EXHIBIT 1.1
IRATA, INC.
AGENCY AGREEMENT
Royce Investment Group, Inc.
000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxx Securities Incorporated
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
September 9, 1996
Gentlemen:
Irata, Inc., a Texas corporation (the "Company"), proposes to offer
for sale to "accredited investors", in a private placement, units ("Units"),
each Unit consisting of 50,000 shares of the Company's Class A Common Stock,
$.10 par value ("Shares") and 50,000 common stock purchase warrants
("Warrants"). A minimum of 60 Units ("Minimum Offering") and a maximum of 69
Units ("Maximum Offering") will be sold in the offering at $25,000 per Unit.
The Units will be offered pursuant to those terms and conditions acceptable to
you as reflected in the Confidential Term Sheet (the "Term Sheet"). Of the
Xxxxx, 00 will be offered on a "best efforts - all-or-none basis and nine Units
will be offered on a "best efforts" basis. The Units are being offered pursuant
to the Term Sheet and related documents in accordance with Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") and Regulation D
promulgated thereunder.
Royce Investment Group, Inc. ("Royce") and Xxxxxxx Xxxxx Securities
Incorporated ("Xxxxx") are sometimes referred to herein as the "Placement
Agents." The Term Sheet (including the exhibits thereto), as it may be amended
from time to time, and the form of proposed subscription agreement between the
Company and each subscriber (the "Subscription Agreement") and the exhibits
which are part of the Term Sheet and/or Subscription Agreement are collectively
referred to herein as the "Offering Documents."
The Company will prepare and deliver to the Placement Agents a
reasonable number of copies of the Offering Documents in form and substance
satisfactory to counsel to the Placement Agent.
Each prospective investor subscribing to purchase Units ("Subscriber")
will be required to deliver, among other things, a Subscription Agreement and a
confidential purchaser questionnaire ("Questionnaire") in the form to be
provided to offerees. Capitalized terms used
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herein, unless otherwise defined or unless the context otherwise indicates,
shall have the same meanings provided in the Offering Documents.
1. Appointment of Placement Agents.
(a) Royce and Xxxxx are hereby appointed exclusive Placement Agents
of the Company (subject to the Placement Agents' right to have Selected Dealers,
as defined in Section 1(c) hereof, participate in the Offering) during the
Offering Period herein specified for the purposes of assisting the Company in
finding qualified Subscribers pursuant to the offering (the "Offering")
described in the Offering Documents. The Offering Period shall commence on the
day the Offering Documents are first made available to you by the Company for
delivery in connection with the offering for sale of the Units and shall
continue until the earlier to occur of (i) the sale of all of the Maximum
Offering or (ii) October 31, 1996 (unless extended for a period of up to 60 days
under circumstances specified in the Term Sheet). If the Minimum Offering is not
sold prior to the end of the Offering Period, the Offering will be terminated
and all funds received from Subscribers will be returned, without interest and
without any deduction. The day that the Offering Period terminates is
hereinafter referred to as the "Termination Date."
(b) Subject to the performance by the Company of all of its
obligations to be performed under this Agreement and to the completeness and
accuracy of all representations and warranties of the Company contained in this
Agreement, Royce and Xxxxx hereby accept such agency and agree to use their best
efforts to assist the Company in finding qualified subscribers pursuant to the
Offering described in the Offering Documents. It is understood that the
Placement Agents have no commitment to sell the Units. The Placement Agents'
agency hereunder is not terminable by the Company except upon termination of the
Offering Period.
(c) The Placement Agents may engage other persons, selected by them
in their discretion, that are members of the National Association of Securities
Dealers, Inc., ("NASD") and that have executed a Selected Dealers Agreement
substantially in the form attached hereto as Schedule A, to assist you in the
Offering (each such person being hereinafter referred to as a "Selected Dealer")
and may allow such persons such part of the compensation and payment of
expenses payable to the Placement Agents hereunder as they shall determine.
Each Selected Dealer shall be required to agree in writing to comply with the
provisions of, and to make the representations, warranties and covenants
contained in, this Section 1.
(d) Subscriptions for Units shall be evidenced by the execution by
Subscribers of a Subscription Agreement. No Subscription Agreement shall be
effective unless and until it is accepted by the Company. Until the Closing,
all subscription funds received shall be held as described in the Subscription
Agreement. The Placement Agents shall not have any obligation to independently
verify the accuracy or completeness of any information contained in any
Subscription Agreement or the authenticity, sufficiency, or validity of any
check delivered by any prospective investor in payment for Units.
(e) The Placement Agents and their respective affiliates may purchase
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Units sold in the Offering, in which event such Units may be purchased net of
commissions.
2. Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agents and each Selected Dealer, if
any, as follows:
(a) Securities Law Compliance. The Offering Documents conform in all
respects with the requirements of Section 4(2) of the Securities Act and
Regulation D promulgated thereunder and with the requirements of all other
published rules and regulations of the Securities and Exchange Commission (the
"Commission") currently in effect relating to "private offerings" to "accredited
investors" of the type contemplated by the Company. The Offering Documents will
not contain an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. If at any time prior to
the completion of the Offering or other termination of this Agreement any event
shall occur as a result of which it might become necessary to amend or
supplement the Offering Documents so that they do not include any untrue
statement of any material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances then
existing, not misleading, the Company will promptly notify you and will supply
you with amendments or supplements correcting such statement or omission. The
Company will also provide the Placement Agents for delivery to all offerees and
purchasers and their representatives, if any, any information, documents and
instruments which the Placement Agents deem necessary to comply with applicable
state and federal law.
(b) Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has all
requisite corporate power and authority to own and lease its properties, to
carry on its business as currently conducted and as proposed to be conducted, to
execute and deliver this Agreement and to carry out the transactions
contemplated by this Agreement, as appropriate and is duly licensed or qualified
to do business as a foreign corporation in each jurisdiction in which the
conduct of its business or ownership or leasing of its properties requires it to
be so qualified except where the failure to be so qualified would not have a
material adverse effect on the business, financial condition or prospects of the
Company.
(c) Capitalization. The authorized, issued and outstanding capital
stock of the Company prior to the consummation of the transactions contemplated
hereby is as set forth in the Offering Documents. All issued and outstanding
shares of the Company are validly issued, fully paid and nonassessable and have
not been issued in violation of the preemptive rights of any stockholder of the
Company. All prior sales of securities of the Company were either registered
under the Act and applicable state securities laws or exempt from such
registration, and no security holder has any rescission rights with respect
thereto.
