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EXHIBIT 10.32
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 Boundless have executed and delivered
a Registration Rights Agreement pertaining to the Shares in the form of Exhibit
C attached to this letter agreement.
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
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(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 Holder'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 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
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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 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
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(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. (g)
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.
7. Boundless hereby represents and warrants to GA as follows:
(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. Boundless has been
advised by GA as to the circumstances under which Boundless 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:
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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 Boundless. Boundless 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
(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
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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 Boundless to Mr. Xxxxxxx Xxxxx, GA's Chief Financial Officer, in
writing at 00000 Xxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxx 00000, or by telephone at
(000) 000-0000. Boundless 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 Boundless has
relied solely on the foregoing in connection with its decision to acquire the
Shares.
(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, Boundless' 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
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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.
(b) Waiver of Unknown Claims. Boundless, 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.
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(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, 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
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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 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.
10. 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.
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(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.
(f) 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.
By:
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Xxxx Xxxxxxxx, Chief Executive Officer
GENERAL AUTOMATION LLC
By:
--------------------------------------
The undersigned hereby agrees to the foregoing.
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BOUNDLESS TECHNOLOGIES, INC.
By:
--------------------------------------
(Signature)
Its:
--------------------------------------
(Please print name and title)
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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.
