EXHIBIT 10.38
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT made and entered into effective as of the
22nd day of January, 1997, is by and between Irata, Inc., a Texas corporation
(the "Company"), and Xxxx X. Xxxxxxx, a resident of the State of New York
("Xxxxxxx").
RECITALS
Xxxxxxx has served as a director of the Company and the Company is
indebted to Xxxxxxx for such services in the amount of $10,000.00 (herein the
"Xxxxxxx Debt"). The Company recently successfully completed a private
placement of 3,245,000 shares of Class A common stock and 3,245,000 common
stock purchase warrants in Units of 50,000 shares of Class A Common Stock and
50,000 common stock purchase warrants at an offering price of $25,000 per Unit.
Xxxxxxx has agreed to convert the Xxxxxxx Debt into 20,000 shares of Class A
Common Stock and 20,000 common stock purchase warrants and the Company has
agreed to issue and deliver to Xxxxxxx an aggregate of 20,000 shares of Class A
Common Stock and 20,000 common stock purchase warrants in exchange for the
surrender of the Xxxxxxx Debt. Accordingly, the Company and Xxxxxxx have agreed
as follows:
1. Subscription and Purchase. Xxxxxxx has agreed to purchase and
hereby purchases an aggregate of 20,000 shares of Class A Common Stock and
20,000 common stock purchase warrants in consideration for the surrender and
cancellation of the Xxxxxxx Debt. The warrants shall have substantially the same
terms as the Private Placement Warrants and shall be exercisable at $1.00 per
share until November 1, 1998 and thereafter shall be exercisable at $1.50 until
expiration of the warrants on November 1, 1999.
2. Representations and Warranties of Xxxxxxx. Xxxxxxx hereby
represents and warrants to the Company and its agents, employees and
representatives as follows:
(a) Investment Intent. (i) The shares of Class A Common Stock, the
warrants to purchase shares of Class A Common Stock and the shares of Class A
Common Stock underlying the warrants (herein collectively the "Securities") are
being acquired solely for the account of Xxxxxxx, for investment, and not with a
view to or for the resale, distribution, subdivision, or fractionalization
thereof, (ii) Xxxxxxx has no contract, understanding, undertaking, agreement, or
arrangement with any person to sell, transfer, or pledge to any person the
Securities or any part thereof, (iii) Xxxxxxx has no present plans to enter into
any such contract, undertaking, agreement or arrangement, (iv) Xxxxxxx
understands the legal consequences of the foregoing representations and
warranties to mean that Xxxxxxx must bear the economic risk of the investment in
the Securities for an indefinite period of time, (v) Xxxxxxx has such knowledge
and experience in financial and business matters that Xxxxxxx is capable of
evaluating the merits and risks of acquiring the Securities, and (vi) Xxxxxxx
acknowledges that the acquisition of the Securities involves a high degree of
risk which may result in the loss of the total amount of Xxxxxxx'x investment in
the Securities.
(b) Securities Compliance. Xxxxxxx understands that no sale,
distribution, transfer or other disposition of the Securities can be made by
Xxxxxxx unless the Securities have been registered under the Securities Act of
1933, as amended (the "Act"), and applicable securities laws of any other
relevant jurisdiction, or exemptions from such registrations are available, as
evidenced by an opinion of counsel satisfactory to the Company, with respect to
the proposed sale, distribution, transfer or other disposition. Any purchaser
on resale or transfer of the Securities will also be required to meet the
suitability requirements applicable to investors and such purchaser or Xxxxxxx
will be required to bear all expenses of such transfer (including the costs of
any legal advice or opinions required).
(c) Experience. Xxxxxxx, together with any Purchaser Representative,
is knowledgeable and experienced in the field of investments involving the
business of the Company or has a general understanding and knowledge of such
investments; furthermore, Xxxxxxx alone, or together with any Purchaser
Representative, has such knowledge and experience in financial and business
matters that Xxxxxxx is capable of understanding the information made available
to Xxxxxxx, evaluating the risks of any investment in the Securities and making
an informed investment decision.
