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Investment Unit Pricing Agreement

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INVESTMENT UNIT PRICING AGREEMENT


THIS INVESTMENT UNIT PRICING AGREEMENT (this "Agreement"), dated as of September 30, 1999, is entered into by and between GENERAL AUTOMATION, INC., a Delaware corporation (the "Company"), and PACIFIC MEZZANINE FUND, L.P., a California limited partnership (together with its successors and assigns, "PMF", and together with the additional parties pursuant to the Loan Agreement (as defined below), the "Investors").


R E C I T A L S


A. The Company and the Investors have entered into a Loan Agreement, dated as of even date herewith (the "Loan Agreement"). Capitalized terms not defined herein shall have the meanings ascribed to them in the Loan Agreement.


B. The parties hereto intend that (i) the Notes, in the original principal amount of a minimum of Three Million One Hundred Fifty Thousand Dollars ($3,150,000) and a maximum of Four Million Two Hundred Thousand Dollars ($4,200,000), which are to be sold to the Investors by the Company on the Closing Date pursuant to the Loan Agreement and (ii) the Warrants, entitling the Investors to purchase up to an aggregate of 525,000 shares of the Company's Common Stock, which are to be issued to the Investors by the Company on the Closing Date pursuant to the Loan Agreement, together shall constitute "investment units" within the meaning of Section 1273(c)(2) of the Code (the "Units"), for which the Investors has paid an aggregate of Four Million Two Hundred Thousand One Hundred Dollars ($4,200,100).


C. Treasury Regulation Section 1.1273-2(h)(1) provides that where an investment unit is issued for money, the investment unit shall be treated as one debt instrument and the issue price of the investment unit shall be determined under Treasury Regulation Section 1.1273-2(a)(1), which provides that the issue price is the price at which a substantial amount of the debt instrument is sold for money. Treasury Regulation Section 1.1273-2(h)(1) further provides that the issue price of the investment unit is then allocated between the debt instrument and the property right that comprise the unit based on their relative fair market values.


NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other valuable consideration, the parties hereto agree as follows:


AGREEMENT


1. Issue Price of Unit. The aggregate issue price of the Units is minimum of Three Million One Hundred Fifty Thousand Seventy Five Dollars ($3,150,075) and a maximum of Four Million Two Hundred Thousand One Hundred Dollars ($4,200,100). Such issue price shall be allocated between the Notes and the Warrants base
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