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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(AMENDMENT NO. 2)
Under the Securities Exchange Act of 1934
JALATE, LTD.
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(Name of Issuer)
Common Stock, no par value
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(Title of Class of Securities)
470145 10 3
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(CUSIP NUMBER)
John D. Robertson
1600 Bank of Oklahoma Plaza
201 Robert S. Kerr
Oklahoma City, Oklahoma 73102
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(Name, Address and Telephone Number
of Person authorized to Receive
Notices and Communications)
January 27, 1998
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(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
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CUSIP NO. 470145 10 3
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1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
William M. DeArman ###-##-####
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2. Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
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3. SEC Use Only
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4. Source of Funds
PF/00
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to items
2(d) or 2(e)
[ ]
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6. Citizenship or Place of Organization
United States
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7. Sole Voting Power
627,493 (consisting of 377,493 shares and 250,000
warrants exercisable within 60 days)
Number of -----------------------------------------------------------
Shares 8. Shared Voting Power
Beneficially
Owned by Each 4,200
Reporting Person -----------------------------------------------------------
With 9. Sole Dispositive Power
627,493 (consisting of 377,493 shares and 250,000
warrants exercisable within 60 days)
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10. Shared Dispositive Power
4,200
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
631,893 (consisting of 381,893 shares and 250,000
warrants exercisable within 60 days)*
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12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
[X]
Excludes 17,500 shares held by or for the benefit of the reporting person's
children.
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13. Percent of Class Represented by Amount in Row (11)
17.3%
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14. Type of Reporting Person
IN
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*Includes 200 shares owned by an individual retirement account for the benefit
of Mr. DeArman's wife, Carol DeArman.
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The purpose of this Amendment No. 2 to the previously filed Schedule 13D is
to report that the ownership of William M. DeArman in the Common Stock, no par
value (the "Shares"), of Jalate, Ltd. (the "Issuer") has increased from 11.2% to
17.3% of the Shares outstanding.
Item 1. SECURITY AND ISSUER.
No change.
Item 2. IDENTITY AND BACKGROUND.
No change.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On January 27, 1998, Mr. DeArman purchased from the Issuer warrants
entitling him to purchase 250,000 Shares for $1.625 per Share. The $25,000
purchase price of the warrants came from the personal funds of Mr. DeArman.
Item 4. PURPOSE OF TRANSACTION.
No change.
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of January 27, 1998, Mr. DeArman was the beneficial owner of an
aggregate of 631,893 Shares of the Issuer (consisting of 381,893 shares and
250,000 warrants) representing approximately 17.3% of the outstanding
Shares. Of this amount, 376,493 Shares and 250,000 warrants were purchased
by Mr. DeArman, 4,000 Shares were purchased by a trust of which Mr. DeArman
is the sole beneficiary, 200 Shares were purchased by an individual
retirement account for the benefit of Mr. DeArman, 200 Shares were
purchased by an individual retirement account for the benefit of Mr.
DeArman's wife, Carol DeArman, and 1,000 Shares were purchased by Mr.
DeArman as custodian for the benefit of certain of Mr. DeArman's children.
This amount does not include 3,000 Shares held individually by one of
Mr. DeArman's children or 14,500 Shares held by trusts for the benefit of
certain of Mr. DeArman's children. Mr. DeArman disclaims beneficial
ownership of these 17,500 Shares held by or for the benefit of his
children.
(b) Mr. DeArman has the sole power to vote and to dispose of 377,493
Shares of the Issuer and the sole power to dispose of the 250,000 warrants.
Mr. DeArman
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shares the power to vote and dispose of 4,200 Shares. Delaware Charter
Guarantee & Trust Company, P. O. Box 8963, Wilmington, Delaware
19899-8963, shares the power to vote and dispose of the 4,000 Shares held
in trust for Mr. DeArman. Merrill Lynch Pierce Fenner & Smith, 3100 Texas
Commerce Tower, Houston, Texas 77002 shares the power to vote and dispose
of the 200 Shares held by Mr. DeArman's individual retirement account.
Merrill Lynch Pierce Fenner & Smith, 3100 Texas Commerce Tower, Houston,
Texas 77002 and Mr. DeArman's wife, Carol DeArman, share the power to vote
and dispose of the 200 shares held by Mrs. DeArman's individual retirement
account.
(c) On January 27, 1998, Mr. DeArman acquired, in a private transaction
with the Issuer, warrants entitling him to purchase 250,000 Shares for
$1.625 per Share. The purchase price of the warrants was $25,000 or $.10
per warrant.
(d) Not Applicable.
(e) Not Applicable.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
On January 27, 1998, the Issuer entered into secured lending transactions
with Mr. DeArman, John E. Drury, Don A. Sanders and Katherine U. Sanders
(collectively, the "Lenders"), whereby the Issuer borrowed $475,000 from Mr.
DeArman, $95,000 from Mr. Drury, $237,500 from Mr. Sanders and $142,500 from Ms.
Sanders. Each of the loans is payable in full on January 31, 2000, accrues
interest at the rate of ten percent (10%) per annum and is subordinated to the
Issuer's obligations to Heller Financial, Inc. and/or Wells Fargo HSBC Trade
Bank, N.A. Each of the loans is secured by, among other things, (i) all of the
capital stock of Air Shop, Ltd., a New York corporation ("Air Shop"), now or
hereafter acquired by the Issuer, and (ii) all of the Issuer's rights under that
certain letter agreement among the Issuer, Dominique Camacho and Air Shop dated
October 17, 1997 with respect to an investment by Jalate in Air Shop. Mr.
DeArman was appointed to act as "agent" on behalf of all Lenders in the
enforcement of their rights and remedies under the promissory notes delivered to
them by Jalate and to act as the secured party under a certain Security and
Pledge Agreement between the Issuer and Mr. DeArman.
In connection with these secured lending transactions, each of the Lenders
also purchased, at a price of $.10 per warrant, warrants entitling them to
acquire up to 500,000 aggregate Shares for $1.625 per Share. Mr. DeArman, Mr.
Drury, Mr. Sanders and Ms. Sanders purchased 250,000 warrants, 50,000 warrants,
125,000 warrants and 75,000 warrants, respectively. The warrants purchased by
Mr. DeArman and the other Lenders may be exercised at any time prior to January
27, 2003. The warrants contain provisions providing for the adjustment of the
exercise price and the number and type of securities
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issuable upon exercise of the warrants should any one or more of certain
specified events occur. The warrants grant to Mr. DeArman and the other
Lenders certain rights of registration for the securities issuable upon
exercise of the warrants.
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
99.3 Subordinated Secured Promissory Note, dated January 27, 1998, executed
by Jalate, Ltd. in favor of William M. DeArman
99.4 Security and Pledge Agreement, dated January 27, 1998, between Jalate,
Ltd. and William M. DeArman
99.5 Agency and Intercreditor Agreement, dated January 27, 1998, among
Katherine U. Sanders, Don A. Sanders, John E. Drury and William M.
DeArman
99.6 Stock Purchase Warrant, dated January 27, 1998, executed by Jalate,
Ltd. in favor of William M. DeArman
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DATED: January 30, 1998.
/s/ William M. DeArman
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William M. DeArman
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SUBORDINATED SECURED PROMISSORY NOTE
$475,000 January 27, 1998
FOR VALUE RECEIVED, JALATE, LTD., a California corporation (herein,
"MAKER"), hereby promises to pay to William M. DeArman (herein, "HOLDER") or to
order the principal sum of Four Hundred Seventy Five Thousand Dollars
($475,000), with interest on the unpaid principal balance outstanding from time
to time, computed at a per annum rate of ten percent (10%), commencing as from
the date hereof until January 31, 2000 ("MATURITY DATE"), when all amounts then
remaining unpaid, together with all accrued and unpaid interest thereon, shall
be due and payable. Interest accrued hereon shall be paid on the last business
day of January, April, July and October, commencing April 30, 1998. The
principal amount hereof shall be repaid in four (4) equal quarterly
installments, commencing as from April 30, 1999, and continuing until the
Maturity Date when all other amounts then remaining unpaid (principal, interest
and other) shall become due and payable. All payments are to be made in lawful
money of the United States of America to Holder at 3100 Texas Commerce Tower,
Houston, Texas 77002 (c/o Sanders Morris Mundy Inc., Attn: Chris Hoeller) or at
such other place as Holder shall designate in writing to Maker.
Upon Maker's failure to pay any amount owing hereon as and when due, such
amount due hereunder together with the accrued interest thereon shall to the
extent not in violation of any applicable laws, bear interest at five percent
(5%) per annum in excess of the rate otherwise applicable thereto ("DEFAULT
RATE") until such amount is paid, it being acknowledged and agreed that the
imposition of a higher rate of interest as herein provided for failure to pay an
amount owing hereunder shall not preclude Holder from accelerating the
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entire amount due hereunder as a result of such non-payment, and upon any
such acceleration, the amount so accelerated shall, to the extent not in
violation of any applicable laws, bear interest at the Default Rate until
full payment of all such accelerated amounts.
