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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A (AMENDMENT NO. 2)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] For the fiscal year ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file Number 0-5260
GENERAL AUTOMATION, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2488811
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17731 Mitchell North, Irvine, California 92714
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (714) 250-4800
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange on which registered
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Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The approximate aggregate market value of voting stock held by non-affiliates of
the registrant was $5,543,832 as of December 1, 1995.
The number of shares of the registrant's Common Stock, $.10 par value,
outstanding as of December 1, 1995 was 7,391,776.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on January 25, 1996 are incorporated by reference into
Part III hereof, to the extent indicated herein.
The Index to Exhibits appears on pages 23 -25
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PART I
ITEM 1. BUSINESS
GENERAL
General Automation, Inc. ("GA" or the "Company"), incorporated in California in
1967 and reincorporated in Delaware in 1986, integrates systems, software and
services for application solutions. GA has positioned itself as a strong service
and support company offering open systems and complimentary software products to
a worldwide network of value-added resellers. GA's product lines include a broad
range of hardware platforms including Intel and Motorola PowerPC based systems,
coupled with efficient and cost effective application environments, providing a
full range of systems, complimentary operating environments and high quality
customer services.
The Company's headquarters, including manufacturing and integration, corporate
and administrative operations are located in Irvine, California. Engineering and
support personnel are located in Hauppauge, New York. GA also has service and
sales offices in various locations throughout the United States and has
established European sales offices in England.
The Company's products are sold in the United States through over 200 value
added resellers. In addition it sells its products in Europe, Canada, Mexico,
Central and South America, Guam, Taiwan, Australia, New Zealand, Singapore, Hong
Kong, Africa and the People's Republic of China through distributors and value
added resellers. The Company provides service and support throughout North
America to over 3,000 customers.
ASSOCIATION WITH SANDERSON ELECTRONICS PLC, SANDERSON TECHNOLOGIES, LTD., & SGA
PACIFIC LIMITED.
In January 1989, Sanderson Electronics PLC ("Sanderson") purchased notes
convertible to Common Stock ($1.75 million) and warrants which were exercised
and acquired approximately 49% of the then outstanding shares of the Company.
Sanderson has since reduced its holding to below 10% of the outstanding shares.
Sanderson is a United Kingdom-based developer and supplier of applications
software using the Pick Operating System and is a UK distributor for the
Company's products.
In September 1989, the Company and Sanderson announced the formation of SGA
Pacific Limited ("SGA") based in Sidney, Australia. The Company held 51% of the
outstanding stock of SGA and Sanderson and management of SGA held 49%. On
November 10, 1994, the Company sold its 51% interest in SGA to Sanderson
Technologies, Ltd. For details of this transaction, see Acquisitions and
Divestitures (following) and Note 8 to the Financial Statements. This
transaction left Sanderson owning 442,588 shares of the Company's stock or
approximately 6% percent of the Company's outstanding shares.
In August 1995, GA and Sanderson Computers Pty Ltd. ("SCPL") entered into an
agreement whereby SCPL acquired GA's Zebra 2000 Library Systems business and
license rights to its Maxial hospitality software. These products have been
successfully sold outside the United States by SCPL. GA had not been able to
profitably sell these products in the US, with nearly 55% of its fiscal 1995
loss coming from these products. SCPL assumed the obligations of completing the
contracts in the backlog and providing on-going software support for all of the
customers. GA will receive certain cash payments and royalties from future SCPL
sales of the products. In addition to the Company's associations with Sanderson
and SGA set out above, both remain major distributors of the Company's products
with GA owning no shares in either firm.
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ACQUISITIONS AND DIVESTITURES
In June 1990, the Company sold 55% of its interest in its United Kingdom
subsidiary, General Automation, LTD. (GAL) to Sanderson Electronics, PLC for
loan forgiveness of $1,250,000, operating cash of $475,000 and 22.8% of the
outstanding shares of SGA giving the Company a 51% interest in SGA.
Subsequently, in January 1992, the Company sold its remaining 45% share of GAL
to Sanderson. See Note 8 to the Financial Statements included in this Form 10-K.
In January 1990, the Company acquired the assets, technology and customer base
of C.I.E. Systems, Inc. (C.I.E.) from the parent C.Itoh Electronics, Inc. for
$4,000,000. GA saw this as an opportunity to add additional sales volume to its
hardware and service business segments as both firms served the same markets.
The C.I.E products were fully integrated into the Company's existing product
lines.
In October 1992, the Company signed an agreement to form a holding company with
Krypton Group Ltd., Eurosystems GA Ltd. ("Eurosystems"), a UK corporation. Under
the terms of the agreement the Company received 61% of the common shares of
Eurosystems in exchange for its shares in General Automation France SA, General
Automation SA, (Belgium), and General Automation Italia SpA (Italy). Krypton
Group Ltd., ("Krypton"), a UK corporation, received 39% of the common shares in
exchange for its 100% share holding in Eurosystems Belgium SA and Eurosystems SA
(France), its 55% share holding in Eurosystems GmbH (Germany) and its 85% share
holding in Eurosystems Maintenance SA (France). The Company considered that the
formation of a holding company, which held the GA subsidiaries in Belgium,
France and Italy, had an enhanced prospect for growth and stability through
local management. Krypton already was in business in the product areas served by
these firms, and offered local support and direction. On October 29, 1993, with
retroactive effect to September 30, 1993, the Company sold its 61% share holding
in Eurosystems to Krypton for cash and a $990,000 note. Through fiscal 1995,
Krypton has made $180,000 in payments. In 1994 payments were suspended by
Krypton and a $240,000 reserve was set up in fiscal year 1994. In 1995 Krypton
filed for bankruptcy. The Company has entered into an agreement which would
allow GA to share equally in the profit of the Eurosystems group of companies
wholly owned by Future Systems Ltd, a newly formed company in Great Britain and
owned by the former Krypton management. The Eurosystems Group has been
profitable and management expects to receive payment in full of the $570,000
carried in the balance sheet. Eurosystems companies remain the distributors of
the Company's products in Belgium, France and Italy (see Note 8 to the
accompanying Consolidated Financial Statements).
On November 10, 1994, the Company completed the sale of its 51% interest in SGA
Pacific, Ltd. to Sanderson Technologies Ltd. for $2,000,000 in cash and notes
receivable, plus 4,100,000 shares of the Company's common stock held by
Sanderson (see Note 8 to the Financial Statements.) The overall reduction in the
number of shares of GA stock held by Sanderson is not felt to be related to or
have any impact on the Company's objectives.
SGA Pacific, Ltd. (now Sanderson Pacific Ltd.) continues as a General Automation
dealer in Asia and the South Pacific for hardware and software products.
Effective May 22, 1995, GA and SunRiver Data Systems formed a Limited Liability
Corporation (LLC) with the Company owning 51% of the partnership and SunRiver
49%. This partnership was formed to allow GA to acquire the former ADDS Pick
based business owned by SunRiver.. This business had been acquired by SunRiver
Data Systems from AT&T GIS in December of 1994 along with a terminal business
which complimented SunRiver's existing business and which SunRiver retained. The
acquisition broadened the Company's product offerings to include the AT&T
manufactured line of INTEL based hardware platforms and the ADDS versions of the
PICK application environment software products known as Mentor and Mentor PRO.
In addition, over two thousand service customers were added to the Company's
customer base. This acquisition effectively doubles the Company's business base
and revenues worldwide while broadening the product offering which is expected
to attract new customers. In addition the Company's engineering and development
as well as
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sales staff were more than doubled. This increase in resources obviously
provided greater customer base penetration as well as providing more skills to
be focused on new product development. Under the terms of the acquisition
agreement, the Company pays royalties to SunRiver for a five year period
starting at 12% of eligible revenues with step decreases down to 7% during the
fifth and final year. The Company makes monthly payments to SunRiver, with a
minimum due during the first year of the agreement of $2.9 million.
Additionally, SunRiver pays to the Company a monthly management fee for its
effort in managing certain of the service contracts which had been prepaid to
SunRiver. This payment arrangement is scheduled to end about May 22, 1996. The
Company sees this agreement as a vehicle for enhanced profits during each of the
five contract years.
PRODUCTS, CUSTOMERS AND MARKETING
GA is a leader in delivering cost-effective environments for
information-critical Pick applications. GA's core strength is in its exceptional
support and value-added services which are complimented by a line of open
systems and software products designed to encompass the needs of its worldwide
network of value-added resellers. GA has established strong relationships with
its value-added channel and enjoys an excellent reputation for product quality
and responsive services and support. Future growth will be achieved by expanding
the channel and enhancing the products and services offered to the channel.
SERVICE AND SUPPORT
GA is a leader in providing quality service and technical support to thousands
of end users. The Company has been delivering highly skilled technical services
for over 28 years and has earned a reputation for excellent quality and
responsive service through an exceptional staff of service professionals. The
service business generates over half of GA's revenue and is a key reason that
customers with information critical applications choose to buy from GA.
GA offers three basic lines of service:
- - Technical field service for the equipment sold by GA and those
maintenance agreements acquired through acquisitions of SunRiver Data
Systems and C.I.E. businesses.
- - Software maintenance services of GA's operating environments.
Additional software support has been sold for complimentary operating
environments such as PICK, VMARK, Unidata, Unix, & AIX.
- - Professional services is a new line of customer service introduced in
1995 that include: product training, system design and site
preparation, network configuration support, and disaster recovery
programs. Contract programming and consulting services are also offered
with expertise in PICK, C, C++, Visual Basic, Microsoft Access, COBOL,
FORTRAN, and Pro-IV. The professional services business is in its early
stages but has proven to be a very profitable venture for GA. This year
GA closed several major software consulting projects. Disaster recovery
has proven to be a strong area of interest, furnishing GA's end user
customers with assistance in developing disaster recovery plans as well
as the assurance that systems will be made available in the case of an
emergency. With GA's move into the open systems market, GA will be able
to leverage those skills and offer services to a larger more dynamic
marketplace.
GA is further expanding its software maintenance services by providing end user
call management and application support services for GA dealers. This service
provides a central call handling and technical call screening facility and is
particularly attractive for those dealers who are of such a size that they
cannot afford to put the support staff in place to handle their after market
support effectively and at the same time continue to develop the application
products and expand their market. These services are not only profitable for the
Company but also leverage its technical staff while making the dealer more
successful.
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SYSTEM AND SOFTWARE PRODUCTS
1995 marked a key year for GA's penetration into the open systems market with
the introduction of two families of systems based on industry standard
architectures: the PowerPC Superscaler RISC processor and Intel Pentium(TM)
processor. To deliver these solutions, GA has entered into OEM and distribution
agreements with Groupe Bull for their enhanced multiprocessor PowerPC-based
servers and AT&T Global Information Service (GIS) for their high performance
multiprocessor Intel-based platforms.
These agreements were forged, because both Groupe Bull's and AT&T's products and
services compliment those offered by GA and feature:
- - A broad range of system solutions starting at a low-end single
processor cost-effective entry level system through an eight-way
multiprocessor enterprise server.
- - A commitment to offer products at a cost-effective discount, allowing
GA to move product successfully through the channel while allowing GA
to achieve its profitability goals.
- - A complimentary service and support network that could be leveraged
worldwide to compliment the effective and growing services offered by
GA.
- - A strong investment in distributed processing, local area networks, and
wide area networks to ensure high connectivity solutions.
PowerPC Systems
This year GA introduced a line for PowerPC symmetric multiprocessor systems
manufactured by Groupe Bull and Motorola. Called the PowerAdvantage(TM) series,
these computers offer excellent price/performance with a state-of-the-art RISC
CPU. The PowerAdvantage product family offers a price competitive solution, with
an entry system priced at $15,000 and high end systems supporting over 1000
users. GA's goal is to double price-performance every year, over the next three
years. This will be achieved through higher clock speeds as well as the
evolution of the PowerPC processor from 601 to 604/603 and 620. In addition two
new entry level systems priced under $80,000 will be introduced.
To deliver the PowerAdvantage systems, GA has entered into an OEM agreement with
Groupe Bull SA. Groupe Bull is a technology leader in multiprocessor systems and
the developer and supplier of the symmetric multiprocessor (SMP) PowerPC system
platform to IBM. GA's relationship with Bull ensures a supply of high
reliability, high performance systems, and a broad product range.
Intel Based Systems
Through its acquisition of the SunRiver Data Systems PICK business, in May of
this year, GA began delivery of a line of single and multiprocessor Intel-based
servers. In September of this year, a distribution agreement was signed with
AT&T GIS under which the Company would purchase systems directly from AT&T.
AT&T's System 3000 family offers a broad range of Microchannel computers.
Numerous upgradeable components make expanding these systems fast and simple.
AT&T is a leader in providing exceptional price/performance UNIX systems. Future
enhancements will incorporate the PCI and EISA I/O buses and will ensure GA has
a highly-competitive offering of Intel-based solutions.
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The 34XX and 35XX products are designed to provide expansion and upgradeability.
Future releases of these products by AT&T will offer:
- - Faster Pentium CPU's
- - Fast and Wide (20 MB/sec) SCSI
- - New External RAID Disk Cabinets
- - Clustering enhancements
- - Quad processor boards
AT&T's product road map for future Intel based servers include:
- - The S10 a new single processor entry system featuring a 90 MHz Pentium
processor, ECC memory, and a PCI/EISA I/O bus.
- - The S40 a high performance 4-way symmetric multiprocessor server
featuring EISA, dual-PCI I/O buses and SCSI II support.
- - The S15 a dual processor EISA/PCI Pentium system.
These systems feature high performance Pentium processors, ECC memory, PCI/ISA,
and Wide SCSI. Mid-range systems will offer support for multiple processors.
Proprietary Systems
Since their introduction in 1983, GA micro-based multi-user computer systems
have evolved into a line of upgradeable high-performance, business-oriented
computer systems that were adaptable to the needs of individual end-users. The
Company continues to manufacture two product series, the A200 and the A500 which
were introduced in fiscal year 1993 and are based on the motorola 680XX CPU
chip. The Company believes that the future revenues from these proprietary
products will continue to decline. The A200 and A500 product series generated
13% of the Company's revenues in 1995, 18% in 1994 and 23% in 1993. The Company
will continue to provide performance improvement up-grades for its older
proprietary products such as the 68040 80MHZ CPU, faster disk drives, and other
higher capacity storage devices as long as there is a demand from its customer
base.
Software
The value-added channel serviced by GA is primarily based on re-sellers and
dealers whose information-critical applications are written to be compliant with
a multi-dimensional database environment standard. This standard is supported by
a collection of system software providers including Unidata, VMARK, Pick Data
Systems, Sequoia, and GA. Although implementations are similar, GA has
differentiated its product offering through enhanced system administration,
network integration, database interoperability, and performance.
GA's multi-dimensional database environments can be run native on a system
architecture or in concert with an advanced operating system such as UNIX, AIX
and Windows NT. GA offers native and UNIX/AIX resident versions for the Intel
and PowerPC microprocessors.
The Intel-based native solution is marketed under the name Mentor PRO and is
sold as a software only solution designed to run on a wide selection of generic
PC type platforms. The Intel/Unix based solution is sold under the name Mentor
Operating Environment (MOE) and is delivered on the AT&T system platforms. The
PowerPC/AIX based solution is sold under the name Power95(TM) and is delivered
on the PowerAdvantage system series. Power95 is a derivative of R91(R), GA's
Motorola 680X0 native multi-dimensional database. Power95 was jointly developed
by GA and Groupe Bull. R91(R) was developed to run a native Motorola 680X0
architecture and features significant enhancements in terms of ease of use,
system administration, distributed processing, and PC network integration.
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The Pick Operating System, which GA's software products are modeled from and are
licensed to was designed as a database management operating system; it supports
hierarchical, flat and relational database files. The Company believes that
among the most distinctive characteristics of its operating environment products
are their relative ease of programming, an English-like information management
and retrieval language, and the speed they offer in the handling of large and
complex databases. They include an advanced, database-oriented version of the
popular BASIC programming language, with automatic compilation and line-editing.
CUSTOMERS AND MARKETING
GA delivers its products and services through a strong international value-added
reseller channel with over 200 active dealers. Through GA's acquisition of the
SunRiver Data Systems business the channel has doubled in size and offers
cross-selling opportunities. A key focus for 1995 was to ensure the successful
integration of both SunRiver's and GA's dealer channels.
GA is selling into a $750 million segment of a larger $9 billion market. GA's
value-added resellers focus on key vertical markets such as healthcare, finance,
manufacturing, distribution, government, travel, and insurance. Around 18% of
GA's product revenue comes from 30 major resellers and distributors located
outside of North America. To expand on that business, in 1995 the Company formed
a wholly owned subsidiary, GA Mentor Ltd. (GAML) headquartered in the UK, and
established a sales office to better service GA's customer in the United
Kingdom, France, Belgium, Italy, and Germany. GA also has strong associations in
the Asia Pacific area with resellers and distributors in Australia, New Zealand,
Singapore, Hong Kong, and Malaysia which GA services out of the Irvine office.
GA's focus for growth includes the following elements:
- - Working closely with GA's value-added resellers and dealers to make
them more successful and thus increase sales through GA.
- - Offering complimentary services that enhance the resellers and dealers
business and increase revenues for them as well as GA.
- - Expanding the value-added channel through an investment in marketing
and direct sales techniques. that leverage GA's products and service
strengths.
- - Strengthening GA's position in international markets.
From a marketing and sales standpoint GA has made a renewed commitment to
growth. In 1995 the Company increased its sales organization from three sales
representatives to six, complimented by adding key management in marketing and
marketing communications.
GA has focused on establishing a stronger corporate identity. GA's new corporate
look is reflected in a coordinated communications programs including public
relations, expanded marketing collateral, a customized dealer program, direct
mail and trade show participation. To properly target these programs, GA has
conducted extensive market research and established a dealer advisory council.
These investments are already paying off with expanded sales and new dealers
entering the program monthly.
MAXIAL SYSTEMS
The Maxial applications software package is a comprehensive suite of programs
designed to automate virtually every function of a modern hotel; this is known
in the hospitality industry as "property management." The Maxial package has
been installed in more than 100 hotels world-wide with a high degree of
acceptance in the Pacific Basin. The same success has not been achieved in the
United States however, where the competition for such systems has been much
stronger. With only 13 systems installed in the US, effective August 28, 1995
the Company entered into an agreement with Sanderson
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Computers Inc. under which the product will be licensed to Sanderson who will be
responsible for the sales and support for the product world-wide and will pay GA
a royalty for each system sold. The amount of revenues expected from this
agreement are uncertain at this time and are not expected to materially affect
the position of the Company other than to eliminate the losses previously
experienced in support of the product.
ZEBRA 2000 LIBRARY INFORMATION AND MANAGEMENT SYSTEM
The Zebra 2000 Advanced Library Management and Information System is a complete
library automation package providing a wide range of advanced features including
on-line public access catalog, circulation control, acquisitions, requisitions,
inventory, closed reserve, serials control and MARC data load and output.
While acceptance of this product has been excellent in the Asia Pacific area
only a few systems were sold in the US resulting in significant losses from
operations to support the development and sales activities. Effective August 28,
1995 the Company entered into an agreement with Sanderson Computers, Inc.,
("SCI") under which SCI will be responsible for the sales and support for the
product world-wide. This product was licensed to GA by Sanderson Computers PTY
LTD initially in 1993 for sale in the US. As a result, the agreement will
provide no future revenues to the Company other than from service and product
purchased from GA by SCI as a GA reseller but will eliminate the losses
previously experienced.
SERVICE ADVANTAGE SYSTEM
The Service Advantage product is a full featured, fully integrated service
company management system and runs on GA native PICK systems as well as AIX and
UNIX based systems under Power95, Mentor Operating Environment (MOE) and VMARK.
The systems provide call handling and dispatch, job costing and bid/proposal
management, inventory control, purchasing, accounting and general ledger,
marketing and sales lead tracking (including scripted telemarketing), and office
automation functions to fully automate the service company operation.
The base product was originally developed by Service Automation Systems ("SAS").
SAS was acquired by Houston Data Center ("HDC") who sold the product primarily
to the heating, ventilating and air conditioning business sector. In May, 1994,
the Company acquired the rights to this product as an offset to an uncollected
receivable balance owed to the Company by HDC. The Company received the
non-exclusive right to market the product in all market sectors, except the
heating, ventilation and air conditioning sector which was sold to another
party.
The Company made the decision to focus its marketing and sales of this product
into the higher end service business, beginning with the telecommunications
industry. Such systems will typically sell in the $50K to $75K range. The
Company has completed the sale of two of these systems since May of 1994 and has
signed a contract to complete a third installation started by HDC. The specific
market size and growth rate is not known at this time.
In order for the Company to focus its management and capital resources on its
key business, a decision has been made to seek a licensee for this product in
the US market. It is expected that this transition will take place early in
calendar year 1996.
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FOREIGN OPERATIONS AND EXPORT SALES
The Company's export sales were approximately 8% in 1995 compared to 62% in
fiscal 1994, and 69% for 1993. In 1992, 1993 and 1994 the Company recognized
revenues from its majority owned subsidiary SGA Pacific Ltd. This subsidiary has
been sold effective November 10, 1994. These revenues were generated through
operations in Asia and the south Pacific. In future years, General Automation
expects to see a continuing relationship with SGA Pacific as a distributor of GA
products to the Pacific Basin and a source of royalty income as they market and
install the Maxial hospitality software, owned by the Company. See Note 7 to the
accompanying Financial Statements included in this Form 10-K for additional
information relating to the Company's international operations, including
financial information concerning operations by major geographic areas.
RAW MATERIALS
Raw materials essential to the Company's business are purchased worldwide in the
ordinary course of business from numerous suppliers. The vast majority of these
materials are generally available, and no serious shortages or delays have been
encountered. Certain raw materials used in producing some of the Company's
products can be obtained only from a small number of suppliers. Products are
designed to use pre-tested and readily available components. Most of these
components are purchased from several suppliers and are subject to blanket
purchase orders. In those situations in which the Company purchases components
from a single supplier, it believes that alternative commercial suppliers of
such components are readily available. The Company purchases the Motorola
MC68030 and MC68040 microprocessors from several independent distributors;
however, if Motorola Corporation should discontinue manufacturing such
microprocessors (which it currently manufactures in at least two separate
manufacturing facilities), an event which the Company considers to be unlikely,
the Company's operations would be adversely affected. In recent years the
Company has experienced no significant difficulty in procurement of necessary
components.
The Company purchases computer systems from other manufacturers including AT&T
GIS in the US and Group Bull in France. Delays are possible in that the GA
orders from its Dealers/VARS may not match production queues at the factories.
The delays are expected to be minimal and not material to the planned Company
results.
COMPETITION
GA markets software, systems and service and therefore faces three types of
competitors. The leading software competitors are Pick Systems, VMARK Software,
and Unidata. These three US-based organizations do not sell system solutions and
focus entirely on software and software support. Pick Systems, a privately held
corporation headquartered in Irvine, California, is GA's primary competitor on
GA's native Intel-based operating environment. VMARK Software, headquartered in
Westboro, Massachusetts, and Unidata , located in Denver, Colorado, offer UNIX
resident database operating environments. GA's software products offer greater
functionality and performance, at competitive prices.
GA's primary system competitors are International Business Machines, Data
General, Digital Equipment Corporation, and Hewlett Packard. GA's key
differentiation is servicing an established dealer base who prefer GA's software
and service to that which is available on these competing platforms.
Since GA currently only offers service on GA delivered systems, GA's competition
for that service business is a handful of third party service providers. These
companies tend to compete on price offering inferior technical support. With the
new PowerPC and Intel-based solutions GA is competing against system providers
such as Wang, AT&T, and IBM. From a software support vantage point, support is
primarily limited to GA developed operating environments.
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GA competes with GA's distributors, such as Monolith Corporation for dealer
direct telephone support; but is primarily the dominant support provider for GA
developed software solutions.
PRODUCT DEVELOPMENT
Because of rapid technological changes, the market in which the Company competes
requires continuous expenditures to develop and improve its products. For fiscal
1995 the Company spent approximately $600K for product development. In 1994 the
Company spent approximately $1.8 million for product development. For the years
ended September 30, 1993 and 1992, the Company spent approximately $1.7 million
and $2.1 million respectively. The decrease in R & D costs are primarily
resultant from the Company's decision to partner with Groupe Bull and AT&T for
hardware systems rather than develop their own. This strategy allows the Company
to invest its R & D dollars into software and support tools to better serve the
market. Certain development costs relating to computer software are capitalized
in accordance with Statement No. 86 of the Financial Accounting Standards Board;
while all other costs associated with product development are charged to
operations as incurred.
PATENTS AND TRADEMARKS
The Company holds trademarks protecting its trade names and symbols. The
Company's major product line utilizes Pick software as its operating system. The
Company is authorized, on a non-exclusive basis, to use and sublicense the use
of the Pick software indefinitely, in accordance with the terms of a license
agreement. The Company does not rely upon and does not believe that its success
is dependent upon patent protection; rather, the Company believes that its
success is dependent upon the knowledge and experience of its management and
technical personnel and its ability to market its existing products and to
develop new products. Invalidation or cancellation of the Pick license, however,
could adversely impact the Company's business, although management believes that
there are alternative courses of action which could be pursued.
MANUFACTURING AND SYSTEM INTEGRATION
The Company has moved rapidly from a manufacturing environment to a system
integration and configuration model. Basic systems are received from its
platform suppliers (Groupe Bull and AT&T) and are configured to the customers'
requirements. Software is loaded and the finished systems are thoroughly tested
prior to shipment. The Company currently performs these functions at its Irvine,
CA headquarters utilizing highly skilled system engineers and technicians to
insure product performance and quality.
MANUFACTURING
The Company has manufacturing facilities at its main location in Irvine,
California. Manufacturing processes are further enhanced by the purchase from
outside vendors of complete subassemblies for various portions of the products
and by coordinated engineering designs that allow common parts and processes for
a majority of the GA product line. The manufacturing facility was operating at
75% capacity at September 30, 1995.
Manufacturing functions performed by GA include system assembly and integration,
QA and testing, and final preparation and packaging.
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BACKLOG
GA computer orders from dealers and other customers generally specify delivery
dates of 30 days or less; the Company rarely receives an order that has
scheduled delivery dates beyond three months. Because of these ordering/delivery
patterns, the backlog at the end of a period may appear to be low and not a
significant indicator of future revenues.
The compressed order-delivery cycle mentioned above, can result in
period-to-period fluctuations in the Company's revenues since it is dependent
upon short term orders which can be deferred or delayed by the dealers and
thereby dramatically influence the current period revenues.
At September 30, 1995 the Company had a manufacturing backlog of $1.5 million.
At September 30, 1994 and September 30, 1993, the manufacturing backlog was $2.8
and $4.1 million, respectively. Almost all of which was attributed to its
recently divested SGA operations.
EMPLOYEES
The Company had approximately 115 employees at September 30, 1995. The Company
has never had a work stoppage and none of the Company's U.S. employees is
represented by a labor union.
GOVERNMENT REGULATIONS
The Company is subject to certain Federal, state and local provisions relating
to protection of the environment. The Company does not operate a type of
business whose activities are likely to require any special measures to ensure
compliance with those provisions. Accordingly, the Company does not believe that
any material capital expenditures will be required for compliance with such
provisions or that such provisions will have any material effect upon its
earnings or competitive position.
ITEM 2. PROPERTIES
In February 1995, the Company's executive offices and principal manufacturing
facilities were moved to a 20,000 square foot facility in Irvine, California,
which has been purchased by the Company (see Note 10 to the Financial
Statements). It is believed that this facility will serve the Company's current
and future needs.
At September 30, 1995 the Company had a remaining exposure of $75,000 under the
lease for the facility in Anaheim, California which previously served as the
Company's headquarters. As a precaution against the event that the property
could not be sublet, a $75,000 accrual was established on the books for this
exposure.
The move of the Company to its new Irvine, California location was dictated by
several factors: 1) The Anaheim facility was larger than needed under the
Company's current and anticipated business operations; the facility was built by
GA at a time when high-bay space was required in the manufacturing of computers.
This is no longer the case. 2) The cost of operating the facility was
approximately 50% higher than it would be in the new building; annualized, this
could total to nearly $75,000 in savings. 3) The new facility is in a much more
attractive and prosperous area, which offered greater security to the Company's
property and personnel. The relocation did not cause any material disruption
in the Company's operations.
The Company also leases space in ten (10) states, primarily for sales and
service offices.
For further information regarding lease commitments, see Note 10 to the
Financial Statements included in this Form 10-K.
11
<PAGE> 12
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various legal proceedings generally incidental to its
business. The ultimate disposition of these proceedings is not presently
determinable, but in the opinion of the Company, these proceedings will not have
a material effect on the business or financial position of the Company and have
been adequately provided for in the Financial Statements.
The Company has been named as one of three defendants in a lawsuit brought by
the owner of real property once leased and used by a division of the Company as
part of its operations. The plaintiff is seeking relief from alleged
environmental damages which may have occurred on the property before, during, or
after the time the Company leased the property. The extent of the damage, if
any, has not been determined at this time nor has the extent of the Company's
liability, if any, been established in relation to the other defendants. All of
the parties to the action, including the plaintiff, are jointly funding testing
to determine the contamination, and scope of any required remedial effort. The
Company has two of its insurance carriers contributing to the Company's legal
expenses associated with this matter. However, such contribution is being made
under a reservation of rights. Until the testing results are available to
determine the environmental damages, if any, the Company has not recorded a
liability for any financial exposures attributed to the Company for remedial
efforts.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The table below provides certain information regarding the selling price of the
Company's Common Stock for the two fiscal years ended September 30, 1995 and
September 30, 1994. The Company's Common Stock is listed on the American Stock
Exchange and is quoted under the symbol GA. The following table sets forth the
range of high and low prices for the Common Stock of the Company for the fiscal
quarter indicated, as reported by the American Stock Exchange.
<TABLE>
<CAPTION>
Sale Prices
---------------
High Low
---- ---
Fiscal Year Ended September 30, 1995
<S> <C> <C>
Fourth Quarter $ 15/16 $ 1/2
Third Quarter $ 11/16 $ 7/16
Second Quarter $ 13/16 $ 7/16
First Quarter $ 7/8 $ 7/16
Fiscal Year Ended September 30, 1994
Fourth Quarter $ 5/8 $ 5/16
Third Quarter $ 3/4 $ 5/8
Second Quarter $ 1 7/16 $ 3/4
First Quarter $ 1 11/16 $ 11/16
</TABLE>
The approximate number of holders of record of Common Stock of the Company as of
December 1, 1995 was 956.
The Company has never paid a dividend on its Common Stock. The Board of
Directors reviews the financial condition of the Company periodically and
evaluates whether to declare dividends. Given the Company's present financial
condition and net operating losses in recent years, the Company does not expect
to pay any dividends in the forseeable future.
In determining whether a security warrants continued listing on the American
Stock Exchange (the "Exchange"), the Exchange does not rely on any precise
mathematical formula. Rather, it considers many factors, including the degree of
investor interest in the issuer of the security, the issuer's prospects for
growth, and whether the security has suitable characteristics for auction market
trading. The Rules of the Exchange provide, however, that the Exchange will
normally consider delisting a security if any one of a number of events shall
occur, including the following: (i) the issuer has stockholders' equity of less
than $4,000,000 and has sustained losses from continuing operations in three of
its four most recent fiscal years, or (ii) the security has traded for a
substantial period of time at a low price per share. The Company has sustained
losses in two of its last three fiscal years, and the Company's stockholders'
equity as of September 30, 1995, its most recent fiscal year-end, was $771,000.
Moreover, the Company's Common Stock has traded at less than $1.00 per share
during most of the preceding two fiscal years. The Company has received notice
that the Exchange has taken formal action to review the continued listing of the
Company's Common Stock; however, they have deferred any delisting action. The
Exchange's position was the result of senior Company management's presentation
and discussion with Exchange officials.
13
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended
September 30
--------------------------------------------
1995(7) 1994(6) 1993(5) 1992(1)(2) 1991(3)
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Sales, net $ 14,269 $ 34,614 $ 42,878 $ 45,205 $ 48,647
-------- -------- -------- -------- --------
Income (loss) from
operations (1,666) 1,300 (351) 42 1,756
-------- -------- -------- -------- --------
Income (loss) before
extraordinary items (2,065) 427 (1,477) (964) 222
Extraordinary items 0 0 900 1,108 74
-------- -------- -------- -------- --------
Net Income (loss) $ (2,065) $ 427 $ (577) $ 144 $ 296
======== ======== ======== ======== ========
Per share-primary:
Income (loss) before
extraordinary items (.26) .04 (.13) (.08) .02
Extraordinary items 0 .08 .09 .01
-------- -------- -------- -------- --------
Net income (loss) $ (.26) $ .04 $ (.05) $ .01 $ .03
======== ======== ======== ======== ========
Working capital $ (638) $ 2,725 $ 1,457 $ 3,450 $ 5,619
Total assets 10,484 18,041 22,456 23,618 29,368
Total debt 2,424 4,247 5,307 5,490 8,571
Shareholders' equity(5) $ 771 $ 3,246 $ 2,264 $ 3,442 $ 3,106
</TABLE>
(1) The Company closed its German subsidiary in the fourth quarter of
fiscal 1992. See Note 8 to the Financial Statements included in this
Form 10-K.
