IRATA INC, DEF 14A, 1997-01-07

IRATA INC
DEF 14A, 1997-01-07
NONSTORE RETAILERS

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

Irata, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[_] No fee required.

[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:
$125
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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

<PAGE>

IRATA, INC.

NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS

The Annual Meeting of Shareholders of Irata, Inc. (the "Company") will be
held at the offices of the Company, 8554 Katy Freeway, Suite 100, Houston,
Texas on Wednesday, January 22, 1997 at 11:00 A.M. local time for the following
purposes:

1. To elect five directors to serve on the Company's Board of Directors.

2. To consider and act upon a proposal to ratify and approve the Board of
Directors' adoption of the Irata, Inc. 1996 Stock Option and Restricted
Stock Plan.

3. To transact such other business as may properly come before the meeting
or any adjournment thereof.

Holders of Class A Common Stock of record at the close of business on
December 12, 1996, will be entitled to notice of and to vote at the meeting.

By Order of the Board of Directors

/s/ SUE CAMP

Sue Camp, Secretary

Houston, Texas
December 19, 1996

----------------

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN, DATE, SIGN AND
MAIL PROMPTLY THE ENCLOSED PROXY CARD IN THE RETURN ENVELOPE FURNISHED FOR SUCH
PURPOSE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED.

----------------
<PAGE>

IRATA, INC.

PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 22, 1997

This Proxy Statement is being furnished to shareholders in connection with
the solicitation of proxies by the Board of Directors of Irata, Inc. (the
"Company") for use at the Annual Meeting of Shareholders to be held at the
offices of the Company, 8554 Katy Freeway, Suite 100, Houston, Texas on
Wednesday, January 22, 1997 at 11:00 A.M. local time and at any adjournments
thereof, for the purposes set forth in this Proxy Statement.

This Proxy Statement and the enclosed form of proxy are being mailed on or
about December 19, 1996, to the Stockholders of record as of December 12,
1996. The annual report to Stockholders for the Company's fiscal year ended
June 30, 1996, is also being mailed to Stockholders contemporaneously with
this Proxy Statement, although the Annual Report does not form a part of the
material for the solicitation of Proxies.

MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING

The persons named on the enclosed proxy form will vote the shares for which
they are appointed in accordance with the directions of the shareholders
appointing them. Unless otherwise indicated, proxies in the form enclosed that
are properly executed, duly returned and not revoked will be voted in favor
of:

(1) the election of the five nominees to the Board of Directors of the
Company named herein; and

(2) the approval of a proposal to ratify and approve the Board of
Directors' adoption of the Irata, Inc. 1996 Stock Option and Restricted
Stock Plan (the "Plan").

The Board of Directors is not presently aware of other proposals which may
be brought before the Annual Meeting. In the event that other proposals are
brought before the Annual Meeting, the persons named in the enclosed proxy
will vote in accordance with what they consider to be in the best interests of
the Company. Any shareholder giving such a proxy may revoke it at any time
before it is exercised.

VOTING REQUIREMENTS

Only holders of shares of Class A Common Stock of record at the close of
business on December 12, 1996, the record date for the determination of
shareholders entitled to notice of, and to vote at, the Annual Meeting and any
adjournment thereof, are entitled to vote at the meeting. As of the record
date, there were 6,256,982 shares of the Company's Class A Common Stock par
value $0.10 per share, issued and outstanding with each entitled to one vote
upon all matters to be acted upon at the meeting. Except for the 1,500,000
shares of the Company's Class B Common Stock par value $0.01 per share, which
are not entitled to vote at the meeting, no other shares of capital stock of
the Company are issued and outstanding. A complete list of all shareholders
entitled to vote at the Annual Meeting will be open for examination by an
shareholder during normal business hours for a period of ten days prior to the
Annual Meeting at the offices of the Company at 8554 Katy Freeway, Suite 100,
Houston, Texas. Such list will also be available at the Annual Meeting and may
be inspected by any Shareholder who is present.

QUORUM AND OTHER MATTERS

Quorum and voting requirements are governed by Texas law, and the Company's
Articles of Incorporation and By-laws. The presence, in person or by proxy, of
the holders of a majority of the shares of the Class A Common Stock of the
Company is necessary to constitute a quorum at the meeting. Each share of
Class A Common Stock is entitled to one vote, in person or by proxy, with
respect to the election of directors and any
<PAGE>

other proposals properly brought before the Annual Meeting. Shares represented
by a properly signed, dated and returned proxy will be treated as present at
the meeting for purposes of determining a quorum, without regard to whether or
not the proxy is marked as casting a vote or abstaining. If a quorum is not
present or represented at the meeting, the stockholders entitled to vote,
present in person or represented by proxy, have the power to adjourn the
meeting, without notice other than announcement at the meeting, until a quorum
is present or represented. At any such adjourned meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the meeting as originally notified. The affirmative vote of a
plurality of the Class A Common Stock represented at the meeting in person or
by proxy is necessary to elect the nominees for election as directors. A
majority of the votes represented by the shareholders present at the Annual
Meeting, in person or by proxy, is necessary for approval of the Plan and for
any other matter that might come before the meeting. If a shareholder, present
in person or by proxy, abstains on any matter, the shareholders' Class A
Common Stock will not be voted on such matter. Thus, an abstention from voting
on any matter has the same legal effect as a vote "against" the matter.
Proxies relating to "street name" shares that are voted by brokers will be
counted as shares present for purposes of determining a quorum, but will not
be treated as shares having voted at the meeting as to any proposal as to
which the broker does not vote. No dissenters' or appraisal rights exist under
Texas law with regard to any matter described herein to be voted on at the
meeting.

The Company will bear the cost of preparing, assembling and mailing all
proxy materials which may be sent to the shareholders in connection with this
solicitation. In addition to the solicitation of proxies by use of the mails,
officers and regular employees of the Company may solicit proxies, for no
additional compensation, by telephone. The Company does not expect to pay any
compensation for the solicitation of proxies. The principal offices of the
Company are located at 8554 Katy Freeway, Suite 100, Houston, Texas 77024.

Votes at the Annual Meeting will be tabulated by an Inspector of Election
appointed by the Company.

PROXY INFORMATION

The enclosed form of proxy may be revoked at any time prior to its exercise
by executing a new proxy with a later date, by voting in person at the Annual
Meeting, or by giving written notice of revocation to Sue Camp, Secretary of
the Company, at any time before the proxy is voted at the Annual Meeting.
Please be sure that your shares are voted by signing, dating and returning the
enclosed form of proxy in the enclosed postage-paid envelope.

2
<PAGE>

PRINCIPAL SHAREHOLDERS

All 1,500,000 shares of Class B Common Stock were issued to and remain owned
of record by Names 'N Faces, Inc. The following table sets forth certain
information as of December 6, 1996, with respect to the beneficial ownership
of shares Class A Common Stock held by (i) each person known by the Company to
be the owner of more than 5% of the outstanding shares Class A Common Stock,
(ii) each director, (iii) each of the executive officers named under
"Executive Compensation", and (iv) all officers and directors as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
SHARES OWNED(2)
--------------------------
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2) OF CLASS
------------------------ --------------- ----------
<S> <C> <C>
The Estate of C. W. Moody, Jr.(3).................. 463,825 7.33%
P.O. Box 573117
Houston, TX 77257-3117
Petrus Fund, L.P.(4)............................... 470,000 7.03%
1700 Lakeside Square
12377 Merit Drive
Dallas, TX 75251
Royce Investment Group, Inc(5)..................... 1,204,994 16.25%
199 Crossways Park Drive
Woodbury, N.Y. 11797
J. T. Trotter(6)................................... 514,246 7.97%
1000 Louisiana, Suite 3600
Houston, TX 77002
John D. Higgins(7)................................. 200,000 3.15%
199 Crossways Park Drive
Woodbury, N.Y. 11797
Robert R. Salyard(8)............................... 90,000 1.43%
530 Mulberry Lane
Haverford, PA 19041
Robert A. Searles, Jr.(9).......................... 84,946 1.35%
8554 Katy Freeway, Suite 100
Houston, TX 77024
M. G. Morgan(10)................................... 73,920 1.17%
8554 Katy Freeway, Suite 100
Houston, TX 77024
Richard W. Fairchild, Jr.(11)...................... 75,000 1.18%
8554 Katy Freeway, Suite 100
Houston, TX 77024
Andrew J. Clark, III............................... 16,466 *
1000 Louisiana, Suite 3640
Houston, TX 77002
Sue Camp(12)....................................... 7,500 *
8554 Katy Freeway, Suite 100
Houston, TX 77024
All officers and directors as a group(13) (8
persons).......................................... 966,657 14.52%
</TABLE>
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* Less than 1%
(1) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all other
shares beneficially owned by them.

3
<PAGE>

(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this proxy
statement upon the exercise of warrants or options. Each beneficial
owner's percentage ownership is determined by assuming that options or
warrants that are held by such persons and which are exercisable within
60 days from the date of this proxy statement have been exercised. In the
case of shares underlying warrants, the number of shares reflected and
the exercise price have been adjusted to give effect to the antidilution
adjustment required resulting from the Company's issuance of 3,125,000
shares in November and December of 1996.
(3) Includes 165,809 shares owned of record by Lone Star Photo Video, Inc. a
company beneficially owned by the Estate of Mr. Moody, 62,016 shares
owned of record by the C. W. Moody Family Trust, of which Mr. Moody was
the beneficiary, 118,000 shares and 118,000 shares issuable upon
exercise, at $1.00 per share until November 1, 1998 and at $1.50 until
November 1, 1999, of common stock purchase warrants (the "Private
Placement Warrants") issued on November 15, 1996, together with the
118,000 shares, in exchange for the surrender of a note of the Company in
the amount of $59,000.00 and other warrants.
(4) Includes 470,000 shares issuable upon exercise at $6.63 per share of
Warrants granted under a Loan Agreement and Loan Commitment to Petrus
Fund, L.P. that are currently exercisable. Petrus Fund, L.P. was granted
an additional 40,000 warrants that are not currently exercisable.
(5) Includes 133,747 shares issuable under the unit purchase option granted
May 1994, exercisable at $5.96 per unit consisting of one share and one
common stock warrant and 133,747 shares issuable upon exercise of the
133,747 Warrants upon exercise at $5.75 per share. Also includes 468,750
shares issuable under the unit purchase option granted Royce Investment
Group, Inc. and Spencer Trask Securities, Inc. in December 1996,
exercisable at $.50 per unit consisting of one share and one Private
Placement Warrant and 468,750 shares issuable upon exercise of the
Private Placement Warrants.
(6) Includes 60,794 shares issuable upon the exercise of the Bridge Warrants
held by Mr. Trotter, 63,081 shares issuable under warrants granted in
March 1995 to Mr. Trotter in exchange for his guarantee of the $500,000
loan of the Company, 114,000 shares issuable upon exercise of Private
Placement Warrants issued to Mr. Trotter on November 15, 1996 in exchange
for surrender of other warrants and $57,000 in debt.
(7) Includes 100,000 shares issuable upon exercise of a Private Placement
Warrant. The Private Placement Warrant was acquired on November 1, 1996
along with 100,000 shares for an aggregate consideration of $50,000 as a
part of the Company's private placement.
(8) Includes 45,000 shares issuable upon exercise of a Private Placement
Warrant. The Private Placement Warrant and 45,000 shares were acquired on
November 15, 1996 upon conversion of $22,500.00 in debt of the Company to
Mr. Salyard for consulting services.
(9) Includes 33,750 shares issuable upon exercise of currently exercisable
options granted under the Company's 1996 Stock Option Plan.
(10) Includes 52,770 shares issuable at $5.00 per share upon exercise of
currently exercisable options granted in February 1994 under the
Company's 1993 Stock Option Plan and 21,150 shares that were exercisable
at $5.00 per share with respect to a grant on January 17, 1995 of options
to purchase 50,000 shares under the Company's 1993 Stock Option Plan.
(11) Represents shares issuable at $5.00 per share upon exercise of currently
exercisable options granted under the Company's 1993 Stock Option Plan.
(12) Includes 7,500 shares issuable upon exercise of stock options that are
immediately exercisable at $.50 per share granted under the Company's
1996 Stock Option Plan.
(13) Includes 327,190 shares issuable upon exercise of currently exercisable
stock options granted under the Company's 1993 and 1996 Stock Option
Plans.

