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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-KSB-A
/ / ANNUAL REPORT PURSUANT TO 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED: FEBRUARY 28, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM: ____________ TO ____________
COMMISSION FILE NUMBER 0-21781
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SERACARE, INC.
(Name of Small Business Issuer in its charter)
<TABLE>
<S> <C>
DELAWARE 95-4343492
(State of (I.R.S. Employer
Incorporation) Identification No.)
1925 CENTURY PARK
EAST, SUITE 1970
LOS ANGELES,
CALIFORNIA
(Address of 90067
principal (Zip code)
executive offices)
</TABLE>
Issuer's telephone number: (310) 772-7777
--------------------------
Securities registered under Section 12(b) of the Exchange Act: None
Securities to be registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 Par Value
--------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/
The issuer's revenue for its fiscal year ended February 28, 1999 was
$49,698,207.
As of April 30,1999, the aggregate market value of the issuers voting shares
held by non-affiliates was approximately $27,941,000 based on the last price per
share of such common stock at which the stock was sold on such date as reported
by the AMEX.
As of April 30, 1999, the issuer had 7,644,418 shares of its common stock,
$.001 par value issued and outstanding.
Transitional Small Business Disclosure Format Yes / / No /X/
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PART I
ITEM 1. BUSINESS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the statements in this
report (including without limitation, statements indicating that the Company
"expects," "estimates," "anticipates," or "believes" and all other statements
concerning future financial results, product offerings or other events that have
not yet occurred) are forward-looking statements that are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995,
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended. Forward-looking statements involve
known and unknown factors, risks and uncertainties which may cause the Company's
actual results in future periods to differ materially from forecasted results.
Those factors, risks and uncertainties include, but are not limited to: the
positioning of the Company's products in the Diagnostic and Therapeutic Plasma
Products industry; the Company's ability to effectively manage its various
businesses in a rapidly changing environment; the impact of new blood safety
measures by the American Blood Resources Association or FDA which could
disqualify certain of the Company's current donors or impose excessive new costs
through new or revised testing and/or screening requirements; new competition
for donors and customers; the Company's dependence on a few major customers and
its ability to negotiate new agreements with such customers with favorable terms
and conditions; the inability of the Company to obtain FDA approval of newly
established centers; the ability of the company to integrate newly acquired
company's with geographically separated organizations, different business
backgrounds and different corporate cultures; and the introduction of synthetic
products which could eliminate the need for plasma products.
DESCRIPTION OF THE BUSINESS
SeraCare, Inc. ("SeraCare" or the "Company") was incorporated under the laws
of the State of Delaware in 1991 and changed its name from American Blood
Institute, Inc. to SeraCare, Inc. effective February 6, 1996. The Company's
principal business and executive offices are at 1925 Century Park East, Suite
1970, Los Angeles, California 90067, telephone (310) 772-7777.
COMPANY HISTORY. The Company as it is currently organized has evolved over
the last three years since February 6, 1996, when a new management team with a
strategic plan for expansion and growth began guiding the Company. During that
three year period, the Company has grown from six plasma collection centers to a
total of thirty two centers as of February 28, 1999, both through acquisition
and by establishing new startup centers. In addition, the Company made two key
acquisitions in Western States Group, Inc. (herein referred to as "Western
States") and Consolidated Technologies (herein referred to as "CTI"); and
recruited some of the leading experts in the industry to join the board of
directors and direct the operations of the Company's three divisions. SeraCare,
Inc. went public in May 1996 on the OTC Bulletin Board and is now listed on the
American Stock Exchange under the symbol SRK.
PRINCIPAL BUSINESS OPERATIONS. Organizationally, the Company consists of
three divisions: Consolidated Technologies Division; Western States Plasma
Division; and Biologics Division. With the acquisitions of Western States and
CTI, the Company became a fully integrated collector; manufacturer and marketer
of plasma based diagnostic products and tests. Western States has provided
expanded worldwide marketing with its domestic customer base and an extensive
European and Asian presence. In addition, the Company's Biologics Division
continues to be a factor in the business of collecting and selling source plasma
to manufacturers of pharmaceutical and diagnostic products (called
Fractionators). While the primary product of the Company's Biologics Division
continues to be source plasma, the Company also collected and sold
Cytomegalovirus Antibody Plasma (CMV), Tetanus Antibody Plasma and HbSag
(hepatitus positive) plasma during the fiscal year ended February 28, 1999. The
Company's customers process source plasma into such products as gamma globulin
(used to provide passive immunity for infectious diseases such as hepatitis B,
tetanus and rabies), the Antihemophilic factor (used to treat
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hemophiliac victims), normal serum albumin (used for shock, trauma and burn
victims), diagnostic test kits for hepatitis and allergies, and blood bank
typing reagents. The Company also initiated various other specialty plasma
programs during the period, and while these programs are only in the early
stages of development, initial results coordinated through the efforts of
Western States and CTI have been promising.
The process of collecting plasma is called Plasmapheresis, which consists of
drawing whole blood from a donor; centrifuge separation of the whole blood into
its components; removal of the plasma component; and returning of the red blood
cells to the donor; all in the same process. Because the red blood cells are
returned to the donor, it is possible to donate plasma more frequently than
whole blood. According to FDA rules, a donor can donate plasma up to twice per
week or 104 times per year.
The Company's Biologics Division currently sells the majority of the source
plasma it collects to fractionators under one to three year renewable contracts
which allow for annual pricing adjustments. The fractionators process the plasma
into therapeutic products which are then sold for distribution to the end users
of the products. None of the source plasma collected by the Company is sold or
administered to an end user without being processed by a fractionator.
CURRENT OPERATIONS.
BIOLOGICS DIVISION. The Biologics Division currently conducts its business
through five wholly-owned subsidiaries: AVRE, Inc., a Nevada corporation, Binary
Associates, Inc., a Colorado corporation, BHM Labs, Inc., an Arkansas
corporation, American Plasma, Inc. a Texas corporation, and SeraCare
Acquisitions, Inc., a Nevada corporation. During FY 1998, the Biologics
Division: opened newly established centers in Pasco, Washington, Toledo, Ohio
and Pocatello, Idaho; became fully licensed by the FDA and QPP certified in a
startup center in Clearfield Utah; completed an Asset Exchange with
Serologicals, Inc. whereby the Company acquired Reno Plasma, Inc. located in
Reno, Nevada and Simi Biological Resources, Inc. plasma collection center
located in Ft. Smith Arkansas and $250,000 in cash in exchange for a two (2)
plasma collection centers located in Colorado Springs, Colorado and one center
located in Pueblo, Colorado. On November 29, 1997, the Biologics Division
completed an Asset Purchase Agreement whereby it acquired five operating plasma
collection centers from American Plasma Management, Inc. which were located in
South Bend, Indiana; Kalamazoo, Michigan; Boise, Idaho; Reno, Nevada; and Salt
Lake City, Utah. During FY 1999, the Biologics Division opened new centers in
Wilmington, Delaware, Savannah, Georgia, Port Arthur, Texas, Lancaster,
Pennsylvania, and Reading, Pennsylvania; became fully licensed by the FDA and
QPP certified in startup centers in Raleigh, North Carolina, Macon, Georgia and
Toledo, Ohio; completed the acquisition of a center in Baton Rouge, Louisiana;
and, effective July 6, 1998, completed the acquisition of American Plasma Inc.
which added eleven mature centers. As of April 30, 1999, the Pasco and Reading
centers were operating under a Reference Number from the FDA pending approval of
license applications. Collection centers which have not received FDA approval of
its license application are allowed to operate under a Reference Number and
process donors in order to develop sufficient training and records for review by
FDA inspectors to establish the locations ability to comply with FDA
Regulations. Such centers are however, precluded from selling any of the
collected plasma until final approval of its license application. Historically,
it has taken approximately twelve to eighteen months from date of filing to
obtain final FDA approval on a new license application. The Company's customers
require both an FDA license and QPP Certification under all current contracts.
QPP Certification for such centers is requested when the FDA license application
has been approved and can take six to eight weeks to obtain.
As of April 30, 1999, the Company had thirty two plasma collection centers
in operation which were located in: Las Vegas, Nevada; Clarkesville, Tennessee;
Phoenix, Arizona; Ft. Smith, Arkansas; Clearfield, Utah; Raleigh, North
Carolina; Pasco, Washington; Toledo, Ohio; Macon, Georgia; Savannah, Georgia;
Reno, Nevada; South Bend, Indiana; Kalamazoo, Michigan; Boise, Idaho; Pocatello,
Idaho; Salt Lake City, Utah; Amarillo, Texas; Beaumont, Texas; Longview, Texas;
Houston, Texas (4); Casa Grande, Arizona;
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Pasadena Texas; Mesa, Arizona; Phoenix, Arizona; Baton Rouge, Louisiana; Port
Arthur, Texas; Wilmington, Delaware; Lancaster, Pennsylvania; and Reading,
Pennsylvania. During the fourth quarter of FY 1999, such centers were collecting
plasma at an annualized rate of about 530,000 liters.
The Company is also in the initial stages of establishing four new centers
which are expected to be operational during the next two to six months.
The plasma centers are operating under the tradename "SeraCare" which is
registered with the United States Patent and Trademark Office.
During the fiscal year ended February 28, 1999 about 54 percent of the
revenue derived from the Biologics Division was from Grupo Grifols, S.A. the
leading fractionator in Spain. Effective January 1, 1999, Grupo Grifols, S.A.
and the Company signed a new two-year contract which extends through the year
2000 and expands the plasma requirements by one-third for the year 2000. About
20 percent of the revenue derived from plasma collection operations was from
sales to Alpha Therapeutic, a subsidiary of Yashi Tomi Pharmaceutical ("Alpha").
Alpha and the Company signed new two-year agreements covering production from
ten of the centers acquired on July 6, 1998. About 11 percent of revenue derived
from plasma collection operations was from North American Biologics, Inc.
("NABI"). Startup centers including Clearfield, Utah; Raleigh, North Carolina;
Macon, Georgia; Toledo, Ohio; and Pasco, Washington were contractually committed
to North American Biologics, Inc. contingent upon final approval of the FDA
license applications and QPP certifications for those centers. The Company
received final FDA license approval and QPP certification for Clearfield during
FY 1998, for Macon and Raleigh during FY 1999, and for Toledo in March 1999. As
of April 30, 1999, final FDA approval and QPP certification was pending for
Pasco. About 15 percent of plasma revenue was from other entities including
inter-divisional sales.
In addition, there is a very active "Spot Market" for plasma via which the
Company could sell excess plasma should any of their location contracts not be
renewed. Prices for "Spot Market" plasma vary, but generally run ten to fifteen
percent higher than the Company's current contract pricing.
Most of the Biologics Division's revenue is derived under contracts and
relationships, which once established continue to be renewed. The plasma
collected by the Biologics Division is generally used in the manufacture of
therapeutic products to treat certain diseases. Several companies are attempting
to develop and market products to treat these diseases based upon technology,
which would lessen or eliminate the need for human blood plasma. Such products,
if successfully developed and marketed, could adversely affect the demand for
plasma. Products utilizing technology developed to date have not yet proven as
cost-effective or as marketable to healthcare providers as products based on
human blood plasma. However, there can be no assurances that such technology
will not ultimately become economically viable and cause a severe adverse impact
upon the Company and the plasma industry as a whole.
WESTERN STATES PLASMA DIVISION. Effective January 1, 1998 SeraCare acquired
all of the stock of The Western States Group, Inc., a California corporation
(herein referred to as "Western States"). In the acquisition, SeraCare acquired
all of the operating assets of Western States which included but are not limited
to: cash; trade accounts receivable; inventories; certain furniture and
fixtures; all machinery and equipment; all leasehold improvements; all licenses
and other intangible properties including certifications, FDA licenses and
trademarks; and all rights and interests arising under or in connection with any
contracts with customers to which Western States is a party.
The Western States Plasma Division operates through Western States Group,
Inc., and is located in Oceanside, California. Western States is an FDA licensed
worldwide marketing organization for therapeutic based blood plasma products,
diagnostic test kits, specialty plasma and bulk materials, with offices in
Helsinki, London, Milan, Tel Aviv, Seoul and Hong Kong. Western States is a
vendor-approved supplier to 507 pharmaceutical and other healthcare companies,
including being listed as an Exclusive Supplier in many customers regulatory
applications with the FDA. Western States has also helped certain customers
develop internal protocols and standards used to establish quality control
benchmarks and has performed various other value-added services for its'
customers in order to establish solid relationships. This
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Division's primary focus is on multinational biotech, pharmaceutical and
technology products. Western States generally sells its plasma under purchase
order agreements, but is also active in the spot market. During FY 1999, Western
States also established itself as a major supplier of plasma based products to
several major domestic pharmaceutical companies.
CONSOLIDATED TECHNOLOGIES DIVISION. Effective January 1, 1998, the Company
acquired substantially all of the operating assets of Consolidated Technologies,
Inc., a Texas corporation ("CTI") located in Austin, Texas. Under terms of the
Asset Purchase Agreement, the assets acquired included but are not limited to:
certain real property; all furniture and fixtures; all machinery and equipment;
all leasehold improvements; all licenses and other intangible properties
including certifications, FDA licenses and trademarks; all inventories; and all
rights and interests arising under or in connection with any contracts with
customers or potential customers to which CTI is a party.
The Consolidated Technologies Division operates through SeraCare Technology,
Inc., a Nevada corporation and consists essentially of the operating assets
acquired in the Consolidated Technologies, Inc. transaction. Located in Austin,
Texas, Consolidated Technologies is a biomedical company which currently
manufacturers over 200 plasma based diagnostic products consisting primarily of
proficiency test specimens, controls and calibrators. Consolidated Technologies
supplies two of the leading proficiency testing services in the United States
who use these products to test members of their respective organizations.
Laboratories and other healthcare companies use controls, calibrators and
standards to assess the accuracy and precision of laboratory test methods and
instruments. Consolidated Technologies' products include biological materials
and private-labeled products for manufacturing or laboratory use. Products have
applications in most laboratory test disciplines, including serum chemistry,
urine chemistry, toxicology, immunology/serology, coagulation, and infectious
disease. In joining SeraCare, Consolidated Technologies has established itself
as a diagnostic products manufacturer with an in-house supply of specialty
plasma via the Company's Biologics Division. This "Closed Loop" cycle from donor
to end product is expected to significantly improve quality control, turnaround
time and the cost of delivering the final product to customers. During FY 1999,
CTI announced the formation of Innovative SeraCare, a joint venture whereby CTI
will manufacture diagnostic controls and calibrators for clients of the joint
venture. Innovative Diagnostics functions as the marketing group for the joint
venture. Initial multi-year contracts from customers of the joint venture are
estimated at between $10--$15 million.
COMPETITION
The Company's Biologics Division competes for donors with pharmaceutical
companies which collect plasma for their own use, several other commercial
plasma collection companies, and non-profit organizations, such as the American
Red Cross and community blood banks, which solicit the donation of whole blood.
A number of these competitors have access to greater financial, marketing and
other resources than the Company. If the Company is unable to maintain and
expand its donor base, its business and future prospects will be adversely
affected.
The Western States Group competes with fractionators in the sale of plasma
products and other plasma collection companies in the sale of human source
plasma and specialty plasma. Long term established relationships internationally
and domestically serve as the cornerstone of Western States competitive edge. In
addition, Western States ability to work with customers in developing SOP's and
formulations for FDA approval appears unique within the industry. However, if
Western States is not able to sustain their relationships, or if more
pharmaceutical companies decide to buy directly from fractionators, its business
and future growth could be adversely affected.
CTI competes with an array of small diagnostics manufacturers in a highly
diverse competitive environment with each company targeting a small segment of
the $20 billion diagnostics industry. Several major pharmaceutical companies are
moving toward outsourcing of their diagnostic test kits, controls and
calibrators, with the key to success as a contract manufacturer being quality
control and a quality end product. CTI has focused its efforts on this segment
where their technical expertise and established quality control procedures
provide a competitive edge. However, if major pharmaceutical companies determine
to manufacture their own products or if CTI fails to maintain a quality image,
their business and future prospects could be adversely affected.
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TRADEMARKS
The Company's plasma collection centers are operated under the tradename
"SeraCare" which is registered with the United States Patent and Trademark
Office.
REGULATORY ISSUES
The plasma collection and derivative industry is one of the most heavily
regulated in the United States. Federal, state and local regulations are
designed to protect the health of the donors as well as the integrity of the
products. The Food and Drug Administration (the "FDA") administers the federal
regulations across the country. Failure to comply with FDA regulations, or state
and local regulations, may result in the forced closure of a collection center
or monetary fines or both, depending upon the issues involved. The Company is
also subject to regulation by Occupational Safety and Health Administration
("OSHA"). The following summarizes the nature of these regulations:
FEDERAL GOVERNMENT
FOOD AND DRUG ADMINISTRATION:
The Food and Drug Administration has extensive regulations pertaining to the
collection, storage and transport of human SOURCE PLASMA. These regulations are
found in the Code of Federal Regulations 21: Parts 207, 211, 606 and 640.
Part 207 requires the operators of blood and blood products establishments
to register and list their products with the Center for Biologics Evaluation and
Research ("CBER"), FDA. Part 211, Subparts B and C regulate the quality control
personnel and facilities as well as the overall facilities themselves.
Part 606 relates to the qualifications of the center personnel, both medical
and technical as well as the plant or center facilities and buildings. Part 640,
Subpart G titled Source Plasma is a comprehensive set of regulations covering
virtually every aspect of a plasma center operation. These include but are not
limited to:
informed consent,
medical supervision,
donor suitability,
collection of blood for source plasma,
plasmapheresis (the actual procedure of collecting plasma),
required laboratory tests,
processing of plasma,
general requirements,
labeling of containers,
manufacturing responsibility,
records,
reporting of donor reactions,
modification of source plasma and
shipping and storage of plasma.
In addition to the Code of Federal Regulations, the FDA regularly releases
various guidelines to which all registered blood establishments are expected to
comply.
To ensure compliance, the FDA, through their various regional offices,
conduct unannounced inspections of all plasma and blood centers. These
inspections are usually annual and the results are kept on record at CBER, FDA.
The inspectors generally examine records, equipment, facilities, review the
training documents for personnel, review the physical examination procedures and
observe the various procedures being accomplished. These inspections typically
last from two to five days and may involve
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more than one inspector. The observations of an inspector are recorded on a Form
483, a copy of which is given to the local manager. These observations must be
responded to within a two week period, detailing what, if any, actions have been
taken to correct the observation. The regional office generally makes a
determination together with CBER as to whether these responses properly address
the issues. If the observations were considered serious enough; or, if the
answers were not considered adequate, CBER will issue a REGULATORY LETTER. This
is considered a "red flag" in the industry and if not responded to in a timely
and appropriate manner, can result in CBER taking further action, including
actually closing the center.
The FDA, through the Federal Register, frequently prints any actions taken
against a blood bank or plasma center as a result of compliance problems. These
are easily obtained either by contacting the FDA directly or on the FDA world
wide web page "www. fda.com".
SeraCare has established the position of "Director of Compliance". This
position serves as the communication link between the company and the FDA. The
Director of Compliance makes periodic unannounced compliance inspections at the
centers, simulating the FDA inspections. Fractionators (manufacturers to whom we
sell the plasma) also conduct compliance inspections in our centers on an annual
basis. Because some of our products find their way into Europe and Asia, the
Company is also periodically inspected by members of other country's regulatory
equivalent to the FDA. The focus of all inspections and review processes is to
ensure that each of the Company's centers are in compliance with all customer,
European or FDA regulations that protect the integrity of the products and the
safety of the donors.
CLINICAL LABORATORY IMPROVEMENT ACT OF 1988:
In 1988, the U.S. Department of Public Health introduced an updated set of
laboratory regulations. One of the many areas which this law, regulates is the
definition of the education level of personnel required to perform clinical
laboratory tests as well as regulating the equipment and the required controls
and calibrations. Among the various tests that must be passed by plasma center
personnel, there are several that fall under the guidelines of this act.
Although in most states the Federal Government has specifically delegated the
enforcement of this act to the States, the act is universally applied. Plasma
centers are periodically inspected under the CLIA 88 regulations.
Part of the required compliance is that centers participate in a quality
control program which is CLIA approved. Consistent with such quality control
program, center personnel perform tests, the results of which are transmitted to
program administrators. The results must fall within an acceptable range in
order for the center to maintain its CLIA approval. To date, no SeraCare center
has failed to obtain CLIA approval.
OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION:
As with most operating companies, all of our centers must comply with both
Federal and State OSHA regulations. SeraCare trains its employees in current
OSHA standards, provides hepatitis vaccine to employees when desired, and
maintains all required records. OSHA does inspect operating locations as they
deem appropriate, and generally do so without advance notice. SeraCare has no
outstanding issues relating to an OSHA inspection which required corrective
action.
STATE GOVERNMENTS
NEVADA:
Nevada law parallels the federal requirements as stated above with one
addition. The state requires that all employees of plasma centers be certified
with the state. This requires 6 months of experience, a completed application
and a fee.
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ALL OTHER STATES
All other states in which SeraCare operates have regulations that parallel
the federal regulations. Most states do conduct periodic unannounced inspections
and require licensing under each state's procedures. The Company currently has
no unresolved issues relating to any state regulations.
INDUSTRY STANDARDS
AMERICAN BLOOD RESOURCES ASSOCIATION:
The American Blood Resources Association ("ABRA"), an industry organization
headquartered in Maryland, represents the majority, by far, of both plasma
collection companies and manufacturers. ABRA has established a voluntary program
in which member centers agree to adhere to a set of standards that exceed those
of FDA or state and local agencies. This program, entitled the Quality Plasma
Program ("QPP"), has been supported by the FDA, the National Hemophilia
Association as well as many European regulatory agencies. The QPP program
requires a biannual inspection which focuses on: employee training; facilities,
including cleanliness; and donor selection. The QPP criteria includes but is not
limited to:
Donors must have permanent addresses with 150 miles of the center.
The rates of viral marker tests must be within set national limits.
A record of all employee training must be available along with the
training procedure.
A program of donor drug testing must be implemented.
All new donors must be checked with the National Donor Deferral Registry.
The facility must meet all published standards, including location and
neighborhood.
All of the Company's operating centers are QPP certified with the exception
of the four centers for which final FDA license approval is pending. All of the
Company's newly established centers and initial stage centers have been designed
and planned to QPP specifications.
During the past five years, the QPP program has created a higher level of
performance criteria with a focus on upgrading the image of the U.S. plasma
collection industry. Examples of the requirements which are enforced by the FDA,
state authorities and ABRA include: upgraded standards for the physical
facilities; higher standards for Standard Operating Procedures; strict screening
of donors for drugs and disease; verified addresses for all donors; use of a
national registry of deferred donors; and controlled viral reactive rates to
insure they remain within prescribed limits. The Quality Plasma Program ("QPP")
is designed to eliminate the collection of plasma from donors who are homeless,
transient or drug addicted. In addition, it requires all certified centers to
maintain documented and approved employee-training programs. All testing
required by the center must be performed in a QPP-approved laboratory.
The Company closely monitors compliance with applicable governmental
regulations, ABRA standards imposed through QPP and the Company's own quality
assurance standards. In addition, contracts with fractionators require that
individual locations be reviewed and approved by such customer in order to allow
them to sell their end products in various countries throughout the world.
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THE INDUSTRY AND THE MARKET
THE PRODUCT
Currently, the Company's primary product is "SOURCE PLASMA." SOURCE PLASMA
is plasma collected from humans. Plasma is the liquid part of blood and is
collected through a procedure similar to giving blood. The clear plasma is
mechanically separated from the cellular elements of the blood (such as red and
white blood cells and platelets) through centrifugation or membrane filtration
at the time the donation is made. These cellular elements are then returned to
the donor as part of the same procedure. The process of collecting plasma is
known as PLASMAPHERESIS. Because blood cells are returned, it is possible for
individuals to donate plasma more frequently than whole blood. Donations of
plasma can be made up to twice per week or 104 times per year pursuant to FDA
rules.
PLASMA DERIVED PRODUCTS
Source plasma is sold to fractionators who process the plasma into two
primary groups of plasma products: INJECTABLE AND NON-INJECTABLE. These products
are used throughout the world to prevent illness and treat injuries.
Pursuant to FDA Regulations, plasma collected by the Company is placed in
storage on site while a sample thereof is sent to a lab for testing. No plasma
can be shipped unless test results are received which indicate the plasma is
free of any bacterial or viral occurrences. If results of the testing indicate
any bacterial or viral presence, the Company now has various customers who use
such plasma for diagnostic and/or research purposes. If the plasma cannot be
sold as source plasma or specialty plasma, it is generally destroyed. The
Company operates primarily under its own STANDARD OPERATING PROCEDURES which has
been approved by the FDA. These procedures which all employees are required to
follow, carefully spell out all safety related instructions. In accordance with
such procedures, all initial donors are given a physical examination before
being accepted as a plasma donor. Additionally, every time the donor donates, he
is tested for the presence of blood borne pathogens such as hepatitis B,
hepatitis C, HIV (antigen and antibody) and liver enzymes (indication of liver
disease, such as other types of hepatitis). The donor is also checked for serum
protein content and hematocrit (percent of red blood cells in serum). These
tests serve as a safety mechanism for both the donor and the plasma. New donors
are also checked for syphilis and drug use. Repeat donors are re-tested for
syphilis three times each year and for drug use once each year.
All plasma collected from a donor is held until the results of his viral
tests are completed. If a donor has a reactive result, all of that donor's
plasma is usually culled from the source plasma inventory. In some cases, the
fractionator operates the laboratory which performs these viral marker tests.
Once the plasma arrives at the fractionation facility, all plasma containers
are checked by the fractionator's quality control staff. The unique donor number
is matched to the test results to ensure no plasma is used that has been found
reactive to viral tests. Once cleared, the fractionator processes the plasma
into its final products. That processing consists of various procedures that, in
and of themselves, reduce the presence of any microorganisms that might have
been in the plasma pool. Temperature and pH are brought to specific levels, then
the in-process products are subjected to a solvent detergent that further
reduces viral activity. There are a number of additional steps, depending on the
product, including dry heat, acetone drying, lyophilizing and membrane
filtration that all reduce the presence of any microorganisms. Some
fractionators actually perform further testing both on in-process products and
final products, so sensitive, that the presence of any single microorganism will
be detected.
None of the source plasma or hyperimmune plasma collected by SeraCare, Inc.
is given to end users without first being processed by a fractionator.
Donor safety is very important to the Company. Accordingly, operating
procedures require that donors have the process thoroughly explained, including
the hazards and side effects and that an informed
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consent form be signed by each donor The Company does extensive training of
employees in order to insure the safety of its donors.
INJECTABLE PLASMA PRODUCTS
SOURCE PLASMA is the base raw material used to manufacture many injectable
therapeutic products, the most important of which are:
NORMAL SERUM ALBUMIN AND PLASMA PROTEIN FRACTION, which are primarily used
to keep vessel walls from collapsing following major injury, as blood volume
expanders and as a protein replacement. They are used:
- to treat shock due to trauma or hemorrhage;
- to treat fluid loss due to severe burns;
- in cardiovascular surgery;
- to treat liver and kidney diseases; and
- as a carrier for many other injectable solutions.
IMMUNE GLOBULINS, which are used to strengthen the immune system in order to
fight off common diseases such as:
- Suppressed immune systems in cases of organ transplants, HIV and
other immune deficiencies;
- Hepatitis B;
- Tetanus;
- Rabies, whooping cough, measles and polio; and
- Other immune related diseases.
ANTIHEMOPHILIC FACTORS, which are specific proteins found in plasma that are
an integral part of the blood clotting mechanism. Persons born with an absence
or a deficient amount of the protein suffer from hemophilia, types A, B, or Von
Willebrand's Disease.
RH IMMUNE GLOBULIN, which is a substance administered to prevent
incompatibilities between the blood of a fetus and mother. Rh incompatibility
occurs when an Rh-negative woman is pregnant with an Rh-positive fetus. This
occurs in 9-10% of pregnancies. If no preventive measures are taken, 0.7-1.8% of
Rh-negative women with an Rh-positive fetus will become isoimmunized
antenatally, developing Rh (D) antibody through exposure to fetal blood; 8-15%
will become isoimmunized at birth, 3-5% after abortion (spontaneous or
therapeutic), and 2.1-3.4% after amniocentesis. Rh(D) isoimmunization currently
occurs at a rate of about 1.5 per 1000 births. Its effects on the fetus or
newborn include hemolytic anemia, hyperbilrubinemia, kernicterus, or
intrauterine deaths due to hydrous fetalis. About 45% of cases require
intrauterine or exchange transfusions to survive, and there are about four
deaths from this disease per 100,000 total births. The prevalence of Rh(D)
isoimmunization has declined significantly following the introduction of Rh(D)
immune globulin.
The administration of Rh(D) immune globulin to these women prevents maternal
sensitization and subsequent hemolytic disease in Rh-positive infants. RhIG must
be administered after abortion, amniocentesis, ectopic pregnancy, and antepartum
hemorrhage, as well as after delivery.
10
<PAGE>
NON-INJECTABLE PLASMA PRODUCTS
A secondary use of plasma is to manufacture certain diagnostic products
which are for the most part non- injectable. Some of the primary diagnostic
products are:
- BLOOD GROUPING AND TYPING REAGENTS which are used by blood banks to match
donor blood with the recipient.
- LABORATORY CONTROL REAGENTS which are used by laboratories to assure the
quality control of their tests.
- SPECIAL TEST KIT REAGENTS which are derived from the plasma of donors
known to have a specific disease and are used in the laboratory as a
positive control test.
SPECIALTY PLASMAS
Specialty Plasmas generally contain high concentrations of specific
antibodies and are used primarily to manufacture immune globulin therapeutic
products which bolster the immunity of patients to fight a particular infection
or to treat certain immune system disorders. Following advances in intravenous
therapy in the mid-1980s, use of specialty plasmas for therapeutic purposes
significantly increased. Among the current uses for specialty plasmas are the
production of products to prevent hepatitis, Rh incompatibility in newborns,
tetanus and rabies. Specialty plasmas are also widely used for diagnostic and
tissue culture purposes. Depending on the rarity of the antibody or medical
history of the donor, the pricing for specialty plasmas currently ranges from
$95 to about $6,000 per liter. The average spot price (free market price) of
source plasma is currently approximately $93. Most specialty plasma is derived
serendipitously (not the result of stimulation) which poses no abnormal risk to
the plasma collector.
The Company currently collects and sells both source plasma and specialty
plasmas, including Cytomegalovirus Antibody Plasma (CMV), Tetanus Antibody
Plasma and various other specialty antibody plasma. The Company has initiated a
program that emphasizes the collection of specialty plasmas by identifying
potential specialty plasma donors through various screening and testing
procedures.
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<PAGE>
THE PLASMA INDUSTRY
The blood resource industry can be divided into two industry segments. One
is the non-profit or voluntary sector which is commonly thought of as the
American Red Cross and various independent non-profit blood centers. This
"non-profit" sector is primarily concerned with providing whole blood and
components of whole blood for transfusion in medical applications at hospitals.
The other is the commercial or "for-profit" segment and is composed primarily of
plasma collection centers. This "for-profit" commercial sector currently
consists of about 450 plasma collection centers throughout the United States
which collect plasma from paid donors and sell the plasma to Fractionators, who
produce plasma derivative products or fractions that are used in therapeutics.
These plasma collection centers are owned by both foreign and U.S. fractionators
and by independent companies such as SeraCare, Inc., who sell to diagnostic
companies and fractionators.
PLASMA MARKET
The source plasma industry has experienced a number of fluctuations in the
supply and demand cycles. In the Company's opinion, the market factors currently
driving the plasma industry include the following:
- The expanded use of immune globulins to prevent and treat disease.
- The worldwide plasma shortage of plasma which has been made worse by the
impact of the "Mad Cow" decease in England which resulted in the stopping
of all plasma collection activities within that country and the
replacement of such plasma from the US.
- Extensive public concern over the safety of blood products which has led
to increased domestic and foreign regulatory control over the collection
and testing of plasma and the disqualification of certain segments of the
population from the donor pool.
- The continuing increase in the uses of plasma as the source material for
new treatments and applications such as fibrin glue, a growth agent for
microbiotics, and vaccines.
- The increased demand for plasma based healthcare products worldwide which
has led to expansion of fractionation capacity.
- The barriers to entry into the fractionation and plasma collection
business which includes an extensive FDA and ABRA approval process which
can take years to complete.
The Company believes that a significant worldwide shortage of plasma has
developed which could last three to five years. This accelerating shortage is
being driven by a series of factors including: the shutdown of plasma collection
in England resulting from "Mad Cow" decease issues; the expanding fractionation
capacity worldwide resulting from the increased need for plasma components to
treat larger and older populations; and, a diminished pool of donors that
resulted from more restrictive testing and screening requirements imposed by
regulatory authorities. In 1998, the FDA introduced the "Applicant Donor
Program" which required first time donors to donate a second time before the
first donation can be sold. This new requirement has caused a decrease in liters
of source plasma available for sale. Another market factor has been increasing
public concern over HIV and other viruses, which has lead to increased testing
and tighter screening processes. And finally, the Company believes that there is
a direct correlation between the economy and the donor pools, wherein as the
economy gets better, it becomes harder to maintain donor pools and attract new
donors.
The Company has generally sold its plasma under contracts ranging from one
to three years, which allow for annual pricing renegotiations. Pricing for
product deliveries is generally mutually agreed upon prior to the beginning of
the contract year and fixed for that year. Consequently, the Company may be
adversely or beneficially affected if its costs of collecting and selling plasma
rise or fall during the year as a result of changes in government regulation,
donor fees or other factors.
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<PAGE>
FRACTIONATORS
Fractionation is the process of separating the raw source plasma into a
variety of derivative products (see "The Product" above). Prior to being
fractionated, source plasma is blended into pools of 4,500 to 10,000 liter units
from many different donor sources.
The four leading fractionators in the United States are:
<TABLE>
<S> <C>
ALPHA THERAPEUTIC a subsidiary of Yashi Tomi Pharmaceutical
CORPORATION
CENTEON PHARMACEUTICALS a subsidiary of Rhone-Poulenc-Rorer, a French
government owned pharmaceutical conglomerate
BAYER CORPORATION a division of Germany's Bayer A.G.
BAXTER, INC. a division of Baxter, Inc., an $8.1 billion
revenue U.S. company.
</TABLE>
CURRENT OPERATIONS
CURRENT PLASMA CENTERS
As of April 30, 1999, the Company had thirty two plasma collection centers
in operation which were located in: Las Vegas, Nevada; Clarkesville, Tennessee;
Phoenix, Arizona; Ft. Smith, Arkansas; Clearfield, Utah; Raleigh, North
Carolina; Pasco, Washington; Toledo, Ohio; Macon, Georgia; Savannah, Georgia;
Reno, Nevada; South Bend, Indiana; Kalamazoo, Michigan; Boise, Idaho; Pocatello,
Idaho; Salt Lake City, Utah; Amarillo, Texas; Beaumont, Texas; Longview, Texas;
Houston, Texas (4); Casa Grande, Arizona; Pasadena Texas; Mesa, Arizona;
Phoenix, Arizona; Baton Rouge, Louisiana; Port Arthur, Texas; Wilmington,
Delaware; Lancaster, Pennsylvania; and Reading, Pennsylvania. The Company is
also in the initial stages of establishing four new centers which are expected
to be operational during the next two to six months. During the fourth quarter
of fiscal year 1999, such centers were collecting plasma at an annualized rate
of about 530,000 liters.
As of May 1, 1998, the Biologics Division had seventeen plasma centers in
operation and was collecting plasma at an annualized rate of about 285,000
liters.
The Company collected approximately 423,000 liters of plasma during the
fiscal year ended February 28, 1999 an increase of 96% from the 215,600 liters
of plasma collected in the same 1998 period. The Company collected approximately
142,000 liters during the same 1997 period.
DONORS
FDA standards restrict the frequency in which a donor may give plasma to
twice a week or 104 times per year. Most regular donors donate between 40 and 60
times per year.
The QPP certification program is focused on excluding drug or alcohol
addicts or homeless persons by requiring proof of permanent address as well as
alcohol and drug use testing.
13
<PAGE>
MARKETING/DONOR RECRUITMENT
Effective recruitment, management and retention of donors are essential to
the Company's plasma business. The Company seeks to attract and retain its donor
base in the following ways:
- by utilizing competitive financial incentives which the Company offers for
the donation of the plasma.
- by providing outstanding customer service to its donors.
- by implementing programs designed to attract donors through education as
to the uses of plasma.
- by encouraging regular participation in its donor programs.
- by providing incentives to encourage donors to return.
Repeat donors are important because of the lower cost associated with
obtaining their plasma and less risk that their plasma will not satisfy
regulatory and customer requirements. The Company's centers advertise for donors
through targeted mailings, flyers and newspapers. Radio and television ads are
also used when advantageous.
The Company's donor records are maintained with the assistance of donor
database systems at each center which allows the Company's personnel to track
the frequency of donor visits. When a donor has not visited a center in over one
month, the center sends a reminder card to the donor emphasizing the importance
of the donor's continued participation.
DONOR PROCESSING
On their first visit all new donors are given a physical examination by
either a licensed physician or physician substitute. The National Donor Deferral
Registry and the deferral lists of the Fractionators and other local plasma
centers are all checked to determine if the donor has ever had positive viral
test results or has ever been previously deferred or rejected as a donor. In
addition to the deferral list checks, each time the donor visits, the donor is
given the opportunity to defer himself confidentially and is asked a number of
screening questions which he must audibly answer. In addition, each time he
visits, the donor is tested for: blood pressure; temperature; pulse; weight;
hematocrit; total proteins; HIV; hepatitis B and C; and liver enzymes.
QUALITY AND OPERATIONAL CONTROLS
Through its QPP and internal operating procedures and policies, the Company
strives to maintain a high level of quality control. The Company's policies
require that donor charts be audited on a daily basis, and that equipment be
regularly re-calibrated. Quality control records and procedures are maintained
at a detailed level.
TRAINING
The Company is focusing on two levels of training: (a) technical training of
employees; and (b) center management skills and development.
All employees are required to read and study detailed training materials and
are then given a written test covering that material. Results of the written
tests must be kept available for FDA inspection. Employees are also required to
demonstrate specific skills to an FDA-certified trainer. Each level of an
employee's training is tracked and documented and each employee is required to
be re-tested on all material every six months. All employees are "cross trained"
in all three of the center's functional areas, allowing for more efficient
scheduling. Ongoing or continuing education sessions are periodically held to
review new procedures, equipment and FDA requirements. All training
documentation is subject to FDA approval.
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<PAGE>
It is the Company's philosophy to continually develop competent individuals
within the Company to move into management positions. Selected individuals are
sent to outside management development seminars in addition to the in-house
program of development. Consequently, all of the open manager positions during
the past three years have been filled with existing in-house personnel.
EMPLOYEES
As of May 1, 1999, the Company employed 543 full time employees and 48 part
time employees. The Biologics Division employed 476 full time and 45 part time
employees. Each location in the Biologics Division has at least one nurse and/or
nurse substitute and the balance are cross-trained as technicians, receptionists
and phlebotomists. The Western States Plasma Division employed 18 full time
employees and one part time employee. The Consolidated Technologies Division
employed 49 full time employees and two part time employees. Corporate office
consisted of seven full time employees as of May 1, 1999.
The Company believes that the relations between the Company's management and
its employees are good, although there can be no assurances that such relations
will continue. The inability of the Company to attract or retain qualified
personnel could have a material adverse effect on the Company.