(2) The Company sold 55% of its share of General Automation, Ltd. (U.K.)
("GAL") to Sanderson Electronics, PLC, ("Sanderson") on June 30, 1990
and sold its remaining 45% of GAL to Sanderson on January 20, 1992.
During the period July 1, 1990, through January 20, 1992, while the
Company owned 45% of GAL, the Company accounted for its minority
interest in GAL on an equity basis. See Note 8 to the Financial
Statements included in this Form 10-K.
(3) On July 1, 1990, the Company purchased an additional 21.8% share of
SGA Pacific, Ltd. ("SGA") making the Company a 51.1% owner of SGA.
Since that time, the financial statements of SGA have been
consolidated with the results of the Company excluding 1995. See Note
8 to the Financial Statements included in this Form 10-K.
(4) No dividends have been paid on the Company's Common Stock during any of
the periods presented. See Item 5 (above) for discussion of dividend
restrictions.
(5) On October 29, 1993, with retroactive effect from September 30, 1993,
the Company divested its European operations. See Notes 7 and 8 to the
Financial Statements.
(6) On November 10, 1994, with retroactive effect from October 1, 1994,
the Company divested its Pacific Basin operations. See Notes 7 and 8
to the Financial Statements.
(7) On May 22, 1995, the Company acquired a similar product and services in
the Pick market from SunRiver Data Systems.
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported a net loss for the year ended September 30, 1995 in the
amount of $2,065,000, compared with a net income of $427,000 and net loss of
$577,000 for the years ended September 30, 1994 and 1993, respectively. The
fiscal 1995 loss is attributed to the Company's three vertical software products
which accounted to approximately 65% of the Company's losses, the $400,000 in
non-recurring expenses associated with the SunRiver partnership, and the late
introduction of the Company's Power95 product line, which had been scheduled for
release in early Spring of 1995. The cost make-up of the non-recurring expenses
associated with the SunRiver partnership included loan-labor costs for the use
of Sunriver personnel by the Company to effect an orderly transistion, legal and
accounting fees, and travel and per diem for personnel operating on a bi-coastal
basis.
Sales NET SALES
(In thousands)
<TABLE>
<CAPTION>
Year Ended
September 30
------------
1995 1994 1993
------- ------- -------
Product Revenues:
<S> <C> <C> <C>
Domestic $ 7,020 $ 6,301 $ 5,759
Europe 3,313
SGA 14,983 12,077
------- ------- -------
7,020 21,284 21,149
------- ------- -------
Service Revenues:
Domestic 7,249 7,121 7,742
Europe 8,930
SGA 6,209 5,057
------- ------- -------
7,249 13,330 21,729
------- ------- -------
Total Sales $14,269 $34,614 $42,878
======= ======= =======
</TABLE>
The three-year table above shows a U.S. increase in revenues for products and a
modest increase in revenues in services over 1994. The instability experienced
in service revenues is due to the very aggressive pricing policies from our
competition. An additional factor is the maturation of our hardware products,
which, if not replaced by GA hardware, often leads to the service contract being
placed with another service organization. The increase in domestic product
revenues from 1994 to 1995 is due to the SunRiver partnership and the
introduction of new products late in 1995.
1995 vs. 1994
Excluding revenue contributions by SGA in 1994, total sales increased $847,000
or 6.3% in 1995 over 1994. Product sales in the U.S. increased 11.4% or
$719,000, primarily through the partnership with SunRiver Data Systems
(described in Acquisitions and Divestitures above) and the introduction of new
products late in the year. The revenue increases shown above were accomplished
without price increases; the intense nature of the competition prevents
aggressive upward pricing
15
<PAGE> 16
policies. The Company believes that the introduction of new products will
generate new sales but is unlikely to allow for enhanced margins.
Domestic service revenues increased $128,000 due to the acquisition of SunRiver
Data Systems service customers offset by the termination of contracts on older
systems. Termination of contracts is a normal part of the business. As computers
grow older, they're no longer covered under contracts. Increased competition has
also caused some sales attrition. The addition of the SunRiver Data Systems
service contracts generated revenues of $553,000 during the last four months the
year.
1994 vs. 1993
Excluding revenue contributions by Eurosystems GA Ltd. in 1993, total sales
increased $3,979,000 or 13.0% in 1994 over 1993. Product sales in the U.S.
increased 9.4% or $542,000, primarily through library vertical sales. SGA's
product sales increase was $2,906,000, an increase of 24.1% over the prior year,
primarily attributable to increases in vertical sales, the largest of which was
the Singapore Port Award.
Excluding Eurosystems, service revenues increased $531,000. Domestically,
service revenues decreased $621,000 due to termination of contracts on older
systems, coupled with decreased sales of new systems. In the Pacific Basin,
service revenues increased $1,152,000 due to new installations of library,
Maxial, and other verticals.
Regarding Company manufactured computer sales, total revenues are expected to
continue to decline as the Company refocuses its efforts in other directions.
The addition of non-GA manufactured products to the Company's product offerings,
such as AT&T and Groupe Bull is expected to more than offset the sales erosion
of GA manufactured products, with the goal to increase the level of earned
profits through this higher volume.
The service segment of the Company provides help desk and on site service for
all GA systems at end user sites in the US and generated half of the Company's
revenues. This business is enjoying increasing revenues due to the acquisition
from SunRiver Data Systems. As the Company moves more into the distribution of
non-manufactured products, the domestic service organization will provide
service and software support for them.
For much of its history, GA has had significant foreign transactions, such sales
are conducted in U.S. dollars. Its foreign subsidiaries were subject to foreign
currency fluctuations, and such gains or losses recorded on a current basis. GA
no longer has foreign holdings subject to currency fluctuations, thereby
avoiding future currency risks.
The Company has approximately 3,500 service customers. The normal service
contract is for a year or more and invoiced in advance of the period in which
the service is to be performed. The pricing is done per a fixed price schedule
and calculated according to the equipment and or software to be maintained.
16
<PAGE> 17
GROSS MARGIN
GROSS MARGIN
(In thousands)
<TABLE>
<CAPTION>
Year Ended
September 30
-----------------------------------------------------------
1995 1994 1993
------------------ ----------------- ------------------
% of % of % of
Amount Sales Amount Sales Amount Sales
----- ----- ------ ----- ------ -----
Products:
<S> <C> <C> <C> <C> <C> <C>
Domestic $ 518 7.4 $ 1,954 31.0 $ 2,404 41.7
Europe 1,373 41.4
SGA 7,567 50.5 6,019 49.8
------- ------- -------
518 7.4 9,521 44.7 9,796 46.3
------- -------
Service and Support:
Domestic 2,285 31.5 1,773 24.9 1,785 23.1
Europe 3,944 44.2
SGA 1,751 28.2 1,315 26.0
------- ------- -------
2,285 31.5 3,524 26.4 7,044 32.4
------- ------- -------
Total Gross Margin $ 2,803 19.6 $13,045 37.7 $16,840 39.3
======= ======= =======
</TABLE>
GROSS MARGIN
1995 vs. 1994
Excluding SGA, the Company's overall gross profit margin decreased 8.2% from
27.8% in fiscal 1994 to 19.6% in fiscal 1995. Gross margin percentages for
domestic products decreased 23.6%, while domestic service and support margins
increased 6.6% from prior year levels. The decrease in product margin was due to
vertical product losses and lower margins on non-GA manufactured computer
systems such as Groupe Bull and AT&T GIS. The increase in service and support
margin was due to the acquisition of the Pick business from SunRiver Data
Systems.
The Company believes that future gross margins in domestic service will
stabilize because of the large combined size of the GA and SunRiver Datasystems
customer base despite pressure from the increasingly competitive nature of that
business segment. To offset decreasing margins from computer hardware sales, it
anticipates increased margins from expanding sales of application software
solutions and non GA products. The aggregate effect of these trends is expected
to have a material impact on the Company's 1996 gross margin.
GA sells its hardware products through a nationwide dealer network, and dealers
sell to the end-users, pricing their products as the competition will allow.
Company pricing strategies in the past have been aimed at stimulating dealer
orders through pricing concessions; general price decreases or increases are not
the normal technique used by the Company. The dealers generally are selling a
system, complete with application software, in a "bundled" proposal, as a
turn-key sale. The direct competitive pressures facing the dealers are more
closely tied to the cost/benefit relationship of their proposal versus those of
other firms.
17
<PAGE> 18
1994 vs. 1993
Excluding Eurosystems GA, Ltd. gross margin contributions increased $1,522,000
and remained at the same level as a percentage of net sales. Domestically,
product gross margins decreased from 41.7% to 31.0%, primarily due to lower
margins on vertical sales and a larger percentage of low-end, low profit
computer systems in the 1994 sales mix. In the Pacific Basin, a modest gross
margin percentage increase of 0.7% was achieved on much larger sales volume.
Domestic service margins increased 23.1% to 24.0% on a lower volume of revenue.
Service revenues in the Pacific Basin increased and an increase in gross margin
percentage of 26.0% to 28.2% was achieved.
NET PROFIT/(LOSS)
<TABLE>
<CAPTION>
NET INCOME/(LOSS)
(In thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Domestic $(2,065) $ (318) $ 108
Europe (1,036)
SGA 745 351
------- ------- -------
Total Net Income/(LOSS) $(2,065) $ 427 $ (577)
======= ======= =======
</TABLE>
1995 vs 1994
Excluding SGA, the net losses are ($2,065,000) and ($318,000) for 1995 and 1994,
respectively. The 1994 loss is net of $900,000 of income resulting from a
decrease in estimated tax liabilities. The fiscal year 1995 loss includes costs
associated with the with SunRiver Data Systems acquisition, heavy investments in
the vertical products and the later then planned entry of the new products in
the marketplace.
1994 vs. 1993
The net income (loss) figures are materially impacted by the decreases in
estimated tax liabilities in these years. See Notes 6 and 9 to the Financial
Statements included in this Form 10-K.
18
<PAGE> 19
EXPENSES
<TABLE>
<CAPTION>
EXPENSES
(In thousands)
Year Ended
September 30
--------------------------------------------------------------
1995 1994 1993
------------------ ------------------ -----------------
% of % of % of
Amount Sales Amount Sales Amount Sales
-------- ------ -------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Research and
Development:
Domestic $ 584 4.1 $ 575 1.7 $ 640 1.5
SGA 1,178 3.4 1,094 2.5
-------- ---- -------- ---- -------- ----
584 4.1 1,753 5.1 1,734 4.0
-------- ---- -------- ---- -------- ----
Selling and
Administrative:
Domestic 3,704 25.9 3,700 10.7 3,754 8.7
Europe 5,307 12.4
SGA 5,907 17.1 5,392 12.6
-------- ---- -------- ---- -------- ----
3,704 25.9 9,607 27.8 14,453 33.7
-------- ---- -------- ---- -------- ----
Other:
Domestic 181 1.3 300 0.9 91 0.2
Europe
SGA 85 0.2 (81) -0.2
-------- ---- -------- ---- -------- ----
181 1.3 385 1.1 10 0.0
-------- ---- -------- ---- -------- ----
Interest:
GA 399 2.8 376 1.1 228 0.5
Europe 25 0.1
SGA 232 0.7 466 1.1
-------- ---- -------- ---- -------- ----
399 2.8 608 1.8 719 1.7
-------- ---- -------- ---- -------- ----
Total $ 4,868 34.1 $ 12,353 35.8 $ 16,916 39.4
======== ==== ======== ==== ======== ====
</TABLE>
Excluding SGA, Research and Development increased $9,000 from 1994 to 1995 as a
result of the SunRiver Data Systems activities. It is the belief of management
that expenditures will decline as the emphasis switches from hardware to
software products. In 1994, the expense increased $19,000.
Selling and administrative expense increased $4,000 from 1994 to 1995, excluding
SGA. Management expects to maintain the same level of expense in the United
States. Selling and administrative expense increased $461,000 from 1993 to 1994,
excluding Eurosystems. In the Pacific Basin, Selling and Administrative expenses
increased $515,000 between 1993 and 1994, which is attributable to expenses
necessary to support increases in sales volume and investments in personnel to
gain additional sales. Management expects to maintain the same level of expense
in the United States. The sale of Eurosystems to the minority shareholders
eliminated the European expense, which was $5,307,000 in 1993. (See note 8 to
the accompanying Financial Statements).
Excluding SGA, other expenses decreased $119,000 from 1994 to 1995 due to the
elimination of goodwill amortization caused by the sale of SGA. Other expense
increased $375,000 from 1993 to 1994. 1993 included credits of $309,000 from
amortization of credits from the advantageous purchase of the assets of C.I.E in
1990.
19
<PAGE> 20
Excluding SGA, interest expense increased $23,000 from 1994 to 1995 due to
higher levels of borrowing during portions of the year. Interest expense
decreased $86,000 from 1993 to 1994, excluding Eurosystems, due to continuing
decreases to the debt balance.
LIQUIDITY AND CAPITAL RESOURCES
The Company is operating on improved cash resources. During the Company's fiscal
1995, the Company's cash receipts exceeded the total expenditures excluding SGA.
The Company has seen improvement in its cash position due to the partnership
with SunRiver Data Systems and expects the trend to continue, augmented by sales
of non GA manufactured products. These two factors are expected to provide GA
with the needed working capital to support future operations. No plans have been
made to seek new equity funds.
Net cash used for operating activities was $343,000. The major items generating
cash were a $563,000 reduction in inventories, a $1,662,000 increase in accounts
payable, and a $3,160,000 increase in advances from customers. The major item
consuming cash was a $3,846,000 increase in accounts receivable. The remainder
was provided by ongoing operations.
Net cash of $1,527,000 was used for investing activities in fiscal 1995 for
capitalized software development costs and additions to property, plant and
equipment.
Financing activities provided $1,741,000 from debt repayments of $1,407,000,
offset by new notes payable of $1,357,000 and $1,791,000 in proceeds from the
sale of SGA.
Currently, the Company has an agreement with a U.S. lender for a revolving line
of credit, not to exceed $800,000, which is collateralized by domestic accounts
receivable. The agreement is renewable at six month intervals. The interest rate
is prime plus 6%, payable monthly, with a minimum of 14%. In addition, there are
monthly collateral management fees charged for maintaining the open line of
credit. Because the amount of borrowing is dependent upon accounts receivable
levels, varying levels of domestic activity could preclude full utilization of
the facility. Management believes that these funds exceed the Company's needs
and is seeking less costly alternatives for temporary capital. At September 30,
1995, the balance of the loan was $543,000. The line of credit contains various
covenants and restrictions; at September 30, 1995 the Company was not in
compliance with certain covenants, for which a waiver was obtained from the
lender. This non-compliance condition was the result of the lender charging
their management fees to the GA account, which then raised the loan to $13,000
above the maximum calculated balance based on net collateral. The situation was
corrected the next business day.
On November 10, 1994, the Company completed the agreement for the sale of its
51% interest in SGA Pacific Ltd. to Sanderson Technology, Ltd. for $1,000,000 in
cash which the Company received on November 14, 1994, a note in the amount of
$1,000,000 to be repaid over 24 months, bearing interest at 8%, plus 4,100,000
shares of the Company's Common Stock, which were retired.
As explained in Item 2 above, the Company has purchased a building in Irvine,
California. Eventually, the Company expects to experience a significant cost
savings, (approximately $75,000 annually) from the move. Until February, 1996,
the Company expects to be responsible for the monthly rent on the existing
Anaheim, California facility. During the period to February, 1996, the Company
expects an additional $75,000 outlay of cash, due to residual payments of rent,
all of which is provided for at September 30, 1995.
20
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Schedules on Page 26 of this report.
21
<PAGE> 22
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the directors and executive officers of
the Company, see the information appearing on pages 3 and 4 of the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held January 25,
1996 under the caption "Election of Directors" and on page 11 of the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held January 25
1996 under the caption "Compliance with Section 16(a) of the Securities Exchange
Act of 1934", which information is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
For information with respect to the compensation of certain executive
officers of the Company, see the information appearing on pages 7 and 8 of the
Company's Proxy Statement for the Annual Meeting of Stockholders to be held
January 25, 1996 under the caption "Executive Compensation", which information
is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
For information with respect to the security ownership of certain
beneficial owners and management of the Company, see the information appearing
on pages 6 and 7 of the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held January 25, 1996 under the caption "Security Ownership
of Certain Beneficial Owners and Management", which information is incorporated
herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information with respect to certain relationships and related
transactions, see the information appearing on page 11 of the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held January 25, 1996
under the caption "Certain Relationships and Related Transactions", which
information is incorporated herein by reference.
22
<PAGE> 23
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
1. Financial Statements
See Index to Consolidated Financial Statements and Schedules on Page
26 of this report.
2. Exhibits
3(a) Amended Certificate of Incorporation of the Company. (1)
3(b) By-Laws of the Company (2)
10(a) Sample Dealer Agreement with Schedule. (3)
10(b) Pick License Agreement dated November 23, 1982, between the
Company and Pick Computer Works, Inc. (3)
10(c) Lease, dated March 28, 1991; between the Company and Lincoln
Properties Company. Premises: 1045 South East Street, Anaheim,
California, as amended. (4)
10(d) Form of Note Purchase and Warrant Agreement dated as of June
17, 1987, between the Company and the Purchasers thereof. (5)
10(e) Amendment dated May 18, 1989 to Note Purchase Agreement dated
June 17, 1987 between the Company and Paul Morigi & Company.
(10)
10(f) The following agreements by and between the Company and
Sanderson Electronics PLC, all dated as of January 6, 1989,
except as indicated: Purchase Agreement; 15% Convertible
Senior Note in the principal amount of $500,000; 15%
Convertible Senior Note in the principal amount of $1,250,000,
dated as of January 24, 1989; Pledge Agreement; Security
Agreement; Common Stock Warrant Agreement (2,837,388 shares of
the Company's Common Stock); Common Stock Warrant Agreement
(2,500,000 shares); Common Stock Warrant Agreement ("Mirror
Rights Agreement"); and Common Stock Registration Rights
Agreement. (6)
10(g) Amendment dated July 28, 1989 to the following agreements by
and between the Company and Sanderson Electronics PLC: 15%
Convertible Senior Note in the principal amount of $500,000,
dated as of January 6, 1989; 15% Convertible Senior Note in
the principal amount of $1,250,000, dated as of January 24,
1989; Common Stock Warrant Agreement dated as of January 6,
1989 pursuant to which the Notes may be converted to 2,500,000
shares of the Company's Common stock. (7)
10(h) Commitment Letter by and between General Automation, Ltd. and
Sanderson Computers (PPS) Limited for a Floating Rate
Unsecured Convertible Loan Stock. (8)
23
<PAGE> 24
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K (Continued)
10(i) Articles of Association of SGA Pacific Limited. (9)
10(j) The Company's 1991 Stock option Plan and Directors' Stock
Option Plan. (11)
10(k) Agreement for the sale and purchase of 49,951 ordinary shares
in the capital of Eurosystems GA Ltd. to Krypton Group Ltd.,
and instrument constituting $990,000 non-interest bearing loan
note, all dated October 28, 1993. (12)
10(l) Agreement relating to the Company's sale of its 51% interest
in SGA Pacific, Limited to Sanderson Technology, Ltd., dated
October 20, 1994. (13)
10(m) Agreement by and between General Automation, Inc. and Future
Services, Ltd., dated March 14, 1996.
10(n) Operating Agreement by and between General Automation, Inc.
and SunRiver Data Systems dated May 22, 1995.
21 Subsidiaries of Registrant
23 Consent of Independent Accountants.
27 Financial Data Schedule.
(1) Filed as Exhibit 3(a) to the Company's 10-K dated as of June 30, 1989,
and by this reference incorporated herein.
(2) Filed as Exhibit No. 30 to the Company's Form 10-K dated as of June 30,
1988, and by this reference incorporated.
(3) Filed as Exhibit No. 10 to the Company's Form S-1 as filed on June 5,
1986, and by this reference incorporated herein.
(4) Filed as Exhibit 10(d) to the Company's Form 10-K dated as of September
30, 1992, and by this reference incorporated herein.
(5) Filed as Exhibit B to the Company's Proxy Statement to Shareholders
dated October 14, 1987, and by this reference incorporated herein.
(6) Filed as Exhibits to the Company's Current Report on Form 8-K dated as
of January 6, 1989, and by this reference incorporated herein.
(7) Filed as Exhibit 10(x) to the Company's Annual Report on Form 10-K
dated as of June 30, 1989, and by this reference incorporated herein.
24
<PAGE> 25
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K (Continued)
(8) Filed as Exhibit 10(y) to the Company's Annual Report on Form 10-K
dated as of June 30, 1989, and by this reference incorporated herein.
(9) Filed as Exhibit 10(bb) to the Company's Annual Report on Form 10-K
dated as of June 30, 1989, and by this reference incorporated herein.
(10) Filed as Exhibit 3(b) to the Company's Form 10-K dated as of June 30,
1989, and by this reference incorporated herein.
(11) Filed as Exhibits to the Company's Form S-8 as filed on October 4,
1991, and by this reference incorporated herein.
(12) Filed as Exhibit to the Company's Form 8-K dated as of November 12,
1993, and by this reference incorporated herein.
(13) Filed as Exhibit to the Company's Form 8-K dated as of November 23,
1994, and by this reference incorporated herein.
25
<PAGE> 26
GENERAL AUTOMATION, INC.
And Subsidiaries
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
<TABLE>
<CAPTION>
Pages
<S> <C>
Report of Independent Accountants 27
Financial Statements:
Consolidated Balance Sheet - September 30, 1995 28 - 29
and 1994
Consolidated Statement of Operations for the Three Years 30
in the period ended September 30, 1995.
Consolidated Statement of Shareholders' Equity 31
(Deficit) for the Three Years Ended September 30, 1995.
Consolidated Statement of Cash Flows for the Three Years 32 - 33
in the period Ended September 30, 1995.
Notes to Consolidated Financial Statements. 34 - 50
</TABLE>
26
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and Board of Directors
of General Automation, Inc.:
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
General Automation, Inc. and its subsidiaries at September 30, 1995 and 1994 and
the results of their operations and their cash flows for each of the three years
in the period ended September 30, 1995, in conformity with generally accepted
accounting principles. These consolidated financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Costa Mesa, California
December 19, 1995
27
<PAGE> 28
GENERAL AUTOMATION, INC.
And Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30
-------------------
1995 1994
------- -------
<S> <C> <C>
Assets
Current Assets:
Cash $ 101 $ 230
Accounts receivable, net (Note 2) 5,679 9,144
Inventories (Note 2) 1,726 4,427
Prepaid expenses 185 409
------- -------
Total current assets 7,691 14,210
------- -------
Long-term receivable 570 210
Property, plant and equipment, net of
accumulated depreciation and
amortization (Note 2) 1,354 1,698
Other assets (Note 2) 869 1,923
------- -------
$10,484 $18,041
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 29
GENERAL AUTOMATION, INC.
And Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30
----------------------
1995 1994
-------- --------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 2,959 $ 3,731
Advances from customers (Note 1) 3,401 1,373
Accrued income taxes (Note 6) 688
Other accrued expenses (Note 2) 850 2,899
Notes payable and current
portion of long-term
debt (Note 3) 1,119 2,794
-------- --------
Total current liabilities 8,329 11,485
Long-term debt, excluding
current portion (Note 3) 1,305 1,453
Deferred credit 79 70
Minority interest - SGA
Pacific Ltd. (SGA) (Note 8) 1,787
Commitments and contingencies (Note 10)
Shareholders' Equity
Common stock par value $.10 per share;
Authorized 30,000,000 shares; issued
and outstanding 7,391,776 at
September 30,1995 and 11,366,776
September 30, 1994 739 1,137
Additional paid in capital 42,533 42,420
Accumulated deficit (42,501) (40,457)
Currency translation adjustments 146
-------- --------
Total shareholders' equity 771 3,246
-------- --------
$ 10,484 $ 18,041
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 30
GENERAL AUTOMATION, INC.
And Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Twelve Months
Ended
September 30
------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Sales - net - Product $ 7,020 $ 21,284 $ 21,149
Service revenue 7,249 13,330 21,729
-------- -------- --------
Total 14,269 34,614 42,878
-------- -------- --------
Costs and expenses:
Cost of sales - Product 6,502 11,763 11,353
- Service 4,964 9,806 14,685
Selling and
administrative 3,704 9,607 14,453
Research and development 584 1,753 1,734
Loss on disposal
of subsidiaries 994
Other, net 181 (385) 10
-------- -------- --------
15,935 33,314 43,229
-------- -------- --------
(Loss) income from
operations (1,666) 1,300 (351)
Interest income 35 41 146
Interest expense (434) (649) (865)
-------- -------- --------
(Loss) income before
income taxes, minority
interest and extraordinary
items (2,065) 692 (1,070)
(Benefit from) provision for
income taxes (454) 190
Minority interest in income
of SGA 719 217
-------- -------- --------
(Loss) income before
extraordinary items (2,065) 427 (1,477)
Extraordinary items (Note 9) 900
-------- -------- --------
Net (loss) income $ (2,065) $ 427 $ (577)
======== ======== ========
Earnings per share - primary:
(Loss) income before
extraordinary items $ (.26) $ (.04) $ (.13)
Extraordinary items .08
-------- -------- --------
Net (loss) income $ (.26) $ (.04) $ (.05)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 31
GENERAL AUTOMATION, INC.
And Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Translation
Shares Amount Capital Deficit Adjustment
------ ------ ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1992 11,366,776 $ 1,137 $ 42,420 $ (40,307) $ 192
Net loss (577)
Translation adjustments (601)
----------- ----------- ----------- ----------- -----------
Balance at September 30, 1993 11,366,776 1,137 42,420 (40,884) (409)
Net income 427
Translation adjustments 555
----------- ----------- ----------- ----------- -----------
Balance at September 30, 1994 11,366,776 1,137 42,420 (40,457) 146
Net loss (2,065)
Retired from Sale of SGA (4,100,000) (410) 113 21 (146)
Issued for legal settlement 125,000 12
----------- ----------- ----------- ----------- -----------
Balance at September 30, 1995 7,391,776 $ 739 $ 42,533 $ (42,501) $ -0-
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 32
GENERAL AUTOMATION, INC.
and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Twelve
Months Ended
September 30
---------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Cash flows (used for) provided by operating activities:
Net (loss) income $(2,065) $ 427 $ (577)
Adjustments to reconcile net
(loss) income to net
cash (used for) provided by
operations:
Depreciation and amortization 355 1,328 1,057
Minority interest in income
of SGA 719 217
Changes in balance sheet items, net of
dispositions
Accounts receivable (3,846) (1,461) (1,711)
Inventories 563 233 1,125
Prepaid expenses (11) 11 (131)
Other assets 79 155 (415)
Accounts payable 1,662 978 1,760
Advances from customers 3,160 (371) 157
Accrued income taxes (512) (441)
Other accrued expenses (240) (534) 216
------- ------- -------
Net cash (used for) provided by operating
activities (343) 973 1,257
------- ------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 33
GENERAL AUTOMATION, INC.
and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Twelve
Months Ended
September 30
---------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Cash flows (used for)
investing activities:
Purchases of property, plant and
equipment (1,328) (431) (556)
Capitalized software (178) (410) (374)
Investment in subsidiary (21)
------- ------- -------
Net cash (used for)
investing activities (1,527) (841) (930)
------- ------- -------
Cash flows provided by (used for)
financing activities:
Proceeds from issuance of notes
payable 1,357 940 1,848
Principal payments on notes
payable (1,407) (2,000) (1,835)
Principal payments on accrued
taxes (133) (200)
Proceeds from sale of SGA Pacific 1,791
------- ------- -------
Net cash provided by (used for)
financing activities 1,741 (1,193) (187)
------- ------- -------
Effect of exchange rates
on cash 125 15
------- ------- -------
Increase (decrease) in cash (129) (936) 155
Cash at beginning of period 230 1,166 1,011
------- ------- -------
Cash at end of period $ 101 $ 230 1,166
======= ======= =======
Cash paid during the period for:
Interest $ 452 $ 1,042 $ 659
======= ======= =======
Income taxes $ $ 133 $ 691
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 34
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. Description of the Company and Summary of Significant Accounting Policies:
DESCRIPTION OF THE COMPANY
The Company is engaged in the development, design and sale of computer software
and hardware and related field support services.
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all of its wholly and majority-owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated.
Revenue Recognition
Revenues for sales of products are recognized as shipped. Revenue is not
recognized on product sales if significant obligations remain or collectibility
is in doubt. Revenues for maintenance service contracts are recognized on a
monthly basis ratably over the period of the contracts. Cash payments received
and billings in advance of revenue recognition are deferred (Advances from
customers) and recognized as earned. Vertical installations (Library, Service
Advantage, etc.) revenues are recognized on the percentage of completion method.
Warranties
All products, except the lowest-end models, carry a one year warranty, during
which all maintenance labor and parts are covered. The Company carries adequate
reserves to cover any anticipated charges of this nature.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Cost elements include material, labor and factory overhead. Market is considered
to be selling price, less allowance for normal selling expenses.
Depreciation and Amortization
Depreciation and amortization are provided over the estimated useful lives of
the assets using the straight-line method. Estimated useful lives are as
follows:
Building 30 years
Machinery and equipment 3-7 years
Furniture and fixtures 3-7 years
Leasehold improvements Lease term or asset life, whichever is less
Customer service spare parts 7 years
The estimated useful life of customer service spare parts is adjusted to reflect
actual usage
34
<PAGE> 35
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
1. Description of the Company and Summary of Significant Accounting Policies,
Continued
Expenditures that materially increase the asset life are capitalized and
ordinary maintenance and repairs are charged to operations as incurred. The
difference between cost of purchased companies and fair value of net assets
acquired is amortized using the straight-line method over 5 years.
Capitalized Software
All capitalized software development costs are amortized on a straight-line
basis over the remaining estimated economic life of the product, generally three
to five years. The costs capitalized are those incurred after the Company has
determined the technical feasibility of a software project. The project
amortization does not commence until after the general release of the product
and are included in the cost of sales.
Equity Investments
The Company accounted for its minority interest in investees on the equity
method, under which the Company recognize its pro-rata share of net income as
reported by the investees, after adjusting for the effects of intercompany
transactions.
Foreign Currency Translation
The assets and liabilities for the Company's international subsidiaries are
translated into US Dollars using current exchange rates. Income statement items
are generally translated at average exchange rates prevailing during the period.
The resulting translation adjustments are recorded in the currency translation
adjustments account in shareholders' equity. Foreign currency transaction gains
and losses are included in net income.
Income Taxes
Effective October 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (FAS 109), Accounting for Income Taxes. The adoption of FAS
109 changes the Company's method of accounting for income taxes from the
deferred method (APB 11) to an asset and liability approach. Previously, the
Company deferred the past tax effects of timing differences between financial
reporting and taxable income. The asset and liability approach requires the
recognition of deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and tax bases
of other assets and liabilities. Adoption of FAS 109 resulted in no material
adjustment to the statement of operations.
Earnings Per Common Share
Earnings or loss per share are based on the weighted average number of shares
outstanding without inclusion of common stock equivalents if such inclusion
would be antidilutive.
Weighted average shares used in the earnings or loss per share calculations for
the years ended September 30, 1995, 1994 and 1993 are 8,036,572, 11,366,776 and
11,366,776, respectively.
35
<PAGE> 36
Reclassifications
Certain reclassifications have been made to the 1994 financial statements to
conform to the 1995 presentation.
36
<PAGE> 37
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
2. Composition of Certain Balance Sheet Accounts (in thousands):
Accounts receivable consist of:
<TABLE>
<CAPTION>
September 30
--------------------
1995 1994
------- -------
<S> <C> <C>
Trade receivables $ 6,007 $ 9,757
Due from related parties 116 75
------- -------
6,123 9,832
Less allowance for
doubtful accounts (444) (688)
------- -------
$ 5,679 $ 9,144
======= =======
Inventories are summarized as follows:
<CAPTION>
September 30
--------------------
1995 1994
------- -------
<S> <C> <C>
Materials, subassemblies
and spare parts $ 1,498 $ 2,715
Work in process 157 297
Finished goods 71 1,415
------- -------
$ 1,726 $ 4,427
======= =======
</TABLE>
37
<PAGE> 38
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
2. Composition of Certain Balance Sheet Accounts (in thousands):
The major classes of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
September 30
--------------------
1995 1994
------- -------
<S> <C> <C>
Land and building $ 1,256
Machinery and equipment 2,064 $ 3,346
Furniture and fixtures 200 1,798
Leasehold improvements 50 451
------- -------
3,570 5,595
Less accumulated
depreciation and
amortization (2,216) (3,897)
------- -------
$ 1,354 $ 1,698
======= =======
</TABLE>
Depreciation and amortization expense for the years ended September 30, 1995,
1994 and 1993 amounted to $60, $528 and $577, respectively.