4
<PAGE>

PROPOSAL I

ELECTION OF DIRECTORS

During the last year the Company lost two directors. Richard W. Fairchild,
Jr. resigned in June and Charles W. Moody, Jr., one of the founders of the
Company, died in July 1996. The vacancies created by these events were filled
in November 1996 and at the shareholders meeting five directors are to be
elected to hold office until the next annual meeting election and until their
successors have been duly elected and qualified. Unless otherwise instructed
or unless authority to vote is withheld, the enclosed proxy will be voted for
the election of the nominees listed herein. All of the nominees have indicated
a willingness to serve, but in case any nominee is not a candidate at the
annual meeting, it is the intention of the persons named in the enclosed proxy
to vote for the remainder of the designated nominees and to vote for a
substitute nominee in their discretion.

The following biographical information is furnished with respect to each
nominee for election at the annual meeting. The information includes age at
November 30, 1996, present position, if any, with the Company, period served
as a director and other business experience during the past five years. THE
BOARD OF DIRECTORS RECOMMEND THAT YOU VOTE FOR ELECTION OF EACH NOMINEE LISTED
BELOW. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY OTHERWISE.

Andrew J. Clark, III, 58, is an attorney and has been engaged in the full-
time practice of law since June 1, 1994. For more than five years prior to
becoming a sole practitioner, he was a partner in the law firm of Butler &
Binion, L.L.P., Houston, Texas. Mr. Clark was first elected a director at the
annual meeting of shareholders in September 1993.

John D. Higgins, 63, has been Senior Vice President--Director of Corporate
Finance of Royce Investment Group ("Royce") for more than the past five years
and serves on the Board of Directors as the designee of Royce. Mr. Higgins is
also a director of Iatros Health Network, Inc. Mr. Higgins was appointed to
fill the vacancy created by the resignation of Mr. Morgan as a director on
November 28, 1995 and was first elected at the annual meeting of shareholders
in January 1995.

Robert R. Salyard, 70, was appointed to the Board of Directors effective
November 3, 1996 to fill the vacancy created by the resignation of Richard W.
Fairchild, Jr. For more than the past five years Mr. Salyard has been a
private investor and engaged in the management consulting business. He serves
as a Director and Corporate Secretary of Spencer Trask Securities, Inc., a
member firm of the National Association of Securities Dealers and co-manager
of the September 6, 1996 private placement offering of the Company pursuant to
which the Company has issued 3,125,000 shares of Class A Common Stock.

Robert A. Searles, Jr., 40, assumed the responsibilities of Executive Vice-
President on November 3, 1996 and continues to serve on the Company's Board of
Directors. Mr. Searles first assumed the responsibilities of director,
President and Chief Executive Officer of the Company on June 23, 1992. From
1988 until joining the Company, Mr. Searles served as Vice President of Sales
and Marketing of Auto Photo Systems, Inc., the U. S. subsidiary of Photo-Me-
Int'l, the worldwide manufacturer and operator of approximately 20,000 wet
process photo booths.

Lance P. Wimmer, 52, was appointed to the Board of Directors effective
November 3, 1996 to fill the vacancy created by the death of C.W. Moody, Jr.
Additionally, he was elected Chairman of the Board, President and chief
executive officer of the Company effective as of November 3, 1996. Mr. Wimmer
had served as a consultant to the Company from April 1996 until his
appointment as an officer and director of the Company. Mr. Wimmer formed
Wimmer Associates, Inc., a professional consulting and management firm in 1992
and has been its Managing Director since its organization. Prior to
organization of Wimmer Associates, Inc., Mr. Wimmer managed the Southwest
region for Buccino & Associates, Inc., a leading operations restructuring
consulting firm.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES LISTED ABOVE.

5
<PAGE>

During the fiscal year ended June 30, 1996, the Board of Directors of the
Company held five meetings at which each of the directors was present in
person or by telephone. On three other occasions the Board took action by
written unanimous consent and on numerous occasions the Board had informal
discussions among all members regarding Company affairs. The Board intends to
have regular meetings at least quarterly. The Company currently has an Audit
Committee. The Audit Committee is authorized to review, with the Company's
independent accountants, the annual financial statements of the Company prior
to publication; to review the work of, and approve non-audit services
performed by such independent accountants; and to review the effectiveness of
the financial and accounting functions, organization, operations and
management of the Company. The Audit Committee consisted of Messrs. Clark and
Fairchild and met once during the year ended June 30, 1996.

OTHER KEY MANAGEMENT

The following persons are key employees of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John C. Stuecheli.......... 49 Vice-President--Finance and Chief Financial
Officer
Sue Camp................... 63 Corporate Secretary and Logistics Manager
Roger Osgood............... 42 Manufacturing and Engineering Technology Manager
Richard W. Bell............ 61 Sales and Marketing Manager
</TABLE>

JOHN C. STUECHELI was elected elected Vice President--Finance and chief
financial officer effective as of November 3, 1996. Mr. Stuecheli had served
as a consultant to the Company for Wimmer Associates, Inc. from April 1996
until his appointment as chief financial officer of the Company. From October
1993 until March of 1996, Mr. Stuecheli engaged in the practice of accounting.
Prior to October 1993, Mr. Stuecheli was in the employ of Buccino &
Associates, Inc., a leading operations restructuring consulting firm.

SUE CAMP joined the Company in September 1992 as Administrative Manager and
Corporate Secretary. Prior to joining the Company she worked with Century 21
Real Estate in a variety of Sales and Administrative capacities for more than
five years.

ROGER OSGOOD joined the Company in December, 1992. Prior to joining the
Company on a full time basis, Mr. Osgood served as technical consultant to the
Company from the Company's inception in April 1992. Previously, he was
employed as a technical engineer for Data East, Inc. in San Jose, California.

RICHARD W. BELL joined the Company in April 1994. Prior to joining the
Company, Mr. Bell spent more than the past five years as Marketing Manager-
South Central Region for Auto Photo Systems.

There is no family relationship between any present executive officers and
directors.

6
<PAGE>

EXECUTIVE COMPENSATION

The following table summarizes all cash compensation paid or accrued by the
Company to the Company's President and Chief Executive Officer, former
Chairman of the Board and former Vice-President, Chief Financial Officer for
services rendered in all capacities to the Company for the years ended June
30, 1994, 1995 and 1996.

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS SECURITIES
ANNUAL COMPENSATION UNDERLYING
--------------------- ----------------------------
NAME AND PRINCIPAL ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS/SARS(1) COMPENSATION
------------------ ---- -------- ------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Richard W. Fairchild,
Jr...................... 1996 $ 61,167 $ -0- -0- N/A
(Resigned June 1996) 1995 16,667 -0- 57,410 N/A
Chairman of the Board 1994 N/A N/A N/A N/A
Robert A. Searles, Jr.... 1996 $115,000 $ -0- -0- $12,502(3)
President and Chief 1995 120,000 -0- -0- 15,555(2)
Executive Officer 1994 120,000 37,500 52,770 15,555(2)
M. G. Morgan............. 1996 $ 76,250 $ -0- 50,000 $ 2,400(4)
(Resigned November 1995) 1995 120,000 -0- 52,770 7,200(4)
Vice President--Finance 1994 110,000 15,000 N/A -0-
and
Chief Financial Officer
</TABLE>
- --------
(1) Includes 52,770 options to Mr. Searles, 102,770 options to Mr. Morgan and
57,410 options to Mr. Fairchild, all exercisable at $5.00 per share.
(2) Represents employer contributions for insurance ($6,233) and a car
allowance ($7,198).
(3) Represents employer contributions for insurance ($8,355) and a car
allowance ($7,200).
(4) Represents employer contributions for a car allowance.

OPTIONS EXERCISED IN LAST FISCAL YEAR AND YEAR-END VALUE

The following table sets forth information with respect to the named
executive officers with respect to the exercise of stock options during the
year ended June 30, 1996 and unexercised stock options held as of June 30,
1996.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES VALUE UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON REALIZED OPTIONS HELD AT IN THE MONEY OPTIONS AT
EXERCISE (#) ($)(1) JUNE 30, 1996 JUNE 30, 1996(2)
------------ -------- ------------------------- -------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
<S> <C> <C> <C> <C>
Richard W. Fairchild,
Jr..................... -0- $N/A 75,000/-0- N/A/N/A
Robert A. Searles, Jr... -0- N/A 52,770/-0- N/A/N/A
M. G. Morgan............ -0- N/A 73,920/-0- N/A/N/A
</TABLE>
- --------
(1) Represents the difference between the market price of the underlying
shares of Class A Common Stock at exercise date and the exercise price.
(2) Based on the closing price on the NASDAQ National Market of the Company's
Class A Common Stock on that date.

EMPLOYMENT AGREEMENTS

The Company entered into an Employment Agreement on June 15, 1993 with Mr.
Searles providing for a base salary of $10,000 per month and a primary term of
three years. The Employment Agreement extended to Mr. Searles the opportunity
to subscribe for and purchase up to 51,196 shares of Class A Stock of the
Company at the purchase price of $7,500. Any such stock purchased by him was
subject to restrictions on transfer which would lapse with respect to 17,066
shares at the end of the first year of employment and with respect to an

7
<PAGE>

additional increment of 17,065 shares after each of the second and third years
of employment had been completed. On July 7, 1993 Mr. Searles borrowed $7,500
from the Company and exercised his right to purchase these shares. On
September 1, 1993, the employment agreement between the Company and Mr.
Searles was amended to extend the term until June 30, 1997, to terminate the
restrictions on transfer of the shares of capital stock purchased by Mr.
Searles, to restrict Mr. Searles from competing with the Company for a two-
year period upon termination of the employment relationship, to provide for a
$30,000 bonus to be paid to him on January 15, 1994 to assist him with federal
tax liability with respect to the exercise of the stock option and to obligate
the Company to forgive the $7,500 liability of Mr. Searles under the note
executed to borrow the $7,500 if Mr. Searles remains in the employ of the
Company on June 30, 1994. The $30,000 bonus was paid to Mr. Searles and the
$7,500 note was forgiven. Under the terms of the employment relationship with
Mr. Searles, he has been provided with a car allowance, medical insurance and
other customary employee benefits.