By acceptance of this Note as evidence of Maker's obligation to repay to
Holder the amounts evidenced hereby, Holder acknowledges and agrees that all
amounts owing hereunder (principal, interest and other) shall be subordinated
and be junior in right of payment to all of Maker's obligations to Heller
Financial, Inc. ("HELLER") and/or Wells Fargo HSBC Trade Bank N.A. ("WELLS
FARGO") relating to present or future loans or other credit accommodations made
to Maker. If an event of default under Maker's loan agreements with either
Heller or Wells Fargo has occurred and is continuing, then Holder shall not be
entitled to and shall not accept any payment from Maker with respect to this
Note unless and until (i) all of Maker's obligations to Heller and/or Wells
Fargo, as applicable, under such agreements have been satisfied in full or (ii)
Heller and/or Wells Fargo, as applicable, consents in writing thereto; PROVIDED,
HOWEVER, that nothing contained herein shall be deemed to prohibit the Secured
Party (defined below) from exercising its rights under the Security and Pledge
Agreement referred to below (including, without limitation, foreclosing upon any
or all of the collateral provided for therein). Further, by acceptance hereof,
Holder hereby waives any and all rights, defenses or protections that may
otherwise be available to him as a surety under applicable law, including,
without limitation, any right, defense or protection available to sureties by
reason of the Texas Civil Code.
All persons or corporations now or at any time liable for payment of the
indebtedness evidenced hereby for themselves, their heirs, legal
representatives, successors and assigns, respectively, expressly waive
presentment for payment, demand, notice of dishonor, protest,
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notice of protest and diligence in collection, and consent that the time of
said payments may be extended by Holder without in any way modifying,
altering, releasing, affecting, or limiting their respective liability for
the indebtedness evidenced hereby.
If this Note is not paid when due (whether at scheduled maturity, by
acceleration or otherwise), Maker promises to pay all costs of collection
including, without limitation, reasonable attorneys' fees, incurred by Holder,
whether or not suit is filed hereon.
This Note may be prepaid by Maker, in whole at any time or in part from
time to time, without payment of any premium or penalty on fifteen (15) days
prior notice to Holder of such election to prepay. In addition, Maker agrees to
use the net proceeds of any equity offering to prepay this Note. Maker also
agrees to use a portion of the proceeds of this Note to satisfy in full its
current financial obligations to Air Shop Ltd., a New York corporation ("AIR
SHOP"), pursuant to that certain letter agreement between Maker and Air Shop
dated October 17, 1997, with regard to the acquisition of certain shares of the
capital stock of Air Shop by Maker. Maker further agrees to reimburse Holder
for his reasonable and documented out-of-pocket expenses (not to exceed $5,000)
incurred in connection with the negotiation of this Note and the transactions
related thereto.
Maker's obligations under this Note are secured by a Security and Pledge
Agreement between Maker and Secured Party (as therein defined) dated as of even
date herewith. The due date of the Note may be accelerated in accordance with
the terms of such Security and Pledge Agreement.
HOLDER'S RIGHTS UNDER THIS NOTE ARE ALSO SUBJECT TO AN INTERCREDITOR
AGREEMENT DATED AS OF EVEN DATE HEREWITH AND MAY ONLY BE EXERCISED IN ACCORDANCE
THEREWITH.
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No provision of this Note is intended to or shall require or permit Holder,
directly or indirectly, to take, collect or receive in money, goods or any other
form, any interest (including amounts deemed by law to be interest) in excess of
the maximum rate of interest permitted by applicable law. If any amount due
from or paid by Maker shall be determined by a court of competent jurisdiction
to be interest in excess of such maximum rate, Maker shall not be obligated to
pay such excess and, if paid, such excess shall be applied against the unpaid
principal balance of this Note or, if and to the extent that this Note has been
paid in full, such excess shall be remitted by Holder to Maker.
Holder may pursue any rights and remedies as the holder of this Note or
under any security agreement, pledge, guaranty or other collateral documents,
including, without limitation, the Security and Pledge Agreement, independently
or concurrently; PROVIDED, HOWEVER, that only Secured Party may exercise the
rights granted to Secured Party under the Security Agreement; and PROVIDED
FURTHER that Holder's rights hereunder must be exercised in accordance with and
subject to the conditions set forth in the Intercreditor Agreement. All rights,
remedies or powers herein conferred upon Holder or conferred by the Security and
Pledge Agreement or any other collateral document shall, to the extent not
prohibited by law, be deemed cumulative and not exclusive of any others thereof,
or any other rights, remedies or powers available to Holder. No delay or
omission of Holder to exercise any right, remedy or power shall impair the same
or be construed to be a waiver of any default or an acquiescence thereto. No
waiver of any default shall extend to or affect any subsequent default or impair
any rights, remedies or powers available to Holder. No single or partial
exercise of any right, remedy or power shall preclude other or future exercise
thereof by Holder.
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This Note has been negotiated in substantial part in the State of Texas and
all questions with respect to the Note and the rights and liabilities of the
parties will be governed by the laws of Texas in all respects, including matters
of construction, validity, enforcement and performance, regardless of the choice
of law provisions of Texas or any other jurisdiction. Any and all disputes
between the parties which may arise pursuant to this Note not resolved by them
will be heard and determined before an appropriate federal or state court
located in Houston, Texas. The parties hereto acknowledge that such courts have
the jurisdiction to interpret and enforce the provisions of this Note and the
parties waive any and all objections that they may have as to personal
jurisdiction or venue in any of the above courts.
JALATE, LTD.,
a California corporation
By: /s/ Frederick A. Findley
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Frederick A. Findley
Vice President and Chief
Financial Officer
Accepted:
/s/ William M. DeArman
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William M. DeArman
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SECURITY AND PLEDGE AGREEMENT
This Security and Pledge Agreement (herein "AGREEMENT") is entered into as
of this 27th day of January, 1998, between JALATE, LTD., a California
corporation ("DEBTOR"), and WILLIAM M. DEARMAN, an individual ("SECURED PARTY"),
as agent for the Holders (defined below).
RECITALS
A. Debtor has executed those certain Subordinated Secured Promissory
Notes all dated as of even date herewith, in the amounts and in favor of the
parties ("HOLDERS") as set forth on SCHEDULE 1 hereto (the "NOTES").
B. Pursuant to an Agency and Intercreditor Agreement (the "INTERCREDITOR
AGREEMENT") between Secured Party and the Holders, Secured Party has been
appointed "Agent" for the Holders, and Debtor is required to grant a security
interest in certain Collateral as more particularly described herein as security
for the repayment of the Notes.
NOW, THEREFORE, for value received, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. COLLATERAL. Debtor hereby conveys, assigns, transfers, delivers,
pledges and grants to Secured Party a security interest in and to each and all
of the following property (herein called the "COLLATERAL"):
(1) Forty (40) shares of Common Stock of Air Shop Ltd., a New York
corporation ) ("AIR SHOP") (the "COMMON STOCK");
(2) Three Thousand (3,000) shares of Preferred Stock of Air Shop (the
"PREFERRED STOCK" and together with the Common Stock, the "STOCK");
(3) Any additional shares of capital stock of Air Shop that Debtor
acquires pursuant to the certain letter agreement between Debtor and Air Shop
dated October 17, 1997 (the "LETTER AGREEMENT"), a copy of which is attached
hereto as SCHEDULE 2;
(4) All of Debtor's rights under the Letter Agreement; and
(5) All proceeds, products, Distributions (defined below) additions,
substitutions and accessions of and to any and all of the foregoing. For
purposes of this Agreement, the term "Distributions" shall mean all stock
dividends, liquidating dividends, shares of stock resulting from stock splits,
reclassifications, warrants, options, noncash dividends and other distributions
on or with respect to the Stock whether similar or dissimilar to the foregoing,
except that Distributions shall not mean cash dividends paid on the Stock.
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2. INDEBTEDNESS SECURED. This Agreement and the aforesaid security
interest is granted to Secured Party to secure the following (all of which are
herein called the "INDEBTEDNESS"):
(1) the prompt and unconditional payment and performance of all
indebtedness and obligations of Debtor to the Holders heretofore, now or
hereafter existing under the Notes, and any other document or agreement now or
hereafter executed in connection therewith or as security for any part thereof,
and any and all renewals, amendments, modifications, increases, extensions or
rearrangements thereof; and
(2) the reimbursement and payment by Debtor of all advances, charges,
costs and expenses, (including reasonable attorneys' fees and legal expenses)
incurred by Secured Party and/or the Holders in connection with exercising any
right, power or remedy conferred by this Agreement, the Notes or by law.
3. DELIVERY AND POSSESSION. The certificates representing the Stock,
accompanied by instruments of assignment thereof, duly executed in blank by
Debtor, have been delivered to Secured Party contemporaneously herewith.
4. TERMINATION. Secured Party shall promptly return the Collateral to
Debtor, and this Agreement will be of no further force and effect, at such time
as the Indebtedness has been paid in full.