ITEM 2. PROPERTIES
The Company currently occupies thirty five locations with executive offices
at 1925 Century Park East, Suite 1970, in Los Angeles; Western States Division
in Oceanside, California; Consolidated Technologies Division in Austin, Texas;
and thirty two plasma center locations in: Las Vegas, Nevada; Clarksville,
Tennessee; Phoenix, Arizona; Ft. Smith, Arkansas; Clearfield, Utah; Raleigh,
North Carolina; Pasco, Washington; Toledo, Ohio; Macon, Georgia; Savannah,
Georgia; Reno, Nevada; South Bend, Indiana; Kalamazoo, Michigan; Boise, Idaho;
Pocatello, Idaho; Salt Lake City, Utah; Amarillo, Texas; Beaumont, Texas;
Longview, Texas; Houston, Texas (4); Casa Grande, Arizona; Pasadena Texas; Mesa,
Arizona; Phoenix, Arizona; Baton Rouge, Louisiana; Port Arthur, Texas;
Wilmington, Delaware; Lancaster, Pennsylvania; and Reading, Pennsylvania. The
Company is also in the initial stages of establishing four new centers which are
expected to be operational during the next two to six months. All of the
Company's facilities are leased from unaffiliated parties under leases expiring
through 2009 and comprising approximately 190,000 square feet. Most of these
leases contain renewal options which permit the Company to renew the leases for
periods of from two to five years at the then fair rental value. The Company
believes that in the normal course of its business it will be able to renew or
replace its existing leases. The Company believes that the space it occupies is
adequate for its current operations.
The Company's plasma collection centers range in size from approximately
2,950 to 7,500 square feet and generally are located in population centers of
60,000 to 1,000,000 people.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings, other than routine
litigation occurring in the normal course of the Company's operations, to which
the Company is a party or of which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
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<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(A) MARKET INFORMATION:
The Company's Common Stock is quoted on AMEX and is traded under the symbol
"SRK". The Company stock began initial trading on the Bulletin Board in May
1996. On March 25, 1998 the Company's Common Stock began trading on the American
Stock Exchange (AMEX). The following table sets forth the range of bid prices
for the Common Stock during the periods indicated, and represents inter-dealer
prices, without retail mark-up, mark-down or commission to the broker-dealer,
and may not represent actual transactions. The information summarized in the
following table has been derived from the NASD's Monthly Statistical Report.
<TABLE>
<CAPTION>
HIGH LOW
----- ---
<S> <C> <C>
For the period March 1, 1997 through May 31, 1997.................................................... 3 1/4 2
For the period June 1, 1997 through August 31, 1997.................................................. 5 1/8 1 7/8
For the period September 1, 1997 through November 30, 1997........................................... 6 7/16 2 1/2
For the period December 1, 1997 through February 28, 1998............................................ 7 5/16 6 1/16
For the period March 1, 1998 through May 31, 1998.................................................... 8 7/8 6 1/4
For the period June 1, 1998 through August 31, 1998.................................................. 7 7/8 4 7/8
For the period September 1, 1998 through November 30, 1998........................................... 5 3/4 4
For the period December 1, 1998 through February 28, 1999............................................ 6 5/8 4 1/4
</TABLE>
(B) HOLDERS:
<TABLE>
<CAPTION>
APPROXIMATE NUMBER OF
RECORD HOLDERS (AS
TITLE OF CLASS OF APRIL 30, 1999)
- ------------------------------------------------------------------------------------------ -----------------------
<S> <C>
Common Stock, $.001 par value............................................................. 400(1)
</TABLE>
- ------------------------
(1) Certain of the Company's shareholders hold shares under "street name" and
are not identified individually. Accordingly, the Company estimates that it
has a total of approximately 500 beneficial shareholders.
(C) DIVIDENDS:
The Company has never paid cash dividends on its Common Stock. Pursuant to
the terms and conditions of the $16 million subordinated debenture and the $17
million senior credit facility, the Company may not declare or pay dividends,
except that SeraCare, Inc. may issue warrants, options, stock, rights or any
other form of equity security as a dividend. The declaration and payment of
dividends in the form of equity securities by the Company's board of directors
will depend, among other factors, on earnings as well as the operating and
financial condition of the Company. At the present time, the Company does not
expect to declare or issue any dividends within the foreseeable future.
(D) In December 1998, the Company sold 22,500 shares of Series C Preferred
Stock and issued warrants to purchase 281,500 shares of common stock at $4.50
per share for $2,250,000. The shares are convertible into 500,000 shares of
common stock. In conjunction with this private placement, the Company paid
$135,000 and issued 25,000 shares of common stock as a placement fee.
16
<PAGE>
ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the statements in this
report (including without limitation, statements indicating that the Company
"expects," "estimates," "anticipates," or "believes" and all other statements
concerning future financial results, product offerings or other events that have
not yet occurred) are forward-looking statements that are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995,
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended. Forward-looking statements involve
known and unknown factors, risks and uncertainties which may cause the Company's
actual results in future periods to differ materially from forecasted results.
Those factors, risks and uncertainties include, but are not limited to: the
positioning of the Company's products in the Company's market segment; the
Company's ability to effectively manage its various businesses in a rapidly
changing environment; new competition for donors and customers; the inability of
the Company to obtain FDA approval of newly established centers; and the
introduction of synthetic products which could eliminate the need for plasma
products.
RESULTS OF OPERATIONS
FISCAL YEAR ENDING FEBRUARY 28, 1999 AS COMPARED TO FISCAL YEAR 1998
REVENUE
Revenue increased by $37,287,237 to $49,698,207, an increase of three
hundred percent. The primary factors reflected in those results were: the
acquisition of the Western States Plasma Division and the Consolidated
Technologies Division effective January 1, 1998, which added $9.6 million and
$5.6 million respectively to revenue during the period and the increased revenue
from plasma collections which added $22.1 million to revenue. The Company
collected about 423,000 liters of plasma during the year ended February 28, 1999
compared to about 215,000 for the comparable prior period or an increase of
ninety eight percent. The increased volumes were the result of: the acquisition
of twelve mature centers during the current year; the acquisitions of the five
operating plasma collection centers from American Plasma Management, Inc. in
November 1997; and, the revenue generated by the FDA approval of newly
established centers in Macon and Raleigh. The newly established center in Pasco
was operating under a Reference Number from the FDA during 1998 and was thus not
allowed to sell or ship plasma during the period, although they were collecting
plasma during the period.
GROSS PROFIT
Gross profit increased by $8.9 million or 546 percent in 1999 to $10,569,814
primarily due to the acquisitions of the Western States Plasma Division and the
Consolidated Technologies Division effective January 1, 1998 which contributed
$3,769,000 and $3,928,000, respectively. Also contributing to the increase in
gross margin was the Biologics Division which contributed $2,873,000 to gross
margin as a result of an increase in revenue which was mostly offset by
increased operating costs. As a result of the aforementioned, the gross profit
percentage increased from 13.2% in fiscal 1998 to 21.3% in fiscal 1999.
GENERAL AND ADMINISTRATIVE EXPENSES
General and Administrative expenses for 1999 were higher by $2,700,864 or
182 percent. This increase was primarily due to the acquisition of the Western
States Plasma Division and Consolidated Technologies Division effective January
1, 1998; higher legal and professional fees; increased travel expenses;
increased salary and related benefits expenses; and, higher general insurance
costs.
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<PAGE>
INTEREST EXPENSE/NON-CASH INTEREST EXPENSE
Combined interest including non-cash interest expense increased by
$3,761,197 in fiscal 1999 as a result of the increased debt during the year,
including: the senior debt facility which was initially established at $10.0
million in April 1998 and was subsequently increased to $17.0 million in
December 1998; the $16 million in subordinated debentures issued February 1998;
various bridge loans in conjunction with acquisitions; and the $600,000 note
associated with the purchase of the five operating plasma collection centers on
November 29, 1997. The non-cash interest for the current year consists of the
amortization of the deferred bond offering costs related to the issuance of the
$16 million subordinated debentures.
OTHER ITEMS
Other income for the current year includes $534,000 from the sale of certain
properties during the year. Other income for the prior year includes $801,215
from a one-time non-operating gain realized from the sale of salvage plasma
material.
INCOME TAXES
No federal taxes were paid or accrued during the year due to the
availability of various loss carryforwards and deferred tax credits. The taxes
reflected are for the various state income taxes paid.
NET INCOME
As a result of the above, there was a net income for the year ended February
28, 1999 of $2,705,002 compared to $453,853 in 1998.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of February 28, 1999, the Company's current assets exceeded current
liabilities by, $9,723,584 compared to $9,444,126 on the year earlier date. The
use of cash during the year was consistent with the Company's strategic plan for
strong growth and the Company feels that progress has been made during the
period. With a continuation of a strategic focus on growth, the short-term
impact on the Company's earnings and cash flow has been to defer profitability
and positive cash flows. The Company believes, however, that the acquisitions of
American Plasma, Inc., Western States Group, Inc., the operating assets of
Consolidated Technologies, Inc., the November 1997 acquisition of centers
located in: Salt Lake City, Utah; Reno, Nevada; Kalamazoo, Michigan; South Bend,
Indiana; and Boise, Idaho; and the continuing ramp-up of the newly established
centers located in: Pasco, Washington; Toledo, Ohio; Raleigh, North Carolina;
Macon, Georgia; Clearfield, Utah; Pocatello, Idaho; Savannah, Georgia;
Wilmington, Delaware; Port Arthur, Texas; Lancaster, Pennsylvania; and, Reading,
Pennsylvania represent substantial progress toward becoming a major supplier of
plasma and plasma products to the diagnostic and therapeutic industry. The
Company believes that industry wide, plasma pricing and plasma products demand
will continue to strengthen in future periods as a result of the evolving
shortage of plasma and the continued expansion of the uses and demand for plasma
based products. In the Biologics Division, the Company opened new centers on
April 1, 1997, May 1, 1997, September 23, 1997, March 1, 1998, June 1998,
September 1998, January 1999 and March 1999 and is planning four additional
openings within the next six months. In addition, the Company acquired five (5)
operating plasma centers in November 1997and eleven operating plasma centers in
July 1998. As a result of this expansion, the Company's current annualized rate
for collections is 530,000 liters of plasma compared to 285,000 a year ago. New
plasma contracts with Grupo Grifols and Alpha Therapeutic have combined with
more favorable pricing on softgoods and testing to generate improved profit
margins. Partially offsetting those benefits, has been the establishment of a 60
day hold on plasma shipments to Spain and a slower than expected process of
receiving final FDA license approval for the newly opened centers. The Company
continues to believe that demand for plasma and plasma products will continue to
accelerate through calendar 1999 and 2000 and has accordingly established itself
in a strong growth posture in order to be able to benefit from the strong
increased demand. The Company believes that recent occurrences in the plasma
industry such as the "Mad Cow" disease in Great Britain and the destruction of
over 300,000 liters of plasma by domestic fractionators due to quality control
issues have added significantly to the expected shortage of supply. With this
background, the Company continues to focus on growth in the volume of plasma
collected in order to capitalize on the anticipated market conditions. The
Company continues to benefit from the acquisitions of the Western States
Division which has provided worldwide marketing of plasma and plasma products in
both the therapeutic and diagnostic segments of the blood products industry and
the acquisition of the Consolidated Technologies Division which has expanded
both its' product line and customer base with corresponding increases in its
profit contribution. The plasma collection center startups and acquisitions
during the past two years are reflective of the Company's commitment to growth.
Meanwhile, the Company's projected capital requirements for the coming year
include the establishment of and/or acquisition of more plasma centers in
addition to continuing the expansion of both the Consolidated Technologies
Division and the Western States Division.
Net cash used in operating activities during the fiscal year ended February
28, 1999 was $7,184,767 compared to $5,103,631 during the same prior year
period. This was due primarily to the increases in accounts receivable and
inventory partially offset by the increases in accrued expenses attributable to
the acquisitions of American Plasma, Inc., Western States Plasma Group, Inc.,
Consolidated Technologies and the five plasma centers from American Plasma
Management, Inc. et al. Also contributing was an increase in inventory and
accounts receivable resulting from the terms of certain sales agreements and an
increase in inventory due to the Applicant Donor program initiated by ABRA and
effective July 1, 1998.
Cash flows used in investing activities for the fiscal year ending February
28, 1999 was $12,752,787 compared to $12,871,130 for the comparable prior year
period. This increase resulted primarily from the
19
<PAGE>
acquisition of American Plasma, Inc. and capital requirements of the newly
established plasma collection centers in Raleigh, Macon, Pasco, Toledo,
Pocatello, Wilmington, Savannah, Port Arthur, Lancaster and Reading.
Cash flow provided by financing activities was $15,283,256 for the current
year period compared to $22,928,208 for the comparable prior period. The prior
year amount was primarily the result of the issuance of $16 million in
subordinated debentures in February 1998. The current year amount is primarily
the result of the senior debt financing obtained initially from Brown Brothers
Harriman & Co. in April 1998 and the replacement senior debt financing with
Brown Brothers Harriman & Co. and State Street Bank which was obtained in
September 1998. The proceeds from the expanded senior debt was used primarily
for the acquisition of American Plasma, Inc. and to repay certain bridge loans
which were made to the Company in conjunction with such acquisition. Also
contributing was a private placement of Preferred Stock Series A in December
1998 and various bridge loans which were made during the year, most of which
were repaid during the year and which were used in part to finance acquisitions
and partially to provide working capital for the newly acquired and start-up
operations.
The senior debt agreement contains various covenants. The Company was in
violation of a covenant and obtained a waiver of the violation subsequent to
year end.
The Company had net operating loss carry-forwards of approximately $4.4
million as of February 28, 1999, which will expire in various amounts through
the year 2018. Certain of these loss carry-forwards have resulted in a deferred
tax asset of approximately $1.7 million. Based upon historical operating
results, management has determined it cannot conclude it is more likely than not
that the deferred tax is realizable. Accordingly, a 100% valuation reserve
allowance has been provided against the deferred tax asset.
As a result of the Company's strategic upgrading of its customer base,
management believes that internally generated cash flow and the existing $17
million restructured senior credit facility may not be sufficient to meet the
Company's working capital requirements for fiscal 2000. As of February 28, 1999,
the Company had $1.2 million available under the current senior credit facility.
The Company is in the process of expanding the senior debt with the current
lenders to provide an additional $3.0 to $5.0 million in availability. With the
additional availability to be provided by the expanded line, Management believes
a combination of internal cash flow and the expanded senior debt facility will
be sufficient to meet the Company's working capital requirements. However, any
significant expansion or acquisition may need to be funded by a combination of
internally generated cash flows, short-term bridge financing, private
placements, and/or a possible public offering. In addition, the Company is
continuing to evaluate various alternatives for restructuring its current debt
position. See Note 6 for future payments of long-term debt.
SUBSEQUENT EVENT
The Company has reached a verbal agreement with NABI to cancel the supply
contracts on the Clearfield, Raleigh, Macon, Toledo and Pasco centers effective
April 30, 1999. This cancellation is by mutual agreement with both parties
believing that they will benefit from the agreement. Under terms of the
agreement, the Company will repay monies advanced on production from Pasco and
Toledo and purchase approximately 48,000 liters of plasma from the NABI
inventory.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income," ("SFAS 130") issued by the FASB is effective for financial statements
with fiscal years beginning after December 15, 1997. Earlier application is
permitted. SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general--purpose
financial statements. The Company adopted SFAS 130 for the year ending
2-28-1999. Such adoption did not have any material
20
<PAGE>
effect on its financial position or results of operations, but has resulted in
additional disclosures as required by the Statement.
Statement of Financial Accounting Standard No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS 131") issued by the
FASB is effective for financial statements with fiscal years beginning after
December 15, 1997. SFAS 131 requires that public companies report certain
information about operating segments, products, services and geographical areas
in which they operate and their major customers. The Company adopted SFAS 131
for the year ending 2-28-1999. Such adoption did not have any material effect on
its financial position or results of operations.
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities,"
(SOP 98-5) issued by the American Institute of Certified Public Accountants is
effective for financial statements beginning after December 15, 1998. SOP 98-5
requires that the costs of start-up activities, including organization costs, be
expensed as incurred. Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer (excluding ongoing customer acquisition costs, such as policy
acquisition costs and loan origination costs) or beneficiary, initiating a new
process in an existing facility, or commencing some new operation. The Company
anticipates adoption of SOP 98-5 for the fiscal year beginning March 1, 1999.
The adoption of SOP 98-5 will result in a "one time charge" cumulative effect of
a change in accounting principle of about $483,000 tax effected at the statutory
rate. To the extent that the Company establishes new startup centers, the
inability to defer startup costs will result in a decrease in its results of
operations. The adoption of SOP 98-5 may also have a negative impact on the
Company's strategic plan for expansion because of the inability to match the
costs of establishing a new center with the revenue derived from such center
even when all production from the center has been contractually committed. The
Company is currently evaluating alternative strategies for achieving our growth
objectives.
INFLATION
Management believes that inflation generally causes an increase in sales
prices with an offsetting unfavorable effect on the cost of products sold and
other operating expenses. Accordingly, with the possible impact on interest
rates, management believes that inflation will have no significant effect on the
Company's results of operations or financial condition.
YEAR 2000
The year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. This could
result in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in other normal business activities. The Company has
invested in the latest hardware and software and has been informed by the
seller's that the programs are year 2000 compliant. Accordingly management
believes the Company has addressed compliance with year 2000 standards. However,
there can be no assurances that there will be no disruptions from the year 2000
issue in the event its customers or vendors are not compliant.
ITEM 7. FINANCIAL STATEMENTS.
All financial statements required to be filed herewith are attached hereto
following the signature page.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable
21
<PAGE>
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The Company is headquartered in Los Angeles, California and operates with a
corporate office staff of seven people.
The present term of office of each director will expire at the next Annual
Meeting of Shareholders. Executive Officers of the Company are elected annually
at the first meeting of the Company's Board of Directors held after the annual
meeting of shareholders. Each executive officer will hold office until his or
her successor is duly elected and qualified or until his or her death or
resignation or until he or she shall have been removed in the manner provided in
the Company's Bylaws. The name and position with the Company and age of each
officer and director, and the period during which each director has served are
as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- ---------------------------- --- ------------------------------------------------------------ ----------------
<S> <C> <C> <C>
Barry D. Plost.............. 53 Chairman of the Board, President and CEO 1996
Jerry L. Burdick............ 59 Executive Vice President, Chief Financial Officer, Secretary 1995
and a Director
Sam Anderson................ 62 Director 1996
Ezzat Jallad................ 36 Director 1996
Nelson Teng................. 52 Director 1997
Robert J. Cresci............ 55 Director April 15, 1998
Michael F. Crowley.......... 55 Director April 15, 1998
William J. Cone............. 48 Director April 15, 1998
</TABLE>
BARRY D. PLOST began serving as Chairman, President and Chief Executive
Officer of the Company on February 6, 1996. Prior to joining the Company, he was
a Management Consultant with the management consulting firm of David Barrett,
Inc. for the period January 1995 until February 6, 1996. Mr. Plost was President
and Chief Executive Officer of Country Wide Transport Services, Inc., a trucking
company, from February 1991 through June 1994, and President and Chief Operating
Officer of Freymiller Trucking, Inc., a trucking company, from November 1979
through August 1991.
JERRY L. BURDICK was appointed Executive Vice President, Chief Financial
Officer, Secretary and a Director effective December 1, 1995. From August 1993
through November 1995, Mr. Burdick was a consultant to SeraCare, Inc. in the
areas of financing, internal controls, profitability analysis, financial
reporting and strategic planning. He also was acting controller and Chief
Financial Officer during the period. Mr. Burdick previously operated his own
consulting practice from March 1988 through August 1993. Mr. Burdick is a
Certified Public Accountant in the State of California.
SAM ANDERSON was elected a Director effective April 16, 1996. Since April of
1996, Mr. Anderson has also been a consultant to SeraCare, Inc. in the areas of:
finding and evaluating potential acquisitions; helping the Company in developing
a strategic plan for increasing the volume of hyperimmune plasma collected
including targeting the particular type of hyperimmune the company should
target; and advising the Chief Executive Officer of the Company on industry
trends and potential changes in regulations and the ramifications thereof. Mr.
Anderson's role is strictly advisory and he has no direct reports within
SeraCare, Inc. Since March 1991, Mr. Anderson has served as a consultant to
various companies in the plasma business and specifically in pharmaceutical
products, fractionation and hyperimmune plasma. From March 1990 to March 1991,
Mr. Anderson served as president of Trancel, Inc., a start-up bio-tech
development company in the area of insulin dependent diabetes and prior to that
served as Chairman and Chief Executive Officer of Alpha Therapeutic Corporation,
a manufacturer of pharmaceutical products and also the largest plasma collection
company and fractionator in the world, until he retired in February 1990.
22
<PAGE>
EZZAT JALLAD was elected a Director effective October 28, 1996. Mr. Jallad
has been Chairman and President of Softpoint, Inc., which develops and markets
point of sale software and hardware for the fast food and retail markets since
June 1995. Previously, he was Executive Vice President of FCIM Corporation, a
financial consulting firm, from April 1988 to May 1995.
DR. NELSON TENG was elected a Director effective January 29, 1997. Dr. Teng
has been the Director of Gynecologic Oncology and Associate Professor of
Gynecology and Obstretrics at Stanford University School of Medicine since 1981.
Dr. Teng also co-founded ADEZA Biomedical in 1984, and UNIVAX Biologics in 1988.
In addition, Dr. Teng has served as a scientific advisor and consultant to
several biotechnology companies and venture capital firms and has authored over
100 publications and 15 patents. Dr. Teng serves on several other boards of
directors.
MICHAEL F. CROWLEY, SR. was elected a Director effective April 15, 1998 and
has also served as President of the Western States Plasma Division of the
Company since February 1998. Mr. Crowley founded Western States Group in 1983.
Prior to that, Mr. Crowley worked for 12 years for Baxter International, Inc.
from 1970 to 1982 and served first as Sales and Operations Manager in Baxter's
international division in England and later as Director of Operations for
Baxter's diagnostic division, Hyland Laboratories, a pharmaceutical company.
WILLIAM J. CONE was elected a Director effective April 15, 1998 and has also
served as President of the Consolidated Technologies Division of the Company
since February 1998. Mr. Cone joined Consolidated Technologies, Inc. in 1972
(three years after his father founded the company in 1969) and was President and
sole shareholder of the company from 1988 until February 1998. Mr. Cone attended
Southwest Texas State University where he majored in microbiology.
ROBERT J. CRESCI was elected a Director effective April 15, 1998. Mr. Cresci
has been a Managing Director of Pecks Management Partners Ltd., an investment
management firm, since September 1990. Mr. Cresci currently serves on boards of
Bridgeport Machines, Inc., EIS International, Inc., Sepracor, Inc., Arcadia
Financial, Ltd., Hitox, Inc., Garnet Resources Corporation, Film Roman, Inc.,
Educational Medical, Inc, Source Media, Inc., Castle Dental Centers, Inc.,
Candlewood Hotel Co., and several private companies.
Currently, the Board of Directors consists of eight directors: Barry D.
Plost, Chairman, President and Chief Executive Officer; Jerry L. Burdick,
Executive Vice President, Chief Financial Officer and Secretary; Michael F.
Crowley, Sr., President of the Western States Plasma Division; William J. Cone,
President of the Consolidated Technologies Division; Sam Anderson, outside
Director; Robert J. Cresci, outside Director; Ezzat Jallad, outside Director;
and Dr. Nelson Teng, outside Director.
ITEM 10. EXECUTIVE COMPENSATION
The Company has key man insurance on Barry D. Plost, Michael F. Crowley,
Sr., and William J. Cone. SAM ANDERSON, an outside Director, has a consulting
agreement with the Company which runs through March 31, 2002 at $50,000 per year
plus fully vested options to purchase 30,000 shares of the Company's common
stock at $1.50 per share which expire in five years. Mr. Anderson also was
granted fully vested, five year options to purchase 20,000 shares of the
Company's common stock at $1.00 per share in conjunction with a $100,000 bridge
loan Mr. Anderson made to the Company on July 2, 1996 and on August 27,1997 was
granted fully vested five year options to purchase 100,000 shares at $2.25, and
on December 31, 1998 was granted fully vested five year options to purchase
15,000 shares at $4.25. DR. NELSON TENG was granted fully vested, five year
options to purchase 50,000 shares of the Company's common stock at $1.50 per
share in January 1997. He was also granted fully vested, five year options to
purchase 15,000 shares at $2.25 on August 27, 1997 and fully vested, five year
options to purchase 15,000 shares at $4.25 on December 28, 1998. EZZAT JALLAD
was granted fully vested five-year options to purchase 15,000 shares at $2.25 on
August 27, 1997 and fully vested five-year options to purchase 15,000 shares at
23
<PAGE>
$4.25 on December 28, 1998. ROBERT CRESCI was granted fully vested five-year
options to purchase 15,000 shares at $4.25 on December 28, 1998.
The following table sets forth the cash compensation and other consideration
paid by the Company to its executive officers whose cash compensation exceeded
$100,000.
<TABLE>
<CAPTION>
PAID PAID PAID
FISCAL FISCAL FISCAL
NAME AND PRINCIPAL POSITION 1999 1998 1997 OPTIONS OTHER
- ---------------------------------------------------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
(8)Barry D. Plost, President, Chairman and CEO...... $ 225,000 $ 172,115 $ 124,167 156,147(1) (7)(6)
150,000(2)
100,000(3)
130,000(4)
1,058,500(5)
(9)Jerry L. Burdick, Executive V. P., Secretary and
CFO............................................... $ 140,000 11) $ 125,000 $ 83,749 99,110 10) (7)(6)
</TABLE>
- ------------------------
(1) Of these, 56,147 are fully vested five-year options granted on February 6,
1996 at a price of $1.25 and 100,000 are fully vested five-year options
granted on August 27, 1997 at a price of $3.00.
(2) These options were granted on February 6, 1996. The prices are 50,000 at
$1.00, 50,000 at $2.00, and 50,000 at $3.00 per share. These options were
fully vested in January 1997 and expire January 2002.
(3) These options were granted on February 6, 1996 and are fully vested at $1.00
per share which expire at the end of five years.
(4) Mr. Plost was granted on July 2, 1996 and July 17 1996 fully vested three
year options to purchase 130,000 shares of the Company's common stock at and
exercise price of $1.00 per share in conjunction with a $400,000 bridge loan
Mr. Plost made to the Company on July 2, 1996 and a $50,000 bridge loan he
made to the Company on July 17, 1996. The options granted represented 100%
of the options granted employees in the year 1997.
(5) Mr. Plost was granted at various times throughout fiscal year 1998 fully
vested options to purchase 1,058,500 of the Company's common stock at prices
ranging from $2.00 to $3.50 which were the fair market value of the shares
on the grant date. These options were granted in conjunction with various
bridge loans made by Mr. Plost to the Company.
(6) The Company has established a Management Bonus Pool whereby ten percent
(10%) of earnings before taxes which are in excess of $920,549 in the year
ending February 28, 1997; $2,590,160 in the year ending February 28, 1998,
and $4,384,187 in the year ending February 28, 1999 will be allocated to a
bonus pool to be paid pro rata to all officers of the Company on the basis
of salaries.
(7) To the extent that quarterly earnings before taxes exceed $100,000, the
excess will be paid on a pro-rata basis to all officers up to an annual
maximum of $10,000 each.
(8) Effective on February 6, 1996, the Company signed an employment agreement
with Mr. Plost through February 5, 1999. On January 27, 1999, the contract
was extended through February 5, 2002 at a base salary of $250,000. Mr.
Plost also participates in the Management Bonus Pool on the same basis as
other officers of the Company during the term of his agreement and also
received certain options as indicated. Mr. Plost was not an employee prior
to February 6, 1996.
(9) Effective on February 6, 1996, the Company signed an employment agreement
with Mr. Burdick through February 5, 1999. The agreement was amended on
February 13, 1998, providing for a current annual salary of $140,000. On
January 27, 1999, the contract was extended through February 5, 2000. Mr.
Burdick also participates in the Management Bonus Pool on the same basis as
other officers of
24
<PAGE>
the Company during the term of his agreement and also received stock options
as indicated above. Mr. Burdick functioned as an accountant and consultant
to the Company prior to February 6, 1996.
(10) Of these, 42,110 are fully vested five year options granted on February 6,
1996 at a price of $1.25; 25,000 are fully vested five year options granted
on April 10, 1997 at a price of $2.00; and 32,000 are fully vested five year
options granted on December 28, 1998 at a price of $4.25.
(11) Excludes auto allowance of $10,000.
AGGREGATE OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE OPTIONS AT OPTIONS AT
NAME AND PRINCIPAL POSITION ON EXERCISE REALIZED YEAR-END(1) YEAR(1)
- ----------------------------------------------------- ------------------- ----------- ----------------- ------------
<S> <C> <C> <C> <C>
Barry D. Plost, President, Chairman and NA NA 56,147 $ 259,680
CEO................................................ 100,000 $ 287,500
150,000 $ 581,250
100,000 $ 487,500
130,000 $ 633,750
858,500 $3,210,688
Jerry L. Burdick, Executive V. P., Secretary and NA NA 99,110 $ 343,634
CFO................................................
</TABLE>
- ------------------------
(1) As of February 28, 1999, there were no options which were unexercisable.
OPTIONS/SAR GRANTS LAST FISCAL YEAR
During the current year Mr. Jerry L. Burdick was granted 32,000 fully vested
five year options on December 28, 1998 at a price of $4.25 which represented 52%
of the individual grants to employees during the year. During the preceding
year, Mr. Barry D. Plost, the President and CEO, was granted fully vested
five-year options to purchase shares at $3.00 on August 27, 1997 which
represented 80% of the individual grants during the year and Mr. Jerry L.
Burdick was granted fully vested five year options to purchase 25,000 shares at
a price of $2.00 on April 10, 1997, which represented 20% of the individual
grants during the year.
25
<PAGE>
EMPLOYMENT AGREEMENTS
The Company had employment agreements with each of the executive officers of
the Company, consisting of: Mr. Barry D. Plost, Chairman, President and Chief
Executive Officer; and Mr. Jerry L. Burdick, Executive Vice President, Chief
Financial Officer and Secretary. The employment agreements with both Mr. Plost
and Mr. Burdick were effective on February 6, 1996 and had terms expiring on
February 5, 1999. On January 27, 1999, the Board of Directors extended the
contract of Mr. Plost was extended three years to February 5, 2002. Mr. Plost is
currently receiving a base salary of $250,000. The Board of Directors also
extended the contract of Mr. Burdick for one year to February 5, 2000. Mr.
Burdick is currently receiving a base salary of $140,000. Both Mr. Plost and Mr.
Burdick are eligible to participate in the management incentive bonus plan if
the Company achieves certain performance objectives.
Discretionary compensation awards for executives, including stock options
are made solely by the Board of Directors.
ITEM 11. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
SECURITYHOLDERS
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's common shares at February 28,
1999 of each present director, all officers, all officers and directors as a
group and each beneficial owner of more than 5% of the Company's common stock.
<TABLE>
<CAPTION>
PRESENTLY
% OF COMMON EXERCISABLE
INDIVIDUAL / GROUP CLASS SHARES OPTIONS
- -------------------------------------------------------------------------------- ----- ----------- ----------
<S> <C> <C> <C>
Barry D. Plost, President & Chairman............................................ 19.8% 393,034 1,394,647
Jerry L. Burdick, Exe VP, CFO & Dir............................................. 2.2% 72,647 99,110
Nelson Teng, Director........................................................... 5.1% 315,000 80,000
Samual Anderson, Director....................................................... 4.6% 191,932 165,000
Ezzat Jallad, Director.......................................................... 0.7% 25,000 30,000
Robert Cresci................................................................... 0.2% 15,000
All Officers and Directors...................................................... 35.3% 998,863 1,783,757
Other beneficial owners:
Brad Gaspard................................................................ 5.8% 441,582
Pecks Management Partners, Ltd.............................................. 21.6% -- 2,100,572
Consolidated Technologies, Inc.............................................. 5.7% 436,364
</TABLE>
Of the issued and outstanding shares as of May 1, 1999, no person or entity
owns or controls 10% or more of the company's common stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
BRIDGE LOANS TO THE COMPANY FROM RELATED PARTIES.
In September 1998, the Company entered into an agreement with a related
party, approved by the Board of Directors, which provided for a bridge loan of
$1,250,000. Interest was payable monthly at eleven and one-half percent per
annum. In December 1998, the bridge loan was repaid in full and the company
issued 193,750 five-year warrants to purchase shares at $4.50 in accordance with
the terms of such bridge loan.
In January 1998, the Company entered into agreements with related parties,
approved by the Board of Directors, which provided for bridge loans totaling
$599,000. The related parties consisted of: Sam Anderson, a director who loaned
$133,000; Dr. Nelson Teng, a director who loaned $130,000; Chang Ming
26
<PAGE>
Teng, father of Dr. Nelson Teng who loaned $50,000; Ezzat Jallad, a director who
loaned $50,000; Stranco Investments Ltd, an investment fund managed by Ezzat
Jallad a director which loaned $200,000; and Peggy Burdick, wife of Jerry
Burdick an officer and director who loaned $36,000. Interest was payable monthly
at ten percent per annum. In connection with the 1998 bridge loans, the Company
granted the holders warrants to purchase 599,000 shares of restricted common
stock at an exercise price of $3.50, which approximated the fair market value of
the shares on the date of grant. In February 1998, these warrants were exchanged
for 299,500 shares of restricted common stock. Except for $80,000 to Nelson Teng
and $43,000 to Samuel Anderson, the loans were repaid in May 1998.
At various times during the year ended February 28, 1998, the Company
entered into agreements with Mr. Barry Plost, the Company's president, which
provided for loans totaling $1,125,000, which were all outstanding at February
28, 1998. These loans were due upon demand, and were secured by all the assets
of the Company. The loans accrued interest at ten and twelve percent per annum.
In connection with these loans, the Company granted options to its president to
purchase 742,500 and 116,000 shares of restricted common stock at $2.00 and
$3.00 per share, which was at the then fair market value, respectively. In
addition, in conjunction with the January 1998 bridge, the Company's president
made a bridge loan to the Company totaling $200,000. Terms of the bridge loan
agreement were exactly the same as the terms other bridge loans made by related
parties in January 1998 (see above). In February 1998 the warrants received in
connection with the bridge loan were exchanged for 100,000 shares of restricted
stock. In May 1998, the Company repaid $1.0 million of such loans and in July
1998 repaid an additional $250,000. In December 1998 in conjunction with the
newly obtained senior debt facility with Brown Brothers & Harriman and State
Street Bank, Mr. Plost signed a subordination agreement relating to $472,500,
whereby Mr. Plost agreed to forego payment until all senior debt had been paid
in full. As of February 28, 1999, $472,500 was outstanding.
SERIES A WARRANTS
The Company issued 940,000 Series A Warrants in connection with the two
private placements dated June 1, 1996 and October 1, 1996. Each warrant allows
the holder to purchase one share of common stock of the Company at $2.75. The
Series A Warrants were exercisable immediately and will terminate on the earlier
of six years from the date of issuance or three years from the date of the
initial effectiveness of an "Initial Registration Statement" under Securities
Act of 1933. The Initial Registration Statement is required to register the
shares issued in conjunction with both private placements and the common stock
underlying Series A Warrants. The Series A Warrants provide for adjustments
consisting of a reduction of the exercise price of each Series A Warrant by $.10
upon the 270th day following the October 23, 1996 and for each subsequent month
thereafter until the Company effectuates such registration. Such reduction is
subject to a floor of $1.50. The Warrants are redeemable by the Company at $.01
per share, upon thirty days notice, if the common stock is publicly traded and
the average of the closing price per share of the common stock for each of the
twenty consecutive trading days immediately prior to the mailing of such
notification and for each day thereafter until the redemption date shall have
exceeded 133.3% of the then existing exercise price. No call for redemption can
be made unless the Company has an effective registration statement on file
relating to the common stock issued in conjunction with the private placements
and the common stock underlying Series A Warrants. During the year ended
February 28, 1998, the Company offered the holders of these warrants a cashless
exchange of one share of stock for two warrants. Holders of 615,000 warrants
(230,000 of which were held by officers and directors of the Company), elected
to receive 307,500 shares of restricted common stock (115,000 were received by
officers and directors of the Company). As of February 28, 1998, 325,000
warrants remained outstanding. In July 1998, the holders of the remaining
325,000 Series A Warrants exercised their option and acquired 325,000 shares of
the Company's common stock.
27
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A)(1) THE FOLLOWING FINANCIAL STATEMENTS ARE BEING FILED AS PART OF THIS
REPORT:
SERACARE, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants--
BDO Seidman, LLP
Consolidated Statements of Income --Year ended February 28, 1999
--Year ended February 28, 1998
Consolidated Balance Sheets--February 28, 1999 and February 28, 1998
Consolidated Statements of Stockholders Equity--Year ended February 28, 1999
--Year ended February 28, 1998
Consolidated Statements of Cash Flows--Year ended February 28, 1999
--Year ended February 28, 1998
Summary of Accounting Policies
Notes to Consolidated Financial Statements
(A)(2) THE FOLLOWING EXHIBITS WERE FILED AS A PART OF THIS REPORT AND WILL BE
PROVIDED UPON REQUEST.
<TABLE>
<C> <S>
3.2 Certificate of Designation of Series C Preferred Stock filed on March 9, 1999.
4.15 Revolving Credit, Term Loan and Security Agreement by and between SeraCare, Inc.,
Avre Incorporated, Binary Associates, Inc., SeraCare Acquisitions, Inc., BHM Labs,
Inc., SeraCare Technology, Inc., Western States Group, Inc., American Plasma, Inc.
("Obligors") and Brown Brothers Harriman & Co. and State Street Bank and Trust
Company ("Lenders") and Brown Brothers Harriman & Co. as Administrative Agent for
Lenders dated December 31, 1998.
4.16 Amended and Restated Cross-Guaranty Agreement between "Lenders" and "Obligors" Dated
December 21, 1998.
4.17 Amended and Restated Revolving Term Note between and SeraCare, Inc. and Brown
Brothers Harriman & Co. dated December 21, 1998.
4.18 Revolving Term Note between and SeraCare, Inc. and State Street Bank & Trust Company
dated December 21, 1998.
4.19 Term Promissory Note and SeraCare, Inc. and Brown Brothers Harriman & Co. dated
December 21, 1998.
4.20 Term Promissory Note between and SeraCare, Inc. and State Street Bank & Trust Company
dated December 21, 1998.
4.21 Amended and Restated Borrowing and Agency Agreement between SeraCare, Inc. and Brown
Brothers Harriman & Co. Dated December 21, 1998.
4.22 Amended and Restated Subordination Agreement between Holders of the 12% Senior
Subordinated Debentures due 2005 of SeraCare, Inc. And Brown Brothers Harriman & Co.
and State Street Bank & Trust Company ("Lenders") dated December 21, 1998.
4.23 Subordination Agreement between Barry D. Plost And Brown Brothers Harriman & Co. and
State Street Bank & Trust Company ("Lenders") dated December 21, 1998.
</TABLE>
28
<PAGE>
<TABLE>
<C> <S>
4.24 Warrant To Purchase Common Stock of SeraCare, Inc. issued to Brown Brothers Harriman
& Co. dated December 21, 1998.
4.25 Warrant To Purchase Common Stock of SeraCare, Inc. issued to State Street Bank dated
December 21, 1998.
4.26 Asset Purchase Agreement By and Between AMEX Plasma Management, Inc. and SeraCare,
Inc. dated October 30, 1998.
23.1 Consent of Independent Certified Public Accountants
</TABLE>
(A)(3) THE FOLLOWING EXHIBITS HAVE BEEN PREVIOUSLY FILED WITH THE COMMISSION AND
ARE HEREBY INCORPORATED HEREIN BY REFERENCE THERETO.
INDEX OF DOCUMENTS PREVIOUSLY FILED AS PART OF REGISTRATION STATEMENT ON
FORM 10SB FILED WITH THE COMMISSION ON NOVEMBER 21, 1996:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Restated Articles of Incorporation filed on February 6, 1996.
