EXHIBIT 10.32
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT made and entered into effective as of the
_____ day of September, 1996, is by and among Irata, Inc., a Texas corporation
(the "Company"), Dominion Investment Corporation, a Texas corporation
("Dominion"), Xxxxxx X. Xxxx, Xx., a resident of Xxxxxx County, Texas ("Xxxx")
and the Estate of Xxxxxxx X. Xxxxx, Xx. (the "Estate").
RECITALS
Dominion, Xxxxxxx X. Xxxxx, Xx. and Xxxx (hereinafter, with the
Estate, collectively referred to as the "Interim Lenders" and singularly as an
"Interim Lender") have heretofore loaned the Company $160,000 (the "Interim
Loan"), with Dominion having loaned $57,000 in principal amount (the "Dominion
Debt"), Xxxxxxx X. Xxxxx, Xx. having loaned $59,000 in principal amount (the
"Estate Debt") and Xxxx having loaned $44,000 in principal amount (the "Xxxx
Debt"). In consideration for facilitating such financing, the Interim Lenders
were granted the following warrants to purchase shares of Class A Common Stock
of the Company ("Interim Lender Warrants") at an exercise price of $4.00 per
share:
WARRANT NO. NAME NO. OF SHARES
10 Dominion Investment Corporation 5,700
00 Xxxxxxx X. Xxxxx, Xx. 5,900
12 Xxxxxx X. Xxxx, Xx. 4,400
The Company has reached agreement with its senior lender, Petrus
Investments, Ltd. (the "Senior Lender") to cure the existing default under the
Company's loan agreement with the Senior Lender (herein the "Loan Agreement
Amendment"). The Loan Agreement Amendment is conditioned upon (i) the Company
successfully completing a private placement of not less than 60 "Units", with
each Unit consisting 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 in accordance
with the Confidential Term Sheet dated September 9, 1996 (the "Term Sheet") of
the Company through Royce Investment Group, Inc. and Xxxxxxx Xxxxx Securities
Incorporated (collectively the "Placement Agents") and (ii) the committment of
the Interim Lenders to convert the Interim Loan, as well as the Interim Lender
Warrants, into 320,000 Interim Lender Units of the Company with each Interim
Lender Unit consisting of one share of Class A Common Stock and one Common Stock
purchase warrant having substantially the same terms as the Common Stock
purchase warrants to be issued by the Company under the Agency Agreement (as
herein defined). The Company has entered into an agency agreement with the
Placement Agents providing for the Placement Agents to use their best efforts to
offer and sell the Units (the "Agency Agreement"). Subject to the simultaneous
closing of the purchase and sale of not less than 60 Units under the Agency
Agreement at a purchase price of $25,000 per Unit, each of the Interim Lenders
has agreed to convert their respective portion of the indebtedness of the
Company under the Interim Loan and the warrants set forth above into 320,000
Interim Lender Units and the Company has agreed to issue and deliver to the
Interim Lenders an aggregate of 320,000 Interim Lender Units in exchange for the
surrender of (i) the indebtedness evidenced by the Interim Loan and (ii) the
Interim Lender Warrants. Accordingly, the Company and the Interim Lenders have
agreed as follows:
1. Subscription and Purchase. Subject to terms and provisions
herein set forth, each of the Interim Lenders hereby irrevocably agrees to
purchase the Interim Lender Units set opposite their respective names in
consideration for the surrender at the Closing of the principal and accrued
interest on the debt evidenced by the Interim Loan and surrender of the Interim
Lender Warrants as set opposite their respective names:
NAME INTERIM LOAN INTERIM LENDER INTERIM LENDER UNITS
SURRENDERED WARRANTS SURRENDERED PURCHASED
Dominion $ 57,000.00 5,700 114,000
Xxxx 44,000.00 4,400 88,000
Estate 59,000.00 5,900 118,000
----------- ------ -------
TOTAL: $160,000.00 16,000 320,000
2. Representations and Warranties of Interim Lenders. Each Interim
Lender hereby represents and
warrants to the Company and its agents, employees and representatives as
follows:
(a) Investment Intent. (i) The Interim Lender Units, the underlying
shares of Class A Common Stock, the underlying 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 such Interim Lender, for investment, and not with a view to or
for the resale, distribution, subdivision, or fractionalization thereof, (ii)
the Interim Lender 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) the Interim Lender has no present plans to
enter into any such contract, undertaking, agreement or arrangement, (iv) the
Interim Lender understands the legal consequences of the foregoing
representations and warranties to mean that Interim Lender must bear the
economic risk of the investment in the Securities for an indefinite period of
time, (v) the Interim Lender has such knowledge and experience in financial and
business matters that Interim Lender is capable of evaluating the merits and
risks of acquiring the Securities, and (vi) the Interim Lender acknowledges that
the acquisition of the Securities involves a high degree of risk which may
result in the loss of the total amount of Interim Lender's investment in the
Securities.
(b) Securities Compliance. The Interim Lender understands that no
sale, distribution, transfer or other disposition of the Securities can be made
by Interim Lender 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
Interim Lender will be required to bear all expenses of such transfer (including
the costs of any legal advice or opinions required).