5. EVENT OF DEFAULT. Any one or more of the following events shall
constitute an event of default (an "EVENT OF DEFAULT") under this Agreement:
(1) Debtor shall fail to pay all or any part of the Indebtedness when
due, whether at scheduled maturity, by acceleration or otherwise and such
failure shall continue for more than three (3) business days after notice
from Secured Party; or
(2) Debtor shall fail to observe or perform any material term,
covenant or condition on its part to be performed or observed under the
Notes or this Agreement and such failure shall continue for more than
thirty (30) days after notice from Secured Party; or
(3) Debtor shall: (i) become insolvent or admit in writing its
inability to pay its debts as they mature; (ii) make a general assignment
for the benefit of creditors or to an agent authorized to liquidate any
substantial amount of its assets; (iii) become the subject of an "order for
relief" within the meaning of the United States Bankruptcy Code; (iv) file
a petition in bankruptcy, or for reorganization, or to effect a plan or
other arrangement with creditors; (v) file an answer to a creditor's
petition, admitting the material allegations thereof for an adjudication of
bankruptcy or for reorganization or to effect a plan or other arrangement
with creditors; (vi) apply to a court for the appointment of a receiver or
custodian for any of its assets or properties; (vii) have a receiver or
custodian appointed for any of its assets or properties, with or
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without consent, and such receiver shall not be discharged within
ninety (90) days after appointment; or (viii) adopt a plan of complete
liquidation of its assets;
(4) Any warranty, representation or statement made to Secured Party
by Debtor in this Agreement shall have been false or incomplete in any
material respect as of the time when made; or
(5) Any of the Notes or this Agreement shall cease to be an
enforceable obligation or any of the same are rescinded, revoked or
modified in any way without the express written consent of Secured Party.
Secured Party agrees that, unless an Event of Default occurs and is
continuing, Secured Party shall not be entitled to exercise any of Debtor's
rights under the Letter Agreement and Debtor shall continue to be able to
exercise all of such rights. Notwithstanding the foregoing, Debtor agrees that
(i) it will not waive any of its rights under the Letter Agreement without the
prior written consent of Secured Party and (ii) if it is unable to exercise any
of its rights under the Letter Agreement, it will assign such rights to Secured
Party. Debtor also agrees to fulfill all of its obligations under the Letter
Agreement in a timely manner. Debtor further agrees that Secured Party is not
required to perform any of Debtor's obligations under the Letter Agreement.
6. ACCELERATION; SECURED PARTY'S RIGHTS AND REMEDIES.
(1) Upon the occurrence of an Event of Default specified in Section
5(3) above, then, without notice, demand or action of any kind by Secured
Party, the entire amount of the Indebtedness shall be immediately due and
payable. Upon the occurrence of any other Event of Default specified in
this Agreement, Secured Party shall have the right, upon notice to Debtor,
to declare the entire amount of the Indebtedness immediately due and
payable.
(2) Upon the occurrence of an Event of Default, Secured Party shall
have all the rights and remedies of a secured party under the Uniform
Commercial Code in effect at the time in Texas (the "CODE") and other
applicable laws and under this Agreement and all other instruments and
agreements evidencing, securing, governing or guaranteeing the
Indebtedness. Without limiting the generality of the foregoing, Secured
Party may exercise the following rights and remedies, without further
notice to Debtor:
(i) Proceed to selectively and successively enforce and exercise
any and all rights and remedies which Secured Party may have under
this Agreement, any other applicable agreement or applicable law,
including, without limitation: (A) commencing one or more actions
against Debtor and reducing the claims of Secured Party against Debtor
to judgment, (B) foreclosure or other enforcement of Secured Party's
security interest in the Collateral, or any portion thereof, or other
enforcement of Secured Party's
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rights and remedies in respect of and to recover upon the Collateral,
through judicial action or otherwise, including all available remedies
under the applicable provisions of the Code, and (C) payment or
discharge of any claim or lien, prior or subordinate, in respect of or
affecting the Collateral;
(ii) Sell, lease or otherwise dispose of the Collateral at
private or public sale (provided that any sale of any portion of the
Collateral constituting securities shall be made in compliance with
federal and applicable state securities laws), in bulk or in parcels
and, where permitted by law, without having the Collateral present at
the place of sale. Secured Party will give Debtor reasonable notice
of the time and place of any public sale or other disposition thereof
or the time after which any private sale or other disposition thereof
is to be made. The requirements of reasonable notice shall be met if
such notice is given to Debtor at least ten (10) days before the time
of any such sale or disposition;
(iii) Exercise any and all rights and remedies of Debtor
relating to the Collateral, including, but not by way of limitation,
the right to collect, demand, receive, settle, compromise, adjust or
sue for all amounts due thereon or thereunder and the right either in
Secured Party's own name or in the name of Debtor, to take such legal
or other action as Debtor might have taken except for this Agreement.
For purposes of enforcing Secured Party's rights under this Section 6,
effective upon the occurrence of an Event of Default, Debtor
irrevocably constitutes and appoints Secured Party and any officer or
agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the
place and stead of Debtor and in the name of Debtor or in its own name
from time to time in Secured Party's discretion for the purposes of
this Agreement, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement.
(iv) Vote any or all of the Stock and to give all consents,
waivers and ratifications in respect thereof and otherwise to act with
respect thereto as though it were the absolute owner thereof.
(v) Cause any or all of the Stock to be transferred into the
name of the Secured Party or the names of any of its nominees.
(3) In the event Secured Party shall elect to selectively and
successively enforce its rights and remedies in respect of any of the
Collateral, pursuant to any applicable agreements or otherwise, such action
shall not be deemed a waiver or discharge of any other right, remedy, lien
or encumbrance until such time as Secured Party shall have been paid in
full the Indebtedness.
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7. APPLICATION OF PROCEEDS. If Secured Party shall sell or otherwise
dispose of all or any portion of the Collateral as a result of the exercise of
its rights as a result of the occurrence of an Event of Default, the proceeds of
such sale or disposition shall be applied by Secured Party in the following
order:
(1) To the payment of reasonable costs and expenses related to any
sale of the Collateral and the exercise of any other right given to Secured
Party pursuant hereto.
(2) To the payment of the Indebtedness.
(3) To the payment of Debtor or its successors or assigns.
8. EXPENSES. Debtor agrees to pay to the Secured Party all reasonable
advances, charges, costs and expenses incurred in connection with the exercise
by the Secured Party of any right, power or remedy conferred by this Agreement
or by law (including but not limited to reasonable attorneys' fees).
9. DEBTOR'S REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants to Secured Party that so long as this Agreement is in effect:
9.1 ENFORCEABLE AGREEMENT. This Agreement is the valid and binding
obligation of Debtor, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to creditors' rights generally and general principles of
equity.
9.2 NO OTHER CLAIM. There is no other claim, lien, security interest
or encumbrance on or against any of the Collateral.
9.3 NO FINANCING STATEMENT. No financing statement is on file in any
public office covering any of the Collateral, except (i) in favor of Secured
Party and (ii) that Heller Financial, Inc. and/or Wells Fargo Bank have filed
financing statements, but have waived their security interests, if any, in the
Collateral.
9.4 POWER AND AUTHORITY. Debtor has full corporate power and
authority to enter into and perform its obligations under this Agreement, and
neither the execution, delivery and performance of this Agreement, nor the
creation of the security interests hereunder, will conflict with, or result in
the breach or violation of, any material agreement or instrument binding on or
enforceable against Debtor or the Collateral. The execution, delivery and
performance of this Agreement, and the creation of the security interest
hereunder, have been duly authorized by all necessary corporate action, and will
not violate or contravene the Articles of Incorporation or Bylaws of Debtor.
10. COVENANTS. Debtor covenants and agrees with Secured Party that,
from and after the date of this Agreement and until the Indebtedness is paid
in full:
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10.1 FURTHER ASSURANCE. Debtor will from time to time, at its sole
expense, promptly execute and deliver all further instruments and documents, and
take all further action that may be reasonably necessary or desirable, or that
Secured Party may reasonably request, in order to continue, perfect and protect
any security interest granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Debtor will execute and file
such financing or continuation statements or amendments thereto and such other
instruments or notices as may be reasonably necessary or desirable, or as
Secured Party may request, in order to perfect and preserve the security
interest granted or intended to be granted hereby. Debtor hereby authorizes
Secured Party to file one or more financing or continuation statements and
amendments thereto relative to all or part of the Collateral without the
signature of such Debtor, where permitted by law, and to execute the same as
attorney-in-fact for such Debtor to the extent such Debtor's signature is
required by law.
10.2 MAINTENANCE OF OFFICE. Debtor shall keep its chief place of
business and chief executive office and the offices where it keeps its records
concerning the Collateral within the State of California and shall notify
Secured Party at least thirty (30) days prior to any change from the location
specified on the signature page hereof. Debtor will not change its name,
identity or corporate structure to such an extent that any financing statement
filed by Secured Party in connection with this Agreement would become seriously
misleading, unless it shall have given Secured Party at least 30 days prior
written notice thereof and prior to effecting any such change taken such steps
as Secured Party may deem reasonably necessary or advisable to continue the
perfection and priority of the security interest granted pursuant hereto.