The Company entered into employment agreements with Messrs. Wimmer and
Stuecheli which became effective as of November 3, 1996. The agreement with
Mr. Wimmer has a term of twenty-four months and from month to month thereafter
and provides for a base salary of $135,000 per annum and the opportunity to
earn up to $40,000 in bonus compensation upon achieving goals established by
the Board of Directors in the Company's business plan. The agreement obligated
the Company to grant to Mr. Wimmer options to purchase an aggregate of 300,000
shares of Class A Common Stock of the Company at $.50 per share, to fund up to
$3,000 per month in commuting expenses between Dallas, Texas and the Company'
office and to provide minimum levels of officers and directors' liability
insurance. The agreement with Mr. Stuecheli is for a term of twelve months and
from month to month thereafter and provides for a base salary of $80,000 per
annum and the opportunity to earn up to $24,000 in bonus compensation upon
achieving goals established by the Board of Directors in the Company's
business plan. The agreement obligates the Company to grant to Mr. Stuecheli
options to purchase an aggregate of 60,000 shares of Class A Common Stock of
the Company at $.50 per share, to fund up to $2,000 per month in commuting
expenses between Dallas, Texas and the Company' office and to provide minimum
levels of officers and directors' liability insurance.

The Company entered into a consulting agreement with Robert R. Salyard which
became effective on November 3, 1996. The agreement with Mr. Salyard has a
term of twenty-four months and provides for a consulting compensation of
$1,500 per month. The agreement obligated the Company to grant to Mr. Salyard
options to purchase an aggregate of 125,000 shares of Class A Common Stock of
the Company at $.50 per share, and to provide minimum levels of officers and
directors' liability insurance.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Clark has acted as counsel to the Company since its inception. During
the fiscal year ended June 30, 1996, he was paid an aggregate of $23,497.50 in
fees and expenses, all of which was for work performed prior to the beginning
of the fiscal year. During the year ended June 30, 1996, Mr. Clark billed the
Company an additional $55,585.52 in fees and expenses, none of which were
paid. Mr. Clark, along with twelve other trade creditors of the Company who
held in the aggregate $734,309.84 in debt of the Company, entered into a
Settlement Agreement pursuant to which on November 1, 1996 his claim for
$55,585.50 was settled in exchange for a cash payment of $8,337.83, an
aggregate of 16,466 shares of Class A Common Stock of the Company and the
agreement to pay $680.00 a month for fifteen months.

Mr. Salyard has served as a consultant to the Company. In November 1996, he
exchanged $22,500 in unpaid consulting fees for an aggregate of 45,000 shares
of Class A Common Stock of the Company and warrants to purchase 45,000 shares
of Class A Common Stock at $1.00 per share until November, 1998 and thereafter
at $1.50 per share until expiration on November, 1999.

In December 1995, the Company made an interim loan of $160,000 from C.W.
Moody, Jr. ($59,000), J.T. Trotter ($57,000) and George V. Kane ($44,000) at
prime plus 1% with maturity in June of 1996. These lenders were granted
warrants to purchase 16,000 shares of Class A Common Stock at $4.00 per share.
On November 15, 1996 these notes and warrants were exchanged by the Moody
Estate for 118,000 shares of

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<PAGE>

Class A Common Stock and warrants to purchase 118,000 shares of Class A Common
Stock, by J. T. Trotter for 114,000 shares and 114,000 warrants and by George
V. Kane for 88,000 shares and 88,000 warrants. The warrants are exercisable at
$1.00 per share until November 1, 1998 and at $1.50 thereafter until
expiration on November 1, 1999.

PROPOSAL II

APPROVAL OF ADOPTION OF THE 1996 STOCK OPTION
AND RESTRICTED STOCK PLAN

INTRODUCTION

By a written consent effective December 6, 1996, the Board of Directors
adopted the Irata, Inc. 1996 Stock Option and Restricted Stock Plan ("1996
Plan"), subject to stockholder approval. A copy of the 1996 Plan is attached
as Exhibit A. The following general description of certain features of the
1996 Plan is qualified in its entirety by reference to Exhibit A.

GENERAL PLAN INFORMATION

The 1996 Plan was adopted for the benefit of the executive officers,
directors and other key employees and consultants of the Company and its
subsidiaries and affiliates and authorizes for issuance upon the exercise of
stock options or grants of performance shares an aggregate of 950,000 shares
of Class A Common Stock.

The purpose of the 1996 Plan is to promote the interests of the Company by
providing incentives to the directors, officers and other key employees and
consultants of the Company to use their best efforts on the Company's behalf
and to aid the Company in attracting, maintaining and developing capable
management personnel by offering such persons competitive compensation levels
and an opportunity to become stockholders of the Company, thereby rewarding
outstanding quality and encouraging continued employment.

ADMINISTRATION

The 1996 Plan may be administered by (i) the Board of Directors of the
Company, (ii) any duly constituted committee of the Board of Directors
consisting of at least two members of the Board of Directors, all of whom
shall be Non-Employee Directors, or (iii) any other duly constituted committee
of the Board of Directors. The administering party is referred to herein as
the "Plan Administrator." At the current time, the Compensation Committee of
the Board of Directors is serving as the Plan Administrator. A Non-Employee
Director is defined as any director who: (i) is not an officer of the Company
or a parent or subsidiary of the Company, or otherwise employed by the Company
or parent or subsidiary of the Company; (ii) does not receive compensation,
either directly or indirectly, from the Company or a parent or subsidiary of
the Company, for services rendered as a consultant or any capacity other than
as a director, except for an amount not exceeding $60,000; (iii) does not
possess an interest in any transaction for which disclosure would be required
under Item 404(a) of Regulation S-K of the Securities Act of 1933, as amended
("Securities Act"); or (iv) is not engaged in a business relationship for
which disclosure would be required pursuant to Item 404(b) of Regulation S-K
under the Securities Act. The Plan Administrator selects the participants to
whom options are to be granted and, with respect to each option, determines
the number of shares covered thereby, the price payable on its exercise, and
the period during which it may be exercised, all in a manner not inconsistent
with the 1996 Plan. The Plan Administrator also resolves all questions of
application or interpretation of the 1996 Plan.

The names and address of the current members of the Compensation Committee
are: Andrew J. Clark, III, 1000 Louisiana, Suite 3640, Houston, Texas 77002
and Robert R. Salyard, 530 Mulberry Lane, Haverford, Pennsylvania 19041. The
service of these individuals on the Compensation Committee does not create any
corporate interlocks or insider participation between the Company's
Compensation Committee and another entity.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

The Company has authorized capital consisting of 20,000,000 shares of Class
A Common Stock, of which 6,256,982 were outstanding as of December 6, 1996,
1,500,000 shares of Class B Common Stock, all of which are outstanding and
100,000 shares of Preferred Stock, none of which have been issued. The 1996
Plan currently authorizes the issuance, upon the exercise of stock options by
eligible participants, of an aggregate of 950,000 shares of the Company's
Class A Common Stock.

The holders of shares of Class B Common Stock shall not be entitled to
receive and the Company shall not pay any dividends to the holders of shares
of Class B Common Stock until such time as the Company has accumulated earned
surplus equal to at least $1,000,000. After the Company has accumulated earned
surplus equal to at least $1,000,000, the holders of shares of Class B Common
Stock shall be entitled to receive the same dividends as are declared and paid
on each share of Class A Common Stock; provided, however, that the total
amount of dividends paid to the holders of Class B Common Stock shall not
exceed the "distribution amount" (as defined herein), and all dividends to
holders of shares of Class A Common Stock and shares of Class B Common Stock
are subject to the prior and superior rights in any resolution or resolutions
providing for the issue of a series of Preferred Stock. In the event of any
liquidation, dissolution or winding up of the affairs of the Company, after
payment to the holders of Preferred Stock of the amounts to which they are
entitled pursuant to the resolution or resolutions of the Board of Directors
providing for the issue of a series of Preferred Stock, the holders of Class A
Common Stock and Class B Common Stock shall be entitled to share ratably in
all assets then remaining subject to the condition that holders of shares of
Class B Common Stock shall not be entitled to share ratably in assets of the
Company until the holders of Class A Common Stock have received, as a group,
in distributions in liquidation or in dividends prior to dissolution, or in
both, an amount equal to $1,000,000 and the total amount of distributions in
liquidation plus all prior dividends paid to the holders of shares of Class B
Common Stock as a group shall not exceed the distribution amount. The
distribution amount shall equal the lesser of $1,000,000 or the aggregate of
$750,000 plus interest at the rate of 3% per annum compounded yearly, computed
on the amount by which $750,000 plus any accrued interest hereunder exceeds
the amount of distributions as are made to the holders of Class B Common
Stock. Once holders of Class B Common Stock have received the distribution
amount, they shall be entitled to no further payments or distributions from
the Company and the shares of Class B Common Stock outstanding shall then be
returned and cancelled.

The Company has not paid any dividends on its Class A Common Stock since its
formation. Although the Company intends to invest any future earnings in its
business, it may determine at some future date that the payment of cash
dividends would be desirable. The payment of any such dividends would depend,
among other things, upon the earnings and financial condition of the Company.

ELIGIBILITY

Participants in the 1996 Plan are selected by the Plan Administrator from
the directors, executive officers and other key employees and consultants of
the Company who occupy responsible managerial or professional positions and
who have the capability of making a substantial contribution to the success of
the Company. In making this selection and in determining the form and amount
of awards, the Plan Administrator may consider any factors deemed relevant,
including the individual's functions, responsibilities, value of services to
the Company and past and potential contributions to the Company's
profitability and growth.

TYPES OF AWARDS

Awards under the 1996 Plan may be in the form of any one or more of the
following: stock options, incentive stock options, and performance shares as
described below. The 1996 Plan permits the granting of both incentive stock
options ("ISOs"), intended to qualify as such under the provisions of Section
422 of the Internal Revenue Code of 1986 (the "Code"), and non-qualified
options. To qualify as ISOs, options must meet additional federal income tax
requirements. These requirements include a limitation that the aggregate fair
market

10
<PAGE>

value of ISOs that first become exercisable during any calendar year may not
exceed $100,000. The term of each option will be fixed by the Plan
Administrator but, for incentive stock options, may not exceed ten years from
date of grant. The Plan Administrator will determine at which time or times
each option may be exercised. Awards are evidenced by award agreements, the
terms and provisions of which may differ, in form and substance satisfactory
to the Plan Administrator and not inconsistent with the 1996 Plan.

EXERCISE PRICE

A stock option entitles the grantee to purchase a set number of shares of
Class A Common Stock at a set price ("Exercise Price"). The Exercise Price for
each share covered by an option will be an amount selected by the Plan
Administrator and will be 100% or more of the fair market value of a share of
Class A Common Stock on the date the option is granted. The Exercise Price
must be paid in full with cash or by delivery of previously owned Class A
Common Stock valued at its fair market value on the exercise date.