(d) No General Solicitation. The Securities have been offered to
Xxxxxxx without any form of general solicitation or advertising of any type by
or on behalf of the Company or any of their employees, agents or
representatives.
(e) Access to Information. Xxxxxxx has (i) read the Term Sheet
prepared by the Company
in connection with the Private Placement and all exhibits or schedules to the
Term Sheet, (ii) for a reasonable amount of time had an opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering and sale of the Securities and the actual and proposed business and
affairs of the Company, and is satisfied with the results thereof, and (iii)
been given access, if requested, to all documents with respect to the Company or
this transaction, as well as to such other information that Xxxxxxx has
requested in order to evaluate an investment in the Securities. XXXXXXX HAS NOT
RECEIVED NOR RELIED UPON ANY REPRESENTATIONS OR WARRANTIES BY THE COMPANY OR
THEIR OFFICERS, MANAGERS, MEMBERS, AGENTS, EMPLOYEES OR REPRESENTATIVES, OR ANY
OTHER PERSON, OTHER THAN THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THE
TERM SHEET AND THIS AGREEMENT.
(f) Exemption Status. Xxxxxxx understands that the Securities to be
sold hereunder are being offered and sold in reliance upon exemptions from
registration under the Act and applicable state securities laws. Xxxxxxx
understands that the Company and its agents, employees, and representatives are
relying on, among other things, the representations and warranties of Xxxxxxx
set forth herein in offering and selling the Securities to Xxxxxxx in reliance
upon exemptions available under the Act and state securities laws.
(g) Domicile. Xxxxxxx is a bona fide resident or domiciliary of the
State of New York and meets the following requirements, as applicable, for
qualifying as a "person resident within the State of New York":
(i) If a corporation, partnership, trust or other form of
business organization, Xxxxxxx has its principal office within the
State of New York.
(ii) If an individual, Xxxxxxx has a principal residence and
domicile in the State of New York and is a citizen of the United
States and is at least twenty-one (21) years of age.
(iii) If a corporation, partnership, trust or other form of
business organization WHICH WAS ORGANIZED FOR THE SPECIFIC PURPOSE OF
ACQUIRING SECURITIES, all of the beneficial owners of Xxxxxxx are
residents of the State of New York and are citizens of the United
States.
(h) Net Worth. Higgins's investment in the Securities will not exceed
20% of Xxxxxxx'x net worth (or joint net worth with Xxxxxxx'x spouse) determined
as of the date of this Agreement.
(i) START-UP COMPANY. XXXXXXX ACKNOWLEDGES THAT THE COMPANY IS A
"START-UP" COMPANY WHICH HAS SUSTAINED SUBSTANTIAL LOSSES AND THAT IS ENGAGED IN
AN INDUSTRY WHICH IS A HIGHLY COMPETITIVE INDUSTRY. CONSEQUENTLY, XXXXXXX
ACKNOWLEDGES THAT AN INVESTMENT IN THE SECURITIES INVOLVES A HIGH DEGREE OF
RISK.
3. Covenants of Xxxxxxx. Xxxxxxx covenants and agrees that for a period
commencing on the date hereof and expiring November 1, 1997, Xxxxxxx will not
publicly sell, assign or transfer any Securities of the Company without the
prior written consent of Royce Investment Group, Inc. Xxxxxxx, to facilitate
enforcement of this covenant, hereby consents to the Company imposing stop
transfer restrictions with respect to all shares of capital stock of the Company
owned by Xxxxxxx until the end of the lock-up period.