(d) Warrants, Preemptive Rights, Etc. Except for the options to
purchase Units to be issued ot the Placement Agents hereunder (the "Agents'
UPO"), and except as set forth in or contemplated
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by the Offering Documents, there are not, nor will there be immediately after
the Closing (as hereinafter defined), any outstanding warrants, options,
agreements, convertible securities, preemptive rights to subscribe for or other
commitments pursuant to which the Company is, or may become, obligated to issue
any shares of its capital stock or other securities of the Company and this
offering will not cause any anti-dilution adjustments to such securities or
commitments except as reflected in the Term Sheet.
(e) Subsidiaries and Investments. The Company has no subsidiaries and
the Company does not own, directly or indirectly, any capital stock or other
equity ownership or proprietary interests in any other corporation, association,
trust, partnership, joint venture or other entity.
(f) Financial Statements. The financial information contained in the
Offering Documents is accurate in all material respects. The Company's
Form 10-QSB for the nine month period ended March 31, 1996, contains the
Company's (i) Balance Sheet at March 31, 1996 (hereinafter, March 31, 1996 being
referred to as the "Balance Sheet Date"), (ii) Statements of Operations for the
three and nine months ended March 31, 1995 and 1996 (iii) Statements of Cash
Flows for the nine months ended March 31, 1995 and 1996 (such financial
statements attached to the Offering Documents hereinafter referred to
collectively as the "Financial Statements"). The Financial Statements have been
prepared in conformity with generally accepted accounting principles
consistently applied and show all material liabilities, absolute or contingent,
of the Company required to be recorded thereon and present fairly the financial
position and results of operations of the Company as of the dates and for the
periods indicated.
(g) Absence of Changes. Other than as set forth in the Term Sheet,
since the Balance Sheet Date, the Company has not incurred any liabilities or
obligations, direct or contingent, not in the ordinary course of business, or
entered into any transaction not in the ordinary course of business, which is
material to the business of the Company, and, except as set forth in Schedule G
to this Agreement there has not been any change in the capital stock of, or any
incurrence of long-term debt by, the Company, or any issuance of options,
warrants or other rights to purchase the capital stock of the Company, or any
adverse change or any development involving, so far as the Company can now
reasonably foresee, a prospective adverse change in the condition (financial or
otherwise), net worth, results of operations, business, key personnel or
properties which would be material to the business or financial condition of the
Company, and the Company has not become a party to, and neither the business nor
the property of the Company has become the subject of, any material litigation
whether or not in the ordinary course of business.
(h) Title. Except as set forth on Schedule H hereto, the Company has
good and marketable title to all properties and assets, owned by it, free and
clear of all liens, charges, encumbrances or restrictions, except such as are
not materially significant or important in relation to the Company's business;
all of the material leases and subleases under which the Company is the lessor
or sublessor of properties or assets or under which the Company holds properties
or assets as lessee or sublessee are in full force and effect, and the Company
is not in
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default in any material respect with respect to any of the terms or provisions
of any of such leases or subleases, and no material claim has been asserted by
anyone adverse to rights of the Company as lessor, sublessor, lessee or
sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continued possession of the leased or
subleased premises or assets under any such lease or sublease. The Company owns
or leases all such properties as are necessary to its operations as now
conducted and to be conducted, as presently planned.
(i) Proprietary Rights. Except as set forth in Schedule I hereto, the
Company owns or possesses adequate and enforceable rights to use all patents,
patent applications, trademarks, service marks, copyrights, trade secrets,
processes, formulations, technology or know-how used or proposed to be used in
the conduct of its business as described in or contemplated by the Term Sheet
(the "Proprietary Rights"). The Company has not received any notice of any
claims, nor does it have any knowledge of any threatened claims, and knows of no
facts which would form the basis of any claim, asserted by any person to the
effect that the sale or use of any product or process now used or offered by the
Company or proposed to be used or offered by the Company infringes on any
patents or infringes upon the use of any such Proprietary Rights of another
person and, to the best of the Company's knowledge, no others have infringed the
Company's Proprietary Rights.
(j) Litigation. Other than as set forth in the Term Sheet, there is no
material action, suit, investigation, customer complaint, claim or proceeding at
law or in equity by or before any arbitrator, governmental instrumentality or
other agency now pending or, to the knowledge of the Company, threatened against
the Company (or basis therefore known to the Company) the adverse outcome of
which would materially adversely affect the Company's business or prospects. The
Company is not subject to any judgment, order, writ, injunction or decree of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign which would materially
adversely affect the Company's business or prospects.
(k) Non-Defaults; Non-Contravention. Other than as set forth in
the Term Sheet and Schedule K hereto, the Company is not in violation of or
default under, nor will the execution and delivery of this Agreement or any of
the Offering Documents, the M/A Agreement, the Escrow Agreement, the Warrants,
the Consulting Agreement or the Agents' UPO (as defined herein) or consummation
of the transactions contemplated herein or therein result in a violation of or
constitute a default in the performance or observance of any obligation (i)
under its Articles of Incorporation, or its By-laws, or any indenture, mortgage,
contract, material purchase order or other agreement or instrument to which the
Company is a party or by which it or its property is bound or affected or (ii)
with respect to any material order, writ, injunction or decree of any court of
any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, and there exists
no condition, event or act which constitutes, nor which after notice, the lapse
of time or both, could constitute a default under any of the foregoing, which in
either case would have a material adverse effect on the business, financial
condition or prospects of the Company.
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(l) Taxes. Except as set forth in the Term Sheet and on Schedule L,
the Company has filed all Federal, state, local and foreign tax returns which
are required to be filed by it and all such returns are true and correct in all
material respects. Except as set forth in the Term Sheet and on Schedule L, the
Company has paid all taxes pursuant to such returns or pursuant to any
assessments received by it or which it is obligated to withhold from amounts
owing to any employee, creditor or third party. Except as set forth in the Term
Sheet and on Schedule L, the Company has properly accrued all taxes required to
be accrued. Except as set forth in the Term Sheet and on Schedule L, the tax
returns of the Company have never been audited by any state, local or Federal
authorities. The Company has not waived any statute of limitations with respect
to taxes or agreed to any extension of time with respect to any tax assessment
or deficiency.
