THE SECURITIES OFFERED HEREIN ARE SUBJECT TO
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY
SECURITIES SUBSCRIPTION AGREEMENT
1. ▇▇▇▇▇▇ ▇▇▇▇▇▇ Holding Corporation, a Texas corporation (the
"Company"), has offered for sale and the undersigned purchaser (the
"Purchaser") hereby tenders this subscription and applies for the
purchase of shares of Series N, Class A Preference Shares (the "Class A
Preferred Stock") of the Company, [together with the shares of the
Company's Common Stock, par value $0.01, issuable upon conversion of the
Series N, Class A Preferred Stock (the "Shares")] at a purchase price per
Share of $25,000, and containing all the rights, obligations, and
conditions as more fully set out in the form of the Certificate of
Designation of Class A Preferred Stock attached hereto as Exhibit "A" and
incorporated herein for all purposes (the "Offering"). Together with
this Subscription Agreement, the Purchaser is delivering to the Escrow
Agent by wire transfer the full amount of the purchase price for the
Shares for which it is subscribing pursuant hereto against delivery of
the Class A Preferred Stock certificates. Time is of the essence in
connection with this Subscription Agreement.
2. Representations and Warranties of Purchaser. In order to induce
the Company to accept this subscription, the Purchaser hereby represents
and warrants to, and covenants with, the Company as follows:
A. (i) The purchaser has received and carefully reviewed the
Company's most recent Annual Report on Form 10-K, its subsequent
Quarterly Reports on Form 10-Q, its most recent Registration
Statement on Form S-3, and its Current Reports on Form 8-K
(collectively, the "SEC Reports"), and a copy of the Certificate of
Designation for the Series N Class A Preferred Stock;
(ii) The Purchaser has had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the
Company and the Offering, and all such questions, if any, have been
answered to the full satisfaction of the Purchaser;
(iii) The Purchaser is an accredited investor and has
such knowledge and expertise in financial and business matters that
the Purchaser is capable of evaluating the merits and risks involved
in an investment in the Class A Preferred Stock and acknowledges
that an investment in the Class A Preferred Stock entails a number
of very significant risks and funds should only be invested by
persons able to withstand the total loss of their investment;
(iv) Except as set forth in this Agreement, no
representations or warranties have been made to the Purchaser by the
Company or any agent, employee or affiliate of the Company and in
entering into this transaction the Purchaser is not relying upon any
information, other than that contained in this Agreement, the SEC
Reports and the results of independent investigation by the
Purchaser;
(v) The Purchaser understands that the Class A Preferred
Stock is being offered and sold to it in reliance on specific
exemptions from the registration requirements of the United States
Federal and State securities laws and that the Company is relying
upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the applicability of such
exemptions and the suitability of the Purchaser to acquire the Class
A Preferred Stock;
(vi) The Purchaser has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder;
and this Agreement is a legally binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms; and
3. Representations of the Company. The Company represents and
warrants:
A. The Company is a Reporting Issuer as defined by Regulation
D. The Company is in full compliance, to the extent applicable,
with all reporting obligations under either Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
B. The execution, delivery and performance of this Agreement
by the Company and the performance of its obligations hereunder do
not and will not constitute a breach or violation of any of the
terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company's Certificate of
Incorporation or By-laws, (ii) any indenture, mortgage, deed of
trust, agreement or other instrument to which the Company is a party
or by which it or any of its property is bound, (iii) any applicable
statute of regulation, (iv) or any judgment, decree or order of any
court or governmental body having jurisdiction over the Company or
any of its property.
C. The Company is a corporation duly organized, validly
existing and in good standing under the law of its jurisdiction of
incorporation and is duly qualified as a foreign corporation in all
jurisdictions where the failure to be so qualified would have a
materially adverse effect on its business, taken as a whole.
D. The execution, delivery and performance of this Agreement
and the consummation of the issuance of the Class A Preferred Stock
and the transactions contemplated by this Agreement are within the
Company's corporate powers and have been duly authorized by all
necessary corporate and stockholder action on behalf of the Company.
E. There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now
pending or, to the knowledge of the Company, threatened, against or
affecting the Company, or any of its properties, which might result
in any material adverse change in the condition (financial or
otherwise) or in the earnings, business affairs or business
prospects of the Company, or which might materially and adversely
affect the properties or assets thereof.
F. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by
which it or its property may be bound; and neither the execution,
nor the delivery by the Company, nor the performance by the Company
of its obligations under, this Agreement or, the Class A Preferred
Stock will conflict with or result in the breach or violation of any
of the terms or provisions of, or constitute a default or result in
the creation or imposition of any lien or charge on any assets or
properties of the Company under, any material indenture, mortgage,
deed of trust or other material agreement or instrument to which the
Company is a party or by which it is bound or any statute or the
Certificate of Incorporation or Bylaws of the Company, or any
decree, judgment, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
its properties.
G. None of the Company's filings with the Securities and
Exchange Commission contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statement therein in light of the
circumstances under which they were made, not misleading. The
Company has timely filed all requisite forms, reports and exhibits
thereto with the Securities and Exchange Commission.
H. There has been no material adverse change in the financial
condition, earnings, business affairs or business prospects of the
Company since the date of the Company's most recent SEC Report filed
with the Securities and Exchange Commission.
I. As of the date hereof, the conduct of the business
complies in all material respects with all statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees
applicable thereto. The Company has not received notice of any
alleged violation of any statute, law, regulation ordinance, rule,
judgment, order or decree from any governmental authority which
would materially adversely affect the business of the Company.
J. There is no fact known to the Company (other than general
economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser that (i) could reasonably be
expected to have a material adverse effect on the condition
(financial or otherwise) or in the earnings, business affairs,
business prospects, properties or assets of the Company or (ii)
could reasonably be expected to materially and adversely affect the
ability of the Company to perform its obligations pursuant to this
Agreement and the Class A Preferred Stock.
K. There is no action pending for delisting of the Common
Stock nor is the Company aware of any threatened action relating
thereto.
L. During the twelve (12) months immediately preceding the
date hereof, the Company has not issued any securities pursuant to
Regulation S or Regulation D under the Act, except as may be
reflected in the Company's filings with the U.S. Securities and
Exchange Commission pursuant Sections 13(a) or 15(d) of the Exchange
Act.
M. The Company covenants and agrees that it will not enter
into any subsequent or further offer or sale of Common Stock or
securities convertible into Common Stock with any third party until
the expiration of the earlier of (a) one hundred eighty (180) days
from the Closing Date, or (b) forty-five (45) days after the
effective date of the Registration Statement required to be filed
under the Registration Rights Agreement, without first offering the
Purchaser the opportunity (which shall remain open for a period of
two business days from the date the Purchaser's representative
receives notice thereof) to purchase all of such additional
securities (in the discretion of the Purchaser) on the terms and
provisions on which the Company proposes to offer such additional
securities to such third party. In the event that the Purchaser
declines to participate in any such investment, the Company shall
provide the Purchaser with prompt written notice of the consummation
of any such transaction with a third party, specifying the material
terms thereof. However, this clause will not apply to (x) the
issuance of securities (other than for cash) in connection with a
merger, consolidation, sale of assets, disposition of a business,
product or license by the Company, strategic alliance, bank loan or
agreement, public offering, securities issued at the then current
market price (as determined in good faith by the Board of
Directors), or the exercise of options, (y) the exchange of the
capital stock or the Company for assets, stock or other joint
venture interests, or (z) any transaction which would result in
beneficial ownership by the Purchaser and its affiliates of more
than 4.9% of the outstanding shares of Common Stock as set out in
Section 6.3 below. This Section 3(M) may be waived by the holders
of two-thirds of the outstanding shares of Preferred Stock (whether
or not the Purchaser shall consent thereto).
4. The Purchaser understands that this subscription is not binding
upon the Company until the Company accepts it, which acceptance is at the
sole discretion of the Company and is to be evidenced by the Company's
execution of this Agreement where indicated. This Agreement shall be
null and void if the Company does not accept it as aforesaid. Upon
acceptance by the Company and receipt by the Escrow Agent of the total
purchase price, the Company will issue to the Escrow Agent one or more
certificates for the full number of shares of Class A Preferred Stock
subscribed for.
5. Covenants of the Company. For so long as any Class A Preferred
Stock held by the Purchaser remain outstanding, the Company covenants and
agrees with the Purchaser that:
(a) It will reserve from its authorized but unissued shares of
Common Stock a sufficient number of shares of Common Stock to permit
the conversion in full of the outstanding Class A Preferred Stock.