10.3 DISPOSITION OF COLLATERAL. Debtor shall not (i) sell, assign, or
otherwise dispose of or grant any option with respect to any of the Collateral,
or (ii) create or suffer to exist any lien, security interest, option or other
charge or encumbrance upon or with respect to any of the Collateral other than
the lien contemplated by this Agreement; provided, HOWEVER, that notwithstanding
the foregoing, Debtor may at any time sell all or part of the Collateral,
provided that the Indebtedness is repaid in full concurrently therewith.
Secured Party agrees to cooperate with Debtor in effecting any such sale,
including by releasing its security interest in any such Collateral in
connection with the consummation of the sale thereof.
11. GENERAL PROVISIONS.
11.1 COMPLETE AGREEMENT; MODIFICATIONS. This Agreement, the Notes and
any documents referred to herein or therein or executed contemporaneously
herewith constitute the parties' entire agreement with respect to the subject
matter hereof and supersede all agreements, representations, warranties,
statements, promises and understandings, whether oral or written, with respect
to the subject matter hereof. This Agreement may not be amended, altered or
modified except by a writing signed by the parties.
-6-
<PAGE>
11.2 ADDITIONAL DOCUMENTS. Each party hereto agrees to execute any
and all further documents and writings and to perform such other actions which
may be or become necessary or expedient to effectuate and carry out this
Agreement.
11.3 NOTICES. Unless otherwise specifically permitted by this
Agreement, all notices under this Agreement shall be in writing and shall be
delivered by personal service, telecopy, Federal Express or comparable overnight
service or certified mail, postage prepaid, to such address as may be designated
from time to time by the relevant party, and which shall initially be:
Jalate, Ltd.
6557 Flotilla Street
City of Commerce, California 90040
Fax: (213) 728-3752
Attn: Frederick A. Findley
Vice President-Finance and
Chief Financial Officer
William M. DeArman
5420 Huckleberry Lane
Houston, Texas 77056
Fax: (713) 552-1505
Any notice sent by certified mail shall be deemed to have been given five
(5) business days after the date on which it is mailed. All other notices shall
be deemed given when received. No objection may be made to the manner of
delivery of any notice actually received in writing by an authorized agent of a
party.
11.4 NO THIRD-PARTY BENEFITS. None of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any third-party
beneficiary, except that each of the Holders is a third-party beneficiary of
this Agreement whose rights may only be exercised by Secured Party in accordance
with the terms of the Intercreditor Agreement.
11.5 NO ASSIGNMENT. Neither of the parties may assign any of his or
its rights under this Agreement without the prior written consent of the other,
which shall not be unreasonably withheld; PROVIDED, HOWEVER, that Secured Party
may assign this Agreement to any successor agent under the Intercreditor
Agreement.
11.6 SUCCESSORS AND ASSIGNS. The covenants, representations,
warranties and agreements herein set forth shall be binding upon Debtor and
shall inure to the benefit of Secured Party and his permitted successors and
assigns. Subject to the foregoing, the term "Debtor," as used throughout this
Agreement shall, regardless of use of the singular form, include the successors,
legal representatives and permitted assigns of Debtor.
-7-
<PAGE>
11.7 GOVERNING LAW; JURISDICTION. This Agreement has been negotiated
in part in, the conveyance, assignment, transfer and delivery has been made in,
and the security interest granted hereby is granted in, and each shall be
governed by the laws of, the State of Texas in all respects, including matters
of construction, validity, enforcement and performance, regardless of the choice
of law provisions of Texas or any other jurisdiction. Any and all disputes
between the parties which may arise pursuant to this Agreement and not resolved
by them will be heard and determined before an appropriate federal or state
court located in Houston, Texas. The parties hereto acknowledge that such
courts have the jurisdiction to interpret and enforce the provisions of this
Agreement and the parties waive any and all objections that they may have as to
personal jurisdiction or venue in any of the above courts.
11.8 WAIVERS STRICTLY CONSTRUED. With regard to any power, remedy or
right provided herein or otherwise available to any party hereunder (i) no
waiver or extension of time shall be effective unless expressly contained in a
writing signed by the waiving party; and (ii) no alteration, modification or
impairment shall be implied by reason of any previous waiver, extension of time,
delay or omission in exercise, or by any other indulgence.
11.9 RULES OF CONSTRUCTION.
11.9.1 HEADINGS. The Article and Section headings in this
Agreement are inserted only as a matter of convenience, and in no way define,
limit, or extend or interpret the scope of this Agreement or of any particular
Article or Section.
11.9.2 TENSE AND CASE. Throughout this Agreement, as the
context may require, references to any word used in one tense or case shall
include all other appropriate tenses or cases.
11.9.3 SEVERABILITY. The validity, legality or enforceability
of the remainder of this Agreement will not be affected even if one or more of
the provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
11.9.4 AGREEMENT NEGOTIATED. The parties hereto are
sophisticated and have been represented throughout this transaction by lawyers
who have carefully negotiated the provisions hereof. As a consequence, the
parties do not believe that the presumptions of any laws or rules relating to
the interpretation of contracts against the drafter of any particular clause
should be applied in this case and therefore waive their effects.
11.9.5 TERMS DEFINED IN UNIFORM COMMERCIAL CODE. Except as the
context may otherwise require, any term used herein that is defined in the Texas
Uniform Commercial Code shall have the meaning given therein.
11.10 COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"Secured Party"
/s/ William M. DeArman
---------------------------------------------
William M. DeArman
"Debtor"
JALATE, LTD., a California corporation
/s/ Frederick A. Findley
---------------------------------------------
By: Frederick A. Findley
Its: Vice President and Chief
Financial Officer
Address:
6557 Flotilla Street
Los Angeles, California 90040
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<PAGE>
SCHEDULE 1
NOTES AND HOLDERS
Holder Note Amount Percentage
------ ----------- ----------
Don A. Sanders $237,500 25%
Katherine U. Sanders $142,500 15%
John E. Drury $ 95,000 10%
William M. DeArman $475,000 50%
-------- ----
Total $950,000 100%
-------- ----
-10-
<PAGE>
AGENCY AND INTERCREDITOR AGREEMENT
This Agency and Intercreditor Agreement ("AGREEMENT") is made by and
among Katherine U. Sanders, Don A. Sanders, John E. Drury and William M.
DeArman (individually a "NOTEHOLDER" and collectively the "NOTEHOLDERS").
R E C I T A L S:
A. Each of the Noteholders is making a loan to Jalate, Ltd., a
California corporation (the "COMPANY"), and will be issued a promissory note
(individually a "NOTE" and collectively the "NOTES"). Such Notes are listed
on SCHEDULE 1 hereto.
B. The Company will execute a Security and Pledge Agreement of even
date with the Notes ("SECURITY AGREEMENT") pursuant to which the Company will
grant to William M. DeArman ("Agent"), as agent for all Noteholders, a
security interest in certain collateral as more particularly described in the
Security Agreement ("COLLATERAL") as security for the repayment of the
Company's obligations under the Notes.
C. The Noteholders desire to enter into this Agreement to appoint
Agent to act on behalf of the Noteholders, and to set forth the Noteholders'
agreements respecting enforcement of their rights and remedies under the
Notes and the Security Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants
and promises herein contained, the parties hereto agree as follows:
1. NOTEHOLDERS' AGENT
1.1 APPOINTMENT. Each Noteholder hereby appoints William M.
DeArman as agent to act on behalf of all Noteholders in the enforcement of
their rights and remedies under the Notes and to act as the secured party
under the Security Agreement.
1.2 AUTHORITY OF AGENT. Agent shall take such action and do such
things from time to time as may be requested by an affirmative vote of the
Noteholders in the manner described in Section 3 of this Agreement.
1.3 RESIGNATION AND REMOVAL OF AGENT. Agent may resign and may be
removed, with or without cause, at any time by the Noteholders. Upon the
resignation or removal of the Agent, the Noteholders shall appoint a
successor agent and the Noteholders shall execute such additional documents
as may be reasonably required to reflect and effect such change. Upon such
appointment and execution of any documents necessary to effectuate such
appointment, the successor agent shall thereafter become the Agent hereunder.
<PAGE>
1.4 EXPENSES. Each Noteholder shall pay its pro rata share (as
defined herein) of any out-of-pocket expenses incurred by Agent in connection
with any collection efforts related to the indebtedness evidenced by the
Notes and the enforcement of rights and remedies under the Security
Agreement. Agent may request that the Noteholders advance funds to cover
expenses yet to be incurred. Any amounts so advanced by Noteholders shall be
returned to them pro rata to the extent such amounts are not expended or are
later recovered upon any required sale of the Collateral, from the Company or
otherwise.
1.5 DELEGATION OF DUTIES. Agent may carry out any of its duties
hereunder by and through its employees, attorneys or agents, and shall be
entitled to reasonably rely upon (and shall be protected in relying upon)
advice of counsel concerning all matters pertaining to its duties hereunder.