(m) Compliance With Laws; Licenses, Etc. Other than as set forth in
the Term Sheet, the Company has not received notice of any violation of or
noncompliance with any Federal, state, local or foreign, laws, ordinances,
regulations and orders applicable to its business which has not been cured, the
violation of, or noncompliance with which, would have a materially adverse
effect on the business or operations of the Company. Other than as set forth in
the Term Sheet, the Company has all licenses and permits and other governmental
certificates, authorizations and permits and approvals (collectively,
"Licenses") required by every Federal, state and local government or regulatory
body for the operation of its business as currently conducted and the use of its
properties, except where the failure to be licensed would not have a material
adverse effect on the business of the Company. Other than as set forth in the
Term Sheet, the Licenses are in full force and effect and no violations are or
have been recorded in respect of any License and no proceeding is pending or
threatened to revoke or limit any thereof.
(n) Authorization of Agreement, Etc. This Agreement has been duly and
validly authorized, executed and delivered by the Company and the execution,
delivery and performance by the Company of this Agreement, the Subscription
Agreements, the M/A Agreement, the Escrow Agreement, the Warrants and the
Consulting Agreement have been duly authorized by all requisite corporate action
by the Company and when delivered, constitute or will constitute the legal,
valid and binding obligations of the Company, enforceable in accordance with
their respective terms.
(o) Authorization of Shares and Warrants Etc. The issuance, sale and
delivery of the Shares and Warrants and the Agents' UPO have been duly
authorized by all requisite corporate action of the Company. When so issued,
sold and delivered, the Shares and the Warrants will be duly executed, issued
and delivered and will constitute valid and legal obligations of the Company
enforceable in accordance with their respective terms and, in each case, will
not be subject to preemptive or any other similar rights of the stockholders of
the Company or others which rights shall not have been waived prior to the first
closing of the Offering (the "Initial Closing").
(p) Authorization of Reserved Shares. The issuance, sale and delivery
by the Company of the shares of Common Stock issuable upon exercise of the
Warrants including
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the Warrant underlying the Agents' UPO (the "Reserved Shares") have been duly
authorized by all requisite corporate action of the Company, and the Reserved
Shares have been duly reserved for issuance upon exercise of all or any of the
Warrants and exercise of the Agents' UPO and when so issued, sold, paid for and
delivered, the Reserved Shares will be validly issued and outstanding, fully
paid and nonassessable, and not subject to preemptive or any other similar
rights of the stockholders of the Company or others which rights shall not have
been waived prior to the Initial Closing.
(q) Exemption from Registration. Assuming (i) the accuracy of the
information provided by the respective Subscribers in the Subscription Documents
and (ii) that the Placement Agents have complied in all material respects with
the provisions of Regulation D promulgated under the Securities Act, the offer
and sale of the Units pursuant to the terms of this Agreement are exempt from
the registration requirements of the Securities Act and the rules and
regulations promulgated thereunder (the "Regulations"). The Company is not
disqualified from the exemption under Regulation D by virtue of the
disqualifications contained in Rule 505(b)(2)(iii) or Rule 507 promulgated
thereunder.
(r) Registration Rights. Except with respect to holders of the Units
and the Agents' UPO and except as set forth in the Term Sheet or on Schedule R
hereto, no person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company.
(s) Brokers. Neither the Company nor any of its officers, directors,
employees or stockholders has employed any broker or finder in connection with
the transactions contemplated by this Agreement other than the Placement Agents.
(t) Title to Units. When certificates representing the securities
comprising the Units and/or the Reserved Shares shall have been duly delivered
to the purchasers and payment shall have been made therefor, the several
purchasers shall have good and marketable title to the Shares and Warrants
and/or the Reserved Shares free and clear of all liens, encumbrances and claims
whatsoever (with the exception of claims arising or through the acts of the
purchasers and except as arising from applicable Federal and state securities
laws), and the Company shall have paid all taxes, if any, in respect of the
original issuance thereof.
(u) Right of First Refusal. Except for the right of first refusal held
by Royce, no person, firm or other business entity is a party to any agreement,
contract or understanding, written or oral entitling such party to a right of
first refusal with respect to the Company.
(v) Securities Exchange Act Compliance. The Company has filed with the
Securities and Exchange Commission ("SEC") on a timely basis all filings
required of a company whose securities have been registered under the Securities
Exchange Act of 1934, as amended ("Exchange Act"). All information contained in
such filings is true, accurate and complete in all material respects. The
Company covenants to maintain the registration of its
7
Common Stock under the Exchange Act and to make all filings thereunder on a
timely basis. For the purpose of this paragraph, filings pursuant to Rule 12b-25
of the Exchange Act shall be deemed timely.
(w) Non-Affiliated Directors. The Company's Board of Directors has not
less than two directors who are independent from, and unaffiliated with,
management of the Company.
3. Closing; Placement and Fees.
(a) Closing. Provided the Minimum Offering shall have been subscribed
for and funds representing the sale thereof shall have cleared, the Initial
Closing shall take place at the offices of Royce, 000 Xxxxxxxxx Xxxx Xxxxx,
Xxxxxxxx, XX 00000 within ten (10) days following the Termination Date (which
date (the "Closing Date") may be accelerated or adjourned by agreement between
the Company and Royce). At the Initial Closing, payment for the Units issued and
sold by the Company shall be made against delivery of certificates representing
the Shares and Warrants comprising such Units. In addition, subsequent closings
(if applicable) may be scheduled at the discretion of the Company and Royce,
each of which shall be deemed a "Closing" hereunder.