Other assets comprise:
<TABLE>
<CAPTION>
September 30
--------------------
1995 1994
------- -------
<S> <C> <C>
Computer software costs $ 1,612 $ 4,403
Goodwill 551
Other 67 44
------- -------
1,679 4,998
Less accumulated
amortization (810) (3,075)
------- -------
$ 869 $ 1,923
======= =======
</TABLE>
During the years ended September 30, 1995, 1994 and 1993 the Company capitalized
$178, $410 and $374 of software and development costs, respectively, and $295,
$678 and $654 of such costs were amortized to cost of sales, respectively.
Other accrued expenses consist of the following:
<TABLE>
<CAPTION>
September 30
-----------------
1995 1994
------ ------
<S> <C> <C>
Accrued payroll 429 $1,305
Accrued taxes other than income 95 150
Other 326 1,444
------ ------
$ 850 $2,899
====== ======
</TABLE>
38
<PAGE> 39
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars and thousands)
3. Notes Payable and Long-Term Debt:
Notes payable and long-term debt consist of the following:
<TABLE>
<CAPTION>
September 30
-----------------
1995 1994
------ ------
(in thousands)
<S> <C> <C>
Note redeemable due March, 1995
bearing interest at 10%, monthly
payments of $150,000
plus interest beginning December, 1994 -- $ 550
Note payable maturing January, 1997
bearing interest at 15%, monthly payments
of $31,192 beginning August, 1995 $ 450 500
Payable for purchase of Maxial Systems, Inc.,
described below, monthly payments of
$6,800, 13% interest 195 245
Notes payable to States relating to taxes
maturing August, 1995 through March, 1999
bearing interest 12%, monthly
payments of $22,640 241 468
Note payable to Sanderson Electronics
PLC, due September 30, 1994 bearing
interest at LIBOR plus 2.5% -- 704
Mortgage payable to National Bank of
Southern California beginning November,
1994 bearing interest at prime + 1%, monthly
payments of $8,445 995 --
Lines of credit:
Bank overdraft facilities, SGA Pacific
Ltd, bearing interest at Australia
prime + 1.65% -- 481
Continental Business Credit, bearing
interest at prime plus 6%, renewable
every six months 543 711
Bank of New Zealand, due on 30 day call
notice at New Zealand prime + 1.65%
to 2.75% -- 588
------ ------
2,424 4,247
Less amounts due in one year 1,119 2,794
------ ------
$1,305 $1,453
====== ======
</TABLE>
39
<PAGE> 40
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
3. Notes Payable and Long-Term Debt, Continued:
Payment requirements on principal balances at September 30, 1995 are
approximately as follows: (in thousands) for the twelve month periods ending
September 30, 1996 - $1,119, 1997 - $233, 1998 - $92, 1999 - $14, 2000 - $10.
In conjunction with the purchase of Maxial Systems, Inc. in 1986, the Company
entered into a revised note agreement with Robert Kramer. The note is
collateralized by the assets of the Company and was issued to complete the
obligations of the Company in the purchase. The note provides for 48 monthly
payments of $7, of which 13 have been made at September 30, 1995. At September
30, 1995 the total remaining payments were $238, less imputed interest, bringing
the present value of the note to $195.
In June 1987, the Company completed a private placement of $1,050 unsecured
redeemable notes due June 1992. Repayment of one note in the amount of $550 was
completed in fiscal 1995. The second note has total remaining payments at
September 30, 1995 of $499 less imputed interest, bringing the present value of
the note to $450. Monthly payments are $31.
In March 1991, an agreement was reached with a domestic lender for a line of
credit collateralized by all current domestic trade accounts receivable. The
maximum borrowing limit is $800 with interest at prime plus 6% with a minimum
rate of 14%. At September 30, 1995 the total owed on this line was $543. The
agreement is renewable at six month intervals. The line includes various
covenants and restrictions; at September 30, 1995 the Company was not in
compliance with certain covenants, for which a waiver was obtained from the
lender.
The Company purchased a building in Irvine, California, on November 16, 1994,
which serves as the Company's corporate offices. The purchase price was $1,200,
less a down payment of $200 leaving a financed balance of $1,000. Monthly
payments for the first twenty-four months are guaranteed to remain at $8 each.
Annual interest is based on prime, plus 1%. Monthly payments will be adjusted
annually for changes to the prime rate. At the end of ten years, a balloon
payment of approximately $917 will be due.
4. Employee Benefit Plans:
The Company has a profit sharing 401K plan covering substantially all of its
domestic employees. Eligible employees may contribute 2% to 12% of their
compensation up to the maximum dollar amount allowed by the IRS. The Company has
agreed to contribute from profits in amounts equal to 50% of each employee's
contribution up to 3% of the employee's compensation. The Company may elect to,
although it is not obligated to, make contributions in years when it has no
profits. Contributions for the periods ended September 30, 1995, September 30,
1994 and September 30, 1993 were $78, $65 and $65, respectively.
40
<PAGE> 41
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
5. Stock Options
In February 1991, the shareholders of the Company adopted the 1991 Stock Option
Plan and the 1991 Directors' Stock Option Plan. The Board of Directors of the
Company authorized the grant of options to current employees and directors of
the Company, which were exercisable through December 31, 1994. Employees and
directors who held options under previous plans were given the right to retain
those options or accept the options under the 1991 Plans, in which case their
existing options would be canceled. Options under the 1991 Plans were priced in
excess of the market price of approximately $0.625 on the date of authorization.
All such option holders accepted the options offered under the 1991 Plans, and
all options to acquire common stock of the Company were consolidated under the
1991 Plans. In April, 1994, the shareholders of the company adopted an amendment
to the 1991 Stock Option Plan increasing the shares of Common Stock reserved for
issuance thereunder from 900,000 to 1,300,000. The shareholders, at the same
time, adopted an amendment to the 1991 Directors' Stock Option Plan to increase
the number of shares of Common Stock reserved for issuance thereunder from
100,000 to 200,000, and to modify certain provisions concerning
non-discretionary stock option grants.
<TABLE>
<CAPTION>
Number of Option Price
Shares Per Share
---------- ------------
1991 PLANS
<S> <C> <C>
Outstanding at September 30, 1992 863,000 $0.75
Granted -0-
Exercised -0-
Terminated (23,000)
---------
Outstanding at September 30, 1993 840,000 $0.75
Granted 513,000
Exercised -0-
Terminated (210,000)
---------
Outstanding at September 30, 1994 1,143,000 $0.75
Granted 300,000
Exercised -0-
Terminated (25,000)
---------
Outstanding at September 30, 1995 1,418,000 $0.75
=========
</TABLE>
All remaining 1,418,000 options granted under the 1991 Plan are exercisable at
September 30, 1995. Under the amended 1991 Plan an additional 82,000 shares have
been reserved for future grants. All outstanding options have been granted at
$0.75 per share.
41
<PAGE> 42
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
6. Income Taxes:
Effective October 1, 1993, the Company adopted the provision of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires a liability approach for computing deferred income taxes. Deferred
income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to amounts which are more likely than not to be realized.
The provision for income taxes is the payable or refundable amount for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
The cumulative effect of adopting Statement 109, as of October 1, 1993 did not
change net income. As permitted under the Statement, prior years' financial
statements have not been restated.
The provision (benefit) for income taxes for each of the three fiscal years in
the period ended September 30, 1995 consists of the following:
<TABLE>
<CAPTION>
Year Ended
September 30
------------------
(in thousands)
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Current:
Domestic $-- $(900) --
Foreign -- $ 446 $ 190
----- ----- -----
-- (454) 190
----- ----- -----
Deferred:
Domestic -- --
Foreign -- -- --
----- ----- -----
$-- $(454) $ 190
===== ===== =====
</TABLE>
Reasons for differences between income tax expense and the amount computed by
applying the federal statutory income tax rate to income (loss) before income
taxes and extraordinary income are as follows:
42
<PAGE> 43
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
6. Income Taxes, Continued:
<TABLE>
<CAPTION> Year Ended
September 30
------------------------------
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Tax (benefits) provision
calculated at Federal
statutory rate $ (702) 235 $ (385)
Tax benefits not provided
on losses of domestic
and foreign operations (405) 414 915
Foreign operations taxed
at other than federal
statutory rate (205) (284)
Amortization of goodwill 53 60 (56)
Reduction in estimated taxes due
under 1989 IRS settlement (900)
Income from sale of foreign subsidiary 1,054
Other (58)
------- ------- -------
(Benefit) provision at effective tax rate $ -- $ (454) $ 190
======= ======= =======
</TABLE>
No deferred taxes were recorded for the period ended September 30, 1995 and
September 30, 1994. For the years ended September 30, 1993, there were $72 in
deferred taxes recorded from European operations.
At September 30, 1995, the Company has domestic net operating loss carryforwards
for financial reporting and tax purposes of approximately $45,000 and $53,000
respectively, expiring primarily during the years 1997 through 2010. The tax net
operating loss carryforwards could be limited due to a possible greater than 50%
ownership change that may have occurred.
On May 19, 1989, the Company and the IRS executed a revised agreement relating
to tax deficiencies assessed for years 1974 to 1981, the terms and conditions of
which include the following:
Beginning on June 5, 1989, the Company began paying $17 per month over
a 60 month period. The IRS applied such payments totaling $1,000
against the Company's assessed liability for interest. The Company
completed the payment schedule in May, 1994.
43
<PAGE> 44
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
6. Income Taxes, Continued:
The remaining amount of the obligation, representing statutory additions
and interest, was set at $2.8 million. This amount was to be offset on a
dollar-for-dollar basis by the Company via a written waiver of 50% of the
net operating loss carryforwards (NOLs) allowable for each taxable year in
which a profit was realized. Such offset will continue until such time
that the $2.8 million is fully satisfied or the Federal income tax return
for fiscal 1994 has been filed by the Company with the IRS, whichever is
earlier. Any portion of the total $2.8 million which remains unsatisfied
following the filing date of the fiscal 1994 Federal income tax return
will be satisfied by waiving an additional amount of NOLs equivalent to
the remaining tax balance of the $2.8 million.
The IRS has replaced the lien against all the assets of the Company with a lien
on certain trademarks and technology of the Company. The lien should have been
released subsequent to receipt of the last payment by the IRS in May, 1994. This
release was not obtained until November, 1995.
At September 30, 1994, 1993 and 1992, the Company revised its estimated tax
liability relating to the $2.8 million fixed portion of the revised IRS
settlement agreement. Based upon projected operating results, management
determined that approximately $1 million each year of the estimated tax
liability would be satisfied by the end of fiscal year 1994 by waiver of unused
NOL carryovers and not from financial assets. Accordingly, the September 30,
1994 tax liability accounts of the Company reflect this change in accounting
estimate, which has been reflected as an extraordinary item in the Consolidated
Statement of Operations, $1,000 in 1992 and $900 in 1993. In 1994 the adjustment
of $900 is included in the provision for income taxes.
Deferred tax assets as of September 30, 1995, relate to the following:
<TABLE>
<CAPTION>
Deferred Tax Assets
--------------------
Current Long-Term
<S> <C> <C>
Inventory reserve 82
Warranty Reserve 16
Vacation accrual 117
Allowance for bad debts 151
Accrued royalties 32
NOL carryforward 2,379
Foreign Tax Credits
------ ------
Total 398 2,379
Valuation Allowance (398) (2,379)
------ ------
Net 0 0
====== ======
</TABLE>
44
<PAGE> 45
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
7. Segment Information:
The Company operates in one business segment. Operations include the design,
manufacture, sales and service of computer systems and computer products. In
1995, essentially all of the Company's operations were within the United
States.
Information concerning the Company's operations by geographic area for 1994
and 1993 is as follows:
<TABLE>
<CAPTION>
Twelve Months Ended September 30, 1994
--------------------------------------------------
United Pacific Elimina-
States Basin tions Total
(In thousands)
<S> <C> <C> <C> <C>
Net sales to
customers $ 13,422 $ 21,192 $ 34,614
Inter-area sales 575 $ (575)
-------- -------- -------- --------
Total net sales $ 13,997 $ 21,192 $ (575) $ 34,614
-------- -------- -------- --------
Segment operating
income $ 741 $ 2,148 $ 2,889
-------- -------- -------- --------
Interest expense, net (608)
Corporate expenses (1,589)
Income before income
taxes and minority interests $ 692
========
Identifiable assets $ 6,655 $ 11,982 $ (596) $ 18,041
-------- -------- -------- --------
Identifiable liabilities $ 5,110 $ 7,942 $ 1,743 $ 14,795
-------- -------- -------- --------
</TABLE>
45
<PAGE> 46
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
7. Segment Information, Continued:
<TABLE>
<CAPTION>
Twelve Months Ended September 30, 1993
----------------------------------------------------------------
United Pacific Elimina-
States Europe Basin tions Total
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales to
customers $ 13,501 $ 12,243 $ 17,134 $ 42,878
Inter-area sales 827 37 $ (864)
-------- -------- -------- -------- --------
Total net sales $ 14,328 $ 12,280 $ 17,134 $ (864) $ 42,878
-------- -------- -------- -------- --------
Segment operating
income (loss) $ 473 $ (718) $ 929 684
-------- -------- -------- --------
Interest expense, net (719)
Corporate expenses (1,035)
--------
Loss before income
taxes minority interests
and extraordinary income $ (1,070)
========
Identifiable assets $ 8,213 $ 5,700 $ 9,772 $ (1,229) $ 22,456
-------- -------- -------- -------- --------
Identifiable
liabilities $ 4,916 $ 4,649 $ 7,404 $ 3,223 $ 20,192
-------- -------- -------- -------- --------
</TABLE>
Sales and transfers between geographic areas are made with reference to
prevailing market prices and at prices approximately equal to those charged to
unaffiliated distributors. Operating income is revenue less related costs and
operating expenses, including other income and expense, but excluding interest
and corporate expenses.
Identifiable assets are those assets of the Company that are identified with
operations in each geographic area.
No single customer or group of related customers or total export sales accounted
for as much as 10% of consolidated sales during any of the periods presented.
8. Acquisitions and Dispositions:
Effective October 1, 1989, the Company acquired a 29.3% interest in SGA Pacific
Limited (SGA), a distributor of the Company's products in Australia, New Zealand
and Asia in exchange for the stock of the Company's wholly-owned subsidiaries in
Singapore and Hong Kong, and for cash of $38. The total consideration, which is
the aggregate of the Company's historical basis in the stock exchanged and the
cash, amounted to $243.
46
<PAGE> 47
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
8. Acquisitions and Dispositions, Continued:
On July 1, 1990, the Company purchased an additional 21.8% interest in SGA from
Sanderson Electronics, PLC, for $875. As the Company became a majority (51.1%)
stockholder, SGA's operations have been consolidated with the Company from July
1, 1990. On November 10, 1994, with retroactive effect from October 1, 1994, the
company sold its 51% share of SGA Pacific, Ltd. to Sanderson Technology, Ltd. In
consideration, Sanderson Technology Ltd. paid the Company $1,000 in cash, $1,000
in a 24 month note, plus transferred 4,100,000 shares of the Company's common
shares back to the Company, which were retired. This brought Sanderson's
interest in the Company down to under 10%. The sale was not recorded as a profit
due to the related party nature of the transaction. However, the estimated gain
of $3.1 million will be taxable on the fiscal 1995 tax return. It is expected
that most of $1.1 million due in Federal income taxes will be offset by net
operating loss carryforwards.
In October, 1992, the Company signed an agreement to form a holding company,
Eurosystems GA Ltd. (Eurosystems), a UK corporation. Under the terms of the
agreement, the Company received 61% of the common shares of Eurosystems in
exchange for its shares in General Automation France SA, General Automation SA
(Belgium), and General Automation Italia SpA (Italy). Krypton Group Ltd., a UK
corporation received 39% of the common shares in exchange for its 100%
shareholding in Eurosystems Belgium SA and Eurosystems SA (France), its 55%
shareholding in Eurosystems GmbH (Germany) and its 85% shareholding in
Eurosystems Maintenance SA (France). The Company accounted for this transaction
as a purchase, with related acquisition adjustments first reflected in the
Company's quarter ended December 31, 1992.
In March, 1993, Eurosystems GA, Ltd. sold its shares of Eurosystems GmbH
(Germany) to the minority shareholders of the German subsidiary for DM3,000
(approximately $1,863). Because this event was related to the initial purchase
in October, 1992, the Company determined that the proper recording of its share
of the gain on the transaction was be to offset the gain of $251 against the
goodwill established at the time of the acquisition.
On October 29, 1993, with retroactive effect from September 30, 1993, the
Company sold its 61% share of Eurosystems to the minority shareholders of
Eurosystems (Krypton Group Ltd.) for $750. A loss of $994 related to this
disposition is included in the 1993 consolidated statement of operations. The
terms included a note receivable in the amount of $750 if paid by December 31,
1993, or $795, including $45 interest if paid before March 31, 1994. If not
repaid by March 31, 1994, the note is repayable in 33 monthly installments of
$30. The note was not paid by March 31, 1994 and after receiving six monthly
installments, payments were suspended by Krypton. For fiscal year 1994, the
Company set up a $240,000 reserve against the $810 balance remaining. In 1995
Krypton filed for bankruptcy. The Company has entered into an agreement which
allows GA to share equally in the profits of the Eurosystems group of companies
wholly owned by Future Services, Ltd. a newly formed company in Great Britain
and owned by the former Krypton management. The Eurosystems group has been
profitable and management expects to receive the $570 carried in the balance
sheet.
47
<PAGE> 48
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
8. Acquisitions and Dispositions, Continued:
Unaudited Proforma condensed financial information of the Company for fiscal
year 1994 as if the divestitures of Eurosystems GA, Ltd. and SGA Pacific,
Limited had occurred as of the beginning of fiscal year 1993:
<TABLE>
<CAPTION>
Unaudited Proforma Balance Sheet
At September 30, 1994
--------------------------------
<S> <C>
Cash $1,063
Accounts and notes receivable 2,820
Inventory 2,318
Other current assets 174
------
6,375
Long-term portion of
notes receivable 710
Other assets 1,049
------
Total assets $8,134
======
Accounts payable $1,297
Other current liabilities 1,396
Notes payable 1,742
------
4,435
------
Long-term debt 732
Other non-current liabilities
Deferred income 70
Shareholders' equity 2,897
------
Total liabilities and
shareholders' equity $8,134
======
Net book value per share,
based on 7,266,776 shares,
after retirement of
4,100,000 shares $ 0.40
======
</TABLE>
48
<PAGE> 49
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
8. Acquisitions and Dispositions, Continued:
<TABLE>
<CAPTION>
Unaudited Proforma Statement of Operations
For the Year Ended September 30, 1994
------------------------------------------
<S> <C>
Sales, net $ 14,572
Income (loss) from
operations (842)
Net income (loss) $ (318)
Per share-primary:
Income (loss) before
extraordinary income $ (0.40)
Extraordinary items
--------
$ (0.40)
========
</TABLE>
9. Extraordinary Income:
Extraordinary income for the year ended September 30, 1993 included $1,000 from
a decrease in estimated tax liabilities as described in Note 6.
10. Commitments and Contingencies:
The Company leases certain facilities and equipment under operating leases.
Lease rental expense for the periods ended September 30, 1995, September 30,
1994 and September 30, 1993 were approximately $305, $1,367 and $1,786,
respectively.
As of September 30, 1995, the minimum rental commitments required under existing
noncancellable operating leases, some of which provide for future increases in
minimum rentals, are (in thousands) as follows:
<TABLE>
<CAPTION>
Amount
------
<S> <C>
1996 $144
1997 5
1998 0
1999 0
----
$149
====
</TABLE>
49
<PAGE> 50
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
10. Commitments and Contingencies, Continued:
The Company is a defendant in various lawsuits and claims which have arisen in
the course of its business. While it is not possible to predict with certainty
the outcome of such litigation and claims, it is the opinion of Company
management, based in part on consultations with counsel, that the liability of
the Company, if any, arising from the ultimate disposition of any or all such
lawsuits and claims has been adequately provided for in the consolidated
financial statements of the Company.
The Company is currently a party to a lease agreement for its former corporate
headquarters in Anaheim through February, 1996. The Company does not expect to
sub-lease the building through the remainder of the lease term. Approximately
$75 has been accrued for losses anticipated with this transaction.
The Company has been named as one of three defendants in a lawsuit brought by
the owner of real property once leased and used by a division of the Company as
part of its operations. The plaintiff is seeking relief from alleged
environmental damages which may have occurred on the property before, during, or
after the time the Company leased the property. The extent of the damage, if
any, has not been determined at this time nor has the extent of the Company's
liability, if any, been established in relation to the other defendants. All of
the parties to the litigation are, under the direction of the court, jointly
funding testing to determine the contamination, and scope of any required
remedial effort. The Company has two of its insurance carriers contributing to
the Company's expenses in this matter. The Company has not recorded a liability
for any potential financial exposures attributed to the Company for remedial
efforts.
11. Other
11.1 Effective May 22, 1995, the Company and SunRiver Data Systems formed a
Limited Liability Corporation (LLC). The LLC was formed to allow the
consolidation of the two firms "Pick" businesses into a single entity, under
one management, to enhance the profit potential from this type of business.
SunRiver does not participate in the profits or losses of this LLC. Under the
agreement, SunRiver is paid a percentage of eligible revenues, ranging from 12%
down to 5% over a five year period. The Company has a first year obligation to
pay SunRiver a minimum of $2.9 million; which is being expensed as incurred. No
minimum payments are required during the balance of the agreement. The
agreement also provides for loaned labor from SunRiver to assist in the
transition and also for SunRiver to pay a fee to GA for managing those
contracts for which SunRiver had been prepaid. These payments will end about
the end of May, 1996.
11.2 Effective August 28, 1995, the Company entered into an agreement with
Sanderson Computer, Inc. ("SCI") under which SCI is responsible for the
world-wide sale of the Zebra 200 Library Systems, and the Maxial hospitality
systems. Further, SCI will assume the responsabilities for completing the
Company's approximate $400,000 backlog of Zebra 2000 contracts. The Company will
receive royalty payments from the Maxial revenues plus an exclusivity annual fee
of $20,000. The Company will receive no revenues from the Zebra 2000 product
line as base software was owned by SCI's parent to whom the Company had been
paying royalties. SCI has used GA employees, facilities and equipment on an
interim basis until they complete the staffing at its Ohio facility; for this,
the Company receives fair value.
12. Subsequent Events (Unaudited)
As of March 14, 1996, the Company received a new $600,000 note from Future
Services, Ltd. to repay the $570,000 note previously carried on the Company's
records. This note bears interest at 10% payable monthly, with the Company
sharing 50% of the net profits of Future Services, Ltd. until the debt is
repaid.
50
<PAGE> 51
SIGNATURES
Pursuant to the requirements of section 13, or 15(d) 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.
GENERAL AUTOMATION, INC.
Date: April 29, 1996 By: /s/ John R. Donnelly
----------------------------
John R. Donnelly
Vice President, and
Chief Financial & Accounting Officer
<PAGE> 1
EXHIBIT 10(m)
GENERAL AUTOMATION INC
AND
FUTURE SERVICES LIMITED
AND
TERENCE ANTHONY BOWMAN
AND
IAN PRYCE DAWKINS
BIBLE
Documents relating to
<TABLE>
<CAPTION>
DATE DOCUMENT PARTIES
<S> <C> <C>
1. 27/02/1996 Minutes of meeting of directors Future Services
Limited
2. 27/02/1996 Notice of Extraordinary General Meeting Future Services
Limited
3. 27/02/1996 Minutes of Extraordinary General Future Services
Meeting Limited
4. 27/02/1996 Copy Special Resolution of Future Future Services
Services Limited Limited
5. 27/02/1996 Minutes of meeting of Board of directors Eurosystems Group
Limited
6. 27/02/1996 Letter to Companies House filing Special Future Services
Resolution of the Company and Articles Limited
of Association
7. 27/02/1996 Letter waiving legal representation Terence Anthony
Bowman and Ian
Pryce Dawkins on
behalf of Future
Services Limited
8. undated Stock Transfer Form Ian Pryce Dawkins
9. undated Stock Transfer form Terence Anthony
Bowman
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
10. 06/03/1996 Agreement General Automation
Inc. (1) Future
Services Limited (2)
Terence Anthony
Bowman (3) Ian
Pryce Dawkins (4)
11. 06/03/1996 Instrument Future Services
Limited (1) Terence
Anthony Dawkins (2)
Ian Pryce Dawkins(3)
12. 06/03/1996 Shares Mortgage Ian Pryce Dawkins
(1) Terence Anthony
Bowman (2) General
Automation Inc. (3)
13. 06/03/1996 Debenture Future Services Ltd
(1) General
Automation Inc. (2)
</TABLE>
<PAGE> 3
1
<PAGE> 4
FUTURE SERVICES LIMITED
COMPANY NO. 3023386
Minutes of a meeting of the directors held at 125 London Wall, London EC2Y 5AE
on 27.2.1996 at 7:00 pm.
PRESENT: T. A. BOWMAN (Chairman)
I. P. DAWKINS
IN ATTENDANCE:
1. IT WAS RESOLVED that T A Bowman be and is hereby appointed as Chairman
for the purposes of this meeting.
2. The Chairman announced that a quorum was present and declared the
meeting open.
3. The directors declared that they were interested in the business of
the meeting pursuant to Section 317 of the Companies Act 1985 in that
they were directors of Eurosystems Group Limited ("EGL") and (former)
directors of Krypton Group Limited ("KGL").
Purchase of shares in EGL
4. The Chairman explained that it was intended that the Company would
enter into an Agreement ("the Agreement") with General Automation Inc
("GAI") to acquire the remaining 49,951 ordinary shares of pound
sterling 1.00 each in EGL ("the Shares") not already owned by FSL and
currently registered in the name of KGL. It was reported the Shares
would be transferred to the Company pursuant to the exercise by GAI
of its power of sale in respect of the Shares under Clause 5 of a
memorandum of deposit made between KGL and GAI dated 28 October 1993
("the Memorandum of Deposit").
5. Agreement
It was noted that in entering into the Agreement the Company will be
obliged to pay to GAI the sum of $600,000 under the terms set out in
the Agreement in consideration of the acquisition of the shares.
5.1 It was further noted that both the Company and the Directors
undertook further obligations to GAI under the terms of the
Agreement in respect of calculation of payments under the
provisions of the Loan Note, the calculation of the eligible
profits of EGL upon which payments would be based and
extensive provisions regarding noteholder protection and
events of default were set out in the Loan Note.
<PAGE> 5
5.2 It was noted that the principal amounts under the Loan Note
would be paid by a half yearly payment to GAI based on the
post tax net profits of EGL
5.3 It was further noted that interest was payable under the Loan
Note of $5,000 per month
6. Fixed and Floating Charge
It was noted that in support of the Company's obligations under the
Loan Note the Company would enter into a Fixed and Floating Charge
charging by way of legal mortgage any freehold and leasehold land, by
way of fixed charge any plant machinery etc. together with book debts
and any credit balances and by way of fixed charge all stocks shares
debentures bonds notes loan capital in any subsidiary of the Company.
7. The Shares Charge
It was also noted that in support of the Company's obligations under
the Agreement and Loan Note and in support of the directors'
obligations under the Share Sale Agreement and the Loan Note the
directors would enter into a Fixed Charge over the shares in the
Company owned by the directors ("the Shares Charge").
8. Approval of the transaction
The Board considered the draft documentation and considered that
$600,000 was a fair price to pay for the shares and it was satisfied
that GAI has the necessary power under the Memorandum of Deposit to
procure the transfer of the shares to the Company. The Board was also
satisfied the Company would have the necessary resources to meet the
payments required to GAI under the Agreement.
EXTRAORDINARY GENERAL MEETING
9. The Chairman explained that:
9.1 as the Chairman and Mr I P Dawkins were directors of KGL and
were also directors and shareholders of FSL and that as the
directors were to enter into the Shares Charge to secure the
performance of FSL's obligations under the Agreement and the
directors' obligations under the Agreement and FSL's and the
directors obligations under the Loan Note, it was necessary
for the Company to approve the proposed transactions in
accordance with Section 320 of the Companies Act 1985.
9.2 it was necessary as a result of the Shares Charge being given
by the directors over the shares in the Company to alter the
Company's Articles of Association to remove the restrictions
on transfer of the Company's shares contained in the Company's
articles of association and to remove the articles allowing
the directors to allot further security and the articles
dealing with pre-emption rights
10. THERE WAS PRODUCED TO THE MEETING:
10.1 a notice convening an extraordinary general meeting of the
Company to be held on the day of February 1996 for the
purpose of considering and, if thought fit, passing the
ordinary resolution set out therein approving the acquisition
of the Shares and the execution
<PAGE> 6
of the Loan Note under the terms of the Agreement and the
execution of the Fixed and Floating Charge together with the
special resolution set out therein altering the Articles of
Association of the Company to facilitate the charging of the
shares in the Company by Messrs Bowman and Dawkins the
directors;
10.2 a form of consent to short notice.
11. IT WAS RESOLVED that the notice of extraordinary general meeting be
and it is hereby approved and that the secretary be and he is hereby
authorised and directed to issue the notice forthwith to the persons
entitled to receive the same and subject to the form of consent to
short notice being signed by the requisite majority, the extraordinary
general meeting of the Company be convened and held forthwith.
12. The meeting was thereupon adjourned to enable the extraordinary
general meeting to be held. On resumption of the meeting it was
reported that the ordinary resolution set out in the notice of
extraordinary general meeting had been duly passed.
13. There was produced to the meeting: --
13.1 A final draft Agreement
13.2 A final draft US$600,000 Loan Note in favour of GAI as
Noteholder
13.3 A final draft Fixed and Floating Charge.
14. IT WAS RESOLVED that entering into the Agreement and the Loan Note and
the Fixed and Floating Charge and acquiring the Shares would be in the
best interests of the Company and that all these documents be approved
and that any director be and he hereby is authorised to execute the
Agreement, the Loan Note and Fixed and Floating Charge and any
documents ancillary thereto for and on behalf of the Company and to
make any alterations considered necessary.
----------------------
Chairman
I certify that this is a true copy of the original minutes
----------------------
Secretary
<PAGE> 7
2
<PAGE> 8
FUTURE SERVICES LIMITED
NOTICE OF EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT an extraordinary general meeting of the company
will be held at 125 London Wall, London EC2Y 5AE on 27.2.1996 at 7:00 pm to
consider and, if thought fit, pass the following resolutions which resolution
1 will be proposed as a special resolution and resolution 2 will be proposed
as an ordinary resolution.
SPECIAL RESOLUTION
1. THAT the articles of association of the company, a copy of which is
produced to the meeting and initialled for the purpose of
identification by the chairman, be adopted as the articles of
association of the company to the exclusion of and in substitution for
the existing articles of association.
ORDINARY RESOLUTION
2. THAT pursuant to s.320 of the Companies Act 1985 the transaction be
entered into between General Automation Inc and the Company in respect
of the acquisition of 49,951 ordinary shares in Eurosystems Group
Limited currently registered in the name of Krypton Group Limited,
together with the execution of a Loan Note and Fixed and Floating
Charge in favour of General Automation Inc. pursuant to the terms of
the agreement for the acquisition of such shares and the transaction
is, and the execution of the Agreement to acquire such shares, the
Loan Note and the Fixed and Floating Charge is, hereby approved.
By Order of the Board
----------------------
Secretary
1996
Registered Office:
Stable House
Swithland Court
Woodhouse Eaves
Leicestershire
LE12 8SS
Note: A member entitled to attend and vote at the meeting is entitled to
appoint a proxy to attend and vote instead of him. A proxy need not
be a member of the company.
<PAGE> 9
3
<PAGE> 10
COMPANY NO 3023386
THE COMPANIES ACT 1985
FUTURE SERVICES LIMITED
MINUTES OF EXTRAORDINARY GENERAL MEETING
Minutes of an extraordinary general meeting of the company held at 125
London Wall, London EC2Y 5AE on 27 February 1996 at 7:00 pm
Present T A BOWMAN
I P DAWKINS
1. The Chairman announced that a quorum was present and declared the
meeting open.