4. Restrictions on Transfer. In addition to the restrictions set forth
above, Xxxxxxx understands and agrees that (i) the Securities are restricted
securities under the Act, and may not be sold, assigned or transferred unless
the sale, assignment or transfer of such Securities is registered under the Act
and applicable blue sky laws, as now in effect or hereafter amended, or there is
furnished evidence in form and substance satisfactory to the Company from
counsel acceptable to the Company that such registrations are not required, (ii)
the Company is under no obligation to register the Securities or to perfect any
exemption for resale of the Securities under applicable securities laws, and
(iii) the following restrictions and limitations will be applicable to the
Securities and any resales, pledges, hypothecations or other transfers of any of
the Securities:
(a) Legend. A legend will be placed on each certificate or other
document evidencing any of the Securities in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), OR THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES
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HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION
OR RESALE AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED IF
SUCH SALE, PLEDGE, OR TRANSFER WOULD BE IN VIOLATION OF THE 1933 ACT
OR THE SECURITIES LAWS OF ANY STATE.
(b) Stop Transfer Instructions. Stop transfer instructions can be
issued by the Company to restrict the resale, pledge, hypothecation or other
transfer in contravention of this Agreement.
(c) Transfers. Xxxxxxx acknowledges that Xxxxxxx will be responsible
for compliance with all conditions to transfer imposed by any applicable
securities law and for any expenses incurred by the Company including, but not
limited to, legal fees, accounting services and filing fees, in connection with
reviewing and effecting such transfer.
5. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation or statement as to the results thereof,
made by or on behalf of Xxxxxxx, the Company or any of their respective agents,
representatives, officers or managers or any controlling person, and will
survive exchange for the Interim Lender Units.
6. Notice. All communications hereunder will be in writing and, if sent
to Xxxxxxx, will be mailed, delivered or telegraphed and confirmed to Xxxxxxx at
the address set forth on the signature page of this Agreement, or if sent to the
Company, will be mailed, delivered or telegraphed and confirmed to them at 0000
Xxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, Attn: Xxxxx Xxxxxx.
7. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Xxxxxxx may not assign the debt evidenced by the Interim Loan or the related
warrants nor any other rights hereunder without the prior written consent of the
Company, which may not be unreasonably withheld.
8. Attempted Breaches. Any transfer of interest effected, or purported
to be effected, not in accordance with the terms and conditions of this
Agreement or any other agreement referred to herein or to a person prohibited by
law from holding any of the Securities shall be null and void and shall not bind
the Company.
9. Amendment. This Agreement may not be modified or amended except by
written instrument executed by or on behalf of each of the parties hereto.
10. Waivers. The observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver shall
be effective only if in a writing signed by the party or parties against which
such waiver is to be asserted. Unless otherwise expressly provided herein, no
delay on the part of any party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party hereto of any right, power or privilege hereunder operate
as a waiver of any other right, power or privilege hereunder nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder.
11. Entire Agreement. This Agreement, including the exhibits hereto, if
any, and the documents and agreements expressly referred to herein constitute
the entire agreement between the parties hereto with respect to the matters
covered hereby, and any other prior or contemporaneous oral or written
understandings or agreements with respect to the matters covered hereby are
expressly superseded by this Agreement. There are no oral or unwritten
agreements between the parties.
12. Severability. If any provision of this Agreement, or the application
of such provision to any person or circumstances, shall be declared judicially
to be invalid, unenforceable or void, such decision will not have the effect of
invalidating or voiding the remainder of this Agreement or affect the
application of such provision to other persons or circumstances, and the parties
hereto agree that the part or parts of this Agreement so held to be invalid,
unenforceable or void will be deemed to have been stricken herefrom and the
remainder of this Agreement will have the same force and effect as if such part
or parts had never been included herein. Any such
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finding of invalidity or unenforceability shall not prevent the enforcement of
such provision in any other jurisdiction to the maximum extent permitted by
applicable law.
13. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND SHALL BE PERFORMABLE IN
XXXXXX COUNTY, TEXAS.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
22nd day of January, 1997.
Irata Inc.
By:_____________________________
Authorized Officer
Address: Royce Investment Group, Inc. _________________________________
000 Xxxxxxxxx Xxxx Xxxxx Xxxx X. Xxxxxxx
Woodbury, N.Y. 11797
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