(b) Conditions to Placement Agents' Obligations. The obligations of
the Placement Agents hereunder will be subject to the accuracy of the
representations and warranties of the Company herein contained as of the date
hereof and as of each Closing Date, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(i) Due Qualification or Exemption. (A) The offering contemplated by
this Agreement will become qualified or be exempt from qualification under the
securities laws of the several states pursuant to paragraph 4(e) below not later
than the Closing Date, and (B) at the Closing Date no stop order suspending the
sale of the Units shall have been issued, and no proceeding for that purpose
shall have been initiated or threatened;
(ii) No Material Misstatements. Neither the Blue Sky qualification
materials or the Term Sheet, or any supplement thereto, will contain an untrue
statement of a fact which in the opinion of either Placement Agent or their
counsel is material, or omits to state a fact, which in the opinion of either
Placement Agent or their counsel is material and is required to be stated
therein, or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(iii) Compliance with Agreements. The Company will have complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to each Closing;
(iv) Corporate Action. The Company will have taken all necessary
corporate action, including, without limitation, obtaining the approval of the
Company's
8
board of directors, for the execution and delivery of this Agreement, the
performance by the Company of its obligations hereunder and the offering
contemplated hereby;
(v) Opinion of Counsel. The Placement Agent shall receive the
opinion of Xxxxxx X. Xxxxx, Esq., dated the Closing(s), substantially to the
effect that:
(A) the Company has been duly organized and is validly existing and in good
standing under the laws of the State of Texas, has all requisite power and
authority necessary to own or hold its respective properties and conduct its
business and is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each other jurisdiction in which the
ownership or leasing of its properties or conduct of its business requires such
qualification, except where the failure to so qualify or be licensed would not
have a material adverse effect on the business and condition (financial or
otherwise) of the Company;
(B) each of this Agreement, the Escrow Agreement (as hereinafter defined), the
Warrants, the Subscription Agreements, the M/A Agreement, the Consulting
Agreement and the Agents' UPO has been duly and validly authorized, executed and
delivered by the Company, and is the valid and binding obligation of the
Company, enforceable against it in accordance with its terms, subject to any
applicable bankruptcy, insolvency or other laws affecting the rights of
creditors generally and to general equitable principles;
(C) the authorized, issued and outstanding capital stock of the Company as of
the date hereof (before giving effect to the transactions contemplated by this
Agreement) is as set forth in the Offering Documents. Except for the Units and
Warrants to be issued as contemplated by this Agreement, to such counsel's
knowledge, there are no outstanding warrants, options, agreements, convertible
securities, preemptive rights or other commitments pursuant to which the Company
is, or may become, obligated to issue any shares of its capital stock or other
securities of the Company other than as set forth in the Term Sheet. All of the
issued shares of capital stock of the Company have been duly and validly
authorized and issued, are fully paid and nonassessable and have not been issued
in violation of the preemptive rights of any securityholder of the Company. The
offers and sales of such outstanding securities were either registered under the
Act and applicable state securities laws or exempt from such registration
requirements. The Shares included in the Units have been duly authorized,
validly issued, fully paid and nonassessable and no personal liability will
attach to the ownership thereof. The Reserved Shares have been duly reserved,
and when issued in accordance with the terms of the Warrants and the Agents' UPO
will be validly issued, fully paid and nonassessable and not subject to
preemptive or any other similar rights and no personal liability will attach to
the ownership thereof;
(D) assuming (i) the accuracy of the information provided by the Subscribers in
the Subscription Documents and (ii) that the Placement Agent has complied in all
material respects with the requirements of section 4(2) of the Securities Act
(and the provisions of Regulation D promulgated thereunder), the issuance and
sale of the Units is exempt from registration under the Securities Act and
Regulation D promulgated thereunder;
9
(E) neither the execution and delivery of this Agreement, the Warrants, the
Subscription Agreements, the M/A Agreement, the Consulting Agreement, or the
Agents' UPO nor compliance with the terms hereof or thereof, nor the
consummation of the transactions herein or therein contemplated, has, nor will,
conflict with, result in a breach of, or constitute a default under the
Certificate of Incorporation or By-laws of the Company, or any material
contract, instrument or document to which the Company is a party, or by which it
or any of its properties is bound or violate any applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court having
jurisdiction over the Company or any of its properties or business;
(F) to such counsel's knowledge, there are no claims, actions, suits,
investigations or proceedings before or by any arbitrator, court, governmental
authority or instrumentality pending or threatened against or affecting the
Company or involving the properties of the Company which might materially and
adversely affect the business, properties or financial condition of the Company
or which might materially adversely affect the transactions or other acts
contemplated by this Agreement or the validity or enforceability of this
Agreement, except as set forth in or contemplated by the Offering Documents; and
(G) such counsel has participated in the preparation of the Offering Documents
and nothing has come to the attention of such counsel to cause them to have
reason to believe that the Offering Documents contained any untrue statement of
a material fact required to be stated therein or omitted to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading (except for the financial statements, notes thereto and other
financial information and statistical data contained therein, as to which such
counsel need express no opinion).
(vi) Officers' Certificate. The Placement Agent shall receive a
certificate of the Company, signed by the President and Secretary thereof, that
the representations and warranties contained in Section 2 hereof are true and
accurate in all material respects at such Closing with the same effect as though
expressly made at such Closing.
(vii) Escrow Agreement. The Placement Agent shall receive a copy of a
duly executed escrow agreement in the form previously delivered to you (the
"Escrow Agreement") with Continental Stock Transfer & Trust Company, New York,
NY.
(viii) Lock-Up Agreements. The Placement Agent shall receive
agreements from each officer and director of the Company to the effect that such
individual shall not publicly sell, assign or transfer any of their securities
of the Company for a period commencing on the date of this Agreement and
expiring 24 months from the effective date of a registration statement covering
the securities underlying the Units sold in the Offering.
(ix) Conversion of Debt. On or before the Initial Closing Date, the
Company shall have effected the conversion of an aggregate of $160,000 principal
amount of
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past due debt, together with accrued interest, into equity of the Company on
such terms as shall have been agreed to by the Placement Agents.
(x) Agreement of Lender. On or before the Initial Closing Date, the
Company shall have received the agreement of its senior lender to (a)
restructure the terms of the Company's credit facility to the satisfaction of
the Placement Agents and (b) permit the granting by the Company of the
registration rights contained in the Term Sheet.
(xi) Transmittal Letters. Within five days after the Closing, the
Placement Agents shall receive evidence of the transmittal of the Warrants and
Shares to the investors and shall receive a letter from the Company confirming
transmittal of the securities to the investors.
(c) Blue Sky. A summary blue sky survey shall be prepared by counsel to
the Placement Agents stating the extent to which and the conditions upon which
offers and sales of the Units may be made in certain jurisdictions. It is
understood that such survey may be based on or rely upon (i) the representations
of each Subscriber set forth in the Subscription Agreement delivered by such
Subscriber, (ii) the representations, warranties and agreements of the Company
set forth in Section 2 of this Agreement, (iii) the representations and
warranties of the Placement Agents, and (iv) the representations of the Company
set forth in the certificate to be delivered at the Closing pursuant to
paragraph (iii) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with payment for and
delivery of the Units at each Closing as provided in paragraph 3(a) above, the
Company shall at such Closing pay to the Placement Agents (i) a commission equal
to 10% of the aggregate purchase price of the Units sold and (ii) a non-
accountable expense allowance equal to 3% of the aggregate purchase price of the
Units sold. The Company shall also pay all expenses in connection with the
qualification of the Units under the securities or Blue Sky laws of the states
which the Placement Agents shall designate. The Company will, at each Closing,
issue to you or your designees (which may include any Selected Dealer or any
officer of the Placement Agents or a Selected Dealer) the Agents' UPO in the
form annexed hereto as Exhibit 1 to purchase 15% of the Units sold in the
Offering. The Agents' UPO will be exercisable for a period of five years from
the Initial Closing.