2. The Chairman announced that all members of the company had consented
to the holding of the meeting at short notice.
3. The following resolutions were proposed of which resolution 1 was
proposed as a special resolution and resolution 2 as an ordinary
resolution. Both resolutions were passed unanimously.
RESOLUTIONS
SPECIAL RESOLUTION
1. THAT the articles of association of the company, a copy of which is
produced to the meeting and initialled for the purpose of
identification by the chairman, be adopted as the articles of
association of the company to the exclusion of and in substitution for
the existing articles of association.
ORDINARY RESOLUTION
2. THAT pursuant to s.320 of the Companies Act 1985 the transaction be
entered into between General Automation Inc and the Company in respect
of the acquisition of 49,951 ordinary shares in Eurosystems Group
Limited currently registered in the name of Krypton Group Limited,
together with the execution of a Loan Note and Fixed and Floating
Charge in favour of General Automation Inc. pursuant to the terms of
the agreement for the acquisition of such shares and transaction is,
and the execution of the Agreement to acquire such shares, the Loan
Note and the Fixed and Floating Charge is, hereby approved.
----------------------
Chairman
<PAGE> 11
4
<PAGE> 12
COMPANY NO 3023386
THE COMPANIES ACT 1985
COPY SPECIAL RESOLUTION
OF
FUTURE SERVICES LIMITED
At an extraordinary general meeting of the company held on 27th February 1996,
the following resolution was passed as a special resolution.
SPECIAL RESOLUTION
1. THAT the articles of association of the company, a copy of which is
produced to the meeting and initialled for the purpose of
identification by the chairman, be adopted as the articles of
association of the company to the exclusion of and in substitution
for the existing articles of association.
----------------------
Chairman
<PAGE> 13
THE COMPANIES ACT 1985
----------
COMPANY LIMITED BY SHARES
----------
ARTICLES of ASSOCIATION
OF
FUTURE SERVICES
LIMITED
ALTERED BY SPECIAL RESOLUTION DATED [ ] FEBRUARY 1996
------------------------------------
1. Subject as hereinafter provided, the regulations contained in Table A
in The Companies (Tables A to F) 1985 (hereinafter referred to as
"Table A") shall apply to the Company.
2. Regulations 8, 40, 64, 76, 77 and 113 of Table A shall not apply to
the Company.
3. The Company is a private company and accordingly no offer or
invitation shall be made to the public (whether for cash or otherwise)
to subscribe for any shares in or debentures of the Company, nor shall
the Company allot or agree to allot (whether for cash or otherwise)
any shares in or debentures of the Company with a view to all or any
of those shares or debentures being offered to the public.
4. As at the date of adoption of these Articles the capital of the
Company is pound sterling 100 divided into 100 Ordinary Shares of
pound sterling 1 each.
5. By virtue of section 91(l) of the Companies Act 1985, sections 89(l)
and 90(l) to 90(6) inclusive of that Act shall not apply to the
Company.
The Company shall have a first and paramount lien on every share
(whether or not it is a fully paid share) for all moneys (whether
presently payable or not) called or payable at a fixed time in respect
of that share and the Company shall also have a first and paramount
lien on all shares (whether fully paid or not) standing registered in
the name
1
<PAGE> 14
of any member whether solely or one of two or more joint holders for
all moneys presently payable by him or his estate to the Company; but
the Directors may at any time declare any share to be wholly or in
part exempt from the provisions of this Article. The Company's lien
(if any) on a share shall extend to all dividends payable thereon.
6. The first sentence of regulation 24 of Table A shall not apply to the
Company.
7. In accordance with section 372(3) of the Companies Act of 1985 in
every notice calling a General Meeting of the Company there shall
appear with reasonable prominence a statement that a member entitled
to attend and vote is entitled to appoint a proxy to attend and vote
instead of him and that a proxy need not be a member of the Company.
Regulation 38 of Table A shall be modified accordingly and the second
sentence of Regulation 59 of Table A shall not apply to the Company.
8. In Regulation 41 of Table A there shall be added at the end: "If at
the end of any adjourned meeting a quorum is not present within half
an hour from the time appointed for the meeting the meeting shall be
dissolved".
9. In the case of the Company having only one member the quorum at any
General Meeting shall be that member or his proxy. In the case that
there are two or more members, two members shall constitute a quorum.
10. Unless and until the Company in general meeting shall otherwise
determine, there shall be no maximum number of Directors and the
minimum number of Directors shall be one. If and so long as there is
a sole Director he may exercise all the powers and authorities vested
in the Directors by these Articles and Table A and Regulation 89 of
Table A shall be modified accordingly. The first Directors of the
Company shall be as named in the statement delivered to the Registrar
of Companies pursuant to section 10 of the Companies Act 1985.
11. The Company shall not be subject to section 293 of the Companies Act
1985, and accordingly any person may be appointed or elected as a
Director, whatever his age, and no Director shall be required to
vacate his office of Director by reason of his attaining or having
attained the age of seventy years or any other age.
14. No person other than a Director retiring by rotation shall be elected
a Director at any general meeting unless:
(i) He is recommended by the Directors; or
(ii) not less than fourteen or more than thirty-five days before
the date of the meeting a notice in writing signed by a member
qualified to vote at the meeting
2
<PAGE> 15
has been given to the Company of the intention to propose that
person for election, together with a notice in writing signed
by that person of his willingness to be elected.
15. A Director shall not be required to hold any share qualification but
shall nevertheless be entitled to receive notice of and to attend at
all general meetings of the holders of any class of shares in the
capital of the Company.
3
<PAGE> 16
THE COMPANIES ACT 1985
----------
COMPANY LIMITED BY SHARES
----------
ARTICLES OF ASSOCIATION
OF
FUTURE SERVICES
LIMITED
ALTERED BY SPECIAL RESOLUTION DATED 27TH FEBRUARY 1996
------------------------------------
1. Subject as hereinafter provided, the regulations contained in Table A
in The Companies (Tables A to F) 1985 (hereinafter referred to as
"Table A") shall apply to the Company.
2. Regulations 8, 40, 64, 76, 77 and 113 of Table A shall not apply to
the Company.
3. The Company is a private company and accordingly no offer or
invitation shall be made to the public (whether for cash or otherwise)
to subscribe for any shares in or debentures of the Company, nor shall
the Company allot or agree to allot (whether for cash or otherwise)
any shares in or debentures of the Company with a view to all or any
of those shares or debentures being offered to the public.
4. As at the date of adoption of these Articles the capital of the
Company is pound sterling 100 divided into 100 Ordinary Shares of
pound sterling 1 each.
5. By virtue of section 91(l) of the Companies Act 1985, sections 89(l)
and 90(l) to 90(6) inclusive of that Act shall not apply to the
Company.
The Company shall have a first and paramount lien on every share
(whether or not it is a fully paid share) for all moneys (whether
presently payable or not) called or payable at a fixed time in respect
of that share and the Company shall also have a first and paramount
lien on all shares (whether fully paid or not) standing registered in
the name
1
<PAGE> 17
of any member whether solely or one of two or more joint holders for
all moneys presently payable by him or his estate to the Company; but
the Directors may at any time declare any share to be wholly or in
part exempt from the provisions of this Article. The Company's lien
(if any) on a share shall extend to all dividends payable thereon.
6. The first sentence of regulation 24 of Table A shall not apply to the
Company.
7. In accordance with section 372(3) of the Companies Act of 1985 in
every notice calling a General Meeting of the Company there shall
appear with reasonable prominence a statement that a member entitled
to attend and vote is entitled to appoint a proxy to attend and vote
instead of him and that a proxy need not be a member of the Company.
Regulation 38 of Table A shall be modified accordingly and the second
sentence of Regulation 59 of Table A shall not apply to the Company.
8. In Regulation 41 of Table A there shall be added at the end: "If at
the end of any adjourned meeting a quorum is not present within half
an hour from the time appointed for the meeting the meeting shall be
dissolved".
9. In the case of the Company having only one member the quorum at any
General Meeting shall be that member or his proxy. In the case that
there are two or more members, two members shall constitute a quorum.
10. Unless and until the Company in general meeting shall otherwise
determine, there shall be no maximum number of Directors and the
minimum number of Directors shall be one. If and so long as there is a
sole Director he may exercise all the powers and authorities vested in
the Directors by these Articles and Table A and Regulation 89 of Table
A shall be modified accordingly. The first Directors of the Company
shall be as named in the statement delivered to the Registrar of
Companies pursuant to section 10 of the Companies Act 1985.
11. The Company shall not be subject to section 293 of the Companies Act
1985, and accordingly any person may be appointed or elected as a
Director, whatever his age, and no Director shall be required to
vacate his office of Director by reason of his attaining or having
attained the age of seventy years or any other age.
14. No person other than a Director retiring by rotation shall be elected
a Director at any general meeting unless:
(i) He is recommended by the Directors; or
(ii) not less than fourteen or more than thirty-five days before
the date of the meeting a notice in writing signed by a member
qualified to vote at the meeting
2
<PAGE> 18
has been given to the Company of the intention to propose that
person for election, together with a notice in writing signed
by that person of his willingness to be elected.
15. A Director shall not be required to hold any share qualification but
shall nevertheless be entitled to receive notice of and to attend at
all general meetings of the holders of any class of shares in the
capital of the Company.
3
<PAGE> 19
5
<PAGE> 20
EUROSYSTEMS GROUP LIMITED
Minutes of a meeting of the Board of Directors of the above-named Company held
at 125 London Wall, London EC2Y 5AE on the 27th day of February 1996 at 7:05 pm
PRESENT: I P DAWKINS (Chairman)
T A BOWMAN
IN ATTENDANCE:
CHAIRMAN
1. IT WAS RESOLVED that Mr I Dawkins be and is hereby appointed the
Chairman for the purposes of this meeting.
2. It was reported that a general notice of interest in accordance with
Section 317 of the Companies Act 1985 had been received by the Board
from the Chairman and from Mr T Bowman.
SHARE TRANSFER
3. IT WAS RESOLVED that the under-mentioned transfer of shares, having
been executed by the transferee, be approved and registered, subject
to it being duly stamped and presented for registration in accordance
with the provisions of the Articles of Association and that a Share
Certificate in respect of such shares be executed and issued to the
transferee:-
<TABLE>
<CAPTION>
TRANSFEROR TRANSFEREE NO. OF SHARES TRANSFERRED
<S> <C> <C>
Krypton Group Limited Future Services Limited 49,951
</TABLE>
CONCLUSION
4. There being no further business the Meeting then terminated.
----------------------
Chairman
<PAGE> 21
EUROSYSTEMS GROUP LIMITED
Minutes of a meeting of the Board of Directors of the above-named Company held
at_________on the________day of________________1996 at_________ [am][pm].
PRESENT: I P DAWKINS (Chairman)
T A BOWMAN
IN ATTENDANCE:
CHAIRMAN
1. IT WAS RESOLVED that Mr I Dawkins be and is hereby appointed the
Chairman for the purposes of this meeting.
2. It was reported that a general notice of interest in accordance with
Section 317 of the Companies Act 1985 had been received by the Board
from the Chairman and from Mr T Bowman.
SHARE TRANSFER
3. IT WAS RESOLVED that the under-mentioned transfer of shares, having
been executed by the transferee, be approved and registered, subject
to it being duly stamped and presented for registration in accordance
with the provisions of the Articles of Association and that a Share
Certificate in respect of such shares be executed and issued to the
transferee:-
<TABLE>
<CAPTION>
TRANSFEROR TRANSFEREE NO. OF SHARES TRANSFERRED
<S> <C> <C>
Krypton Group Limited Future Services Limited 49,951
</TABLE>
CONCLUSION
4. There being no further business the Meeting then terminated.
----------------------
Chairman
<PAGE> 22
6
<PAGE> 23
FUTURE SERVICES LIMITED
REGISTERED OFFICE
STABLE HOUSE
WOODLAND COURT
WOODHOUSE EAVES
LEICESTERSHIRE
LE12 8SS
The Companies Registrar
Companies House
Crown Way
Maindy
CARDIFF
CF4 3UZ
27 February 1996
Dear Sirs
COMPANY REGISTRATION NO. -- 3023386
We enclose original Special Resolution of the Company dated 27th February 1996
together with attached Articles of Association. Kindly acknowledge receipt to
both the solicitors filing this Resolution and the company by signing the
enclosed copy of this letter and returning it each party in the stamped
addressed envelope provided.
Yours faithfully
<PAGE> 24
FUTURE SERVICES LIMITED
REGISTERED OFFICE
STABLE HOUSE
WOODLAND COURT
WOODHOUSE EAVES
LEICESTERSHIRE
LE12 8SS
<PAGE> 25
T POPE ESQ
DIBB LUPTON BROOMHEAD
125 LONDON WALL
LONDON
EC2Y 5AE
<PAGE> 26
7
<PAGE> 27
FUTURE SERVICES LIMITED
REGISTERED OFFICE
STABLE HOUSE
WOODLAND COURT
WOODHOUSE EAVES
LEICESTERSHIRE
LE12 8SS
General Automation Inc.
17731 Mitchell North
Irvine
CA 92714
USA
27 February 1996
Dear Sirs
FUTURE SERVICES LIMITED ("FSL")
SALE OF SHARES IN EUROSYSTEMS GROUP LTD ("EGL") TOGETHER WITH LOAN NOTE IN
FAVOUR OF GENERAL AUTOMATION INC. ("GAI") AND FIXED AND FLOATING CHARGE IN
FAVOUR OF GAI AND CHARGE OVER SHARES IN FSL TO BE GRANTED BY MESSRS BOWMAN &
DAWKINS
We confirm we have received from you the following documents.
1. Agreement to acquire 49,951 ordinary pound sterling 1.00 shares in
EGL.
2. US$600,000 Loan Note in respect of the monies payable by FSL under the
terms of the Agreement. This Loan Note also contains certain
obligations and undertakings on the part of FSL on the part of
ourselves as individuals and directors of FSL.
3. The event of default are set out in the Loan Note which would trigger
the ability of GAI to exercise their rights under the Shares Mortgage
and the Fixed and Floating Charge.
4. Fixed and Floating Charge to be granted by FSL in favour of GAI to
support the obligations of FSL under the Loan Note and the Agreement.
5. A Shares Mortgage which contains a Charge over the shares of ourselves
owned in FSL to support the obligations of FSL and the obligations of
ourselves under the terms of the Share Sale Agreement and the Loan
Note.
We have confirmed to you that we do not wish, on behalf of FSL, and on behalf
of ourselves individually, to take legal advice on the documents and we
understand their nature and contents. We further understand the documents in
large measure reflect the matters set out in the Heads of Terms signed by
ourselves last Friday the 23rd of February 1996.
<PAGE> 28
We have also had the opportunity to read through the Board Minutes and Ordinary
Special Resolutions of FSL and the same comments apply to these documents that
apply to the documents mentioned above.
Yours faithfully
/s/ T A BOWMAN /s/ I P DAWKINS
- -----------------------------------------------
T A Bowman and I P Dawkins for and on behalf of
Future Services Limited
/s/ T A BOWMAN
- --------------------------------
T A Bowman
/s/ I P DAWKINS
- --------------------------------
I P Dawkins
<PAGE> 29
8
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C> <C>
(Above this line for Registrars only)
/ ---------------------------------------------------------------------------------------------------------------------
STOCK / / Certificate lodged with the Registrar
TRANSFER / /
FORM / /
/ /
/ Consideration Money pound sterling ............... / (For completion by the Registrar/Stock Exchange)
/ ---------------------------------------------------------------------------------------------------------------------
/ Name of Undertaking / FUTURE SERVICES LIMITED (co. no. 3023386)
/ /
/ --------------------------------/------------------------------------------------------------------------------------
/ Description of Security / Ordinary shares of pound sterling 1.00 each
/ /
/ ---.----------------------------/------------------------------------------------------------------------------------
/ Number or amount of Shares, / Words / Figures
/ Stock or other security and, / Fifty ordinary one pound shares /
/ in figures column only, / /
/ number and denominations of / /
/ units, if any. / /
/ / / (50 units of pound
/ / / sterling 1.00)
/ ------.-------------------------/------------------------------------------------------------------------------------
/ Name(s) of registered / In the name(s) of
/ holder(s) should be given in /
/ full: the address should be / Ian Pyce Dawkins of Stable House Swithland Court Woodhouse Eaves
/ given where there is only one / Leicestershire LE12 8SS
/ holder. /
/ /
/ If the transfer is not made
/ by the registered holder(s) /
/ insert also the name(s) and /
/ capacity (e.g. Executor(s) of /
/ the person(s) making the /
/ transfer. /
/ /
/-------------------------------------------------------------------------------------------------------------------------------
/ I/We hereby transfer the above security out of the name(s) aforesaid / Stamp of Selling Broker(s) or, for transactions
/ to the person(s) named below. / which are not stock exchange transactions of
/ / Agent(s), if any acting for the Tranferor(s)
/ Signature(s) of transferor(s) /
/ /
/ /
/ 1. /s/ I P DAWKINS /
/ ---------------------------------------------------------------- /
/ 2. /
/ ---------------------------------------------------------------- /
/ 3. /
/ ---------------------------------------------------------------- /
/ 4. / Date
/ ---------------------------------------------------------------- / ----------------------------------------------
/ Bodies corporate should execute under their common seal /
/-------------------------------------------------------------------------------------------------------------------------------
/ /
/ /
/ Full name(s) and full postal /
/ address(es) (including County /
/ or, if applicable, Postal /
/ District number) of the /
/ person(s) to whom the /
/ security is transferred. /
/ /
/ /
/ Please state title, if any, or /
/ whether Mr., Mrs. or Miss. /
/ /
/ /
/ Please complete in type- /
/ writing or Block Capitals /
/-------------------------------------------------------------------------------------------------------------------------------
/ I/We request that such entries be made in the register as are necessary to give effect to this transfer.
/-------------------------------------------------------------------------------------------------------------------------------
/ / Stamp or name and address of person lodging this form
/ Stamp of Buying Broker(s) (if any) / (if other than the buying broker(s))
/-------------------------------------------------------------- / --------------------------------------------------------------
/ /
/ /
/ /
/ /
/ /
/ /
/-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
9
<PAGE> 32
<TABLE>
<CAPTION>
<S> <C> <C>
(Above this line for Registrars only)
/ ---------------------------------------------------------------------------------------------------------------------
STOCK / / Certificate lodged with the Registrar
TRANSFER / /
FORM / /
/ /
/ Consideration Money pound sterling ............... / (For completion by the Registrar/Stock Exchange)
/ ---------------------------------------------------------------------------------------------------------------------
/ Name of Undertaking / FUTURE SERVICES LIMITED (co. no. 3023386)
/ /
/ --------------------------------/------------------------------------------------------------------------------------
/ Description of Security / Ordinary shares of pound sterling 1.00 each
/ /
/ ---.----------------------------/------------------------------------------------------------------------------------
/ Number or amount of Shares, / Words / Figures
/ Stock or other security and, / Fifty ordinary one pound shares /
/ in figures column only, / /
/ number and denominations of / /
/ units, if any. / /
/ / / (50 units of pound
/ / / sterling 1.00)
/ ------.-------------------------/------------------------------------------------------------------------------------
/ Name(s) of registered / In the name(s) of
/ holder(s) should be given in /
/ full: the address should be / Terence Anthony Bowman of Bayview House, The Square,
/ given where there is only one / Cawsand, Cornwall, PL10 1PD
/ holder. /
/ /
/ If the transfer is not made
/ by the registered holder(s) /
/ insert also the name(s) and /
/ capacity (e.g. Executor(s) of /
/ the person(s) making the /
/ transfer. /
/ /
/-------------------------------------------------------------------------------------------------------------------------------
/ I/We hereby transfer the above security out of the name(s) aforesaid / Stamp of Selling Broker(s) or, for transactions
/ to the person(s) named below. / which are not stock exchange transactions of
/ / Agent(s), if any acting for the Tranferor(s)
/ Signature(s) of transferor(s) /
/ /
/ /
/ 1. /s/ T A BOWMAN /
/ ---------------------------------------------------------------- /
/ 2. /
/ ---------------------------------------------------------------- /
/ 3. /
/ ---------------------------------------------------------------- /
/ 4. / Date
/ ---------------------------------------------------------------- / ----------------------------------------------
/ Bodies corporate should execute under their common seal /
/-------------------------------------------------------------------------------------------------------------------------------
/ /
/ /
/ Full name(s) and full postal /
/ address(es) (including County /
/ or, if applicable, Postal /
/ District number) of the /
/ person(s) to whom the /
/ security is transferred. /
/ /
/ /
/ Please state title, if any, or /
/ whether Mr., Mrs. or Miss. /
/ /
/ /
/ Please complete in type- /
/ writing or Block Capitals /
/-------------------------------------------------------------------------------------------------------------------------------
/ I/We request that such entries be made in the register as are necessary to give effect to this transfer.
/-------------------------------------------------------------------------------------------------------------------------------
/ / Stamp or name and address of person lodging this form
/ Stamp of Buying Broker(s) (if any) / (if other than the buying broker(s))
/-------------------------------------------------------------- / --------------------------------------------------------------
/ /
/ /
/ /
/ /
/ /
/ /
/-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 33
10
<PAGE> 34
DATED 6th MARCH 1996
GENERAL AUTOMATION INC
- AND -
FUTURE SERVICES LIMITED
- AND -
TERENCE ANTHONY BOWMAN
AND
IAN PRYCE DAWKINS
--------------------
AGREEMENT
--------------------
FOR THE TRANSFER OF
49,951 ORDINARY SHARES OF POUND STERLING 1 EACH
IN THE CAPITAL OF EUROSYSTEMS GROUP LIMITED
(COMPANY NUMBER 2744739)
- -------------------------------------------------------------------------------
Dibb Lupton Broomhead
125 LONDON WALL
LONDON
EC2Y 5AE
TEL: 0345 26 27 28
Fax: 0171 600 1753
<PAGE> 35
THIS AGREEMENT is made on 6th March 1996
BETWEEN:
(1) GENERAL AUTOMATION INC a company organised under the laws of the State
of Delaware, United States of America and whose principal place of
business is at 17731 Mitchell North Irvine CA92714 USA ("GAI"); and
(2) FUTURE SERVICES LIMITED (Company Number 3023386) whose registered
office is at Stable House, Swithland Court, Woodhouse Eames,
Leicestershire, England ("FSL"); and
(3) TERENCE ANTHONY BOWMAN of Bayview House, The Square, Cawsand, Cornwall
PL10 1PD and IAN PRYCE DAWKINS of Stable House, Swithland Court,
Woodhouse Eaves, Leicestershire LE12 8SS (the "Directors")
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement where the context admits the following words
and phrases have the meanings next to them:
"agreed form" means a document or agreement in a
form agreed by the parties hereto
prior to Completion;
"Company" means Eurosystems Group Limited
(Company no. 2744739) (formerly
called Eurosystems GA Limited)
whose registered office is at
7 Pilgrim Street, London EC4V 6DR;
<PAGE> 36
the "FSL Shares the fixed charge over the Shares
Charge" in FSL to be given on completion
by the Directors;
"Completion" completion of the transfer of the
Shares in accordance with
Clause 4;
"Consideration" means the consideration for the
Shares specified in Clause 3;
"Encumbrance" means any interest or equity of any
person (including without
limitation, any right to acquire,
option or preemption), any
mortgage, pledge, lien, assignment,
hypothecation, security interest,
title retention or any other security
agreement or arrangement affecting
property of any kind (or any rights
in it);
"FSL Legal Charge" a fixed and floating charge in the
agreed form made between FSL and
GAI;
"Krypton" means Krypton Group Limited (Company
no. 1385108) whose registered
office is at ?????
the "Loan Notes" the $600,000 Loan Note of FSL to be
completed by an
2
<PAGE> 37
instrument in the form annexed
"Memorandum of hereto; means the memorandum of
Deposit" deposit made between Krypton and GAI
dated 28 October 1993;
"Shares" 49,951 ordinary shares of pound
sterling 1 each in the capital of
the Company to be transferred
pursuant to Clause 2.
1.2 References to clauses, sub-clauses, schedules and paragraphs
are to clauses, sub-clauses, schedules and paragraphs of this
Agreement.
1.3 This Agreement incorporates the Schedules to it.
1.4 References to any gender includes the other genders and
references to the singular includes the plural and vice versa,
words denoting persons include corporations and unincorporated
associations and partnerships.
1.5 Headings and descriptive notes in brackets to provisions of
this Agreement or statutes are for ease of reference only and
do not affect the interpretation of this Agreement.
1.6 References to the parties to this Agreement includes their
respective permitted assigns.
2. TRANSFER OF SHARES
Subject to the terms of this Agreement, GAI shall, as mortgagee
exercising its power of sale under the Memorandum of Deposit, procure
the transfer to FSL of the Shares and
3
<PAGE> 38
FSL shall accept such a transfer. The Shares are transferred together
with all rights vested therein or thereafter attaching to them
(including all unpaid dividends and other distributions declared or
made on or before the date of this Agreement).
3. CONSIDERATION
The Consideration for the transfer of the Shares shall be US$600,000
and the obligations of FSL and the Directors under the terms of this
Agreement. The Consideration payable in cash shall be paid by FSL to
GAI in accordance with the provisions of Schedule 1. The obligations
of FSL and the Directors are set out in Schedule 2.
4. COMPLETION
Completion shall take place immediately following the signing of this
Agreement whereupon each party shall comply with the provisions
specified in Schedule 2.
5. POST COMPLETION OBLIGATIONS
FSL hereby undertakes that it shall and the Directors will procure
that FSL shall until payment in full of the total amount of the
Consideration in accordance with Schedule 1 of this Agreement comply
with any and all post completion obligations set out in this agreement
and the Loan Notes.
6. ASSIGNMENT
This Agreement is binding upon and shall ensure for the benefit of the
successors of the parties but shall not be assignable except with the
prior written consent of the other party.
4
<PAGE> 39
7. EXCLUSION
It is agreed the Exclusions set out in Schedule 3 shall take effect on
it set out in full in this clause.
8. AMENDMENT AND WAIVER
8.1 No variation of this Agreement (except as set out in
sub-clause 8.2) shall be effective unless made in writing and
signed by all the parties.
8.2 No waiver of any term provision or condition of this Agreement
shall be effective except to the extent made in writing and
signed by the waiving party.
8.3 No omission or delay on the part of any party in exercising
any right power or privilege under this Agreement shall
operate as a waiver by it of any right to exercise it in
future or of any other of Its rights under this Agreement.
9. FURTHER ASSURANCE
FSL and the directors shall whenever requested by GAM execute and
procure the execution of such documents and do such acts and things as
GAM may reasonably require to give full effect to this Agreement.
10. TIME OF THE ESSENCE
Time shall be of the essence of this Agreement both as to any due date
or period mentioned in this Agreement and to any due date or period
substituted by payment of the parties.
5
<PAGE> 40
11. PUBLICITY
No announcement or disclosure in respect of the making or terms of
this Agreement shall be made or disclosed by either party without
prior consultation with the other party except to the extent
disclosure is required by law or any requirements of the US securities
laws or regulations which disclosure shall then only be made:
11.1 after prior consultation with the other party as to its terms;
11.2 strictly in accordance with any Agreements as to the terms of
disclosure; and
11.3 only to the persons and in the manner required by law or as
otherwise agreed.
12. NOTICES
12.1 Any notices or other document to be served under this
Agreement must be in writing and may be delivered or sent by
pre-paid air mail post or facsimile transmission to FSL at its
registered office for the time being and to GAI at its
registered address and to the Directors at their address as
contained in this Agreement.
12.2 Any notice or document shall be deemed served:
12.2.1 if delivered at the time of delivery;
12.2.2 if posted 4 days after posting; and
12.2.3 if sent by facsimile transmission at the time of
transmission if between the hours of 9.00 am and 5.00
pm on Monday to Friday (other than
6
<PAGE> 41
statutory holidays) or otherwise at 9.00 am on the next
succeeding banking business day provided always that a hard
copy of the facsimile transmission is posted to the addressee
of the notice within 24 hours of such transmission.
12.3 In proving service (without prejudice to any other means):
12.3.1 by post it shall only be necessary to prove the
notice or document was contained in an envelope
properly stamped and posted as provided in this
Clause;
12.3.2 by facsimile transmission that the notice or document
was duly received by production of a copy fax bearing
the addressee's answerback code or automatic record
of correct transmission.
13. ENTIRE AGREEMENT
This document and the documents executed pursuant to it (including any
side letters between the parties of today's date) constitute the
entire Agreement between the parties in connection with the sale and
purchase of the Shares.
14. SURVIVORSHIP
This Agreement shall as to any of its provisions remaining to be
performed in whole or in part or capable of having effect following
Completion (or any transfer of the Shares) remain in full force and
effect notwithstanding Completion (or any transfer of the Shares).
7
<PAGE> 42
15. ENGLISH LAW
The performance, construction and validity of this Agreement shall be
governed by English Law and the parties hereby submit to the non-
exclusive jurisdiction of the English Courts.
AS WITNESS this Agreement has been duly executed by the parties on the date set
out above.
8
<PAGE> 43
SCHEDULE I
Consideration
The Consideration shall be provided by FSL in the following manner:
1. The creation and issue by FSL to GAI of the Loan Note on Completion.
2. The compliance by FSL with the completion requirements detailed in
Schedule 2 on Completion.
9
<PAGE> 44
SCHEDULE 2
COMPLETION REQUIREMENTS
1. GAI shall deliver or cause to be delivered to FSL the transfer of the
Shares provided to GAI by Krypton pursuant to Clause 4 of the
Memorandum of Deposit, duly executed by Krypton acting by Messrs I P
Dawkins and T A Bowman as secretary and director of Krypton, together
with the Share Certificate for the Shares. FSL acknowledges and
agrees that the transferor stated in such transfer shall be Krypton
and will raise no objection, requisition or enquiry in relation
thereto.
2. The Directors shall procure that a meeting of the board of directors
of the Company is held at which its directors shall validly:
2.1 approve the share transfer and vote in favour of the
registration of FSL as a member (subject only to due stamping
where necessary); and
2.2 authorise the issue of a share certificate for the Shares to
FSL.
3. The Directors shall procure a meeting of the board of directors of FSL
is held at which its directors shall validly:
3.1 call the necessary shareholders meeting and prove the valid
passing of the necessary special resolutions in the form
annexed hereto to alter FSL's articles of association;
3.2 execute the FSL Legal Charge and deliver the same to GAI.
4. The Directors will execute the FSL Shares Charge and deliver the same
to GAI.
10
<PAGE> 45
SCHEDULE 3
EXCLUSIONS
1. The interests in the Shares which GAI sells and the Purchaser buys is
such right, title and interest as GAI may have at Completion (if any)
and references to the Shares shall mean such right, title and
interest.
2. All representations, warranties and conditions, express or implied and
whether statutory or otherwise, are expressly excluded upon and in
relation to the sale of the Shares.
3. FSL acknowledges and agrees that it is not relying on any statement or
silence on the part of GAI or of their employees, advisers, valuers,
agents, partners or representatives.
4. The provisions of this schedule shall continue notwithstanding
Completion and shall operate as waivers of any claim in tort and
restitution as well as under the law of contract.
5. These exclusions shall be in addition to, and not in substitution for,
any right of indemnity or right of payment for the Shares or relief
otherwise available to GAI and shall continue after Completion.