RESTRICTIONS

As soon as practicable after receipt of payment of the Exercise Price, the
Company will deliver to the optionee a certificate or certificates for such
shares of Class A Common Stock represented by the option exercised. The
optionee will become a stockholder of the Company with respect to Class A
Common Stock represented by the share certificates issued and as such will be
fully entitled to receive dividends, to vote and to exercise all other rights
of a stockholder, including the right to dispose of such shares. Prior to the
receipt of certificates for shares of Class A Common Stock, an optionee will
have no rights of a stockholder.

PERFORMANCE SHARES

The Plan Administrator is also authorized to award shares of Class A Common
Stock ("Performance Shares") that are subject to certain conditions set forth
in the 1996 Plan and subject to such other conditions and restrictions as the
Plan Administrator may determine, but without the payment of any
consideration. Performance Shares may, in the Plan Administrator's discretion,
be subject to forfeiture, in whole or in part, in the event that performance
targets established by the Plan Administrator are not met.

TAX INFORMATION

The following is a brief summary of the general rules relating to the tax
consequences under present federal income tax laws with respect to grants
under the 1996 Plan:

Taxation of ISOs. No taxable income will be realized by an optionee upon the
grant or exercise of an ISO. If shares of Class A Common Stock are issued to
an optionee pursuant to the exercise of an ISO and if no disposition of such
shares is made within two years after the date of grant or within one year
after the transfer of such shares to such optionee, then, upon the sale of
such shares, any amount realized in excess of the exercise price will be taxed
to such optionee as a long-term capital gain and any loss sustained will be a
long-term capital loss and no deduction will be allowed to the optionee's
employer for federal income tax purposes. If no disqualifying disposition is
made, the exercise of an ISO will give rise to an adjustment in computing
alternative minimum taxable income that may result in alternative minimum tax
liability for the optionee.

If shares of Class A Common Stock acquired upon the exercise of an ISO are
disposed of prior to the expiration of either holding period described above,
the optionee in most instances will realize ordinary income in the year of
such disqualifying disposition in an amount equal to the excess (if any) of
the fair market value of the shares at exercise (or, if less, the amount
realized on the disposition of the shares) over the exercise price thereof and
the optionee's employer will be entitled to deduce such amount. Any additional
gain realized by the participant will be taxed as short-term or long-term
capital gain, depending on how long the shares have been held, and will not
result in any deduction by the employer. The holding period for long-term
capital gain treatment is more than one year.

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<PAGE>

If an ISO is exercised at a time when it no longer qualifies as ISO, the
option will be treated as a non-qualified option. Subject to certain
exceptions for disability or death, an ISO generally will not be eligible for
the tax treatment described above if it is exercised more than three months
following the termination of employment.

Taxation of Non-Qualified Options. No income will be realized by an optionee
at the time a non-qualified option is granted. In most instances, ordinary
income will be realized by the optionee upon exercise in an amount equal to
the difference between the fair market value of the shares on the date of
exercise and the exercise price (the amount paid for the shares) and the
optionee's employer will be entitled to a tax deduction in the same amount. At
disposition appreciation (or depreciation) after the date of exercise will be
treated as either short-term or long-term capital gain (or loss) depending on
how long the shares have been held.

Taxation of Class A Common Stock used to Exercise Options. Shares of Class A
Common Stock delivered to pay for shares of Class A Common Stock purchased on
the exercise of an ISO or a non-qualified stock option will be valued at the
fair market value at the date of exercise. Unless the delivery of shares
constitutes a disqualifying disposition of shares acquired upon exercise of an
ISO, no taxable gain or loss on the surrendered shares will be realized at the
time of delivery. For federal income tax purposes, the optionee receives the
same tax basis and holding period in a number of the new shares equal to the
number of old shares exchanged. The optionee will also receive a tax basis in
the additional shares equal to zero in the case of an ISO or equal to their
fair market value at the date of exercise in the case of a non-qualified stock
option and a new holding period in either case.

Performance Shares. A grantee normally will not realize taxable income and
the Company will not be entitled to a deduction upon the grant of Performance
Shares assuming the shares granted are subject to restrictions resulting in a
"substantial risk of forfeiture." When the shares are no longer subject to a
substantial risk of forfeiture or if there are no restrictions at the time of
grant, the grantee will realize taxable ordinary income in an amount equal to
the fair market value of the stock at that time and the Company will be
entitled to a deduction in the same amount. A grantee, however, may elect to
realize taxable ordinary income in the year the restricted stock is granted in
an amount equal to their fair market value at the time of grant, determined
without regard to the restrictions. In that event, the Company will be
entitled to a deduction in such year in the same amount, and any gain or loss
realized by the grantee upon the subsequent disposition of the shares will be
taxable at short- or long-term capital gain rates but will not result in any
further deduction to the Company.

Withholding. The Company has the right to require an optionee or grantee to
remit an amount necessary to satisfy any federal, state or local tax
withholding requirements prior to the delivery of certificates for such
shares. An optionee or grantee may be required to deposit cash with the
Company in an amount necessary to satisfy the applicable federal and state law
requirements with respect to withholding of taxes on wages. Alternatively, the
Company may issue such shares, net of the number of shares sufficient to
satisfy the withholding requirements. For withholding purposes, Class A Common
Stock will be valued on the date the withholding obligation is incurred.

Other Tax Information. The foregoing does not constitute a definitive
statement on the tax effects of awards under the 1996 Plan and is based on the
laws and regulations presently in effect. There can be no assurance that the
tax consequences as discussed above will continue or that other tax laws will
not be applicable. Accordingly, it is suggested that prior to exercising an
award granted under the 1996 Plan and prior to disposing of shares acquired
pursuant to an exercise thereof, a grantee should consult his tax advisor.

The 1996 Plan is not qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended.

ASSIGNMENT OF INTEREST

No option granted under the 1996 Plan is assignable or transferable other
than by will or by the laws of the descent and distribution. During the
lifetime of the optionee, the award may be exercisable only by the optionee.

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<PAGE>

TERMINATION OF EMPLOYMENT

Upon the termination of an optionee's employment, unless termination results
from death or permanent disability the option shall expire on the earlier of
the date the option otherwise would have expired or, in the case of an ISO, 90
days after such termination, and in the case of other options, six months
after termination unless the Plan Administrator extends the period in its sole
discretion. If termination results from death or permanent disability, the
Optionee, or his estate in the case of death, may exercise the option until
the earlier of the date the option would have expired by its terms or twelve
months after termination. If an employee is terminated for cause, his ISOs
will be immediately cancelled. If an employee is terminated for any reason,
his unvested Performance Shares will be immediately forfeited.

AMENDMENT AND TERMINATION

The Plan Administrator is permitted to amend the 1996 Plan without further
approval by the stockholders except as to any change in the participants
eligible to be granted Plan Awards or any change in the number of shares that
may be issued except pursuant to the antidilution adjustment provisions. No
amendment may adversely affect any outstanding grants without the holder's
consent.

CHANGES IN CAPITAL STRUCTURE

The 1996 Plan provides for proportionate adjustments upwards or downwards
upon an increase or decrease, respectively, in the number of shares of Class A
Common Stock outstanding resulting from any stock split, reverse split, stock
dividend, combination or other subdivision or consolidation of shares without
the receipt of consideration by the Company. In the event of liquidation, sale
of assets or merger, the Plan Administrator may, in the exercise of its sole
discretion declare that options outstanding under the Plan shall terminate as
of a date fixed by the Plan Administrator and give each Optionee the right to
exercise the Optionee's Option as to all or any part of the Shares covered by
such Option, including Shares as to which the Option would not otherwise be
exerciseable.

OTHER INFORMATION

The fair market value of the Class A Common Stock shall be determined by the
Plan Administrator and, generally, shall be the average of the high and low
sales prices of the Class A Common Stock as reported on the consolidated
trading tables of The Wall Street Journal on the date the option is granted.
If at any time the Class A Common Stock shall not have been traded on National
Association of Securities Dealers, Inc. Automatic Quotation System/National
Market or other public securities market for more than ten days immediately
preceding such date, the Plan Administrator may provide other appropriate
means of determining fair market value.

Optionees will not be given periodic reports on the status of their options;
however, grantees may obtain information as to the amount and status of their
options at any time upon written request to the Company. The Plan
Administrator may permit the Company to withhold Class A Common Stock to
satisfy all or part of the optionee's withholding tax. The Class A Common
Stock will be valued at its fair market value. The payment of withholding
taxes by surrendering Class A Common Stock is subject to any restrictions the
Plan Administrator may impose.

Neither the adoption of the 1996 Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall
be construed as creating any limitations of the power of the Board of
Directors to adopt such other incentive arrangements as it may deem desirable
including without limitation, the granting of stock options otherwise than
under the 1996 Plan, and such arrangements may be either generally applicable
or applicable only in specific cases.

The 1996 Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974.

13
<PAGE>

GRANTS OF OPTIONS UNDER THE 1996 PLAN

Effective December 6, 1996, the Plan Administrator granted, subject to
stockholder approval of the 1996 Plan, options to purchase the following
number of shares of Class A Common Stock under the 1996 Plan: (i) to Robert R.
Salyard, a Director of and Consultant to the Company, a Non-Statutory Option
to purchase an aggregate of 125,000 Shares, (ii) to Andrew J. Clark, III, a
Director of the Company a Non-Statutory Option to purchase an aggregate of
50,000 Shares, (iii) to John D. Higgins, a Director of the Company a Non-
Statutory Option to purchase an aggregate of 25,000 Shares, (iv) to Lance P.
Wimmer, Chairman of the Board of Directors, President and chief executive
officer of the Company, an ISO Option to purchase an aggregate of 300,000
Shares, (v) to Robert A. Searles, a Director and Executive Vice President of
the Company, an ISO Option to purchase an aggregate of 67,500 Shares, (vi) to
John Stuecheli, the Vice President--Finance and chief financial officer of the
Company, an ISO Option to purchase an aggregate of 60,000 Shares, (vii) to Sue
Camp, the Secretary of the Company, an ISO Option to purchase an aggregate of
15,000 Shares, (viii) to Roger Osgood, the Director of Manufacturing and
Technical Support for the Company, an ISO Option to purchase an aggregate of
18,750 Shares, and (ix) to Richard Bell, the Director of Marketing of the
Company, an ISO Option to purchase an aggregate of 15,000 Shares. The Board of
Directors, as the Plan Administrator, fixed the exercise price of these
options at $.50 per share. This determination was based upon the
contemporaneous closing of a private placement in which an aggregare 3,125,000
shares of Class A Common Stock and warrants to purchase an additional
3,125,000 shares of Class A Common Stock were sold for aggregate consideration
of $1,562,500, a price of $.50 for the equivalent of a a unit consisting of
one share of Class A Common Stock and one warrant. However, on December 6,
1996, the effective date of the grant, the average of the high and low sale
price of the shares on the Small Cap System of the National Association of
Securities Dealers was $.875.

APPROVAL OF ADOPTION OF 1996 PLAN

There are currently available for grant under the 1993 Plan 78,310 shares of
Class A Common Stock. Management and the Board of Directors believe it is in
the best interest of the Company to adopt the 1996 Plan to increase the
Company's ability to attract and retain the valuable services of individuals
of outstanding quality and ability to serve in the offices and directorships
of the Company.

