directors, employees and
agents, whether past, present or future (the "GA Released Parties"),
and GA and GAL each hereby release and discharge Boundless and
Boundless Corporation, as well as all of their respective officers,
directors, employees and agents, whether past, present or future (the
"Boundless Released Parties") from any and all claims, demands, costs,
liabilities, obligations, damages, expenses, and actions and causes of
action of every nature, whether in law or in equity, known or unknown
or suspected or unsuspected (collectively, "Claims"), which Boundless,
on the one hand, or GAL and/or GA, on the other hand, ever had or now
has or makes claim to have against the GA Released Parties or the
Boundless Released Parties, or any of them, as the case may be,
directly or indirectly arising out of or in connection with any event,
condition, action, failure to act or other circumstance on or before
the date hereof, including but not limited to any and all Claims
arising out of or related to the Operating Agreement entered into by
GA and Boundless dated as of May 22, 1995.
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September 30, 1999
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(b) Waiver of Unknown Claims. Xxxxxxxxx, GA and GAL each understands that
Section 1542 of the Civil Code of California provides as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
SECTION 1542 OF THE CIVIL CODE OF CALIFORNIA IS HEREBY EXPRESSLY WAIVED BY
BOUNDLESS, GA AND GAL.
(c) Factual Differences. Boundless and GA each understands and accepts the
risk that the facts with respect to which this letter agreement is
entered into may be different from the facts now known or believed by
it to be true. This letter agreement shall remain in all respects
effective and shall not be subject to termination or rescission by
virtue of any such differences in fact, absent a showing of
intentional fraud by GA in inducing Boundless to enter into this
letter agreement.
(d) Non-Assignment. Boundless hereby represents and warrants to GA that
there has been no assignment of any Claims or any other rights which
are the subject of the release set forth in Section 8(a) above. GA and
GAL hereby represent and warrant to Boundless that there has been no
assignment of any Claims or any other rights which are the subject of
the release set forth in Section 8(a) above.
9. Indemnification. Boundless will defend, indemnify and hold GA, its
officers, directors and each person who controls GA within the meaning of
the Act, from and against, and agrees to reimburse GA, its officers,
directors and controlling persons with respect to, any and all claims,
actions, demands, losses, damages, liabilities, costs or expenses,
including without limitation attorneys' fees, to which GA, its officers,
directors or such controlling persons may become subject insofar as such
claims, actions, demands, losses, damages, liabilities, costs or expenses
arise from or are the result of any breach of any representation or
warranty made by Boundless in this letter agreement, or the assertion by
any person or entity of any claim or cause of action against GA or GAL
based upon allegations which, if true, would constitute a breach of any
representation or warranty made by Boundless in this letter agreement.
10. Indemnification by GA. GA shall defend, indemnify and hold harmless
Boundless, its officers, directors and each person who controls Boundless
within the meaning of the Act, from and against, and agrees to reimburse
Boundless, its officers, directors and controlling persons with respect to,
any and all claims, actions, demands, losses, damages,
Boundless Technologies, Inc.
September 30, 1999
Page 9
liabilities, costs or expenses, including without limitation attorneys'
fees, to which Boundless, its officers, directors or such controlling
persons may become subject insofar as such claims, actions, demands,
losses, damages, liabilities, costs or expenses result from the assertion
by any third party against Boundless its officers, directors or such
controlling persons of any claim or cause of action based upon past or
future business activities of GA or GAL, including any act or omission by
GA pertaining to GA's management and/or operation of GAL. The
indemnification provided in this Section applies to claims heretofore made
and which may hereinafter be made against Boundless by Pick Systems and/or
Via Systems, Inc. GA and GAL are jointly and severally responsible for the
indemnifications provided in this Section 10.