11
<PAGE> 46
SIGNED as a Deed and delivered )
by TERENCE ANTHONY BOWMAN in )
the presence of: )
SIGNED as a Deed and delivered )
by IAN PRYCE DAWKINS in the )
presence of: )
EXECUTED AS A DEED by GENERAL )
AUTOMATION INC. acting by the )
following signatures )
-------------------------------------
-------------------------------------
12
<PAGE> 47
11
<PAGE> 48
DATED 6TH MARCH 1996
FUTURE SERVICES LIMITED
and
TERENCE ANTHONY BOWMAN
IAN PRYCE DAWKINS
INSTRUMENT
constituting US $600,000
10% Loan Notes
- --------------------------------------------------------------------------------
Dibb Lupton Broomhead
125 London Wall
LONDON
EC2Y 5AE
Tel : 0345 26 27 28
Fax : 0171 600 1678
<PAGE> 49
THIS INSTRUMENT is made 6th March 1996
BY:
(1) FUTURE SERVICES LIMITED (Company No 3023386) whose registered office
is at Stable House Swithland Court Woodhouse Eaves Leicestershire LE12
8SS (the "Company")
(2) TERENCE ANTHONY BOWMAN of Bayview House The Square Cawsand Cornwall
PL10 1PD and IAN PRYCE DAWKINS of Stable House Swithland Court
Woodhouse Eaves Leicestershire LE12 8SS ("TAB" and "IPD")
1. INTERPRETATION
1.1 Definitions
In this instrument where the context admits the following
words and phrases have the meanings next to them:
<TABLE>
<S> <C>
the "Accountants the report referred to in Part
Report" 1 of Schedule 3;
the "Payment the accounts referred to in
Accounts" Part 1 of Schedule 3;
"Completion" the date hereof;
"Directors" TAB and IPD and any directors
appointed from time to time in
respect of the Company;
"EGL" Eurosystems Group Limited
(Company No 2744739);
"End Year Date" the date at the end of EGL's
accounting reference year or
period being the period
notified to Companies House
under the provisions of s225 of
the Companies Act 1985;
"EGL Share Capital" all the share capital of
Eurosystems Group Limited
(Company No 2744739) which is
issued from time to time;
"FSL's Accountants" Cooper Parry Accountants of 1/2
Friargate Derby;
</TABLE>
1
<PAGE> 50
<TABLE>
<S> <C>
"GAI" General Automation Inc a company organised under the Law of Delaware U.S.A.
whose principal place of business is 17731 Mitchell North Irvine CA 92714
USA "Repayment Dates" monthly commencing on the 29th day of February 1996 (and thereafter on the
last business day of each month) in respect of the interest repayments of
USS5,000 per month and on the Half Year Date and the End Year Date in
respect of the repayments of the principal indebtedness;
the "Subsidiaries" (1) Eurosystems Group Limited (Company No. 2744739) (2) Eurosystems UK
Limited (Company No. 1257722), (3) Eurosystems GA Belgium nv/sa (Company No.
358.518 Bruxelles), (4) Eurosystems GA France S.A. (Company No. B 331 904
854), (5) Eurosystems Italia S.p.A. (Company No. CCIAA Milano No. 848285)
together with any other companies or undertakings which are subsidiaries or
subsidiary undertakings of EGL from time to time
the "Noteholder's Price Waterhouse;
Accountants
"the "Group"
the following companies: (1) EGL, (2) Eurosystems UK Limited (Company No.
1257722), (3)
</TABLE>
2
<PAGE> 51
<TABLE>
<S> <C>
Eurosystems GA Belgium nv/sa (Company No. 358.518 Bruxelles), (4)
Eurosystems GA France S.A. (Company No. B 331 904 854), (5) Eurosystems
Italia S.p.A. Company No. CCIAA Milano No. 848285);
"Group Company" any company which is a member of the Group;
"Half Year Date" the date six calendar months after the start of EGL's accounting reference
year or period being the period notified to Companies House by EGL under the
provisions of s225 of the Companies Act 1985;
"Notes" the US $600,000 10% Loan Notes hereby constituted or, as the case may
require, the amount thereof for the time being issued and outstanding;
"Noteholder" the person or several persons for the time being entered in
the Register hereinafter mentioned as the holders of the Notes;
"Sale Shares" the Sale Shares referred to in an Agreement of even date herewith made
between (1) General Automation, Inc (2) the Company and (3) the Directors;
"Share Sale the Agreement referred to in
Agreement" the definition of Sale Shares above;
the "Security" the Security listed in Schedule 4;
</TABLE>
3
<PAGE> 52
1.2 Construction of certain references In this instrument where
the context admits:
1.2.1 references to clauses and sub-clauses Schedules and
paragraphs are to clauses and sub-clauses of, Schedules
to, and paragraphs of Schedules to this instrument save
where otherwise stated;
1.2.2 this instrument incorporates the Schedules to it;
1.2.3 references to any gender includes the other genders and
reference to the singular includes the plural and vice
versa, words denoting persons include corporations and
unincorporated associations and partnerships;
1.2.4 headings and descriptive notes in brackets to
provisions of this instrument or statutes are for ease
of reference only and do not affect the interpretation
of this instrument;
1.2.5 reference to the parties to this instrument includes
their respective permitted assign;
1.2.6 reference to this instrument and any other document
referred to in this instrument include reference to any
such document as amended or supplemented in accordance
with its terms.
2. WHEREAS:
2.1 The Company has by resolution of its board of Directors passed
on [ ] February 1996 created US $600,000 (Six hundred thousand
US dollars) 10% Loan Notes on the terms hereinafter set out.
2.2 The Notes are to be issued to GAI, as part of the
consideration for the Sale Shares.
2.3 This instrument takes effect as a deed if executed by hand.
4
<PAGE> 53
3. CONDIT10NS
The Notes shall be held subject to the conditions in Schedule 2 and
such conditions shall be binding on the Company and the Noteholder and
all persons claiming through them respectively.
4. INTEREST
4.1 The Company will pay to the Noteholders interest on the Notes
at the rate of 10%(ten per cent) per annum monthly in arrears
on the last business day of each calendar month such payments
to be made at the rate of $5,000 US (Five thousand US dollars)
per month. The interest shall accrue from day to day and be
computed on a 360 day basis from the date of this Instrument.
4.2 Insofar as the payment at the rate of $5,000 US per month
exceeds the amount of interest payable on the balance of the
indebtedness outstanding under the Notes any surplus over and
above the interest payment will be utilised in repayment of
the principal indebtedness outstanding hereunder.
5. PAYMENT
All monies payable in respect of the Notes either of interest paid or
principal shall be paid in US dollars to the Noteholder by bank
transfer to the following account: Account Number 4500132251; Union
Bank, Orange CA 72668; Routing Number: 122000-496 or by such other
method as the Noteholder may specify from time to time.
6. REPAYMENTS OF PRINCIPAL AMOUNT OF THE NOTES
As and when the Notes are, or any part thereof is, repayable in
accordance with the Conditions the Company will pay to the Noteholders
the principal amount of the Notes which falls to be repaid together
with interest at the rate specified in clause 4 hereof calculated to
the actual date of redemption or repayment.
5
<PAGE> 54
7. SET-OFF AND TAXATION
All sums payable by the Company hereunder (whether of principal,
interest, fees or otherwise) shall be paid:
7.1 in full without any deduction on account of any set-off of
amounts due or allegedly due from the Noteholder to the
Company; and
7.2 free and clear of, and without deduction for, any taxes or
otherwise except to the extent that the Company is required by
law to make payment subject to such deduction. If any such
deduction must be made or if the Noteholder is required to
make any payment on or in relation to any amount received or
receivable by it hereunder (other than a tax on overall net
income) by reason of law, the Company shall pay such
additional amounts as may be necessary to ensure that the
Noteholder receives and may retain a net amount equal to the
full amount which it would have received had payment not been
made subject to any deduction or the Noteholder had not been
obliged to make a payment in relation to any such receipt.
8. NOTICES
8.1 Any notice or other document to be served under this
instrument must be in writing and may be delivered or sent by
pre-paid air mail post or facsimile transmission to the
Company at its registered office for the time being and to a
Noteholder at his registered address.
8.2 Any notice or document shall be deemed served:
8.2.1 if delivered by hand at the time of delivery;
8.2.2 if posted 4 days after posting;
8.2.3 if sent by facsimile transmission at the time of
transmission if between the hours of 9.00 am and 5.00
pm on Monday to Friday in the country of receipt
(other than statutory holidays) or otherwise at 9.00
am on the next succeeding banking business day in the
country of receipt
6
<PAGE> 55
provided always that a hard copy of the facsimile
transmission is posted to the addressee of the notice
within 24 hours of such transmission.
8.3 Service will be proved (without prejudice to any other means):
8.3.1 by post if it can be shown that the notice or
document was contained in a envelope properly stamped
and posted as provided in this clause;
8.3.2 by facsimile if it can be shown that the notice or
document was duly received by production of a copy
fax bearing the addressee's answerback code or
automatic record of correct transmission.
9. CERTIFICATE
The Noteholder shall be entitled to a Certificate or Certificates
stating the amount of the Notes held by it and each Certificate shall
be executed as a deed of the Company by the signature of two of its
Directors or by one of its Directors and its secretary and shall be in
the form or substantially in the form set out in Schedule 1.
10. ENGLISH LAW
This instrument shall be governed by English law and the parties
hereby submit to the non-exclusive jurisdiction of the English Courts.
IN WITNESS of which this instrument has been duly executed as a deed the day
and year first above written
7
<PAGE> 56
SCHEDULE 1
Form of Certificate
CERTIFICATE NO
ISSUE OF US $600,000
INTEREST BEARING LOAN NOTES
(THE "NOTES")
THIS IS TO CERTIFY THAT GENERAL AUTOMATION, INC a company organised under the
laws of the State of Delaware United States of America and whose principal
place of business is at 17731 Mitchell North Irvine CA 92714 USA is the
registered holder of US $600,000 of the Notes which are constituted by an
instrument entered into by Future Services Limited on February 1996 (the
"Instrument") and issued on the date set out below subject to the provisions
contained in the Instrument and the conditions set out in Schedule 2 thereto.
DATE OF ISSUE OF NOTES: February 1996.
EXECUTED by FUTURE SERVICES LIMITED )
as a DEED by these signatures and )
DELIVERED )
............................... Director
................................. Secretary/Director
8
<PAGE> 57
SCHEDULE 2
The Condition&
1. The Notes shall be redeemed by the Company by payments according to
the provisions of clauses 4, 5, 6 and 7 of the main part of this
instrument and Schedule 3 of this instrument
2. 2.1 Any partial redemption shall be pro rata to the respective
holdings of the persons holding the Notes at the relevant
time.
2.2 All Notes redeemed in full by the Company will be cancelled
and will not be reissued.
3. On completion of this instrument the Company will deliver or procure
the delivery to the Noteholder of the duly executed Security as
security for the Company's obligations under this instrument.
4. Notwithstanding anything herein contained the Notes shall become
immediately repayable upon notice being served on the Company by the
Noteholder in any of the following events:
4.1 if the Company or the Directors are in breach of any term of
this Instrument or the Share Sale Agreement; or
4.2 if the Company fails to make the payment of any of the monies
due hereunder within 3 days of the due date for any such
payment; or
4.3 if an order is made or an effective resolution is passed for
winding up of any Group Company or any similar process for the
dissolution or winding up of any Group Company is commenced or
instituted in any jurisdiction (except for the purpose of a
reconstruction or amalgamation the terms of which have
previously been approved in writing by the Noteholder); or
4.4 if the Company stops or declares itself unable to make payment
to its creditors or any Group Company ceases or
9
<PAGE> 58
threatens to cease carrying on its business or substantially
the whole of its business; or
4.5 if any person having any security interests in or over the
assets or undertaking of any Group Company becomes entitled,
takes or threatens to take any action or steps to enforce such
interest or
4.6 a petition is served for an administration order (or any
process similar thereto is instituted in any jurisdiction) to
be made in relation to any Group Company; or
4.7 if any distress, execution, sequestration or other process is
levied or enforced upon or sued out against the property of
any Group Company; or
4.8 if the Company is unable to pay its debts within the meaning
of Section 123 of the Insolvency Act 1986; or
4.9 if the Company ceases to be legally and beneficially entitled
to more than 50% of the EGL Share Capital or EGL ceases to be
legally and beneficially entitled to more than 50% of the
issued share capital from time to time of any of the
Subsidiaries; or
4.10 if the Directors cease to be legally and beneficially entitled
to more than 50% of the issued share capital from time to time
of the Company; or
4.11 any indebtedness for borrowings of any Group Company is not
paid when due (or within any applicable grace period) any
indebtedness of the Group is declared to be or otherwise
becomes due and payable prior to its specified maturity or any
creditor or creditors of the Group become entitled to declare
any indebtedness for borrowings of the Group or any Group
Company due and payable prior to its specified maturity; or
4.12 GAI for any reason considers that the Security given is in
jeopardy; or
4.13 at any time it is or becomes unlawful for the Company to
perform or comply with any or all of its obligations hereunder
or at any time it is or becomes unlawful for any Group Company
to comply with the obligations under
10
<PAGE> 59
any of the Security or any of the obligations of the Company
or any Group Company hereunder or for any Group Company under
any of the Security are not or cease to be legally valid and
binding; or
4.14 if any material part of the assets or revenues of any Group
Company is sold or disposed of or threatened to be sold or
disposed of whether in a single transaction or a number of
transactions; or
4.15 if control (as defined in s 435 of the Insolvency Act 1986) or
the power to take control of any Group Company is acquired by
any person or company or group of associates (as defined in
such section); or
4.16 if any of the Directors and/or the Company fail to comply with
any undertaking set out in Part 5 of Schedule 3 and such
failure is either incapable of remedy or if capable remedy is
not remedied within 7 days of written notice to do so being
served on the Directors and/or the Company
5. A Register of the Notes will be kept by the Company and there shall be
entered in such Register:
5.1 the names and addresses of the holders for the time being of
the Notes;
5.2 the amount of the Notes issued on each particular issue date
held by every registered holder;
5.3 the date on which the name of every such registered holder is
entered in respect of the Notes standing in his name; and
5.4 the serial number of each Certificate number issued in respect
of the Notes and the dates of issue thereof.
Any change of name or address on the part of any Noteholder shall
forthwith be notified to the Company and thereupon the Register shall
be altered accordingly.
6. The Company will recognise the registered holder of any Notes as the
absolute holder thereof and will not be bound to take notice of or to
see to the execution of any trust whether
11
<PAGE> 60
express, implied or constructive to which the Notes may be subject and
the receipt of such person for the monies payable upon the repayment
of the same shall be a good discharge to the Company notwithstanding
any notice it may have, whether express or otherwise, of the right,
title, interest or claim of any other person to or in such notes or
interest or monies. No notice of any trust, express, implied or
constructive shall (except as provided by any statutory provisions or
as required by an order of a court of competent jurisdiction) be
entered on the Register in respect of any Notes.
7. The Notes shall be freely transferable by the holders thereof from
time to time.
8. If any Certificate issued in respect of the Notes be worn out or
defaced, then upon production thereof to the Directors they may cancel
the same and may issue a new Certificate in lieu thereof and if any
such Certificate be lost or destroyed then upon proof thereof to the
satisfaction of the Directors or in default of proof on such indemnity
as the Directors may deem adequate being given a new Certificate in
lieu thereof may be given to a person entitled to such lost or
destroyed Certificate. An entry of the issue of the new Certificate
and indemnity (if any) shall be made in the Register.'
9. Any modification or compromise or any arrangement in respect of the
rights of the Noteholder against the Company and any modification of
these conditions or of the provisions of this instrument shall require
the prior written consent of the Company and the Noteholder.
12
<PAGE> 61
SCHEDULE 3
Part 1
Calculation of Payments under the provisions of the Loan Note
1. In this Schedule where the context admits the following words and
phrases have the meanings next to them:
<TABLE>
<S> <C>
"Audited Accounts" the audited financial statements of each Group company and
any consolidated accounts prepared and audited in respect
of the Group as a whole;
"Eligible Profit" the consolidated pre tax profit of EGL and Subsidiaries for
the relevant period calculated as set out in Part 2 of this Schedule;
"Payment Period" each period in respect of which Payment Accounts are to be prepared;
"Payment Year" any financial year for which Eligible Profit is to be calculated;
"Eligible Profit the certificate by the Company's Accountants specified in
Certificate" paragraph 2 of Part 3 of this Schedule;
"Payment Accounts" the consolidated accounts of the Group for the period between the date of
this instrument and 31.03.1996 and each consecutive six month period
thereafter in a Payment Year;
"Independent a firm of independent accountants agreed by the Noteholder and FSL
Accountants" or in default of agreement within 7 days either party requesting an
appointment appointed on the application of either party (following notice to
the other) by the President or other senior officer for the time being of the
Institute of Chartered Accountants in England and Wales;
"Accountants Report" the report specified in Paragraph 8 of Part 3 of this Schedule;
</TABLE>
2. In addition to the interest payments payable under clause 4 of the
Instrument the payments payable in redemption of the Notes shall be a
sum equal to 50 per cent of the Eligible Profit in each Payment Period
until the entire amount of the Notes has been redeemed.
13
<PAGE> 62
Part 2
Calculation of Eligible Profit
1. The Eligible Profit is the consolidated net pre-tax profit of
the Group as shown in the Payment Accounts subject to the following
adjustments:
1.1 by adding back to profit any sums which would not have been
deducted had those accounts been prepared on the accounting
principles bases policies and methods normally used by the
Group in preparing the Audited Accounts and which are
generally accepted in the UK and which are in accordance with
all applicable Statements of Standard Accounts Practice and
Financial Reporting Standards;
1.2 by adding back any payment or provision for Tax (including
Advance Corporation Tax) or other tax equivalent to
Corporation Tax in the case of any overseas subsidiary and any
other tax whether of the United Kingdom or otherwise which may
be imposed on or by reference to profit gains income or
distributions;
1.3 adding back any provision for or payment of any dividend or
other distribution by the Group;
1.4 adding back any sum specified as or proposed to be
transferred to reserves;
1.5 by ignoring the effect of any exceptional items;
1.6 adding back any sum deducted from gross profit in respect of
the emoluments paid or payable to or for the benefit of any
(or any former) director of the Company (or any person
connected with any such person) or any individual who is not
an employee of the Group except as arms-length consideration
for services properly rendered to the Group (including fees
expenses pension contributions and the cost in money value to
the Company or Group of non-cash benefits and any sum paid to
any third party as consideration for the services of the
person concerned);
1.7 without prejudice to the generality of 1.6 adding back any sum
deducted from gross profits in respect of the emoluments and
benefits payable to TAB or IPD in excess of the emoluments and
benefits contracted to be paid to TAB and IPD under the terms
of their current service contracts with the Group
1.8 adding back any management (or similar) charges to the Group
paid or provided for except as agreed with the Noteholder.
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<PAGE> 63
1.9 excluding the financial ef facts of transactions entered into
by the Group which are not on arms-length terms or which are
outside the ordinary and proper course of business of the
Group
1.10 by excluding any costs attributable to the early repayment
redemption or cancellation of loans or other financing
arrangements (including without limitation, leasing, hire,
hire purchase or other conditional purchase or deferred
payment agreements);
1.11 treating all sums owing by FSL and the Directors to any Group
company as presently due and payable;
1.12 by adding back any amount written off in respect of goodwill
or other intangible assets;
1.13 by adding back the amount of any transfer or proposed transfer
to the reserves.
1.14 if the auditors certificate in respect of the relevant Audited
Accounts is not unqualified by making such adjustment to the
prof it of the Group as is fair and reasonable to take account
of any matter affected by the qualification made by the
auditor;
Part 3
1. FSL and the Directors shall procure that the Payment Accounts are
prepared within 28 days of the end of each Payment Period and are
submitted together with the Eligible Profit Certificate specified in
paragraph 3 of this Part to the Noteholder.
2. FSL and the Directors shall procure that the Audited Accounts for each
financial period are prepared and audited within six months of the end
of that period and the auditors' certificate signed and submitted to
the Noteholder.
3. FSL and the Directors shall procure that the Company's Accountants
issue a certificate (the "Eligible Profit Certificate") in respect of
each Payment Period in each Payment Year stating the Eligible Profit
for that Payment Period as appropriate such certificates shall have
attached to them a copy of the relevant accounts.
4. 4.1 the Noteholder may by notice to FSL and the Directors
delivered within 7 days of receipt by the Noteholder of the
Eligible Profit Certificate require that the calculation of
the Eligible Profit specified in it (including any Payment
Accounts on which the calculation is based) be reviewed by the
Noteholder's Accountants.
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<PAGE> 64
4.2 Without limiting sub-paragraph 4-1 of this Part if the
auditors certificate on any accounts annexed to a Eligible
Profit Certificate is qualified the Noteholder may by notice
to the Purchaser within 7 days of receipt by the Noteholder of
the said Eligible Profit Certificate require those accounts to
be reviewed by the Noteholder's Accountants to determine any
adjustment required under Part 2 of this Schedule.
5. FSL's Accountants and the Noteholder's Accountants shall endeavour to
agree any matters relating to the Eligible Profit Certificate or
Payment Accounts not agreed between them within 7 days of the
Noteholder's Accountants completing their review.
6. If the said accountants fail to agree any matter referred to in
paragraph 5 of this Part within the time specified in it the matter in
dispute shall be referred to Independent Accountants (acting as
experts) for determination. The decision of the Independent
Accountants on any matter referred to them shall (except in the case
of manifest error) be final and binding on the Accountants and the
parties. The costs of the Independent Accountants shall be borne as
they direct or in default of a direction by them by the Noteholder and
FSL and the Directors equally.
7 . The parties shall procure that the said accountants and any
Independent Accountants are each given access to all working papers
prepared by the Group or by them and given any information and
explanations they may- reasonably request to carry out their
respective functions under this Schedule.
8. Upon the agreement of (or determination under paragraph 5 of any
matter disputed) the Eligible Prof it the parties shall procure that
the Accountants jointly sign and deliver to GAI and FSL and the
Directors a report confirming the amount of Eligible Profit for the
relevant Payment Period.
Part 4
Payment of Amounts Due
1. Any payments payable to GAI shall be paid:
1.1 as to the payment provided for by paragraph 2 of Part 1 of
this Schedule, such payments will be made simultaneously with
the delivery of the Payment Accounts and the Eligible Profit
Certificate.
1.2 if the Noteholder requires a review under paragraph 4 of Part
3 of this Schedule FSL shall:
1.2.1 pay the amount of such payment as is payable in
accordance with the relevant Payment Accounts and
Eligible Profit Certificate;
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<PAGE> 65
1.2.2 pay the balance of such payment (if any) within 7
days of the delivery of the Accountants Report to the
Noteholders and FSL and the Directors together with
interest on that balance from the date the sum
specified in paragraph 1.2.1 above was due to the
date of payment of that balance at the rate of 3 per
cent above the base rate of National Westminster Bank
plc current from time to time;
2. In the event that the Audited Accounts show a higher Eligible Profits
figure than that shown by the Payment Accounts and Eligible Profit
Certificate for any Payment Year after adjustment of the Audited
Accounts figure to take into account the provisions of this Schedule
and in particular part 3 hereof then within 14 days of the filing of
the Audited Accounts at Companies House a balancing payment will be
made by the Company to the Noteholder for any such Payment Year and
insofar as any over payment has been made by the Company this will be
deducted from the payment due for the next Payment period.
Part 5
Noteholder Protection
The Company and the Directors acknowledge that having regard to the terms of
this Instrument the Noteholder has a legitimate interest in ensuring that the
Eligible Profit of the Group for each of the Payment Years is as high as may
fairly and reasonably be achieved by the Group in those years. Accordingly the
Company and the Directors undertake with the Noteholder that during the Payment
Years:
1. they will use their best endeavours to promote the business of the
Group and use all their reasonable commercial endeavours to maximise
the profits of the Group
2. they will not do anything with the intention of or which is reasonably
likely to adversely affecting the business of the Group or the
Eligible Profit;
3. they will not seek to transfer or divert or direct elsewhere any
orders or enquiries for products or services available from the Group;
4. they will provide the Group with access to the financial management
and other facilities of the Company and the Directors.
5. the Directors will not without the previous written consent of the
Noteholder part with control of the Company and the Company will not
part with control of EGL or the Subsidiaries for the
17
<PAGE> 66
time being. (For the purpose of this sub-paragraph a person or company
"A" shall be deemed to part with control of company "B" if as a result
of any transaction or series of company transactions or arrangements
whether or not involving a transfer of shares in the relevant company
or the issue of any shares in any company such person or "A" ceases
(either directly or indirectly) to be the holder of shares
representing over 50% of the equity share capital of "B";
6. they will not sell or procure the sale or otherwise dispose of the
whole or any substantial part of the business undertaking or assets
(other than current assets disposed of in the normal course of
business) of any Group company;
7. they will procure that any Group Company does not pass any resolution
to go into voluntary liquidation (except if a relevant company is at
that time insolvent and a registered insolvency practitioner advises
liquidation by reason of insolvency);
8. they will procure that the Group makes no material adverse alteration
in the nature scope or conduct of its business;
9. they will procure that Eligible Profits are not adversely affected by
any service management or similar charge (save as provided for in Part
2 of this Schedule) or by any transaction or arrangement which is not
a bona fide commercial transaction or arrangement on arms-length
terms;
10. FSL and the Directors further undertake with the Nbteholder that they
will respectively procure that the Group will (without prejudice to
any particular provisions above):
10.1 not declare, make or pay any dividend or other distribution
without the Noteholder's consent;
10.2 not create or agree to create any encumbrance without the
Noteholder's consent or redeem or agree to redeem any
Encumbrance (other than trade guarantees or indemnities in
the ordinary course of its business) of the type and scale
given in the current financial year;
10.3 not borrow any money or agree to do so other than in the
normal course of trading except as agreed by the Noteholder;
10.4 not permit any of its insurance policies to lapse become void
or voidable or do anything to adversely affect their renewal
on the insurers standard (or if different the existing) terms;
10.5 not to take any steps to have any Group Company wound up
unless a registered insolvency practitioner has advised that
that Group company should be wound up as insolvent;
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<PAGE> 67
10.6 the Group shall not sell, transfer, lease, assign, grant any
licence in respect of or otherwise disposed of the whole or
any part of its undertaking property or other assets (whether
by one transaction or a series of transactions whether related
or not) other than sale of current assets in the ordinary
course of trading;
10.7 that the Group shall not give any guarantee or indemnity other
than in the ordinary course of trading and in particular not
give. any such guarantee or indemnity in respect of
liabilities of any other member of the Group;
10.8 the Group shall not make any loan or advance or provide any
credit other than:
(a) for the deposit of monies with the bank which is an
authorised institution under the Banking Act 1987;
(b) normal trade credit;
(c) to another member of the Group on terms that it shall
be repaid forthwith upon the borrower leaving the
Group;
(d) bona fide expenses advanced to employees of the Group;
(e) as permitted by the Noteholder;
10.9 without the Noteholders consent such consent not be
unreasonably withheld the Group shall not subscribe for or
purchase or acquire any shares, debentures, debenture stock,
mortgages, securities or interest in any other company, trust
partnership or other body (whether or not having separate
legal personality);
10.10 the Group shall not acquire any subsidiary or associated
company or new business or any interest in any such;
10.11 the memorandum and articles of association of the Company or
any Group company will not be altered without the consent of
the Noteholder;
10.12 the monthly accounting statements and information currently
prepared by each Group company will be copied to the
Noteholder within 7 days of receipt of such statements and
information by the company and/or the Directors and the
company and/or the Directors will procure that each Group
company will continue to produce such statements and
information.
19
<PAGE> 68
SCHEDULE 4
the "Security"
1. Fixed and Floating Charge in the agreed form given by FSL to the
Noteholder.
2. Fixed Charge over the shares in FSL in the agreed form given by the
Directors to the Noteholder.
20
<PAGE> 69
EXECUTED by FUTURE SERVICES LIMITED as a DEED by these signatures and DELIVERED
Director /s/ T A BOWMAN
Secretary/Director /s/ I P DAWKINS
SIGNED by TERENCE ANTHONY BOWMAN as a DEED in the presence of:
/s/ TERENCE ANTHONY BOWMAN
Witness Signature:
Name: T.J. Pope
Address: 125 London Wall, London EC2Y 5AE
Occupation: Solicitor
SIGNED by IAN PRYCE DAWKINS as a DEED in the presence of:
/s/ IAN PRYCE DAWKINS
Witness Signature:
Name: T.J. Pope
Address: 125 London Wall, London EC2Y 5AE
Occupation: Solicitor
21
<PAGE> 70
12
<PAGE> 71
DATED: 6 March 1996
IAN PRYCE DAWKINS
and
TERENCE ANTHONY BOWMAN
--and--
GENERAL AUTOMATION INC.
----------
SHARES MORTGAGE
----------
-----------------------------------
Dibb Lupton Broomhead
125 London Wall
LONDON
EC2Y 5AE
Tel: 0345 26 27 28
Fax: 0171 600 1753
<PAGE> 72
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
----
<S> <C> <C>
1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . 1
2. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. DEPOSIT OF TITLE DOCUMENTS AND REGISTRATION . . . . . . . 4
4. DIVIDENDS AND VOTING . . . . . . . . . . . . . . . . . . 6
5. CALLS AND OTHER OBLIGATIONS . . . . . . . . . . . . . . . 6
6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 7
7. UNDERTAKINGS . . . . . . . . . . . . . . . . . . . . . . 8
8. PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . 8
9. ENFORCEMENT OF SECURITY . . . . . . . . . . . . . . . . . 11
10. APPLICATION OF PROCEEDS . . . . . . . . . . . . . . . . . 11
11. RELEASE OF SECURITY . . . . . . . . . . . . . . . . . . . 12
12. FURTHER ASSURANCE AND POWER OF ATTORNEY . . . . . . . . . 12
13. DELEGATION . . . . . . . . . . . . . . . . . . . . . . . 13
14. PROTECTION OF PURCHASER . . . . . . . . . . . . . . . . . 13
15. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . 14
16. EXPENSES AND TAXES . . . . . . . . . . . . . . . . . . . 14
17. WAIVERS; REMEDIES CUMULATIVE . . . . . . . . . . . . . . 15
18. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . 15
19. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . 15
20. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 16
21. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . 17
22. GOVERNING LAW AND JURISDICTION . . . . . . . . . . . . . 17
</TABLE>
<PAGE> 73
THIS SHARES MORTGAGE is made as a deed on 6 March 1996
BETWEEN:
(1) IAN PRYCE DAWKINS, of Stable House, Swithland Court, Woodhouse Eaves,
Leicestershire LE12 8SS and TERENCE ANTHONY BOWMAN of Bayview House,
The Square, Cawsand, Cornwall PL10 1PD (together called the
"Mortgagor"); and
(2) GENERAL AUTOMATION INC., whose principal place of business is at 17731
Mitchell North, Irvine CA92714, USA ("GAI").
WHEREAS:
(A) By a Loan Note dated 6 March 1996 (the "Loan Note") and a Sale Share
Agreement of the same date ("the Share Sale Agreement") both made
between the Mortgagor, Future Services Limited (Company no. 3023386)
(the "Borrower") and GAI, the Borrower agrees to pay certain monies to
GAI and the Borrower and the Mortgagor undertake certain obligations
to GAI on the terms and conditions contained in the Loan Note and the
Sale Share Agreement.
(B) The Mortgagor has agreed to provide security to GAI to secure its
obligations and the obligations of the Borrower on the terms of this
Mortgage.
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1
<TABLE>
<S> <C>
"Event of Default" means an Event of Default
specified in Clause 4 of Schedule 2
of the Loan Note.
"Potential Default" means an event, occurrence or
</TABLE>
1
<PAGE> 74
<TABLE>
<S> <C>
omission which with any of the passing of time,
determination of materiality, giving of notice or
satisfaction of any other condition would be an
Event of Default.
"Security Assets" means the Shares and all rights, assets or
property referred to in Clause 2.1 below.
"Security Documents" means the Loan Note, the Share Sale Agreement,
this Mortgage and any other document present or future in
connection with it or evidencing or creating security
for any obligation of a Security Party to GAI, as from
time to time varied.
"Secured Liabilities" means the aggregate of all sums of money
and liabilities from time to time owing by the
Borrower or any other Security Party to GAI under
the Security Documents (whether actual or contingent,
joint or several).
"Security Party" means each party to a Security Document other than GAI.
"Shares" means 100 Ordinary Shares of ONE POUND (pound sterling 1) each
in the Borrower owned by the Mortgagor.
</TABLE>
2
<PAGE> 75
1.2 The expressions in Clause 1.1 have their defined meanings in
this Mortgage unless the context otherwise requires.
1.3 Terms defined in the Loan Note have the same meaning when used
in this Mortgage unless otherwise defined in this Mortgage.
1.4 The index to and the headings in this Mortgage are for
convenience only and are to be ignored in construing this
Mortgage.
1.5 Unless the contrary intention appears, a reference to:
1.5.1 a provision of law is a reference to that provision
as amended or re-enacted;
1.5.2 a clause or a Schedule is a reference to a clause of
or a schedule to this Mortgage;
1.5.3 words importing the plural include the singular and
vice versa;
1.5.4 reference to a law (i) includes any statute, decree,
constitution, regulation, order, judgment or
directive of any Government Entity; (ii) includes
any treaty, pact, compact or other agreement to which
any Government Entity is a signatory or party; (iii)
includes any judicial or administrative
interpretation or application thereof and (iv) is a
reference to that provision as amended, substituted
or reenacted;
1.5.5 a person includes its successors and assigns;
3
<PAGE> 76
1.5.6 any document is a reference to that document as
amended, novated or supplemented; and
1.5.7 a time of day is a reference to London time.