1.6 RELIANCE. Agent shall be entitled to reasonably rely on and
shall be fully protected in relying on any writing, resolution, notice,
consent, certificate, affidavit, letter, statement or other document believed
by it to be genuine.
1.7 RIGHTS AS NOTEHOLDER. Each Noteholder acknowledges that with
respect to any Note held directly or indirectly by Agent (it being
acknowledged that the initial Agent, William M. DeArman, holds a Note), Agent
shall have the same rights as any other Noteholder and may exercise such
rights as though it were not the Agent hereunder.
2. PRO RATA SHARE. Each Noteholder's pro rata share shall be equal at
any time to the outstanding principal balance of that Noteholder's Note
divided by the aggregate outstanding principal balance of all of the Notes.
Notwithstanding anything to the contrary herein, subject to the rights of
Agent to reimbursement of expenses, each Noteholder shall share in the
proceeds of the Collateral and any other collections received from the
Company in payment of the indebtedness represented by the Notes in accordance
with such Noteholder's pro rata share. Each Noteholder shall share
collection costs and expenses in accordance with its pro rata share.
3. DECISION MAKING. The following provisions shall govern voting and
decision making by the Noteholders with respect to actions to be taken under
this Agreement:
(a) The following actions shall require the affirmative vote of
all of the Noteholders:
(i) Reductions in the principal amount of or accrued
interest on any of the Notes, extensions of the maturity date of the Notes,
or any waiver of any default in the payment of any principal amount of the
Notes; and
(ii) Any amendment, modification or termination of this
Agreement, and any change in the percentage interest of Noteholders required
to consent to the amendment, modification or termination of this Agreement.
2
<PAGE>
(b) The following actions shall require the affirmative vote of
Noteholders holding in excess of 50% of the aggregate outstanding principal
balance of the Notes:
(i) Agent's obligation to exercise the rights described in
the Notes and the Security Agreement and any other agreements or documents
now or hereafter executed to secure the Notes;
(ii) Waiver of any default or any event of default, except a
default in the payment of any principal amount of the Notes when due;
(iii) Removal of Agent and the appointment of a successor
agent; and
(iv) Other actions relating to the Notes or the Security
Agreement not specifically set forth in this Section 3.
(c) In the event a Noteholder determines that a vote of
Noteholders is necessary, the Noteholder may request a vote and give each
Noteholder two business days' written notice, if practicable, or notice by
telephone if written notice is not practicable, which notice shall set forth
the issue to be decided and shall set forth the time for response or vote and
the place and method of such vote. Notice shall be deemed given when
actually received. Any Noteholder not responding within the time limit shall
be registered as voting no. The vote shall be conducted by Agent and may be
by meeting, telephone conference call or by individual polling of the voters.
Agent shall notify each Noteholder of the results of the vote and proceed to
act as required by the vote.
4. LIMITATION OF LIABILITY. Agent shall not be liable for any action
taken or omitted to be taken by it in accordance with this Agreement if it
acted or failed to act in good faith and reasonably believed it was acting or
withholding action within the discretion or power conferred by this
Agreement, nor shall it be responsible for the consequences of any error in
judgment. Except as provided herein, Agent shall be under no duty to enforce
any rights with respect to the Notes, the Security Agreement or the
Collateral covered thereby. Agent shall not be compelled to do any act
hereunder or to take any action towards the execution or enforcement of the
powers hereby created or to prosecute or defend any suit hereunder unless
indemnified to its reasonable satisfaction against loss, cost, liability and
expense. Agent shall not be responsible in any manner to any of the
Noteholders for the effectiveness, enforceability, genuineness, validity or
due execution of any of the Notes, the Security Agreement, or any other
documents evidencing the obligations of the Company under the Notes or
securing same, or for any representation, warranty, document, certificate,
report or statement made in or furnished under or in connection with any of
the foregoing documents, or be under any obligation to any of the Noteholders
to ascertain or to inquire as to the Company's performance or observation of
any of the terms, covenants or conditions of the Notes or Security Agreement.
The Noteholders agree to indemnify Agent from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and/or disbursements of any kind or nature whatsoever
which may be
3
<PAGE>
imposed on, asserted against, or incurred by it in any way relating to or
arising out of any document pertaining to the Notes or any action taken or
omitted by it under such documents, except to the extent the same results
from the gross negligence or willful misconduct of Agent.
5. PARITY OF THE NOTEHOLDERS. Each Noteholder acknowledges and agrees
that all liabilities owed to the Noteholder by the Company arising under that
Noteholder's Note shall be PARI PASSU with the liabilities owed to all other
Noteholders arising under their Notes.
6. NOTEHOLDER CREDIT DECISION. Each Noteholder acknowledges that it
has, independently and without reliance on Agent or any other Noteholder and
based upon such documents and information as it has deemed appropriate, made
its own credit analysis and decision to make a loan to the Company and to
enter into this Agreement.
7. BENEFITS OF AGREEMENT. None of the provisions of this Agreement
shall inure to the benefit of the Company or any person other than the
Noteholders. Neither the Company nor any other person shall be entitled to
rely upon or to raise as a defense in any manner whatsoever based on the
failure of any Noteholder to comply with this Agreement.
8. NO PARTNERSHIP. Neither the execution of this Agreement nor any
agreement related to the Collateral securing the Notes is intended to be or
to create, and the foregoing shall not be construed to be, a partnership,
joint venture or other joint enterprise among the Noteholders or any of them,
or as between the Noteholders and Agent.
9. CONTROLLING AGREEMENT; COUNTERPARTS. In the event of any conflict
between the terms of the Notes, the Security Agreement, and this Agreement
relating to the relationships among Noteholders and as between the
Noteholders and Agent, this Agreement shall control. This Agreement may be
executed in any number of counterparts, all of which, when taken together,
shall constitute one agreement.
10. SURVIVAL OF AGREEMENTS. This Agreement shall remain in full force
and effect until payment in full of the Notes and any other obligations
secured under the Security Agreement.
11. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas, and each party to the extent it may lawfully do so hereby
consents to service of process and to be sued in the State of Texas and in
the United States District Court for the Southern District of Texas, as well
as to the jurisdiction of all courts from which an appeal may be taken from
such courts, for the purpose of any suit, action or other proceeding arising
out of this Agreement, or with respect to the transactions contemplated
hereby, and expressly waives any and all objections it may have as to venue
in any such courts.
4
<PAGE>
"NOTEHOLDERS":
/s/ Katherine U. Sanders
----------------------------------------
KATHERINE U. SANDERS
Date: January 27, 1998
/s/ Don A. Sanders
----------------------------------------
DON A. SANDERS
Date: January 27, 1998
/s/ John E. Drury
----------------------------------------
JOHN E. DRURY
Date: January 27, 1998
/s/ William M. DeArman
----------------------------------------
WILLIAM M. DeARMAN
Date: January 27, 1998
5
<PAGE>
SCHEDULE 1
NOTES AND HOLDERS
Holder Note Amount Percentage
------ ----------- ----------
Don A. Sanders $237,500 25%
Katherine U. Sanders $142,500 15%
John E. Drury $ 95,000 10%
William M. DeArman $475,000 50%
-------- ----
TOTAL $950,000 100%
-------- ----
6
<PAGE>
JALATE, LTD.
STOCK PURCHASE WARRANT
THE WARRANTS EVIDENCED HEREBY AND THE SHARES OF STOCK ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE OFFERED OR SOLD WITHOUT REGISTRATION UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE UNDER SUCH ACT OR THE RULES OR
REGULATIONS PROMULGATED THEREUNDER
WARRANT TO PURCHASE 250,000 SHARES OF COMMON STOCK
AS DESCRIBED HEREIN
Issue Date: January 27, 1998. Series A Warrant No. 4
Expiration Date: January 27, 2003. ---
Sale Price: $.10 per Number of Shares.
This certifies that, for value received, William M. DeArman, his permitted
successors and assigns ("HOLDER"), is entitled to purchase from Jalate, Ltd., a
California corporation (the "COMPANY"), up to and including 250,000 fully paid
and nonassessable shares (the "NUMBER OF SHARES") of the Common Stock, no par
value, of the Company (the "COMMON STOCK") on the terms set forth herein at an
exercise price of $1.625 per share (the "PURCHASE PRICE"). The Number of Shares
and the Purchase Price may be adjusted from time to time as described in this
Warrant.
1. EXERCISE.
1.1 TIME FOR EXERCISE. This Warrant may be exercised in whole or in part
at any time, and from time to time, during the period commencing on the date of
this Warrant and expiring on January 27, 2003 (the "EXERCISE PERIOD").
1.2 MANNER OF EXERCISE. This Warrant shall be exercised by delivering it
to the Company with the exercise form duly completed and signed, specifying
(i) the number of shares as to which the Warrant is being exercised at that time
(the "EXERCISE NUMBER"), and (ii) whether the exercise is being made by
"purchase" or "exchange".
1.2.1 PURCHASE. If the Holder elects the purchase option, the
Holder shall simultaneously therewith deliver to the Company cash or a certified
check in an amount equal to the Exercise Number multiplied by the Purchase
Price, and the Holder shall be entitled to receive the full Exercise Number of
shares of Common Stock.