11. Indemnification Procedure. Promptly after receipt by a party indemnified
pursuant to the provisions of Section 9 or 10 of this Letter Agreement of
notice of the commencement of any action involving the subject matter of
the foregoing indemnity provisions, such indemnified party will, if a claim
therefor is to be made against the indemnifying party pursuant to the
provisions of Section 9 or 10 hereof, notify the indemnifying party of the
commencement thereof, but the omission so to notify the indemnifying party
shall not relieve the indemnifying party from liability under this letter
agreement; provided that if the indemnifying party has not received notice
of the claim and the indemnified party fails to vigorously defend the
claim, and as a result the rights of the indemnifying party are
substantially prejudiced, or if the indemnified party settles or
compromises the claim without the approval of the indemnifying party, the
indemnifying party shall be relieved of liability under this letter
agreement. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein and, to the
extent that it may wish, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party shall have the
right, at the indemnifying party's own cost and expense, to select separate
counsel (in which case the indemnifying party shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties). Upon the permitted assumption by the indemnifying party of the
defense of such action, and approval by the indemnified party of counsel,
the indemnifying party shall not be liable to such indemnified party under
Section 9 or 10, as the case may be, for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof (other than reasonable costs of investigation) unless (i)
the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time, (ii) the indemnifying party and its counsel do
not actively and vigorously pursue the defense of such action, or (iii) the
indemnifying party has authorized the employment of counsel for the
Boundless Technologies, Inc.
September 30, 1999
Page 10
indemnified party at the expense of the indemnifying party. No indemnifying
party shall be liable to an indemnified party for any settlement of any
action or claim without the consent of the indemnifying party and no
indemnifying party will consent to entry of any judgment or enter into any
settlement, which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release
from all liability with respect to such claim or litigation. In the event
of a claim for indemnification under Section 10 of this Letter Agreement,
all notices described in this Section 11 may be sent exclusively to GA.
12. Miscellaneous.
(a) Entire Agreement. This letter agreement is entered into by each of the
parties hereto without reliance upon any statement, representation,
promise, inducement or agreement not expressly contained within this
letter agreement. This letter agreement constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes all prior oral or written agreements and understandings
concerning such subject matter.
(b) Modification. This letter agreement shall not be amended or modified
except in a writing signed by both GA and Boundless.
(c) Attorneys' Fees. If any litigation is brought concerning this letter
agreement or the rights or duties of any person in relation thereto,
the prevailing party in such litigation shall be entitled to recover
from the other party reasonable attorneys' fees and costs in such
litigation in addition to any other relief to which such prevailing
party may be entitled.
(d) Governing Law. The internal laws of the State of California shall
govern this letter agreement in all respects, including, but not
limited to, matters of construction, validity, enforcement and
interpretation.
(e) Further Assurances. The parties shall at their own cost and expense
execute and deliver such further documents and instruments and shall
take such other actions as may be reasonably required or appropriate
to carry out the intent and purposes of this Agreement.
To acknowledge your agreement to the foregoing and your intent to be bound
thereby, please execute the additional copy of this letter which is enclosed,
and return it to the undersigned.
Very truly yours,
GENERAL AUTOMATION, INC.
Boundless Technologies, Inc.
September 30, 1999
Page 11
By: /s/ Xxxx Xxxxxxxx
--------------------------------------
Xxxx Xxxxxxxx, Chief Executive Officer
GENERAL AUTOMATION LLC
By: /s/ Xxxx Xxxxxxxx
The undersigned xxxxxx agrees to the foregoing.
BOUNDLESS TECHNOLOGIES, INC.
By: /s/ X Xxxxxx Xxxxx
--------------------------------------
(Signature)
Its: X. X. Xxxxx, CEO
(Please print name and title)
Boundless Technologies, Inc.
September 30, 1999
Page 12
SCHEDULE 6(d)
GA is in default of its payment obligations under that certain Promissory
Note payable by GA to XXX Xxxxxxxxxxx dated May 4, 1998 in the original
principal amount of $1,723,921, the remaining balance of which is approximately
$739,000.
LIST OF EXHIBITS TO AGREEMENT
between General Automation, Inc. and
Boundless Technologies, Inc.
dated September 30, 1999
A. $250,000 Promissory Note - Filed with 10-K
B. $500,000 Promissory Note - Filed with 10-K
C. Registration Rights Agreement*
D. Loan Agreement*
E. Form of Secured Convertible Promissory Note - Filed with 10-K
F. Form of Warrant - Filed with 10-K
G. Form of Security Agreement*
H. Form of Investors' Rights Agreement*
I. Form of Subordination Agreement*
J. Form of Intercreditor Agreement*
* These exhibits have been omitted from Registrant's filing with the
Commission but Registrant will provide any such omitted exhibits to the
Commission upon its request.