(e) Bring-Down Opinions and Certificates. If there is more than one
Closing, then at each such Closing there shall be delivered to the Placement
Agents updated opinions and certificates as described in (v) and (vi) of Section
3(b) above, respectively.
(f) No Adverse Changes. There shall not have occurred, at any time prior
to the Closing or, if applicable, any additional Closing, (i) any domestic or
international event, act or occurrence which has materially disrupted, or in the
opinion of either Placement Agent will in the immediate future materially
disrupt, the securities markets; (ii) a general suspension of, or a general
limitation on prices for, trading in securities on the New York Stock Exchange
or the American Stock Exchange or in the over-the-counter market; (iii) any
outbreak
11
of major hostilities or other national or international calamity; (iv) any
banking moratorium declared by a state or federal authority; (v) any moratorium
declared in foreign exchange trading by major international banks or other
persons; (vi) any material interruption in the mail service or other means of
communication within the United States; (vii) any material adverse change in the
business, properties, assets, results of operations, or financial condition of
the Company; or (viii) any change in the market for securities in general or in
political, financial, or economic conditions which, in the reasonable judgment
of either Placement Agent, makes it inadvisable to proceed with the offering,
sale, and delivery of the Units.
4. Covenants of the Company.
(a) Use of Proceeds. The net proceeds of the Offering will be used by the
Company substantially as set forth in the Term Sheet. Other than as set forth
in the Term Sheet, the Company shall not use any of the proceeds from the
Offering to repay any indebtedness of the Company to any current executive
officers, directors or principal stockholders of the Company.
(b) Expenses of Offering. The Company shall be responsible for, and shall bear
all expenses directly incurred in connection with, the proposed Offering
including, but not limited to, legal fees relating to the costs of preparing the
Offering Documents and all amendments, supplements and exhibits thereto;
preparing and delivering all placement agent and selling documents, including,
but not limited to, the Agency Agreement with the Placement Agents and the blue
sky memorandum; Warrant Agreements, Share and Reserved Share certificates; blue
sky fees, filing fees and the fees and disbursements of counsel in connection
with blue sky matters (the "Company Expenses"). Such expenses shall not include
the cost of the Placement Agents' mailing, telephone, telegraph, travel, due
diligence meeting and other similar expenses (the "Placement Agents expenses")
which are covered by the 3% non-accountable expense allowance payable by the
Company to the Placement Agents.
(c) Reservation of Common Stock. The Company shall reserve and keep available
that maximum number of its authorized but unissued shares of Common Stock which
are issuable upon exercise of the Warrants and the Agents' UPO, including the
Warrants underlying the Agents' UPO.
(d) Notification. The Company shall notify the Placement Agent immediately,
and in writing, (A) when any event shall have occurred during the period
commencing on the date hereof and ending on the later of the last Closing or the
Termination Date as a result of which the Offering Documents would include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (B) of the receipt of any notification with respect to the modification,
rescission, withdrawal or suspension of the qualification or registration of the
Units, or of any exemption from such registration or qualification, in any
jurisdiction. The Company will use its best efforts to prevent the issuance of
any such modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued and you
12
so request, to obtain the lifting thereof as promptly as possible.
(e) Blue Sky. The Company will use its best efforts to qualify or register the
Units for offering and sale under, or establish an exemption from such
qualification or registration under, the securities or "blue sky" laws of such
jurisdictions as you may reasonably request; provided however, that the Company
will not be obligated to qualify as a dealer in securities in any jurisdiction
in which it is not so qualified. The Company will not consummate any sale of
Units in any jurisdiction in which it is not so qualified or in any manner in
which such sale may not be lawfully made.
(f) Form D Filing. The Company shall file five copies of a Notice of Sales of
Securities on Form D with the Securities and Exchange Commission (the
"Commission") no later than 15 days after the first sale of the Units. The
Company shall file promptly such amendments to such Notices on Form D as shall
become necessary and shall also comply with any filing requirement imposed by
the laws of any state or jurisdiction in which offers and sales are made. The
Company shall furnish Royce with copies of all such filings.
(g) Press Releases, Etc. The Company shall not, during the period commencing
on the date hereof and ending on the later of the last Closing and the
Termination Date, issue any press release or other communication, or hold any
press conference with respect to the Company, its financial condition, results
of operations, business, properties, assets, or liabilities, or the Offering,
without the prior consent of Royce, which consent shall not be unreasonably
withheld.
(h) Form 10-KSB. The Company will provide to Royce, promptly upon the filing
thereof with the Commission (and in any event no later than two days of such
filing), a copy of its Annual Report on Form 10-KSB for the year ended June 30,
1996.
(i) Restrictions on Issuance of Securities. Prior to the Closing Date, the
Company will not, without the prior written consent of Royce, issue additional
shares of Common Stock or grant any warrants, options or other securities of the
Company.
(j) Right of First Refusal. During the five year period from the date of the
Initial Closing, Royce shall have the right of first refusal (the "Right of
First Refusal") to purchase for its account of or to act as underwriter or agent
for any and all public or private offerings of the securities of the Company, or
any successor to or subsidiary of the Company or other entity in which the
Company has an equity interest (collectively referred to herein as the
"Company") by the Company (the "Subsequent Company Offering") or any secondary
offering ("Secondary Offering") of the Company's securities by any of the
Company's stockholders owning at least five percent (5%) of the Company's
securities prior to or immediately following the consummation of the Offering
("Principal Stockholders"). Accordingly, if during such period the Company
intends to make a Subsequent Company Offering or the Company receives
notification from any of such Principal Stockholders of its securities of such
holder's intention to make a Secondary Offering, the Company shall notify Royce
in writing of such intention and of the
13
proposed terms of the offering. The Company shall thereafter promptly furnish
Royce with such information concerning the business, condition and prospects of
the Company as Royce may reasonably be requested. If within thirty (30) business
days of the mailing by registered mail addressed to Royce with respect to a
Subsequent Company Offering, or within two (2) business days of the receipt by
Royce with respect to a Secondary Offering, of such notice of intention and
statement of terms Royce does not accept in writing such offer to act as
underwriter or agent with respect to such offering upon the terms proposed, the
Company and each of the Principal Stockholders shall be free to negotiate terms
with other underwriters or agents with respect to such offering and to effect
such offering on such proposed terms. Before the Company and/or any of the
Principal Stockholders shall accept any modified proposal from such underwriter
or agent, Royce's preferential right shall be reinstated and the same procedure
with respect to such modified proposal as provided above shall be adopted. The
failure by Royce to exercise its Right of First Refusal in any particular
instance shall not affect in any way such right with respect to any other
Subsequent Company Offering or Secondary Offering. By execution of this
Agreement, each of the Principal Stockholders agrees to be bound by the terms of
this Section 4(j) concerning any proposed Secondary Offering of the Company's
securities.