Approval of the adoption of the 1996 Plan requires the affirmative vote of a
majority of the outstanding shares of Class A Common Stock present and voting
at the Annual Meeting in person or by proxy.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE IRATA, INC.
1996 STOCK OPTION AND RESTRICTED STOCK PLAN, AS IDENTIFIED IN THE ENCLOSED
PROXY CARD. PROXIES RECEIVED BY THE COMPANY WILL BE SO VOTED UNLESS A CONTRARY
VOTE IS SPECIFIED.

CHANGE IN ACCOUNTANTS

The Company's financial statements were previously audited by Ernst & Young
L.L.P., whose resignation, effective June 11, 1996, was accepted by the Board
of Directors. The Company subsequently engaged Lane Gorman Trubitt, L.L.P. to
perform audit services for the year ended June 30, 1996. Ernst & Young's
report on the Company's financial statements for the two years ended June 30,
1995 contained an unqualified opinion. However, the audit report included an
explanatory paragraph that raised substantial doubt about the Company's
ability to continue as a going concern existed. At no time was there any
disagreement between the Company and Ernst & Young LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.

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<PAGE>

SECTION 16 FILINGS DISCLOSURE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Commission, the Boston Stock Exchange and NASDAQ initial reports of ownership
and reports of changes in ownership of Class A Common Stock of the Company.
Officers, directors and greater than ten-percent shareholders are required by
Commission regulations to furnish the Company with copies of all Section 16(a)
forms they file.

To the Company's knowledge, based solely on review of the Company's copies
of such reports furnished to the Company and written representations that no
other reports were required, during the fiscal year ended June 30, 1994 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were compiled with.

SHAREHOLDER PROPOSALS

Any shareholder that meets the requirements of the proxy rules under the
Securities Exchange Act of 1934 may submit to the Board of Directors proposals
to be considered for submission to the shareholders at the 1996 Annual
Meeting. Shareholder proposals to be presented at the next Annual Meeting of
Shareholders must be in writing and received at the Company's principal
executive offices by the Secretary no later than July 6, 1996 in order to be
included in the next years proxy statement. Any such notice shall set forth:
(a) the name and address of the shareholder and the text of the proposal to be
introduced; (b) the number of shares of stock held of record, owned
beneficially and represented by proxy by such shareholder as of the date of
such notice; (c) a representation that the shareholder intends to appear in
person or by proxy at the meeting to introduce the proposal specified in the
notice.

GENERAL

Lane Gorman Trubitt, L.L.P. served as the Company's independent auditors for
the fiscal year ended June 30, 1996. A representative of Lane Gorman Trubitt,
L.L.P. will be present at the Annual Meeting with the opportunity to make a
statement, if he desires to do so, and will be available to respond to
appropriate questions. The Board of Directors of the Company has designated
Lane Gorman Trubitt, L.L.P. as independent auditors for the current fiscal
year.

The management of the Company does not know of any matters other than those
stated in this Proxy Statement which are to be presented for action at the
meeting. If any other matters should properly come before the meeting, proxies
will be voted on these other matters in accordance with the best judgement of
the persons appointed to vote the proxies.

The Annual Report of the Company for the fiscal year ended June 30, 1996 is
being mailed with this proxy statement to shareholders entitled to vote at the
meeting. A copy of the Company's Annual Report on Form 10-KSB for its fiscal
year ended June 30, 1996, as filed with the Securities and Exchange
Commission, will be furnished without charge to any shareholder upon written
request to Irata, Inc., 8554 Katy Freeway, Suite 100, Houston, Texas 77024,
Attn: Investor Relations.

15
<PAGE>

MISCELLANEOUS

All share information in this Proxy Statement has been adjusted to give
effect to the reverse stock splits that became effective in September and
December of 1993 and the application of antidilution adjustments with respect
to warrants and options resulting from the private placement completed in
November and December 1996. All information contained in the Proxy Statement
relating to the occupations, affiliations and securities holdings of directors
and officers of the Company and their relationship and transactions with the
Company is based upon information received from directors and officers. All
information relating to any beneficial owners of more than 5% of the Company's
Common Stock is based upon information contained in reports filed by such
owner with the Commission.

By Order of the Board of Directors

Lance P. Wimmer
Chairman of the Board and President

December 19, 1996
Houston, Texas

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<PAGE>

EXHIBIT A

IRATA, INC.

1996 STOCK OPTION AND RESTRICTED STOCK PLAN

SECTION 1
ESTABLISHMENT AND PURPOSE

This Plan is established (i) to offer selected Employees, Directors and
Consultants of the Company or its Subsidiaries an equity ownership interest in
the financial success of the Company, (ii) to provide the Company an
opportunity to attract and retain the best available personnel for positions
of substantial responsibility, and (iii) to encourage equity participation in
the Company by eligible Participants. This Plan provides for the grant by the
Company of (i) Options to purchase Shares, and (ii) shares of Restricted
Stock. Options granted under this Plan may include nonstatutory options as
well as incentive stock options intended to qualify under Section 422 of the
Code.

SECTION 2
DEFINITIONS

"Board of Directors" shall mean the board of directors of the Company, as
duly elected from time to time.

"Code" shall mean the Internal Revenue Code of 1986, as amended, and as
interpreted by the regulations thereunder.

"Committee" shall mean the Compensation Committee of the Company, or such
other Committee as may be appointed by the Board of Directors from time to
time.

"Company" shall mean Irata, Inc., a Texas corporation.

"Consultant" shall mean any individual that is expressly designated as a
consultant of the Company or its Subsidiaries by the Committee or the Board of
Directors of the Company as a whole, in each case in its sole discretion.

"Date of Grant" shall mean the date on which the Committee or the Board of
Directors resolves to grant an Option to an Optionee or grant Restricted Stock
to a participant, as the case may be.

"Employees" shall include every individual performing Services to the
Company or its Subsidiaries if the relationship between such individual and
the Company or its Subsidiaries is the legal relationship of employer and
employee. This definition of "Employee" is qualified in its entirety and is
subject to the definition set forth in Section 3401(c) of the Code and the
regulations thereunder.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and as interpreted by the rules and regulations promulgated thereunder.

"Exercise Price" shall mean the amount for which one Share may be purchased
upon exercise of an Option, as specified by the Committee (or Board of
Directors as a whole if the option is granted by the Board) in the applicable
Stock Option Agreement, but in no event less than the par value per Share.

"Fair Market Value" shall mean such amount as the Committee or Board of
Directors, if an option is granted by the Board of Directors as a whole, in
each case in its sole discretion, shall determine, giving consideration to (i)
if there is a public market for the securities, the mean of the bid and asked
prices of the securities per share or unit, as the case may be, as reported in
the Wall Street Journal (or, if not so reported, as
<PAGE>

otherwise reported by the National Association of Securities Dealers Automated
Quotation System) as of the date in question or, (ii) in the event the
securities are listed on a stock exchange, the closing sales price of the
securities per share or unit, as the case may be, on such exchange, as
reported in the Wall Street Journal, as of the date in question, and (iii) in
the event of a contemporaneous sale of Stock by the Company, the sales price
to the Company before commissions and underwriting discounts for such sale.

"ISO" shall mean a stock option which is granted to an individual and which
meets the requirements of Section 422(b) of the Code, pursuant to which the
Optionee has no tax consequences resulting from the grant or, subject to
certain holding period requirements, exercise of the option and the employer
is not entitled to a business expense deduction with respect thereto.

"Non-Employee Director" shall mean a director who (i) is not an officer of
the Company or a parent or subsidiary of the Company, or otherwise employed by
the Company or parent or subsidiary of the Company; (ii) does not receive
compensation, either directly or indirectly, from the Company or a parent or
subsidiary of the Company, for services rendered as a consultant or in any
capacity other than as a director, except for an amount not exceeding $60,000;
(iii) does not possess an interest in any transaction for which disclosure
would be required under item 404(a) of Regulation S-K of the Securities Act of
1933, as amended ("Securities Act"); or (iv) is not engaged in a business
relationship for which disclosure would be required pursuant to Item 404(b) of
Regulation S-K of the Securities Act.

"Nonstatutory Option" shall mean any Option granted by the Committee or the
Board of Directors that does not meet the requirements of Sections 421 through
424 of the Code, as amended.

"Option" shall mean either an ISO or Nonstatutory Option, as the context
requires.

"Optionee" shall mean a Participant who holds an Option.

"Participants" shall mean those individuals described in Section 1 of this
Plan selected by the Committee or the Board of Directors who are eligible
under Section 4 of this Plan for grants of either Options or Restricted Stock
under this Plan.

"Permanent and Total Disability" shall mean that an individual is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period
of not less than twelve (12) months. An individual shall not be considered to
suffer from Permanent and Total Disability unless such individual furnishes
proof of the existence thereof in such form and manner, and at such times, as
the Committee may reasonably require. The scope of this definition shall
automatically be reduced or expanded to the extent that Section 22(e)(3) of
the Code is amended to reduce or expand the scope of the definition of
Permanent and Total Disability thereunder.

"Plan" shall mean this Irata, Inc. 1996 Stock Option and Restricted Stock
Plan, as amended from time to time.

"Plan Award" shall mean the grant of either an Option or Restricted Stock,
as the context requires.

"Plan Administrator" shall mean the Board of Directors of the Company or if
created by the Board of Directors, the Committee.

"Restricted Stock" shall have that meaning set forth in Section 7(a) of this
Plan.

"Restricted Stock Account" shall have that meaning set forth in Section
7(a)(ii) of this Plan.

"Restricted Stock Criteria" shall have that meaning set forth in Section
7(a)(iv) of this Plan.

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"Restriction Period" shall have that meaning set forth in Section 7(a)(iii)
of this Plan.

"Services" shall mean services rendered to the Company or any of its
Subsidiaries as an Employee, Director or Consultant, as the context requires.

"Share" shall mean one share of Stock, as adjusted in accordance with
Section 9 of this Plan (if applicable).

"Stock" shall mean the Class A Common Stock of the Company, par value $.10
per share.

"Stock Option Agreement" shall mean the agreement executed between the
Company and an Optionee that contains the terms, conditions and restrictions
pertaining to the granting of an Option.

"Subsidiary" shall mean any corporation as to which more than fifty percent
(50%) of the outstanding voting stock or shares shall now or hereafter be
owned or controlled, directly by a person, any Subsidiary of such person, or
any Subsidiary of such Subsidiary.

"Ten-Percent Stockholder" shall mean a person that owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company or any Subsidiary, taking into account the attribution
rules set forth in Section 424 of the Code, as amended. For purposes of this
definition of "Ten-Percent Stockholder," the term "outstanding stock" shall
include all stock actually issued and outstanding immediately after the grant
of an Option to an Optionee. "Outstanding stock" shall not include reacquired
shares or shares authorized for issuance under outstanding Options held by the
Optionee or by any other person.

"Vest Date" shall have the meaning set forth in Section 7(a)(v) of this
Plan.