(c) Experience. Such Interim Lender, 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, such Interim Lender alone, or
together with any Purchaser Representative, has such knowledge and experience in
financial and business matters that such Interim Lender is capable of
understanding the information set forth in the Circular, 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
Interim Lenders 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. Such Interim Lender has (i) read the Term
Sheet 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 such Interim Lender has requested in order to
evaluate an investment in the Securities. SUCH INTERIM LENDER 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. Such Interim Lender 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.
Such Interim Lender understands that the Company and its agents, employees, and
representatives are relying on, among other things, the representations and
warranties of Interim Lenders set forth herein in offering and selling the
Securities to Interim Lenders in reliance upon exemptions available under the
Act and state securities laws.
(g) Domicile. Such Interim Lender is a bona fide resident or
domiciliary of the State of Texas and meets the following requirements, as
applicable, for qualifying as a "person resident within the State of Texas":
(i) If a corporation, partnership, trust or other form of
business organization, Interim Lender has its principal office within
the State of Texas.
(ii) If an individual, Interim Lender has a principal residence
and domicile in the
2
State of Texas 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 Interim Lender
are residents of the State of Texas and are citizens of the United
States.
(h) Net Worth. Interim Lender's investment in the Securities will not
exceed 20% of Interim Lender's net worth (or joint net worth with Interim
Lender's spouse) determined as of the date of this Agreement.
(i) START-UP COMPANY. INTERIM LENDERS 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,
INTERIM LENDERS ACKNOWLEDGES THAT AN INVESTMENT IN THE SECURITIES INVOLVES A
HIGH DEGREE OF RISK.
3. Covenants of Interim Lenders. As an inducement for Royce Investment
Group, Inc. to act as Placement Agent for the Company's Securities under the
Agency Agreement, each of the Interim Lenders covenants and agrees that for a
period commencing on the date hereof and expiring twelve (12) months after the
closing of the sale of the Units as contemplated under the Agency Agreement,
such Interim Lender will not publicly sell, assign or transfer any Securities of
the Company without the prior written consent of Royce Investment Group, Inc.
Each such Interim Lender, 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 such Interim Lender until the
end of the lock-up period.
4. Restrictions on Transfer. In addition to the restrictions set forth
above, Interim Lenders 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 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. Interim Lenders acknowledges that Interim Lenders 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. Closing. The closing of the purchase and sale of the Interim Lender
Units (the "Closing") may be held on any date, determined in the sole discretion
of the Company, on or after the date hereof, but in no event no later than
November 15, 1996.
6. Conditions Precedent to Closing. The obligations of the Interim
Lenders to exchange the Interim Loan and the Interim Lender Warrants for the
Interim Lender Units under this Agreement are subject to the satisfaction, at or
before the Closing Date, of all the conditions set out below in this
Section 6(a). Each Interim Lender may waive any or all of these conditions in
whole or in part without prior notice; provided, however, that
3
no such waiver of a condition shall constitute a waiver by such Interim Lender
of any of its other rights or remedies, at Law or in equity, if the Company
shall be in default of any of its representations, warranties or covenants under
this Agreement.
(a) Senior Loan Agreement Amendment. The Company and Petrus
Investments, Ltd., its senior lender shall have reached agreement amending the
Company's loan agreement with its senior lender to cure the defaults that have
been in existence.
(b) Closing of Offering. The Company shall have contemporaneously or
previously closed the sale of not less than 60 Units at a purchase price of
$25,000 per Unit through the Placement Agents, with each Unit consisting of one
share of Class A Common Stock of the Company and one Common Stock Purchase
Warrant evidencing the right to purchase one share of Class A Common Stock at an
exercise price of $1.00 per share if exercised prior to two years after the
closing and thereafter exercisable at $1.50 per share.
(c) Mutual Performance. Each of the Interim Lenders or their
successors or assigns shall have performed their obligations under this
Agreement, and shall contemporaneously performed its other obligations hereunder
to exchange the Interim Loan and the Interim Lender Warrants for their
respective portion of the Interim Lender Units.
(d) Other Documents. Interim Lenders shall have received at the
Closing, such further instruments, documents and certificates, in form and
content reasonably satisfactory to Interim Lenders and their respective counsel,
as may be reasonably requested by each such Interim Lender.
7. 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 any Interim Lender, 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.
8. Notice. All communications hereunder will be in writing and, if sent
to a Interim Lender, will be mailed, delivered or telegraphed and confirmed to
the Interim Lender 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.
9. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns. No
Interim Lender may not assign the debt evidenced by the Interim Lender or the
related warrants nor any other rights hereunder without the prior written
consent of the Company, which may not be unreasonably withheld.
10. 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 Interim Lender Units shall be null and void and
shall not bind the Company.
11. Amendment. This Agreement may not be modified or amended except by
written instrument executed by or on behalf of each of the parties hereto.
12. 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.
13. 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.
4
14. 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 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.
15. Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
16. 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
_____ day of ______________________, 1996.
Irata Inc.
By:______________________________________
Authorized Officer
Address: ________________ The Estate of Xxxxxxx X. Xxxxx,
________________
Houston, Texas 770__
By:_______________________________________
Independent Executor
1000 Louisiana Dominion Investment Corporation
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
By:_______________________________________
Authorized Officer
0000 Xxxx Xxxxxxx __________________________________________
Suite 100 Xxxxxx X. Xxxx, Xx.
Xxxxxxx, Xxxxx 00000
5