2.2 By-laws of American Blood Institute, Inc. (now known as SeraCare, Inc.) dated June 10, 1992.
3.1 Certificate of Designation of Series A Preferred Stock filed on July 10, 1996.
4.9 Revolving Term Note between Brown Brothers Harriman & Co and SeraCare, Inc. dated April 24, 1998.
4.10 Revolving Loan and Security Agreement between Brown Brothers Harriman & Co and SeraCare, Inc. dated
April 24, 1998.
4.11 Subordination Agreement between Brown Brothers Harriman & Co and SeraCare, Inc. dated April 24, 1998.
4.12 Borrowing and Agency Agreement between Brown Brothers Harriman & Co and SeraCare, Inc. dated April 24,
1998.
4.13 Cross-Guaranty Agreement between Brown Brothers Harriman & Co and SeraCare, Inc. dated April 24, 1998.
4.14 Warrant To Purchase Common Stock of SeraCare, Inc. issued to Brown Brothers Harriman & Co. dated April
24, 1998.
6.1 Employment Agreement dated February 5, 1996 between the Company and Barry D. Plost.
6.2 Employment Agreement dated November 14, 1995 between the Company and Jerry L. Burdick.
6.3 Employment Agreement dated November 14, 1995 between the Company and Brian Olson.
6.4 Employment Agreement dated September 3, 1996 between the Company and Brad Rabe.
6.5 Consulting Agreement dated July 2, 1996 between the Company and Samuel Anderson.
6.6 Bridge Note Agreement dated July 2, 1996 between the Company and Barry D. Plost.
6.7 Bridge Note Agreement dated July 17, 1996 between the Company and Barry D. Plost.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
6.8 Bridge Note Agreement dated July 2, 1996 between the Company and Samuel Anderson.
6.9 Asset Purchase Agreement dated September 3, 1996 between the Company and Brad Rabe.
6.10 Asset Exchange Agreement dated July 2, 1996 between the Company and Silver State Plasma Products, Inc.
6.10(a) Note payable dated July 2, 1996 between the Company and Silver State Plasma Products, Inc.
6.11 Amended and Restated Loan Agreement between the Company and CVD Financial Corporation.
6.11(a) Note payable dated February 6, 1996 between the Company and CVD Financial Corporation.
6.12 Contract for Exchange of Corporate Stock date July 9, 1996 between the Company and Mr. Burt H. McGhee.
6.13 Series A Warrant Agreement dated September 4, 1996.
6.14 Series A Warrant Agreement dated October 23, 1996.
6.15 Registration Rights Agreement dated September 4, 1996.
6.16 Registration Rights Agreement dated October 23, 1996.
6.17 Dealer Warrant Agreement dated September 4, 1996.
6.18 Dealer Registration Rights Agreement September 4, 1996.
6.19 Motion for Order Confirming Third Amended Joint Plan of Reorganization of American Blood Institute,
Inc., AVRE, Inc. and Binary Associates, Inc. dated January 24, 1996.
6.19(a) Order Confirming Third Amended Joint Plan of Reorganization of American Blood Institute, Inc., AVRE,
Inc. and Binary Associates, Inc. dated and filed January 24, 1996.
10.1 Subsidiaries of Registrant.
</TABLE>
(B) REPORTS ON FORM 8-K
None
30
<PAGE>
GLOSSARY OF TERMS
<TABLE>
<S> <C>
ALBUMIN A large molecule found in abundance in plasma which assists in
maintaining the body's fluid levels.
ANTIBODY A protein molecule produced in response to a specific foreign substance
to which the antibody may bind and destroy to protect the body from
foreign invasion.
ANTIGEN A foreign substance such as a virus, bacteria or toxin which stimulates
the production of antibodies.
CLOTTING FACTORS A series of protein substances involved in the clotting processes. The
most frequently used are referred to as Factors VIII and IX.
CYTOMEGALOVIRUS A virus commonly infecting various populations, resulting in flu-like
symptoms and the development of CMV antibodies in an otherwise healthy
person. If it infects a person with a compromised immune system, it has
much more severe consequences, including causing death.
HEMOPHILIA Any of several blood-coagulation disorders in which the blood fails to
clot normally because of a deficiency or an abnormality of one of the
clotting factors.
HEPATITIS Inflammation of the liver caused by infectious or toxic agents and
characterized by jaundice, fever, liver enlargement and abdominal pain.
There are various forms of viral hepatitis, including hepatitis A, B,
and C, which cause different disease conditions.
HIV Human Immunodeficiency Virus, a virus that causes AIDS.
IMMUNE GLOBULINS A group of proteins which contains antibodies.
ORPHAN DRUG STATUS A designation given by FDA to a drug which treats relatively rare
diseases or diseases affecting fewer than 200,000 persons in the United
States at the time of the application for such status. The company to
first receive orphan drug status and receive FDA marketing approval is
entitled to a seven-year exclusive marketing period in the United
States.
PLASMA Liquid portion of blood which contains various proteins, as
distinguished from formed elements of the blood such as red blood cells,
white blood cells and platelets. Plasma also contains antibodies.
PLASMAPHERESIS A process in which plasma is removed from whole blood and the remaining
components of the whole blood are returned to the donor.
PLATELETS Cells in blood which promote blood clotting.
RED BLOOD CELLS Principal cell found in whole blood, containing hemoglobin, the primary
carrier of oxygen to the body.
SOURCE PLASMA The proper name of a product defined as a liquid portion of human blood
collected by plasmapheresis meeting the FDA criteria or "source plasma"
and intended as source material for further manufacturing use. Source
plasma is sometimes referred to as normal plasma.
SPECIALTY PLASMA Plasma collected to provide specific antibodies to manufacture immune
globulins for specific diseases or collected according to special
specifications for further manufacturing either into therapeutic or
diagnostic products.
WHITE BLOOD CELLS Several types of specialized cells found in whole blood that are a
critical part of the defense of the body against disease and infections.
</TABLE>
31
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
SERACARE, INC.
(Registrant)
By: /s/ BARRY D. PLOST
-----------------------------------------
Dated May 26, 1999 Barry D. Plost, President & CEO
By: /s/ JERRY L. BURDICK
-----------------------------------------
Jerry L. Burdick
Principal Accounting and Finance Officer
</TABLE>
In accordance with Section 12 of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ BARRY D. PLOST
- ------------------------------ Chairman of the Board and May 26, 1999
Barry D. Plost CEO
/s/ JERRY L. BURDICK
- ------------------------------ Executive Vice President May 26, 1999
Jerry L. Burdick and CFO
/s/ SAMUEL ANDERSON
- ------------------------------ Director May 26, 1999
Samuel Anderson
/s/ ROBERT J. CRESCI
- ------------------------------ Director May 26, 1999
Robert J. Cresci
/s/ EZZAT JALLAD
- ------------------------------ Director May 26, 1999
Ezzat Jallad
/s/ DR. NELSON TENG
- ------------------------------ Director May 26, 1999
Dr. Nelson Teng
/s/ MICHAEL F. CROWLEY, SR.
- ------------------------------ Director May 26, 1999
Michael F. Crowley, Sr.
/s/ WILLIAM J. CONE
- ------------------------------ Director May 26, 1999
William J. Cone
</TABLE>
32
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS................................... F-2
CONSOLIDATED FINANCIAL STATEMENTS
Statements of Income............................................................. F-3
Balance Sheets................................................................... F-4
Statements of Stockholders' Equity............................................... F-5
Statements of Cash Flows......................................................... F-6
Summary of Accounting Policies................................................... F-8
Notes to Consolidated Financial Statements....................................... F-13
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
SeraCare, Inc.
We have audited the accompanying consolidated balance sheets of SeraCare,
Inc. and subsidiaries as of February 28, 1999 and 1998 and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SeraCare,
Inc. and subsidiaries as of February 28, 1999 and 1998 and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
BDO Seidman, LLP
Los Angeles, California
May 18, 1999
F-2
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28,
1999 1998
------------- -------------
<S> <C> <C>
Revenue
Net sales (Notes 13 and 14)...................................................... $ 49,010,389 $ 12,291,396
Income from joint venture........................................................ 687,818 119,574
------------- -------------
Total Revenue................................................................ 49,698,207 12,410,970
Cost of sales...................................................................... 39,128,393 10,774,398
------------- -------------
Gross profit..................................................................... 10,569,814 1,636,572
General and administrative expenses................................................ 4,180,160 1,479,296
------------- -------------
Operating income................................................................. 6,389,654 157,276
Interest expense................................................................... (2,907,145) (458,719)
Non-cash interest expense (Note 6)................................................. (1,387,157) (74,386)
Other income, net (Note 15)........................................................ 626,664 854,682
------------- -------------
Income before income taxes....................................................... 2,722,016 478,853
Income taxes (Note 11)............................................................. 17,014 25,000
------------- -------------
Net income....................................................................... $ 2,705,002 $ 453,853
------------- -------------
------------- -------------
Earnings per common share (Note 16)
Basic............................................................................ $ 0.37 $ 0.09
------------- -------------
------------- -------------
Diluted.......................................................................... $ 0.24 $ 0.08
------------- -------------
------------- -------------
Weighted average shares outstanding (Note 16)
Basic............................................................................ 7,365,212 4,818,313
------------- -------------
------------- -------------
Diluted.......................................................................... 11,103,186 5,706,405
------------- -------------
------------- -------------
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-3
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF AS OF
FEBRUARY 28, FEBRUARY 28,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS (NOTES 3, 4 AND 5)
CURRENT ASSETS
Cash and cash equivalents........................................................ $ 843,226 $ 5,497,524
Accounts receivable (Note 14).................................................... 13,619,739 4,612,968
Inventory........................................................................ 10,659,226 7,644,601
Prepaid expenses and other current assets........................................ 580,883 243,785
------------- -------------
Total Current Assets........................................................... 25,703,074 17,998,878
------------- -------------
PROPERTY AND EQUIPMENT--NET (NOTE 2)............................................... 4,632,159 2,780,850
FDA licenses, less accumulated amortization of $145,716 and $57,351................ 7,836,942 2,759,999
Donor base and records, less accumulated amortization of $173,834 and $61,149...... 4,376,488 1,688,762
Reorganization value in excess of amounts allocated to identifiable assets, less
accumulated amortization of $117,203 and $78,635................................. 654,250 692,818
Goodwill, less accumulated amortization of $770,946 and $84,292.................... 11,798,511 9,748,357
Deferred bond offering cost, less accumulated amortization of $1,234,954 and
$49,349 (Note 6)................................................................. 7,091,952 8,241,225
Other assets, including start-up costs of $791,185 and $739,171.................... 2,482,886 1,318,483
------------- -------------
Total Assets....................................................................... $ 64,576,262 $ 45,229,372
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses............................................ 2,535,050 2,495,588
Accrued payroll and related expenses............................................. 366,475 230,474
Accrued expenses................................................................. 2,219,957 1,266,854
Deferred income.................................................................. 397,353 1,131,178
Line of credit................................................................... 8,840,000
Bridge loans from related parties (Note 4)....................................... 123,000 2,121,500
Notes payable (Note 5)........................................................... 297,746 1,296,947
Current portion of long-term debt (Notes 3 and 6)................................ 1,199,909 12,211
------------- -------------
Total Current Liabilities........................................................ 15,979,490 8,554,752
------------- -------------
LONG-TERM DEBT (NOTES 4, 5 AND 6).................................................. 22,895,014 16,196,670
Series A redeemable preferred stock, $.001 par value, 25,000,000 shares authorized;
400 shares and 1600 shares issued and outstanding................................ 60,107 231,130
Commitments (Note 12)
STOCKHOLDERS' EQUITY
Series B convertible preferred stock, $.001 par value, 15,000 shares authorized
and outstanding. Liquidation value $100 per share.............................. 15 15
Series C convertible preferred stock, $.001 par value, 22,500 shares authorized
and outstanding. Liquidation value $100 per share, 10% cumulative dividend..... 22
Common stock, $.001 par value, 25,000,000 shares authorized, 7,644,418 and
7,210,585 issued and outstanding............................................... 7,644 7,210
Additional paid-in capital....................................................... 22,982,605 20,293,232
Retained earnings (deficit)...................................................... 2,651,365 (53,637)
------------- -------------
Total stockholders' equity......................................................... 25,641,651 20,246,820
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................... $ 64,576,262 $ 45,229,372
------------- -------------
------------- -------------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-4
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK
--------------------------------------------------
COMMON
SERIES B SERIES C STOCK
------------------------ ------------------------ ---------
SHARES AMOUNT SHARES AMOUNT SHARES
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 1, 1997.................................... -- $ -- -- $ -- 4,149,387
Common stock issued for (Note 7):
Private placement, net of costs of $204,811............. -- -- -- -- 1,136,396
Conversion of debt...................................... -- -- -- -- 487,813
Services................................................ -- -- -- -- 30,000
Acquisition of Western States subsidiary (Note 1)....... -- -- -- -- 125,000
Acquisition of assets of CTI (Note 1)................... -- -- -- -- 436,364
Cashless exchange of warrants........................... -- -- -- -- 840,500
Acquisition of plasma centers........................... -- -- -- -- 5,125
Compensation expense related to non-employee stock
options................................................. -- -- -- -- --
Issuance of options in conjunction with the original issue
discount associated with the bridge loans............... -- -- -- -- --
Warrants issued in conjunction with subordinated bonds.... -- -- -- -- --
Issuance of Series B Convertible Preferred Stock, net of
$7,500 of issuance costs, issued in a private
placement............................................... 15,000 15 -- -- --
Net income for the year................................... -- -- -- -- --
----------- --- ----------- --- ---------
BALANCE, FEBRUARY 28,1998................................. 15,000 15 -- -- 7,210,585
Common stock issued for (Note 7)
Acquisition of plasma center............................ -- -- -- -- 50,000
Exercise of Series A warrants........................... -- -- -- -- 325,000
Finders' fees on private placement...................... -- -- -- -- 25,000
Prior private placement, adjustment of shares........... -- -- -- -- 33,833
Issuance of Series C Convertible Preferred Stock, net of
$135,000 of issuance costs, issued in a private
placement............................................... -- -- 22,500 22 --
Warrants issued........................................... -- -- -- -- --
Subsequent costs relating to private placement............ -- -- -- -- --
Net income for the year................................... -- -- -- -- --
----------- --- ----------- --- ---------
BALANCE, FEBRUARY 28,1999................................. 15,000 $ 15 22,500 $ 22 7,644,418
----------- --- ----------- --- ---------
----------- --- ----------- --- ---------
<CAPTION>
ADDITIONAL RETAINED
PAID-IN EARNINGS
AMOUNT CAPITAL (DEFICIT) TOTAL
----------- ---------- --------- ----------
<S> <C> <C> <C> <C>
BALANCE, MARCH 1, 1997.................................... $ 4,149 $4,182,954 ($507,490) $3,679,613
Common stock issued for (Note 7):
Private placement, net of costs of $204,811............. 1,136 3,931,582 -- 3,932,718
Conversion of debt...................................... 488 996,840 -- 997,328
Services................................................ 30 9,970 -- 10,000
Acquisition of Western States subsidiary (Note 1)....... 125 438,163 -- 438,288
Acquisition of assets of CTI (Note 1)................... 436 1,529,587 -- 1,530,023
Cashless exchange of warrants........................... 841 (841) -- --
Acquisition of plasma centers........................... 5 7,682 -- 7,687
Compensation expense related to non-employee stock
options................................................. -- 107,101 -- 107,101
Issuance of options in conjunction with the original issue
discount associated with the bridge loans............... -- 187,009 -- 187,009
Warrants issued in conjunction with subordinated bonds.... -- 7,410,700 -- 7,410,700
Issuance of Series B Convertible Preferred Stock, net of
$7,500 of issuance costs, issued in a private
placement............................................... -- 1,492,485 -- 1,492,500
Net income for the year................................... -- -- 453,853 453,853
----------- ---------- --------- ----------
BALANCE, FEBRUARY 28,1998................................. 7,210 20,293,232 (53,637) 20,246,820
Common stock issued for (Note 7)
Acquisition of plasma center............................ 50 149,177 -- 149,227
Exercise of Series A warrants........................... 325 487,175 -- 487,500
Finders' fees on private placement...................... 25 (25) -- --
Prior private placement, adjustment of shares........... 34 (34) -- --
Issuance of Series C Convertible Preferred Stock, net of
$135,000 of issuance costs, issued in a private
placement............................................... -- 2,114,978 -- 2,115,000
Warrants issued........................................... -- 45,097 -- 45,097
Subsequent costs relating to private placement............ -- (106,995) -- (106,995)
Net income for the year................................... -- -- 2,705,002 2,705,002
----------- ---------- --------- ----------
BALANCE, FEBRUARY 28,1999................................. $ 7,644 $22,982,605 $2,651,365 $25,641,651
----------- ---------- --------- ----------
----------- ---------- --------- ----------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-5
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
1999 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities
Net income.......................................................................... $2,705,002 $ 453,853
Adjustments to reconcile net income to cash provided by (used in) operating
activities:
Depreciation and amortization..................................................... 1,823,730 461,182
Income from joint venture......................................................... (687,818) (119,574)
Gain on sale of land and buildings................................................ (539,769) --
Non-cash interest expense......................................................... 1,387,157 74,386
Non-cash general and administrative expense....................................... 3,215 10,700
Issuance of common stock in exchange for services................................. -- 10,000
(Increase) decrease from changes in:
Accounts receivable............................................................. (8,808,192) (3,503,367)
Inventory....................................................................... (2,535,950) (5,755,645)
Prepaid expenses and other current assets....................................... (224,820) (108,466)
Other assets.................................................................... (557,697) 45,515
Accounts payable................................................................ (104,904) 1,340,823
Accrued payroll and related expenses............................................ 136,001 27,591
Accrued expenses................................................................ 953,103 828,193
Deferred income................................................................. (733,825) 1,131,178
------------ ------------
Net cash used in operating activities (7,184,767) (5,103,631)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment................................................. (1,219,402) (800,955)
Cash paid to purchase subsidiaries, net of cash acquired............................ (9,062,667) (3,555,662)
Assets of CTI, American Plasma and Serologicals acquired for cash................... -- (6,999,853)
Cash acquired in Acquisition........................................................ -- 250,000
Distributions from unconsolidated subsidiary........................................ 675,000 --
Additions to FDA licenses........................................................... (1,175,772) (569,355)
Additions to donor base and records................................................. (947,720) (435,903)
Additions to other intangible assets................................................ (1,022,226) (759,402)
------------ ------------
Net cash used in investing activities................................................. (12,752,787) (12,871,130)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit................................................. 8,840,000 --
Proceeds from notes payable......................................................... 2,000,000 1,946,947
Repayments of notes payable......................................................... (3,008,500) (500,000)
Proceeds from long-term debt, net of issuance costs................................. 7,000,000 15,120,125
Repayments of long-term debt........................................................ (346,750) (830,163)
Proceeds from bridge loans from related parties..................................... 1,250,000 1,924,000
Repayments of bride loans from related parties...................................... (2,776,000) --
Payments on redemption of preferred stock........................................... (170,998) (157,917)
Net Proceeds from issuance of preferred and common shares........................... 2,495,504 5,425,216
------------ ------------
Net cash provided by financing activities............................................. 15,283,256 22,928,208
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS............................................. (4,654,298) 4,953,447
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................ 5,497,524 544,077
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................................. $ 843,226 $5,497,524
------------ ------------
------------ ------------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
(a) Cash paid for:
Interest.......................................................... $2,517,113 $ 402,861
State income taxes................................................ $ 17,014 $ 25,000
</TABLE>
(b) Non-cash investing and financing activities
During 1999 the Company entered agreements for the sale of four real estate
properties for a combined selling price of $975,000. In conjunction with such
sales, the acquiring company assumed a mortgage of $173,109 and SeraCare, Inc.
retained a note receivable of $608,169.
On October 31, 1998, the Company acquired a plasma collection center in
exchange for 50,000 shares of common stock and 50,000 warrants which were valued
at $149,227 for purposes of accounting for the transaction.
Effective January 1, 1998, the Company acquired substantially all of the the
operating assets of Consolidated Technologies and an affiliate in exchange for
436,364 shares of stock and $5,600,000 in cash (Note 1).
Effective January 1, 1998, the Company acquired substantially all of the
stock of Western States Group, Inc. for 125,000 shares of common stock and
$4,033,204 in cash (Note 1).
On November 29, 1997, the Company acquired substantially all of the
operating assets of American Plasma Management for $1,250,000 in cash and a note
for $600,000. In addition, the Company assumed an existing mortgage of $175,533
on one of the plasma centers (Note 1).
In conjunction with the Senior Subordinated Debentures (Note 6), the Company
issued 2,100,572 warrants to purchase common stock to the debenture holders and
131,286 warrants to the referring investment banker as part of a finders fee.
During 1998, the holders of $997,328 of the Company's debt elected to
convert such debt into 487,813 shares of restricted common stock.
During 1998, the holders of 615,000 Series A Warrants elected to convert the
warrants into 453,750 shares of restricted common stock.
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-7
<PAGE>
SERACARE INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
ORGANIZATION
SeraCare, Inc. (the "Company"), a Delaware corporation, was formed on
November 8, 1991. The business of the Company is currently carried out through
its wholly-owned subsidiaries AVRE, Inc., a Nevada corporation, BHM Labs, Inc.,
an Arkansas corporation, Binary Associates, Inc., a Colorado corporation,
SeraCare Acquisitions, Inc., a Nevada corporation, Western States, Inc., a
California corporation, SeraCare Technology, Inc., a Nevada corporation and
American Plasma, Inc., a Texas corporation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
REVENUE RECOGNITION
The Company's policy is to record revenue upon shipment of its products. The
Company generally sells its plasma to fractionators under long-term contracts. A
fractionator is a company that manufactures pharmaceutical and diagnostic
products by processing the raw source plasma into a variety of derivative
products. During 1997, the Company received advance payments from a customer
pending FDA licenses. The revenue related to these advance payments has been
deferred until actual shipment of the plasma and is presented as deferred income
in the accompanying consolidated balance sheet.
INVENTORY
Inventory, which primarily consists of blood plasma collected from donors,
is valued at the lower of cost or market (net realizable value). Cost is
determined by the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of five to ten years.
Leasehold improvements are recorded at cost and are amortized using the
straight-line method, over the lesser of the estimated useful lives of the
property or the lease term, not to exceed ten years.
INVESTMENT IN JOINT VENTURE
The Company has a 50% interest in a joint venture, included in other assets
in the consolidated balance sheet, which it accounts for using the equity method
of accounting. The 50% interest in the joint venture's assets and equity is not
material in relation to the Company. This joint venture recorded sales of $5.8
million, net income of $1.4 million and had total assets of $.5 million as of
and for the year ended February 28, 1999.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. A valuation allowance is provided when management
cannot determine whether or not it is more likely that the net deferred tax
asset will be
F-8
<PAGE>
SERACARE INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
realized. The effect on deferred tax assets and liabilities of a change in the
rates is recognized in income in the period that includes the enactment date.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with an original maturity of three months or less
to be cash equivalents.
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS
Under the principles of "fresh-start" reporting, the Company allocated total
reorganization value among identifiable tangible and intangible assets on the
basis of their estimated fair values. The remaining amount is classified as
reorganization value in excess of amounts allocable to identifiable assets and
is being amortized over twenty years. The Company evaluates and assesses the
overall recoverability of this asset by determining if the unamortized balance
can be recovered through undiscounted future operating cash flows.
FDA LICENSES
Food and Drug Administration ("FDA") licenses which are required to operate
a plasma center, are assigned a value based on either the fair market value of
acquiring a FDA license or the incremental costs incurred during the FDA
licensing approval process, not to exceed the fair value. The Company evaluates
and assesses the overall recoverability of an FDA license by determining if the
unamortized balance can be recovered through undiscounted future operating cash
flows. Management believes that as long as the Company continues to demonstrate
compliance, an FDA license has an unlimited useful life. Accordingly, the FDA
licenses are being amortized using the straight-line method over forty years.
DONOR BASE AND RECORDS
Donor base and records arise from business combinations or from the costs
incurred in establishing a donor base and the required records of a new center.
These costs consist of incremental costs directly related to the processing of
new donors. The value assigned to donor base and records is established by the
Company the costs incurred, not to exceed the fair value. The Company evaluates
and assesses the overall recoverability of donor base and records by determining
if the unamortized balance can be recovered through undiscounted future
operating cash flows. Donor base and records are being amortized using the
straight-line method over an estimated useful life of twenty years.
GOODWILL
Goodwill represents the excess of the purchase price over the fair value of
net assets of businesses acquired and is amortized using the straight-line
method over a period of twenty years. The Company assesses the recoverability of
its goodwill periodically by evaluating the expected undiscounted future cash
flows for individual centers to determine whether they are sufficient to support
recorded goodwill. If undiscounted cash flows are not sufficient to support the
recorded asset, an impairment loss is recognized to reduce the carrying value of
the goodwill based on the expected discounted cash flows of the center.
START-UP COSTS
Start-up costs of $791,185 and $739,171 were included in other assets at
February 28, 1999 and 1998, respectively. These costs represent non-recurring
expenditures directly related to and incurred during the start-up phase of the
opening of the Company's newly established centers. Start-up costs consist
primarily
F-9
<PAGE>
SERACARE INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
of direct labor and overhead associated with the start-up phase. The start-up
costs are being amortized on a straight-line basis over a period not to exceed
three years. Recoverability of these costs are assessed on an on-going basis.
Amortization of start-up costs during the years ended February 28, 1999 and 1998
was $255,591 and $20,231, respectively.
DEFERRED FINANCING COSTS
Included in other assets as of February 28, 1999 and 1998, are deferred
financing costs of $99,632 and $162,009, respectively. These costs relate to
loan fees the fair value of options and warrants issued together with bridge
loans and notes payable. These costs are amortized over the anticipated life of
the respective financial instruments.
EARNINGS PER SHARE
As of February 28, 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). This
pronouncement provides a different method of calculating earnings per share than
was used in accordance with APB 15, "Earnings per Share". SFAS 128 provides for
the calculation of Basic and Diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing net income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could occur if securities or other contracts (such as stock
options, warrants, convertible debentures or convertible preferred stock) to
issue common stock were exercised or converted into common stock.
DEFERRED BOND OFFERING COSTS
Deferred bond offering costs represents the fair value of the warrants
issued to debenture holders and an investment banker in connection with the $16
million debentures issued on February 13, 1998 and the related costs and
expenses of such issuance. The deferred bond offering costs are being amortized
over the 7 year term of such debentures on a straight-line basis using the bonds
outstanding method.
STOCK-BASED COMPENSATION
As of March 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which
establishes a fair value method of accounting for stock-based compensation. In
accordance with SFAS 123, the Company has chosen to continue to account for
employee stock-based compensation utilizing the intrinsic value method
prescribed in APB 25. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair market price of the Company's stock
at the date of grant over the amount an employee must pay to acquire the stock.
Also, in accordance with SFAS 123, the Company has provided footnote
disclosure with respect to stock-based employee compensation. The cost of
stock-based employee compensation is measured at the grant date based on the
value of the award and is recognized over the service period. The value of the
stock based award is determined using a pricing model whereby compensation cost
is the excess of the fair value of the stock as determined by the model at grant
date or other measurement date over the amount an employee must pay to acquire
the stock.
The Company accounts for non-employee stock based compensation by
establishing a fair value for stock options granted. Compensation costs is
measured as the excess, if any, of the fair value of the
F-10
<PAGE>
SERACARE INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Company's stock at the date of grant over the amount the non-employee must pay
to acquire the stock and is recognized over the anticipated service period.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF LONG-TERM DEBT
The fair value of the Company's long-term debt, which approximates the
carrying value, is estimated based on the quoted market prices for the same or
similar issues.
IMPAIRMENT OF LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
established guidelines regarding when impairment losses on long-lived assets,
which include plant and equipment and certain identifiable intangible assets,
should be recognized and how impairment losses should be measured. The Company
periodically reviews such assets for possible impairment and expected losses, if
any, are recorded currently.
RECLASSIFICATIONS
Certain reclassifications have been made to conform the prior year amounts
to the current year presentation.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income," ("SFAS 130") issued by the FASB is effective for financial statements
with fiscal years beginning after December 15, 1997. Earlier application is
permitted. SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general--purpose
financial statements. The Company adopted SFAS 130 for the year ending
2-28-1999. Such adoption did not have any material effect on its financial
position or results of operations, but has resulted in additional disclosures as
required by the Statement.
Statement of Financial Accounting Standard No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS 131") issued by the
FASB is effective for financial statements with fiscal years beginning after
December 15, 1997. SFAS 131 requires that public companies report certain
information about operating segments, products, services and geographical areas
in which they operate and their major customers. The Company adopted SFAS 131
for the year ending 2-28-1999. Such adoption did not have any material effect on
its financial position or results of operations.
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities,"
(SOP 98-5) issued by the American Institute of Certified Public Accountants is
effective for financial statements beginning after December 15, 1998. SOP 98-5
requires that the costs of start-up activities, including organization costs, be
expensed as incurred. Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting
F-11
<PAGE>
SERACARE INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
business with a new class of customer (excluding ongoing customer acquisition
costs, such as policy acquisition costs and loan origination costs) or
beneficiary, initiating a new process in an existing facility, or commencing
some new operation. The Company anticipates adoption of SOP 98-5 for the fiscal
year beginning March 1, 1999. The adoption of SOP 98-5 will result in a "one
time charge" cumulative effect of a change in accounting principle of about
$483,000 tax effected at the statutory rate. To the extent that the Company
establishes new startup centers, the inability to defer startup costs will
result is in a decrease in its results of operations. The adoption of SOP 98-5
may also have a negative impact on the Company's strategic plan for expansion
because of the inability to match the costs of establishing a new center with
the revenue derived from such center even when all production from the center
has been contractually committed. The Company is currently evaluating
alternative strategies for achieving our growth objectives.
F-12
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS OPERATIONS
GENERAL
COMPANY HISTORY
The Company as it is currently organized has evolved over the last three
years since February 6, 1996, with a strategic plan for expansion and growth.
During that three year period, the Company has grown from six plasma collection
centers to a total of thirty two centers as of February 28, 1999, both through
acquisition and by establishing new startup centers. In addition, the Company
made two key acquisitions in Western States Group, Inc. and Consolidated
Technologies. SeraCare, Inc. went public in May 1996 on the OTC Bulletin Board
and is now listed on the American Stock Exchange under the symbol SRK.
Organizationally, the Company consists of: Consolidated Technologies
Division; Western States Plasma Division; and the Biologics Division. With the
acquisitions of Western States and CTI, the Company became a fully integrated
collector; manufacturer and marketer of plasma based diagnostic products.
Western States a "Value Added Distributor" has provided expanded worldwide
marketing with its domestic customer base and an extensive European and Asian
presence. In addition, the Company's Biologics Division continues provide the
Company's primary product of collecting and selling source plasma to
manufacturers of therapeutic and diagnostic products. The plasma centers
currently operated by the Company are operating under the trade name "SeraCare".
The name "SeraCare" is registered with the United States Patent and Trademark
Office.
ACQUISITIONS
AMERICAN PLASMA, INC.
Effective July 6, 1998, the Company acquired all of the capital stock of
American Plasma, Inc. ("American") located in Houston, Texas. American operates
eleven plasmapheresis centers located in: Houston, Texas (4), South Houston,
Texas; Beaumont, Texas; Longview, Texas; Casa Grande, Arizona; Phoenix, Arizona;
Mesa, Arizona; and Amarillo, Texas. The total purchase price was $9,611,102.
AMEX PLASMA MANAGEMENT, INC.
In October, 1998, the Company acquired certain of the operating assets of a
plasma center in Baton Rouge, Louisiana from Amex Plasma Management, Inc. for
50,000 shares of common stock and a five-year warrant to purchase 50,000 shares
of common stock at $6.00 per share. This transaction was valued at $149,227, the
fair value of the shares and warrants at that date.
CONSOLIDATED TECHNOLOGIES, INC.
Effective January 1, 1998, the Company acquired substantially all of the
operating assets of Consolidated Technologies, Inc. and an affiliate, both
located in Austin, Texas. Consolidated Technologies, Inc. is a biomedical
manufacturing company specializing in the supply of products and services to the
in-vitro diagnostic industry. The total purchase price was valued at $7,130,023,
consisting of $5,600,000 in cash and 436,364 shares of the Company's common
stock.
WESTERN STATES GROUP, INC.
Effective January 1, 1998, the Company acquired all of the stock of Western
States Group, Inc. located in Fallbrook, California. Western States Group, Inc.
is a worldwide marketing organization for
F-13
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. BUSINESS OPERATIONS (CONTINUED)
therapeutic blood plasma products, diagnostic test kits, specialty plasma and
bulk plasma. The total purchase price was $4,471,492, consisting of $4,033,204
in cash and 125,000 shares of the Company's common stock. The Purchase Agreement
provides for future additional consideration if certain performance criteria are
met during the two years immediately after the acquisition.
AMERICAN PLASMA MANAGEMENT, INC.
On November 29, 1997, the Company acquired substantially all of the
operating assets of five plasma centers from American Plasma Management, Inc.
The total purchase price was $1,850,000, consisting of $1,250,000 in cash and
$600,000 in a note payable, due October 31, 1998 (see Note 5). In addition, the
Company assumed the existing mortgage of $175,533 on one of the plasma centers.
SEROLOGICALS CORPORATION
On August 13, 1997, the Company acquired two plasma centers located in Reno,
Nevada and Ft. Smith, Arkansas, plus $250,000 in exchange for three of the
Company's plasma centers located in Colorado Springs (2) and Pueblo, Colorado.
All acquisitions were accounted for using the purchase method of accounting.
Accordingly, the results of operations are reported as of the effective dates of
acquisition. The purchase price has been allocated to the net assets acquired
based upon fair market values at the date of acquisition. The excess purchase
price over the net assets acquired was recorded as goodwill and is being
amortized over twenty years.
The unaudited proforma results of operations, assuming the acquisitions
occurred as of the beginning of the respective period for revenue, net income
and income per share, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY FEBRUARY
1999 1998
------------- -------------
<S> <C> <C>
Revenue........................................................ $ 53,717,000 $ 45,292,000
Net income..................................................... 2,762,000 1,754,000
Income per share
Basic........................................................ .37 .33
Diluted...................................................... .25 .21
</TABLE>
These unaudited pro forma results are not necessarily indicative of actual
or future operating results.
F-14
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
FEBRUARY FEBRUARY
1999 1998
------------ ------------
<S> <C> <C>
Land.............................................................. $ -- $ 85,280
Buildings and improvements........................................ 117,255 458,375
Furniture and equipment........................................... 1,769,846 1,212,459
Leasehold improvements............................................ 3,233,626 1,020,022
Construction-in-process 340,347 295,382
------------ ------------
5,461,074 3,071,518
Less: accumulated depreciation and amortization................... 828,915 290,668
------------ ------------
Property and equipment, net....................................... $ 4,632,159 $ 2,780,850
------------ ------------
------------ ------------
</TABLE>
Depreciation and amortization expense on property and equipment was $538,247
and $186,132 for the years ending February 28, 1999 and 1998, respectively.
3. LINE OF CREDIT
During December, 1998, the Company obtained a senior credit facility of $17
million. As structured, $7 million was established as a term loan (Note 6) and
$10 million was established as a revolving line of credit. Draws under the
revolving line of credit are limited to the sum of (a) seventy-five percent of
qualifying accounts receivable plus fifty percent of inventory value. At
February 28, 1999, $8,840,000 had been drawn under this line of credit. Interest
accrues at a per annum rate equal to the Wall Street Journal Prime Rate plus
.75% (8.5% at February 28, 1999) and is payable quarterly. The restructured
facility is secured by all the assets of the Company. The agreement calls for
restrictions on cash of $150,000. The new agreement contains various covenants
relating to: maintaining minimum tangible capital base, current ratio and
coverage ratio; senior indebtedness to EBITDA; and restrictions on additional
indebtedness, investments, asset sales, mergers or other changes of control,
divestitures, acquisitions, dividends and distributions. As of February 28,
1999, the Company was in violation of a covenant which was subsequently waived
by the lender. This senior credit facility has a term ending December 2000.
4. BRIDGE LOANS FROM RELATED PARTIES
During the year ended February 28, 1999, the Company entered into an
agreement with a related party to provide a bridge loan of $1,250,000 to the
Company to purchase the stock of American Plasma, Inc. (Note 1). Interest was
payable at 11.5 percent per annum. In connection with this loan, the Company
granted the holder warrants to purchase 193,750 shares of restricted common
stock at an exercise price of $4.50, which approximated the fair value of the
shares on the date of grant. The Company paid $25,000 of loan origination fees
related to this loan. This loan was repaid prior to year end.
In January 1998, the Company entered into agreements with related parties,
approved by the Board of Directors, which provided for bridge loans of $599,000.
Interest is payable monthly at ten percent per annum. At February 28, 1999,
$123,000 of these bridge loans were outstanding. These loans are due on demand.
In connection with the 1998 bridge loans, the Company granted the holders
warrants to purchase 599,000 shares of restricted common stock at an exercise
price of $3.50, which approximated the fair value
F-15
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. BRIDGE LOANS FROM RELATED PARTIES (CONTINUED)
of the shares on the date of grant. In February 1998, these warrants were
exchanged for 299,500 shares of restricted common stock.
At various times during the year ended February 28, 1998, the Company
entered into agreements with the Company's president, which provided for loans
totaling $1,325,000. These loans are due upon demand, and are secured by all the
assets of the Company. The loans accrue interest at ten and twelve percent per
annum. At February 28, 1999, $472,500 of these loans were outstanding and was
subject of a subordination agreement whereby such amount cannot be repaid until
the senior lenders have been paid in full. Accordingly, this obligation has been
classified in long-term debt on the balance sheet. In connection with these
loans, the Company granted options to its president to purchase 742,500 and
116,000 shares of restricted common stock at $2.00 and $3.00 per share, which
was at the then fair value, respectively.
During 1997, the Company entered into agreements with related parties,
approved by the Board of Directors, which provided for bridge loans of $550,000.
The bridge loans were due on demand and were secured by all of the assets of
SeraCare's consolidated operations. The loans accrue interest at twelve percent
per annum. The balance of these loans was $197,500 at February 28, 1998 and was
repaid during the year ended February 28, 1999.
5. NOTES PAYABLE
In September 1998, the Company entered into an agreement, approved by the
Board of Directors, which provided $2.0 million to the Company in connection
with the acquisition of the stock of American Plasma, Inc. (Note 1). Interest is
payable at 11.5 percent per annum. In connection with this loan, the Company
granted the holder warrants to purchase 228,683 shares of restricted common
stock at an exercise price of $4.50, which approximated the fair value of the
shares on the date of grant. The Company paid $40,000 in loan origination fees
related to this loan. This loan was repaid by year end.
During the year ended February 28, 1998, the Company entered into
agreements, approved by the Board of Directors, which provided for loans of
$808,500. These loans were due April 12, 1998. Interest was payable monthly at
ten percent per annum. $500,000 of these loans was repaid in 1998 and the
remaining $308,500 was repaid during 1999. In connection with these loans, the
Company granted the holders warrants to purchase 308,500 shares of common stock
at an exercise price of $3.50 per share and 285,000 shares at an exercise price
of $4.00 per share, which approximated the fair value of the shares on the dates
of grant. In February 1998, the warrants with an exercise price of $3.50 were
exchanged for 154,250 shares of restricted common stock.
In conjunction with the American Plasma Management, Inc. acquisition, the
Company became obligated under a note payable for $600,000, which had an
interest rate of eight percent and was due on October 31, 1998. The note was
repaid prior to year end.
At various times during the year ended February 28, 1998, the Company
entered into agreements, which provided for loans totaling $1,138,447. These
loans are due upon demand and are secured by all the assets of the Company. The
loans accrue interest at twelve percent per annum. In connection with these
loans, the Company granted three-year options to purchase 487,978 shares of
common stock at exercise prices ranging between $2.00 and $3.00 per share, which
was at the then fair value. In December 1997, $750,000 of these loans were
converted into 375,000 shares of restricted common stock. At February 28, 1999
and 1998 $288,447 and $388,447 respectively of these loans was outstanding.