1.2.2 EXCHANGE. If the Holder elects the exchange option, the
Holder shall be entitled (without cash payment) to receive that number of shares
of Common Stock having
<PAGE>
an aggregate Market Value on the date of exercise equal to the difference
between the Market Value of the Exercise Number of shares and the aggregate
Purchase Price thereof. "MARKET VALUE" for any security on any given date
means (i) the average closing price for the prior ten trading days for such
security on the principal stock exchange on which such security is traded or
(ii) if not so traded, the closing (or, if no closing price is available, the
average of the bid and asked prices) for such period on The Nasdaq Stock
Market if such security is quoted thereon or (iii) if not listed on any
exchange or quoted on The Nasdaq Stock Market, such value, determined without
regard to the minority shareholder position of the Holder, as may be
determined in good faith by an independent appraiser selected by the Company
and the Holder, which determination shall be conclusively binding on the
parties. The costs of the independent appraiser shall be divided equally
between the Company and the Holders.
1.3 EFFECT OF EXERCISE. Promptly (but in any case within five business
days) after any exercise, the Company shall deliver to the Holder (i) duly
executed certificates in the name or names specified in the exercise notice
representing the aggregate number of shares issuable upon such exercise, and
(ii) if this Warrant is exercised only in part, a new Warrant of like tenor
representing the balance of the Number of Shares. Such certificates shall be
deemed to have been issued, and the person receiving them shall be deemed to be
a holder of record of such shares, as of the close of business on the date the
actions required in Section 1.2 shall have been completed or, if on that date
the stock transfer books of the Company are closed, as of the next business day
on which the stock transfer books of the Company are open.
2. TRANSFER OF WARRANTS AND STOCK.
2.1 TRANSFER RESTRICTIONS. Neither this Warrant nor the securities
issuable upon its exercise may be sold, transferred or pledged unless the
Company shall have been supplied with reasonably satisfactory evidence that such
transfer is not in violation of the Securities Act of 1933, as amended (the
"ACT"), and any applicable state securities laws. The Company may place a
legend to that effect on this Warrant, any replacement Warrant and each
certificate representing shares issuable upon exercise of this Warrant.
2.2 MANNER OF TRANSFER. Upon delivery of this Warrant to the Company with
the assignment form duly completed and signed, the Company will promptly (but in
any case within five business days) execute and deliver to each transferee and,
if applicable, the Holder, Warrants of like tenor evidencing the rights (i) of
the transferee(s) to purchase the Number of Shares specified for each in the
assignment forms, and (ii) of the Holder to purchase any untransferred portion,
which in the aggregate shall equal the Number of Shares of the original Warrant.
If this Warrant is properly assigned in compliance with this Section 2, it may
be exercised by an assignee without having a new Warrant issued.
2.3 LOSS, DESTRUCTION OR MUTILATION OF WARRANT CERTIFICATES. Upon receipt
of (i) evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Warrant and (ii) except in the case of
mutilation, an indemnity or security
-2-
<PAGE>
reasonably satisfactory to the Company, the Company will promptly (but in any
case within five business days) execute and deliver a replacement Warrant of
like tenor representing the right to purchase the same Number of Shares.
3. COST OF ISSUANCES. The Company shall pay all expenses, transfer taxes and
other charges payable in connection with the preparation, issuance and delivery
of stock certificates or replacement Warrants, except for any transfer tax or
other charge imposed as a result of (a) any issuance of certificates in any name
other than the name of the Holder, or (b) any transfer of the Warrant. The
Company shall not be required to issue or deliver any stock certificate or
Warrant until it receives reasonably satisfactory evidence that any such tax or
other charge has been paid by the Holder.
4. ANTI-DILUTION PROVISIONS. If any of the following events occur at any time
hereafter during the life of the Warrant, then the Warrant immediately prior to
such event shall be changed as described in order to prevent dilution:
4.1 If at any time (i) the outstanding shares of Common Stock are
subdivided into a greater number of shares, then the Purchase Price will be
reduced proportionately and the Number of Shares will be increased
proportionately; conversely, (ii) if the outstanding shares of Common Stock are
consolidated into a smaller number of shares, then the Purchase Price will be
increased proportionately and the Number of Shares will be reduced
proportionately.
4.2 Upon (i) any reorganization or reclassification of the Common
Stock, (ii) the dissolution or liquidation of the Company, (iii) a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation
or entity or becomes a subsidiary of another corporation or entity, or (iv) the
sale of substantially all the property or more than fifty percent (50%) of the
then outstanding stock of the Company to another corporation or entity (any such
occurrence shall be an "Event"), in which holders of Common Stock are entitled
to receive securities and/or assets as a result of their Common Stock ownership,
then upon exercise of this Warrant the Holder will have the right to receive the
shares of stock, securities or assets which it would have received if the
Warrant had been fully exercised as of the record date for such Event. The
Company will not effect any Event unless prior to or simultaneously with its
consummation the successor corporation or entity resulting from the
consolidation or merger (if other than the Company) or the Company's new
ultimate parent corporation or entity (if the Company becomes a subsidiary), or
the corporation purchasing the Company's assets or stock, assumes the
performance of the Company's obligations under this Warrant (as appropriately
adjusted to reflect such consolidation, merger or sale such that the Holder's
rights under this Warrant remain, as nearly as practicable, unchanged) by a
binding written instrument.
4.3 If at any time the Company declares a dividend on the Common
Stock payable in shares of Common Stock or securities convertible into shares of
Common Stock, the Number of Shares shall be increased, as of the record date for
determining which holders
-3-
<PAGE>
of Common Stock shall be entitled to receive such dividend, in proportion to
the increase in the number of outstanding shares of Common Stock as a result
of such dividend. In the event any such securities convertible into shares
of Common Stock are not so converted by the time any such conversion right
expires, the Number of Shares shall be proportionately decreased, as of such
expiration date.
4.4 Upon each computation of an adjustment under this Section 4, the
Purchase Price shall be computed to the nearest tenth of a cent and the Number
of Shares shall be calculated to the nearest whole share. However, the
fractional amount shall be used in calculating any future adjustments. No
fractional shares of stock shall be issued in connection with the exercise of
this Warrant, but the Company shall, in the case of the final exercise under
this Warrant, make a cash payment for any fractional shares based on the Market
Value of a share of Common Stock on the date of exercise (as defined in Section
1.2.2).
4.5 Officer's Certificate. Whenever the Number of Shares or the Purchase
Price shall be adjusted as required by the provisions of this Section 4, the
Company forthwith shall file in the custody of its secretary or an assistant
secretary, at its principal office, a certificate of the chief financial officer
of the Company showing the adjusted Number of Shares and the adjusted Purchase
Price and setting forth in reasonable detail the circumstances requiring the
adjustment. Each such officer's certificate shall be made available at all
reasonable times during reasonable hours for inspection by the Holder.
Notwithstanding any changes in the Purchase Price or the Number of Shares,
this Warrant may continue to state the initial Purchase Price and the initial
Number of Shares. Alternatively, the Company may elect to issue a new Warrant
or Warrants of like tenor for the additional shares of Common Stock or, upon
surrender of the existing Warrant, to issue a replacement Warrant evidencing all
the Warrant Shares to which the Holder is entitled after such adjustments.
5. COVENANTS. The Company agrees that:
5.1 RESERVATION OF STOCK. During the period in which this Warrant may be
exercised, the Company will reserve sufficient authorized but unissued
securities (and, if applicable, property) to enable it to satisfy its
obligations on exercise of this Warrant. If at any time the Company's
authorized securities shall not be sufficient to allow the exercise of this
Warrant, the Company shall take such corporate action as may be necessary to
increase its authorized but unissued securities to be sufficient for such
purpose.
5.2 NO LIENS, ETC. All securities that may be issued upon exercise of
this Warrant will, upon issuance, be validly issued, fully paid, nonassessable
and free from all taxes, liens and charges with respect to the issue thereof,
and shall be listed on any exchanges on which that class of securities is
listed.
-4-
<PAGE>
5.3 NO DIMINUTION OF VALUE. The Company will not take any action to
terminate this Warrant or to diminish it in value.
5.4 FURNISH INFORMATION. The Company will promptly deliver to the Holder
copies of all financial statements, reports and proxy statements which the
Company shall have sent to its stockholders generally.
5.5 STOCK AND WARRANT TRANSFER BOOKS. Except upon dissolution,
liquidation or winding up or for ordinary holidays and weekends, the Company
will not at any time close its stock or warrant transfer books so as to result
in preventing or delaying the exercise or transfer of this Warrant.
6. STATUS OF HOLDER.
6.1 NOT SHAREHOLDER. Unless the Holder exercises this Warrant in writing,
the Holder shall not be entitled to any rights (i) as a stockholder of the
Company with respect to the shares as to which the Warrant is exercisable
including, without limitation, the right to vote or receive dividends or other
distributions, or (ii) to receive any notice of any proceedings of the Company
except as otherwise provided in this Warrant.