2. SECURITY
For good and valuable consideration, receipt of which is acknowledged
and as security for the Secured Liabilities and the obligations of the
Mortgagor and the Borrower under the Security Documents the Mortgagor
with full title guarantee:
2.1 mortgages and charges to GAI, by way of a first legal
mortgage, the Shares; and
2.2 mortgages and charges and agrees to mortgage and charge to
GAI, by way of a first legal mortgage:
2.2.1 all dividends paid or payable after the date of this
Mortgage on all or any of the Shares;
2.2.2 all stocks, shares, securities, rights, moneys or
property accruing or offered at any time (whether by
way of redemption, bonus, preference, option rights
or otherwise) to or in respect of any of the Shares
or in substitution or exchange for or otherwise
derived from, any of the Shares; and
2.2.3 all dividends, interest or other income in respect of
any such asset as is referred to in sub-Clause 2.2.2.
3. DEPOSIT OF TITLE DOCUMENTS AND REGISTRATION
3.1 The Mortgagor shall:
4
<PAGE> 77
3.1.1 immediately deposit with GAI all certificates or
other documents evidencing an entitlement to the
Shares and share transfer forms in blank in respect
of those Shares as are in certificated form;
3.1.2 immediately on conversion of any of the Shares from
certificated to uncertificated form, and on the
creation or conversion of any other securities which
are for the time being comprised in the Security
Assets in or into uncertificated form, give such
instructions or directions as GAI may require in
order to protect or preserve its security; and
3.1.3 immediately on receipt of any certificate or other
document evidencing any entitlement to any further or
other Security Assets deposit it with GAI together
with such share transfer forms in blank or other
documents as GAI may require.
3.2 The Mortgagor authorises GAI:
3.2.1 to arrange for any of the Security Assets which are
in registered form to be registered in the name of
GAI or a nominee of GAI (if required by GAI to
perfect GAI's security); and
3.2.2 (under its powers of realisation) to transfer or
cause any of the Security Assets to be transferred to
and registered in the name of any purchaser or
transferee.
3.3 The Mortgagor shall from time to time on the request of GAI
execute and sign all transfers, powers of attorney and other
documents and give such
5
<PAGE> 78
instructions and directions as GAI may require for perfecting
its title to any of the Security Assets or for vesting the
same in itself or its nominee or in any purchaser or
transferee.
4. DIVIDEDS AND VOTING
4.1 Unless and until an Event of Default or a Potential Default
occurs, the Mortgagor shall be entitled:
4.1.1 to receive all dividends, interest and income from
the Security Assets; and
4.1.2 to exercise, or to direct GAI to exercise, any voting
rights attached to any of the Security Assets but
only in a manner consistent with the terms of this
Mortgage.
4.2 At any time after the occurrence of an Event of Default or
Potential Default and without any further consent or authority
on the part of the Mortgagor, GAI may exercise at its
discretion (in the name of the Mortgagor or otherwise), in
respect of any of the Security Assets, any voting rights and
any powers or rights which may be exercised by the person or
persons in whose name or names the Security Assets are
registered or who is the holder or bearer of them including
(but without limitation) all the powers given to trustees by
Section 10(3) and (4) of the Trustee Act 1925 (as amended by
Section 9 of the Trustee Investments Act 1961) in respect of
securities or property subject to a trust.
4.3 GAI will give notice of any such action as is referred to in
Clause 4.2 above to the Mortgagor as soon as practicable.
6
<PAGE> 79
5. CALLS AND OTHER OBLIGATIONS
5.1 The Mortgagor will pay all calls or other payments which may
become due in respect of any of the Security Assets and, if it
fails to do so, GAI may elect to make such payments on behalf
of the Mortgagor. Any sums so paid by GAI shall be repayable
by the Mortgagor to GAI on demand, together with interest at
the Default Rate from the date of such payment by GAI, and
pending such repayment shall be added to and form part of the
Secured Liabilities.
5.2 The Mortgagor shall promptly copy to GAI and comply with all
requests for information which is within its knowledge and
which are made under Section 212 of the Companies Act 1985 or
any similar provision contained in any articles of association
or other constitutional document relating to any of the
Security Assets and, if its fails to do so, GAI may elect to
provide such information as it may have on behalf of the
Mortgagor.
5.3 The Mortgagor shall remain liable to observe and perform all
of the other conditions and obligations assumed by it in
respect of any of the Security Assets.
5.4 GAI shall not be required to perform or fulfil any obligation
of the Mortgagor in respect of the Security Assets or to make
any payment, or to make any enquiry as to the nature or
sufficiency of any payment received by it or the Mortgagor, or
to present or file any claim or take any other action to
collect or enforce the payment of any amount to which it may
have been or to which it may be entitled under this Mortgage
at any time or times.
7
<PAGE> 80
6. REPRESENTATIONS AND WARRANTIES
The Mortgagor represents and warrants to GAI that:
6.1 the Mortgagor has full title guarantee to the Shares, free
from any lien, charge, equity or encumbrance;
6.2 the Shares are fully paid; and
6.3 it will have full title guarantee to any other Security
Assets, free from any lien, charge, equity or encumbrance.
7. UNDERTAKINGS
The Mortgagor undertakes to GAI that:
7.1 it will not assign, pledge or otherwise encumber the whole or
any part of the Security Assets to anyone other than GAI;
7.2 the Shares represent and will continue to represent 100 per
cent of the share capital of the Borrower and no further
shares in the Borrower shall be allotted or issued during the
term of this charge; and
7.3 it will not take or permit the taking of any action whereby
the rights attaching to any of the Security Assets are diluted
by the issue of any further shares in the Borrower.
8. PRESERVATION OF SECURITY
8.1 The security constituted by this Mortgage:
8.1.1 shall be a continuing security;
8
<PAGE> 81
8.1.2 shall not be satisfied by any intermediate payment or
satisfaction of the whole or any part of the Secured
Liabilities;
8.1.3 shall secure the ultimate balance of the Secured
Liabilities; and
8.1.4 shall be in addition to and shall not be affected by
any other Encumbrance now or subsequently held by GAI
for all or any of the Secured Liabilities.
8.2 The obligations of the Mortgagor under this Mortgage shall not
be affected by any act, omission or circumstances which but
for this provision might operate to release or otherwise
exonerate the Mortgagor from its obligations under this
Mortgage or affect such obligations including (but without
limitation) and whether or not known to the Mortgagor or GAI:
8.2.1 any time or indulgence granted to or composition with
the Borrower or any other person;
8.2.2 the variation, extension, compromise, renewal or
release of, or refusal or neglect to perfect or
enforce, any terms of the Security Documents or any
rights or remedies against, or any security granted
by, the Borrower or any other person;
8.2.3 any irregularity, invalidity or unenforceability of
any obligations of the Borrower under the Security
Documents or any present or future law or order of
any government or authority (whether of right or in
9
<PAGE> 82
fact) purporting to reduce or otherwise affect any of
such obligations to the intent that the Mortgagor's
obligations under this Mortgage and this security
shall remain in full force and this Mortgage shall be
construed accordingly as if there were no such
irregularity, unenforceability, invalidity, law or
order;
8.2.4 any legal limitation, disability, incapacity or other
circumstances relating to the Borrower, any guarantor
or any other person or any amendment to or variation
of the terms of the Security Documents or any other
document or security.
8.3 The Mortgagor waives any right it may have of first requiring
GAI to proceed against or claim payment from the Borrower or
enforce any guarantee or security before enforcing this
Mortgage.
8.4 Until all the Secured Liabilities have been irrevocably paid
in full, the Mortgagor shall not, after default and a claim
has been made under this Mortgage or this Mortgage becomes
enforceable:
8.4.1 be entitled or claim to rank as creditor in the
bankruptcy, liquidation or dissolution of the
Borrower or any other guarantor in competition with
GAI; or
8.4.2 receive, claim or have the benefit of any payment or
distribution from or on account of the Borrower or
any guarantor or exercise any right of set-off as
against the Borrower or any guarantor or claim the
benefit of any security or moneys held by or for the
account of GAI and
10
<PAGE> 83
GAI shall be entitled to apply such security and moneys
as it sees fit.
8.5 A certificate of GAI as to the amount due from the Borrower
under the Security Documents shall, as against the Mortgagor,
be conclusive evidence of such amount in the absence of
manifest error.
8.6 Where any discharge (whether in respect of this Mortgage, any
other security or otherwise) is made in whole or in part or
any arrangement is made on the faith of any payment, security
or other disposition which is avoided or must be repaid on
bankruptcy, liquidation or otherwise without limitation, this
security and the liability of the Mortgagor under this
Mortgage shall continue as if there had been no such discharge
or arrangement.
9. ENFORCEMENT OF SECURITY
If an Event of Default occurs, GAI shall be entitled to put into force
and to exercise immediately, or as and when it may see fit, any and
every power possessed by GAI by virtue of this Mortgage or available
to a secured creditor (but so that section 93 and section 103 of the
Law of Property Act 1925 shall not apply to this security) and in
particular (but without limitation) GAI shall have power:
9.1 to sell all or any of the Security Assets in any manner
permitted by law upon such terms as GAI shall in its absolute
discretion determine; and
9.2 to collect, recover or compromise and to give a good discharge
for any moneys payable to the Mortgagor in respect of any of
the Security Assets.
11
<PAGE> 84
10. APPLICATION OF PROCEEDS
All moneys received by GAI in respect of the Security Assets after
this security has become enforceable shall be applied by GAI in or
towards payment of the Secured Liabilities in such order as GAI sees
fit.
11. RELEASE OF SECURITY
Upon the irrevocable payment and discharge in full of all the Secured
Liabilities, GAI, at the request and expense of the Mortgagor, will
release to the Mortgagor all the right, title and interest of GAI in
or to the Security Assets and will give such instructions and
directions as the Mortgagor may require in order to perfect such
release.
12. FURTHER ASSURANCE AND POWER OF ATTORNEY
12.1 The Mortgagor shall from time to time upon the request of GAI
promptly and duly execute and deliver any and all such further
instruments and documents as GAI may deem desirable for the
purpose of obtaining the full benefit of this Mortgage and of
the rights and powers granted under it.
12.2 The Mortgagor by way of security irrevocably appoints GAI the
attorney of the Mortgagor on its behalf and in the name of the
Mortgagor or GAI (as the attorney may decide) to do all acts
and things and execute all documents which the Mortgagor could
itself do in relation to any of the Security Assets or in
connection with any of the matters provided for in this
Mortgage, including (but without limitation):
12.2.1 to execute any transfer or other assurance in respect
of the Security Assets;
12
<PAGE> 85
12.2.2 to exercise all the rights and powers of the
Mortgagor in respect of the Security Assets;
12.2.3 to ask, require, demand, receive, compound and give a
good discharge for any and all moneys and claims for
moneys due and to become due under or arising out of
any of the Security Assets;
12.2.4 to endorse any cheques or other instruments or orders
in connection with any of the Security Assets; and
12.2.5 to make any claims or to take any action or to
institute any proceedings which GAI considers to be
necessary or advisable to protect the security
created by this Mortgage.
13. DELEGAT1ON
GAI may at any time:
13.1 delegate to any person(s) all or any of its rights, powers and
discretions under this Mortgage on such terms (including power
to sub-delegate) as GAI sees fit; and
13.2 employ agents, managers, employees, advisers and others on
such terms as GAI sees fit for any of the purposes set out in
this Mortgage.
14. PROTECTION OF PURCHASER
14.1 No purchaser or other person dealing with GAI or with its
attorney or agent shall be concerned to enquire:
13
<PAGE> 86
14.1.1 whether any power exercised or purported to be
exercised by it or him has become exercisable;
14.1.2 whether any money remains due on this security;
14.1.3 as to the property or regularity of any of its or his
actions; or
14.1.4 as to the application of any money paid to it or him.
14.2 In the absence of bad faith on the part of such purchaser or
other person, such dealings shall be deemed, so far as regards
the safety and protection of such purchaser or other person,
to be within the powers conferred by this Mortgage and to be
valid accordingly. The remedy of the Mortgagor in respect of
any impropriety or irregularity whatever in the exercise of
such powers shall be in damages only.
15. INDEMNITY
15.1 The Mortgagor will indemnify GAI and every attorney appointed
by it in respect of all liabilities and expenses incurred by
it or him in good faith in the execution or purported
execution of any rights in accordance with this Mortgage.
15.2 GAI shall not be liable for any losses arising in connection
with the exercise or purported exercise of any of its rights,
powers and discretions in good faith under this Mortgage and
in particular (but without limitation) GAI in possession shall
not be liable to account as Mortgagee in possession or for
anything except actual receipts.
14
<PAGE> 87
16. EXPENSES AND TAXES
16.1 The Mortgagor will reimburse GAI on demand for all charges and
expenses (including legal fees and expenses) and any VAT on
them incurred in the negotiation, preparation and execution of
this Mortgage and all waivers, discharges, amendments and
other documents in connection with it.
16.2 The Mortgagor will pay or procure the payment when due of all
present and future registration fees, stamp duties and other
imposts or transaction taxes in relation to this Mortgage and
keep GAI indemnified against any failure or delay in paying
them.
17. WAIVERS: REMEDIES CUMULATVE
The rights of GAI under this Mortgage:
17.1 may be exercised as often as necessary;
17.2 are cumulative and are not exclusive of its rights under the
general law; and
17.3 may be waived only in writing and specifically and may be on
such terms as GAI sees fit.
18. ASSIGNMENT
The Mortgagor may not assign any of its rights under this Mortgage.
GAI may assign all or any part of its rights under this Mortgage and
may change its lending office from time to time. References to GAI
include assigns of GAI.
15
<PAGE> 88
19. SEVERABILITY
If a provision of this Mortgage is or becomes illegal, invalid or
unenforceable in any jurisdiction, that shall not affect:
19.1 the validity or enforceability in that jurisdiction of any
other provision of this Mortgage; or
19.2 the validity or enforceability in other jurisdictions of that
or any other provision of this Mortgage.
20. NOTICES
20.1 All notices or other communications under or in connection
with this Mortgage shall be given in writing or by telex or
facsimile. Any such notice will be deemed to be given as
follows:
20.1.1 if in writing, when delivered;
20.1.2 if by telex, when dispatched, but only if, at the
time of transmission, the correct answerback at the
start and at the end of the sender's copy of the
notice; and
20.1.3 if by facsimile, when received.
However, a notice given in accordance with the above but
received on a non-working day or after business hours in the
place of receipt will only be deemed to be given on the next
working day in that place.
16
<PAGE> 89
20.2 The address and facsimile number of the Mortgagor are in
respect of Ian Pryce Dawkins:
Stable House,
Swithland Court,
Woodhouse Eaves,
Leicestershire LE12 8SS
Fax No. [ ]
and in respect of Terence Anthony Bowman
Bayview House,
The 664 Square,
Cawsand, Cornwall
Fax No. [ ]
and the address, telex number and facsimile number of GAI are:
17731 Mitchell North,
Irvine CA 92714, USA
Fax No. 001 714 752 6772
or such other address and fax number as either party may
notify to the other by not less than five Business Days'
notice.
21. COUNTERPARTS
This Mortgage may be executed in any number of counterparts, all of
which, taken together, shall constitute one and the same instrument
and any party may enter into this Mortgage by executing a counterpart.
17
<PAGE> 90
22. GOVERNING LAW AND JURISRICTMION
22.1 This Mortgage is governed by and shall be construed in
accordance with English law.
22.2 The Mortgagor irrevocably agrees, that the English courts are
to have jurisdiction to settle any disputes which may arise in
connection with this Mortgage and in relation to this
Mortgage.
22.3 Nothing in Clause 22.2 limits the right of GAI to take
proceedings against the Mortgagor in any other court of
competent jurisdiction, nor shall the taking of proceedings in
one or more jurisdictions preclude the taking of proceedings
in any other jurisdiction, whether concurrently or not.
IN WITNESS whereof each individual Mortgagor and GAI have executed this
Mortgage as a deed on the date at the beginning of this Mortgage.
18
<PAGE> 91
SIGNED as a Deed and delivered by
TERRENCE ANTHONY BOWMAN in the
presence of:
/s/ T.J. POPE /s/ T.A. BOWMAN
---------------------- ------------------------
125 London Wall
London EC2Y 5AE
Solicitor
SIGNED as a Deed and delivered by
IAN PRYCE DAWKINS in the
presence of:
/s/ T.J. POPE /s/ I.P. DAWKINS
---------------------- ------------------------
125 London Wall
London EC2Y 5AE
Solicitor
EXECUTED AS A DEED by GENERAL
AUTOMATION INC. acting by the
following signatures
/s/ [UNKOWN SIGNATURE] Pres. & C.E.O.
-----------------------------------------------
/s/ [UNKNOWN SIGNATURE]
-----------------------------------------------
19
<PAGE> 92
13
<PAGE> 93
DATED 6th MARCH 1996
FUTURE SERVICES LIMITED
(COMPANY NO. 3023386)
- AND -
GENERAL AUTOMATION INC
--------------------
DEBENTURE
--------------------
- ------------------------------------------------------------------------------
Dibb Lupton Broomhead
125 London Wall
LONDON
EC2Y 5AE
Tel: 0345 26 27 28
Fax: 0171 600 1678
<PAGE> 94
CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. MORTGAGES, FIXED CHARGES AND FLOATING CHARGE . . . . . . . . . . . . . . . . . . . . . 5
3. NEGATIVE PLEDGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. FURTHER ASSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5. DEBTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6. CONVERSION OF FLOATING CHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8. UNDERTAKINGS BY THE CHARGOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. POWERS OF GAI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10. AUTOMATIC CRYSTALLISATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11. APPOINTMENT OF RECEIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13. PROTECTION OF PURCHASERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14. CURRENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15. APPLICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
16. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
17. REMEDIES CUMULATIVE ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
18. PROVISIONS SEVERABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
19. GAI'S DISCRETION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
20. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
21. LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SCHEDULE 1
THE LEGALLY MORTGAGED PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE> 95
THIS DEBENTURE is made on the 6th day of March 1996
BETWEEN:
(1) FUTURE SERVICES LIMITED a company incorporated under the laws of
England and Wales with registered number 3023386 having its registered
office at Stable House, Swithland Court, Woodhouse Court,
Leicestershire, England (the "Chargor"); and
(2) GENERAL AUTOMATION INC a company organised under the laws of the State
of Delaware United States of America whose principal place of
business is at 17731 Mitchell North, Irvine, CA USA 92714, ("GAI").
WHEREAS:
(A) By a Loan Note ("the Loan Note") dated 6th March 1996 and a Share Sale
Agreement ("the Share Sale Agreement") of the same date both made
between the Chargor and its directors and GAI the Chargor agreed to pay
certain monies to GAI and undertook certain obligations to GAI on the
terms and conditions contained in the Loan Note and the Share Sale
Agreement.
(B) It is a term of the Share Sale Agreement and the Loan Note that the
Chargor enters into this Debenture.
NOW THIS DEED WITNESSETH as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Debenture, unless the context otherwise requires or
unless otherwise defined or provided for in this Debenture,
words and expressions shall have the same meanings as
attributed to them under the Loan Note and Share Sale
Agreement. In addition, the following words and expressions
shall have the respective meanings ascribed to them:
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<PAGE> 96
"Charged Property" the property, assets and
income of the Chargor
mortgaged, assigned
or charged to GAI (whether by
way of legal mortgage,
assignment, fixed or floating
charge) by or pursuant to
this Debenture and each and
every part thereof;
"Credit Balances" has the meaning ascribed
to that term in clause 2.1.5;
"Debts" has the meaning ascribed
to that term in clause 2.1.4;
"Floating Charge has the meaning ascribed to
Property" that term in clause 2.1.9;
"Legally Mortgaged has the meaning ascribed to
Property" that term in clause 2.1.1;
"Receiver" an administrative
receiver or a receiver
appointed pursuant to the
provisions of this Debenture
or pursuant to any applicable
law and such expression shall
include, without limitation,
a receiver and manager;
"Secured Obligations" the actual, contingent,
present and/or future
obligations and liabilities
of the Chargor to GAI under or
pursuant to the Loan Note
and Share Sale Agreement and
2
<PAGE> 97
the actual, contingent,
present and/or future
obligations and liabilities of
the Chargor arising under or
pursuant to this Debenture;
"Subsidiary" any company or undertaking
in the UK or elsewhere which
is a subsidiary of the
Chargor as defined by s.736
of the Companies Act 1985
from time to time including
without prejudice to the
generality of the foregoing
the following companies:
(1) Eurosystems Group Limited
(Company No. 2744739)
(2) Eurosystems UK Limited
(Company No. 1257722),
(3) General Automation Italia
SpA (Registered CCIAA Milano
No. 848285), (4) General
Automation France SA
(Registered No. B328508437),
(5) General Automation SA
(Registered No. 358.518
Brussels) together with any
other companies or
undertakings which are
subsidiaries or subsidiary
undertakings of EGL from time
to time.
3
<PAGE> 98
1.2 In this Debenture:
1.2.1 references to clauses and Schedules are to be construed as
references to the clauses of, and Schedules to, this
Debenture, references to subclauses shall unless otherwise
specifically stated be construed as references to the
subclauses of the clause in which the reference appears and
references to this Debenture include its Schedules;
1.2.2 references to this Debenture (or to any specific provisions of
this Debenture) or any other document shall be construed as
references to this Debenture, that provision or that document
as in force for the time being and as amended in accordance
with its terms, or, as the case may be, with the agreement of
the relevant parties;
1.2.3 words importing the plural shall include the singular and
vice versa;
1.2.4 references to a person shall be construed as including
reference to an individual, firm, company, corporation,
unincorporated body of persons or any state or any agency
thereof;
1.2.5 references to any statute or statutory provisions include any
statute or statutory provision which amends, extends,
consolidates or replaces the same, or which has been amended,
extended, consolidated or replaced by the same, and shall
include any orders, regulations, instruments or other
subordinate legislation made under the relevant statute;
4
<PAGE> 99
1.2.6 the words "other" and "otherwise" shall not be construed
ejusdem generis with any foregoing words where a wider
construction is possible; and
1.2.7 the words "including" and "in particular" shall be construed
as being by way of illustration or emphasis only and shall not
be construed as, nor shall they take effect as, limiting the
generality of any foregoing words.
2. MORTGAGES, FIXED CHARGES AND FLOATING CHARGE
2.1 The Chargor, as beneficial owner, hereby charges as continuing
security for the payment of the Secured Obligations, in favour
of GAI:
2.1.1 by way of legal mortgage all estates or interests in
the freehold, leasehold and other immoveable property
described in Schedule 1 and the proceeds of sale
thereof and all buildings and trade and other
fixtures on any such property belonging to or charged
to the Chargor (the "Legally Mortgaged Property");
2.1.2 by way of fixed charge all estates or interests in
any freehold, leasehold and other immoveable property
now or at any time during the continuance of this
security belonging to the Chargor (other than the
Legally Mortgaged Property) and the proceeds of sale
thereof and all buildings and trade and other
fixtures from time to time on any such property
belonging to or charged to the Chargor;
2.1.3 by way of fixed charge all plant, machinery,
vehicles, computers and office and other
5
<PAGE> 100
equipment owned by the Chargor both present and
future;
2.1.4 by way of fixed charge all book and other debts now
or at any time hereafter due or owing to the Chargor
together with the full benefit of all guarantees and
securities therefor and indemnities in respect
thereof (the "Debts");
2.1.5 by way of fixed charge all credit balances of the
Chargor with other bankers or third parties (the
"Credit Balances");
2.1.6 by way of a fixed charge all stocks, shares,
debentures, bonds, notes, loan capital of:
2.1.6.1 any Subsidiary; and
2.1.6.2 any other body corporate
and all rights to subscribe for, redeem, convert
other securities into or otherwise acquire any of the
same which may now or hereafter belong to the
Chargor, together with all dividends, interest and
other income and all other rights of whatsoever kind
deriving from or incidental to any of the foregoing;
2.1.7 by way of fixed charge the goodwill of the Chargor
and its uncalled capital now or at any time hereafter
in existence;
2.1.8 by way of fixed charge all copyrights, patents,
patent applications, licences, trade marks, trade
names, know-how and inventions or other rights of
every kind deriving therefrom now or at any time
hereafter belonging to the Chargor
6
<PAGE> 101
and all fees, royalties and other rights of every
kind deriving from such copyrights, patents, trade
marks, trade names, know-how and inventions; and
2.1.9 by way of floating charge the whole of the Chargor's
undertaking and all its property, assets and rights,
whatsoever and wheresoever, present and future, other
than any property or assets from time to time or for
the time being effectively mortgaged, assigned or
charged to GAI by way of fixed charge by this clause
or clause 2.2 below (hereinafter collectively
referred to as the "Floating Charge Property").
(and to the intent that the security so constituted shall be a
continuing security in favour of GAI).
2.2 The Security constituted by or pursuant to this Debenture
shall be in addition to and shall be independent of every
bill, note, guarantee, mortgage, pledge or other security
which GAI may at any time hold in respect of any of the
Secured Obligations and it is hereby declared that no prior
security held by GAI over the Charged Property or any part
thereof shall merge in the security created hereby or pursuant
hereto.
3. NEGATIVE PLEDGE
The Chargor hereby covenants that without the prior written consent of
GAI it shall not nor shall it agree or purport to:
3.1 create or permit to subsist any Encumbrance whether in any
such case ranking in priority to or pari passu with or after
the mortgages assignments and the fixed and floating charges
hereby created or any other security
7
<PAGE> 102
created by this Debenture save to the extent permitted or
required under the Facilities Agreement; or
3.2 sell, discount, factor, transfer, lease, lend or otherwise
dispose of, whether by means of one or a number of
transactions related or not and whether at one time or over a
period of time, the whole or, save in the ordinary course of
business, any part of its undertaking or assets save as
permitted by consent in writing given by the Chargor.
4. FURTHER ASSURANCE
4.1 The Chargor hereby applies to the Chief Land Registrar for the
registration against the registered titles specified in
Schedule 1 of the following:
4.1.1 a restriction in the following terms;
"except under an order of the Registrar no charge or
other security interest is to be registered or noted
without the consent of the proprietor for the time
being of charge number [ ]";
4.1.2 a notice that under the provisions of this Debenture
the Secured Parties are under an obligation to make
further advances.
4.2 The Chargor shall from time to time, at the request of GAI and
at the Chargor's cost, execute in favour of GAI, or as it may
direct, such further or other legal assignments, transfers,
mortgages, charges or other documents as in any such case GAI
shall stipulate over the Chargor's estate or interest in any
property or assets of whatsoever nature or tenure and
wheresoever situate, for the propose of more effectively
providing
8
<PAGE> 103
security to GAI for the payment or discharge of the Secured
Obligations. Without prejudice to the generality of the
foregoing, such assignments, transfers, mortgages, charges or
other documents shall be in such form as GAI shall stipulate
and may contain provisions such as are herein contained or
provisions of the like effect and/or such other provisions of
whatsoever kind as GAI shall consider requisite for the
improvement or perfection of the security constituted by or
pursuant to this Debenture. The obligations of the Chargor
under this clause shall be in addition to and not in
substitution for the covenants for further assurance deemed to
be included herein by virtue of section 76(l)(c) of the Law of
Property Act 1925.
4.3 The Chargor shall immediately after the execution of this
Debenture (or upon becoming possessed thereof at any time
hereafter) deposit with GAI all deeds, certificates and other
documents constituting or evidencing title to its real
property comprised within the Charged Property or any part
thereof and to any of the assets and rights charged under
clause 2.1.6.
5. DEBTS
5.1 The Chargor shall from time to time pay the proceeds of all
Debts into such bank accounts as GAI may designate in writing
to the Chargor and enter into such further arrangements in
respect of such Debts as GAI may require.
6. CONVERSION OF FLOATING CHARGE
If, at any time, GAI believes that any assets of the Chargor are in danger
of being seized or sold under any form of distress, execution or other
similar process it may, by notice in writing to the Chargor, convert the
floating charge created
9
<PAGE> 104
by this Debenture into a fixed charge in relation to the assets
specified in such notice (which assets need not be exclusively those
assets which are in danger of seizure or sale) and GAI shall further
be entitled (but not bound) to take possession of or appoint a
Receiver of such assets.
7. INSURANCE
7.1 The Chargor shall at all times during the subsistence of the
security constituted by or pursuant to this Debenture comply
with all covenants, undertakings and conditions as to
insurance of any part of the Charged Property imposed by the
terms of any lease, agreement for lease or any tenancy under
which the Chargor derives its estate or interest therein and,
subject to the foregoing and so far as not inconsistent with
the said terms, the Chargor shall at all such times:
7.1.1 cause all buildings, trade and other fixtures and all
plant, machinery, vehicles, computers and office and
other equipment and all stock in trade forming part
of the Charged Property to be insured and to be kept
insured in such insurance office, in such amounts and
against such risks as GAI may require from time to
time, but otherwise in such insurance office of
repute as shall have been selected by the Chargor or
with Lloyd's underwriters on the equivalent basis as
insurances are maintained by prudent companies
carrying on businesses comparable with that of the
Chargor and on a comparable scale as regards the
property and assets insured, the insured risks and
the classes of risk to be covered and the amount of
the insurance cover;
7.1.2 cause the interest of GAI in all parts of the Charged
Property that are for the time being
10
<PAGE> 105
insured otherwise than in the joint names of GAI and
the Chargor to be noted by endorsement on the policy
or policies of insurance relating thereto;
7.1.3 duly and punctually pay all premiums and other monies
due and payable under all such insurances as
aforesaid and promptly upon request by GAI produce to
GAI the premium receipts or other evidence of the
payment thereof; and
7.1.4 on demand by GAI, deposit all policies and other
contracts of insurance relating to the Charged
Property or any part thereof with GAI or produce the
same to GAI for inspection.
7.2 If default shall be made by the Chargor in complying with
clause 7.1 GAI may but shall not be obliged to effect or
renew any such insurance as is mentioned in that clause either
in its own name or in its name and that of the Chargor with an
endorsement of GAI's interest. The monies expended by GAI on
so effecting or renewing any such insurance shall be
reimbursed by the Chargor to GAI on demand and until so
reimbursed shall carry interest at the rate of two (2) per
cent above National Westminster Bank base rate from time to
time from the date of payment to the date of reimbursement
(after as well as before any judgment).
7.3 All claims and monies received or receivable under any such
insurances as aforesaid shall (subject to the rights and
claims of any lessor or landlord of any part of the Charged
Property) at the direction of GAI be applied either in making
good the loss or damage in respect of which the same has been
received or in or towards the discharge of the Secured
Obligations.
11
<PAGE> 106
8. UNDERTAKINGS BY THE CHARGOR
8.1 The Chargor hereby undertakes with GAI that it will at all
times while there shall subsist any security constituted by or
pursuant to this Debenture:
8.1.1 keep all buildings, trade and other fixtures, fixed
and other plant and machinery forming part of the
Charged Property in good and substantial repair and
permit GAI, its officers, employees and agents free
access at all reasonable times to view the state and
condition thereof, provided that GAI shall have given
the Chargor reasonable prior notice of its desire to
exercise its rights under this sub-clause and
requested access accordingly;
8.1.2 preserve, maintain and renew as and when necessary
all copyrights, licences, patents, trade marks and
other rights required in connection with its
business and/or the premises in which such business
is conducted;
8.1.3 observe and perform all covenants reserved by or
contained in any lease, agreement for lease or
tenancy agreement under which any part of the Charged
Property may be held and will not without the consent
of GAI vary, surrender, cancel, assign or otherwise
dispose of or permit to be forfeited any leasehold
interest forming part of the Charged Property or
agree any rent review;
8.1.4 observe and perform all restrictive and other
covenants and stipulations affecting any part of the
Charged Property or the use or the enjoyment of the
same or any part thereof;
12
<PAGE> 107
8.1.5 observe and perform all obligations under any
statute, regulation, directive, order or notice made
or given by any competent authority and not to do or
permit or allow to subsist on or about any part of
the Chargor's real property anything which might
result in proceedings being brought by a competent
authority;
8.1.6 not without the prior written consent of GAI part
with possession of the whole or any part of, or
confer on any other person any right or licence to
occupy, or grant any licence to assign or sub-let,
any land or buildings forming part of the Charged
Property;
8.1.7 not without the prior written consent of GAI allow
any person other than itself to be registered under
the Land Registration Act 1925 a proprietor of the
Charged Property or any part thereof or create or
permit to arise any overriding interest affecting
such property and the reasonable costs incurred by
GAI of lodging from time to time a caution against
registration of the title to such property (if
unregistered) or any part thereof shall be an expense
properly incurred in relation to this security; and
8.1.8 indemnify GAI (and as a separate covenant any
Receiver or Receivers appointed by it) against all
existing and future rents, taxes, rates, duties,
fees, renewal fees, charges, assessments, impositions
and outgoings whatsoever (whether imposed by deed or
statute or otherwise and whether in the nature of
capital or revenue and even though of a wholly novel
character) which now or at any time during the
continuance of the security constituted by
13
<PAGE> 108
or pursuant to this Debenture are properly payable in
respect of the Charged Property or any part thereof
or by the owner or occupier thereof.