F-16
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT
SENIOR SUBORDINATED DEBENTURES
On February 13, 1998, the Company issued $16,000,000 in Senior Subordinated
Debentures with interest payable quarterly at 12%. One-third of the then
outstanding balance is due on February 13, 2003, one-half of the then
outstanding balance is due on February 13, 2004 with the remaining balance due
on February 13, 2005. In the event of certain public offerings of the Company's
securities or a change in control (as defined), the Company is required to
prepay the outstanding balance of the debentures. In addition, the Company may
prepay the debentures at any time without penalty. The debentures are senior to
all other debt but are subordinate to the senior bank debt.
As part of the Securities Purchase Agreement, the Company issued warrants to
the debenture holders to purchase 2,100,572 shares of common stock at $.01 per
share. These warrants were valued at the fair value at that date, which resulted
in a deferred offering cost of $7,410,400. This discount is being amortized as
non-cash interest expense over the term of the debt.
The Securities Purchase Agreement contains certain affirmative and negative
covenants, including maintenance of certain minimum funded debt and fixed charge
coverage ratios and restrictions on incurring certain indebtedness and liens,
making certain dividend payments, making certain loans and advances or
investments in other persons, selling a substantial amount of assets, entering
into certain mergers or business combinations or using securities which are
senior to or PARI PASSU with these debentures. At February 28, 1999, the Company
was in compliance with these covenants.
In conjunction with these debentures, the Company paid a finder's fee to the
referring investment banker, consisting of $640,000 in cash and warrants to
purchase 131,286 shares of its common stock at $3.00 per share. These warrants
were valued at $69,599.
MORTGAGE PAYABLE
On November 29, 1997, the Company assumed the mortgage on one of the plasma
centers acquired in connection with the acquisition of the operating assets of
American Plasma Management. The mortgage was due in monthly installments of
principal and interest of $1,830 through June 1, 2005. Interest accrued at 10.5
percent per annum. During the year ended February 28, 1999, the Company sold the
underlying land and building and the buyer assumed this mortgage (see Note 15).
TERM LOAN
As discussed in Note 3, $7 million of the newly negotiated senior credit
facility was restructured as a term loan. Interest is payable quarterly at a per
annum rate equal to the Wall Street Journal Prime Rate plus .75% (8.5% as of
February 28, 1999). Principal is payable over a three year period ending
December 1, 2001. The term loan is subject to the same covenants as the credit
facility (Note 3) and is secured by all the assets of the Company.
DEBT ACQUIRED IN PURCHASE OF AMERICAN PLASMA, INC.
American Plasma, Inc. entered into two notes payable in 1996 to purchase the
assets of four plasma centers. The notes are secured by all the assets of one of
the four plasma centers and certain other assets of the other centers. The first
note is due in 24 quarterly payments of $40,152, representing principal and
interest at 12 percent per annum. At February 28, 1999, $364,653 was outstanding
on this note payable. The second note payable is due in biweekly installments of
$2,974, representing principal and interest
F-17
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
imputed at 12 percent per annum, through May, 2002. At February 28, 1999,
$240,914 was outstanding on this note payable.
SILVER STATE PLASMA PRODUCTS, INC.
On July 2, 1996, the Company acquired the operating assets of Silver State
Plasma Center in Las Vegas, Nevada for $500,000 in cash and $300,000 in a note
payable. Principal and interest are payable monthly with interest at 8%. During
1998, this note payable was converted into 112,813 shares of restricted common
stock.
CVD FINANCIAL CORPORATION
As of February 28, 1997, the Company owed CVD Financial $821,432 under a
loan agreement in the original amount of $1,150,000, with interest at 14% per
annum payable monthly and principal payable quarterly. During 1998, the Company
repaid this loan.
KIER CORPORATION
On September 2, 1996, the Company assumed a $45,000 note payable to The Kier
Corporation, a lessor, in conjunction with the Company's acquisition of the
rights to the Clearfield, Utah plasma collection center. The note payable
accrues interest at 10.5% and is payable in monthly installments of $967. These
monthly installments have been added to the base rental payments and are paid
monthly over a five-year period. The first monthly installment of interest and
principal commenced on October 20, 1996 and the final installment is due on
September 20, 2001. If the lease is terminated or the Company defaults on the
lease, the remainder of the loan is due in full immediately. At February 28,
1999, the outstanding balance on the note payable was $26,156. Future minimum
payments to be made, as of February 28, 1999:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY AMOUNT
- ------------------------------------------------------------------------------- -------------
<S> <C>
2000......................................................................... $ 1,199,909
2001......................................................................... 2,725,636
2002......................................................................... 3,687,954
2003......................................................................... 5,342,257
2004......................................................................... 5,333,333
Thereafter................................................................... 5,805,833
-------------
24,094,922
Less current portion........................................................... 1,199,909
-------------
-------------
$ 22,895,013
-------------
-------------
</TABLE>
7. STOCKHOLDERS' EQUITY
COMMON STOCK
In connection with the acquisition of a plasma center in October 1998, the
Company issued 50,000 shares of restricted common stock in a transaction valued
at $149,227 (see Note 1).
In August and September, 1998, the holders of Series A warrants exercised
their warrants to purchase 325,000 shares of common stock at $1.50 per share.
F-18
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
In November, 1998, the Company issued an additional 33,833 shares of common
stock in conjunction with the terms of a prior private placement.
During 1998, the Company completed various private placements and received
$3,932,718, net of $204,811 of related offering costs and expenses. In
connection with these offerings, the Company issued 1,136,396 shares of its
restricted common stock.
In connection with the Silver State Plasma Products, Inc. acquisitions, the
Company had a note payable with an outstanding balance of $247,328 on February
28, 1997. During 1998, this note was converted into 112,813 shares of restricted
common stock at the rate of $2.19 per share.
Additionally, during 1998 the Company received $750,000 of bridge loans,
which were converted into 375,000 shares of restricted common stock (see Note
5).
In connection with the acquisition of Western States Group, Inc., the
Company issued 125,000 shares of restricted common stock, in a transaction
valued at $438,288 (see Note 1).
In connection with the acquisition of the assets of Consolidated
Technologies, Inc., the Company issued 436,364 shares of restricted common
stock, in a transaction valued at $1,530,023 (see Note 1).
In an effort to reduce the number of warrants outstanding prior to the
issuance of the Senior Subordinated Debentures (see Note 5), the Company offered
the holders of various warrants a cashless exchange of one share of common stock
for two warrants. In conjunction with this offer, the holders of 615,000 Series
A warrants elected to receive 307,500 shares of restricted common stock. In
addition, the bridge loan holders elected to convert 907,500 warrants to 453,750
shares of restricted common stock. Dealer warrants were also exchanged for a
total of 79,250 shares of restricted common stock.
The Company granted options during fiscal 1998 to various outside directors.
As a result, the Company recorded deferred compensation expense of $96,401 in
1998, included in other assets on the Consolidated Balance Sheets, and
compensation expense of $21,420 in 1999 and $10,700 in 1998, included as general
and administrative expenses on the Consolidated Statements of Income.
SERIES B PREFERRED STOCK
In December 1997, the Company issued 15,000 shares of the Company's Series B
Convertible Preferred Stock, par value $.001 per share, for $1,500,000 in a
private placement, less issuance costs of $7,500. Such preferred stock is
convertible into 300,000 common shares and has a $100 per share liquidation
preference. The Series B Convertible Preferred Stock has no voting rights prior
to conversion, does not accrue interest or cash dividends and is redeemable by
the Company beginning January 1, 1999 at a premium to liquidation preference.
The Company is required to redeem on December 31, 2002 all shares of Series B
Preferred Stock which remain outstanding on such date at a price equal to the
liquidation preference. As of February 28, 1999, all 15,000 shares were still
outstanding.
SERIES C PREFERRED STOCK
In December, 1998, the Company issued 22,500 shares of the Company's Series
C Convertible Preferred Stock, par value $.001 per share, plus warrants to
purchase 281,500 shares of common stock at $4.50 per share, for $2,250,000 in a
private placement, less issuance costs of $135,000. Such preferred stock is
convertible into 500,000 shares of common stock and has a $100 per share
liquidation preference. The
F-19
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
Series C Convertible Preferred Stock has no voting rights prior to conversion
and accrues interest at the rate of 10% of the liquidation value (payable
quarterly in arrears). In connection with this private placement, the Company
issued 25,000 shares of common stock as additional issuance costs. As of
February 28, 1999 dividends in arrears were approximately $37,500.
SERIES A WARRANTS
The Company issued 940,000 Series A Warrants in connection with the two
private placements dated June 1, 1996 and October 1, 1996. Each warrant allowed
the holder to purchase one share of common stock of the Company at $2.75, with
the exercise price dropping to $1.50 per share if the Company did not register
the sharess issued in conjunction with both private placements and the common
stock underlying Series A Warrants by August 7, 1998. During the year ended
February 28, 1998, the Company offered the holders of these warrants a cashless
exchange of one share of common stock for two warrants. Holders of 615,000
warrants elected to receive 307,500 shares of restricted common stock at that
time. The holders of the remaining 325,000 warrants exercised the warrants
during the current year at the exercise price of $1.50 per share.
OTHER WARRANTS
In conjunction with the private placement of Series C preferred stock, the
Company issued warrants to purchase 281,250 shares of common stock at $4.50 per
share.
In conjunction with a $1.25 million loan from a related party (see Note 4)
as well as a $2.0 million loan (see Note 5) both of which were related to the
acquisition of the stock of American Plasma, Inc., the Company issued warrants
to the loan holders to purchase 422,433 shares of common stock at $4.50 per
share.
In conjunction with the issuance of the $16 million in subordinated
debentures (see Note 6), the Company issued warrants to the debenture holders to
purchase 2,100,572 shares of common stock at $.01 per share. In addition, the
Company granted warrants to purchase 131,286 shares of its common stock at $3.00
per share as a finder's fee to the referring investment banker.
8. SERIES A REDEEMABLE PREFERRED STOCK
On July 7, 1996, the Company acquired BHM Labs, Inc. in exchange for 3,600
shares of the Company's Series A Preferred Stock. The preferred stock is
redeemable over three years, in 36 monthly installments with interest at the
rate of eight percent per annum starting June 1996. Upon receipt of each monthly
payment, the holder shall deliver to the Company, Series A Stock Certificates
representing 1/36th (one hundred shares) of the preferred stock initially issued
to the holder in connection with the acquisition. As of February 28, 1999, the
Company has redeemed 3,200 shares of the preferred stock for $451,162 in cash.
The shares are redeemable at $60,107 during fiscal year 2000.
F-20
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTIONS
The Company has entered into various employment and consulting agreements
with officers and directors of the Company. As part of the agreements the
officers and directors were granted stock options as follows:
In February 1996, the president and chief executive officer of the Company
was granted an option to purchase 100,000 shares of common stock of the Company
at a price of $1.00 per share. These options became fully vested upon execution
of the agreement and are exercisable until January 2001.
Additionally, the president and chief executive officer was granted the
following options, which are exercisable for a period of five years from the
vesting date, unless noted otherwise.
(1) In February 1996, the Company granted options to purchase 56,147 shares of
common stock of the Company for the price of $1.25 per share. The options
became fully vested in October 1996.
(2) In conjunction with the employment agreement dated February 6, 1996, the
Company granted options to purchase 150,000 shares of common stock of the
Company for prices ranging from $1.00 to $3.00 per share. These options
became fully vested in January 1997.
(3) In conjunction with certain Bridge loans made to the Company in July 1996,
the Company granted options to purchase 130,000 shares of common stock of
the Company at a price of $1.00 per share. These options were fully vested
on the date granted, and are exercisable for a period of three years from
the vesting date.
(4) In conjunction with the $742,500 loans to the Company during calendar 1997
(see Note 4), the Company granted options to purchase 742,500 and 116,000
shares of common stock at an exercise price of $2.00 and $3.00 per share,
which was at the then fair market value, respectively. These options were
fully vested on the date granted, and are exercisable for three years.
(5) In August 1997, the Board granted options to the Company's president to
purchase 100,000 shares of common stock at an exercise price of $3.00 per
share, which was above the fair market value at the time. These options
vested immediately and are exercisable for five years.
(6) In conjunction with a January 1998 bridge loan (see Note 4), the Company
granted options to purchase 200,000 shares of common stock at an exercise
price of $3.50 per share, which was at the then fair market value. In
February 1998, these options were exchanged for 100,000 shares of common
stock in a cashless exchange.
In conjunction with the 1996 Plan of Reorganization, the Vice President of
Finance was granted options to purchase 42,110 shares of common stock of the
Company. These options became fully vested in October 1996 at an option price
set at $1.25 per share. These options are exercisable for a period of five years
from the vesting date.
In April 1997, the Board granted options to the Vice President of Finance to
purchase 25,000 shares of common stock at an exercise price of $2.00 per share,
which was at the then fair market value. These options vested immediately and
are exercisable for five years.
In December 1998, the Board granted options to the Vice President of Finance
to purchase 32,000 shares of common stock at an exercise price of $4.25 per
share, which was at the then fair market value. These options vested immediately
and are exercisable for five years.
F-21
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTIONS (CONTINUED)
In August 1997, various directors were granted options to purchase 145,000
shares of common stock of the Company at an exercise price of $2.25 per share,
which was at the then fair market value. These options were fully vested at the
granting date and are exercisable for a period of five years.
In December 1998, various directors were granted options to purchase 60,000
shares of common stock of the Company at an exercise price of $4.25 per share,
which was at the then fair market value. These options were fully vested at the
granting date and are exercisable for a period of five years.
During the year ended February 28, 1997, various directors were granted
options to purchase 20,000 and 95,000 shares of common stock of the Company at
an exercise price of $1.00 and $1.50, respectively. These options were fully
vested at the granting date and are exercisable for a period of five years.
In connection with various loans made to the Company during the year ended
February 28, 1998, the Company granted options to purchase 1,580,473 shares of
common stock at exercise prices ranging between $2.00 and $4.00 per share
(including 349,000 granted at $3.50 per share to related parties). These options
were fully vested at the granting date and are exercisable for a period of three
years. In February 1998, 707,500 of these options were exchanged for 353,750
shares of common stock in a cashless exchange (including 349,000 options
exchanged for 174,500 shares of common stock by related parties).
In connection with the acquisition of a plasma collection center in Baton
Rouge, LA, the Company issued 50,000 five year warrants to purchase SeraCare,
Inc. shares at $6.00 to AMEX Plasma Management, Inc. in October 1998.
During the year ended February 28, 1999, the Company granted options to one
employee to purchase 388,267 shares of common stock at an exercise price of
$6.31 per share. These options were fully vested at the granting date and are
exercisable for a period of 5 years.
During the year ended February 28, 1999, the Company granted options to
three employees to purchase 30,000 shares of common stock at an exercise price
of $4.25 per share. These options vest over three years and are exercisable for
a period of 3 years.
The following table summarizes all option/warrant activity for the years
ended February 28, 1999 and 1998:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED
COMMON STOCK AVERAGE
WARRANTS/OPTIONS PRICE
---------------- -----------
<S> <C> <C>
Outstanding as of March 1, 1997.................................. 1,561,832 $ 2.22
Granted.......................................................... 5,140,831 1.69
Exercised........................................................ (1,523,000) (3.20)
---------------- -----
Outstanding as of February 28, 1998.............................. 5,179,663 1.40
Granted.......................................................... 1,288,855 4.99
Exercised........................................................ (325,000) (2.75)
---------------- -----
Outstanding as of February 28, 1999.............................. 6,143,518 $ 2.08
---------------- -----
---------------- -----
Exercisable as of February 28, 1999.............................. 6,120,185 $ 2.07
---------------- -----
---------------- -----
</TABLE>
FASB Statement 123, "Accounting for Stock-Based Compensation," requires the
Company to provide pro forma information regarding net income and earnings per
share as if compensation cost for the
F-22
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTIONS (CONTINUED)
Company's stock option plans had been determined in accordance with the fair
value based method prescribed in FASB Statement 123. The Company estimates the
fair value of each stock option, using the Black Scholes method, at the
weighted-average assumption used for grants in fiscal 1999 and 1998 dividend
yield of zero percent; expected volatility of 13 percent and 23 percent; risk
free interest rate of 5.24 and 5.67; and expected life of 5.0 years.
The weighted average fair value of options granted during the years ended
February 28, 1999 and 1998 was $.13 and $.74, respectively.
Under the accounting provisions of FASB Statement 123, the Company's net
income and income per share for the years ended February 28, 1999 and 1998 would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEARS ENDED FEBRUARY 28,
------------------------
<S> <C> <C>
1999 1998
------------ ----------
Net income
As reported....................................................... $ 2,705,002 $ 453,853
Pro forma......................................................... $ 2,677,632 $ 391,653
Basic income per share
As reported....................................................... $ .37 $ .09
Pro forma......................................................... $ .36 $ .08
Diluted income per share
As reported....................................................... $ .24 $ .08
Pro forma......................................................... $ .24 $ .07
</TABLE>
The following table summarizes information about stock options outstanding
at February 28, 1999:
<TABLE>
<CAPTION>
EXERCISABLE
OUTSTANDING ---------------------------
- ----------------------------------------------------------
RANGE OF WEIGHTED AVERAGE WEIGHTED AVERAGE
EXERCISE ------------------------------ ---------------------------
PRICES SHARES LIFE (MONTHS) EXERCISE PRICE SHARES EXERCISE PRICE
- -------------- ---------- ------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
$0.01 2,125,477 Unlimited $ 0.01 2,125,477 $ 0.01
$1.00-$1.70 521,330 16.0 $ 1.18 521,330 $ 1.18
$2.00 1,011,726 18.8 $ 2.00 1,011,726 $ 2.00
$2.25-$4.00 1,221,035 18.5 $ 3.02 1,221,035 $ 3.02
$4.25-$4.50 825,683 57.1 $ 4.46 802,350 $ 4.47
$6.00-$6.31 438,267 49.8 $ 6.27 438,267 $ 6.27
---------- ----- ---------- -----
6,143,518 $ 2.08 6,120,185 $ 2.07
---------- ----- ---------- -----
---------- ----- ---------- -----
</TABLE>
F-23
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LEASES
The Company is currently leasing its corporate office under a noncancelable
lease agreement, which expires in May 1999. In addition, the Company leases
office and manufacturing facilities in Austin, Texas under a noncancelable lease
agreement expiring in November 1999. The Company is also obligated under various
other lease agreements for other locations (primarily donor centers) through
four of its wholly-owned subsidiaries. Two donor center locations are leased on
a month-to-month basis. The remaining leases expire at various dates through
August 2008. All of the leases have renewal options.
Future minimum rental obligations under the aforementioned lease agreements
are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
2000.......................................................................... $ 1,802,173
2001.......................................................................... 1,377,260
2002.......................................................................... 1,238,901
2003.......................................................................... 1,084,822
2004.......................................................................... 683,377
Thereafter.................................................................... 1,484,317
------------
$ 7,670,850
------------
------------
</TABLE>
Rent expense amounted to $1,534,419 and $571,508 for the years ended
February 28, 1999 and 1998, respectively.
11. INCOME TAXES
The difference between the reported tax provision and the statutory rate
applied to the pre-tax income for fiscal year ended February 28, 1998 and 1999
is primarily related to the realization of deferred tax assets, primarily the
utilization of net operating loss carryforwards.
Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes. As of February 28, 1999, the
Company's net loss carryforwards resulted in deferred tax assets of
approximately $1.7 million. Based upon historical earnings, management was
unable to determine that it was more likely than not that the deferred tax
assets would be realized, therefore a 100% valuation allowance was established.
As of February 28, 1999, the Company had approximately $4.4 million of
federal and state net operating loss carryforwards. Of that amount, about $3.6
million is subject to limitation under section 382 of the Internal Revenue Code.
The loss carryforwards expire in various amounts through the year 2018.
12. COMMITMENTS
The Company has entered into various employment and consulting agreements
with current and previous officers and directors of the Company. The following
describes certain terms and obligations provided by the agreements entered into
by the Company with such officers and directors:
The Company is obligated to the president under a three-year extension
of his employment agreement through dated February 5, 2002. The Company is
obligated to the executive vice president under a one-year extension of his
employment agreement through dated February 5, 2000.The current annual
salaries under these agreements are $390,000.
F-24
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. COMMITMENTS (CONTINUED)
The Company is also obligated to the president of Biologics Division
under a three year agreement through February 1, 2001. The current annual
salary under this agreement is $160,000.
Under the terms of a consulting agreement dated in April 1996, the
Company is obligated to pay an outside director $50,000 per year. In January
1998, the term of such agreement was extended through March 2002.
In connection with the acquisitions of Consolidated Technology Group and
Western States Group, Inc., the Company is obligated under the terms of four
five-year employment agreements dated February 13, 1998. The current annual
salaries under these agreements are $522,000.
The employment agreements also provide for a management bonus which will
allocate on the basis of salaries, 10% of pre-tax earnings to management
personnel in the event the Company achieves certain minimum annual pre-tax
earnings, as defined in the agreements.
13. CONCENTRATION OF CREDIT RISK, SIGNIFICANT CUSTOMERS AND SALES COMMITMENTS
During the year ended February 28, 1999, the Company sold its primary
product, plasma, on credit mainly to fractionators in the health care industry.
The plasma is processed into various immune enhancing and other pharmaceutical
products which are then sold for therapeutic applications.
Plasma collection, storage, labeling and distribution activities are subject
to strict regulation and licensing by the U.S. Food and Drug Administration
("FDA"). The Company's facilities are subject to periodic inspection by the FDA.
Failure to comply or correct deficiencies with applicable laws or regulations
could subject the Company to enforcement action, including product seizures,
recalls, center or facility closure, license revocations and civil and criminal
penalties, any one or more could have a material adverse effect on the Company's
business.
Laws and regulations with similar substantive and enforcement provisions are
also in effect in many of the states and municipalities where the Company does
business. Any change in existing federal, state or municipal laws or
regulations, or in the interpretation or enforcement thereof, or the
promulgation of any additional laws or regulations could have an adverse effect
on the Company's business.
The Company is required to obtain from each donor an informed consent
regarding the donation procedure. Failure of the Company to obtain an adequate
consent could have a material adverse effect on the Company.
For the year ended February 28, 1999, approximately 32% of the net sales
were to Grupo Grifols, S.A., the leading fractionator in Spain and about 20%
were to Alpha Therapeutics. No other customer represented ten percent or more of
net revenue. Accounts receivable due from Grupo Griffols, S.A. also represented
approximately 37% of accounts receivable as of February 28, 1999.
During the year ended February 28, 1998, the Company terminated agreements
with two customers which represented 28% and 15% of sales in fiscal 1998 from
the plasma operations and negotiated new agreements with a new customer for such
plasma. In addition, in November 1997, the Company acquired five mature plasma
collection centers from American Plasma Management, Inc. (see Note 1) and began
to expand its customer base by selling the plasma from such centers to new
customers. Further, effective January 1, 1998, the Company acquired Western
States Group, Inc. and Consolidated Technologies, Inc., both of whom enjoy a
broad customer base of complementary but not identical customers.
F-25
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. CONCENTRATION OF CREDIT RISK, SIGNIFICANT CUSTOMERS AND SALES COMMITMENTS
(CONTINUED)
In November 1996, the Company entered into an agreement with one customer
relating to three start-up facilities and in April 1997 added two additional
start-up facilities whereby the Company committed to sell substantially all of
the plasma collected from the indicated centers at various prices specified in
the agreement. The agreement expires January 31, 2000 and may be terminated if
the plasma collection centers fail to comply with applicable FDA, QPP and
customer initiated operating procedures. As of February 28, 1999, four of the
centers subject to this agreement were licensed to ship plasma by FDA and QPP
approval. The remaining center is operating under a reference number from the
FDA in order to establish compliance documentation sufficient for approval and
had not yet received FDA and QPP approval to sell collected plasma.
14. RELATED PARTY TRANSACTIONS
The Company has had various transactions with related parties. These
transactions are described in Notes 4, 7, 9, 12 and 17. The Company had sales of
$629,547 to a related party of which the outstanding balance at February 28,
1999 was $623,899.
15. OTHER INCOME
Other income at February 28, 1999, includes approximately $534,000 of gain
realized from the sale of three properties acquired as part of the American
Plasma Management, Inc. acquisition. The underlying mortgage on one of the
properties was assumed by the buyer. The Company is leasing these properties
back under 5 and 10-year leases.
Other income at February 28, 1998, includes $801,215 from a one-time
non-operating gain realized from the sale of salvage plasma material.
F-26
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. EARNINGS PER SHARE
The following table reconciles the numerators and denominators of the basic
and diluted earnings per share computation. The net income available to common
stockholders has been adjusted for dividends on preferred stock.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
----------------------------
1999 1998
------------- -------------
<S> <C> <C>
Basic earnings per share
Net income........................................................................ $ 2,705,002 $ 453,853
Dividends on preferred stock...................................................... 37,500 --
------------- -------------
Net income available to common stockholders (numerator)........................... $ 2,667,502 $ 453,853
------------- -------------
------------- -------------
Weighted average common shares outstanding (denominator).......................... 7,365,212 4,818,313
------------- -------------
------------- -------------
Basic earnings per share.......................................................... $ 0.37 $ 0.09
------------- -------------
------------- -------------
Diluted earnings per share
Net income available to common stockholders (numerator)........................... $ 2,667,502 $ 453,853
------------- -------------
------------- -------------
Weighted average common shares outstanding........................................ 7,365,212 4,818,313
Weighted average warrants/options outstanding..................................... 5,485,604 2,505,029
Weighted average other dilutive securities........................................ 425,000 75,000
Stock acquired with proceeds...................................................... (2,172,630) (1,691,937)
------------- -------------
Weighted average common shares and assumed conversion outstanding (denominator)... 11,103,186 5,706,405
------------- -------------
------------- -------------
Diluted earnings per share........................................................ $ 0.24 $ 0.08
------------- -------------
------------- -------------
</TABLE>
17. SUBSEQUENT EVENTS
The Company has reached a verbal agreement with NABI to cancel the supply
contracts on the Clearfield, Raleigh, Macon, Toledo and Pasco centers effective
April 30, 1999. This cancellation is by mutual agreement with both parties. The
Company believes that with the evolving shortage of plasma and the continuing
increase in pricing, they will benefit from the agreement. Under terms of the
agreement, the Company will repay monies advanced on production from Pasco and
Toledo and purchase approximately 48,000 liters of plasma from the NABI
inventory during the next three months.
In March 1999, the Company granted 839,011 options to purchase shares of
common stock at an exercise price of $4.25 per share to Mr. Barry D. Plost in
connection with certain bridge loans made to the Company.
18. SEGMENT INFORMATION
Effective March 1, 1998, the Company adopted SFAS No. 131 for financial
reporting of its operating segments. The Company's business activities are
divided, managed and conducted in two basic business segments, the Therapeutic
Products segment and the Diagnostic Products segment. These two segments were
determined by management based upon the inherent differences in the end use of
the products, the inherent differences in the value added processes made by the
company, the differences in the regulatory requirements and the inherent
differences in the strategies required to successfully market finished products.
Operations which do not fall into either of these two segments including
unallocated corporate
F-27
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. SEGMENT INFORMATION (CONTINUED)
overhead is reported in the category "Corporate and Other". Fiscal years ended
February 28, 1999 and 1998 are presented in compliance with the requirements of
SFAS No. 131.
The Therapeutic segment includes plasma collection and those other
activities involving the collection and/or sale of plasma to manufacturers whose
objective is the production of injectable plasma products such as albumin,
antihemophilic factors 8 and 9, and Rh Immune globulin. The Diagnostic segment
includes the manufacture and/or sale of non-injectable plasma products such as
proficiency tests, controls, calibrators, reagents and specialty test kits. The
Diagnostic segment also includes the production and/or sale monoclonal
antibodies.
The company utilizes multiple forms of analysis and control to evaluate the
performance of the segments and to evaluate investment decisions. In general,
gross margin and Earnings Before Interest Depreciation and Amortization (EBITDA)
are deemed to be the most significant measurements of performance, although
collection volumes and certain controllable costs also provide useful "early
warning signs" of future performance.
The following segment financial statements have been prepared on the same
basis as the Company's consolidated financial statements, utilizing the
accounting policies described in the Summary of Significant Accounting Policies.
The Company's segment information as of and for the years ended February 28,
1999 and 1998 is as follows:
<TABLE>
<CAPTION>
THERAPEUTIC DIAGNOSTIC TOTAL CORPORATE CONSOLIDATED
SEGMENT SEGMENT SEGMENTS AND OTHER TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales--Third Party
Fy 1998.................................. 9,922,804 2,368,592 12,291,396 12,291,396
Fy 1999.................................. 36,596,599 12,413,790 49,010,389 49,010,389
Income from Joint Venture
Fy 1998.................................. -- 119,574 119,574 119,574
Fy 1999.................................. -- 687,818 687,818 687,818
Net Sales--Inter-Segment
Fy 1998.................................. -- 71,836 71,836 --
Fy 1999.................................. 2,871,653 895,189 3,766,842 --
Gross Profit
Fy 1998.................................. 755,951 880,621 1,636,572 1,636,572
Fy 1999.................................. 3,944,378 6,625,436 10,569,814 10,569,814
Operating Income
Fy 1998.................................. 668,967 634,615 1,303,582 (1,146,306) 157,276
Fy 1999.................................. 2,823,535 5,007,803 7,831,338 (1,458,698) 6,372,640
Interest Expense--net
Fy 1998.................................. -- -- -- 533,105 533,105
Fy 1999.................................. 157,946 -- 157,946 4,136,356 4,294,302
Other income
Fy 1998.................................. 802,162 -- 802,162 52,520 854,682
Fy 1999.................................. 10,408 7,718 18,126 608,538 626,664
</TABLE>
F-28
<PAGE>
SERACARE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
THERAPEUTIC DIAGNOSTIC TOTAL CORPORATE CONSOLIDATED
SEGMENT SEGMENT SEGMENTS AND OTHER TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Taxes on Income
Fy 1998.................................. 25,000 -- 25,000 -- 25,000
Fy 1999.................................. 17,014 -- 17,014 -- 17,014
Net Income
Fy 1998.................................. 1,446,129 634,615 2,080,744 (1,626,891) 453,853
Fy 1999.................................. 2,675,997 5,015,521 7,691,518 (4,986,516) 2,705,002
Identifiable Assets
Fy 1998.................................. 20,243,804 10,727,920 30,971,724 14,257,648 45,229,372
Fy 1999.................................. 36,962,339 17,769,323 54,731,662 9,844,600 64,576,262
Depreciation and Amortization
Fy 1998.................................. 297,647 109,547 407,194 53,988 461,182
Fy 1999.................................. 937,883 483,805 1,421,688 413,755 1,835,443
Capital Expenditures
Fy 1998.................................. 2,564,233 -- 2,564,233 1,382 2,565,615
Fy 1999.................................. 1,349,818 1,342,777 2,692,595 295,525 2,988,120
</TABLE>
"Corporate and Other" includes unallocated corporate overhead, interest expense,
and other income (expense) amounts which are not specifically attributable to
either segment. Identifiable assets of each segment consists primarily of cash,
accounts receivable, inventories, certain intangible assets, and specifically
attributable fixed assets including equipment. Corporate assets includes
corporate cash, certain notes receivable, deferred bond discount and other
assets not specifically allocable to either segment.
F-29
<PAGE>
3.2 CERTIFICATE OF DESIGNATION OF SERIES C PREFERRED STOCK FILED ON
MARCH 9,1999.
<PAGE>
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
-------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "SERACARE, INC.", FILED IN THIS OFFICE ON THE NINTH DAY OF MARCH,
A.D. 1999, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
/s/ Edward J. Freel
------------------------------------------
[SEAL] EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 9618663
DATE: 03-10-99
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 03/09/1999
CERTIFICATE OF DESIGNATIONS 991090495 - 2275058
OF
SERACARE, INC.
-------------------------------------------
Pursuant to Section 151 of the Delaware General Corporation Law
(the "GCL") SERACARE, INC., a Delaware corporation (the "Corporation"),
certifies as follows:
FIRST: Under the authority contained in Articles FOURTH and SIXTH of
the Restated Certificate of Incorporation of the Corporation, the Board of
Directors of the Corporation has classified an aggregate of twenty five thousand
(25,000) shares of the authorized but unissued shares of Preferred Stock of the
Corporation into a series which shall be designated "Series C Convertible
Preferred Stock."
SECOND: The following resolution was adopted by the Board of Directors
on January 27, 1999 and such resolution has not been modified and is in full
force and effect on the date hereof:
RESOLVED, that the Board of Directors hereby creates, from the
authorized but unissued shares of Preferred Stock of the Corporation, a series
of convertible Preferred Stock designated as Series C Convertible Preferred
Stock, par value $0.001 per share (the "SERIES C PREFERRED Stock"), and hereby
fixes the powers, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, of the shares of such series, as follows:
Section 1. SERIES C PREFERRED STOCK DIVIDENDS.
The holders of the Series C Preferred Stock shall be entitled to
receive dividends thereon at the annual rate of ten percent (10%) of the
Liquidation Preference per share, payable quarterly in arrears, from the date
funds are received by the Corporation.
Section 2. LIQUIDATION PREFERENCES.
Subject to the holders' conversion rights provided below herein, upon
any liquidation (complete or partial), dissolution or winding up of the
Corporation, or any similar distribution of its assets to its stockholders which
results in a return of capital, whether voluntary or involuntary, the holders of
the Series C Preferred Stock shall be entitled, before any distribution or
payment is made upon any Junior Securities (thereinafter defined) of the
Corporation, to be paid out of the assets of the Corporation available for
distribution
<PAGE>
to its stockholders (whether from capital, surplus or earnings) an amount in
cash equal to the sum of $100 (the "LIQUIDATION PREFERENCE"), and shall not be
entitled to any further payment. The term "Junior Security" shall mean the
Corporation's Common Stock and all other equity securities of the Corporation
which are junior in rights and liquidation preference to the Series C Preferred
Stock. Written notice of such liquidation, dissolution, winding up or other
distribution of assets, stating a payment date, the amount of the payment and
the place where the amounts distributable shall be payable, shall be mailed by
certified or registered mail, return receipt requested, not less than 60 days
prior to the payment date stated therein, to each record holder of any share of
Series C Preferred Stock entitled thereto at the address for such record holder
shown on the Corporation's records. A consolidation or merger of the Corporation
into any other corporation or corporations, or a sale of all or substantially
all of the assets of the Corporation, shall, at the option of the holders of the
Series C Preferred Stock, be deemed a liquidation, dissolution or winding up
within the meaning of this Section 2 if the shares of stock of the Corporation
outstanding immediately prior to such transaction represent immediately after
such transaction less than a majority of the voting power of the surviving
corporation (or of the acquiror of the Corporation's assets in the case of a
sale of assets). Such option may be exercised by the vote or written consent of
holders of a majority of the Series C Preferred Stock at any time within thirty
calendar days after written notice (which shall be given promptly) of the
essential terms of such transaction shall have been given to the holders of the
Series C Preferred Stock in the manner provided by law for the giving of notice
of meetings of shareholders.
Section 3. REDEMPTIONS OF SERIES C PREFERRED STOCK.
3.1 REDEMPTION UPON CORPORATE CHANGE. (a) At any time after the
Series C Preferred Stock is convertible by the holders thereof in accordance
with Section 4.2(a), if a Corporate Change is to occur, the Corporation shall
redeem all of the outstanding Series C Preferred Stock immediately prior to the
consummation of such Corporate Change. Upon any such redemption, the Redemption
Price per share of Series C Preferred Stock shall be an amount equal to the
Liquidation Preference. Written notice of any impending Corporate Change, and
the substance and intended date of consummation thereof, shall be mailed by
certified or registered mail, return receipt requested, not more than sixty (60)
nor less than ten (10) days prior to the date of consummation thereof, to the
Purchaser at the address shown on the Corporation's record. Notwithstanding the
foregoing, in the event that a holder shall have delivered a Conversion Notice
to the Corporation prior to any Corporate Change, the Corporation's redemption
rights under this Section 3.1 shall terminate as to
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any shares of Series C Preferred Stock which are the subject of such holder's
Conversion Notice.
(b) "CORPORATE CHANGE" means (i) the sale, exchange or transfer of
all or substantially all of the Corporation's assets to an unaffiliated third
party, or (ii) any transaction or series of related transactions in which one
(1) or more persons (other than a holder of Series C Preferred Stock or an
affiliate thereof), other than the holders of a majority of the shares of Common
Stock outstanding on the date the Series C Preferred Stock is issued, shall
directly or indirectly acquire ownership of or control over capital stock (not
including shares held or controlled by them on the date of original issuance of
the Series C Preferred Stock) of the Corporation (or securities exchangeable for
or convertible into such stock) entitled to elect fifty percent (50%) or more of
the Corporation's Board of Directors and representing at least fifty percent
(50%) of the number of shares of Common Stock outstanding. Notwithstanding the
foregoing, no Corporate Change shall be deemed to have occurred as a result of
(A) the exercise of any options or warrants outstanding on the date hereof or
(B) any public offering of securities by the Corporation.
3.2 NOTICE OF REDEMPTION. Except as otherwise expressly provided
herein, notice of any redemption of Series C Preferred Stock, specifying the
time and place of redemption, the Redemption Price and the Section and
paragraph pursuant to which such redemption is being made, shall be mailed by
certified or registered mail, return receipt requested, to each holder of
record of shares of Series C Preferred Stock to be redeemed, at the address
for such holder shown on the Corporation's records, not more than sixty (60)
nor less than thirty (30) days (or ten (10) days, in the case of a redemption
pursuant to Section 3.1) prior to the date on which such redemption is to be
made. Upon mailing any such notice of redemption the Corporation shall become
obligated to redeem at the time of redemption specified therein (the
"REDEMPTION DATE") all shares of Series C Preferred Stock therein specified.
3.3 RIGHTS AFTER REDEMPTION DATE. Provided that the Redemption Price
is paid in full on the applicable Redemption Date, all rights of the holder of
such shares of Series C Preferred Stock as a stockholder of the Corporation, by
reason of the ownership of such shares, shall cease, except the right to receive
the Redemption Price of such shares upon presentation and surrender of the
certificate representing such shares, and such shares shall not after such
Redemption Date be deemed to be outstanding.
3.4 DEPOSIT OF REDEMPTION PRICE. If on or before the date of
redemption specified in any notice of redemption of any
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share of Series C Preferred Stock, the Corporation shall irrevocably deposit the
amount of the Redemption Price thereof with a bank or trust company having an
office in the City of New York, designated in such notice of redemption, in
trust for the benefit of the holder of such share of Series C Preferred Stock,
such share of Series C Preferred Stock shall be deemed to have been redeemed on
the date so specified, whether or not the certificate for such share shall be
surrendered for redemption and canceled.
Section 4. CONVERSION OF SERIES C PREFERRED STOCK.
4.1 AUTOMATIC CONVERSION BY CORPORATION. Providing: (A) the
Corporation has on file an effective registration statement on the date of such
Automatic Conversion, and; (B) the closing (Last Trade) price of the Common
Stock averages in excess of $7.00 per share for a thirty consecutive trading day
period prior to such Automatic Conversion; then, at the option of the
Corporation, the Corporation may automatically convert any or all shares of
Series C Preferred Stock then issued and outstanding into such number of fully
paid and non-assessable whole shares of Common Stock which is obtained by
multiplying the number of shares of Series C Preferred Stock so to be converted
by the Liquidation Preference of such shares plus any accrued but unpaid
interest and dividing the result by the Conversion Price (as defined in Section
4.4) then in effect.
4.2 CONVERSION RIGHTS OF HOLDERS OF SERIES C PREFERRED STOCK AND
PROCEDURES.