SECTION 3
ADMINISTRATION

(a) General Administration. This Plan shall be administered by the Plan
Administrator which shall be the Board of Directors as a whole, or if
appointed the Committee, which shall consist of at least two persons, each of
whom shall be Non-Employee Directors. The members of the Committee shall be
appointed by the Board of Directors for such terms as the Board of Directors
may determine. The Board of Directors may from time to time remove members
from, or add members to, the Committee. Vacancies on the Committee, however
caused, may be filled by the Board of Directors.

(b) Committee Procedures. The Board of Directors shall designate one of the
members of the Committee as chairman. The Committee may hold meetings at such
times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts
reduced to or approved in writing by a majority of all Committee members,
shall be valid acts of the Committee. A majority of the Committee shall
constitute a quorum.

(c) Authority of Plan Administrator. This Plan shall be administered by, or
under the direction of, either the Board of Directors or if appointed by the
Board of Directors, the Committee constituted in such a manner as to comply at
all times with Rule 16b-3 (or any successor rule) under the Exchange Act. The
Plan Administrator shall administer this Plan so as to comply at all times
with the Exchange Act and, subject to the Code, shall otherwise have absolute
and final authority to interpret this Plan and to make all determinations
specified in or permitted by this Plan or deemed necessary or desirable for
its administration or for the conduct of the Plan Administrator's business
including, without limitation, the authority to take the following actions:

(i) To interpret this Plan and to apply its provisions;

(ii) To adopt, amend or rescind rules, procedures and forms relating to
this Plan;

(iii) To authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of this Plan;

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<PAGE>

(iv) To determine when Plan Awards are to be granted under this Plan;

(v) To select the Optionees and Participants;

(vi) To determine the number of Shares to be made subject to each Plan
Award;

(vii) To prescribe the terms, conditions and restrictions of each Plan
Award, including, without limitation, the Exercise Price and the
determination whether an Option is to be classified as an ISO or a
Nonstatutory Option;

(viii) To amend any outstanding Stock Option Agreement or the terms,
conditions and restrictions of a grant of Restricted Stock, subject to
applicable legal restrictions and the consent of the Optionee or
Participant, as the case may be, who entered into such agreement;

(ix) To establish procedures so that an Optionee may obtain a loan
through a registered broker-dealer under the rules and regulations of the
Federal Reserve Board, for the purpose of exercising an Option;

(x) To establish procedures for an Optionee (1) to have withheld from the
total number of Shares to be acquired upon the exercise of an Option that
number of Shares having a Fair Market Value which, together with such cash
as shall be paid in respect of fractional shares, shall equal the Exercise
Price, and (2) to exercise a portion of an Option by delivering that number
of Shares already owned by an Optionee having a Fair Market Value which
shall equal the partial Exercise Price and to deliver the Shares thus
acquired by such Optionee in payment of Shares to be received pursuant to
the exercise of additional portions of the Option, the effect of which
shall be that an Optionee can in sequence utilize such newly-acquired
shares in payment of the Exercise Price of the entire Option, together with
such cash as shall be paid in respect of fractional shares;

(xi) To establish procedures whereby a number of Shares may be withheld
from the total number of Shares to be issued upon exercise of an Option, to
meet the obligation of withholding for federal and state income and other
taxes, if any, incurred by the Optionee upon such exercise; and

(xii) To take any other actions deemed necessary or advisable for the
administration of this Plan.

All interpretations and determinations of the Plan Administrator made with
respect to the granting of Plan Awards shall be final, conclusive, and binding
on all interest parties. The Plan Administrator may make grants of Plan Awards
on an individual or group basis. No member of the Committee shall be liable
for any action that is taken or is omitted to be taken if such action or
omission is taken in good faith with respect to this Plan or grant of any Plan
Award.

SECTION 4
ELIGIBILITY AND CURRENT GRANTS

(a) General Rule. Subject to the limitations set forth in subsection (b)
below, Participants shall be eligible to participate in this Plan; provided,
however, that any Non-Employee Directors who are serving on the Committee
shall not be eligible for any Plan Awards not granted by the Board of
Directors as a whole nor shall any person be eligible for any Plan Awards if
the granting of a Plan Award to such person would destroy the satisfaction by
this Plan of the general exemptive conditions of Rule 16b-3 under the Exchange
Act.

(b) Non-Employee Ineligible for ISOs. In no event shall an ISO be granted to
any individual who is not an Employee on the Date of Grant.

(c) Current Non-Statutory Option Grants. Upon adoption of this Plan, the
Board of Directors has made the following grants of Non-Statutory Options:

(i) To Robert R. Salyard, a Director of and Consultant to the Company, a
Non-Statutory Option to purchase an aggregate of 125,000 Shares, at an
exercise price of $.50 per Share, 75,001 Shares of which

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<PAGE>

shall become exercisable on August 1, 1997, 16,667 Shares of which shall
become exercisable on October 30, 1997, 16,667 Shares of which shall become
exercisable on January 28, 1998, and the final 16,665 of which shall become
exercisable on April 28, 1998. Except as otherwise provided in this Plan
the Options granted to Mr. Salyard shall terminate and expire on November
3, 2002.

(ii) To Andrew J. Clark, III, a Director of the Company, a Non-Statutory
Option to purchase an aggregate of 50,000 Shares, at an exercise price of
$.50 per Share, 30,000 Shares of which shall become exercisable on August
1, 1997, 6,667 Shares of which shall become exercisable on October 30,
1997, 6,667 Shares of which shall become exercisable on January 28, 1998,
and the final 6,665 of which shall become exercisable on April 28, 1998.
The Options granted to Mr. Clark become exercisable only upon surrender to
the Company of the options to purchase 25,000 Shares outstanding under the
Company's 1993 Stock Option Plan. Except as otherwise provided in this Plan
the Options granted to Mr. Clark shall terminate and expire on November 3,
2002.

(iii) To John D. Higgins, a Director of the Company, a Non-Statutory
Option to purchase an aggregate of 25,000 Shares, at an exercise price of
$.50 per Share, 15,000 Shares of which shall become exercisable on August
1, 1997, 3,334 Shares of which shall become exercisable on October 30,
1997, 3,333 Shares of which shall become exercisable on January 28, 1998,
and the final 3,333 of which shall become exercisable on April 28, 1998.
Except as otherwise provided in this Plan the Options granted to Mr.
Higgins shall terminate and expire on November 3, 2002.

(d) Current ISO Option Grants. Upon adoption of this Plan, the Board of
Directors has made the following grants of ISO Options:

(i) To Lance P. Wimmer, Chairman of the Board of Directors, President and
chief executive officer of the Company, an ISO Option to purchase an
aggregate of 300,000 Shares, at an exercise price of $.50 per Share,
175,001 Shares of which shall become exercisable on August 1, 1997, 24,000
Shares of which shall become exercisable on October 30, 1997, 59,334 Shares
of which shall become exercisable on January 28, 1998, and the final 41,665
of which shall become exercisable on April 28, 1998. Except as otherwise
provided in this Plan the Options granted to Mr. Wimmer shall terminate and
expire on November 3, 2002.

(ii) To Robert A. Searles, a Director and Executive Vice President of the
Company, an ISO Option to purchase an aggregate of 67,500 Shares, at an
exercise price of $.50 per Share, 33,750 Shares of which shall be
immediately exercisable, an additional 11,250 Shares of which shall become
exercisable on November 1, 1998, an additional 11,250 Shares of which shall
become exercisable on November 1, 1999 and the final 11,250 Shares of which
shall become exercisable on November 1, 2000. The Options granted to Mr.
Searles become exercisable only upon surrender to the Company of the
options to purchase 52,770 Shares outstanding under the Company's 1993
Stock Option Plan. Except as otherwise provided in this Plan the Options
granted to Mr. Searles shall terminate and expire on November 3, 2002.

(iii) To John Stuecheli, the Vice President-Finance and chief financial
officer of the Company, an ISO Option to purchase an aggregate of 60,000
Shares, 36,000 Shares of which shall become exercisable on August 1, 1997,
8,000 Shares of which shall become exercisable on October 30, 1997, 8,000
Shares of which shall become exercisable on January 28, 1998, and the final
8,000 of which shall become exercisable on April 28, 1998. Except as
otherwise provided in this Plan the Options granted to Mr. Stuecheli shall
terminate and expire on November 3, 2002.

(iv) To Sue Camp, the Secretary of the Company, an ISO Option to purchase
an aggregate of 15,000 Shares, at an exercise price of $.50 per Share,
7,500 Shares of which shall be immediately exercisable, an additional 2,500
Shares of which shall become exercisable on November 1, 1998, an additional
2,500 Shares of which shall become exercisable on November 1, 1999 and the
final 2,500 Shares of which shall become exercisable on November 1, 2000.
Except as otherwise provided in this Plan the Options granted to Ms. Camp
shall terminate and expire on November 3, 2002.

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<PAGE>

(v) To Roger Osgood, the Director of Manufacturing and Technical Support
for the Company, an ISO Option to purchase an aggregate of 18,750 Shares,
at an exercise price of $.50 per Share, 9,375 Shares of which shall be
immediately exercisable, an additional 3,125 Shares of which shall become
exercisable on November 1, 1998, an additional 3,125 Shares of which shall
become exercisable on November 1, 1999 and the final 3,125 Shares of which
shall become exercisable on November 1, 2000. Except as otherwise provided
in this Plan the Options granted to Mr. Osgood shall terminate and expire
on November 3, 2002.

(vi) To Richard Bell, the Director of Marketing of the Company, an ISO
Option to purchase an aggregate of 15,000 Shares, at an exercise price of
$.50 per Share, 5,000 Shares of which shall be immediately exercisable, an
additional 2,500 Shares of which shall become exercisable on November 1,
1998, an additional 2,500 Shares of which shall become exercisable on
November 1, 1999, an additional 2,500 Shares of which shall become
exercisable on November 1, 2000 and the final 2,500 Shares of which shall
become exercisable on November 1, 2001. Except as otherwise provided in
this Plan the Options granted to Mr. Bell shall terminate and expire on
November 3, 2002.

SECTION 5
SHARES SUBJECT TO PLAN

(a) Basic Limitation. Shares offered under this Plan may be authorized but
unissued Shares or Shares that have been reacquired by the Company. The
aggregate number of Shares that are available for issuance under this Plan
shall not exceed Nine Hundred Fifty Thousand (950,000) Shares, subject to
adjustment pursuant to Section 9 of this Plan. The Plan Administrator shall
not issue more Shares than are available for issuance under this Plan. The
number of Shares that are subject to unexercised Options at any time under
this Plan shall not exceed the number of Shares that remain available for
issuance under this Plan. The Company, during the term of this Plan, shall at
all times reserve and keep available sufficient Shares to satisfy the
requirements of this Plan.

(b) Additional Shares. In the event any outstanding Option for any reason
expires, is cancelled or otherwise terminates, the Shares allocable to the
unexercised portion of such Option shall again be available for issuance under
this Plan. In the event that Shares issued under this Plan revert to the
Company prior to the Vest Date under a grant of Restricted Stock, such Shares
shall again be available for issuance under this Plan.