6.2 LIMITATION OF LIABILITY. Unless the Holder exercises this Warrant in
writing, the Holder's rights and privileges hereunder shall not give rise to any
liability for the Purchase Price or as a stockholder of the Company, whether to
the Company or its creditors.
7. REGISTRATION RIGHTS.
7.1 DEMAND REGISTRATION. This Warrant is one in a series of warrants
having the same terms and identified as "Series A" (the "SERIES A WARRANTS").
Upon the request of the holders of a majority of the shares issuable upon
exercise of the Series A Warrants made anytime during the Exercise Period, the
Company will use all reasonable efforts on one occasion to register for resale
in accordance with the Act, all shares of Common Stock issuable upon exercise of
the Warrant which do not qualify for an exemption from such registration under
Rule 144 under the Act or a comparable or successor exemption from registration
("REGISTRABLE SHARES"); provided that such registration must cover at least
one-half of the Number of Shares covered by the original Series A Warrants.
The Holder agrees to cooperate with the Company in all reasonable ways to
effect such registration. The Company will use all reasonable efforts to
keep such registration effective for one hundred eighty days or, if shorter,
until all Registrable Shares included in the registration statement have been
disposed of. The effectiveness period of the registration statement shall be
subject to customary and reasonable "black-out" periods in the event of any
significant corporate transactions (including material financings); PROVIDED,
HOWEVER, that the one hundred eighty day effectiveness period shall be
extended on a day-for-day basis in connection with any such "black-out."
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The Purchase Price shall be decreased by $.10 per share (subject to
adjustment pursuant to Section 4.1 hereof) if the Company does not file the
registration statement with the Securities and Exchange Commission (the
"COMMISSION") within 90 days following the making of the demand and by an
additional $.10 per share (subject to adjustment pursuant to Section 4.1 hereof)
for each subsequent 90-day period in which the registration statement is not
filed.
7.2 "PIGGYBACK" REGISTRATION. If at any time the Company proposes to file
a registration statement under the Act with respect to an offering of its Common
Stock (other than a registration statement on Form S-4 or Form S-8 or any
successor or similar forms), whether or not for sale for its own account, then
the Company each such time shall give the Holder ten (10) business days written
notice before the filing thereof, which such notice shall offer the Holder the
opportunity to register such Holder's Registrable Shares. The Company shall
include in such registration statement all of the Holder's Registrable Shares
with respect to which the Company has received written request for inclusion
within ten (10) business days after notice has been duly given by the Company.
Notwithstanding the foregoing, the Company shall not be required to include the
Holder's Registrable Shares if the managing underwriter or underwriters of such
offering determine and advise the Company that inclusion of the Registrable
Shares and any other shares having "piggyback" registration rights (the "OTHER
SHARES") would likely adversely affect such offering. If the managing
underwriter or underwriters determine that a portion of the Registrable Shares
and Other Shares may be included in the offering, the Registrable Shares and the
Other Shares shall be included in the registration on a pro rata basis (in
relation to the number of such Registrable Shares and Other Shares so requested
to be included in the offering).
7.3 REGISTRATION EXPENSES. Except as otherwise required by state
securities laws or the rules and regulations promulgated thereunder, all
expenses, disbursements and fees incurred by the Company in connection with
carrying out its obligations under this Section 7 shall be borne by the Company;
PROVIDED, HOWEVER, that the Holder shall pay (i) all costs and expenses of
counsel, accounting or financing professionals retained by such Holder, (ii) all
underwriting discounts, commissions, fees and expenses and all transfer taxes
with respect to the shares sold by such Holder, and (iii) all other expenses
incurred by such Holder and incidental to the sale and delivery of the shares to
be sold by such Holder.
7.4 CONDITIONS TO HOLDER'S RIGHTS. It shall be a condition of the
Holder's rights under this Section 7 that:
7.4.1 COOPERATION. Such Holder shall cooperate with the Company by
supplying information and executing documents relating to such Holder or the
securities of the Company owned by such Holder in connection with such
registration which are customary for offerings of this type or is required by
applicable laws or regulations (including agreeing to sell such Holder's
Registrable Securities on the basis provided in any underwriting arrangements
containing customary terms reasonably satisfactory to such Holder); and
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7.4.2 UNDERTAKINGS. Such Holder shall enter into any undertakings and
take such other action relating to the conduct of the proposed offering which
the Company or the underwriters may reasonably request as being necessary to
insure compliance with federal and state securities laws and the rules or other
requirements of the National Association of Securities Dealers, Inc., The Nasdaq
Stock Market or which the Company or the underwriters may reasonably request to
otherwise effectuate the offering.
7.5 REGISTRATION PROCEDURES. If and whenever the Company is required to
use its reasonable efforts to effect the registration of any Registrable Shares
under the Act as provided in this Section 7, the Company will, as expeditiously
as practicable:
(i) notify the Holder of the Commission's requests for amending or
supplementing of the registration statement and the prospectus, and prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to
comply with the provisions of the Act with respect to the disposition of
all Registrable Shares covered by such registration statement;
(ii) furnish to the Holder such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Act, in conformity with the requirements of
the Act, and such other documents, as the Holder may reasonably request;
(iii) use its reasonable efforts (x) to register or qualify all
Registrable Shares covered by such registration statement under such other
securities or blue sky laws of such States of the United States of America
where an exemption is not available and as the Holder shall reasonably
request, (y) to keep such registration or qualification in effect for so
long as such registration statement remains in effect, and (z) to take any
other action which may be reasonably necessary or advisable to enable the
Holder to consummate the disposition in such jurisdictions of the
Registrable Shares to be sold by the Holder, except that the Company shall
not for any such purpose be required to qualify generally to do business as
a foreign corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (iii) be obligated to be so qualified or
to consent to general service of process or become subject to general
taxation in any such jurisdiction;
(iv) use its reasonable efforts to cause all Registrable Shares
covered by such registration statement to be registered with or approved by
such other federal or state governmental agencies or authorities as may be
necessary in the opinion of counsel to the Company and counsel to the
Holder to consummate the disposition of such Registrable Shares;
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(v) furnish to the Holder a signed counterpart of
(x) an opinion of counsel for the Company, and
(y) a "comfort" letter signed by the independent public
accountants who have certified the Company's financial statements
included or incorporated by reference in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountant's comfort letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' comfort letters delivered to the
underwriters in underwritten public offerings of securities (and dated the
dates such opinions and comfort letters are customarily dated) and, in the
case of the accountant's comfort letter, such other financial matters, and
in the case of the legal opinion, such other legal matters, as the Holder
or the underwriters may reasonably request;
(vi) notify the Holder at any time when a prospectus relating thereto
is required to be delivered under the Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were made,
and at the request of the Holder promptly prepare and furnish to him a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
and
(vii) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission.
The Holder agrees by acquisition of such Registrable Shares that upon
receipt of any written notice from the Company of the happening of any event of
the kind described in subdivision (vi) of this Section 7.5 the Holder will
forthwith discontinue its disposition of Registrable Shares pursuant to the
registration statement relating to such Registrable Shares until the Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
subdivision (vi) of this Section 7.5 and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in the Holder's possession, of the prospectus
relating to such Registrable Shares current at the time of receipt of such
notice.
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Nothing contained in this Section 7.5 shall require or obligate the Company
to cause any registration statement pursuant to which the Holder has exercised
its "piggyback" registration rights pursuant to Section 7.2 hereof to become
effective or, if declared effective, to maintain the effectiveness of such
registration statement.
7.6 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any registration of
any Registrable Shares under the Act, the Company will, and it hereby does,
indemnify and hold harmless, to the full extent permitted by law, the Holder,
its directors, officers, partners, heirs, personal representatives, agents and
affiliates and each other person, if any, who controls the Holder within the
meaning of the Act, against any and all losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect thereof)
which arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and the Company will reimburse the Holder and each such director, officer,
partner, heir, personal representative, agent or affiliate, and controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; PROVIDED, HOWEVER, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement (i) in reliance
upon and in conformity with written information furnished to the Company through
an instrument duly executed by or on behalf of the Holder, specifically stating
that it is for use in the preparation thereof or (ii) which is corrected in an
amendment or supplement or final prospectus (or amendment or supplement thereto)
provided to the indemnified person and such amended, supplemented or final
prospectus (or amendment or supplement thereto) was not given by or on behalf of
such indemnified person to the person who purchased the Registrable Securities,
if such is required by law at or prior to the written confirmation of the sale
of the Registrable Securities to such person; and PROVIDED, FURTHER, that the
Company shall not be liable to any person to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon any violation by such person of the Act or the
Securities Exchange Act of 1934, as amended. Such indemnity shall remain in
full force regardless of any investigation made by or on behalf of the Holder or
any such director, officer, partner, heir, personal representative, agent or
affiliate or controlling person and shall survive the transfer of such
securities by the Holder.