(a) The shares of Series C Preferred Stock shall be convertible by the
Holders thereof in accordance with the terms of this Section 4, at the option of
the Holder thereof at any time unless or until such Series C Preferred Stock has
been converted by the Corporation pursuant to Section 4.1 above. Series C
Preferred Stock shall be convertible into such number of fully paid and
non-assessable whole shares of Common Stock which is obtained by multiplying the
number of shares of Series C Preferred Stock so to be converted by the
Liquidation Preference of such shares and dividing the result by the Conversion
Price (as defined in Section 4.4) then in effect.
(b) A holder of shares of Series C Preferred Stock may, at any time,
convert pursuant to this Section 4 all or any part (in whole numbers of shares
only) of the shares of Series C Preferred Stock held by such holder into fully
paid and non-assessable shares of Common Stock. Provided that such Automatic
Conversion is effected, the right to convert as to any particular share shall
terminate at the close of business on the day immediately prior to the date
fixed for automatic Conversion of the Series C Preferred Stock pursuant to
section 4.1 or upon
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any liquidation, dissolution, winding up or similar distribution of the
Corporation.
(c) Each conversion of Series C Preferred Stock shall be effected by
the surrender of the certificate or certificates representing the shares to be
converted at "the principal office of the Corporation (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to the holder or holders of the Series C Preferred Stock) at any time during its
usual business hours, together with written notice by the holder of such Series
C Preferred Stock (a "CONVERSION NOTICE") stating that such holder desires to
convert the shares, or a stated number of the shares, represented by such
certificate or certificates which notice shall also specify the name or names
(with addresses) and denominations in which the certificate or certificates for
Common Stock shall be issued and shall include instructions for delivery
thereof. Such conversion shall be deemed to have been effected as of the close
of business on the date on which such certificate or certificates shall have
been surrendered and such notice shall have been received, and as of such date
(the "CONVERSION DATE") the rights of the holder of such Series C Preferred
Stock (or specified portion thereof) as such holder shall cease and the person
or persons in whose name or names any certificate or certificates for shares of
Common Stock are to be issued upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Common Stock represented
thereby.
(d) As soon as possible after the Conversion Date (and in no event
more than 30 days after the Conversion Date), the Corporation shall deliver to
the converting holder or, with respect to the certificate(s) specified in (i)
below, as specified by such converting holder:
(i) a certificate or certificates representing the number of shares
of Common Stock issuable by reason of such conversion registered in such
name or names and such denomination or denominations as the converting
holder shall have specified; and
(ii) a certificate representing any shares of Series C Preferred
Stock which shall have been represented by the certificate or certificates
which shall have been delivered to the Corporation in connection with such
conversion but which shall not have been converted; and
(iii) a payment of cash in an amount equal to the value of any
fractional share of Common Stock that otherwise would be issuable in
connection with the Series C Preferred Stock converted.
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4.3 AUTHORIZATION AND ISSUANCE OF COMMON STOCK. The Corporation
covenants and agrees that:
(a) The Corporation will at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose of
issuing upon the conversion of the Series C Preferred Stock as provided in this
Section 4 such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Series C Preferred Stock. The
corporation covenants that all shares of Common Stock which shall be so issuable
shall, when issued, be duly and validly issued, fully paid and non-assessable
and free from all taxes, liens, and charges. The Corporation will take all such
action as may be necessary to assure that all shares of Common Stock may be so
issued without violation of any applicable law or regulation or any requirements
of any domestic stock exchange upon which any shares of Common Stock may be
listed.
(b) The Corporation will not take any action which results in any
adjustment of the number of shares of Common Stock which may be acquired upon
conversion of a share of Series C Preferred Stock if after such action the total
number of shares of Common Stock issuable upon conversion of the Series C
Preferred Stock then Outstanding, together with the total number of shares of
Common Stock then Outstanding and the total number of shares of Common Stock
reserved for any purpose other than issuance upon conversion of the Series C
Preferred Stock, would exceed the total number of shares of Common Stock then
authorized by the Corporation's Restated Certificate of Incorporation.
(c) The issuance of certificates for shares of Common Stock upon
conversion of shares of the Series C Preferred Stock shall be made without
charge to the holders of such shares for any issuance tax in respect thereof, or
other cost incurred by the Corporation in connection with such conversion and
the related issuance of shares of Common Stock, provided that the Corporation
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the holder of the Series C Preferred Stock converted.
(d) The Corporation will not close its books against the transfer of
any share of Series C Preferred Stock or of any share of Common Stock issued or
issuable upon the conversion of such shares in any manner which interferes with
the timely conversion of such shares.
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4.4 CONVERSION PRICE.
(a) The initial conversion price shall be four dollars and fifty cents
($4.50) and may be adjusted from time to time as defined in 4.4 (b) the
"CONVERSION PRICE").
(b) If the Common Stock underlying the Convertible Preferred is not
registered pursuant to the 1933 Securities Act within 90 days of the Closing
Date of this agreement, the Conversion Price of the Series C Convertible
Preferred Stock shall be permanently reduced by $.50. In addition, the
Conversion Price shall be permanently reduced by an additional $.25 on each
monthly anniversary thereafter until such registration statement becomes
effective.
Section 5. ANTI-DILUTION PROVISIONS
5.1 SUBDIVISIONS AND COMBINATIONS. In the event that the Corporation
shall at any time subdivide (by any stock split, stock dividend or otherwise)
one or more classes of its outstanding Common Stock into a greater number of
shares of Common Stock, the Conversion Price in effect immediately prior to such
subdivision forthwith shall be proportionately reduced. Conversely, in the event
the outstanding shares of one or more classes of the Common Stock shall be
combined into a smaller number of shares (by reverse stock split or otherwise),
the Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
5.2 DIVIDENDS. In the event that the Corporation declares a dividend
(other than a cash dividend payable out of earnings or earned surplus) upon
Common Stock, then at the option of the holders of a majority of the outstanding
shares of Series C Preferred Stock,
(1) the Corporation shall pay over to each holder, on the dividend
payment date, the stock or other securities and other property which holder
would have received if such holder had converted all of his or its shares
of Series C Preferred Stock into Common Stock and had been the record
holder of such Common Stock on the date on which a record is taken for the
purpose of such dividend, or, if a record is not taken, the date as of
which the holders of Common Stock of record entitled to such dividend are
to be determined, or
(2) the Conversion Price in effect immediately prior to the
declaration of such dividend shall be reduced by an amount equal to the
fair value of such dividend per share (as reasonably determined by the
Board of Directors of the Corporation), such reduction to be effective on
the date
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an of which a record is taken for purposes of such dividend, or if a record
is not taken, the date as of which holders of record of Common Stock
entitled to such dividend are determined, or
(3) in the case of a dividend consisting of stock or securities
(other than Common Stock, Options or Convertible Securities) or other
property distributable to holders of Common Stock, the holder of Series C
Preferred Stock may elect that, in lieu of (1) or (2) above, lawful and
adequate provisions shall be made (including without limitation any
necessary reduction in the Conversion Price) whereby such holder of Series
C Preferred Stock shall thereafter have the right to purchase and/or
receive, on the terms and conditions specified in this Certificate of
Designations and in addition to the shares of Common Stock receivable
immediately prior to the declaration of such dividend upon conversion of
his or its shares of Series C Preferred Stock, such shares of stock,
securities or property as are distributable with respect to outstanding
shares of Common Stock equal to the number of shares of Common Stock
receivable immediately prior to such declaration upon conversion of his or
its shares of Series C Preferred Stock, to the end that the provisions
hereof (including without limitation provisions for adjustments of the
Conversion Price and of the number of shares receivable upon such
conversion) shall thereafter be applicable, as nearly as may be, in
relation to such shares of stock, securities or property.
For the purposes of this Section 5.2, "DIVIDEND" shall mean any
distribution to the holders of Common Stock as such, and a dividend shall be
considered payable out of earnings or earned surplus (other than revaluation or
paid-in surplus) only to the extent that such earnings or earned surplus are
charged an amount equal to the fair value of such dividend as reasonably
determined by the Board of Directors of the Corporation.
5.3 REORGANIZATION RECLASSIFICATION, Consolidation, MERGER OR SALE.
If any capital reorganization or reclassification of the capital stock of the
Corporation, or any consolidation or merger of the Corporation with or into
another corporation, or any sale of all or substantially all of the
Corporation's assets to another corporation shall be effected in such a way that
holders of Common Stock shall be entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
(as determined reasonably and in good faith by the Board of Directors of the
Corporation) shall be made whereby each of the holders of the Series C Preferred
Stock
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shall thereafter have the right to acquire and receive upon the basis and upon
the terms and conditions specified herein and in lieu of the shares of Common
Stock of the Corporation immediately theretofore acquirable and receivable upon
the conversion of such holder's shares, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of Common Stock equal to the number of shares of Common
Stock immediately theretofore acquirable and receivable upon conversion of such
shares had such reorganization, reclassification, consolidation, merger or sale
not taken place, and in any such case appropriate provision shall be made with
respect to such holder's rights and interests to the end that the provisions of
this Section 5 (including without limitation provisions for adjustments of the
Conversion Price and of the number of shares of Common Stock acquirable and
receivable upon the exercise of the conversion rights granted in this Section 5)
shall thereafter be applicable in relation to any shares of stock, securities or
assets thereafter deliverable upon the conversion of such holder's shares. The
Corporation shall not effect any consolidation, merger or sale, unless the
successor corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
the obligation to deliver to each such holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire or receive.
5.4 NOTICE OF ADJUSTMENT. Immediately upon any adjustment of the
Conversion Price, the Corporation shall send written notice thereof to all
holders of Series C Preferred Stock, which notice shall state the Conversion
Price resulting from such adjustment and the increase or decrease, if any, in
the number of shares of Common Stock acquirable and receivable upon conversions
of all shares of Series C Preferred Stock held by each such holder, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
5.5 OTHER ADJUSTMENT-RELATED NOTICES. In the event that at any time:
(a) the Corporation shall declare a dividend (or any other
distribution) upon its Common Stock payable otherwise than in cash out of
earnings or earned surplus;
(b) the Corporation shall offer for subscription pro rata to the
holders of any class of its Common Stock any additional shares of stock of
any class or other rights;
(c) there shall be any capital reorganization, or reclassification of
the capital stock of the Corporation, or consolidation or merger of the
Corporation with, or sale
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of all or substantially all of its assets to, another corporation; or
(d) there shall be any voluntary or involuntary dissolution,
liquidation, winding up or similar distribution of the Corporation.
Then, in connection with any such event set forth in (a) through (d) above,
the Corporation shall give by first class mail, postage prepaid, addressed
to the holders of Series C Preferred Stock at the address for each such
holder as shown on the books of the Corporation:
(i) at least 30 days' prior written notice of the date on which the
books of the Corporation shall close or a record shall be taken for such
dividend, distribution or subscription rights (and specifying the date on
which the holders of Common Stock shall be entitled thereto) or for
determining rights to vote in respect of such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding up or similar distribution; and
(ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding up or
similar distribution, at least 30 days' prior written notice of the date
when the same shall take place (and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding up or similar distribution).
5.6 NOTICE OF CERTAIN EVENTS. If any event occurs which could be
reasonably expected to negatively affect the conversion rights of the Series C
Preferred Stock then the "Corporation" shall provide written notice to the
Holders of the Series C Preferred Stock of record within thirty days of such
event.
Section 6. VOTING RIGHTS OF SERIES C PREFERRED STOCK.
Except as otherwise provided by law, by agreement among the
stockholders, or as otherwise provided in this Certificate of Designations,
Series C Preferred Stock shall entitle the holders thereof to no voting rights.
Section 7. REGISTRATION OF TRANSFER.
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The Corporation shall keep at its principal office (or such other
place as the Corporation reasonably designates) a register for the registration
of shares of Series C Preferred Stock. Upon the surrender of any certificate
representing Series C Preferred Stock at such place, the Corporation shall, at
the request of the registered holder of such certificate, execute and deliver
(at the Corporation's expense) a new certificate or certificates in exchange
therefor representing the aggregate number of shares represented by the
surrendered certificate, subject to the requirements of applicable securities
laws. Each such new certificate shall be registered in such name and shall
represent such number of shares as shall be requested by the holder of the
surrendered certificate, shall be substantially identical in form to the
surrendered certificate.
Section 8. REPLACEMENT.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing one
or more shares of the Series C Preferred Stock and, in the case of any such
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to
the Corporation (provided that if the registered holder is an institutional
investor its own agreement of indemnity, without bond, shall be satisfactory),
or, in the case of any such mutilation, upon surrender of such certificate, the
Corporation shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of shares
represented by such lost, stolen, destroyed or mutilated certificate.
Section 9. RESTRICTIONS ON CORPORATE ACTION.
The Corporation shall not modify its Restated Certificate of
Incorporation or Bylaws so as to amend or change any of the rights, preferences
or privileges of the Series C Preferred Stock without the consent of the holders
of a majority of the Series C Preferred Stock.
Section 10. MISCELLANEOUS.
(a) The unenforceability or invalidity of any provision or provisions
of this Certificate of Designations shall not render invalid or unenforceable
any other provision or provisions herein contained.
(b) Section and paragraph headings herein are for convenience only
and shall not be construed as a part of this Certificate of Designations.
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(c) All notices to holders of Series C Preferred Stock required or
permitted hereunder shall be sent by overnight courier service, prepaid,
addressed to each such holder at the address for such holder shown on the books
of the Corporation.
IN WITNESS WHEREOF, this Certificate has been signed on this 28th day
of December, 1998, and the signature of the undersigned shall constitute the
affirmation and acknowledgment of the undersigned, under penalties of perjury,
that this Certificate is the act and deed of the undersigned and that the facts
stated in the Certificate are true.
SERACARE, INC.
By: /s/ Barry D. Plost
------------------------------------
Barry D. Plost, President
ATTEST:
/s/ Jerry Burdick
------------------------------------
Jerry L. Burdick,
Executive Vice President
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4.15 REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT BY AND BETWEEN
SERACARE, INC., AVRE INCORPORATED, BINARY ASSOCIATES, INC., SERACARE
ACQUISITIONS, INC., BHM LABS, INC., SERACARE TECHNOLOGY, INC.,WESTERN
STATES GROUP, INC., AMERICAN PLASMA, INC. ("OBLIGORS") AND BROWN
BROTHERS HARRIMAN & CO. AND STATE STREET BANK AND TRUST COMPANY
("LENDERS") AND BROWN BROTHERS HARRIMAN & CO. AS ADMINISTRATIVE AGENT
FOR LENDERS DATED DECEMBER 21, 1998.
<PAGE>
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
This REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT entered into at
Boston, Massachusetts, as of December 21, 1998, between SERACARE, INC., a
California corporation with an address of 1925 Century Park East, Suite 1970,
Los Angeles, California 90067 (the "Borrower"); AVRE INCORPORATED, a Nevada
corporation with an address of 1925 Century Park East, Suite 1970, Los
Angeles, California 90067 ("Avre"); BINARY ASSOCIATES, INC., a Colorado
corporation with an address of 1925 Century Park East, Suite 1970, Los
Angeles, California 90067 ("Binary"); SERACARE ACQUISITIONS, INC., a Nevada
corporation with an address of 1925 Century Park East, Suite 1970, Los
Angeles, California 90067 ("Acquisitions"); BHM LABS, INC., an Arkansas
corporation with an address of 1925 Century Park East, Suite 1970, Los
Angeles, California 90067 ("BHM"); SERACARE TECHNOLOGY, INC., a Nevada
corporation with an address of 2170 Woodward, Austin, Texas 78744
("Technology"); THE WESTERN STATES GROUP, INC., a California corporation with
an address of 1935 Avenida del Oro, Suite F, Oceanside, California 92056
("Western"); AMERICAN PLASMA, INC., a Texas corporation with an address of
719 Sawdust Road, Suite 205, Spring, Texas 77380 and with an address after
December 31, 1998 of 1925 Century Park East, Suite 1970, Los Angeles,
California 90067 ("American Plasma," and along with the Borrower, Avre,
Binary, Acquisitions, BHM, Technology and Western, each an "Obligor" and
collectively, the "Obligors"); and BROWN BROTHERS HARRIMAN & CO., a New York
general partnership with an address of 40 Water Street, Boston, Massachusetts
02109 ("BBH"); STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company with an address of 225 Franklin Street, Boston, Massachusetts 02110
("State Street") (BBH and State Street hereinafter are collectively referred
to as "Lenders" and sometimes individually as a "Lender"); and BROWN BROTHERS
HARRIMAN & CO. AS ADMINISTRATIVE AGENT for the Lenders, with an address of 40
Water Street, Boston, Massachusetts 02109 (the "Administrative Agent").
THIS REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT AMENDS AND
RESTATES IN ITS ENTIRETY THAT CERTAIN AMENDED AND RESTATED REVOLVING LOAN AND
SECURITY AGREEMENT DATED AS OF SEPTEMBER 29, 1998, AMONG THE OBLIGORS AND BBH.
FOR VALUE RECEIVED, and in consideration of the granting by the Lenders
of financial accommodations to Obligors, and the mutual covenants and
agreements herein contained, each Obligor, the Administrative Agent and the
Lenders, as of the date hereof and as of the date of each credit and/or other
financial accommodation, agree as follows:
1. THE REVOLVING LOAN
1.1 REVOLVING LOAN. Lenders agree to establish a revolving line of credit
for Borrower of up to Ten Million Dollars ($10,000,000) (the "Revolving Loan
Amount") which shall expire on December 1, 2000 (the "Revolving
<PAGE>
Loan"). Subject to the terms and conditions set forth herein, and in reliance
upon the representations, warranties and covenants of the Borrower made
herein, each Lender severally agrees to lend to the Borrower from time to
time through the Administrative Agent upon the Borrower's request its
respective pro-rata share (as set forth in EXHIBIT A attached hereto) of the
amounts of advances requested by the Borrower under the Revolving Loan such
that the aggregate principal amount outstanding under the Revolving Loan
shall not exceed at any time the amount of the lesser of (a) the Revolving
Loan Amount and (b) the Borrowing Base, as such term is hereinafter defined
and as calculated in a borrowing base certificate in the form of EXHIBIT B
attached hereto and delivered to the Administrative Agent and each Lender
simultaneously with the execution and delivery of this Agreement and monthly
on or before the 20th day of each month (with respect to the prior month),
commencing January 1, 1999. The Borrower shall make all requests for advances
under the Revolving Loan to the Administrative Agent not later than 1:00 p.m.
(Boston, Massachusetts time) on the Business Day (as hereinafter defined)
immediately preceding the date on which the Borrower desires to receive the
advance. Each request by the Borrower for an advance under the Revolving Loan
shall specify the amount and date of such advance. "Business Day" means any
day other than a Saturday, Sunday or federal or Massachusetts holiday on
which banks in Boston, Massachusetts are open for the conduct of a
substantial part of their commercial banking business. Advances under the
Revolving Loan may only be made on a Business Day. The failure or delay by a
Lender to make available its pro-rata share of any advance requested by
Borrower under the Revolving Loan shall not relieve the other Lender of its
obligation, if any, to make available its pro-rata share of such advance. In
no event, however, shall a Lender, or the Administrative Agent, be
responsible for the failure of the other Lender to make available any portion
of such an advance. The Revolving Loan is evidenced by (1) that certain
Amended and Restated Revolving Term Note of even date herewith by the
Borrower in favor of BBH in the face amount of $5,000,000 (the "BBH Revolving
Note") and (2) that certain Revolving Term Note of even date herewith by the
Borrower in favor of State Street in the face amount of $5,000,000 (the
"State Street Revolving Note") (the BBH Revolving Note and State Street
Revolving Note are hereinafter together referred to as the "Revolving Note").
This Agreement, the Revolving Note, the Term Note (as hereinafter defined)
and any and all other documents, amendments and renewals executed and
delivered in connection with any of the foregoing are collectively
hereinafter referred to as the "Loan Documents."
1.2 REVOLVING LOAN ACCOUNT. An account shall be opened on the books of the
Administrative Agent which shall be designated on the Administrative Agent's
books and records as Borrower's "Revolving Loan Account," in which account a
record will be kept of all loans and other advances made by Lenders to
Borrower respecting the Revolving Loan, and all payments thereon and other
appropriate debits and credits as provided by this Agreement. Each loan made
hereunder by a Lender shall be made in accordance with this Agreement and may
be credited by the Administrative Agent to any deposit account of Borrower
with such Lender, or may be paid to Borrower, or may be applied to any
Obligations (as hereinafter defined), as such Lender may in each instance
elect.
1.3 INTEREST. Interest will be charged to Borrower on the principal amount
of the Revolving Loan from time to time outstanding at the rate specified in
the Revolving Note in accordance with the terms of the Revolving Note.
Interest shall be payable quarterly in arrears in accordance with the terms
of the Revolving Note.
1.4 COMMITMENT AND FACILITY FEES. In addition to all other fees and
expenses due to Lenders respecting the Revolving Loan, Borrower shall pay to
the Administrative Agent for payment ratably to the Lenders (i)
simultaneously with the execution and delivery of this Agreement, a facility
fee equal to $60,000 and (ii) quarterly in arrears on the first business day
of each calendar quarter commencing January 1, 1999, an unused commitment fee
equal to an amount calculated by multiplying .000625 by the difference
between the Revolving Loan Amount and the average daily balance outstanding
respecting the Revolving Loan during the prior calendar quarter.
1.5 REPAYMENT. All loans and advances made by Lenders to Borrower under or
pursuant to this Agreement respecting the Revolving Loan shall be payable to
the Administrative Agent for the ratable account of the Lenders on or before
the maturity date of the Revolving Note unless otherwise agreed to in writing
by the Borrower and the Lenders and so long as there are no uncured Events of
Default (as hereinafter defined). The Borrower will make payments of
principal under the Revolving Loan from time to time so that the aggregate
outstanding principal balance of the Revolving Loan does not exceed the
lesser of the Borrowing Base (as hereinafter defined) and the Revolving Loan
Amount at any time.
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1.6 ADDITIONAL LOANS. Any loans, advances and credits to the Borrower that
are made in excess of the Revolving Loan Amount for the line of credit
established hereunder shall not affect the obligations of Borrower or any of
the Administrative Agent's or Lenders' rights or remedies hereunder or under
the Loan Documents or otherwise, such loans and all loans hereunder to be
secured by the Collateral (as hereinafter defined) and to be due and payable
to the Administrative Agent upon the same terms as the Revolving Loan Amount
pursuant to the Revolving Note, and shall bear interest at the rate set forth
in the Revolving Note unless otherwise agreed to in writing. All checks or
other items paid by a Lender which cause an overdraft in any deposit account
maintained by Borrower with such Lender shall constitute an advance to
Borrower pursuant to this Agreement, repayable on demand, and shall be
secured by all Collateral at any time pledged by Borrower to such Lender.
1.7 AUTHORIZED PERSONS. Any person duly authorized by a general borrowing
resolution of the Borrower, or in the absence of such a resolution, the
President, Chief Financial Officer, Treasurer or any Vice President of the
Borrower, may request discretionary loans hereunder, either orally or
otherwise, but the Lenders at their option may require that all requests for
loans hereunder shall be in writing. Each of the Lenders and the
Administrative Agent shall incur no liability to the Borrower in acting upon
any request referred to herein which it believes in good faith to have been
made by an authorized person or persons.
1.8 MONTHLY STATEMENT. At the option of the Administrative Agent, after
the end of each month, Administrative Agent will render to Borrower a
statement of Borrower's Revolving Loan Account with Administrative Agent,
showing all applicable credits and debits. Each statement shall be considered
correct and to have been accepted by Borrower and shall be conclusively
binding upon Borrower in respect of all charges, debits and credits of
whatsoever nature contained therein respecting the Revolving Loan, and the
closing balance shown therein, unless Borrower notifies Administrative Agent
in writing of any discrepancy within twenty (20) days from the receipt by the
Borrower of any such monthly statement.
2. TERM LOAN
2.1 TERM LOAN. Upon the terms and subject to the conditions of this
Agreement, and in reliance upon the representations, warranties and covenants
of the Borrower made herein, the Lenders agree to lend to the Borrower the
principal sum of $7,000,000 (the "Term Loan Amount") on the date hereof. Such
loan (the "Term Loan") is evidenced by (1) that certain Term Promissory Note
of even date herewith by the Borrower in favor of BBH in the principal amount
of $3,500,000 (the "BBH Term Note") and (2) that certain Term Promissory Note
of even date herewith by the Borrower in favor of State Street in the
principal amount of $3,500,000 (the "State Street Term Note") (the BBH Term
Note and State Street Term Note are hereinafter together referred to as the
"Term Note"). Each Lender's respective pro-rata share of the Term Loan Amount
is set forth in attached EXHIBIT A.
2.2 INTEREST. Interest will be charged to Borrower on the principal amount
of the Term Loan from time to time outstanding at the rate specified in the
Term Note in accordance with the terms of the Term Note. Interest shall be
payable quarterly in arrears in accordance with the terms of the Term Note.
2.3 REPAYMENT. The Term Loan Amount shall be payable to the Administrative
Agent for the ratable account of the Lenders over an approximate three-year
period ending December 1, 2001 in accordance with the terms of the Term Note
unless otherwise agreed to in writing by the Borrower and the Lenders and so
long as there are no uncured Events of Default (as hereinafter defined).
2.4 PREPAYMENT. The Term Loan may be prepaid in whole or in part without
premium or penalty, provided that the Borrower shall also pay accrued
interest on the principal so prepaid to the date of such prepayment and all
fees and charges payable on or before the date of such prepayment. Mandatory
and voluntary prepayments shall be applied against unpaid installments of
principal of the Term Loan in inverse order of maturity of such installments.
The Borrower shall not be permitted to reborrow any part of the principal of
the Term Loan so prepaid at any time or under any circumstances.
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3. MANNER OF PAYMENT UNDER REVOLVING LOAN AND TERM LOAN
3.1 All payments of principal, interest, fees and any other amounts due
hereunder or under any of the other Loan Documents shall be made to the
Administrative Agent for the ratable account of the Lenders at the
Administrative Agents office at 40 Water Street, Boston, Massachusetts 02109,
or at such other location as the Administrative Agent may from time to time
designate in writing, in each case in United States Dollars constituting
immediately available funds.
4. GRANT OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. In consideration of the Lenders' extending
credit and other financial accommodations to the Obligors, each Obligor
hereby grants to the Administrative Agent for the ratable benefit of the
Administrative Agent and the Lenders a security interest in (including,
without limitation, a lien on and pledge of) all of such Obligor's Collateral
(as hereinafter defined). The security interest granted by this Agreement is
given to and shall be held by the Administrative Agent for the ratable
benefit of the Administrative Agent and the Lenders as security for the
payment and performance of all Obligations (as hereinafter defined).
4.2 DEFINITIONS. The following definitions shall apply:
(a) "Accounts Receivable" means all of an Obligor's accounts,
accounts receivable, contract rights, notes, bills, drafts,
acceptances, instruments, documents, chattel paper and all other
debts, obligations and liabilities in whatever form owing to an
Obligor from any Person (as defined below) for goods sold by it
or for services rendered by it, or however otherwise established
or created, all guaranties and security therefor, all right,
title and interest of an Obligor in the goods or services which
gave rise thereto, including rights to reclamation and stoppage
in transit and all rights of any unpaid seller of goods or
services; whether any of the foregoing be now existing or
hereafter arising, now or hereafter received by or owing or
belonging to an Obligor.
(b) "Borrowing Base" as used in this Agreement means the lesser of
(i) the sum of seventy-five percent (75%) of the Obligors'
Accounts Receivable (excluding (1) all Accounts Receivable owed
by a Debtor (as hereinafter defined) in respect of which there
has been established a contra account or against which an offset,
charge or lien has been claimed or asserted by such Debtor, to
the extent of such account, offset, charge or lien, (2) all
Accounts Receivable owed by a Debtor as to which any Obligor has
received notice or has knowledge of bankruptcy, insolvency or
other facts which make collection doubtful or have been turned
over to a collection agency or an attorney for collection, (3)
all Accounts Receivable that are greater than ninety (90) days
from the invoice date, and (4) those foreign Accounts Receivable
which when added to all other foreign Accounts Receivable would
cause the sum of the foreign Accounts Receivable to exceed
twenty-five percent (25%) of the Obligors' Accounts Receivable)
plus the lesser amount of (A) fifty percent (50%) of the
Obligors' Inventory (as hereinafter defined) and (B) $7,500,000,
and (ii) the Revolving Loan Amount. For purposes of clause 4
above, Accounts Receivable that are due from Grifols, S.A. or are
backed by a letter of credit (to the extent so backed) shall be
deemed not to be foreign Accounts Receivable.
(c) "Code" shall mean the Massachusetts Uniform Commercial Code
(General Law, Chapter 106) as amended from time to time.
(d) "Collateral" shall mean all of each Obligor's present and future
right, title and interest in and to any and all of the following
property, whether such property is now existing or hereafter
created:
(i) All goods, including, without limitation, all Inventory
(as hereinafter defined), farm products, Equipment (as
hereinafter defined), including, without limitation, all
machinery, furniture, and trade fixtures;
(ii) All accounts, Accounts Receivable, contract rights and
chattel paper, regardless of whether or not they constitute
proceeds of other Collateral;
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(iii) All investment property, including, without limitation,
all securities (including, but not limited to, all of the
Borrower's stock of its subsidiaries) whether certificated or
uncertificated, all securities entitlements, securities accounts,
commodity contracts or commodity accounts;
(iv) All general intangibles, regardless of whether or not
they constitute proceeds of other Collateral, including, without
limitation, all of an Obligor's rights to tax refunds and all of
an Obligor's rights (which a Lender may exercise or not as it in
its sole discretion may determine) to acquire or obtain goods
and/or services with respect to the manufacture, processing,
storage, sale, shipment, delivery or installation of any of an
Obligor's Inventory (as hereinafter defined) or other Collateral;
(v) All products of and accessions to any of the Collateral;
(vi) All liens, guaranties, securities, rights, remedies and
privileges pertaining to any of the Collateral, including the
right of stoppage in transit;
(vii) All obligations owing to an Obligor of every kind and
nature; and all choices in action;
(viii) All goodwill, trade secrets, computer programs, customer
lists, copyrights, trade names, trademarks and patents;
(ix) All documents and instruments (whether negotiable or
nonnegotiable, and regardless of their being attached to chattel
paper);
(x) All proceeds of Collateral of every kind and nature in
whatever form, including, without limitation, both cash and
noncash proceeds resulting or arising from the rendering of
services by an Obligor or the sale or other disposition by an
Obligor of the Inventory (as hereinafter defined) or other
Collateral;
(xi) All books and records relating to the conduct of an
Obligor's business including, without in any way limiting the
generality of the foregoing, those relating to its accounts; and
(xii) All deposit accounts maintained by an Obligor with any
Lender, trust company, investment firm or fund, or any similar
institution or organization.
(e) "Contract Rights" or "contract rights" means rights of an Obligor
to payment under contracts not yet earned by performance and not
evidenced by instruments or chattel paper.
(f) "Debtors" shall mean an Obligor's customers who are indebted to
the Obligor.
(g) "Equipment" shall mean and include all of an Obligor's machinery,
equipment, furniture, trade fixtures and motor vehicles and
intending to include all tangible personal property, or goods,
utilized in the conduct of an Obligor's business, but excluding
therefrom inventory, as that term is defined in the Code, and all
replacements or substitutions therefor and all accessions
thereto.
(h) "Inventory" means all inventory of whatever name, nature, kind or
description, all goods held for sale or lease or to be furnished
under contracts of service, finished goods, work in process, raw
materials, materials used or consumed by an Obligor, parts,
supplies, all wrapping, packaging, advertising labeling, and
shipping materials, devices, names and marks, all contract rights
and documents relating to any of the foregoing, whether any of
the foregoing be now existing or hereafter arising, wherever
located, now owned or hereafter acquired by an Obligor.
(i) "Obligation(s)" shall mean, without limitation, all loans,
advances, indebtedness, notes, liabilities and amounts,
liquidated or unliquidated, owing by the Obligors to the Lenders
and the Administrative Agent at any time, of each and every kind,
nature and description, whether arising under this Agreement or
otherwise, and whether secured or unsecured, direct or indirect
(that is, whether the same are due directly by an Obligor to a
Lender or the Administrative Agent; or are due indirectly by an
Obligor to a Lender or the Administrative Agent as endorser,
guarantor or other surety, or as a borrower of obligations due
third persons which have been endorsed or assigned to a Lender or
the Administrative Agent or otherwise), absolute or contingent,
due or to become due, now existing or hereafter contracted. Said
term shall also include all interest and other charges chargeable
to an Obligor or due from an Obligor to a Lender or the
Administrative Agent from time to time and all costs and expenses
referred to in this Agreement.
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(j) "Permitted Investments" shall mean (i) direct obligations of the
United States, or obligations guaranteed as to principal and
interest by the United States government, (ii) bankers'
acceptances and certificates of deposit issued by any bank or any
other bank or trust company or, in the case of any subsidiary
bank of a bank holding company, a bank holding company, having
capital, surplus and undivided profits of at least $500,000,000,
the short-term deposits of which are given an A1 or P1 rating by
Standard & Poor's Rating Group or Moody's Investors Service,
Inc., as applicable, (iii) obligations of any bank or trust
company or bank holding company described in clause (ii) above in
respect of the repurchase of obligations of the type described in
clause (i) hereof, provided that such repurchase obligations
shall be fully secured by obligations of the type described in
said clause (i) and the possession of such obligations shall be
transferred to, and segregated from other obligations owned by,
any such bank, trust company or bank holding company, (iv)
commercial paper given a rating of A1 or P1 by Standard & Poor's
Ratings Group or Moody's Investors Service, Inc., as applicable
and (v) money market funds organized under the laws of the United
States or any state thereof that invest substantially all of
their assets in any of the types of investments described in
clauses (i), (ii), (iii) or (iv); PROVIDED, HOWEVER, that no such
investment shall have a maturity longer than 270 days from the
date of acquisition by an Obligor.
(k) "Person" or "party" shall include individuals, firms,
corporations and all other entities.
All words and terms used in this Agreement other than those
specifically defined herein shall have the meanings accorded to them in the
Code.
4.3 ORDINARY COURSE OF BUSINESS. The Lenders hereby authorize and permit
each Obligor to hold, process, sell, use or consume in the manufacture or
processing of finished goods, or otherwise dispose of for fair consideration,
the Inventory, all in the ordinary course of such Obligor's business,
excluding, without limitation, sales to creditors or in bulk or sales or
other dispositions occurring under circumstances which would or could create
any lien or interest adverse to the Lenders' security interest or other right
hereunder in the proceeds resulting therefrom. The Lenders also hereby
authorize and permit each Obligor to receive from Debtors all amounts due as
proceeds of the Collateral at the Obligor's own cost and expense, and also
liability, if any, in the ordinary course of business; and the Lenders or the
Administrative Agent may, so long as there is an existing uncured Event of
Default (as hereinafter defined), terminate all or any part of the authority
and permission herein or elsewhere in this Agreement granted to any such
Obligor with reference to the Collateral.
Until the Administrative Agent shall otherwise notify an Obligor, all
proceeds of and collections of Collateral shall be retained by such Obligor
and used solely for the ordinary and usual operation of such Obligor's
business. From and after notice by the Administrative Agent to an Obligor,
all proceeds of and collections of the Collateral shall be held in trust by
such Obligor for the Administrative Agent and the Lenders and shall not be
commingled with such Obligor's other funds or deposited in any Lender account
of such Obligor; and such Obligor agrees to deliver to the Administrative
Agent on the dates of receipt thereof by such Obligor, duly endorsed to the
Administrative Agent for the ratable benefit of the Administrative Agent and
the Lenders, or to bearer, or assigned to the Administrative Agent for the
ratable benefit of the Administrative Agent and the Lenders, as may be
appropriate, all proceeds of the Collateral in the identical form received by
such Obligor.
4.4 ALLOWANCES. Each Obligor may grant such allowances or other
adjustments to Debtors (exclusive of extending the time for payment of any
item in excess of $50,000 which shall not be done without first obtaining the
Administrative Agent's written consent in each instance) as such Obligor may
reasonably deem to accord with sound business practice, including, without
limiting the generality of the foregoing, accepting the return of all or any
part of the Inventory.
4.5 RECORDS. Each Obligor shall deliver to the Administrative Agent and
the Lenders from time to time promptly at their reasonable request all
invoices, original documents of title, contracts, chattel paper, instruments
and any other writings relating thereto, and other evidence of performance of
contracts, or evidence of shipment or delivery of the merchandise or of the
rendering of services; and each Obligor will deliver to the Administrative
Agent and the Lenders promptly at their reasonable request from time to time
additional copies of any or all of such papers or writings, and such other
information with respect to any of the Collateral and such schedules of
Inventory, schedules of accounts and such other writings as the
Administrative Agent or Lenders may in their sole discretion
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deem to be necessary or effectual to evidence any loan hereunder or the
Lenders' and Administrative Agent's security interest in the Collateral.
4.6 LEGENDS. Each Obligor shall promptly make, stamp or record such
entries or legends on such Obligor's books and records or on any of the
Collateral as the Administrative Agent shall reasonably request from time to
time, to indicate and disclose that the Lenders and Administrative Agent have
a security interest in such Collateral.
4.7 INSPECTION. The Administrative Agent and each Lender, or their
representatives, at any time and from time to time, but with at least one (1)
business day's notice, shall have the right, and each Obligor will permit
them at the Obligors' expense during normal business hours so long as there
is no existing uncured Event of Default under this Agreement or at any time
(with or without notice at Administrative Agent's or such Lender's option, as
applicable) if there is an existing uncured Event of Default:
(a) to examine, check, make copies of or extracts from any of the
Obligor's books, records and files (including, without
limitation, orders and original correspondence);
(b) to inspect, examine or appraise the Collateral and to check and
test the same as to quality, quantity, value and condition; and
(c) to verify the Collateral or any portion or portions thereof or
each Obligor's compliance with the provisions of this Agreement.
5. REPRESENTATIONS AND WARRANTIES
5.1 ORGANIZATION AND QUALIFICATION. Each Obligor is a duly organized and
existing corporation under the laws of the State of its incorporation, as
indicated above, in good standing under the laws of said state, and is duly
qualified to do business under the laws of each state where the nature of the
business done or property owned requires such qualification, except where the
failure to be so qualified would not have a material adverse affect on the
financial condition or results of operations of Obligors on a consolidated
basis.
5.2 SUBSIDIARIES. Each Obligor has no subsidiaries other than those listed
on SCHEDULE 5.2, if any, and each Obligor has never consolidated, merged or
acquired substantially all of the assets of any other entity or person other
than those listed on SCHEDULE 5.2, if any.
5.3 CORPORATE RECORDS. Each Obligor's Certificate of Incorporation and all
amendments thereto have been duly filed. All outstanding capital stock issued
by each Obligor was and is properly issued and all books and records of each
Obligor, including but not limited to its minute books, bylaws and books of
account, are accurate and up to date and will be so maintained.
5.4 TITLE TO PROPERTIES; ABSENCE OF LIENS. Except as set forth on SCHEDULE
5.4, each Obligor has good and clear record and marketable title to all of
its properties and assets, and all of its properties and assets including the
Collateral are free and clear of all mortgages, liens, pledges, charges,
encumbrances, setoffs, except (a) the mortgages and security interests as set
forth on SCHEDULE 5.4a, if any, and (b) the leases of personal property as
set forth on SCHEDULE 5.4b, if any.
5.5 PLACES OF BUSINESS. Each Obligor's chief executive office is correctly
stated in the preamble to this Agreement, and each Obligor shall, during the
term of this Agreement, keep the Administrative Agent currently and
accurately informed in writing of each of its other places of business, and
shall not change the location of such chief executive office or open or
close, move or change any existing or new place of business without giving
the Administrative Agent at least thirty (30) days prior written notice
thereof.