(k) M/A Agreement. Prior to or on the Initial Closing Date, the Company shall
execute and deliver to Royce an agreement with Royce regarding mergers,
acquisitions, joint ventures and certain other forms of transactions, in the
form previously delivered to the Company by Royce (the "M/A Agreement").
(l) Board Designee. The Company shall, for a period of five years following
the Initial Closing, at Royce's option, nominate a designee of Royce to the
Company's Board of Directors.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Placement Agents and
each Selected Dealer, if any, and their respective shareholders, directors,
officers, agents and controlling persons (an "Indemnified Party") against any
and all loss, liability, claim, damage and expense whatsoever (and all actions
in respect thereof), and to reimburse the Placement Agents for legal fees and
related expenses as incurred (including, but not limited to the costs of giving
testimony or furnishing documents in response to a subpoena or otherwise, and
the costs of investigating, preparing or defending any such action or claim
whether or not in connection with litigation in which either Placement Agent is
a party), arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Offering Documents or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(b) The Company agrees to indemnify and hold harmless an Indemnified Party to
the same extent as the foregoing indemnity, against any and all loss, liability,
claim, damage and expense whatsoever directly arising out of the exercise by any
person of any right under the Securities Act or the Exchange Act or the
securities or Blue Sky laws of any state
14
on account of violations of the representations, warranties or agreements set
forth in Section 2 hereof.
(c) Promptly after receipt by a person entitled to indemnification pursuant
to the foregoing subsection (a) or (b) (an "indemnified party") under this
Section of notice of the commencement of any action, the indemnified party will,
if a claim in respect thereof is to be made against the Company under this
Section, notify in writing the Company of the commencement thereof; but the
omission so to notify the Company will not relieve it from any liability which
it may have to the indemnified party otherwise than under this Section. In case
any such action is brought against an indemnified party, and it notifies the
Company of the commencement thereof, the Company will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to the
indemnified party, and after notice from the Company to the indemnified party of
its election so to assume the defense thereof, the Company will not be liable to
the indemnified party under this Section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the Company if the Company has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that the fees and expenses of such counsel shall be at the
expense of the Company if (i) the employment of such counsel has been
specifically authorized in writing by the Company or (ii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party or parties and the Company and, in the judgment of the indemnified party,
it is advisable for the indemnified party or parties to be represented by
separate counsel (in which case the Company shall not have the right to assume
the defense of such action on behalf of the indemnified party or parties, it
being understood, however, that the Company shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for the indemnified party or parties. No settlement of any action
against an indemnified party shall be made without the consent of the
indemnified party, which shall not be unreasonably withheld in light of all
factors of importance to the indemnified party.
6. Contribution.
To provide for just and equitable contribution, if (i) an indemnified party
makes a claim for indemnification pursuant to Section (5) but it is found in a
final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this Agreement
expressly provides for indemnification in such case, or (ii) any indemnified or
indemnifying party seeks contribution under the Securities Act, the Exchange
Act, or otherwise, then the Company (including for this purpose any contribution
made by or on behalf of any officer, director, employee or agent for the
Company, or any controlling person of the Company), on the one hand, and the
Placement Agents and any Selected Dealers
15
(including for this purpose any contribution by or on behalf of
an indemnified party), on the other hand, shall contribute to the losses,
liabilities, claims, damages, and expenses whatsoever to which any of them may
be subject, in such proportions as are appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Placement Agents and
the Selected Dealers, on the other hand; provided, however, that if applicable
law does not permit such allocation, then other relevant equitable
considerations such as the relative fault of the Company and the Placement
Agents and the Selected Dealers in connection with the facts which resulted in
such losses, liabilities, claims, damages, and expenses shall also be
considered. In no case shall any Placement Agent or Selected Dealer be
responsible for a portion of the contribution obligation in excess of the
compensation received by it pursuant to Section 3 hereof or the Selected Dealer
Agreement, as the case may be. No person guilty of a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 6,
each person, if any, who controls either Placement Agent or a Selected Dealer
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and each officer, director, stockholder, employee and agent of
either Placement Agent or a Selected Dealer, shall have the same rights to
contribution as either Placement Agent or the Selected Dealer, and each person,
if any who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act and each officer, director,
employee and agent of the Company, shall have the same rights to contribution as
the Company, subject in each case to the provisions of this Section 6. Anything
in this Section 6 to the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 6 is intended to supersede any right
to contribution under the Securities Act, the Exchange Act, or otherwise.
7. Miscellaneous.
(a) Survival. Any termination of the Offering without consummation thereof
shall be without obligation on the part of any party except that the
indemnification provided in Section 5 hereof and the contribution provided in
Section 6 hereof shall survive any termination and shall survive the Closing for
a period of three years.
(b) Representations, Warranties and Covenants to Survive Delivery. The
respective representations, warranties, indemnities, agreements, covenants and
other statements of the Company as of the date hereof shall survive execution of
this Agreement and delivery of the Units and the termination of this Agreement.
(c) No Other Beneficiaries. This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective successors and
controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York without regard to conflict of
law provisions.
16
(e) Counterparts. This Agreement may be signed in counterparts with the same
effect as if both parties had signed one and the same instrument.
(f) Notices. Any communications specifically required hereunder to be in
writing, if sent to the Placement Agents, will be mailed, delivered and
confirmed to them at Royce Investment Group, Inc., 000 Xxxxxxxxx Xxxx Xxxxx,
Xxxxxxxx, Xxx Xxxx 00000, Att: Xxxx Xxxxxxx, with a copy to Bachner, Tally,
Xxxxxxx & Xxxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Att: Xxxx
Xxxxxxx, Esq. and if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at 0000 Xxxx Xxxxxxx, Xxxxxxx, Xxxxx 00000,
Att: Xxxxxx Xxxxxxx, with a copy to Xxxxxx X. Xxxxx, Esq., 0000 Xxxxxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxx 00000.