(b) It will maintain the listing of its Common Stock on
NASDAQ.
6. Any holder of Series N Class A Preferred Stock (an "Eligible
Holder") may at any time after the registration statement is declared
effective convert any whole number of shares of Series N Class A
Preferred Stock in accordance with this Part. For the purposes of
conversion, the Series N Class A Preferred Stock shall be valued at
$25,000 per share ("Value"), and, if converted, the Series N Class A
Preferred Stock shall be converted into such number of Common Shares of
the Company $.01 par value (the "Conversion Shares") as is obtained by
dividing the aggregate Value of the shares of Series N Class A Preferred
Stock being so converted by the "Conversion Price." For purposes of this
Part, the "Conversion Price" means Seventy-five percent (75%), or such
lesser amount which reflects any penalty which may accrue in accordance
with Paragraph 7 of this Subscription Agreement, of the average daily
closing bid price of Common Stock as reported by NASDAQ for the period of
5 consecutive trading days immediately preceding the date of the
conversion of the Series N Class A Preferred Stock in respect of which
such Conversion Price is determined. The number of Conversion Shares so
determined shall be rounded to the nearest whole number of shares.
6.1 The conversion right provided by the above section may be
exercised only by an Eligible Holder of Series N Class A Preferred Stock,
in whole or in part, by the surrender of the share certificate or share
certificates representing the Series N Class A Preferred Stock to be
converted at the principal office of the Corporation (or at such other
place as the Corporation may designate in a written notice sent to the
holder by first-class mail, postage prepaid, at its address shown on the
books of the Corporation) against delivery of that number of whole Common
Shares as shall be computed by dividing (1) the aggregate Value of the
Series N Class A Preferred Stock so surrendered, if any, by (2) the
Conversion Price. Each Series N Class A Preferred Stock certificate
surrendered for conversion shall be endorsed by its holder. In the event
of any exercise of the conversion right of the Series N Class A Preferred
Stock granted herein (i) share certificates representing the Common Stock
purchased by virtue of such exercise, free of restrictive legend or stop
transfer orders, shall be delivered to such holder within 5 business days
after receipt by the Corporation of the original Notice of Conversion and
the certificate representing the Series N Class A Preferred Stock (the
fifth business day after receipt of such original documents, not counting
the date of receipt, being the "Delivery Date"), and (ii) unless the
Series N Class A Preferred Stock has been fully converted, a new share
certificate representing the Series N Class A Preferred Stock not so
converted, if any, shall also be delivered to such holder on or before
such Delivery Date, or carried on the Corporation's ledger, at holder's
option. Any Eligible Holder may exercise its right to convert the Series
N Class A Preferred Stock by telecopying an executed and completed Notice
of Conversion to the Corporation, and within 72 hours thereafter,
delivering the original Notice of Conversion and the certificate
representing the Series N Class A Preferred Stock to the Corporation by
express courier. Each date on which a telecopied Notice of Conversion is
received by the Corporation in accordance with the provisions hereof
shall be deemed a Conversion Date. The Corporation will cause delivery
of the Common Stock certificates issuable upon conversion of any Series N
Class A Preferred Stock (together with the certificates representing the
Series N Class A Preferred Stock not so converted, if requested) to the
Eligible Holder via express courier on or before the Delivery Date if the
Corporation has received the original Notice of Conversion and Series N
Class A Preferred Stock certificate being so converted in accordance with
this paragraph.
6.2 All Common Shares which may be issued upon conversion of
Series N Class A Shares will, upon issuance, be duly issued, fully paid
and nonassessable and free from all taxes, liens, and charges with
respect to the issue thereof. At all times that any Series N Class A
Shares are outstanding, the Corporation shall have authorized, and shall
have reserved for the purpose of issuance upon such conversion, a
sufficient number of Common Shares to provide for the conversion into
Common Shares of all Series N Class A Shares then outstanding at the then
effective Conversion Price. Without limiting the generality of the
foregoing, if, at any time, the Conversion Price is decreased, the number
of Common Shares authorized and reserved for issuance upon the conversion
of the Series N Class A Shares shall be proportionately increased.