5.6 VALID OBLIGATIONS. The execution, delivery and performance of the Loan
Documents have been duly authorized by all necessary corporate action and
each represents a legal, valid and binding obligation of each Obligor and is
fully enforceable according to its terms, except as limited by laws relating
to the enforcement of creditors' rights and by general principles of equity.
5.7 CONFLICTS WITH OTHER AGREEMENTS. Except as set forth on SCHEDULE 5.7,
there is no provision in any indenture, contract or agreement to which any
Obligor is a party which prohibits the execution, delivery or performance of
the Loan Documents.
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5.8 GOVERNMENTAL APPROVALS. The execution, delivery and performance of the
Loan Documents does not require any approval of any governmental agency or
authority and, except as set forth on SCHEDULE 5.8, each Obligor has obtained
all requisite licenses, franchises, permits, consents and other
authorizations which are material to operate its business as currently
conducted. All such licenses, franchises, permits, consents and
authorizations are readily assignable and transferable by the Obligors,
subject to approval by the applicable governmental agency or authority.
5.9 LITIGATION. There are no actions, suits or proceedings pending or to
the knowledge of any Obligor threatened against any Obligor which might
materially adversely affect the ability of any Obligor to perform its
obligations under the Loan Documents.
5.10 FINANCIAL STATEMENTS. The Obligors have furnished to the Lenders the
following financial statements (the "Financial Statements"): consolidated and
consolidating balance sheet as of August 31, 1998, and consolidated and
consolidating statement of profit and loss for the six-month period ending
August 31, 1998. The balance sheet fairly presents the condition of the
Obligors at the date thereof and the statement of profit and loss fairly
presents the results of the operations of the Obligors for the period
indicated, all in conformity with generally accepted accounting principles,
consistently applied.
5.11 ACCOUNTS AND CONTRACT RIGHTS. All of each Obligor's Accounts
Receivable arise out of legally enforceable and existing contracts; and
represent undisputed bona fide indebtedness by the Debtor for sales or leases
of Inventory shipped and delivered or services rendered by an Obligor to a
Debtor, and are not and will not be subject to any discount (except such cash
or trade discount as may be shown on any invoice, contract or other writing
in the ordinary course of business). No contract right, account, general
intangible or chattel paper is or will be represented by any note or other
instrument, and no contract right, account or general intangible is or will
be represented by any conditional or installment sales obligation or other
chattel paper, except such instruments or chattel paper as have been or
immediately upon receipt by an Obligor will be delivered to the
Administrative Agent (duly endorsed or assigned), such delivery, in the case
of chattel paper, to include all executed copies except those in the
possession of the installment buyer and any security for or guaranty of any
of the Collateral shall be delivered to the Administrative Agent immediately
upon receipt thereof by an Obligor, with such assignments and endorsements
thereof as the Administrative Agent may request.
5.12 TITLE TO COLLATERAL. Except as set forth in SCHEDULE 5.12, attached
hereto, or as otherwise permitted under this Agreement, (i) at the date
hereof each Obligor is (and as to Collateral that such Obligor may acquire
after the date hereof, will be) the lawful owner of the Collateral; (ii) the
Collateral and each item thereof is, will be and shall continue to be free of
all restrictions, liens, encumbrances or other rights, title or interests
(other than the security interest therein granted to the Administrative Agent
for the ratable benefit of the Administrative Agent and the Lenders hereby),
credits, defenses, recoupments, set-offs or counterclaims whatsoever; each
Obligor has and will have full power and authority to grant to the
Administrative Agent for the ratable benefit of the Administrative Agent and
the Lenders a security interest therein; (iii) each Obligor has not
transferred, assigned, sold, pledged, encumbered, subjected to lien or
granted any security interest in, and will not transfer, assign, sell (except
sales or other dispositions in the ordinary course of business in respect to
Inventory or as expressly permitted in this Agreement), pledge, encumber,
subject to lien or grant any security interest in, any of the Collateral (or
any of such Obligor's right, title or interest therein), to any person other
than the Administrative Agent for the ratable benefit of the Administrative
Agent and the Lenders; the Collateral is and will be valid and genuine in all
respects; (iv) the Accounts Receivable shall represent unconditional and
undisputed bona fide indebtedness by the Debtor for sales or leases of
Inventory shipped and delivered or services rendered by an Obligor to Debtor,
and is not and will not be subject to any discount (except such cash or trade
discount as may be shown on any invoice, contract or other writing in the
ordinary course of business); and (v) each Obligor will warrant and defend
the Lenders' right to and interest in the Collateral against all claims and
demands of all persons whatsoever.
5.13 LOCATION OF COLLATERAL. The Collateral is kept and maintained solely
at the locations set forth in SCHEDULE 5.13 attached hereto. Except for
sale, processing, use, consumption or other disposition of Inventory and
Equipment in the ordinary course of business, each Obligor will keep all
Collateral only at locations specified in SCHEDULE 5.13; each Obligor shall,
during the term of this Agreement, keep the Administrative Agent currently
and accurately informed in writing of each location where such Obligor's
records relating to its accounts and
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contract rights, respectively, are kept, and shall not remove such records or
any of them to another state without giving the Administrative Agent at least
thirty (30) days prior written notice thereof.
5.14 THIRD PARTIES. The Administrative Agent and Lenders shall not be
deemed to have assumed any liability or responsibility to any Obligor or any
third person for the correctness, validity or genuineness of any instruments
or documents that may be released or endorsed to an Obligor by the
Administrative Agent or the Lenders (which shall automatically be deemed to
be without recourse to the Administrative Agent and Lenders in any event) or
for the existence, character, quantity, quality, condition, value or delivery
of any goods purporting to be represented by any such documents; and the
Administrative Agent and Lenders, by accepting such security interest in the
Collateral, or by releasing any Collateral to any Obligor, shall not be
deemed to have assumed any obligation or liability to any supplier or Debtor
or to any other third party, and each Obligor agrees to indemnify and defend
the Administrative Agent and Lenders and hold them harmless in respect to any
claim or proceeding arising out of any matter referred to in this paragraph.
5.15 PAYMENT OF ACCOUNTS. Upon becoming aware of any suspension of business,
assignment or trust mortgage for the benefit of creditors, dissolution,
petition in receivership or under any chapter of the Bankruptcy Code as
amended from time to time by or against any Debtor, any Debtor becoming
insolvent or unable to pay its debts as they mature or any other act of the
same or different nature amounting to a business failure, each Obligor will
forthwith notify the Administrative Agent and the Lenders thereof.
5.16 NOTIFICATION OF DAMAGE. Each Obligor will immediately notify the
Administrative Agent and the Lenders of any loss or damage to, or material
diminution in or any occurrence that would materially adversely affect the
value of the Inventory, the Equipment or other Collateral.
5.17 CHANGES. Since the date of the Financial Statements, there have been
no changes in the assets, liabilities, financial condition or business of any
Obligor, other than changes in the ordinary course of business, or relating
to the acquisition of American Plasma, Western and Consolidated Technologies,
Inc., or as set forth on SCHEDULE 5.17, or the issuance of the Company's 12%
senior subordinated debentures, the effect of which have, in the aggregate,
been materially adverse to the financial condition or results of operations
of the Obligors on a consolidated basis.
5.18 YEAR 2000. To each Obligor's knowledge, (i) no material modifications
are required to any of each Obligor's computer systems or computer software
to assure that such systems and software contain no deficiencies relating to
formatting for entering dates (commonly referred to and referred herein as
the "Year 2000 Problem"); (ii) each Obligor's computer systems and software
in all material respects are susceptible to all necessary modification and
each Obligor has adequate personnel or consultants UNDER CONTRACT or other
available means to timely modify (or, as applicable, replace and/or upgrade)
its own computer systems and software. Each Obligor is not aware of any
inability on the part of any of its customers, insurance providers or vendors
to timely address the Year 2000 Problem that will in any manner materially
adversely affect such Obligor's business operations.
5.19 TAXES. Each Obligor has filed or is in the process of filing all
Federal, state and other tax returns required to be filed (except for such
returns for which current and valid extensions have been filed), and all
taxes, assessments and other governmental charges due from each Obligor have
been fully paid. Each Obligor has established on its books reserves adequate
for the payment of all Federal, state and other tax liabilities (if any).
5.20 USE OF PROCEEDS. No portion of the Revolving Loan or Term Loan is to
be used for the purpose of purchasing or carrying any "margin security" or
"margin stock" as such terms are used in Regulations G and U of the Board of
Governors of the Federal Reserve System, 12 C.F.R. 207 and 221. The proceeds
of the Revolving Loan are to be used for working capital and to finance
acquisitions; the proceeds of the Term Loan are to be used for the
refinancing of certain indebtedness owed to BBH and to repay indebtedness
owed to William Cone and Western Equities LLC. The Borrower shall within
thirty (30) days of the date hereof repay such indebtedness to William Cone
and Western Equities LLC and, as promptly as practicable thereafter (but in
no event more than fifteen (15) days thereafter), provide the Administrative
Agent with a copy of a written confirmation from each of William Cone and
Western Equities LLC that the indebtedness owed to each of them by the
Borrower has been paid in full.
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5.21 INTELLECTUAL PROPERTY. Each Obligor has obtained and holds all
patents, trademarks, service marks, trade names and copyrights necessary to
conduct its business as presently conducted, and each thereof is in full
force and effect and no event has occurred which constitutes or, after notice
or lapse of time or both, would constitute, a material default under any
thereof. All patents, trademarks and copyrights owned by each Obligor (and
all pending applications of each Obligor for registration of patents,
trademarks and copyrights) as of the date hereof are listed in SCHEDULE 5.21
attached hereto.
6. AFFIRMATIVE COVENANTS
6.1 PAYMENTS. Each Obligor will duly and punctually pay all interest and
principal becoming due the Lenders and will duly and punctually perform all
things on its part to be done or performed under this Agreement.
6.2 BOOKS AND RECORDS; INSPECTION. Each Obligor will at all times keep
proper books of account in which full, true and correct entries will be made
of its transactions in accordance with generally accepted accounting
principles, consistently applied and which are, in the opinion of a certified
public accountant reasonably acceptable to the Administrative Agent, adequate
to determine fairly the financial condition and the results of operations of
each Obligor. Each Obligor will at all reasonable times make its books and
records available in its offices for inspection and examination by the
Administrative Agent and each Lender and the Administrative Agent's and each
Lender's representatives and, with at least one (1) business day's advance
notice, will permit inspection of the Collateral and all of its properties by
the Administrative Agent and each Lender and the Administrative Agent's and
each Lender's representatives during normal business hours so long as there
is no existing uncured Event of Default (as hereinafter defined) under this
Agreement or at any time (with or without notice at the Administrative
Agent's or such Lender's option, as applicable) if there is an existing
uncured Event of Default (as hereinafter defined). Each Obligor will from
time to time furnish the Administrative Agent and the Lenders with such
information and statements as the Administrative Agent and Lenders may
reasonably request with respect to the Obligations or the Administrative
Agent's and Lenders' security interest in the Collateral. Each Obligor shall,
during the term of this Agreement, keep the Administrative Agent currently
and accurately informed in writing of each location where each Obligor's
records relating to its accounts and contract rights are kept, and shall not
remove such records to another location without giving the Administrative
Agent at least thirty (30) days prior written notice thereof.
6.3 FINANCIAL STATEMENTS. The Obligors will furnish to the Administrative
Agent and the Lenders:
(a) as soon as available to the Obligors, but in any event within
forty-five (45) days after the close of each quarterly period of
their fiscal year, a full and complete signed copy of financial
statements, which shall include a balance sheet of the Obligors,
as at the end of such quarter, and statement of profit and loss
of the Obligors reflecting the results of their operations during
such quarter on a consolidated and consolidating basis, and shall
be prepared by the Obligors and certified by the Chief Financial
Officer of each Obligor as to correctness in accordance with
generally accepted accounting principles, consistently applied;
(b) as soon as available to the Obligors, but in any event within
ninety (90) days after the close of their fiscal year, a full and
complete signed copy of financial statements, prepared by
certified public accountants reasonably acceptable to the
Lenders, which shall include a balance sheet of the Obligors, as
at the end of such year, and statement of profit and loss of the
Obligors reflecting the results of their operations during such
year on a consolidated and consolidating basis, bearing the
opinion of such certified public accountants and prepared on an
audited basis in accordance with generally accepted accounting
principles, consistently applied together with any so-called
management letter;
(c) within thirty (30) days after the close of each fiscal year,
financial projections and cash flow reports for the Obligors
including projected borrowing through the then current fiscal
year;
(d) within forty-five (45) days after end of each fiscal quarter, a
Covenant Compliance Certificate in the form of EXHIBIT C attached
hereto;
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(e) from time to time, such financial data and information about any
Obligor as the Administrative Agent or Lenders may reasonably
request; and
(f) any financial data and information about any guarantors of the
Obligations as the Administrative Agent or Lenders may reasonably
request.
6.4 CONDUCT OF BUSINESS. Each Obligor will maintain its corporate
existence in good standing and comply with all laws and regulations of the
United States and of any state or states thereof and of any political
subdivision thereof, and of any governmental authority which may be
applicable to it or to its business; provided that this covenant shall not
apply to any tax, assessment or charge which is being contested in good faith
and with respect to which reserves have been established and are being
maintained.
6.5 NOTICE TO ACCOUNT DEBTORS. Each Obligor agrees, at the request of the
Administrative Agent, to notify all or any of the Debtors in writing of the
Administrative Agent's and Lenders' security interest in the Collateral in
whatever reasonable manner the Administrative Agent requests and, if the
Administrative Agent so requests, to permit the Administrative Agent to
notify all or any of the Debtors at such Obligor's expense.
6.6 OPERATING AND DEPOSIT ACCOUNTS. The Obligors shall maintain with BBH
their primary operating and deposit accounts which shall at all times have a
minimum balance of at least $150,000. At the option of the Lenders, all loan
payments and fees will automatically be debited from the Borrower's primary
operating accounts and all advances will automatically be credited to the
Borrower's primary operating accounts.
6.7 TAXES. Each Obligor will promptly pay all real and personal property
taxes, assessments and charges and all franchise, income, unemployment old
age benefits, withholding, sales and other taxes assessed against it or
payable by it before delinquent; provided that this covenant shall not apply
to any tax assessment or charge which is being contested in good faith and
with respect to which reserves have been established and are being
maintained. The Administrative Agent may, at its option, from time to time,
discharge any taxes, liens or encumbrances of any of the Collateral, and each
Obligor will pay to the Administrative Agent on demand or the Administrative
Agent in its sole discretion may charge to the Obligors all amounts so paid
or incurred by it.
6.8 MAINTENANCE. Each Obligor will keep and maintain the Collateral and
its other properties, if any, in good repair, working order and condition.
Each Obligor will promptly notify the Administrative Agent and the Lenders of
any loss or damage to or any occurrence which would materially adversely
affect the value of any Collateral. The Administrative Agent may, at its
option, from time to time, take any other action that the Administrative
Agent may deem proper to repair, maintain or preserve any of the Collateral,
and each Obligor will pay to the Administrative Agent on demand or the
Administrative Agent in its sole discretion may charge to the Obligors all
amounts so paid or incurred by it.
6.9 INSURANCE. Each Obligor will maintain in force casualty insurance on
all Collateral and any other property of such Obligor, if any, against risks
customarily insured against by companies engaged in businesses similar to
that of such Obligor containing such terms and written by such companies as
may be reasonably satisfactory to the Administrative Agent, such insurance to
be payable to the Administrative Agent for the ratable benefit of the
Administrative Agent and the Lenders as its interest may appear in the event
of loss; no loss shall be adjusted thereunder without the Administrative
Agent's approval; and all such policies shall provide that they may not be
canceled without first giving at least ten (10) days prior written notice of
cancellation to the Administrative Agent. In the event that any Obligor fails
to provide evidence of such insurance, the Administrative Agent may, at its
option, secure such insurance and charge the cost thereof to the Obligors. At
the option of the Administrative Agent, all insurance proceeds received from
any loss or damage to any of the Collateral shall be applied either to the
replacement or repair thereof or as a payment on account of the Obligations.
From and after the occurrence of an Event of Default (as hereinafter
defined), the Administrative Agent is authorized to cancel any insurance
maintained hereunder and apply any returned or unearned premiums, all of
which are hereby assigned to the Administrative Agent, as a payment on
account of the Obligations.
6.10 NOTIFICATION OF DEFAULT. Within five (5) days of becoming aware of the
existence of any condition or event which constitutes an Event of Default, or
any condition or event which would upon notice or lapse of time, or both,
constitute an Event of Default, the Obligors shall give the Administrative
Agent and the Lenders written notice thereof specifying the nature and
duration thereof and the action being or proposed to be taken with respect
thereto.
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6.11 NOTIFICATION OF MATERIAL LITIGATION. Each Obligor will promptly notify
the Administrative Agent and the Lenders in writing of any litigation or of
any investigative proceedings of a governmental agency or authority commenced
or threatened against it which would or might be materially adverse to the
financial condition of such Obligor.
6.12 YEAR 2000. Each Obligor will take commercially reasonable actions to
ensure that such Obligor's computer systems and computer software shall at
all times contain no material deficiencies relating to the Year 2000 Problem;
and each Obligor hereby indemnifies and holds the Administrative Agent and
the Lenders harmless from any losses the Administrative Agent or the Lenders
may suffer resulting from any deficiencies in such Obligor's computer systems
or computer software relating to the Year 2000 Problem.
6.13 PENSION PLANS. With respect to any pension or benefit plan maintained
by any Obligor, or to which any Obligor contributes ("Plan"), the benefits
under which are guarantied, in whole or in part, by the Pension Benefit
Guaranty Corporation created by the Employee Retirement Income Security Act
of 1974, P.L. 93-406, or any governmental authority succeeding to any or all
of the functions of the Pension Benefit Guaranty Corporation ("Pension
Benefit Guaranty Corporation"), each Obligor will (a) fund each Plan as
required by the provisions of Section 412 of the Internal Revenue Code of
1986, as amended; (b) cause each Plan to pay all benefits when due; (c)
furnish the Administrative Agent (i) promptly with a copy of any notice of
each Plan's termination sent to the Pension Benefit Guaranty Corporation and
(ii) no later than the date of submission to the Department of Labor or to
the Internal Revenue Service, as the case may be, a copy of any request for
waiver from the funding standards or extension of the amortization periods
required by Section 412 of the Internal Revenue Code of 1986, as amended; and
(d) subscribe to any contingent liability insurance provided by the Pension
Benefit Guaranty Corporation to protect against employer liability upon
termination of a guarantied pension plan, if available to such Obligor.
6.14 ENVIRONMENTAL. As of the date hereof neither the Obligors nor any of
Obligors' agents, employees or independent contractors (1) have caused or are
aware of a release or threat of release of Materials (as hereinafter defined)
on any of the premises or personal property owned or controlled by any
Obligor, or any abutting property, which could give rise to any material
liability under any Superfund and Hazardous Waste Laws (as hereinafter
defined) or any other federal, state or local law, rule or regulation
relating to the protection of the environment or human safety; (2) have
arranged for the transport of or transported any Materials in a manner as to
violate, or result in potential liabilities under, any Superfund and
Hazardous Waste Laws; (3) have received any notice, order or demand from the
Environmental Protection Agency or any state or local agency or authority
under any Superfund and Hazardous Waste Laws; (4) have incurred any liability
under any Superfund and Hazardous Waste Laws in connection with the
mismanagement, improper disposal or release of Materials; (5) are aware of
any inspection or investigation of any of the premises or personal property
owned or controlled by any Obligor or abutting property by any federal, state
or local agency for possible violations of the Superfund and Hazardous Waste
Laws.
To the best of each Obligor's knowledge, no prior owner or tenant of
any premises or property presently controlled or owned by such Obligor
committed or omitted any act which caused the release of Materials on such
premises or property which could give rise to a lien thereon by any federal,
state or local government. No notice or statement of claim or lien affecting
any property or premises owned or controlled by each Obligor has been
recorded or filed in any public records by any federal, state or local
government for costs, penalties, fines or other charges as to such property.
Each Obligor agrees to indemnify and hold the Administrative Agent and
each Lender harmless from all liability, loss, cost, damage and expense,
including attorney fees and costs of litigation, arising from any and all of
its violations of the Superfund and Hazardous Waste Laws including those
arising from any lien on any premises or property owned or controlled by such
Obligor by any federal, state and local government arising from the presence
of Materials. Each Obligor further agrees to reimburse the Administrative
Agent and each Lender upon demand for any reasonable costs incurred by the
Administrative Agent and each Lender in connection with the foregoing. Each
Obligor agrees its obligations hereunder shall be continuous and shall
survive the repayment of all debts to Lenders and the Administrative Agent
including repayment of all Obligations.
The term "Materials" means any "oil, "hazardous material," "hazardous
wastes" or "hazardous substances" as defined under the Comprehensive
Environmental Response, Compensation, and Liability Act. 42
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U.S.C. Section 9601 ET SEQ., as amended, the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Section 6901 ET SEQ., as amended, any
applicable state or local statutes or ordinances, and regulations adopted
thereunder, and the foregoing are collectively the "Superfund and Hazardous
Waste Laws."
6.15 RATIFICATION OF LOAN DOCUMENTS. Within thirty (30) days after the date
hereof, the Borrower's Board of Directors, whether at a meeting of the Board
of Directors or by unanimous written consent, shall ratify and approve each
of the Loan Documents in its final form and shall promptly forward to the
Administrative Agent a copy of the unanimous written consent or minutes of
the meeting evidencing such ratification and approval.
7. NEGATIVE COVENANTS
7.1 FINANCIAL COVENANTS. The Obligors will not as of the last date of each
fiscal quarter beginning with the fiscal quarter ending February 28, 1999
fail to be in compliance with any of the financial covenants in this section
on a consolidated basis.
(a) DEFINITIONS. The following definitions shall apply to this
Section:
(i) "Current Maturities of Long-Term Debt" shall mean all
principal and lease payments to be paid by the Obligors during
any fiscal period of Obligors on account of (A) the Revolving
Loan, (B) the Term Loan; (C) other money borrowed from all
sources and (D) capitalized leases.
(ii) "Tangible Net Worth" shall mean Obligors' stockholders'
equity determined in accordance with generally accepted
accounting principles, consistently applied, SUBTRACTING
THEREFROM (A) intangibles (as determined in accordance with such
principles so applied); and (B) Accounts Receivable and
Indebtedness owing to an Obligor from any employee, stockholder
or parent, subsidiary or other affiliate of such Obligor,
(iii) "Indebtedness" shall mean, with respect to any person (A)
all indebtedness for borrowed money or for the deferred purchase
price of property or services, and all obligations under leases
which are or should be under generally accepted accounting
principles recorded as capital leases, in respect of which such
person is directly or contingently liable as borrower, guarantor,
endorser or otherwise, or in respect of which such person
otherwise assures a creditor against loss, (B) all indebtedness
for borrowed money or for the deferred purchase price of property
or services secured by (or for which the holder has an existing
right, contingent or otherwise, to be secured by) any lien upon
property (including without limitation accounts receivable and
contract rights) owned by such person, whether or not such person
has assumed or become liable for the payment thereof, and (C) all
other liabilities or obligations which would, in accordance with
generally accepted accounting principles, be classified as
liabilities of such person.
(iv) "Subordinated Indebtedness" shall mean Indebtedness which
is expressly subordinated to Senior Indebtedness (as hereinafter
defined) in writing pursuant to subordination agreements
acceptable to the Lenders.
(v) "Senior Indebtedness" shall mean any amount of any
Indebtedness owing by the Borrower to the Lenders.
(vi) "Current Assets" and "Current Liabilities" shall be
defined according to generally accepted accounting principles.
(vii) "Income" and "Net Income" shall be defined according to
generally accepted accounting principles.
(b) TANGIBLE CAPITAL BASE. The Obligors will not permit their
Tangible Net Worth plus their Subordinated Indebtedness
("Tangible Capital Base") as of the last date of each fiscal
quarter beginning with the fiscal quarter ending February 28,
1999 to be less than $7,450,000 plus seventy-five percent (75%)
of the Obligors' Net Income for each fiscal quarter beginning
with the fiscal quarter ending November 30, 1998 plus the amount
of amortization of Obligors' intangibles for each fiscal quarter
beginning with the fiscal quarter ending November 30, 1998 plus
the amount of any new equity raised by Obligors Such
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minimum requisite Tangible Capital Base amount shall not be
reduced by any net losses of the Obligors.
(c) SENIOR INDEBTEDNESS TO EBITDA. For all periods beginning with the
fiscal quarter ending February 28, 1999, the Obligors will not as
of the last date of each fiscal quarter permit the aggregate
amount of their Senior Indebtedness to be more than two (2) times
the sum of their EBITDA for the Obligors' trailing four (4)
fiscal quarters. "EBITDA" shall mean earnings before interest,
tax, depreciation and amortization expense as defined according
to generally accepted accounting principles, consistently
applied.
(d) CURRENT RATIO. The Obligors will not as of the last date of each
fiscal quarter beginning with the fiscal quarter ending February
28, 1999 permit the ratio of their Current Assets to Current
Liabilities, excluding any Current Maturities of Long-Term Debt,
to be less than 1.4:1.0.
(e) COVERAGE RATIO. The Obligors will not as of the last date of each
fiscal quarter beginning with the fiscal quarter ending February
28, 1999 permit the amount of their EBITDA for the trailing four
(4) fiscal quarters of the Obligors plus payments under all
leases minus any cash dividends and distributions minus capital
expenditures minus taxes paid by the Obligors to be less than 1.4
times the sum of all interest expense plus all principal payments
(to all creditors) plus payments under all leases, all for the
trailing four (4) fiscal quarters of the Obligors.
7.2 LIMITATIONS ON INDEBTEDNESS. Each Obligor will not issue any evidence
of indebtedness or create, assume, guarantee, become contingently liable for,
or suffer to exist indebtedness in addition to Indebtedness to the Lenders,
except (i) Indebtedness or liabilities of such Obligor for money borrowed,
incurred or arising in the ordinary course of business within the limits
provided for in this Agreement, (ii) Indebtedness relating to the Borrower's
12% Senior Subordinated Debentures due 2005 (including all guarantees
thereof), (iii) Indebtedness of any Obligor which is subordinated to the
Senior Indebtedness on terms and conditions acceptable to the Lenders, (iv)
Indebtedness secured by liens permitted pursuant to Section 7.10 hereof, or
(v) Indebtedness which is incurred after the date hereof, is non-recourse to
the Obligors, is incurred in connection with the acquisition of (A) assets of
another Person by any Obligor or (B) stock by any Obligor, and is secured
solely by the stock or assets so acquired.
7.3 SALE OF INTEREST. There shall not be any sale or transfer of ownership
of any interest in any subsidiary of the Borrower which is an Obligor
hereunder without the Lenders' prior written consent.
7.4 LOANS OR ADVANCES. Each Obligor will not make any loans or advances to
any individual, firm or corporation, including, without limitation, its
officers and employees; provided, however, that (i) an Obligor may make
advances to its employees, including its officers, with respect to expenses
incurred or to be incurred by such employees which expenses are reimbursable
by such Obligor; (ii) each Obligor may extend credit in the ordinary course
of business in accordance with customary trade practices; (iii) each Obligor
may own, purchase or acquire Permitted Investments, or otherwise make an
investment in a Person not otherwise permitted pursuant to this Section,
provided the amount of such investment for all Obligors collectively shall
not exceed $25,000 per individual investment or $50,000 in the aggregate; and
(iv) each Obligor may make or permit to remain outstanding loans or advances
to any other Obligor named herein.
7.5 DIVIDENDS AND DISTRIBUTIONS. Each Obligor may, without prior written
permission of the Administrative Agent or the Lenders, pay any dividends on
or make any distribution on account of any class of such Obligor's capital
stock in cash or in property (other than additional shares of such stock), or
redeem, purchase or otherwise acquire, directly or indirectly, any of such
stock, provided that no such payments or distribution shall cause any
Obligor, after effecting any such dividend or distribution, to fail to comply
with any other provisions of this Agreement, including, without limitation,
each of the financial covenants set forth in Section 7.1 of this Agreement.
7.6 INTENTIONALLY OMITTED.
7.7 INVESTMENTS. Each Obligor will not make investments in, or advances
to, any individual, partnership, corporation, limited liability company,
trust or other organization or person, nor purchase or otherwise invest in or
hold securities, nonoperating real estate or other nonoperating assets or
purchase all or substantially all the assets of any entity; except the
Obligors or any Obligor may
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(a) own, purchase or acquire Permitted Investments;
(b) endorse negotiable instruments for collection in the ordinary
course of business;
(c) make an investment in a Person not otherwise permitted pursuant
to this Section 7.7, provided the amount of such investment
(including the amount of any guarantee, endorsement or other
liability with respect thereto) for all Obligors collectively
shall not exceed $25,000 per individual investment or $50,000 in
the aggregate;
(d) make an investment in a Person that becomes a wholly-owned
subsidiary as a result of such investment or in assets of a
Person that become assets of an Obligor provided that: (i) such
investments relate to the acquisition of companies engaged in the
business of whole blood or plasma collection, processing and
marketing, selling of blood and blood byproducts and any related
business or activities; (ii) the Obligors shall deliver to the
Administrative Agent pro forma financial statements reflecting
the investment and related calculations demonstrating compliance
with all covenants contained herein relating to financial and
accounting matters, together with a description in reasonable
detail of the nature and reasons for the proposed transaction,
provided, however, that such pro forma financial statements shall
contain an appropriate footnote describing the nature and source
of any known contingent liabilities in connection with such
investment; (iii) immediately after giving effect to such
transaction, no Event of Default shall exist and be continuing;
(iv) such investments do not exceed $5,000,000 in cash purchase
price for the Obligors in any one fiscal year; and (v) with
respect to any investment that contemplates the assumption by any
Obligor of any contingent liabilities either by agreement or by
merger with or into the entity that is subject to such contingent
liabilities, the Administrative Agent shall approve such
investment prior to the consummation of such investment (which
approval shall not be unreasonably withheld, conditioned or
delayed); and
(e) make or permit to remain outstanding loans or advances to any
wholly owned subsidiary (hereafter created).
By way of example and not limitation, the acquisition by any Obligor
of the capital stock of any entity that has contingent liabilities shall not
be subject to the prior approval of the Administrative Agent pursuant to
clause (v) of Section 7.7(d) above so long as the applicable acquisition
agreement does not contemplate that such acquired entity be merged with or
into any Obligor or that any Obligor otherwise become directly liable for the
contingent liabilities of such entity.
7.8 MERGER. Each Obligor will not merge or consolidate or be merged or
consolidated with or into any other corporation except that any Obligor may
enter into a merger in connection with an investment permitted by Section
7.7, and except that any Obligor may be merged, consolidated, dissolved or
liquidated into any other Obligor.
7.9 SALE OF ASSETS. Except for the planned dispositions of certain real
property located in South Bend, Indiana, Kalamazoo, Michigan, Salt Lake City,
Utah and Fort Worth, Texas, each Obligor will not sell, lease or otherwise
dispose of any of its assets except (i) in the ordinary and usual course of
business and except for the purpose of replacing machinery, equipment or
other personal property which, as a consequence of wear, duplication or
obsolescence, is no longer used or necessary in such Obligor's business,
provided that fair consideration is received therefor; (ii) if the net
proceeds of such sale are applied to the repayment of the Senior
Indebtedness; (iii) if the net proceeds of such sale are reinvested in the
business of the Obligors or are otherwise invested pursuant to Section 7.7
hereof; or (iv) if in the aggregate all of the transfers made by all Obligors
since the date hereof and not otherwise permitted by clause (i), (ii) or
(iii) above amounts to less than $200,000. Notwithstanding this Section 7.9,
no assets of any Obligor shall be sold, disposed of or otherwise conveyed (i)
at less than fair market value or (ii) if any Event of Default (as
hereinafter defined) shall have occurred and then be continuing or shall
result from such sale or disposition.
7.10 RESTRICTION ON LIENS. Each Obligor will not grant any security
interest in, or mortgage of, any of its properties or assets including the
Collateral except (i) liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with generally accepted
accounting principles ("GAAP"); (ii) statutory liens of landlords and liens
of carriers, warehousemen, mechanics, materialmen and other similar Persons
and other liens imposed by law incurred in the ordinary course of business
for sums not yet delinquent or being contested in good faith, if such
reserves or other
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appropriate provision, if any, as shall be required by GAAP shall have been
made therefor; (iii) liens made to secure Senior Indebtedness; (iv) liens
incurred through purchase money security interests or in connection with
equipment leases in amounts which, at the time incurred, do not exceed the
fair market value of the asset securing such lien and such lien extends only
to the asset leased or financed; provided that any indebtedness or leases
incurred in any year secured by such liens shall not exceed $1,000,000 in the
aggregate for all Obligors; (v) liens securing Indebtedness permitted under
Section 7.2 hereof; and (vi) liens or deposits made to secure payment of
workers' compensation, or in connection with the participation in any fund in
connection with workers' compensation, unemployment insurance, pensions or
other social security programs.
7.11 OTHER BUSINESS. Each Obligor will not engage in any business other
than the business in which it is currently engaged or a business reasonably
allied thereto.
8. DEFAULT
8.1 DEFAULT. "Event of Default" shall mean the occurrence of one or more of
any of the following events:
(a) the Borrower or any other Obligor defaults in the payment of any
principal of or interest on any Senior Indebtedness when the same
shall become due, either by the terms thereof or otherwise as
herein provided, and in the case of interest payments, such
default shall continue for a period of three (3) business days
after such date;
(b) the Borrower or any other Obligor defaults in the payment when
due, either by the terms thereof or otherwise as herein provided,
of any other amounts on any Senior Indebtedness and such default
shall continue unremedied for five (5) or more business days;
(c) the Borrower or any other Obligor (i) defaults in any payment of
principal of or interest on any other Indebtedness in an amount
exceeding $100,000 and such default shall continue beyond any
applicable grace period or (ii) fails to perform or observe any
other agreement, term or condition contained in any agreement
under which any such obligation is created (or if any other event
thereunder or under any such agreement shall occur and be
continuing), and in the case of (ii) above, the effect of such
default, failure or other event is to cause, or, with respect to
any Indebtedness, to permit the holder or holders of such
obligation (or a trustee on behalf of such holder or holders) to
cause an obligation of more than $100,000 to become due prior to
any stated maturity;
(d) the Borrower or any other Obligor defaults in the performance or
observance of any of the agreements (other than payment defaults
and defaults which are unable to be cured) contained in Section 6
(Affirmative Covenants) or Section 7 (Negative Covenants) hereof
or in the performance or observance of any other material
agreement, term or condition contained herein or in the other
Loan Documents and any such default shall not have been remedied
within thirty (30) days after the first date such default in the
exercise of commercially reasonable diligence should have become
known to any officer of any Obligor, provided, however, that such
thirty (30) day cure period shall not apply to a default under
Section 6.15 of this Agreement;
(e) If any statement, representation or warranty heretofore, now or
hereafter made in connection with this Agreement or in any
supporting financial statement of any Obligor shall be determined
by the Administrative Agent or a Lender to have been false in any
material respect when made, and if susceptible to cure. such
inaccuracy shall not have been remedied within thirty (30) days
after the first date such default in the exercise of commercially
reasonable diligence should have become known to any officer of
any Obligor;
(f) The liquidation, termination or dissolution of, or the merger or
consolidation of, any Obligor, with or into another entity
(except as otherwise permitted hereunder without the consent of
the Lenders), or any Obligor ceasing to carry on actively its
present business or the appointment of a receiver
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for any Obligor.
(g) The institution by or against any Obligor or guarantor of the
Obligations of any proceedings under the Bankruptcy Code 11 USC
Section 101 ET SEQ. or any other law in which any Obligor or any
guarantor of the Obligations is alleged to be insolvent or
unable to pay their respective debts as they mature, or the
making by any Obligor or any guarantor of the Obligations of an
assignment for the benefit of creditors or the granting of a
trust mortgage for the benefit of creditors.
(h) The service upon the Administrative Agent or a Lender hereof of a
writ in which the Administrative Agent or a Lender is named as
trustee of any Obligor or of any guarantor of the Obligations.
(i) A judgment or judgments for the payment of money in excess of
$100,000 over and above the amount of such judgment actually paid
by insurance shall be rendered against any Obligor and any such
judgment shall remain unsatisfied and in effect for any period of
sixty (60) consecutive days without a stay of execution.
(j) Any levy, seizure, attachment, execution or similar process shall
be issued or levied on any of the property of any Obligor having
a material adverse affect on any Obligor.
(k) The termination of any guaranty of the Obligations.
(l) The occurrence of such a materially adverse change in the
condition or affairs (financial or otherwise) of any Obligor
such that the prospects for timely or full payment or
performance of any of the Obligations have been or are
reasonably likely to be substantially impaired.
8.2 DEFAULT REMEDIES. If an Event of Default shall occur, at the election
of the Lenders, all Obligations shall become immediately due and payable upon
written notice or demand (except that no written notice or demand shall be
required in the case of an Event of Default under Sections 8.1(e) or 8.1(g)
above).
The Administrative Agent is hereby authorized, at its election and at
the direction of the Lenders, after an Event of Default, without any further
demand or notice except to such extent as notice may be required by
applicable law, to take possession and/or sell or otherwise dispose of all or
any of the Collateral at public or private sale; and the Administrative Agent
and Lenders may also exercise any and all other rights and remedies of a
secured party under the Code or which are otherwise accorded to them by
applicable law, all as the Lenders may determine. If notice of a sale or
other action by the Administrative Agent is required by applicable law,
unless the Collateral is perishable or threatens to decline speedily in value
or is of a type customarily sold on a recognized market, each Obligor agrees
that five (5) days' written notice to such Obligor, or the shortest period of
written notice permitted by such law, whichever is larger, shall be
sufficient notice; and that to the extent permitted by law, the
Administrative Agent and the Lenders, their officers, attorneys and agents
may bid and become purchasers at any such sale, if public, and may purchase
at any private sale any of the Collateral that is of a type customarily sold
on a recognized market or which is the subject of widely distributed standard
price quotations. Any sale (public or private) shall be free from any right
of redemption, which each Obligor hereby waives and releases. No purchaser at
any sale (public or private) shall be responsible for the application of the
purchase money. Any balance of the net proceeds of sale remaining after
paying all Obligations of the Obligors to the Lenders and the Administrative
Agent shall be returned to the Obligors or to such other party as may be
legally entitled thereto; and if there is a deficiency, the Obligors shall be
responsible for the same, with interest, to the extent permitted by
applicable law. Upon demand by the Administrative Agent, each Obligor shall
assemble the Collateral and make it available to the Administrative Agent at
a place designated by the Administrative Agent which is reasonably convenient
to the Administrative Agent and such Obligor. Each Obligor hereby
acknowledges that the Lenders have extended credit and other financial
accommodations to the Obligors upon reliance of such Obligor's granting the
Administrative Agent and the Lenders the rights and remedies contained in
this Agreement including, without limitation, the right to take immediate
possession of the Collateral upon the occurrence of an Event of Default and
each Obligor hereby acknowledges that the Administrative Agent and the
Lenders are entitled to equitable and injunctive relief to enforce any of
their rights and remedies hereunder or under the Code and each Obligor hereby
waives any defense to such equitable or injunctive relief based upon any
allegation of the absence of irreparable
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harm to the Administrative Agent or Lenders.