SECTION 6
TERMS AND CONDITIONS OF OPTIONS

(a) Term of Option. The term of each Option shall be ten (10) years from the
Date of Grant or such shorter term as may be determined by the Committee;
provided, however, in the case of an ISO granted to a Ten-Percent Stockholder,
the term of such ISO shall be five (5) years from the Date of Grant or such
shorter time as may be determined by the Committee.

(b) Vesting of Options. Unless otherwise provided in the applicable Stock
Option Agreement as approved by the Plan Administrator, each Option granted
pursuant to this Plan shall vest at the rate of twenty-five percent (25%) per
year, on each anniversary of the Date of Grant, until such Option is fully
vested. Notwithstanding this Section 6(b), the Plan Administrator may
accelerate the vesting of any Option granted hereunder.

(i) Exercise Price. The Exercise Price shall be such price as is
determined by the Plan Administrator in its sole discretion and set forth
in the Stock Option Agreement; provided, however, in the case of an ISO
granted to an Optionee, the Exercise Price shall not be less than 100% of
the Fair Market Value of the Shares subject to such option on the Date of
Grant (or 110% in the case of an Option granted to a Participant who is a
Ten-Percent Stockholder on the Date of Grant).

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<PAGE>

(ii) Payment of Shares. Payment for the Shares upon exercise of an Option
shall be made in cash, by certified check, or if authorized by the Plan
Administrator, by delivery of other Shares having a Fair Market Value on
the date of delivery equal to the aggregate exercise price of the Shares as
to which said Option is being exercised, or by any combination of such
methods of payment or by any other method of payment as may be permitted
under applicable law and this Plan and authorized by the Plan Administrator
under Section 3(c) of this Plan.

(d) Exercise of Option.

(i) Procedure for Exercise; Rights of Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
shall be determined by the Plan Administrator, including, without
limitation, performance criteria with respect to the Company and/or the
Optionee, and in accordance with the terms of this Plan.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Stock Option Agreement by the Optionee entitled to exercise the Option and
full payment for the Shares and any withholding and other applicable taxes
with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Plan Administrator, consist
of any form of consideration and method of payment allowable under Section
6(c)(ii) of this Plan. Upon the receipt of notice of exercise and full
payment for the Shares and taxes, the Shares shall be deemed to have been
issued and the Optionee shall be entitled to receive such Shares and shall
be a shareholder with respect to such Shares, and the Shares shall be
considered fully paid and nonassessable. No adjustment will be made for a
dividend or other right for which the record date is prior to the date on
which the stock certificate is issued, except as provided in Section 9 of
this Plan.

Each exercise of an Option shall reduce, by an equal number, the total
number of Shares that may thereafter be purchased under such Option.

(ii) Termination of Status as an Employee, Director or Consultant. Except
as provided in Subsections 6(d)(iii) and 6(d)(iv) below, an Optionee
holding an Option who ceases to be an Employee, Director or Consultant of
the Company may, but only until the earlier of the date (i) the Option held
by the Optionee expires, or (ii) (y) in the case of an ISO, ninety (90)
days, and (z) in the case of a Nonstatutory Option, six (6) months, after
the date such Optionee ceases to be an Employee, Director or a Consultant
(or in each case, such shorter period as may be provided in the Stock
Option agreement), exercise the Option to the extent that the Optionee was
entitled to exercise it on such date, unless the Plan Administrator further
extends such period in its sole discretion. To the extent that the Optionee
was not entitled to exercise an Option on such date, or if the Optionee
does not exercise it within the time specified herein, such Option shall
terminate. The Plan Administrator shall have the authority to determine the
date an Optionee ceases to be an Employee, Director or a Consultant.

(iii) Permanent and Total Disability. Notwithstanding the provisions of
Section 6(d)(ii) above, in the event an Optionee is unable to continue to
perform Services for the Company or any of its Subsidiaries as a result of
such Optionee's Permanent and Total Disability (and, for ISOs, at the time
such Permanent and Total Disability begins, the Optionee was an Employee
and had been an Employee since the Date of Grant), such Optionee may
exercise an Option in whole or in part to the extent that the Optionee was
entitled to exercise it on such date, but only until the earlier of the
date (i) the Option held by the Optionee expires, or (ii) twelve (12)
months from the date of termination of Services due to such Permanent and
Total Disability. To the extent the Optionee is not entitled to exercise an
Option on such date or if the Optionee does not exercise it within the time
specified herein, such Option shall terminate.

(iv) Death of an Optionee. Upon the death of an Optionee, any Option held
by an Optionee shall terminate and be of no further effect; provided,
however, notwithstanding the provisions of Section 6(d)(ii) above, in the
event an Optionee's death occurs during the term of an Option held by such
Optionee and, at

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<PAGE>

the time of death, the Optionee was an Employee, Director or Consultant
(and, for ISOs, at the time of death, the Optionee was an Employee and had
been an Employee since the Date of Grant), the Option may be exercised in
whole or in part to the extent that the Optionee was entitled to exercise
it on such date, but only until the earlier of the date (i) the Option held
by the Optionee expires, or (ii) twelve (12) months from the date of the
Optionee's death, by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance. To the extent the
Option is not entitled to be exercised on such date or if the Option is not
exercised within the time specified herein, such Option shall terminate.

(v) Return of Proceeds.

(a) The Plan Administrator, in its discretion, may include as a term of
any Optionee's Stock Option Agreement a provision that, if within one year
after ceasing to be an Employee, Director or Consultant (whether
voluntarily or involuntarily), an Optionee shall, directly or indirectly,
engage in an activity to competes with the business of the Company or a
Subsidiary as conducted at the time the Optionee ceased to be an Employee,
Director or Consultant (as determined by the Board of Directors in its sole
discretion and good faith) and such Optionee had exercised Options within
six months of the date the Optionee ceased to be an Employee, Director or
Consultant, the Optionee shall be required to remit to the Company in good
funds within 5 business days of receipt of written demand therefor an
amount equal to the excess of (A) the Fair Market Value per share of Common
Stock on the date of exercise of such Option(s) multiplied by the number of
shares with respect to which the Options were exercised over (B) the
aggregate option exercise price for such number of shares of Common Stock
(the "Proceeds").

(b) The Plan Administrator, in its discretion, may include as a term of
any Optionee's Stock Option Agreement a provision requiring the remittance
by an Optionee to the Company in good funds within 5 business days of
receipt of written demand therefor of Proceeds by an Optionee that has
exercised Options within six (6) months of the date the Optionee ceased to
be an Employee, Director or Consultant (whether voluntarily or
involuntarily). The Plan Administrator shall have the authority in its
discretion to include such other conditions and/or terms in an Optionee's
Stock Option Agreement that it deems appropriate or desirable in
furtherance of the foregoing provisions.

(e) Non-Transferability of Options. No Option granted under this Plan may be
sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act, or the rules
thereunder, and no Option granted under this Plan is assignable by operation
of law or subject to execution, attachment or similar process. Any Option
granted under this Plan can only be exercised during the Optionee's lifetime
by such Optionee. Any attempted sale, pledge, assignment, hypothecation or
other transfer of the Option contrary to the provisions hereof and the levy of
any execution, attachment or similar process upon the Option shall be null and
void and without force or effect. No transfer of the Option by will or by the
laws of descent and distribution shall be effective to bind the Company unless
the Company shall have been furnished written notice thereof and an
authenticated copy of the will and/or such other evidence as the Plan
Administrator may deem necessary to establish the validity of the transfer and
the acceptance by the transfer or transferees of the terms and conditions of
the Option. The terms of any Option transferred by will or by the laws of
descent and distribution shall be binding upon the executors, administrators,
heirs and successors of Optionee.

(f) Time of Granting Options. Any Option granted hereunder shall be deemed
to be granted on the Date of Grant. Written notice of the Plan Administrator's
determination to grant an Option to an Optionee, evidenced by a Stock Option
Agreement, dated as of the Date of Grant, shall be given to such Optionee
within a reasonable time after the Date of Grant.

(g) Modification, Extension and Renewal of Options. Within the limitations
of this Plan, the Plan Administrator may modify, extend or renew outstanding
Options or may accept the cancellation of outstanding Options (to the extent
not previously exercised) for the granting of new Options in substitution
therefor. The

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<PAGE>

foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair the Optionee's rights or obligations
under such Option.

(h) Restrictions on Transfer of Shares. Any Shares issued upon exercise of
an Option shall be subject to such rights of repurchase and other transfer
restrictions as the Plan Administrator may determine in its sole discretion.
Such restrictions shall be set forth in the applicable Stock Option Agreement.

(i) Special Limitation on ISOs. To the extent that the aggregate Fair Market
Value (determined on the Date of Grant) of the Shares with respect to which
ISOs are exercisable for the first time by an individual during any calendar
year under this Plan, and under all other plans maintained by the Company,
exceeds $100,000, such Options shall be treated as Options that are not ISOs.

(j) Leaves of Absence. Leaves of absence approved by the Company which
conform to the policies of the Company shall not be considered termination of
employment if the employer-employee relationship as defined under the Code or
the regulations promulgated thereunder otherwise exists.

(k) Early Exercise. In the Plan Administrator's sole and absolute
discretion, an Option may include a provision whereby the Optionee may elect
at any time while an Employee, Director or Consultant to exercise the Option
as to any part or all of the shares subject to the Option prior to the full
vesting of the Option. Any unvested shares so purchased may be subject to a
repurchase right in favor of the Company, with the repurchase price to be
equal to the original purchase price of the stock, or to any other restriction
the Company determines to be appropriate; provided, however, that (i) the
right to repurchase at the original purchase price shall lapse at a rate equal
to the remaining portion of the original vesting schedule of the shares so
purchased, (ii) such repurchase right shall be exercisable by the Company
within (A) the ninety (90) day period following the termination of employment
or relationship as a Consultant, or (B) such longer period as may be agreed to
by the Company and the Optionee (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code (regarding "qualified small
business stock")), and (iii) such repurchase right shall be exercisable for
cash or cancellation of purchase money indebtedness for the shares. Should the
right of repurchase be assigned by the Company, the assignee shall pay the
Company cash equal to the difference between the original purchase price and
stock's Fair Market Value if the original purchase price is less than the
stock's Fair Market Value.

SECTION 7
RESTRICTED STOCK

(a) Authority to Grant Restricted Stock. The Plan Administrator shall have
the authority to grant to Participants Shares that are subject to certain
terms, conditions and restrictions (the "Restricted Stock"). The Restricted
Stock may be granted by the Plan Administrator either separately or in
combination with Options. The terms, conditions and restrictions of the
Restricted Stock shall be determined from time to time by the Plan
Administrator without limitation, except as otherwise provided in this Plan;
provided, however, that each grant of Restricted Stock shall require the
Participant to remain an Employee or Director of (or otherwise provide
Services to) the Company or any of its Subsidiaries for at least six (6)
months from the Date of Grant. The granting, vesting and issuing of the
Restricted Stock shall also be subject to the following provisions:

(i) Nature of Grant. Restricted Stock shall be granted to Participants
for Services rendered and at no additional cost to Participant; provided,
however, that the value of the Services performed must, in the opinion of
the Plan Administrator, equal or exceed the par value of the Restricted
Stock to be granted to the Participant.