(g) Entire Agreement. This Agreement constitutes the entire agreement of the
parties with respect to the matters herein referred and supersedes all prior
agreements and understandings, written and oral, between the parties with
respect to the subject matter hereof. Neither this Agreement nor any term
hereof may be changed, waived or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver or
termination is sought.
If you find the foregoing is in accordance with our understanding, kindly sign
and return to us a counterpart hereof, whereupon this instrument along with all
counterparts will become a binding agreement between us.
Very truly yours,
IRATA, INC.
By:
__________________________________
Title:
Agreed:
ROYCE INVESTMENT GROUP, INC.
By: ____________________________
Authorized Officer
XXXXXXX XXXXX SECURITIES INCORPORATED
17
By: ____________________________
Authorized Officer
18
SCHEDULE A
IRATA, INC.
PRIVATE PLACEMENT SELLING AGREEMENT
Woodbury, New York
, 1996
Dear Sirs:
1. Irata, Inc. (the "Company") is offering for sale a minimum of 60 and a
maximum of 69 Units, each unit consisting of 50,000 shares of the Company's
Class A Common Stock ("Shares") and 50,000 common stock purchase warrants
("Warrants") ("Units"). The Units and the terms under which they are to be
offered for sale by the Company are more particularly described in the
Confidential Term Sheet dated , 1996 (the "Term Sheet") and the form of
subscription agreement between the Company and each subscriber (the
"Subscription Agreement"), the exhibits to the Term Sheet and the Subscription
Agreement, and any other documents delivered to subscribers (herein,
collectively the "Offering Documents"). Royce Investment Group, Inc. and Xxxxxxx
Xxxxx Securities Incorporated (the "Placement Agents") have agreed to act as
exclusive placement agents to the Company for the purpose of assisting the
Company in finding subscribers who satisfy the requirements set forth in the
Offering Documents and more particularly in the Subscription Agreement (herein,
"Qualified Subscribers") pursuant to the offering ("Private Placement")
described in the Offering Documents.
2. The Units are to be offered to a limited number of subscribers by the Company
at the price per Unit set forth in the Offering Documents (the "Subscription
Price"), in accordance with the terms of offering thereof set forth in the
Offering Documents.
3. We are extending the right, subject to the terms and conditions hereof, to
assist the Company in finding Qualified Subscribers to purchase a portion of the
Units, to certain dealers who are actually engaged in the investment banking or
securities business and who are members in good standing of the National
Association of Securities Dealers, Inc. (the "NASD") (such dealers who shall
agree to assist in locating Qualified Subscribers for Units hereunder being
herein called "Selected Dealers"), at the Subscription Price, for which they
will receive a commission of % of the Subscription Price for Units purchased by
Qualified Subscribers presented to the Company by them. The Selected Dealers
have agreed to comply with the provisions of all applicable Rules of Fair
Practice of the NASD. We may be included among the Selected Dealers.
4. We shall have full authority to take such action as we may deem advisable
19
in respect of all matters pertaining to the Private Placement of the Units.
5. If you desire to present to the Company any Qualified Subscribers for Units,
your application should reach us promptly by telephone or telegraph at either
Royce Investment Group, Inc., 000 Xxxxxxxxx Xxxx Xxxxx, Xxxxxxxx, Xxx Xxxx
00000, Attention: Xx Xxxx, telephone number 000-000-0000 or Xxxxxxx Xxxxx
Securities Incorporated, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: __________________, telephone number 212355-5565. We reserve the
right to reject subscriptions in whole or in part, to make allotments and to
close the subscription books at any time without notice. The Shares Units
allotted to the Qualified Subscribers presented by you will be confirmed,
subject to the terms and conditions of this Agreement.
6. The privilege of assisting the Company in finding Qualified Subscribers for
the Units is extended to you only so long as the Company may lawfully sell the
Units to residents in the state in which any such Qualified Subscribers reside
pursuant to the terms of the Offering Documents.
7. Any Units offered under the terms of this Agreement and the Offering
Documents may only be offered and sold subject to the securities or blue sky
laws of the various states or other jurisdictions.
You agree to advise us from time to time, upon request, of the number of sets of
Offering Documents delivered to qualified subscribers by you hereunder at the
time of such request.
No expenses shall be charged to Selected Dealers.
Neither you nor any other person is or has been authorized to give any
information or to make any representation in connection with the offer or sale
of the Units other than as contained in the Offering Documents.
8. On becoming a Selected Dealer, and in assisting the Company in finding
Qualified Subscribers for the Units, you agree to comply with all the applicable
requirements of the Securities Act of 1933, as amended (the "1933 Act")
specifically with respect to the requirements of Regulation D thereunder. You
confirm that you are familiar with Rules 501 and 502 under the 1933 Act relating
to the limitations on the manner in which a private placement may be conducted
pursuant to Regulation D under the 1933 Act.
9. Upon request, you will be informed as to the states and other jurisdictions
in which we have been advised that the Units have been qualified or are exempt
from registration requirements for offer and sale under the respective
securities or blue sky laws of such states and other jurisdictions, but we do
not assume any obligation or responsibility as to the right of any Selected
Dealer to offer the Units in any state or other jurisdiction or as to the
eligibility of the Units for sale therein. We will, if requested, file a
Further State Notice in respect of the Units
20
pursuant to Article 23-A of the General Business Law of the State of New York.
10. No Selected Dealer is authorized to act as our agent or an agent of the
Company or otherwise to act on our behalf in assisting the Company in finding
Qualified Subscribers or otherwise or to furnish any information or make any
representation except as contained in the Offering Documents.
11. Nothing will constitute the Selected Dealers an association or other
separate entity or partners with us, or with each other, but you will be
responsible for your share of any liability or expense based on any claim to the
contrary. We shall not be under any liability for or in respect of value,
validity or form of the components of the Units or the delivery of the Shares
and Warrants comprising the Units, including certificates for the Shares, or the
performance by anyone of any agreement on its part, or the qualification of the
Units for offer or sale under the laws of any jurisdiction, or for or in respect
of any other matter relating to this Agreement, except for lack of good faith
and for obligations expressly assumed by us in this Agreement and no obligation
on our part shall be implied herefrom. The foregoing provisions shall not be
deemed a waiver of any liability imposed under the federal securities laws.
12. Payment for the Units subscribed for hereunder is to be made by Qualified
Subscribers at the Subscription Price during the term of the Private Placement
set forth in the Offering Documents at the office of either Placement Agent, by
a certified or official bank check, payable to the order of Continental Stock
Transfer & Trust Company Special Acct Re: Irata, Inc.