8.3 POWER OF ATTORNEY. Each Obligor hereby irrevocably constitutes and
appoints the Administrative Agent as such Obligor's true and lawful attorney,
with full power of substitution, at the sole cost and expense of such Obligor
but for the sole benefit of the Administrative Agent and the Lenders, upon
the occurrence of an Event of Default to convert the Collateral into cash,
including, without limitation, completing the manufacture or processing of
work in process, and the sale (either public or private) of all or any
portion or portions of the Inventory and other Collateral; to enforce
collection of the Collateral, either in its own name or in the name of such
Obligor, including, without limitation, executing releases, compromising or
settling with any Debtors and prosecuting, defending, compromising or
releasing any action relating to the Collateral; to receive, open and dispose
of all mail addressed to any Obligor and to take therefrom any remittances or
proceeds of Collateral in which the Administrative Agent and the Lenders have
a security interest; to notify U.S. Postal Service authorities to change the
address for delivery of mail addressed to any Obligor to such address as the
Administrative Agent shall designate; to open and administer a lock-box in
which Lenders may direct any Obligor to deposit or have deposited any
payments owed to such Obligor, to endorse the name of any Obligor in favor of
the Administrative Agent upon any and all checks, drafts, money orders,
notes, acceptances or other instruments of the same or different nature; to
sign and endorse the name of any Obligor on and to receive as secured party
any of the Collateral, any invoices, schedules of Collateral, freight or
express receipts, or bills of lading, storage receipts, warehouse receipts,
or other documents of title of the same or different nature relating to the
Collateral; to sign the name of any Obligor on any notice to the Debtors or
on verification of the Collateral; and to sign and file or record on behalf
of any Obligor any financing or other statement in order to perfect or
protect the Administrative Agent's and Lenders' security interest. The
Administrative Agent shall not be obliged to do any of the acts or exercise
any of the powers hereinabove authorized, but if the Administrative Agent
elects to do any such act or exercise any such power, it shall not be
accountable for more than it actually receives as a result of such exercise
of power, and it shall not be responsible to any Obligor except for willful
misconduct in bad faith. All powers conferred upon the Administrative Agent
by this Agreement, being coupled with an interest, shall be irrevocable so
long as any Obligation of any Obligor to the Lenders or Administrative Agent
shall remain unpaid.
8.4 NONEXCLUSIVE REMEDIES. All of the Administrative Agent's and Lenders'
rights and remedies not only under the provisions of this Agreement but also
under any other agreement or transaction shall be cumulative and not
alternative or exclusive, and may be exercised by the Administrative Agent
and Lenders, as applicable, at such time or times and in such order of
preference as the Administrative Agent or the Lenders in their sole
discretion, as applicable, may determine.
8.5 REASSIGNMENT TO OBLIGORS. Whenever the Lenders deem it desirable that
any legal action be instituted with respect to any Collateral or that any
other action be taken in any attempt to effectuate collection of any
Collateral, the Administrative Agent may reassign the item in question to the
respective Obligor (and if the Administrative Agent shall execute any such
reassignment, it shall automatically be deemed to be without recourse to the
Administrative Agent in any event) and require such Obligor to proceed with
such legal or other action at such Obligor's sole liability, cost and
expense, in which event all amounts collected by such Obligor on such item
shall nevertheless be subject to the Administrative Agent's and Lenders'
security interest.
9. THE ADMINISTRATIVE AGENT
9.1 APPOINTMENT POWERS AND IMMUNITIES. Each Lender hereby irrevocably
appoints and authorizes the Administrative Agent to act as its agent
hereunder and under each of the Loan Documents with such powers as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and the Loan Documents, together with such other powers as are
reasonably incidental thereto. The Administrative Agent (which term as used
in this sentence and in Section 9.7 and the first sentence of Section 9.8
shall include reference to its Affiliates (as hereinafter defined) and the
respective officers, directors, employees and agents of the Administrative
Agent and its Affiliates); (a) shall have no duties or responsibilities
except those expressly set forth in this Agreement to be a trustee for any
Lender (b) shall not be responsible to the Lenders for any recitals.
statements, representations or warranties of any Obligor contained in this
Agreement, or in any certificate or other document referred to or provided
for in, or received by any of them under, this Agreement, or for the value,
validity, effectiveness, genuineness, enforceability, perfection or
sufficiency of this Agreement any promissory note or any other
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document referred to or provided for herein or for any failure by any Obligor
or any other Person to perform any of its obligations hereunder or
thereunder; (c) shall not be empowered or required to initiate or conduct any
litigation or collection proceedings hereunder except to the extent requested
by or consented to by the Lenders; (d) shall not be empowered or required to
alter or amend any term of this Agreement or the Loan Documents except to the
extent requested by or consented to in writing by the Lenders; (e) except to
the extent requested by or consented to in writing by the Lenders, shall not
be empowered or required to foreclose on the Collateral or enter into any
forbearance arrangement with any Obligor or enter into any arrangement with
any Obligor for the restructuring of the Revolving Loan or Term Loan; and (f)
shall not be responsible for any action taken or omitted to be taken by it
hereunder or under any other document or instrument referred to or provided
for herein or in connection herewith, except for its own gross negligence or
willful misconduct, "Affiliates" shall mean with respect to any Person (i)
each Person that, directly or indirectly, owns or controls, whether
beneficially, or as a trustee, guardian or other fiduciary 5% or more of the
securities or interests having ordinary voting power in the election of
directors of such Person, (ii) each Person that controls, is controlled by or
is under common control with such Person or any Affiliate of such Person and
(iii) each of such Person's officers, directors, joint venturers and partners
(for the purpose of this definition, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise). The Administrative Agent may
employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by
it with reasonable care. Subject to the foregoing, the Administrative Agent
shall, on behalf of the Lenders, exercise any and all rights, powers and
remedies of the Lenders under this Agreement and any other Loan Documents,
including the giving of any consent or waiver or the entering into of any
amendment, subject to the provisions of Section 10.9 below.
9.2 REVOLVING LOAN ADVANCES. Upon receipt by the Administrative Agent of a
request from the Borrower for an advance under the Revolving Loan specifying
the amount and date of such advance, the Administrative Agent shall promptly
notify the Lenders by telephone or facsimile transmission of such request.
Each Lender, before 1:00 pm (Boston, Massachusetts time) on the specified
date of such advance, shall make available to the Administrative Agent in
immediately available funds by wire transfer at its office at 40 Water
Street, Boston, Massachusetts 02109, such Lender's pro-rata share of such
advance. If a Lender shall fail to provide the Administrative Agent with its
pro-rata share of a requested advance as provided for in this Section, the
Administrative Agent, in its sole discretion and upon notice to such Lender,
may refuse to make available to the Borrower such Lender's pro-rata share of
such advance.
9.3 DISTRIBUTION OF PAYMENTS BETWEEN LENDERS AND ADMINISTRATIVE AGENT.
(a) All payments and prepayments of principal of and interest on the
Loans received by the Administrative Agent shall be paid to each
of the Lenders pro rata in accordance with their respective
pro-rata shares in such Loans in immediately available funds by
wire transfer no later than 1:00 p.m. (Boston, Massachusetts
time) on the Business Day immediately following the date on which
such payments or prepayments are received by the Administrative
Agent, and any other payments received by the Administrative
Agent hereunder shall be paid in the same manner to the Lenders
or the Administrative Agent or both pro rata as their respective
interests appear. No Obligor shall have any liability whatsoever
to any Lender or the Administrative Agent for any errors made by
the Administrative Agent in allocating between the Lenders any
payment made by such Obligor to the Administrative Agent or for
any conflicts regarding allocation or distribution of such
payment between the Lenders.
(b) Each of the Lenders and the Administrative Agent hereby agrees
that if it should receive any amount (whether by voluntary
payment, by the exercise of the right of set-off or banker's
lien, by counterclaim or cross action, by the enforcement of any
right hereunder or otherwise) in respect of principal of, or
interest on, the Loans, or any fees which are to be shared
between the Lenders, which, as compared to the amounts
theretofore received by the other Lender with respect to such
principal, interest or fees, is in excess of such receiving
Lender's pro-rata share of such principal, interest or fees as
provided in this Agreement, such Lender shall share such excess,
less the costs and expenses (including, reasonable attorneys'
fees and disbursements) incurred by such Lender in connection
with such realization, exercise, claim or action pro rata with
the other
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Lender in proportion to their respective interests therein.
(c) In the event that a Lender has not made available to the
Administrative Agent its pro-rata share of an advance or
advances requested by the Borrower in accordance with the terms
of this Agreement and the other Lender has made available its
pro-rata share of such advance or advances, and the
Administrative Agent has made available to the Borrower the
other Lenders pro-rata share of such advance or advances, then
the Administrative Agent shall pay all principal and interest
payments and prepayments received by the Administrative Agent
first to the other Lender which made available its pro-rata
share of such advance or advances until the amount of such other
Lender's pro-rata share made available to the Borrower has been
repaid to such other Lender in full and the Lenders' respective
pro-rata shares in outstanding advances made to the Borrower are
equal to those pro-rata shares set forth in attached EXHIBIT A.
No Obligor shall have any liability whatsoever to any Lender or
the Administrative Agent who, pursuant to this Section 9.3(c),
fails to receive any portion or all of any principal or interest
payments or prepayments made by the Borrower to the
Administrative Agent pursuant to this Agreement.
9.4 RELIANCE BY AGENT. The Administrative Agent shall be entitled to rely
upon any certifications, notices or communications (including any
communications by telephone, facsimile, telex, telegram or cable) believed by
it to be genuine and correct and to have been signed or sent by or on behalf
of the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the
Administrative Agent. As to any matters not expressly provided for by this
Agreement, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with the
instructions of the Lenders, and any action taken or failure to act pursuant
thereto shall be binding on the Lenders.
9.5 DEFAULTS. The Administrative Agent shall not be deemed to have
knowledge of the occurrence of an Event of Default (other than the nonpayment
of principal of or interest on the Revolving Note or Term Note (hereinafter
collectively referred to as the "Notes") unless the Administrative Agent has
received written notice from a Lender or the Borrower specifying such Event
of Default. In the event that the Administrative Agent receives such a notice
of the occurrence of an Event of Default, the Administrative Agent shall give
notice thereof to the Lenders (and shall give each Lender prompt notice of
each such nonpayment). The Administrative Agent shall (subject to the
provisions of Sections 9.9 and 10.15 below) take such action with respect to
such Event of Default as shall be directed by the Lenders, provided, that,
unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Event
of Default as it shall deem advisable and in the best interests of the
Lenders.
9.6 RIGHTS AS A LENDER. With respect to its pro-rata share of the Loans
made by it, BBH, in its capacity as a Lender hereunder, shall have the same
rights and powers hereunder as the other Lender and may exercise the same as
though it were not acting as the Administrative Agent, and the term "Lender"
or "Lenders" shall, unless the context otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent and
its Affiliates may (without having to account therefor to any Lender) accept
deposits from and generally engage in any kind of banking, trust or other
business with any Obligor or any of its Affiliates, as if the Administrative
Agent were not acting as the agent hereunder, and the Administrative Agent
may accept fees and other consideration from any of such Persons for services
as the Administrative Agent or otherwise without having to account for the
same to the Lenders.
9.7 INDEMNIFICATION. The Lenders agree to indemnify the Administrative
Agent ratably in accordance with the aggregate principal amount of the Notes
held by the Lenders (or, if no such principal is at the time outstanding,
ratably in accordance with their respective pro-rata shares set forth in
attached EXHIBIT A), for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Administrative Agent in any way relating
to or arising out of this Agreement or the transactions contemplated hereby
or referred to herein or therein (including the costs and expenses which any
Obligor is obligated to pay but excluding, unless an Event of Default has
occurred and is continuing, normal administrative costs and expenses incident
to the performance of its agency duties hereunder) or the enforcement of any
of the terms of this Agreement or of any such other
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documents, provided that no Lender shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of
the Administrative Agent.
9.8 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDER. Each Lender
agrees that it has, independently and without reliance on the Administrative
Agent or the other Lender, and based on such documents and information as it
has deemed appropriate, made its own credit analysis of the Obligors and its
own decision to enter into this Agreement and that it will, independently and
without reliance upon the Administrative Agent or the other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking
action under this Agreement. The Administrative Agent shall not be required
to keep itself informed as to the performance or observance by the Obligors
of this Agreement or any other document referred to or provided for herein or
to inspect the properties or books of the Obligors. Except for any notices,
reports and other documents and information expressly required to be
furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Obligors which may come into the possession of
the Administrative Agent or any of its Affiliates. Notwithstanding the
foregoing, the Administrative Agent will use its best efforts to provide to
the Lenders any and all information reasonably requested by them and
reasonably available to the Administrative Agent promptly upon such request.
9.9 FAILURE TO ACT. Except for action expressly required of the
Administrative Agent hereunder, the Administrative Agent shall in all cases
be fully justified in failing or refusing to act hereunder unless it shall be
indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.
9.10 RESIGNATION OF ADMINISTRATIVE AGENT. Subject to the appointment and
acceptance of a successor Administrative Agent as provided below, the
Administrative Agent may resign at any time by giving notice thereof to the
Lenders and the Borrower. Upon any such resignation, the Lenders shall
appoint a successor Administrative Agent which shall be reasonably
satisfactory to the Borrower. If no successor Administrative Agent shall have
been so appointed by the Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Administrative Agent's giving of
notice of resignation, then the retiring Administrative Agent may, on behalf
of the Lenders, appoint a successor Administrative Agent which shall be a
Lender which has a combined capital and surplus of at least $500,000,000 and
which shall be reasonably satisfactory to the Borrower. Upon the acceptance
of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. After
the retiring Administrative Agent's resignation hereunder as Administrative
Agent, the provisions of this Section 9 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Administrative Agent.
9.11 COOPERATION OF LENDERS. Each Lender shall (a) endeavor to and shall
not be liable for any failure to promptly notify the other Lender and the
Administrative Agent of any Events of Default known to such Lender under this
Agreement and not reasonably believed to have been previously disclosed to
the other Lender; and (b) provide the other Lender and the Administrative
Agent with such information and documentation as such other Lender or the
Administrative Agent shall reasonably request in the performance of their
respective duties hereunder, including all information relative to the
outstanding balance of principal, interest and other sums owed to such Lender.
9.12 AMENDMENT OF SECTION 9. Each Obligor hereby agrees that the provisions
of this Section 9 (other than Sections 9.10 and 9.13) generally constitute an
agreement among the Administrative Agent and the Lenders and that any and all
of the provisions of this Section 9 (other than Sections 9.10 and 9.13) may
be amended at any time by the Lenders and Administrative Agent without the
consent or approval of, or notice to, any Obligor (other than the requirement
of notice to the Borrower of the resignation of the Administrative Agent and
other than any provision in addition to Sections 9.10 and 9.13 which affects
the Obligors). Any required consent or approval of any Obligor with respect
to an amendment of Section 9.10 hereof shall not be unreasonably withheld or
delayed.
9.13 RELIANCE. As to any consent that is granted or any other action that
is taken by the Administrative Agent hereunder, or under the Loan Documents
the Obligors shall be entitled to rely any of the foregoing granted.
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delivered or taken by the Administrative Agent, and the Lenders shall be
bound thereby, without the necessity of any Obligor inquiring or confirming
the Administrative Agent's authority.
9.14 MINIMUM PRO-RATA SHARE OF BBH. So long as BBH serves as Administrative
Agent hereunder, BBH shall at all times maintain a pro-rata share in the
Loans of at least 25%.
10. MISCELLANEOUS
10.1 WAIVERS. Each Obligor waives notice of nonpayment, demand,
presentment, protest or notice of protest of the Collateral, and all other
notices, consents to any renewals or extensions of time of payment thereof,
and generally waives any and all suretyship defenses and defenses in the
nature thereof.
10.2 SEVERABILITY. If any provision of this Agreement or portion of such
provision or the application thereof to any person or circumstance shall to
any extent be held invalid or unenforceable, the remainder of this Agreement
(or the remainder of such provision) and the application thereof to other
persons or circumstances shall not be affected thereby.
10.3 SET-OFF. Any deposits, balances or other sums credited by or due from
a Lender or any of its Affiliates to any Obligor and any security or other
property of any Obligor in the possession of such Lender, whether for
safekeeping or otherwise, may, at any time whether or not an Event of Default
has occurred or demand has been made, without notice to any Obligor, or
compliance with any other condition precedent now or hereafter imposed by
statute, rule of law, or otherwise (all of which are hereby expressly waived)
be set off, appropriated and applied by such Lender against any and all of
the Obligations ratably between the Lenders in proportion to the respective
pro-rata shares of the Lenders with respect to the Obligations, in such
manner as such Lender in its sole discretion may determine. The rights of
each Lender under this Section 10.3 are in addition to other rights
(including without limitation, other rights of set-off) which each Lender may
have.
10.4 INDEMNIFICATION. Each Obligor shall indemnify, defend and hold the
Administrative Agent and Lenders harmless against, of and from any claim (as
well as from attorneys' reasonable fees and expenses in connection therewith)
brought or threatened against the Administrative Agent or a Lender by such
Obligor, any guarantor or endorser of the Obligations, or any other person on
account of the Administrative Agent's or a Lender's relationship with any
Obligor, or any guarantor or endorser of the Obligations (each of which may
be defended, compromised, settled or pursued by the Administrative Agent with
counsel of the Administrative Agent's election, but at the expense of the
Obligors), except (a) in the case of the indemnification of the
Administrative Agent against a claim brought or threatened against the
Administrative Agent, for any claim arising out of the gross negligence or
willful misconduct of the Administrative Agent, as adjudged by a court of
competent jurisdiction, and (b) in the case of the indemnification of a
Lender against a claim brought or threatened against such Lender, for any
claim arising out of the gross negligence or willful misconduct of such
Lender, as adjudged by a court of competent jurisdiction, and (c) in the case
of the indemnification of the Administrative Agent or a Lender against a
claim brought against the Administrative Agent by a Lender or against a
Lender by the other Lender or by the Administrative Agent. The within
indemnification shall survive payment of the Obligations, and/or any
termination, release or discharge executed by the Administrative Agent or a
Lender in favor of any Obligor. For purposes of clarification, no Obligor
shall have any obligation to indemnify the Administrative Agent or any Lender
against any claim brought or threatened against the Administrative Agent or
any such Lender that any Obligor believes arises out of the gross negligence
or willful misconduct of the Administrative Agent or any such Lender if a
court of competent jurisdiction has determined that such claim in fact arose
out of the gross negligence or willful misconduct of the Administrative Agent
or such Lender, as the case may be. The Lenders shall be severally liable to
refund any amounts actually and voluntarily paid by the Obligors to the
Administrative Agent with respect to any such claim, promptly after such
judicial determination. Notwithstanding any provision in this Agreement to
the contrary, the Lenders and Administrative Agent agree that neither the
Lenders nor the Administrative Agent shall (1) declare an Event of Default
or accelerate the Obligations or (2) set aside or reserve any Collateral or
otherwise exercise any remedies with respect to any Collateral, in each case
based solely upon an Obligor's failure to pay the amount of any indemnifiable
claim (and/or attorneys' fees and expenses in connection therewith) prior to
such judicial determination, PROVIDED, HOWEVER, that in the case of an Event
of Default (other than the failure to pay the amount of any indemnifiable
claim and/or attorneys' fees and expenses in connection therewith prior to
such judicial determination), the Lenders and the Administrative Agent may
accelerate the Obligations and set aside or
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reserve any Collateral or otherwise exercise any remedies with respect to any
Collateral. Notwithstanding any provision in this Agreement to the contrary,
in no circumstance shall the Administrative Agent or Lenders seek
consequential, punitive or any other additional damages based upon the
failure or the alleged failure of any Obligor to pay the amount of any
indemnifiable claim and/or attorneys' fees and expenses in connection
therewith prior to such judicial determination.
10.5 COSTS AND EXPENSES. Each Obligor shall pay to the Administrative Agent
any and all costs and expenses (including, without limitation, reasonable
attorneys' fees, court costs, litigation and other expenses) incurred or paid
by the Administrative Agent or a Lender (a) in establishing, maintaining,
protecting or enforcing any of the Administrative Agent's or a Lender's
rights or the Obligations, including, without limitation, any and all such
costs and expenses incurred or paid by the Administrative Agent or a Lender
in defending the Administrative Agent's and Lenders' security interest in,
title or right to the Collateral or in collecting or attempting to collect or
enforcing or attempting to enforce payment of the Collateral, and (b) in
connection with the preparation, amendment, review, negotiation, execution
and delivery of this Agreement and the Loan Documents.
10.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
10.7 BINDING EFFECT OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the respective heirs, executors, administrators,
legal representatives, successors and assigns of the parties hereto, and
shall remain in full force and effect (and the Administrative Agent and
Lenders shall be entitled to rely thereon) until terminated as to future
transactions by written notice from either party to the other party of the
termination hereof; provided that any such termination shall not release or
affect any Collateral in which the Administrative Agent and Lenders already
have a security interest or any Obligations incurred or rights accrued
hereunder prior to the effective date of such notice (as hereinafter defined)
of such termination. Notwithstanding any such termination, the Administrative
Agent and Lenders shall have a security interest in all Collateral to secure
the payment and performance of Obligations arising after such termination as
a result of commitments or undertakings made or entered into by the Lenders
prior to such termination. The Lenders may, with the prior written approval
of Borrower (which shall not be unreasonably withheld or delayed), transfer
and assign this Agreement and deliver the Collateral to the assignee, who
shall thereupon have all of the rights of the Lenders; and the Administrative
Agent and Lenders shall then be relieved and discharged of any responsibility
or liability with respect to this Agreement and the Collateral. The Lenders
may, with the prior written approval of Borrower (which shall not be
unreasonably withheld or delayed), from time to time grant participation
interests in the Loans in minimum amounts of $1,000,000 which shall not
relieve the Lenders of any obligations or liability hereunder with respect to
the making of Revolving Loans, and notwithstanding the grant of any such
participation interests, the Borrower and the other Obligors, except as
otherwise provided herein, may look solely to the Administrative Agent as the
agent for all participants for purposes of obtaining the consent, waiver or
agreement of Lenders to any action or amendment of the Loan Documents and for
purposes of the delivery of notice thereunder.
10.8 FURTHER ASSURANCES. Each Obligor will from time to time execute and
deliver to the Administrative Agent, and take or cause to be taken, all such
other further action as the Administrative Agent may request in order to
effect and confirm or vest more securely in the Lenders or Administrative
Agent all rights contemplated or to vest more fully in or assure to the
Lenders or Administrative Agent the security interest in the Collateral
granted to the Administrative Agent and the Lenders by this Agreement or to
comply with applicable statutes or law and to facilitate the collection of
the Collateral.
10.9 AMENDMENTS AND WAIVERS. This Agreement may be amended and any Obligor
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if such Obligor shall obtain the Lenders'
prior written consent to each such amendment, action or omission to act. No
delay or omission on the part of a Lender or the Administrative Agent in
exercising any right hereunder shall operate as a waiver of such right or any
other right, and waiver on any one or more occasions shall not be construed
as a bar to or waiver of any right or remedy of a Lender or the
Administrative Agent on any future occasion.
10.10 TERMS OF AGREEMENT. This Agreement shall continue in force and effect
so long as any Obligations or obligation of any Obligor to the Lenders or
Administrative Agent shall be outstanding and is supplementary to each and
every other agreement between any Obligor and Lenders and/or Administrative
Agent and shall not be so construed as to limit or otherwise derogate from
any of the rights or remedies of Lenders or the Administrative
23
<PAGE>
Agent any of the liabilities, obligations or undertakings of any Obligor
under any such agreement, nor shall any contemporaneous or subsequent
agreement between any Obligor and a Lender and/or the Administrative Agent be
construed to limit or otherwise derogate from any of the rights or remedies
of Lenders or the Administrative Agent or any of the liabilities, obligations
or undertakings of any Obligor hereunder, unless such other agreement
specifically refers to this Agreement and expressly so provides.
10.11 NOTICES. Any notices under or pursuant to this Agreement shall be
deemed duly received and effective if delivered in hand to any officer of
agent of any Obligor or Lenders or the Administrative Agent, as applicable,
or if mailed by registered or certified mail, return receipt requested,
addressed to any Obligor or Lenders or the Administrative Agent, as
applicable, at the addresses set forth in this Agreement or as any party may
from time to time designate by written notice to the other parties, on the
third business day after such mailing.
10.12 MASSACHUSETTS LAW. This Agreement is intended to take effect as a
sealed instrument and has been executed or completed and is to be performed
in Massachusetts, and it and all transactions thereunder or pursuant thereto
shall be governed as to interpretation, validity, effect, rights, duties and
remedies of the parties thereunder and in all other respects by the domestic
laws of Massachusetts.
10.13 REPRODUCTIONS. This Agreement and all documents which have been or may
be hereinafter furnished by any Obligor to the Lenders and the Administrative
Agent may be reproduced by the Lenders and the Administrative Agent by any
photographic, photostatic, microfilm, xerographic or similar process, and any
such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the regular course
of business).
10.14 VENU. Each Obligor irrevocably submits to the nonexclusive
jurisdiction of any federal or state court sitting in Massachusetts, over any
suit, action or proceeding arising out of or relating to this Agreement. Each
Obligor irrevocably waives, to the fullest extent it may effectively do so
under applicable law, any objection it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any
such court and any claim that the same has been brought in an inconvenient
forum. Each Obligor irrevocably appoints the Secretary of State of the
Commonwealth of Massachusetts as its authorized agent to accept and
acknowledge on its behalf any and all process which may be served in any such
suit, action or proceeding, consents to such process being served (i) by
mailing a copy thereof by registered or certified mail, postage prepaid,
return receipt requested to such Obligor and (ii) by serving the same upon
such agent, and agrees that such service shall in every respect be deemed
effective service upon such Obligor.
10.15 JURY WAIVER. EACH OF THE OBLIGORS, LENDERS AND THE ADMINISTRATIVE
AGENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND AFTER AN
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, WAIVES ANY AND ALL RIGHTS TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS AGREEMENT,
THE OBLIGATIONS, ALL MATTERS CONTEMPLATED HEREBY AND DOCUMENTS EXECUTED IN
CONNECTION HEREWITH. EACH OBLIGOR CERTIFIES THAT NEITHER THE LENDERS NOR THE
ADMINISTRATIVE AGENT NOR ANY OF THEIR REPRESENTATIVES, AGENTS OR COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDERS OR THE ADMINISTRATIVE
AGENT WOULD NOT IN THE EVENT OF ANY SUCH PROCEEDING SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO TRIAL BY JURY.
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Witness OBLIGORS:
SeraCare, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
- ------------------------------ ---------------------------------
Barry D. Plost, Chairman and CEO
Avre Incorporated
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
- ------------------------------ ---------------------------------
Barry D. Plost, Chairman and CEO
Binary Associates, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
- ------------------------------ ---------------------------------
Barry D. Plost, Chairman and CEO
SeraCare Acquisitions, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
- ------------------------------ ---------------------------------
Barry D. Plost, Chairman and CEO
BHM Labs, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
- ------------------------------ ---------------------------------
Barry D. Plost, Chairman and CEO
SeraCare Technology, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
- ------------------------------ ---------------------------------
Barry D. Plost, Chairman and CEO
<PAGE>
The Western States Group, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
- ------------------------------ ---------------------------------
Barry D. Plost, Chairman and CEO
American Plasma, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
- ------------------------------ ---------------------------------
Name: Barry D. Plost
Title: Chairman and CEO
Brown Brothers Harriman & Co.
/s/ [ILLEGIBLE] By: /s/ Joseph E. Hall
- ------------------------------ ---------------------------------
Name: Joseph E. Hall
Title: Deputy Manager
State Street Bank and Trust Company
/s/ [ILLEGIBLE] By: /s/ Bruce S. Daniels
- ------------------------------ ---------------------------------
Name: Bruce S. Daniels
Title: VP
Brown Brothers Harriman & Co., as
Administrative Agent
/s/ [ILLEGIBLE] By: /s/ Joseph E. Hall
- ------------------------------ ---------------------------------
Name: Joseph E. Hall
Title: Deputy Manager
<PAGE>
EXHIBIT A
LENDERS' COMMITMENTS AND PRO-RATA SHARES
<TABLE>
<CAPTION>
Lender Revolving Loan Term Loan Pro-Rata Share
- ------ Commitment Commitment --------------
-------------- ----------
<S> <C> <C> <C>
Brown Brothers $5,000,000 $3,500,000 50%
Harriman & Co.
State Street Bank and $5,000,000 $3,500,000 50%
Trust Company
- --------------------------- ----------------- ------------ --------------
Aggregates: $10,000,000 $7,000,000 100%
</TABLE>
<PAGE>
EXHIBIT B
SeraCare, Inc.
BORROWING BASE CERTIFICATE
To: Brown Brothers Harriman & Co. and State Street Bank and Trust
Company (collectively the "Lenders") under a certain Revolving Credit, Term
Loan and Security Agreement dated as of December ___, 1998 (the "Loan
Agreement"), by and among the Lenders: Brown Brothers Harriman & Co. as
Administrative Agent for the Lenders; SeraCare, Inc. (the "Borrower"); Avre
Incorporated; Binary Associates, Inc.; SeraCare Acquisitions, Inc.; BHM
Labs, Inc.; SeraCare Technology, Inc.; The Western States Group, Inc. and
American Plasma, Inc.
Terms used in this certificate shall have the same meaning as ascribed
thereto in the Loan Agreement.
The undersigned officers of the Borrower certify that the information
furnished herein as of _______________ 1998 is true and correct and that as
of the date hereof no Event of Default, or event which after notice or lapse
of time or both would be an Event of Default, under the Loan Agreement has
occurred.
COMPUTATION OF BORROWING BASE
-----------------------------
(a) Accounts Receivable(*) of SeraCare Biologics division
(excluding Accounts Receivable from Grifois, S.A.)
excluding invoices over 90 days from invoice date __________________
(b) Accounts Receivable(*) of The Western States Group, Inc.
excluding invoices over 90 days from invoice date __________________
(c) Accounts Receivable(*) of Consolidated Technologies, Inc.
excluding invoices over 90 days from invoice date __________________
(d) Accounts Receivable(*) from Grifois S.A.
excluding invoices over 90 days from invoice date __________________
(e) Other Accounts Receivable(*)
excluding invoices over 90 days from invoice date __________________
(f) Sub Total (total of (a), (b), (c), (d) and (e) __________________
(g) Foreign Accounts Receivable included in (f) that
are not due from Grifois or not backed by a letter
of credit __________________
(h) Amount in (g) less 25% of the amount in (f), but
not less than $0. __________________
(i) Qualifying Accounts Receivable ( = (f) minus (h)) __________________
(j) Qualifying Accounts Receivable Times 75% __________________
(k) Lessor of Inventory times 50% or $7,500,000 __________________
(l) Total of (j) plus (k) __________________
(m) Maximum Revolving Loan Amount __________________
(n) Net Amount Available (lessor of (l) or (k) ==================
(*) ACCOUNTS RECEIVABLE SHALL EXCLUDE: amounts for which an offset, charge or
lien has been asserted; amounts for debtors who are insolvent, bankrupt or
have been turned over for collection.
VALUE OF CERTAIN INVENTORIES
- ----------------------------
BHM Labs -- Ft Smith Arkansas ___________
American Plasma, Inc. -- Canal Street, Houston Texas ___________
American Plasma, Inc. -- West Bellfort, Houston Texas ___________
American Plasma, Inc. -- South Shaver, South Houston Texas ___________
By ______________________________________ Date________________
Authorized Signer
<PAGE>
EXHIBIT C
COVENANT COMPLIANCE CERTIFICATE
The undersigned hereby certifies to Brown Brothers Harriman & Co.
("Brown Brothers"), in connection with that certain Revolving Credit, Term
Loan and Security Agreement, dated as of ____________, 1998 (the "Loan
Agreement") among Brown Brothers, State Street Bank and Trust Company, Brown
Brothers Harriman & Co. as Administrative Agent, SeraCare, Inc. ("SeraCare"),
Avre Incorporated ("Avre"), Binary Associates, Inc. ("Binary"), SeraCare
Acquisitions, Inc. ("Acquisitions"), BHM Labs, Inc. ("BHM"), SeraCare
Technology, Inc. ("Technology"), The Western States Group, Inc. ("Western"),
and American Plasma, Inc. (and along with SeraCare, Avre, Binary,
Acquisitions, BHM Technology and Western, each an "Obligor" and collectively
the "Obligors"), that the undersigned is the duly elected and acting
_____________ of SeraCare, Inc., a California corporation, and that, as of
the date hereof, (i) each Obligor is in full and complete compliance with
each of the affirmative covenants set forth in Section 6 of the Loan
Agreement and with each of the negative covenants set forth in Section 7 of
the Loan Agreement, and (ii) there are no existing uncured Events of Default
under Section 8 of the Loan Agreement.
WITNESS my hand and seal as of ______________________, 1998.
_________________________________
<PAGE>
SCHEDULE 5.2
SERACARE, INC. - a Delaware corporation
Parent Company
100% owned subsidiaries:
AVRE, INC. - a Nevada corporation
Acquired October 1993
Owns and operates plasma collection centers.
BINARY ASSOCIATES, INC. - a Colorado corporation
Acquired October 1993
Owns and operates plasma collection centers.
BHM LABS, INC. - an Arkansas corporation
Acquired July 1996
Owns and operates plasma collection center.
SERACARE ACQUISITIONS, INC. - a Nevada corporation
Established in June 1996
SERACARE TECHNOLOGY, INC. - a Nevada corporation
Established in January 1998
DBA: Consolidated Technologies
WESTERN STATES GROUP, INC. - a California corporation
Acquired in February 1998
AMERICAN PLASMA, INC. - a Texas corporation
Acquired in September 1998
1
<PAGE>
SCHEDULE 5.4
TITLE TO REAL AND PERSONAL PROPERTY:
EXCEPTIONS TO GOOD AND CLEAR TITLE:
1. In the November 29, 1997 American Plasma acquisition, SeraCare acquired
three properties located in Salt Lake City, Utah; South Bend, Indiana and
Kalamazoo, Michigan. O'Melveny & Myers LLP has been working on the title
transfer which has not yet been accomplished. There is a mortgage on the
Salt Lake City location which is listed on SCHEDULE 5.4a. There is a
carryover title issue relating to a prior owner which is in the process of
being clarified and which has caused the delay.
2. Each of the plasma collection centers has Haemonetics Plasmapheresis
machines which are used during the plasma collection process. None of these
machines are owned. Such machines are provided by Haemonetics on a "Loaned"
basis and are Loaned conditional upon the company purchasing "softgoods"
used by the machines during the collection process for Haemonetics.
3. Please refer to SCHEDULES 5.4a and 5.4b which are hereby incorporated
herein by such reference.
2
<PAGE>
SCHEDULE 5.4(a)
1. Mortgage:
Salt Lake City
606 W. North Temple
Salt Lake City, UT 84116
Mortgage held by:
Zions First National Bank
P.O. Box 25822
Salt Lake City, UT 84125
Loan Number: 1094408-9004
2. Certain of the Collateral located at American Plasma, Inc.'s facilities is
subject to the following liens:
- A UCC 1 financing statement secures Alpha Therapeutic
Corporation's interest in the plasma softgood setups and
supplies for use at the following donor center locations:
Beaumont, TX; Case Grande, AZ; Houston, TX (4
locations); Longview, TX.
- A UCC 1 financing statement secures Jerry J. Moore
Investments' interest in all property placed in the demised
premises at 3316 # 1 South Shaver, South Houston, TX 77504.
- A UCC 1 financial statement secures Weingarten Realty
Investors' interest in all property placed in the leased
premises at 8550 West Bellfort, Houston, TX 77071.
- A UCC 1 financing statement secures Weingarten Realty
Investors' interest in all property placed in the leased
premises at 8542 West Bellfort, Houston, TX 77071.
- A UCC 1 financing statement secures Samuel H. Summer's
interest (as assigned from Plasmalab Donor Centers, Inc.) in
certain of the assets of American Plasma Services, L.P.
American Plasma, Inc. is the successor to American Plasma
Services, L.P.
- American Plasma Services, L.P. has granted a security
interest in certain of its collateral to Nathaniel Summer,
pursuant to that certain Security Agreement, dated June 10,
1996, by and between American Plasma Services, L.P. and
Nathaniel Summer. American Plasma, Inc. is the successor to
American Plasma Services, L.P.
- American Plasma Services, L.P. has granted a security
interest in certain of its collateral to Plasmalab Donor
Centers, Inc., pursuant to that certain Security
3
<PAGE>
Agreement, dated April 23, 1996, by and between American
Plasma Services, L.P. and Plasmalab Donor Centers, Inc.
American Plasma, Inc. is the successor to American Plasma
Services, L.P.
3. Each of the leases for the following facilities contain contractual
provisions providing the lessor therein with a security interest in all of the
property of American Plasma, Inc. located at the respective facility:
- 2219 Canal Street, Houston, Texas 77003 -- Walter A. Smith
Paving Contractor (Lessor)
- 1223 West 43rd Street, Houston, Texas 77018 -- Shocen, Ltd.
(Lessor)
- 2209 Calder Avenue, Beaumont, Texas 77702 -- Ardmore
Addition (Lessor)
- 1725 High Street, Longview, Texas 75602 -- Naseep Thomas
(Lessor)
4. Pecks Management Partners Ltd. has a security interest in all of the
property and assets of SeraCare and/or its subsidiaries. This security interest
is subordinate to any and all bank debt of SeraCare and/or its subsidiaries.
5. SeraCare, Inc. has pledged all of the assets of BHM Labs, Inc. to the
holders of certain of SeraCare, Inc.'s preferred stock. In connection with such
pledge, such holders also have possession of the certificates representing all
of the outstanding capital stock of BHM Labs, Inc.
4
<PAGE>
SCHEDULE 5.4b
PERSONAL PROPERTY LEASES:
PLASMA OPERATIONS - No material personal property leases other than copiers.
- See attached for facility leases.
WESTERN STATES GROUP, INC. - No material personal leases other than copier.
- See attached for facility lease.
AMERICAN PLASMA, INC. - Equipment lease for 12 PCS (plasma collection devices)
from Haemonetics Corp. at $3,347.86 per month. No other material personal leases
other than copiers.
- See attached for facility leases.
CONSOLIDATED TECHNOLOGIES:
Facilities - Teachers Realty Corporation
Current Amendment Term: Shall end on November 14, 1999
Renewal Option: One Additional Term of Five Years
Monthly Rent Currently Paid: 48.6 cents per Sq. Ft. ($9,094.52)
Location is the Home Office/Manufacturing Facility in Austin,
Texas.
Machinery(*) BT Finance, Inc. - Various equipment $ 161.73
Beckman Instruments - Various equipment $1,792.50
GE Capital - Various equipment $ 796.00
Trinity Capital Corp. - Various equipment $2,662.65
Ionics Ahlfinger Water Co. - Water purifier $ 100.00
Abbott Laboratories - Clinical Chemistry $8,258.39
Affiliated Corporate Services, Inc. - Various equipment $1,796.91
(*)All above (except the Abbott Laboratories lease) are
renewable or have buyout provisions
5
<PAGE>
PLASMA OPERATIONS
SCHEDULE OF FACILITIES LEASES
<TABLE>
<CAPTION>
CENTER LANDLORD CURRENT MNTHLY. RENT TERM
- -------------------------------------------------------------------------------------------------------
BINARY ASSOCIATES, INC.
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BATON ROUGE, LA RR Company of America, LLC $3,500.00 12/1/98 - 11/30/03
PO Box 60100 with two 5-year options to renew
Lafayetta, LA 70596-0100
CLARKESVILLE, TN Dale Gallinatti $4,653.98 12/24/92 - 12/24/2002
119 Calle La Mesa with 5-year option to renew
Moraga, CA 94556
Larry Cary
32 Woodridge Drive
Colorado Springs, CO 80906
LAS VEGAS, NV Hy Moss $5,200.00 6/1/93 - 5/31/99
6971 Monte Rosa with 2-year option to renew
Las Vegas, NV 89120
610 LLC $2,000.00 Month-to-month (terminates
860 East Sahara Avenue effective 12/31/98)
Las Vegas, NV 89104 Former center used as storage
RENO #1 Wu Investment Co. $5,000.00 11/1/98 - 10/31/03
4829 Geary Blvd. with 5-year option to renew
San Francisco, CA 94118
CORPORATE OFFICES Watt Management Co. $3,836.25 5/20/96 - 5/20/99
1875 Century Park East
Suite 1110
Los Angeles, CA 90067
AVRE, INC.