(b) INDEMNIFICATION BY THE HOLDER. As a condition to including any
Registrable Shares in any registration statement, the Company shall have
received an undertaking
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reasonably satisfactory to it from each Holder, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in
subdivision (a) of this Section 7.6) the Company, its directors, officers,
agents and affiliates and each other person, if any, who controls the Company
within the meaning of the Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement
or alleged statement or omission or alleged omission (i) was made in reliance
upon and in conformity with written information furnished to the Company
through an instrument duly executed by the Holder specifically stating that
it is for the use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement or (ii) is corrected in an amendment or supplement or final
prospectus (or amendment or supplement thereto) provided to the indemnifying
person and such amended, supplemented or final prospectus (or amendment or
supplement thereto) was not given by or on behalf of such indemnifying person
to the person who purchased the Registrable Securities, if such is required
by law at or prior to the written confirmation of the sale of the Registrable
Securities to such person; PROVIDED, HOWEVER, that the liability of such
indemnifying party under this Section 7.6(b) shall be limited to the amount
of proceeds received by the Holder in the offering giving rise to such
liability. Such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such
director, officer or controlling person and shall survive the transfer of
such securities by the Holder.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivisions of
this Section 7.6, such indemnified party will, if a claim in respect thereof
is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; PROVIDED, HOWEVER, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 7.6, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any
such claim or action is brought against an indemnified party, the
indemnifying party shall be entitled to participate in and, unless
representation of such indemnified party and any such indemnifying party by
the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel
has been proposed) due to actual or potential differing interests between
them, to assume the defense thereof, jointly with any other indemnifying
party similarly notified to the extent that it may wish, with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs
of investigation. No indemnifying party shall be liable for any settlement
of any action or proceeding effected without its written consent. No
indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect to
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such claim or litigation. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by an
indemnifying party with respect to such claim, unless representation of such
indemnified parties by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or
potential differing interests between them with respect to such claim, in
which event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels.
(d) CONTRIBUTION. If the indemnification provided for in this Section
7.6 shall for any reason be held by a court to be unavailable to an
indemnified party under subparagraph (a) or (b) hereof in respect of any
loss, claim, damage or liability, or any action in respect thereof, then, in
lieu of the amount paid or payable under subparagraph (a) or (b) hereof, the
indemnified party and the indemnifying party under subparagraph (a) or (b)
hereof shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigation of the same), (i) in such proportion as is
appropriate to reflect the relative fault of the Company and the Holder with
respect to the acts, statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
shall be appropriate to reflect the relative benefits received by the Company
and the Holder from the offering of the securities covered by such
registration statement. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. In addition, no person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such person's consent, which consent shall not be
unreasonably withheld.
(e) OTHER INDEMNIFICATION. Indemnification and contribution similar to
that specified in the preceding subdivisions of this Section 7.6 (with
appropriate modifications) shall be given by the Company and the Holder with
respect to any required registration or other qualification of securities
under any federal or state law or regulation of any governmental authority
other than the Act.
(f) INDEMNIFICATION PAYMENTS. The indemnification and contribution
required by this Section 7.6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills
are received or expense, loss, damage or liability is incurred.
8. GENERAL PROVISIONS.
8.1 COMPLETE AGREEMENT; MODIFICATIONS. This Warrant and any documents
referred to herein or executed contemporaneously herewith constitute the
parties' entire agreement with respect to the subject matter hereof and
supersede all agreements, representations, warranties, statements, promises
and understandings, whether oral or
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<PAGE>
written, with respect to the subject matter hereof. This Warrant may not be
amended, altered or modified except by a writing signed by the parties.
8.2 ADDITIONAL DOCUMENTS. Each party hereto agrees to execute any and all
further documents and writings and to perform such other actions which may be or
become necessary or expedient to effectuate and carry out this Warrant.
8.3 NOTICES. All notices under this Warrant shall be in writing and shall
be delivered by personal service or telecopy or certified mail, postage prepaid,
to such address as may be designated from time to time by the relevant party,
and which shall initially be:
Jalate, Ltd.
6557 Flotilla Street
City of Commerce, California 90040
Fax: (213) 728-3752
Attn: Frederick A. Findley
Vice President-Finance and
Chief Financial Officer
William M. DeArman
5420 Huckleberry Lane
Houston, Texas 77056
Fax: (713) 552-1505
Any notice sent by certified mail shall be deemed to have been given five
(5) business days after the date on which it is mailed. All other notices shall
be deemed given when received. No objection may be made to the manner of
delivery of any notice actually received in writing by an authorized agent of a
party.
8.4 NO THIRD-PARTY BENEFITS; SUCCESSORS AND ASSIGNS. None of the
provisions of this Warrant shall be for the benefit of, or enforceable by, any
third-party beneficiary. Except as provided herein to the contrary, this
Warrant shall be binding upon and inure to the benefit of the parties, their
respective successors and permitted assigns.
8.5 DISPUTES.
8.5.1 GOVERNING LAW; JURISDICTION. This Warrant concerns a
California business and all questions with respect to the Warrant and the rights
and liabilities of the parties will be governed by the laws of California in all
respects, including matters of construction, validity, enforcement and
performance, regardless of the choice of law provisions of California or any
other jurisdiction. Any and all disputes between the parties which may arise
pursuant to this Warrant and not resolved by them will be heard and determined
before an appropriate federal or state court located in Houston, Texas. The
parties hereto acknowledge that such courts have the jurisdiction to interpret
and enforce the
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provisions of this Warrant and the parties waive any and all objections that
they may have as to personal jurisdiction or venue in any of the above courts.
8.5.2 ATTORNEYS' FEES. Should any litigation be commenced (including
any proceedings in a bankruptcy court) between the parties hereto or their
representatives concerning any provisions of this Warrant or the rights and
duties of any person or entity hereunder, the party or parties prevailing in
such proceeding shall be entitled, in addition to such other relief as may be
granted, to the reasonable attorneys' fees and court costs incurred by reason of
such litigation.
8.6 WAIVERS STRICTLY CONSTRUED. With regard to any power, remedy or right
provided herein or otherwise available to any party hereunder (i) no waiver or
extension of time shall be effective unless expressly contained in a writing
signed by the waiving party; and (ii) no alteration, modification or impairment
shall be implied by reason of any previous waiver, extension of time, delay or
omission in exercise, or other indulgence.
8.7 RULES OF CONSTRUCTION.
8.7.1 HEADINGS. The Article and Section headings in this Warrant are
inserted only as a matter of convenience, and in no way define, limit, or extend
or interpret the scope of this Warrant or of any particular Article or Section.
8.7.2 TENSE AND CASE. Throughout this Warrant, as the context may
require, references to any word used in one tense or case shall include all
other appropriate tenses or cases.
8.7.3 SEVERABILITY. The validity, legality or enforceability of the
remainder of this Warrant will not be affected even if one or more of the
provisions of this Warrant are held to be invalid, illegal or unenforceable in
any respect.
8.7.4 WARRANT NEGOTIATED. The parties hereto are sophisticated and
have been represented throughout this transaction by lawyers who have carefully
negotiated the provisions hereof. As a consequence, the parties do not believe
that the presumptions of any laws or rules relating to the interpretation of
contracts against the drafter of any particular clause should be applied in this
case and therefore waive their effects.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
effective as of January 27, 1998.
JALATE, LTD., a California
corporation
By: /s/ Frederick A. Findley
-----------------------------------
Frederick A. Findley
Vice President and Chief
Financial Officer
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<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________________________ hereby sells, assigns
and transfers to the transferee named below [the rights to purchase ___ of the
Number of Shares under] this Warrant, together with all rights, title and
interest therein. [The rights to purchase the remaining Number of Shares shall
remain the property of the undersigned.] This includes a transfer of the
registration rights in the Warrant; PROVIDED, HOWEVER, that in the case of a
partial assignment of this Warrant, both the Holder and the transferee shall
have the registration rights set forth in Section 7 of the Warrant.
Dated: _______________
[NAME OF HOLDER]
By
----------------------------------
Signature
Name:
-------------------------------
(Please Print)
Address:
----------------------------
----------------------------
----------------------------
Employer Identification Number,
Social Security Number or other
identifying number:
----------------
TRANSFEREE:
Name:
--------------------------
(Please Print)
Address:
-----------------------
-----------------------
-----------------------
Employer Identification Number,
Social Security Number or other
identifying number:
------------
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EXERCISE FORM
To Be Executed
Upon Exercise of Warrant
The undersigned hereby exercises the Warrant with regard to _____________
shares of Common Stock and herewith [makes payment of the purchase price in
full] [or requests that the Company exchange the Warrant as provided in
Section 1.2.2 of the Warrant]. The undersigned requests that certificate(s) for
such shares [and the Warrant for the unexercised portion of this Warrant] be
issued [to the Holder] [in the name set forth below].
Dated: _______________
[NAME OF HOLDER]
By
----------------------------------
Signature
Name:
-------------------------------
(Please Print)
Address:
----------------------------
----------------------------
----------------------------
Employer Identification Number,
Social Security Number or other
identifying number:
----------------
[TRANSFEREE:
Name:
--------------------------
(Please Print)
Address:
-----------------------
-----------------------
-----------------------
Employer Identification Number,
Social Security Number or other
identifying number:
------------]
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