13. Notice to us should be send to the addresses either Placement Agent set
forth in paragraph 5 above. Notices to you shall be deemed to have been duly
given if mailed to you at the address to which this letter is addressed.
14. If you desire to assist the Company in finding Qualified Subscribers
pursuant to the terms set forth above, please confirm your application by
signing and returning to us your confirmation on the duplicate copy of this
letter enclosed herewith, even though you may have previously advised us thereof
by telephone or telegraph. Our signature hereon may be by facsimile.
Very truly yours,
ROYCE INVESTMENT GROUP, INC. OR XXXXXXX XXXXX SECURITIES
INCORPORATED
By: __________________________ By: ____________________________
Authorized Officer Authorized Officer
21
Royce Investment Group, Inc.
000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
We hereby present to Irata, Inc. (the "Company") Qualified Subscribers for
____________ Units in accordance with the terms and conditions stated in the
foregoing letter. We hereby acknowledge receipt of the Offering Documents
referred to in the first paragraph thereof relating to said Units. We confirm
that we are a dealer actually engaged in the investment banking or securities
business and that we are a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD"). We hereby agree to comply with all of
the applicable provisions of the Rules of Fair Practice of the NASD.
Name
By:
________________________________
Authorized Officer
Address:
Dated: ________________________
22
23
Xxxxxxx Xxxxx Securities Incorporated
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
We hereby present to Irata, Inc. (the "Company") Qualified Subscribers for
____________ Units in accordance with the terms and conditions stated in the
foregoing letter. We hereby acknowledge receipt of the Offering Documents
referred to in the first paragraph thereof relating to said Units. We confirm
that we are a dealer actually engaged in the investment banking or securities
business and that we are a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD"). We hereby agree to comply with all of
the applicable provisions of the Rules of Fair Practice of the NASD.
Name
By:
________________________________
Authorized Officer
Address:
Dated: ________________________
24
SCHEDULE G
The Company's Board of Directors has previously authorized the issuance of 4,047
shares of its Class A Common Stock to Walnut Capital Corporation, 2,500 shares
of its Class A Common Stock to Xxx Xxxxxxx and 10,239 shares of its Class A
Common Stock to Xxxxx Xxxxxx. Certificates evidencing these shares have not yet
been issued by the Company's transfer agent.
25
SCHEDULE H
The Company's assets and properties are subject to no liens and encumbrances
except for (i) liens in favor of its senior lender, Petrus Investments, Ltd.;
(ii) liens for current property taxes not yet due and payable; (iii) statutory
liens not yet delinquent; and (iv) minor defects and irregularities in title or
encumbrances which are not substantial in character, amount or extent and which
do not materially and adversely affect the value of or interfere with the use of
the properties subject thereto or affected thereby.
26
SCHEDULE L
The Company has previously filed sales tax returns in the following states but
is delinquent for the listed period. The Company intends to cure the
delinquencies.
Number of Delinquent Estimated
State Locations Period Tax Due
------------------------------------------------------------------------------------------
Alabama 2 July - Dec. '95 $ 1,600
Georgia 7 July - Dec. '95 $ 2,530
Missouri 9 Jan. '95 - June '96 $16,700
West Virginia 8 July '94 - Dec. '95 $ 9,700
Ohio 1 Jan. '95 - June '96 $ 1,000
Minnesota 9 Oct. '94 - Dec. '95 $ 5,500
-------
$37,030
=======
The Company is registered in the following states but has not filed an initial
tax return for the listed periods. The Company intends to cure the
delinquencies
Number of Delinquent Estimated
State Locations Period Tax Due
------------------------------------------------------------------------------------------
Kansas 6 Dec. '94 - June '96 $ 4,780
Maine 3 Mar. '95 - June '96 $ 760
Massachusetts 10 (All Third-Party) $ --
Michigan 7 Aug. '94 - June '96 $ 6,100
Nebraska 2 Jan. '95 - June '96 $ 2,040
Nevada 4 July '94 - June '96 $ 4,650
North Carolina 4 Nov. '94 - June '96 $ 3,710
North Dakota 1 Jan. '95 - June '96 $ 1,870
Rhode Island 2 (All Third-Party) $ --
Vermont 1 Sept. '95 - June '96 $ 1,160
Washington 10 Nov. '94 - June '96 $12,400
-------
$37,470
=======
27
SCHEDULE R
The holders of the following securities of the Company have registration rights:
1. The holders of the bridge warrants issued by the Company in connection with
the Company's December 1994 financing, who hold the right, after application of
the antidilution provisions of such bridge warrants, to purchase 395,173 shares
of Class A Common Stock, at a price per share of $1.8979009 have mandatory
registration rights.
2. The underwriting agreement pursuant to which the Company issued and sold
units in its initial public offering that included redeemable warrants, that
after application of the antidilution provisions of the warrants provide for the
issuance of 1,666,315 shares of Class A Common Stock at a purchase price of
$5.3141226, obligate the Company to file post effective amendments to the
registration statement covering such securities. The Company is in default with
respect to this provision.
3. The holder of the Unit Purchase Option granted to Royce Investment Group,
Inc. in connection with the Company's initial public offering has a mandatory
registration right with respect to the Unit Purchase Option, the underlying
144,897 shares of Class A Common Stock, the 144,897 Redeemable Warrants issuable
upon exercise of the Unit Purchase Option and the 144,897 shares of Class A
Common Stock issuable upon exercise of the Redeemable Warrants (giving effect to
the antidilution provisions of such securities).
4. Venlease Associates and Hill Branscomb, who hold warrants that after
application of the antidilution provisions of such warrants, are exercisable for
54,424 shares of Class A Common Stock of the company at an exercise price of
$1.9292956, have piggy-back registration rights.
5. The interim lenders who arranged bridge financing in December 1995 and who
hold warrants to purchase 38,745 shares of Class A Common Stock of the Company,
giving effect to the antidilution provisions of such securities, have piggy-back
registration rights.
6. The Company's senior lender who holds warrants to
purchase 510,000 shares of the Class A Common Stock of the Company has mandatory
registration rights that prohibit granting other registration rights.
28
SCHEDULE K
The Company is in default under the loan agreement with its senior lender.
Additionally, the Company is in default with respect to its covenant under its
underwriting agreement with Royce Investment Group, Inc. to keep its
registration statement current with respect to the Redeemable Warrants issued in
connection with its initial public offering.
29