8.2 If any such sums as are referred to in sub-clause 8.1.8 shall
be paid by GAI (or any Receiver or Receivers) the same shall
be reimbursed by the Chargor to GAI on demand and until so
reimbursed shall bear interest at the rate of two (2) per cent
above the National Westminster Bank base rate from time to
time from the date of payment to the date of reimbursement
(after as well as before any judgment).
9. POWERS OF GAI
9.1 At any time after GAI shall have duly served notice on the
Chargor demanding payment or discharge by the Chargor of all
or any of the Secured Obligations, in whole or in part, or if
requested by the Chargor, GAI may exercise without further
notice and without any of the restrictions contained in
section 103 of the Law of Property Act 1925, whether or not it
shall have appointed a Receiver, all the powers conferred on
mortgagees by the Law of Property Act 1925 and all the powers
and discretions conferred by this Debenture.
9.2 The statutory powers of leasing, letting, entering into
agreements for leases or lettings and accepting and agreeing
to accept surrenders of leases conferred by sections 99 and
100 of the said Act shall not be exercisable by the Chargor in
relation to any part of the Charged Property without the prior
written consent of GAI. In addition to such statutory powers
GAI shall have power after serving the notice referred to in
clause 9.1 to lease or make agreements for leases at a premium
or otherwise and accept surrenders of leases
14
<PAGE> 109
and generally without restriction on the kinds of leases and
agreements for leases that GAI may make and generally without
the necessity for GAI to comply with any restrictions imposed
by or the other provisions of the said sections 99 and 100.
GAI may delegate such powers to any person and no such
delegation shall preclude the subsequent exercise of such
powers by GAI itself or preclude GAI from making a subsequent
delegation thereof to some other person and any such
delegation may be revoked.
9.3 The restriction on the right of consolidating mortgage
securities contained in section 93 of the Law of Property Act
1925 shall not apply to this Debenture.
9.4 So far as permitted by law, neither GAI nor any Receiver
shall, by reason of it or any Receiver entering into
possession of any part of the Charged Property when entitled
so to do, be liable to account as mortgagee in possession or
be liable for any loss or realisation or for any default or
omission for which a mortgagee in possession might be liable.
10. AUTOMATIC CRYSTALLISATION
Notwithstanding anything to the contrary herein contained if the
Chargor charges, pledges or otherwise encumbers (whether by way of
fixed or floating security) any of the property, assets and income
comprising the Floating Charge Property or attempts so to do without
the prior consent in writing of GAI or if any creditor or other person
levies any distress, execution, sequestration or other process against
any of the said property, assets and income the floating charge hereby
created shall automatically without notice operate as a fixed charge
forthwith upon the occurrence of such event.
15
<PAGE> 110
11. APPOINTMENT OF RECEIVER
11.1 At any time after GAI shall have duly served notice on the
Chargor demanding the payment or discharge by the Chargor of
all or any of the Secured obligations, in whole or in part, or
if requested by the Chargor or after the application to the
court for an administration order in relation to the Chargor
under the Insolvency Act 1986, GAI may appoint one or more
persons to be a Receiver or Receivers of the Charged Property.
11.2 Subject to section 45 of the Insolvency Act 1986, GAI may
(i) remove any Receiver previously appointed hereunder, and
(ii) appoint another person or other persons as Receiver or
Receivers, either in the place of a Receiver so removed or who
has otherwise ceased to act or to act jointly with a Receiver
or Receivers previously appointed hereunder.
11.3 If at any time and by virtue of any such appointment(s) any two
or more persons shall hold office as Receivers of the same
assets or income, each one of such Receivers shall be entitled
(unless the contrary shall be stated in any of the deed(s) or
other instrument(s) appointing them) to exercise all the powers
and discretions hereby conferred on Receivers individually and
to the exclusion of the other or others of them.
11.4 Every such appointment or removal, and every delegation,
appointment or removal by GAI in the exercise of any right to
delegate its powers or to remove delegates herein contained,
may be made in writing under the hand of any [manager] or
other officer of GAI.
11.5 Every Receiver shall have:
16
<PAGE> 111
11.5.1 all the powers conferred by the Law of Property Act
1925 on mortgagees in possession and receivers
appointed under that Act;
11.5.2 power in the name or on behalf and at the cost of the
Chargor to exercise all the powers and rights of an
absolute owner and to do or omit to do anything which
the Chargor itself could do; and
11.5.3 if an administrative receiver, all the powers
specified in Schedule 1 of the Insolvency Act 1986.
11.6 In making any sale or other disposal of any of the Charged
Property in the exercise of their respective powers the
Receiver or GAI may require any consideration (without
prejudice to its obligations under applicable law) and may
accept, as and by way of consideration for such sale or other
disposal, cash, shares, loan capital or other obligations,
including without limitation consideration fluctuating
according to or dependent upon profit or turnover and
consideration the amount whereof is to be determined by a
third party. Any such consideration may be receivable in a
lump sum or by instalments.
11.7 All monies received by any Receiver appointed under this
Debenture shall be applied in the following order: (1) in the
payment of the costs, charges and expenses of and incidental
to the Receiver's appointment and the payment of his
remuneration; (2) in the payment and discharge of any
outgoings paid and liabilities incurred by the Receiver in the
exercise of any of the powers of the Receiver; (3) in
providing for the matters (other than the remuneration of the
Receiver) specified in the first three paragraphs of section
17
<PAGE> 112
109(8) of the Law of Property Act 1925; (4) in or towards
payment of any debts or claims which are by statute payable in
preference to the Secured Obligations but only to the extent
to which such debts or claims have such preference; (5) in or
towards the satisfaction of the Secured Obligations in
accordance with the terms of this Debenture; and any surplus
shall be paid to the Chargor or other person entitled thereto.
The provisions of this clause and clause 11.9 shall take
effect as and by way of variation and extension to the
provisions of the said section 109(8), which provisions as so
varied and extended shall be deemed incorporated herein.
11.8 Every Receiver shall be the agent of the Chargor which shall
be solely responsible for his acts and defaults and for the
payment of his remuneration.
11.9 Every Receiver shall be entitled to remuneration for his
services at a rate fixed by agreement between him and GAI (or,
failing such agreement, to be conclusively fixed by GAI)
commensurate with the work and responsibilities involved upon
the basis of charging from time to time adopted in accordance
with his current practice or the current practice of his firm
and without being limited to the maximum rate specified in
section 109(6) of the Law of Property Act 1925.
12. POWER OF ATTORNEY
12.1 The Chargor hereby irrevocably appoints the following, namely:
12.1.1 GAI;
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<PAGE> 113
12.1.2 each and every person to whom GAI shall from time to
time have delegated the exercise of the power of
attorney conferred by this clause; and
12.1.3 any Receiver appointed hereunder and for the time
being holding office as such
jointly and also severally to be its attorney or attorneys and
in its name and otherwise on its behalf to do all acts and
things and to sign, seal, execute, deliver, perfect and do all
deeds, instruments, documents, acts and things which may be
required for carrying out any obligation imposed on the
Chargor by or pursuant to this Debenture (including but not
limited to the obligations of the Chargor under clause 4.2 and
the statutory covenant referred to in such clause), for
carrying any sale, lease or other dealing by GAI or such
Receiver into effect, for conveying or transferring any legal
estate or other interest in land or other property or
otherwise howsoever, for getting in the Charged Property, and
generally for enabling GAI and the Receiver to exercise the
respective powers conferred on them by or pursuant to this
Debenture or by law. GAI shall have full power to delegate
the power conferred on it by this clause, but no such
delegation shall preclude the subsequent exercise of such
power by GAI itself or preclude GAI from making a subsequent
delegation thereof to some other person; any such delegation
may be revoked by GAI at any time.
12.2 The power of attorney hereby granted is as regards GAI, its
delegates and any such Receiver (and as the Chargor hereby
acknowledges) granted irrevocably and for value as part of the
security constituted by this Debenture to secure proprietary
interests in and the performance of obligations owed to the
respective donees within the meaning of the Powers of Attorney
Act 1971.
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13. PROTECTION OF PURCHASERS
No purchaser or other person dealing with GAI or its delegate or any
Receiver appointed hereunder shall be bound to see or inquire whether
the right of GAI or such Receiver to exercise any of its or his powers
has arisen or become exercisable or be concerned with notice to the
contrary, or be concerned to see whether any such delegation by GAI
shall have lapsed for any reason or been revoked.
14. CURRENCY
For the purpose of or pending the discharge of any of the Secured
Obligations GAI may, in its sole discretion, convert any monies
received, recovered or realised in any currency under this Debenture
(including the proceeds of any previous conversion under this clause)
from their existing currency of denomination into any other currency
at such rate or rates of exchange and at such time as GAI thinks fit.
15. APPLICATION
The Chargor shall have no rights in respect of the application by GAI
of any sums received, recovered or realised by GAI under this
Debenture.
16. NOTICES
Without prejudice to any other method of service of notices and
communications provided by law, a demand or notice under this
Debenture shall be in writing signed by an officer or agent of GAI and
may be served on the Chargor by hand or post and either by delivering
the same to any officer of the Chargor at any place or by addressing
the same to the Chargor at its registered office or principal place of
business last known to GAI; if such demand or notice is sent by
pre-paid first class post it shall be deemed to have been received on
the day
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following the day on which it was posted (ignoring Sundays) and shall
be effective notwithstanding it be returned undelivered.
17. REMEDIES CUMULATIVE ETC
17.1 The rights, powers and remedies provided in this Debenture are
cumulative and are not, nor are they to be construed as,
exclusive of any rights, powers or remedies provided by law or
otherwise.
17.2 No failure on the part of GAI to exercise, or delay on its
part in exercising, any of its respective rights, powers and
remedies provided by this Debenture or by law (collectively
the "Rights") shall operate as a waiver thereof, nor shall
any single or partial waiver of any of the Rights preclude any
further or other exercise of that one of the Rights concerned
or the exercise of any other of the Rights.
17.3 The Chargor hereby agrees to indemnify GAI and any Receiver
against all losses, actions, claims, costs, charges, expenses
and liabilities incurred by GAI and by any Receiver (including
any substitute delegate attorney as aforesaid) in relation to
this Debenture or the Secured Obligations (including, without
limitation, the costs, charges and expenses incurred in the
carrying of this Debenture into effect or in the exercise of
any of the rights, remedies and powers conferred hereby or in
the perfection or enforcement of the security constituted
hereby or pursuant hereto or in the perfection or enforcement
of any other security for or guarantee in respect of the
Secured Obligations) or occasioned by any breach by the
Chargor of any of its covenants or obligations under this
Debenture. The Chargor shall so indemnify GAI and any
Receiver on demand and shall pay interest on the sum demanded
at the rate per annum of two (2) per cent above the [rate
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specified in the Facilities Agreement] from time to time from
the date on which the same was demanded by GAI or any
Receiver, as the case may be, and any sum so demanded together
with any interest, shall be a charge upon the Charged Property
in addition to the monies hereby secured.
18. PROVISIONS SEVERABLE
Every provision contained in this Debenture shall be severable and
distinct from every other such provision and if at any time any one or
more of such provisions is or becomes invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining such provisions shall not in any way be affected thereby.
19. GAI'S DISCRETION
19.1 Any liberty or power which may be exercised or any
determination which may be made hereunder by GAI may be
exercised or made in the absolute and unfettered discretion of
GAI which shall not be under any obligation to give reasons
therefor.
19.2 A certificate by an officer of GAI (i) as to the amount for
the time being due to GAI under the Facilities Agreement and
(ii) as to any sums payable to GAI hereunder shall (save in
the case of manifest error) be conclusive and binding upon the
Chargor for all purposes.
20. AMENDMENTS
No amendments or waiver of any provision of this Debenture and no
consent to any departure by the Chargor therefrom shall in any event
be effective unless the same shall be in writing and signed or
approved in writing by GAI and then such waiver or
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consent shall be effective only in the specific instance and for the
specific purpose for which it was given.
21. LAW
This Debenture shall be governed by and construed in accordance with the
provisions of English law.
IN WITNESS whereof the Chargor and GAI have executed this Debenture as a deed
the day and year first before written.
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SCHEDULE 1
THE LEGALLY MORTGAGED PROPERTY
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EXECUTED AS A DEED by FUTURE )
SERVICES LIMITED acting by the )
following signatures )
Director /s/ T. BOWMAN
----------------------------
Director/Secretary /s/ I.P. DAWKINS
------------------
EXECUTED AS A DEED by GENERAL )
AUTOMATION INC acting by the )
following signatures )
/s/ ?????
--------------------------------------
/s/ ?????
--------------------------------------
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EXHIBIT 10(n)
OPERATING AGREEMENT
FOR
GENERAL AUTOMATION LLC
A DELAWARE LIMITED LIABILITY COMPANY
This operating agreement ("Agreement"), is made as of May 22, 1995, by
and between General Automation, Inc., a Delaware corporation ("GAI"), and
SunRiver Data Systems, a Delaware corporation ("SunRiver") with reference to
the following facts:
A. On May 6, 1995, a Certificate of Formation for General Automation
LLC ("GAL" or the "Company"), a limited liability company under the laws of the
State of Delaware, was filed with the Delaware Secretary of State.
B. The parties desire to adopt and approve an operating agreement for
GAL.
NOW, THEREFORE, the parties (hereinafter sometimes collectively
referred to as the "Members" or individually as the "Member") by this Agreement
set forth the operating agreement for GAL under the laws of the State of
Delaware upon the terms and subject to the conditions of this Agreement.
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the
meanings set forth below (all terms used in this Agreement that are not defined
in this Article I shall have the meanings set forth elsewhere in this
Agreement):
1.1 "Act" shall mean the Delaware Limited Liability Company Act,
codified in the Delaware Code Annotated, Section 18-101 et seq., as the same
may be amended from time to time.
1.2 "Articles" shall mean the Certificate of Formation for GAL
originally filed with the Delaware Secretary of State and as amended from time
to time.
1.3 "Capital Account" shall mean with respect to any Member the
capital account which GAL establishes and maintains for such Member pursuant to
Section 3.3.
1.4 "Capital Contribution" shall mean the total value of cash and
fair market value of property contributed and/or services rendered or to be
rendered to GAL by Members.
1.5 "Fiscal Year" shall mean GAL's fiscal year, which shall be
the October 1st through September 30th.
1.6 "GAI's PICK Business" consists of the distribution of
PICK-based computer systems and software running GAI's version of the PICK
System on various hardware platforms, including but not restricted to GAI's
R91(R) version of the PICK System on GAI's manufactured 68040 based systems and
its soon to be released Power95(R) version of PICK running on GAI badged AIX
based hardware platforms supplied under OEM agreements by Groupe Bull, IBM, and
Motorola marketed
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through dealers, distributors, original equipment manufacturers and value-
added resellers, and the maintenance and support of such systems under
maintenance contracts and on "time and material" basis.
1.7 "Majority Interest" shall mean one or more Percentage
Interests of Members which taken together exceed fifty percent (50%) of the
aggregate of all Percentage Interests.
1.8 "Manager" shall mean one or more Managers. Specifically,
"Manager" shall mean GAI, or any other persons that succeed it.
1.9 "Member" shall mean each Person who (a) is an initial
signatory to this Agreement, has been admitted to GAL as a Member in accordance
with the Articles of this Agreement or is an assignee who has become a Member
in accordance with Article VI and (b) has not resigned, withdrawn, been
expelled or, if other than an individual, dissolved.
1.10 "Membership Interest" shall mean a Member's entire interest
in GAL including the right to vote on or participate in the management, and the
right to receive information concerning the business and affairs of GAL.
1.11 "Percentage Interest" shall mean the percentage of a Member
set forth opposite the name of such Member under the column "Member's
Percentage Interest" in Exhibit A hereto, as such percentage may be adjusted
from time to time pursuant to the terms of this Agreement. Percentage
Interests shall be determined in accordance with the relative proportions of
the Capital Accounts of the Members.
1.12 "Software" shall mean executable programs and source code for
all PICK like products of GAI and SunRiver, such as Mentor, Mentor PRO, Mentor
Operating Environment, R91, R83, and Power95.
1.13 "SunRiver's PICK Business" consists of the distribution of
PICK-based computer systems and software running SunRiver's version of the
PICK System on various hardware platforms (including but not restricted to
SunRiver's Intel based product marketed under the trademark "ADDS Mentor(R)PRO"
and SunRiver's Mentor Operating Environment (MO/E) operating system) through
dealers, distributors, original equipment manufacturers and value-added
resellers, and the maintenance and support of such systems under maintenance
contracts and on "time and material" basis, all in substantially the form
previously operated by the Applied Digital Data Systems, Inc. subsidiary of
AT&T Global Information Solutions ("AT&T-GIS") , which was acquired by SunRiver
in December 1994.
1.14 "Significant Terminal VAR" Shall mean a _PICK dealer/VAR that
also sells terminal products purchased from SunRiver into markets other than
the "PICK" market and purchases more than 50 terminals per annum.
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ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. Pursuant to the Act, the Members have formed a
Delaware limited liability company under the laws of the State of Delaware by
filing the Articles with the Delaware Secretary of State and entering into this
Agreement. The rights and liabilities of the Members shall be determined
pursuant to the Act and this Agreement. To the greatest extent permitted by
the Act, the Agreement shall control.
2.2 Name. The name of the company shall be "General Automation
LLC."
2.3 Term. The term of this Agreement shall be co-terminus with
the period of durations of GAL provided in the Articles, unless extended or
sooner terminated as hereinafter provided.
2.4 Office and Agent. GAL shall continuously maintain an office
and registered agent in the State of Delaware as required by the Act. The
principal office of GAL shall be at 17731 Mitchell North, Irvine, California
92714. Such location could change, as GAI from time to time may determine, or
the business of GAL may require. The registered agent shall be as stated in
the Articles or as otherwise determined by the Manager.
2.5 Purpose of GAL. The purpose of GAL is to engage in any lawful
activity for which a limited liability company may be organized under the Act.
Notwithstanding the foregoing, without the unanimous consent of the Members,
GAL shall not engage in any business other than the following:
(a) to manage and operate GAI's PICK Business and SunRiver's
PICK Business.
(b) the development, manufacturing, marketing, sale,
distribution and service of information management environment products
currently known as Mentor PRO, Mentor Operating Environment, R91, Power95 and
future derivatives and enhanced versions of such products;
(c) the manufacture and/or integration, marketing, sale and
distribution of hardware platforms using PICK software for use in the PICK
marketplace provided by AT&T, Groupe BULL, IBM, Motorola, and others on various
operating systems as may be determined by the management of GAL;
(d) to provide technical service and support for the company's
products including: AT&T UNIX, AIX, and other operating systems as well as
professional services for PICK application software worldwide; and
(e) such other activities directly related to the foregoing
("the Business") as may be necessary, advisable, or appropriate, in the
reasonable opinion of the Manager to further the foregoing business.
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ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Initial Capital Contributions. Each Member shall contribute
such amount as is set forth on Exhibit "A" as their initial Capital
Contribution, which Exhibit "A" shall be revised to reflect any additional
contributions contributed in accordance with Section 3.2.
3.2 Additional Capital Contributions. No Member shall be required
to make any additional Capital Contributions. To the extent unanimously
approved by the Members, the Members may be permitted to make additional
Capital Contributions.
3.3. Capital Accounts. GAL will maintain the capital accounts in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv).
3.4 No Interest. No Member shall be entitled to receive any
interest on their Capital Contributions.
ARTICLE IV
MAINTENANCE CONTRACTS, LEASES, DISTRIBUTORSHIPS, AND LICENSES
4.1 Assignment of Maintenance Contracts. SunRiver and GAI shall
retain their respective ownership of and the obligations under all their
existing system maintenance contracts with their customers. SunRiver shall
subcontract with GAL to provide all services required by SunRiver under these
agreements, including call management, Technical Assistance Center support for
software and hardware for SunRiver's customers. SunRiver shall pay GAL a
monthly management fee equal to twenty percent (20 %) of the monthly charges to
the customers under such maintenance contract for this service. GAL will use
its best efforts to secure contracts from all SunRiver customers upon the
expiration of the existing SunRiver maintenance contracts with such customers,
and shall act as a re-seller of SunRiver supplied AT&T maintenance services as
provided under the Master OEM Maintenance Agreement (the "AT&T Agreement")
between SunRiver and AT&T Global Information Solutions Company (AT&T) dated
December 9, 1994 to such customers until such time as GAL shall secure a direct
maintenance agreement with AT&T, which GAL shall use its best effort to secure.
GAL shall be responsible for renewal and billing of all new service contracts
and renewals of existing contracts after closing and shall perform all
activities consistent with the AT&T Agreement. The Manager hereby agrees to
actively promote the Business of GAL, and SunRiver and GAI agree to cooperate
with GAL to allow it to actively conduct its business and to expand the PICK
market for current and future products.
4.2 Lease of Capital Equipment. SunRiver shall rent or lease to
GAL any existing capital equipment including, but not limited to, computers,
terminals, modems, networks, and other devices used in the operation of the
SunRiver PICK Businesses. The listing of all such equipment is contained on
and Exhibit "B" attached hereto. SunRiver shall be compensated for such
equipment lease at the rate of .0278 times the market value of such equipment
per month for three (3) years after which time the capital equipment shall
become the property of GAL.
4.3 Distributorship. SunRiver hereby appoints GAL as a
distributor and grants to GAL the exclusive right to market, distribute, sell,
install, and support the terminal products of SunRiver to
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GAL's PICK customers and VARs except as st forth below. SunRiver shall not
sell terminal products to any GAL VARs which sell hardware and products which
utilize the Pick Operating Systems or software that emulates the functions and
features of the Pick Operating System but shall be authorized to sell terminal
products to any "Significant Terminal VARs". GAL and SunRiver agree to execute
a standard SunRiver distributor agreement substantially in the same form as
Exhibit "C" attached. GAL shall exclusively sell SunRiver terminal products so
long as GAL determines, in its reasonable judgment, that the SunRiver terminal
products are both technically and financially competitive with similar terminal
products.
4.4 AT&T Agreements. Nothing in this agreement shall be
considered to constitute an assignment of the AT&T Agreement. GAL shall take no
actions in contravention of SunRiver's existing agreements with AT&T.
4.5 PICK Systems Negotiations. SunRiver and GAI shall jointly
engage in negotiations with PICK Systems, the goal of which shall be to secure
an agreement between the parties to allow for the integration of the features
of GAI's R91, Power95 and SunRiver's Mentor(R)PRO into Advanced PICK, for which
a favorable license will be issued by PICK to GAI.
4.6 Software Licenses. Concurrent with the execution of this
agreement, GAI and SunRiver shall each enter into an Exclusive License
Agreement with GAL substantially in the form attached as Exhibit "E" whereby
each shall license its proprietary software version of the PICK Operating
System to GAL to enable GAL to market and to sell such software in furtherance
of the Business. GAL shall be further authorized to develop and enhance the
software during the term of the Exclusive License Agreement. All such
enhancement shall remain the property of GAL subject to the provisions of
Article IX and XI hereof.
4.7 On-going Business Relationships: The parties agree that
SunRiver and GAI will continue to work together to exploit the PICK marketplace
and to explore combined purchases of materials, equipment, parts and services.
GAL may elect to purchase from SunRiver certain continuing services including
(i) Marketing and marketing communications services; (ii) Software development;
(iii) facilities as may be required. GAL shall purchase such services from
SunRiver prior to purchasing the same from a third party provided that the
service is available from SunRiver at a commercially reasonable price and
provides equivalent benefits. Such services shall be provided by SunRiver on a
cost-plus ten (10) per cent basis.
ARTICLE V
PURCHASE OF PRODUCTION AND
SPARE PARTS INVENTORIES
5.1 Production Inventories. Both GAI and SunRiver shall retain
ownership of their respective inventories of production Parts currently used to
support their respective PICK businesses ("the Parts"). A complete listing of
all spare Parts currently in inventory, with corresponding Part identification
numbers and prices, is attached hereto as Exhibit "D", and incorporated herein
by reference. GAL shall purchase such Parts as and when required to conduct
the business on a cost plus eight percent (8%) basis. GAL shall purchase spare
Parts from SunRiver prior to purchasing the same Parts from a third party
providing the Part is available from SunRiver at a commercially competitive
price. For a period of three (3) years following the date of this agreement
GAL shall have a right of
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first refusal to purchase any of the Parts which SunRiver may offer to sell to
any third party at a price equivalent to that offered to such third party. All
Parts not acquired during such three (3) year period may be disposed of by
SunRiver in any manner it so chooses.
ARTICLE VI
MEMBERS
6.1 Limited Liability. Except as required under the Act or as
expressly set forth in this Agreement, no Member shall be personally liable for
any debt, obligation, or liability of GAL, whether that liability or obligation
arises in contract, tort, or otherwise.
6.2 Admission of Additional Members. The Manager, with the
unanimous approval of the Members, may admit to GAL additional Members. Any
additional Members shall obtain Membership Interests and will participate in
the management and distributions of GAL on such terms as are determined by the
Manager and approved unanimously by the Members. Notwithstanding the
foregoing, substitute Members may only be admitted in accordance with Article
VII.
6.3 Withdrawals or Resignations. Any Member may withdraw or
resign as a Member at any time upon 180 days prior written notice to GAL. Such
Member's Membership Interest will be subject to purchase and sale as provided
in Article IX. The withdrawing Member is not entitled to a return of capital
prior to dissolution. The withdrawing Member is entitled to receive
distributions as otherwise provided for in this agreement until its capital is
returned. Except as set forth in this agreement withdrawal of a Member will
not result in a dissolution of GAL, if the Members agree to continue GAL.
6.4 Remuneration to Members. Except as authorized in this
Agreement, no Member is entitled to remuneration for acting in GAL business,
subject to the entitlement of the Manager or Members winding up the affairs of
GAL to reasonable compensation pursuant to Section 11.2.
6.5 Members Are Not Agents. The management of GAL is vested in
the Manager. No Member, acting solely in the capacity of a Member, is an agent
of GAL nor can any Member in such capacity bind nor execute any instrument on
behalf of GAL.
6.6 Information. The Manager shall on request furnish a photocopy
of the (a) Member list, (b) the Manager list, (c) the federal, state or local
tax or informational returns, (d) the Articles of Organization and all
amendments or (e) the Agreement and all amendments, correct as of the date of
making the photocopy, to any Member, the representative of any Member, or the
nominee of any Member.
6.7 Permitted Actions by Members. At any meeting of Members duly
called for that purpose, the Members may, by vote of the Members owning a
Majority of all the Membership Interests, take all actions necessary to manage
GAL, other than those set out below, which shall require unanimous approval of
the Membership.
6.7.1 Appoint a Manager other than GAI except as
specifically authorized by this agreement.
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6.7.2 Amend this Agreement.
6.7.3 Dissolve GAL.
6.7.4 Approve or disapprove the sale of the assets of GAL.
6.7.5 Approve Annual Business Plan. The members agree the
plan will be formulated on or about September 30 of each year,
and such plan will have monthly and quarterly projections of
revenue.
6.7.6 Approve any financing or lien other than Accounts
Receivable which encumbers the assets of GAL and which would
be superior in priority to the payment of distributions to
SunRiver.
6.8 Meetings of Members.
A. Date, Time and Place of Meetings of Members: Secretary.
Meetings of Members may be held as such date, time and place as the Manager may
fix from time to time. The meeting must be held within the county the
principal place of business is located. No annual or regular meetings of
Members is required.
B. Power to Call Meetings. Meetings of the Members may be
called by any Manager, or upon written demand of any Members for the purpose of
addressing any matters on which the Members may vote.
C. Notice of Meeting. Written notice of a meeting of Members
shall be sent or otherwise given to each Member not less that ten (10) nor
more than thirty (30) days before the date of the meeting. the notice shall
specify the place, date and hour of the meeting, and the general nature of the
business to be transacted. No other business may be transacted at this
meeting. When the meeting is called by other than a Manager and the notice is
not given within twenty (20) days after the receipt of the request, the person
entitled to call the meeting may give the notice.
D. Manner of Giving Notice: Affidavit of Notice. Notice of
any meeting of Members shall be given either personally or by first-class mail
or telegraphic or other written communication, charges prepaid, addressed to
the Member at the address of that Member appearing on the books of GAL or given
by the Member to GAL for the purpose of notice. Notice shall be deemed to have
been given at the time when delivered personally or deposited in the mail or
sent by telegram or other means of written communication.
E. Validity of Action. Any action approved at a meeting,
other than by unanimous approval of those entitled to vote, shall be valid only
if the general nature of the proposal so approved was stated in the notice of
meeting or in any written waiver of notice.
F. Quorum. The presence of the holders of a Majority
Interest shall constitute a quorum at a meeting of Members. The Members
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the loss of a
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quorum, if any action taken after loss of a quorum (other than adjournment) is
approved by at least Members holding a Majority Interest.
G. Adjourned Meeting: Notice. Any Members' meeting, whether
or not a quorum is present, may be adjourned from time to time by the vote of
the majority of the Membership Interests represented at that meeting.
H. Waiver of Notice or Consent. The actions taken at any
meeting of Members however called and noticed, and whatever held, have the same
validity as if taken at a meeting duly held after regular call and notice, if a
quorum is present and if, either before or after the meeting, each of the
Members entitled to vote, who was not present signs a written waiver of notice
or consents to the holding of the meeting or approves the minutes of the
meeting. All such waivers, consents or approvals shall be filed with GAL
records or made a part of the minutes of the meeting. Attendance of a person
at a meeting shall constitute a waiver of notice of that meeting, except when
the person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened, and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters not included in the notice of the meeting if that
objection is expressly made at the meeting.
I. Action by Written Consent without a Meeting. Any action
that may be taken at a meeting of Members may be taken without a meeting, if a
consent in writing setting forth the action so taken, is signed and delivered
to GAL by Members having not less than the minimum number of votes that would
be necessary to authorize or take that action at a meeting at which all Members
entitled to vote on that action at a meeting were present and voted. All
consents shall be filed with the Manager shall be maintained in GAL records.
ARTICLE VII
MANAGEMENT AND CONTROL OF GAL
7.1 Management of GAL by Managers. The business and affairs of GAL
shall be managed exclusively by GAI, except as otherwise set forth in this
agreement. Except for situations in which a unanimous vote of the Members is
expressly required by the Articles or this Agreement, GAI shall have full,
complete and exclusive authority, power, and discretion to manage and control
the business and affairs of GAL, to make all decisions regarding those matters
and to perform any and all other acts or activities customary or incident to
the management of GAL's business and affairs generally consistent with the
approved Business Plan, which such Business Plan shall be prepared no less than
annually and shall include but is not limited to an operating budget, marketing
plan, sales goals and objectives, and product development plans.
7.2 Managing Member's Powers and Duties. GAI shall, in management of
GAL's affairs, have, subject to the laws of the State of Delaware, including
without limitation, the following powers:
1. To employ from time to time at the expense of GAL, on such
terms and for such compensation as the Manager may deemed reasonable, such
persons as may be required for efficient maintenance and operation of GAL
business, including accountants, attorneys, and others.
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2. To pay all attorneys' fees and accountants' fees and other
costs incurred in the formation of GAL and completion of all steps necessary
for GAL to comply with all applicable laws.
3. To execute, acknowledge, and deliver any and all
instruments in writing required to effectuate any of his other powers.
7.3 Election of Managers.
A. Number, Term, and Qualifications. GAL shall initially
have one (1) Manager which shall be GAI. Unless the Manager resigns or is
removed, the Manager shall hold office until a successor shall have been
elected and qualified. Except as set forth herein, the Manager shall be
elected by the unanimous vote or written consent of the Members. A Manager
need not be a Member.
B. Resignation. If GAI should resign as Manager, SunRiver
shall have the option of becoming Manager without the requirement of the
unanimous vote of the Members, and GAL shall continue to be governed as set
herein. Should SunRiver not exercise its right to become Manager and the
Members are unable to agree on a suitable Manager then GAL shall be dissolved
as set out in Article 8 hereof.
C. Removal. Except as set forth below the Manager may be
removed at any time, with or without cause, by the affirmative vote of Members
holding a Majority Interest at a meeting called expressly for that purpose, or
by the written consent of the Members holding a Majority Interest. Any removal
shall be without prejudice to the rights, if any, of the Manager under any
agreement and, if the Manger is also a Member, shall not affect the Manager's
rights as a Member or constitute a withdrawal of a Member. Notwithstanding the
foregoing, if SunRiver becomes the Manager under any of the provisions provided
for such appointment, except as set forth in Article XIII, SunRiver may not be
removed without the unanimous vote of the Members.