6.3 Notwithstanding the provisions hereof, in no event shall
the holder be entitled to convert any Series N Class A Preferred Stock in
excess of that number of shares upon conversion of which the sum of (1)
the number of shares of Common Stock beneficially owned by the Purchaser
and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of
the Preferred Stock), and (2) the number of shares of Common Stock
issuable upon the conversion of the Preferred Stock with respect to which
the determination of this proviso is being made, would result in
beneficial ownership by the Purchaser and its affiliates of more than
4.9% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13 D-G thereunder, except as
otherwise provided in clause (1) of such proviso.
7. Registration. The Company shall be required, at the Company's
expense, to effect the registration of twice the number of the Underlying
Shares issuable on the "Closing Date" (October 15, 1997) upon conversion
of the Class A Preferred Stock under the Act and relevant Blue Sky laws.
The Company and the Purchaser shall cooperate in good faith in connection
with the furnishing of information required for such registration and the
taking of such other actions as may be legally or commercially necessary
in order to effect such registration. The Company shall file a
registration statement on or before November 24, 1997 and shall use its
best efforts to cause such registration statement to become effective as
soon as practicable thereafter. Such best efforts shall include, but not
be limited to, promptly responding to all comments received from the
staff of the Securities and Exchange Commission with respect to such
registration statement and promptly preparing and filing amendments to
such registration statement which are responsive to the comments received
from the staff of the Securities and Exchange Commission. Once declared
effective by the Securities and Exchange Commission the Company shall
cause such registration statement to remain effective until the earlier
of (i) the sale by the Purchaser of all Underlying Shares registered or
(ii) one year after the effective date of such registration statement.
In the event the registration statement is not declared effective within
90 days after the date of filing, at Purchaser's option, either (i) the
current Twenty-five percent (25%) discount provided in the Conversion
Price shall increase by three percent (3%) and such discount shall
continue to increase by two percent (2%) for each thirty (30) day period
thereafter until the registration statement is declared effective by the
SEC, or until the discount reached is thirty-five percent (35%), and
additional Common Stock shall be issued to the Purchaser upon conversion
in accordance with such additional discounts, or (ii) Purchaser may
convert any whole number of shares of Series N Class A Preferred Stock
into Common Shares of the Corporation pursuant to Regulation S, provided
that Purchaser demonstrates to the Corporation's reasonable satisfaction
that Purchaser is qualified at all relevant times as an investor under
Regulation S.
8. Indemnification.
A. The Purchaser agrees to indemnify the Company and hold it
harmless from and against any and all losses, damages, liabilities,
costs and expenses which it may sustain or incur in connection with
the breach by the Purchaser of any representation, warranty or
covenant made by it herein.
B. The Company agrees to indemnify the Purchaser and hold it
harmless from and against any and all losses, damages, liabilities,
costs and expenses which it may sustain or incur in connection with
the breach by the Company of any representation, warranty or
covenant made by it herein.
9. Neither this Agreement nor any of the rights of the Purchaser
hereunder may be transferred or assigned by the Purchaser.
10. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware. Each of the parties
consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of New York or the City of Dallas, or the
state courts of the State of New York sitting in the City of New York, or
the state courts of the State of Texas sitting in the City of Dallas in
connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto. This
Agreement may be signed in one or more counterparts, each of which shall
be deemed an original. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction. This Agreement may be amended only
by an instrument in writing signed by the party to be charged with
enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject
matter hereof.
11. Unless the context otherwise requires, all personal pronouns
used in this Agreement, whether in the masculine, feminine or neuter
gender, shall include all other genders.
12. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered
personally or mailed by certified or registered mail, return receipt
requested, postage prepaid, as follows: If to Purchaser, to the address
set forth on the signature page of this Agreement and if to the Company,
to ▇▇▇▇▇▇ ▇▇▇▇▇▇ Holding Corporation, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, or to such other address as the Company or the Purchaser shall
have designated to the other by like notice.
13. Restricted Legend. The Purchaser recognizes that the Class A
Preferred Stock, when issued, will not have been registered for public
sale under the Securities Act of 1933 (the "Act") or the securities laws
of any state and that the share certificate will bear a "Restricted
Stock" legend as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER SAID ACT, OR (2) AN OPINION OF COMPANY COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED."