(ii) Restricted Stock Account. The Company shall establish a restricted
stock account (the "Restricted Stock Account") for each Participant to whom
Restricted Stock is granted, and such Restricted Stock shall be credited to
such account. No certificates will be issued to the Participant with
respect to the Restricted Stock until the Vest Date as provided herein.
Every credit of Restricted Stock under this Plan to a Restricted Stock
Account shall be considered "contingent" and unfunded until the Vest Date.
Such contingent credits

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<PAGE>

shall be considered bookkeeping entries only, notwithstanding the
"crediting" of "dividends" as provided herein. Such accounts shall be
subject to the general claims of the Company's creditors. The Participant's
rights to the Restricted Stock Account shall be no greater than that of a
general creditor of the Company. Nothing contained herein shall be
construed as creating a trust or fiduciary relationship between the
Participants and the Company, the Board of Directors or the Plan
Administrator.

(iii) Restrictions. The terms, conditions and restrictions of the
Restricted Stock shall be determined by the Plan Administrator on the Date
of Grant. The Restricted Stock may not be sold, assigned, transferred,
redeemed, pledged or otherwise encumbered during the period in which the
terms, conditions and restrictions apply (the "Restriction Period"). More
than one grant of Restricted Stock may be outstanding at any one time, and
the Restriction Periods may be of different lengths. Receipt of the
Restricted Stock is conditioned upon satisfactory compliance with the
terms, conditions and restrictions of this Plan and those imposed by the
Plan Administrator.

(iv) Restricted Stock Criteria. At the time of each grant of Restricted
Stock, the Plan Administrator in its sole discretion may establish certain
criteria to determine the times at which restrictions placed on Restricted
Stock shall lapse (i.e., the termination of the Restriction Period), which
criteria may include, without limitation, performance measures and targets
and/or holding period requirements (the "Restricted Stock Criteria"). The
Plan Administrator may establish a corresponding relationship between the
Restricted Stock Criteria and (i) the number of Shares of Restricted Stock
that may be earned, and (ii) the extent to which the terms, conditions and
restrictions on the Restricted Stock shall lapse. Restricted Stock Criteria
may vary among grants of Restricted Stock; provided, however, that once the
Restricted Stock Criteria are established for a grant of Restricted Stock,
the Restricted Stock Criteria shall not be modified with respect to that
grant.

(v) Vesting. On the date the Restriction Period terminates, the
Restricted Stock shall vest in the Participant (the "Vest Date"), who may
then require the Company to issue certificates evidencing the Restricted
Stock credited to the Restricted Stock Account of such Participant.

(vi) Dividends. The Plan Administrator may provide from time to time that
amounts equivalent to dividends shall be payable with respect to the
Restricted Stock held in the Restricted Stock Account of a Participant.
Such amounts shall be credited to the Restricted Stock Account and shall be
payable to the Participant on the Vest Date.

(vii) Termination of Services. If a Participant (x) with the consent of
the Plan Administrator, ceases to be an Employee or Director of, or
otherwise ceases to provide Services to, the Company or any of its
Subsidiaries, or (y) dies or suffers from Permanent and Total Disability,
the vesting or forfeiture (including, without limitation, the terms,
conditions and restrictions) of any grant under this Section 7 shall be
determined by the Plan Administrator in its sole discretion, subject to any
limitations or terms of this Plan. If the Participant ceases to be an
Employee or Director of, or otherwise ceases to provide Services to, the
Company or any of its Subsidiaries for any other reason, all grants of
Restricted Stock under this Plan shall be forfeited (subject to the terms
of this Plan).

(b) Deferral of Payments. The Plan Administrator may establish procedures by
which a Participant may elect to defer the transfer of Restricted Stock to the
Participant. The Plan Administrator shall determine the terms and conditions
of such deferral in its sole discretion.

SECTION 8
ISSUANCE OF SHARES

As a condition to the transfer of any Shares issued under this Plan, the
Company may require an opinion of counsel, satisfactory to the Company, to the
effect that such transfer will not be in violation of the Securities Act of
1933, as amended (the "Securities Act"), or any other applicable securities
laws, rules or regulations, or that such transfer has been registered under
federal and all applicable state securities laws. The Company may refrain from
delivering or transferring Shares issued under this Plan until the Plan
Administrator has determined that the

10
<PAGE>

Participant has tendered to the Company any and all applicable federal, state
or local tax owed by the Participant as the result of the receipt of a Plan
Award, the exercise of an Option or the disposition of any Shares issued under
this Plan, in the event that the Company reasonably determines that it might
have a legal liability to satisfy such tax. The Company shall not be liable to
any person or entity for damages due to any delay in the delivery or issuance
of any stock certificate evidencing any Shares for any reason whatsoever.

SECTION 9
CAPITALIZATION ADJUSTMENTS; MERGER

(a) Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of Shares covered by
each outstanding Option, the aggregate number of Shares that have been
authorized for issuance under this Plan, the maximum number of Shares that an
Optionee may receive rights to pursuant to Section 6(k) of this Plan, and the
number of Shares of Restricted Stock credited to any Restricted Stock Account
of a Participant (as well as the Exercise Price covered by any outstanding
Option), shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, payment of a stock
dividend with respect to the Stock or any other increase or decrease in the
number of issued Shares effected without receipt of consideration by the
Company. Such adjustment shall be made by the Plan Administrator in its sole
discretion, which adjustment shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of
any class shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an Option.

(b) Dissolution, Liquidation, Sale of Assets or Merger. In the event of the
proposed dissolution or liquidation of the Company, or a proposed sale of all
or substantially all of the assets of the Company, or the proposed merger of
the Company with or into another corporation, any Options and grants of
Restricted Stock shall terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Plan Administrator. The Plan
Administrator may, in the exercise of its sole discretion, in such instances
declare that any Option shall terminate as of a date fixed by the Plan
Administrator and give each Optionee the right to exercise the Optionee's
Option as to all or any part of the Shares covered by such Option, including
Shares as to which the Option would not otherwise be exercisable.

SECTION 10
NO EMPLOYMENT RIGHTS

No provision of this Plan, under any Stock Option Agreement or under any
grant of Restricted Stock shall be construed to give any Participant any right
to remain an Employee or Director of, or provide Services to, the Company or
any of its Subsidiaries or to affect the right of the Company to terminate any
Participant's service at any time, with or without cause.

SECTION 11
SHAREHOLDER APPROVAL

With respect to any amendment to this Plan adopted by the Plan Administrator
that is required to be approved by the Company's shareholders pursuant to the
terms of Section 12 of this Plan, such approval shall be obtained within
twelve (12) months after the date such amendment is adopted by the Plan
Administrator; provided, that such amendment shall not become effective until
such approval has been obtained.

If the Company is required to comply with Section 14(c) of the Exchange Act,
the approval by the Company's shareholders of this Plan, and their approval of
any subsequent amendment to this Plan requiring their approval, shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act
and the rules and regulations promulgated thereunder. If the Company is not
required to comply with Section 14(a) of the Exchange Act at the time of
seeking such approval and such approval is not solicited substantially in
accordance

11
<PAGE>

with the rules and regulations, if any, in effect under Section 14(a) of the
Exchange Act at the time of such approval, the Company shall furnish in
writing to the holders of record of the securities entitled to vote for this
Plan substantially the same information concerning this Plan which would be
required by the rules and regulations in effect under Section 14(a) of the
Exchange Act at the time that such information is furnished, if proxies to be
voted with respect to the approval or disapproval of this Plan were then being
solicited, on or prior to the date of the first annual meeting of security
holders held subsequent to the later of: (i) the first registration of an
equity security under Section 12 of the Act or (ii) the acquisition of an
equity security which exemption from Section 16(b) under the Exchange Act is
claimed.

SECTION 12
TERM OF PLAN; EFFECT OF AMENDMENT OR TERMINATION

(a) Term of Plan. This Plan shall become effective upon its adoption by the
Board of Directors. This Plan shall continue in effect for a term of ten (10)
years unless sooner terminated under this Section 12.

(b) Amendment and Termination. The Plan Administrator in its sole discretion
may terminate this Plan at any time. The Plan Administrator may amend this
Plan at any time in such respects as the Plan Administrator may deem
advisable; provided, that the following amendments shall require approval of
the holders of a majority of the outstanding Shares entitled to vote:

(i) Any change in the aggregate number of Shares that may be issued under
this Plan, other than in connection with an adjustment under Section 9 of
this Plan;

(ii) Any change in the designation of the Participants eligible to be
granted Plan Awards; or

(iii) Any change in this Plan that would materially increase the benefits
accruing to Participants under this Plan.

(c) Effect of Termination. In the event this Plan is terminated, no Shares
shall be issued under this Plan nor shall any Shares of Restricted Stock be
credited to a Restricted Stock Account, except upon exercise of an Option
granted prior to such termination or issuance of Shares of Restricted Stock
previously credited to a Restricted Stock Account. The termination of this
Plan, or any amendment thereof, shall not affect any Shares previously issued
to a Participant, any Option previously granted under this Plan or any
Restricted Stock previously credited to a Restricted Stock Account.

SECTION 13
GOVERNING LAW

THIS PLAN AND ANY AND ALL STOCK OPTION AGREEMENTS AND AGREEMENTS RELATING TO
THE GRANT OF RESTRICTED STOCK EXECUTED IN CONNECTION WITH THIS PLAN SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

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<PAGE>

IRATA, INC.
8554 KATY FREEWAY, SUITE 100, HOUSTON, TEXAS 77024

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Lance P. Wimmer and Robert A. Searles, Jr. as
Proxies, each with the power to appoint his substitute and hereby authorizes
them to represent and to vote, as designated below, all of the shares of Class
A Common Stock of Irata, Inc. held of record by the undersigned on December 12,
1996 at the 1996 Annual Meeting of Stockholders to be held on Wednesday,
January 22, 1997 at 11:00 a.m. Houston time, at the Conference Center, 8586
Katy Freeway, Houston, Texas 77024 or any adjournment thereof.

1. Election of Directors: ANDREW J. CLARK, III, JOHN D. HIGGINS, ROBERT R.
SALYARD, ROBERT A. SEARLES, JR., LANCE P. WIMMER

[ ] FOR all nominees [ ] WITHHOLD authority to vote
above (except as for nominees listed above
marked above)

(INSTRUCTIONS: To withhold authority to vote for any nominee, strike that
nominee's name above)

2. Approval of Adoption of 1996 Plan

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. In their discretion, they are authorized to vote upon such other business as
may properly come before this meeting and any adjournment thereof.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

(Please sign on reverse side)

This Proxy when properly executed will be voted in the manner herein by the
undersigned shareholder. If no designation is made, this proxy will be voted
for the named Nominees, approval of the 1996 Plan and for discretionary
authority for other matters.

[ ] I plan to attend the Annual Meeting.

DATE: , 1996

-----------------------------------
(Signature)

NOTE: Please sign exactly as name
appears above. When shares are
held by joint tenants, both should
sign. When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such, please sign in full
corporate name by President or
other authorized officer. If a
Partnership, please sign in
Partnership name by authorized
person.