7.4 Management Committee. GAL shall have a management committee
that consists of five (5) individuals, at least three (3) of which shall be
selected by GAI and two (2) of which may be selected by SunRiver, at SunRiver's
discretion. The management committee will have no authority over the Manager
and its decisions, but will serve to advise and consult with the Manager on an
as needed basis but no less than once per month.
7.5 Members have No Managerial Authority. The Members shall have no
power to participate in the management of GAL except as expressly authorized by
this Agreement or the Articles and except as expressly required by the Act.
Unless expressly and duly authorized in writing to do so by a Manager, no
Member shall have any power or authority to bind or act on behalf of GAL in any
way, to pledge its credit, or to render it liable for any purpose.
7.6 Performance of Duties: Liability of Managers. A Manager shall
not be liable to GAL or to any Member for any loss or damage sustained by GAL
or any Member, unless the loss or damage shall have been the result of fraud,
deceit, gross negligence, reckless or intentional misconduct, or a knowing
violation of law by the Manager. The Manager shall perform its Managerial
duties in good faith, in a manner they reasonably believe to be in the best
interests of GAL and its Members, and with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would use under
similar circumstances. A Manager who so performs the duties of Manager shall
not have any liability by reason of being or having been a Manager of GAL.
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7.7 Devotion of Time. The Manager is not obligated to devote all of
their time or business efforts to the affairs of GAL. The Manager shall devote
whatever time, effort, and skill as they deem appropriate for the operation of
GAL.
7.8 Competing Activities. The Members, their officers, directors,
shareholders, partners, Members, Managers, agents, or employees may engage or
invest in, independently or with others, any business activity of any type or
description, except those which directly or indirectly compete with GAL or the
Business. Neither GAL nor any Member shall have any right in or to such other
ventures or activities or to the income or proceeds derived therefrom. The
Manager and the Members shall not be obligated to present any investment
opportunity or prospective economic advantage to GAL, even if the opportunity
is of the character that, if presented to GAL, could be taken by GAL.
7.9 Transaction between GAL and Managers. Notwithstanding that it
may constitute a conflict of interest, the Manager may, engage in any
transaction with GAL so long as such transaction is not expressly prohibited by
this Agreement and so long as the terms and conditions of such transaction are
fair and reasonable to GAL and are on terms not less favorable to GAL then can
be secured from arms-length third parties.
7.10 Payments to Managers. Except a specified in this Agreement, GAI
is not entitled to remuneration for services rendered to GAL. GAI and their
affiliates shall receive only the following payments:
A. Management Fee. GAI's sole compensation will be to
receive cash distributions as provided for in Section 8.1.
B. Expenses. GAL shall reimburse the Manager for the actual
cost of goods and materials used for or by GAL. GAL shall also pay or
reimburse the Manager for organizational expenses (including, without
limitation, legal and accounting fees and costs) incurred to form GAL and
prepare the Articles and this Agreement.
ARTICLE VIII
ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS
8.1a The Members shall distribute cash and allocate profit or loss
as described below. SunRiver shall receive cash distributions equal to a
percentage of the "Net Revenues" of the combined Business for each preceding
month as set forth below. Solely for the purposes of this Agreement, "Net
Revenues" shall be monthly gross revenues from the Businesses, less credits,
returns, sales taxes and duties, packaging, prepaid and billed freight charges
on customer shipments, and all other related pass through charges. No
deduction shall be made for the costs of goods, operating expenses, and other
expenses of GAL in determining net revenues. GAI will receive all other cash
distributions, if any, not paid to SunRiver. Except as set forth in Paragraph
8.1b the amount of "net revenue" paid monthly to SunRiver, for the first 60
months from the date hereof, will be as follows:
<TABLE>
<S> <C>
Months 1-12 -- 12% Months 12-24 -- 10%
Months 24-36 -- 9% Months 36-48 -- 8%
Months 48-60 -- 7%
</TABLE>
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The monthly cash distributions to SunRiver required under this Paragraph 8.1 or
as may be modified under Paragraph 8.1(b) (hereinafter the "SunRiver
Distributions") shall be made to SunRiver no later than thirty (30) business
days after the close of the month and shall be paid without reference to the
profits of GAL or whether GAL is profitable for any period or any year. In the
event such payments are not made by GAL to SunRiver in a timely fashion,
SunRiver shall have all the rights of a creditor under the law plus the rights
set forth in Article X of this Agreement. The SunRiver Distributions provided
for hereunder are in addition to the other payments required under this
agreement including Paragraphs 4.2 and 5.1 or as may be modified under
Paragraph 8.1(b).
8.1b Revenue Forecast. If during the any three (3) month period of
the twelve (12) month period following the date of this Agreement the actual
net revenue generated by the Business falls below 85% of that net revenue which
is established by the approved Business Plan for that period, then the
following modifications to the distribution procedures of Paragraph 8.1 shall
apply as follows:
A. If the revenue deficiency during any such three (3) months
during the twelve (12) month period from the date hereof results in all or part
from actual revenues from former SunRiver customers being less than the
revenue which is forecast for the period by the Business Plan from those
customers, and, if such deficit is equal to or greater than 15% of the total
projected net revenue in the Business Plan, from all sources, then the
percentage of net revenue paid to SunRiver shall be reduced from 12% to 10.5%
for such period, the remainder of the twelve (12) month period commencing from
the date hereof.
B. Conversely, if the revenue deficiency during any such three
(3) months during the twelve (12) month period from the date hereof results in
all or part from actual revenue from GAI customers being less than that
revenue which is forecast for the period by the Business Plan from those
customers, and if such deficit is equal to or greater than 15% of the total
projected net revenue in the Business Plan, from all sources, then the
percentage of net revenue paid to SunRiver shall be increased from 12% to 13.5%
for the remainder of the twelve (12) month period commencing from the date
hereof.
Provided however that in no event shall the distribution of net revenue to
SunRiver during the first twelve (12) months following the execution of this
Agreement be less than $2.9 million, regardless of the actual net revenue
generated by the Business from either of GAI's or SunRiver's customer base.
Moreover, neither of the above paragraphs will apply if both paragraphs are
applicable.
8.2 Profits. After giving effect to the special allocations set
forth in Paragraph 8.4, Profits with respect to any Fiscal Year shall be
allocated to the Members as follows:
(a) First, to the Members until the cumulative profits
allocated pursuant to this Paragraph 8.2 (a) are equal to the cumulative Losses
allocated to the Members pursuant to Paragraph 8.3 (b)(ii) for all prior Fiscal
Years;
(b) Second, to the Members until the cumulative profits
allocated pursuant to this Paragraph 8.2 (b) are equal to the cumulative Losses
allocated to the Members pursuant to Paragraph 8.3(b)(i) and Paragraph 8.3(ii)
for all prior Fiscal Years;
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(c) Third , to SunRiver in an amount equal to the SunRiver
Distributions paid to it from the inception of the Partnership and to date and
which have not been subject to a profits allocation under this Paragraph 8.2;
and
(d) the balance, if any, to GAI.
Distribution to the Members will be made within thirty (30) days following the
close of the month. The Members acknowledge that year end adjustments may be
made on Monthly payments.
8.3 Losses. After giving effect to the special allocations set
forth in Paragraph 8.4, losses with respect to any Fiscal Year shall be
allocated to the Members as follows:
(a) 99 percent to GAI and 1 percent to SunRiver;
(b) Losses allocated to any Member with respect to any
Fiscal year shall not exceed the maximum amount of Losses that may be so
allocated without causing such Member to have a Negative Capital Account at
the end of such year. All Losses in excess of the limitation set forth in this
Paragraph 8.2(c) shall be allocated:
(i) First, to the Members who will not be subject
to this limitation to the extent possible until such Members become subject to
this limitation; and
(ii) Second, any remaining amount to the Members
pro rata in accordance with their aggregate Percentage Interests, unless
otherwise required by the Code or Treasury Regulations.
8.4 Special Allocations.
(a) Qualified Income Offset. Subject to paragraph (6)
below, notwithstanding anything herein to the contrary, but only if required by
Treasury Regulation section 1.704-1(b) in order for the allocations provided
for herein to be considered to have substantial economic effect or to be deemed
to be in accordance with the Members' interests in the Company, if in any
Fiscal Year, a Member unexpectedly receives an adjustment, allocation or
distribution described in Treasury Regulation section 1.704-1(b) (2) (ii) (d)
(4), (5) or (6), and such adjustment, allocation or distribution causes or
increases a Negative Capital Account such Member shall be allocated items of
income and gain (consisting of a pro rata portion of each item of Company
income, including gross income and gain) in an amount and manner sufficient to
eliminate such deficit balance as quickly as possible. This paragraph is
intended to comply with Treasury Regulation section 1.704-1(b) (2) (ii) (d) and
shall be interpreted consistently therewith.
(b) Minimum Gain Charge Back. Notwithstanding any other
provision of this Article 8, if there is a net decrease in Company Minimum Gain
(as defined in the Treasury Regulations under Section 704 of the code) during
any Fiscal Year, each Member shall, subject to the exception provided in
Treasury Regulation section 1.704-2(f), be allocated items of income and gain
for such year an amount equal to such Member's share of the net decrease in
Company Minimum gain within the meaning of Treasury Regulation section
1.704-2(g) (2). To the extent that Paragraph 8.4 is inconsistent with Treasury
Regulation sections 1.704-2(f) or 1.704-2(b) or
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incomplete with respect to such Treasury Regulations, the Minimum Gain Charge
back provided for herein shall be applied and interpreted in accordance with
such Regulations.
(c) Nonrecourse Deductions. Nonrecourse Deductions shall
be allocated to the Members as described in Paragraph 8.3(b)(ii).
(d) Curative Allocations. Special allocations of items
of income or gain, allocations of Losses, allocations pursuant to Paragraph 8.4
and any other allocations may not be consistent with the manner in which the
Members intend to divide the Company Profits, Losses, Nonrecourse Deductions,
gain and similar items. Accordingly, Profits, Losses, Nonrecourse Deductions,
and other items shall be allocated subsequent to any such special allocations
among the Members consistent with Treasury Regulation section 1.704-1(b) and
1.704-2 so as to prevent such special allocations from distorting the manner in
which overall Company Profits, Losses and Nonrecourse Deductions are intended
to be allocated among the Members. In general, the Members and the Company
anticipate and agree that this will be accomplished by specially allocating
other Profits, Losses and items of income, gain, loss and deduction among the
Members in the current year or subsequent years so that the net amount of such
special or other unintended allocations to each Member is zero after taking
into account present value concepts.
(e) Member Nonrecourse Deduction and Member Minimum
Gain Charge back.
(i) Member Nonrecourse Deductions. Any Member
Nonrecourse Deductions (as defined in the Treasury Regulations under Section
704 of the code) for any fiscal year or other period shall be allocated to the
Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable
in accordance with Treasury Regulation sections 1.704-2(i) and 1.704-2(k) and
Member Minimum Gain Chargeable arising from any decrease in Member Minimum Gain
shall be allocated to the Member as required by Treasury Regulation section
1.704-2(i).
(ii) Member Minimum Gain Charge back. If there is
a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt
during any Fiscal Year; within the meaning of Treasury Regulation sections
1.704-2(i) (3) and 1.704-2(k), each Member who, as of the beginning of such
year, has a share of the Member Minimum gain attributable to such Member
Nonrecourse Debt, determined in accordance with treasury Regulation section
1.704-2(i) (5) and 1.704-2(k), shall be allocated items of income and gain for
such year (and, if necessary, subsequent years) in proportion to, and to the
extent of, an amount equal to the greater of (A) such Member's share of the net
decrease in Member Minimum Gain attributable to such Member Nonrecourse Debt
that is allocable to the disposition of Company property subject to such Member
Nonrecourse Debt, or (B) the Negative Capital Account of such Member as of the
end of such year, determined before taking into account any allocation of
Company income, gain, loss, deduction or Code section 705(a) (2) (B)
expenditure for such year equal to that Member's share of the net decrease in
the Member Minimum Gain, determined in a manner consistent with Treasury
Regulation section 1.704-2(g) (2). to the extent that this Section 8.4(ii) is
inconsistent with Treasury Regulation section 1.704-2(i) or 1.704-2(k) or
incomplete with respect to such Treasury Regulation, the Member Minimum gain
chargeable provided for herein shall be applied and interpreted in accordance
with such regulation.
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8.5 Allocation of Credits. All tax credits shall be allocated
among the Members in accordance with their Percentage Interests or in
accordance with applicable provisions of the Code or Treasury Regulation to the
extent any such provision is inconsistent with such allocation.
8.6 Tax Allocations. Except to the extent otherwise required by
the Code and Regulations, the "traditional" methods provided for the Treasury
Regulations Section 1.704.3(b) shall apply to all tax allocations governed by
Section 704(c) and all reverse 704(c) allocations.
8.7 Change in Members' Interest. In the event there is any change
in the members' percentage Interests in the Company during any Fiscal Year,
Profits, Losses or Nonrecourse Deductions shall be allocated among the Members
in accordance with their Percentage Interests from time to time during such
Fiscal Year in accordance with Code section 706, using any convention permitted
by law and selected by the Manager in its sole discretion.
8.8 Notwithstanding anything contained in this Agreement to the
contrary, each of SunRiver and GAI will be allocated not less than one percent
of GAL's income and loss in every tax year.
8.9 On the fifth anniversary of the date hereof, the allocations
provided for herein will be amended as agreed by GAI and SunRiver, consistent
with the new Agreement among the Members.
8.10 Obligations of Members to Report Allocations. The Members are
aware of the income tax consequences of the allocations made by this Article
VIII and hereby agree to be bound by the provisions of this Article VIII in
reporting their shares of Company income and loss for income tax purposes which
income and loss will be determined under the relevant provisions of the
Internal Revenue Code of 1986, as amended.
ARTICLE IX
TRANSFER AND ASSIGNMENT OF INTERESTS
9.1 Transfer and Assignment of Interests. No Member shall be
entitled to transfer assign, convey, sell, encumber, or in any way alienate all
or any part of his or her Membership Interest except with the prior written
consent of all of the other Members, which consent may be given or withheld,
conditioned or delayed (as allowed by this Agreement or the Act), as the other
Members may determine in their sole discretion. After the consummation of any
transfer of any part of a Membership Interest, the Membership Interest so
transferred shall continue to be subject to the terms and provisions of this
Agreement.
9.2 Substitution of Members. A transferee of a Membership Interest
shall have the right to become a substitute Member only if the requirements of
Section VI are met, and such transferee executes an instrument satisfactory to
GAL accepting and adopting the terms and provisions of this Agreement. The
admission of a substitute Member shall not result in the release of the Member
who assigned the Membership Interest from any liability that such Member may
have to GAL.
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9.3 Right of First Refusal. Each time a Member proposes to transfer,
assign, convey, sell, encumber or in any way alienate all or any part of his or
her Membership Interest (or as required by operation of law or other
involuntary transfer to do so) such Member shall first offer such Membership
Interest to GAL and the non-transferring Members in accordance with the
following provisions:
A. Such Member shall deliver a written notice to GAL and the
other Members stating (i) such Member's bona fide intention to transfer such
Membership Interest, (ii) the name and address of the proposed transferee,
(iii) the Membership Interest to be transferred, and (iv) the purchase price in
terms of payment for which the Member proposes to transfer such Membership
Interest.
B. Within thirty (30) days after receipt of the notice, each
non-transferring Member shall notify the Manager in writing of his or her
desire to purchase a portion of the Membership Interest being so transferred.
The failure of any Member to submit a notice within the applicable period shall
constitute an election on the part of that Member not to purchase any of the
Membership Interest which may be so transferred. Each Member so electing to
purchase shall be entitled to purchase a portion of such Membership Interest in
the same proportion that the Percentage Interest of such Member bears to the
Membership Interest of all Members who so elect. In the event any Member
elects to purchase none or less than all of his or her pro rata share of such
Membership Interest, the other Members can elect to purchase more than their
pro rata share. If such Members fail to purchase the entire Membership
Interest being transferred, GAL may purchase any remaining share of such
Membership Interest.
C. Within ninety (90) days after the notice described in
Section 9.3, GAL and the Members electing to purchase such Membership Interest
shall have the first right to purchase or obtain such Membership Interest upon
the price and terms of payment designated in such notice. If such notice
provides for the payment of non-cash consideration such payment shall
nonetheless be made in cash based on a good faith estimate of the present fair
market value of the non-cash consideration offered as determined by the Members
who are purchasing such Membership Interest.
D. If GAL or the other Members elect not to purchase all of
the Membership Interest designated in the notice described in Paragraph 9.3A,
then the transferring Member may transfer the Membership Interest described in
the notice to the proposed transferee, providing such transfer (i) is
completed within thirty (30) days after the expiration of GAL's and the other
Members' right to purchase such Membership Interest, (ii) is made on terms no
less favorable to the transferring Member than as designated in the notice,
and (iii) the requirements of Sections 9.1, and 9.2 are met. If such Membership
Interest is not so transferred, the transferring Member must give notice in
accordance with this Section prior to any other or subsequent transfer of such
Membership Interest.
9.4 Purchase by GAI. Upon the earlier of the expiration of equity
sixty (60) months from the date of this Agreement or the withdrawal of SunRiver
as a Member, GAI shall have the option to purchase SunRiver's Membership
Interest in GAL for common stock in GAI equal to nine percent (9%) of each
class of GAI's then outstanding capital stock. GAI shall, within ninety (90)
days following the happening of one of the above trigger events, notify
SunRiver of its intention to acquire SunRiver's Membership Interest. Within
thirty (30) days following such notice, if any, GAI shall issue and deliver to
SunRiver shares of stock in GAI equal to nine percent (9%) each class of GAI's
then outstanding capital stock. Upon issuance of such common stock to SunRiver
GAI shall immediately proceed to register such shares under and in accordance
with the Securities Act of 1933 and the
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regulations promulgated thereunder. Such shares shall be granted protection
from dilution to the extent that GAI under SEC regulations can so grant. In
the event that GAI purchases SunRiver's Membership Interest pursuant to this
Paragraph 9.4, then GAL or GAI shall retain ownership of any intellectual
property, software , or other products developed by GAL and, at SunRiver's
request, shall grant SunRiver a "favored nation" right to license and sell any
such intellectual property, software or other products owned or developed by
GAL. If GAI does not elect to purchase SunRiver's Membership Interest, then
the parties will negotiate in good faith to determine SunRiver's future profit
sharing percentages and its rights to distribution of future revenue.
ARTICLE X
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
10.1 Books and Records. The books and records of GAL shall be kept,
and the results of its operations recorded, in accordance with the accounting
methods followed for generally accepted accounting principles. GAL shall
maintain at its principal office in California all of the following:
A. A current list of the full name and last known business or
residence address of each Member, together with the Capital Contributions,
Capital Account and Percentage Interest of each Member;
B. A current list of the full name and business or residence
address of each Member;
C. A copy of the Articles and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which the
Articles or may amendments thereto have been executed;
D. Copies of GAL's federal, state, and local income tax or
information returns and reports, if any, for the six most recent taxable years;
E. A copy of this Agreement and any and all amendments
thereto together with executed copies of any powers of attorney pursuant to
which this Agreement or any amendments thereto have been executed;
F. Copies of the financial statements of GAL, if any, for the
six (6) most recent Fiscal Years; and
G. GAL's books and records as they relate to the internal
affairs of GAL for at least the current and past four (4) Fiscal Years.
10.2 Delivery to Members and Inspection.
A. Upon the request of any Member for purposes reasonably
related to the interest of that Member the Manager shall promptly deliver to
the requesting Member at the expense of GAL, a copy of the information required
to be maintained by Section s 10.1, A, B and D, and a copy of this Agreement.
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B. Each Member and Manager has the right, upon reasonable
request for purposes reasonably related to the interest of the Member, to:
(i) inspect and copy during normal business hours
any of GAL records described in Section 10.1A through G; and
(ii) obtain from the Manager, promptly after their
becoming available, a copy of GAL's federal, state, and local income tax or
information returns for each Fiscal Year.
C. The Manager shall promptly furnish to a Member a copy of
any amendment to the Articles or this Agreement.
10.3 Financial Statements.
A. The Manager shall cause monthly, quarterly, and annual
reports to be sent to each of the Members not later than the earlier of (i) 60
days after the close of the Fiscal Quarter and Fiscal Year and twenty (20) days
after the end of the month and (ii) such time to allow each Member to
incorporate such information in their respective 10Q and 10K SEC filings as
required or as otherwise agreed by the Members. The reports shall contain a
balance sheet as of the end of the Fiscal Quarter and Year and an income
statement and statement of changes in financial position for the Fiscal Quarter
and Year. Annual Reports shall be audited by the GAL's accountants.
B. The Manager shall cause to be prepared at least annually,
at Company expense, information necessary for the preparation for the Member's
federal and state income tax returns. The Manager shall send or cause to be
sent to each Member within sixty (60) days after the end of each taxable year
such information as is necessary to complete federal and state income tax
returns.
10.4 Filings. The Manager, at Company expense, shall cause the income
tax returns for GAL to be prepared and timely filed with the appropriate
authorities.
10.5 Bank Accounts. The Manager shall maintain the funds of GAL in
one or more separate bank accounts in the name of GAL, and shall not permit the
funds of GAL to be commingled in any fashion with the funds of any other person
or entity.
10.6 Accounting Decisions and Reliance on Others. All decisions as to
accounting matters, except as otherwise specifically set forth herein, shall be
made by the Manager. The Manager may rely upon the advise of their accountants
as to whether such decisions are in accordance with accounting methods followed
for generally accepted accounting principles. The Merger may cause GAL to make
whatever elections GAL may take under the Code and Regulations including the
election referred to in Section 754 of the Code to Adjust the Basis of Company
Assets.
10.7 Tax Matters Partner The Manager will designate a member to act
on behalf of GAL as the "tax matters partner" within the meaning of Section
623(a)(7) of the Code.
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ARTICLE XI
DISSOLUTION AND WINDING UP
11.1 Dissolution. GAL shall be dissolved, its assets shall be
disposed of, and its affairs wound up on the first to occur of the following:
A. Upon the happening of any event of dissolution specified
in the Articles;
B. Upon the entry of a decree of judicial dissolution;
C. Upon the mutual assent of Members;
D. Upon the "Bankruptcy " of one of the Members.
E. The sale of all or substantial all of the assets of GAL; or
F. Twenty (20) years from the date of this Agreement.
For the purposes of this Agreement, "Bankruptcy" shall mean: (a) the filing of
an application by a Member for, or consent to, the appointment of a trustee,
receiver, or custodian of its other assets; (b) the entry of an order for
relief with respect to a Member in proceedings under the United States
Bankruptcy Code, (c) the making by a Member of a general assignment for the
benefit creditors; or (d) the entry of an order, judgment, or decree by any
court of competent jurisdiction appointing a trustee, receiver, or custodian of
the assets of a Member unless the proceedings and the person appointed are
dismissed within (90) days.
11.2 Winding Up. Upon the occurrence of any event specified in
Paragraph 11.3 of this agreement, GAL shall continue solely for the purpose of
winding up its affairs in an orderly manner, liquidating its assets, and
satisfying the claims of its creditors. The non-bankrupt Member shall be
responsible for overseeing the winding up and liquidation of GAL, shall take
full account of the liabilities of GAL and shall either cause its assets to be
sold or distributed in each case subject to Paragaph 11.3, and if sold as
promptly as is consistent with obtaining the fair market value thereof, shall
cause the proceeds therefrom, to extent sufficient therefore, to be applied and
distributed as provided in Section 10.5 . The Member responsible for winding
up GAL shall be entitled to reasonable compensation for such services.
11.3 Software License: Should the dissolution of GAL occur for any
reason, other than the purchase of SunRiver's Membership Interest by GAI, both
GAI and SunRiver shall have a unrestricted, royalty free license, to all
software and other intellectual properties owned or developed by GAL.
11.4 Distributions in Kind Any non-cash asset distributed to one or
more Member shall first be valued at its fair market value to determine the Net
Profit or Net Loss that would have resulted if such asset were sold for such
value. The amount distributed and charged to the Capital Account of each
Member achieving an interest in such distributed asset shall be the fair market
value of such interest (net of any liability secured by such asset that such
Member assumes or takes subject to). The fair market value of such asset shall
be determined by the Manager or by the Members or, if any
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Member objects, by an independent appraiser selected by the Manager or
liquidating trustee and approved by the Members.
11.5 Order of Payment of Liabilities Upon Dissolution. After
determining that all known debts and liabilities of GAL including, without
limitation, debts and liabilities to Members who are creditors of GAL, have
been paid or adequately provided for, the remaining assets shall be distributed
to the Members in accordance with their positive Capital Account balances,
after taking into account income and loss for GAL's taxable year during which
liquidation occurs. Such liquidating distributions shall be made by the end of
GAL's taxable year in which GAL is liquidated, or if later, within ninety (90)
days after the date of such liquidation.
11.6 Limitations on Payments made in Dissolution. Except as
otherwise specifically provided in this Agreement, each Member shall only be
entitled to look solely at the assets of Company for the return of his or her
positive Capital Account balance and shall have no recourse for his or her
Capital Contribution and/or share of Net Profits (upon dissolution or
otherwise) against the Manager or any other Member.
11.7 Certificate of Cancellation. GAI shall cause to be filed in the
office of, and on a form prescribed by, the Delaware Secretary of State, a
certificate of cancellation of the Articles upon the completion of the winding
up of the affairs of GAL.
11.8 No Action for Dissolution. Except expressly permitted in this
Agreement, a Member shall not take any voluntary action that directly causes a
Dissolution Event. The Members acknowledge that irreparable damage would be
done to the goodwill and reputation of GAL if any Member should bring an action
in court to dissolve GAL under circumstances where dissolution is not required
by Section 11.1.
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification of Agents. GAL shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he
or she is or was a Member, Manager, officer, employee or other agent of GAL or
that, being or having been such a Member, Manager, officer, employee or agent,
to the fullest extent permitted by applicable law in effect on the date hereof
and to such greater extent as applicable law may hereafter from time to time
permit. The Manager shall be authorized, on behalf of GAL, to enter into
indemnity agreements from time to time with any Person entitled to be
indemnified by GAL hereunder, upon such terms and conditions as the Manager
deem appropriate in their business judgment.
ARTICLE XIII
SUNRIVER AS MANAGER
13.1 SunRiver as Joint Manager. The Members acknowledge that
although GAI has been designated to act as the sole Manager of GAL pursuant to
Paragraph 7.3A and holds a majority ownership position in GAL. Under certain
circumstances, listed below, SunRiver may appoint a Manager to join with GAI to
manage the Business and the affairs of GAL.
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A. Should GAL fail to achieve the revenue projections
established in the Business Plan for three (3) consecutive months during it's
fiscal year starting October 1, 1995 through September 30, 1996 , as reported
pursuant to Paragraph 10.3.
B. Should GAL fail to achieve the net profit established in
the Business Plan for six (6) consecutive monthly periods, when taken
cumulatively, starting October 1, 1995, as reported pursuant to Paragraph 10.3.
C. Should GAL fail to report any profit for two (2)
consecutive quarterly periods when taken cumulatively, starting October 1,
1995, as reported pursuant to Paragraph 10.3.
Upon the occurrence of any of such events, SunRiver shall give written notice
to GAI of SunRiver's intent to exercise its option as joint Manager, and GAI
shall have thirty (30) days to cure the failure in the performance of GAL or,
if it is unable to do so, SunRiver shall immediately be appointed as a Manager
and all control of GAL shall thereafter require the joint affirmation of both
GAI and SunRiver until such time as one of the Managers shall either be
replaced, resign, or SunRiver shall sell its Membership to GAI.
13.2 SunRiver as Manager. Anything in this Agreement to the
contrary notwithstanding, SunRiver may replace GAI as the Manager with complete
control over the Business and affairs of GAL upon the occurrence of one or more
of the following events:
A. The Bankruptcy of GAI.
B. GAL fails or is unable to make a required distribution
of net revenue to SunRiver when such payment is due.
C. GAL should violate any of the covenants contained in this
Agreement pertaining to SunRiver and fails to remedy such violation with-in
sixty (60) days following receipt of written notice of such violation from
SunRiver.
Following the appointment of SunRiver or any successor Manager as Manager the
provisions of this Article 13 concerning the replacement of the Manager shall
thereafter apply to SunRiver or any successor Manger, except that the
applicable test periods will begin the month after SunRiver becomes Manager.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Entire Agreement and Severability Provisions. This Agreement
constitutes the entire understanding and agreement between GAI, SunRiver, and
GAL, and supersedes any and all prior, contemporaneous oral or written
communications relating to the subject matter hereof, all of which are merged
herein. This Agreement can only be modified, amended, or altered by an
instrument in writing, mutually signed by the parties hereto. Such amendment
shall be binding with or without any additional consideration. If any provision
of this Agreement is held unenforceable, said holding shall not be
20
<PAGE> 21
deemed to impair the validity of the remaining provisions of the Agreement
which shall remain in full force and effect.
14.2 Waiver. No waiver of any provision of this Agreement or any
rights or obligations of either party hereunder shall be effective, except
pursuant to written instrument signed by the party or parties waiving
compliance. This waiver shall be effective only in the specific instance and
the specific purpose stated.
14.3 Governing Law and Choice of Forum. This Agreement shall be
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts wholly executed and wholly performed therein. The
parties agree that, and hereby submit themselves to, the exclusive jurisdiction
and venue for the purposes of resolving any action or proceeding brought by
either party against the other arising out of or related to this Agreement
shall be brought only in a state or federal court of competent jurisdiction
located in the County of Orange, California.
14.4 Attorney's Fees. The prevailing party in any action or proceeding
between Independent and International arising out of or related to this
Agreement shall be entitled to recover its reasonable attorney's fees and costs
incurred in connection therewith.
14.5 Notices. All notices, requests, demands and other communications
required under this Agreement shall be deemed duly given to the respective
parties at the addresses first set forth above or at such other addresses as
designated in writing by either party in accordance with this Section upon (a)
personal delivery, or (b) delivery by U.S. mail, postage pre-paid, or (c)
receipt by the transmitting party of confirmation or answer back if delivery is
by telex, telegram or facsimile.
14.6 Press Releases and Public Announcements: SunRiver and GAI agree
that no press releases or public announcements of any kind shall be made
regarding this Agreement and during the transition period without the mutual
approval of both parties and further agree to instruct their respective
employees to respect the confidentiality of the proposed agreement until such
time that a public announcement is released.
14.7 Expenses: Except as indicated in the foregoing each party will
pay its own expenses in connection with the completion of the transactions
contemplated hereby.
EXECUTED as of the date first written above.
SUNRIVER DATA SYSTEMS, INC. GENERAL AUTOMATION LLC
By: /s/ Geral Youngblood By: /s/ R.D. Bagby
-------------------- ------------------
Title: President & CFO Title: President & CEO
---------------- ---------------
21
<PAGE> 22
EXHIBIT "A"
CAPITAL ACCOUNT AND MEMBER PERCENT INTEREST
<TABLE>
<CAPTION>
INITIAL CAPITAL CONTRIBUTION MEMBER PERCENT INTEREST
- ---------------------------- -----------------------
<S> <C> <C>
SunRiver $ 980.00 49%
- --------
GAI $1000.00 51%
- ---
</TABLE>
22
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF GENERAL AUTOMATION, INC.
General Automation, Inc. owns the issued and outstanding securities of the
following corporations as indicated:
<TABLE>
<CAPTION>
% Thereof Owned
by Applicant
Name Corporation Jurisdiction
- --------- --------------- -----------------
<S> <C> <C>
GA Mentor Ltd. 100% United Kingdom
GA Capital Ltd. 100% United Kingdom
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-43158 and No. 33-79038) of our report dated
December 19, 1995 appearing on page 27 of General Automation, Inc.'s Annual
Report on Form 10-K for the year ended September 30, 1995.
PRICE WATERHOUSE LLP
Costa Mesa, California
April 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 101
<SECURITIES> 0
<RECEIVABLES> 6,123
<ALLOWANCES> 444
<INVENTORY> 1,726
<CURRENT-ASSETS> 7,691
<PP&E> 3,570
<DEPRECIATION> 2,216
<TOTAL-ASSETS> 10,484
<CURRENT-LIABILITIES> 8,329
<BONDS> 0
<COMMON> 739
0
0
<OTHER-SE> 771
<TOTAL-LIABILITY-AND-EQUITY> 10,484
<SALES> 7,020
<TOTAL-REVENUES> 14,269
<CGS> 6,502
<TOTAL-COSTS> 11,466
<OTHER-EXPENSES> 4,373
<LOSS-PROVISION> 96
<INTEREST-EXPENSE> 399
<INCOME-PRETAX> (2,065)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,065)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,065)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