Signatures Follow
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of October 15, 1997.
The Purchaser declares under penalty of perjury that the statements,
representations and warranties contained in the foregoing Securities
Purchase Agreement and in the following Purchaser Acknowledgments are
true, correct and complete.
PURCHASER: ______________________________
______________________________
(Signature) (Title)
______________________________
(Print Name)
Exact Name(s) in which ownership of Securities is to be registered:
______________________________________
Principal Place of Business: _________________________________________
_________________________________________
_________________________________________
Federal Tax ID Number: __________________________________________
Amount of Subscription $
AGREED AND ACCEPTED:
▇▇▇▇▇▇ ▇▇▇▇▇▇ HOLDING CORPORATION
By:______________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and CEO
APPENDIX "A"
PURCHASER ACKNOWLEDGMENTS
In order to induce the Company to accept the foregoing Securities
Purchase Agreement, the Purchaser expressly acknowledges the following by
placing his or her initials (or, if the Purchaser is a person other than
an individual, the initials of an individual duly empowered to act for
the Purchaser) in each of the spaces provided below:
THE PURCHASER HAS RECEIVED, HAS CAREFULLY REVIEWED INFORMATION ON
THE COMPANY AND HAS MADE AN INDEPENDENT INVESTIGATION AND ANALYSIS OF THE
INVESTMENT.
THE PURCHASER HAS CAREFULLY READ THE FOREGOING SECURITIES PURCHASE
AGREEMENT AND IN PARTICULAR, HAS CAREFULLY READ AND UNDERSTANDS THE
PURCHASER'S REPRESENTATIONS AND WARRANTIES MADE THEREIN AND CONFIRMS THAT
ALL SUCH REPRESENTATIONS AND WARRANTIES ARE TRUE AND CORRECT.
THE PURCHASER QUALIFIES UNDER THE FOLLOWING CATEGORY OR CATEGORIES
OF DEFINITIONS OF "ACCREDITED INVESTOR" (INDICATE EACH APPLICABLE
CATEGORY):
(1) The Purchaser is a natural person whose individual net worth,
or joint net worth with that person's spouse, exceeds
$1,000,000.
(______) Yes (______) No
(2) The Purchaser is a natural person who had an individual income
in excess of $200,000 in each of the two most recent years or
joint income with that person's spouse in excess of $300,000 in
each of those years and has a reasonable expectation of
realizing the same income level in the current year.
(______) Yes (______) No
(3) The Purchaser is a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended.
(______) Yes (______) No
(4) The Purchaser is an insurance company, a registered securities
broker or dealer, a licensed Small Business Investment Company,
a registered investment company, a business development company
as defined in Section 2(a)(48) of the Investment Company Act of
1940 or a private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940.
(______) Yes (______) No
(5) The Purchaser is an organization described in Section 501(c)(3)
of the Internal Revenue Code of 1986, as amended, or a
corporation, Massachusetts or similar business trust or
partnership, not formed for the specific purpose of acquiring
the Units, with total assets in excess of $5,000,000.
(______) Yes (______) No
(6) The Purchaser is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Units offered, whose purchase is directed by a person who
has such knowledge and experience that he or she is capable of
evaluating the merits and risks of the proposed investment.
(______) Yes (______) No
(7) The Purchaser is a bank, savings and loan association or
similar institution acting in its individual or fiduciary
capacity, or an employee benefit plan with total assets in
excess of $5,000,000.
(______) Yes (______) No
(8) The Purchaser is a Plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of
a state or its political subdivisions for the benefit of its
employees, with total assets in excess of $5,000,000.
(______) Yes (______) No
(9) The Purchaser is an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 ("ERISA"),
the investment decisions for which are made by a plan
fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance company,
or registered investment adviser, or is an employee benefit
plan that has total assets in excess of $5,000,000.
(______) Yes (______) No
(10) The Purchaser is an entity in which all of the equity owners
are accredited investors or individuals who are accredited
investors (as defined above).
(______) Yes (______) No
IN WITNESS WHEREOF, the Purchaser has executed and delivered this
Purchaser Acknowledgment as of the day and year specified above.
Official Signatory of Purchaser:
Name of Company: ___________________
By: _______________________________
(Signature)
Name Printed: _______________________
Title: ______________________________