- -------------------------------------------------------------------------------------------------------
COLORADO SPRINGS Delta & Bijou Property Mgmt. $2,370.69 8/1/95 - 7/31/2000
2140 Crystal River Drive Former center exchanged with
Colorado Springs, CO 80915 Serological, Inc. attempting to
sublease
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CENTER LANDLORD CURRENT MNTHLY. RENT TERM
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PHOENIX Harry Tang $2,000.00 6/1/98 - 5/30/03
20943 Brand Avenue Two five year renewal options
Long Beach, CA 90810
(310) 537-6624
WESTERN STATES
GROUP, INC.
- -------------------------------------------------------------------------------------------------------
OCEANSIDE, CA Del Oro Gateway Partners, L.P. $3,224.32 8/1/98 - 7/31/03
1947 Camino Vida Roble, Suite One five year renewal option
104, Carlsbad, California 92008
SERACARE
TECHNOLOGY, INC.
- -------------------------------------------------------------------------------------------------------
AUSTIN, TX TIAA Realty, Inc. $24,658.82 Lease expires 11/14/99
C/o Transwestern Property One five year renewal option
Company
901 S. MoPac, Bldg One, Suite 520
Austin, TX 78746
BHM LABS, INC.
- -------------------------------------------------------------------------------------------------------
FT. SMITH, AR Gene Wahl $1,200.00 1/7/96 - 6/30/2001
P.O. Box 2124 5 YEARS RENEWAL OPTION.
Fort Smith, AR 72902 Vacant - attempting to sublease
(501) 782-3053
Simi Biological Resources, Inc. $1,990.00 5/1/98 - 4/30/03
1590 South Ocean Line, Unit 123 5-year renewal option
Ft. Lauderdale, FL 33316
SERACARE
ACQUISITIONS, INC.
- -------------------------------------------------------------------------------------------------------
MACON, GA Thornton Realty Co. $3,750.00 9/1/96 - 8/31/2001
686 Poplar St. Box T 10 YEARS RENEWAL OPTION
Macon, GA 31202
(912) 745-1677
TOLEDO, OHIO Eugene L. Buckland $1,895.00 10/1/96 - 9/30/2001
1717 Green Valley 10 YEARS RENEWAL OPTION
Toledo, OH 43614
(419) 513-9977
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
CENTER LANDLORD CURRENT MNTHLY. RENT TERM
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLEARFIELD, UT The Kier Corporation $4,391.25 9/20/96 - 9/20/2006
3710 Quincy, Avenue 5 YEARS RENEWAL OPTION
Ogden, UT 84403
RALEIGH, NC James Levinson $2,500.00 6/1/98 - 5/30/03
P.O. Box 117
Benson, NC 27504
PASCO, WA 201 Associates $2,000-00 9/15/96 - 9/14/2001
c/o William Rill 5-year renewal option
P.O. Box 197 Option to Purchase
Port Orchard, WA 98366
SAVANAH, GA Mr. Donald Amerson $4,500.00 7/1/97 - 6/20/2002
P.O. Box 13354 10 YEARS RENEWAL OPTION
Savannah, GA 31416
POCATELLO, ID Coldwell Banker Landmark $1,860.00 7/11/97 - 4/30/2003
920 Dean Drive, Suite C
Pocatello, ID 83201
BOISE, ID Larry Stevens $3,350.00 8/1/98 - 12/31/03
100 North 9th Street, Suite 200 Two 5-year renewal options
Boise, ID 83702
RENO #2 Angelina Capurro $2,500.00 Month-to-month
5005 Longley Lane
Reno, NV 89511
WILMINGTON, DE Leon N. Weiner & Associates, $4,904.50 1/26/98 - 1/25/2003
Inc. 5 YEARS RENEWAL OPTION
4 Denny Road
Wilmington, DE 19809
(302) 764-9430
PORT ARTHUR, TX Daryl Burke & Adrian Scallan $3,000.00 7/1/98 - 6/30/03
1348 Ninth Avenue Two five year renewal options
Port Arthur, Texas
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
CENTER LANDLORD CURRENT MNTHLY. RENT TERM
- -------------------------------------------------------------------------------------------------------
AMERICAN PLASMA, INC.
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2219 CANAL STREET Walter A. Smith $2,786.43 10/1/94 - 9/30/99
HOUSTON, TX Paving Contractors
2111 Canal
Houston, Texas 77003
1223 WEST 43RD Shocen, Ltd $5,192.34 2/1/97 - 1/31/04
STREET 5718 Westheimer, Suite 800
HOUSTON, TX Houston, Texas 77057
3316 #1, SOUTH Jerry J. Moore Investments $6,230.00 11/1/96 - 8/31/07
SHAVER, SOUTH 7880 San Felipe Ste 100
HOUSTON, TX Houston, Texas 77063
2209 CALDER Ardmore Addition $1,881.00 9/7/96 - 9/6/00
AVENUE 240 Crockett Street
BEAUMONT, TX Beaumont, Texas 77701
1725 SOUTH HIGH Mrs. Naseep Thomas $2,250.00 7/1/98 - 6/30/99
STREET c/o Thomas A. Sweeny & Assoc.
LONGVIEW, TX P.O. Box 3172
Longview, Texas 75606
8542 W. BELLFORT Weingarten Realty Investors $992.58 12/5/97 - 7/31/99
HOUSTON, TX P.O. Box 924133
Houston, Texas 77292-4133
8550 W. BELFFORT Weingarten Realty Investors $3,449.00 8/1/98 - 7/31/99
HOUSTON, TX P.O. Box 924133
Houston, Texas 77292-4133
719 SAWDUST ROAD Gazal Development Corporation $3,890.00 11/1/96 - 10/31/99
SUITE 205 719 Sawdust Road, Suite 100
SPRING, TX Spring, Texas 77380
565 SOUTH DOBSON Dobson Road Partners $4,973.00 4/1/98 - 3/31/03
ROAD, SUITES 13-16 c/o Hannay Investment Properties
MESA, AZ 4651 East Palomino
Phoenix, Arizona 85018
3701 PLAINS BLVD. Omni Capital Corporation $2,200.00 9/1/98 - 8/31/00
#21, AMARILLO, TX 1715 West 58th
Amarillo, Texas 79110
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
CENTER LANDLORD CURRENT MNTHLY. RENT TERM
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
417 NORTH Barnes & Halliburton $1,312.41 1/1/97 - 12/31/99
FLORENCE STREET 1577 North Pinal Avenue
CASE GRANDE, AZ Case Grande, Arizona 85222
4014-4020 N. 19TH Samuel & Jeanie Summer $4,781.43 4/23/96 - 4/22/06
AVE-, PHOENIX, AZ 6058 E. Evening Glow Dr.
Scottsdale, Arizona 85262
12734 WOODFOREST Vezcor, Inc. $4,271.25 11/1/95 - 10/31/00
BOULEVARD c/o Tarantino Properties, Inc.
HOUSTON, TX 7887 San Felipe #237
Houston, Texas 77063
</TABLE>
10
<PAGE>
SCHEDULE 5.7
1. American Plasma Services, L.P. has granted a security interest in
certain of its collateral to Plasmalab Donor Centers, Inc., pursuant to that
certain Security Agreement, dated April 23, 1996, by and between American Plasma
Services, L.P. and Plasmalab Donor Centers. Inc. (the "PLASMALAB SECURITY
AGREEMENT"). American Plasma, Inc. is the successor to American Plasma Services,
L.P. Sections 1, 2 and 3 of the Plasmalab Security Agreement prohibit and/or
require the prior consent of Plasmalab Donor Centers, Inc. (which consent shall
not be unreasonably withheld) before granting additional security interests (or
authorizing, executing or filing financing, statements with respect to such
additional security interests) in the collateral which is subject to the
Plasmalab Security Agreement.
2. American Plasma Services, L.P. has granted a security interest in
certain of its collateral to Nathaniel Summer, pursuant to that certain Security
Agreement, dated June 10, 1996, by and between American Plasma Services, L.P.
and Nathaniel Summer (the "SUMMER SECURITY AGREEMENT"). American Plasma, Inc. is
the successor to American Plasma Services, L.P. Sections 1, 2 and 3 of the
Summer Security Agreement prohibit and/or require the prior consent of Nathaniel
Summer (which consent shall not be unreasonably withheld) before granting
additional security interests (or authorizing, executing or filing financing
statements with respect to such additional security interests) in the collateral
which is subject to the Summer Security Agreement.
Except as disclosed in Items 1 and 2 to this SCHEDULE 5.7, there
is no provision in any indenture, contract or agreement to which any Obligor is
a party which prohibits the execution, delivery or performance of the Loan
Documents. However, the contracts and agreements set forth on Schedule 5.4(a)
provide for liens and encumbrances on certain of the Collateral, as set forth on
such Schedule.
11
<PAGE>
SCHEDULE 5.8
1. SeraCare Acquisitions. Inc. does not currently have a FDA license for
its Toledo. Ohio or Pasco, Washington facilities. Both facilities are currently
operating under a reference number pending the issuance of the FDA license for
each entity.
1. SeraCare Acquisitions. Inc. does not currently have QPP certification
for its Port Arthur, Texas or Savanah, Georgia facilities. SeraCare
Acquisitions, Inc. is in the process of obtaining such certification for both
such facilities, however, six months of operations are required before a
facility can receive QPP certification.
12
<PAGE>
SCHEDULE 5.12
TITLE TO COLLATERAL
1. SCHEDULES 5.4, 5.4a and 5.4b are incorporated herein by reference.
- Following the grant of a security interest in the Collateral to
the Lender as contemplated by the Loan Documents, the Borrower
will be required to grant to Pecks Management Partners, Ltd., as
agent for the holders of the Borrower's 12% Senior Subordinated
Debentures due 2005, a security interest in the Borrower's and
each other Obligor's assets.
2. See Item 5 of SCHEDULE 5.4(a) which is incorporated herein by reference.
13
<PAGE>
SCHEDULE 5.13
LOCATION OF COLLATERAL
See Item 5 of Schedule 5.4(a) which is incorporated herein by reference.
LOCATION
SERACARE, INC.
CORPORATE OFFICES (this is also the location of the corporate records of each of
Avre, Inc., BHM Labs, Inc., Binary Associates, Inc. and SeraCare Acquisitions,
Inc.)
1925 Century Park East
Suite 1970
Los Angeles, CA 90067
BINARY ASSOCIATES, INC.
LAS VEGAS
611 N. Las Vegas Blvd.
Las Vegas, NV 89101
CLARKESVILLE
1174 Ft. Campbell Blvd.
Clarkesville, TN 37042
RENO #1
513 E. 2nd Street
Reno, NV 89502
BATON ROUGE
4226 Plank Road
Baton Rouge, Louisiana 70805
BHM LABS, INC.
FORT SMITH
910 N. 32nd Street
Ft. Smith, AR 72903
AVRE, INC.
PHOENIX
3529 McDowell
Phoenix, AZ 85029
14
<PAGE>
SERACARE ACQUISITIONS, INC.
CLEARFIELD
375 South State
Clearfield, UT 84015
RALEIGH
1 Maiden Lane
Raleigh, NC 27607
MACON
542 First Street
Macon, GA 31201
PASCO
745 W. Court Street
Pasco, WA 99301
TOLEDO
2540 Dorr Street
Toledo, OH 43607
POCATELLO
425 E. Center Street
Pocatello, ID 83706
SALT LAKE CITY
606 W. North Temple
Salt Lake City, UT 84116
RENO #2
785 E. 2nd Street
Reno, NV 89502
SOUTH BEND
515 Lincoln Way Street
South Bend, IN 46601
BOISE
4017 Overland
Boise, ID 83705
KALAMAZOO
705 North Park Street
Kalamazoo, MI 49007
15
<PAGE>
SAVANAH
8805 White Bluff Road
Suite G, H & J
Savanah, GA 31406
WILMINGTON
Adams Four Shopping Center
4th & Adams Streets
Wilmington, DE 19801
PORT ARTHUR
1348 9th Avenue
Port Arthur, Texas 77642
SERACARE TECHNOLOGY, INC.
2170 Woodward Street
Austin, TX 78744
WESTERN STATES GROUP, INC.
1935 Avenida del Oro
Suite F
Oceanside, CA 92056
AMERICAN PLASMA, INC.
CANAL STREET
2219 Canal Street
Houston, Texas 77003
WEST 43RD
1223 West 43rd Street
Houston, Texas 77018
SOUTH SHAVER
3316 #1, South Shaver
South Houston, Texas 77504
CALDER AVENUE
2209 Calder Avenue
Beaumont, Texas 77702
SOUTH HIGH STREET
1725 South High Street
Longview, Texas 75602
16
<PAGE>
8542 W. BELLFORT
8542 W. Belfort
Houston, Texas 77071
8550 W. BELLFORT
8550 W. Belfort
Houston, Texas 77071
SAWDUST ROAD
719 Sawdust Road, Suite 205
Spring, Texas 77380
SOUTH DOBSON ROAD
565 South Dobson Road
Suites 13-16
Mesa, Arizona 85202
PLAINS BLVD.
3701 Plains Blvd.
#21 Amarillo, Texas 79102
NORTH FLORENCE STREET
417 North Florence Street
Case Grande, Arizona 85222
N. 19TH AVE.
4014-4020 N. 19th Ave.
Phoenix, Arizona 85015
WOODFOREST BOULEVARD
12734 Woodforest Boulevard
Houston, Texas 77015
PUBLIC WAREHOUSE (USED BY SERACARE ACQUISITIONS, INC., THE WESTERN STATES GROUP,
INC., BINARY ASSOCIATES, INC., AVRE, INC. AND BHM LABS, INC.):
AMERICAN COLD STORAGE
Louisville Division
607 Industry Road
Louisville, KY 40201-2287
17
<PAGE>
SCHEDULE 5.17
On June 29, 1998, SeraCare, Inc. filed a Registration Statement
on Form S-3 under the Securities Act of 1933 with the Securities and Exchange
Commission.
18
<PAGE>
SCHEDULE 5.21
SeraCare, Inc. has an application pending with the U.S. Patent
and Trademark Office for a trademark to the name "SeraCare" and design.
19
<PAGE>
4.16 AMENDED AND RESTATED CROSS-GUARANTY AGREEMENT BETWEEN "LENDERS" AND
"OBLIGORS" DATED DECEMBER 21, 1998.
<PAGE>
AMENDED AND RESTATED
CROSS-GUARANTY AGREEMENT
(UNLIMITED)
To: Brown Brothers Harriman & Co. ("BBH")
40 Water Street
Boston, Massachusetts 02109
and
State Street Bank and Trust Co. ("State Street")
225 Franklin Street
Boston, Massachusetts 02110
and
Brown Brothers Harriman & Co. as Administrative Agent
40 Water Street
Boston, Massachusetts 02109
1. GUARANTY OF PAYMENT AND PERFORMANCE OF OBLIGATIONS. In
consideration of BBH and State Street (hereinafter collectively referred to
as the "Lenders" and sometimes individually as a "Lender") extending credit
or otherwise in their discretion giving time, financial or banking facilities
or accommodations to any one or more of the undersigned (each a "Customer"
with respect to such extensions of credit, facilities or accommodations),
each undersigned hereby unconditionally guarantees to the Lenders (each
undersigned being referred to as a "Guarantor" with respect to its guaranty
obligations set forth herein) that (a) each Customer will duly and punctually
pay or perform, at the place specified therefor or, if no place is specified,
at the main office of Brown Brothers Harriman & Co. as Administrative Agent
for the Lenders (the "Administrative Agent") at 40 Water Street, Boston,
Massachusetts 02109, all indebtedness, obligations and liabilities, direct or
indirect, matured or unmatured, primary or secondary, certain or contingent,
of any Customer to the Lenders and Administrative Agent now or hereafter
owing or incurred (including without limitation costs and expenses incurred
by the Lenders and the Administrative Agent in attempting to collect or
enforce any of the foregoing) which are chargeable to any Customer either by
law or under the terms of the Lenders' or Administrative Agent's arrangements
with such Customer, together with interest accrued in each case to the date
of payment hereunder (collectively, the "Obligations" and individually, an
"Obligation"); (b) if there is an agreement evidencing or executed and
delivered in connection with any Obligation, each Customer will perform in
all other respects strictly in accordance with the terms thereof; and (c)
this Amended and Restated Cross-Guaranty Agreement (the "Guaranty") shall not
be affected by any fraudulent, illegal, or improper act by any Customer, nor
by the invalidation (by
<PAGE>
operation of law or otherwise) of all or any part of the Obligations of any
Customer to the Lenders. This Guaranty is an absolute, direct, unconditional and
continuing guaranty of the full and punctual payment and performance by each
Customer of the Obligations and not of their collectibility only and is in no
way conditioned upon any requirement that the Lenders or Administrative Agent
first attempt to collect any of the Obligations from any Customer or resort to
any security or any other means of obtaining payment of any of the Obligations
which the Lenders or Administrative Agent now has or may acquire after the date
hereof, or upon any other contingency whatsoever. Nothing shall discharge or
satisfy the liability of each Guarantor hereunder except the full payment and
performance of all of each Customer's debts and obligations to the Lenders and
Administrative Agent with interest and costs of collection. Upon any default by
any Customer in the full and punctual payment and performance of the
Obligations, the liabilities and obligations of each Guarantor hereunder shall,
at the option of the Lenders, become forthwith due and payable to the Lenders
without demand or notice of any nature, all of which are expressly waived by
each Guarantor. Payments by each Guarantor hereunder may be required by the
Lenders on any number of occasions.
2. GUARANTORS' FURTHER AGREEMENTS TO PAY. Each Guarantor further
agrees, as the principal obligor and not as a guarantor only, to pay to the
Administrative Agent forthwith upon demand, in funds immediately available to
the Administrative Agent, all costs and expenses (including court costs and
legal expenses) incurred or expended by the Lenders or Administrative Agent in
connection with this Guaranty and the enforcement hereof, together with interest
on amounts recoverable under this Guaranty from the time such amounts become due
until payment at the usual rate (the default rate, if applicable) charged by the
Lenders to each of the undersigned respectively.
3. UNLIMITED LIABILITY OF GUARANTORS. The liability of each
Guarantor hereunder shall be unlimited and shall be joint and several.
4. TERMINATION OF GUARANTY. Except as specifically provided
otherwise, the obligations of each Guarantor under this Guaranty shall continue
in full force and effect until all Obligations are fully paid and performed.
This Guaranty may be terminated as to any Guarantor only by such Guarantor's
giving the Lenders sixty (60) days' prior written notice by registered or
certified mail. and thereupon this Guaranty shall terminate with respect to
such Guarantor only at the expiration of said sixty (60) day period which shall
then be the effective date of termination, and that such termination shall be
applicable only to transactions having their inception after the effective date
of termination and shall not affect rights and obligations arising out of
transactions having their inception prior to such date. The death, termination
and dissolution of any Guarantor shall not effect the termination of this
Guarantv as to any other Guarantor. The termination by any Guarantor of any
other guaranty shall not affect the continuing liability hereunder of any
Guarantor. This Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time payment of all or any part of the Obligations
guaranteed hereunder is rescinded or otherwise must be restored by the Lenders
or Administrative Agent to any Customer
2
<PAGE>
or to the creditors of such Customer or any representative of such Customer or
representative of the Customer's creditor's as a voidable preference or
fraudulent conveyance upon the insolvency, bankruptcy or reorganization of any
Customer, or to any Guarantor or to the creditors of any Guarantor or any
representative of any Guarantor or representative of the creditors of any
Guarantor upon the insolvency, bankruptcy or reorganization of any Guarantor, or
otherwise, all as though such payments had not been made, and in such event this
Guaranty shall survive as an obligation of each Guarantor, notwithstanding any
return of the original of this Guaranty to any Guarantor or Customer or any
other apparent termination of any Guarantor's obligations hereunder.
5. SECURITY; SETOFF. Each Guarantor grants to the Lenders, as security
for the full and punctual payment and performance of such Guarantor's
obligations hereunder, a continuing lien on and security interest in all
securities or other property belonging to such Guarantor now or hereafter held
by the Lenders or any of their lending affiliates or any Lender acting as a
participant under any loan agreement between any Customer and Lenders, and in
all deposits and other sums credited by or due from the Lenders or any of their
lending affiliates or any Lender acting as a participant under any loan
agreement between any Customer and Lenders, to such Guarantor or subject to
withdrawal by such Guarantor; and regardless of the adequacy of any collateral
or other means of obtaining repayment of the Obligations, each Lender may at any
time and without notice to such Guarantor set off the whole or any portion or
portions of any or all such deposits and other sums against amounts payable
under this Guaranty, whether or not any other person or persons could also
withdraw money therefrom.
6. LENDERS' AND ADMINISTRATIVE AGENT'S FREEDOM TO DEAL WITH
CUSTOMERS AND OTHER PARTIES. The Lenders and Administrative Agent shall be at
liberty, without giving notice to or obtaining the assent of any Guarantor
and without relieving any Guarantor of any liability hereunder, to deal with
each Customer and with each other party who now is or after the date hereof
becomes liable in any manner for any of the Obligations, in such manner as
Lenders and Administrative Agent in their sole discretion deem fit, and to
this end each Guarantor gives to the Lenders and Administrative Agent full
authority in their sole discretion to do any or all of the following things:
(a) extend credit, make loans and afford other financial accommodations to
any Customer at such times, in such amounts and on such terms as the Lenders
may approve, (b) vary the terms and grant extensions or renewals of any
present or future indebtedness or obligation to the Lenders of any customer
or of any such other party, (c) grant time, waivers and other indulgences in
respect thereto, (d) vary, exchange, release or discharge, wholly or
partially, or delay in or abstain from perfecting and enforcing any security
or guaranty or other means of obtaining payment of any of the Obligations
which the Lenders now have or acquire after the date hereof, (e) accept
partial payments from any Customer or any such other party, (f) release or
discharge, wholly or partially, any endorser or guarantor, and (g) compromise
or make any settlement or other arrangement with any Customer or any such
other party.
7. UNENFORCEABILITY OF OBLIGATIONS AGAINST CUSTOMERS; INVALIDITY OF
SECURITY OR
3
<PAGE>
OTHER GUARANTIES. If for any reason a Customer has no legal existence or is
under no legal obligation to discharge any of the Obligations undertaken or
purported to be undertaken by it or on its behalf, or if any of the moneys
included in the Obligations are not recoverable from any Customer by operation
of law or for any other reason, this Guaranty shall nevertheless be binding on
each other Guarantor to the same extent as if such Guarantor at all times had
been the principal debtor on all such Obligations. This Guaranty shall be in
addition to any other guaranty or other security for the Obligations, and it
shall not be prejudiced or rendered unenforceable by the invalidity of any such
other guaranty or security.
8. WAIVERS BY GUARANTORS. Each Guarantor waives: notice of acceptance
thereof, presentment and protest of any instrument, and notice thereof; notice
of default; notice of any action taken or omitted by any Lender or the
Administrative Agent in reliance hereon, and any requirement that the Lenders or
Administrative Agent be diligent or prompt in making demands hereunder, giving
notice of any default by any Customer or asserting any other right of the
Lenders or Administrative Agent hereunder. Each Guarantor also irrevocably
waives, to the fullest extent permitted by law, all defenses which at any time
may be available in respect of such Guarantor's obligations hereunder by virtue
of any homestead exemption, statute of limitations, valuation, stay, moratorium
law or other similar law now or hereafter in effect.
9. NO CONTEST WITH LENDERS OR ADMINISTRATIVE AGENT. No Guarantor
will, by paying any sum recoverable hereunder (whether or not demanded by the
Lenders or Administrative Agent) or by any means or on any other ground,
claim any setoff or counterclaim against any Customer in respect of any
liability of such Guarantor to such Customer or, in proceedings under the
Bankruptcy Act or insolvency proceedings of any nature, prove in competition
with any Lender or the Administrative Agent in respect of any payment
hereunder or be entitled to have the benefit of any counterclaim or proof of
claim or dividend or payment by or on behalf of any Customer or the benefit
of any other security for any Obligation which, now or hereafter, any Lender
or the Administrative Agent may hold or in which it may have any share.
10. BANKRUPTCY. If any Customer or Guarantor or any other guarantor
should at any time become insolvent or make a general assignment, or if a
petition in bankruptcy or any insolvency or reorganization proceedings shall be
filed or commenced by, against or in respect of any Customer or Guarantor, or
any other guarantor, any and all obligations of each Guarantor shall, at
Lenders' option, forthwith become due and payable without notice.
11. LENDERS' RECORDS. The Lenders' and Administrative Agent's books
and records showing the account between the Lenders and any Customer shall be
admissible in any action or proceeding, shall by binding upon each Guarantor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof.
12. DEMANDS AND NOTICES. Any demand on or notice to any Guarantor
shall be in writing and shall be effective when handed to such
Guarantor or left at or mailed or sent by
4
<PAGE>
facsimile to such Guarantor's usual or last known address.
13. AMENDMENTS, WAIVERS, ETC. Except as otherwise provided in
paragraph 4 of this Guaranty, no provision of this Guaranty can be changed,
waived, discharged or terminated except by an instrument in writing signed by
the Lenders and the Guarantor to be affected by the same, expressly referring to
the provision of this Guaranty to which such instrument relates; and no such
waiver shall extend to, affect or impair any right with respect to any
Obligation which is not expressly dealt with therein. No course of dealing or
delay or omission on the part of a Lender in exercising any right shall operate
as a waiver thereof or otherwise be prejudicial thereto.
14. MISCELLANEOUS PROVISIONS. Rights and remedies available to the
Lenders and the Administrative Agent under this Guaranty are cumulative, and
not exclusive of any rights and remedies otherwise available to the Lenders
and Administrative Agent. The Lenders' or the Administrative Agent's delay or
omission by the Lenders or Administrative Agent in exercising any of its
rights and remedies shall not constitute a waiver of these rights and
remedies, nor shall a Lender's or the Administrative Agent's waiver of any
right or remedy operate as a waiver of any other right or remedy available to
such Lender or the Administrative Agent. A Lender's or the Administrative
Agent's waiver of any right or remedy on any one occasion shall not be
considered a waiver of same on any subsequent occasion, nor shall it be
considered to be a continuing waiver. This Guaranty incorporates all
discussions and negotiations between Lenders and Administrative Agent and
each Guarantor concerning the guaranty and indemnification provided by the
undersigned hereby, and no such discussions or negotiations shall limit,
modify, or otherwise affect the provisions hereof, and no provision hereof
may be altered, amended, waived, canceled or modified, except by a written
instrument executed, sealed, and acknowledged by a duly authorized officer of
each Lender. This Guaranty and all documents which have been or may be
hereinafter furnished by each Guarantor to Lenders may be reproduced by
Lenders by any photographic, photostatic, microfilm, xerographic, or similar
process, and that any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was
made in the regular course of business).
This Guaranty, all acts and transactions hereunder, and the rights and
obligations of the parties hereto shall be governed, construed and interpreted
according to the laws of the Commonwealth of Massachusetts, shall be binding
upon the heirs, executors, administrators, successors and assigns of each
Guarantor and shall inure to the benefit of Lenders' and Administrative Agent's
successors and assigns.
If any provision of this Guaranty is found to be invalid, illegal or
unenforceable, the validity of the remainder of the Guaranty shall not be
affected.
JURY WAIVER. EACH GUARANTOR, LENDER AND ADMINISTRATIVE
5
<PAGE>
AGENT HEREBY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING IN CONNECTION WITH THIS GUARANTY, THE OBLIGATIONS, IN ALL MATTERS
CONTEMPLATED HEREBY, AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
This Guaranty amends and restates in its entirety that Amended and
Restated Cross Guaranty Agreement made by the undersigned in favor of BBH dated
as of September 29, 1998.
[INTENTIONALLY LEFT BLANK)
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Guaranty or
have caused this Guaranty to be executed on their behalf by an officer or other
person thereunto duly authorized under seal as of the 21st day of December,
1998.
SeraCare, Inc.
Jerry L Burdick By: /s/ Barry D. Plost
- ----------------------------- --------------------------------
Barry D. Plost, Chairman and CEO
Avre Incorporated
Jerry L Burdick By: /s/ Barry D. Plost
- ----------------------------- --------------------------------
Barry D. Plost, Chairman and CEO
Binary Associates, Inc.
Jerry L Burdick By: /s/ Barry D. Plost
- ----------------------------- --------------------------------
Barry D. Plost, Chairman and CEO
SeraCare Acquisitions, Inc.
Jerry L Burdick By: /s/ Barry D. Plost
- ----------------------------- --------------------------------
Barry D. Plost, Chairman and CEO
BHM Labs, Inc.
Jerry L Burdick By: /s/ Barry D. Plost
- ----------------------------- --------------------------------
Barry D. Plost, Chairman and CEO
7
<PAGE>
SeraCare Technology, Inc.
Jerry L Burdick By: /s/ Barry D. Plost
- ----------------------------- --------------------------------
Barry D. Plost, Chairman and CEO
The Western States Group, Inc.
Jerry L Burdick By: /s/ Barry D. Plost
- ----------------------------- --------------------------------
Barry D. Plost, Chairman and CEO
American Plasma, Inc.
Jerry L Burdick By: /s/ Barry D. Plost
- ----------------------------- --------------------------------
Barry D. Plost, Chairman and CEO
8
<PAGE>
4.17 AMENDED AND RESTATED REVOLVING TERM NOTE BETWEEN AND
SERACARE, INC. AND BROWN BROTHERS HARRIMAN & CO. DATED
DECEMBER 21, 1998.
<PAGE>
AMENDED AND RESTATED REVOLVING TERM NOTE
December 21, 1998
$5,000,000 Boston, Massachusetts
For value received, the undersigned SeraCare, Inc. (the "Borrower"),
promises to pay to Brown Brothers Harriman & Co. (hereinafter sometimes
referred to as "BBH" and "Payee"), or order, the principal amount of Five
Million Dollars ($5,000,000) or such lesser amount as may be outstanding
under that certain Revolving Credit, Term Loan and Security Agreement, dated
as of even date herewith (the "Loan Agreement"), among the Borrower, Avre
Incorporated, Binary Associates, Inc., SeraCare Acquisitions, Inc., BHM Labs,
Inc., SeraCare Technology, Inc., The Western States Group, Inc., American
Plasma, Inc., BBH, State Street Bank and Trust Company ("State Street") and
Brown Brothers Harriman & Co. as Administrative Agent (the "Administrative
Agent"), on or before December 1, 2000, with interest from the date hereof on
the said principal balance from time to time outstanding. This Note and that
certain Revolving Term Note from the Borrower to State Street in the face
amount of $5,000,000 dated the date hereof comprise the "Revolving Note" as
defined in the Loan Agreement. The aggregate principal balance outstanding
under this Note shall bear interest thereon at a per annum rate equal to the
Wall Street Journal Prime Rate (as hereinafter defined) plus three-quarters
of one percent (0.75%), payable quarterly in arrears on the first business
day of each fiscal quarter, commencing March 1, 1999. BBH and State Street
are hereinafter collectively referred to as the "Lenders." Capitalized terms
used but not defined herein are as defined in the Loan Agreement.
"Wall Street Journal Prime Rate" means the highest rate published from
time to time by the Wall Street Journal as the Prime Rate, or, in the event
the Wall Street Journal ceases to publish the Prime Rate, the base, reference
or other rate then designated by the Payee for general commercial loan
reference purposes, it being understood that such rate is a reference rate,
not necessarily the lowest, established from time to time, which serves as
the basis upon which effective interest rates are calculated for loans making
reference thereto. The effective interest rate applicable to undersigned's
loans shall change on the date of each change in the Wall Street Journal
Prime Rate.
Principal and interest shall be payable to the Administrative Agent for
the account of the Payee at the Administrative Agent's office at 40 Water
Street, Boston, Massachusetts 02109 (or at such other place as the
Administrative Agent may hereafter direct the Borrower) in lawful money of
the United States of America without set-off, deduction or counterclaim.
Interest shall be calculated on the basis of actual number of days elapsed
and a 360-day year.
This Note is issued as a replacement of, but does not evidence payment
or satisfaction of, the Amended and Restated Revolving Term Note dated
September 29, 1998 issued by the Borrower in favor of BBH. This Note is
issued pursuant to, is entitled to the benefits of, and is subject to, the
provisions of the Loan Agreement, but neither this reference to the Loan
Agreement nor any provision thereof shall affect or impair the absolute and
unconditional obligation of the Borrower to pay the principal of and interest
on this Note as herein provided.
This Note is a revolving note and subject to the foregoing, the Borrower
may, at its option, at any time prior to demand borrow, pay, prepay and
reborrow hereunder, all in accordance with the provisions hereof and of any
and all other agreements between the Borrower and the Lenders related hereto;
provided, however, that the principal balance outstanding shall at no time
exceed the face amount of this Note.
At the option of the holder, this Note shall become immediately due and
payable without notice or demand upon the occurrence of an Event of Default
under the Loan Agreement.
Any payments received by the Administrative Agent and Payee on account
of this Note shall be applied first, to any costs, expenses or charges then
owed to the Payee and the Administrative Agent by the Borrower; second, to
accrued and unpaid interest; and third, to the unpaid principal balance
hereof. The Borrower hereby authorizes the Payee to charge any deposit
account which the Borrower may maintain with the Payee for any payment
required hereunder.
<PAGE>
The Borrower represents to the Administrative Agent and the Payee that
the proceeds of this Note will not be used for personal, family or household
purposes.
Any and all deposits or other sums at any time credited by or due to the
undersigned or any endorser or guarantor hereof from the Payee or any of its
banking or lending affiliates or any lender acting as a participant under any
loan arrangement between the Payee and the Borrower, any endorser or
guarantor hereof, and any cash, securities, instruments or other property of
the undersigned in the possession of the Payee or any of its banking or
lending affiliates or any lender acting as a participant under any loan
arrangement between the Payee and the Borrower, any endorser or guarantor
hereof, whether for safekeeping or otherwise, or in transit to or from the
Payee or any of its banking or lending affiliates or any such participant, or
in the possession of any third party acting on the Payee's behalf (regardless
of the reason the Payee had received same or whether the Payee has
conditionally released the same) shall at all times constitute security for
all of the liabilities and obligations of the undersigned and any endorser
and guarantor hereof to the Payee and may be applied or set off against such
liabilities and obligations of the undersigned or any endorser or guarantor
hereof to the Payee at any time, whether or not such are then due, whether or
not demand has been made and whether or not other collateral is then
available to the Payee.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of
such holder, nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future
occasion. The Borrower and every other maker and every endorser or guarantor
of this Note, regardless of the time, order or place of signing, waives
presentment, demand, protest and notices of every kind and assents to any
extension or postponement of the time of payment or any other indulgence, to
any substitution, exchange or release of collateral, and to the addition or
release of any other party or person primarily or secondarily liable. The
Borrower and each endorser and guarantor of this Note waive any rights to any
homestead exemptions on record as of the date of this Note respecting any
premises under the provisions of Chapter 188, Section 1, of the General Laws
of Massachusetts.
The Borrower and each endorser and guarantor of this Note shall
indemnify, defend and hold the Payee, the Administrative Agent and their
directors, officers, employees, agents and attorneys harmless against any
claim (as well as from attorneys' reasonable fees and expenses in connection
therewith) brought or threatened against the Administrative Agent or the
Payee by the Borrower, by any endorser or guarantor, or by any other person
on account of the Administrative Agent's or the Payee's relationship with the
Borrower or any endorser or guarantor hereof (each of which may be defended,
compromised, settled or pursued by the Administrative Agent with counsel of
the Administrative Agent's selection, but at the expense of the Borrower and
any endorser and/or guarantor), except (a) in the case of the indemnification
of the Administrative Agent against a claim brought or threatened against the
Administrative Agent, for any claim arising out of the gross negligence or
willful misconduct of the Administrative Agent, as adjudged by a court of
competent jurisdiction, and (b) in the case of the indemnification of Payee
against a claim brought or threatened against Payee, for any claim arising
out of the gross negligence or willful misconduct of Payee, as adjudged by a
court of competent jurisdiction, and (c) in the case of the indemnification
of the Administrative Agent or Payee against a claim brought against the
Administrative Agent by Payee or against Payee by the other Lender or by the
Administrative Agent. The within indemnification shall survive payment of the
Obligations, and/or any termination, release or discharge executed by the
Administrative Agent or Payee in favor of any Obligor. For purposes of
clarification, no Obligor shall have any obligation to indemnify the
Administrative Agent or Payee against any claim brought or threatened against
the Administrative Agent or Payee that any Obligor believes arises out of the
gross negligence or willful misconduct of the Administrative Agent or Payee
if a court of competent jurisdiction has determined that such claim in fact
arose out of the gross negligence or willful misconduct of the Administrative
Agent or Payee, as the case may be. The Payee shall be severally liable to
refund any amounts actually and voluntarily paid by the Obligors to the
Administrative Agent with respect to any such claim, promptly after such
judicial determination. Notwithstanding any provision in this Agreement to
the contrary, the Payee and Administrative Agent agree that neither the Payee
nor the Administrative
2
<PAGE>
Agent shall (1) declare an Event of Default or accelerate the Obligations or
(2) set aside or reserve any Collateral or otherwise exercise any remedies
with respect to any Collateral, in each case based solely upon an Obligor's
failure to pay the amount of any indemnifiable claim (and/or attorneys' fees
and expenses in connection therewith) prior to such judicial determination,
PROVIDED, HOWEVER, that in the case of an Event of Default (other than the
failure to pay the amount of any indemnifiable claim and/or attorneys' fees
and expenses in connection therewith prior to such judicial determination),
the Payee and the Administrative Agent may accelerate the Obligations and set
aside or reserve any Collateral or otherwise exercise any remedies with
respect to any Collateral. Notwithstanding any provision in this Agreement to
the contrary, in no circumstance shall the Administrative Agent or Payee seek
consequential, punitive or any other additional damages based upon the
failure or the alleged failure of any Obligor to pay the amount of any
indemnifiable claim and/or attorneys' fees and expenses in connection
therewith prior to such judicial determination.
The Borrower and each endorser and guarantor of this Note agree to pay
to the Administrative Agent and the Payee, upon demand, costs of collection
of the principal of and interest on this Note, including, without limitation,
reasonable attorneys' fees. After demand, interest shall accrue at a rate per
annum equal to the aggregate of four percent (4%) plus the rate provided for
herein. If any payment due under this Note is unpaid for ten (10) days or
more, the Borrower shall pay, in addition to any other sums due under this
Note (and without limiting the holder's other remedies on account thereof), a
late charge equal to five percent (5%) of such unpaid amount.
This Note shall be binding upon the Borrower and each endorser and
guarantor hereof and upon their respective heirs, successors, assigns and
legal representatives, and shall inure to the benefit of the Administrative
Agent and the Payee and their successors, endorsees and assigns.
The liabilities of the Borrower and any endorser or guarantor of this
Note are joint and several; provided, however, the release by the Payee of
the Borrower or any one or more endorser or guarantor shall not release any
other person obligated on account of this Note. Any and all present and
future debts of the Borrower to any endorser or guarantor of this Note are
subordinated to the full payment and performance of all present and future
debts and obligations of the Borrower to the Lenders. Each reference in this
Note to the Borrower, any endorser, and any guarantor, is to such person
individually and also to all such persons jointly. No person obligated on
account of this Note may seek contribution from any other person also
obligated, unless and until all liabilities, obligations and indebtedness to
the Lenders of the person from whom contribution is sought have been
satisfied in full. The release or compromise by the Administrative Agent or
the Payee of any collateral shall not release any person obligated on account
of this Note.
A photographic or other reproduction of this Note may be made by the
Administrative Agent or the Payee if marked "copy" or "duplicate" or with any
similar designation, and any such reproduction shall be admissible in
evidence with the same effect of the original itself in any judicial or
administrative proceeding, whether or not the original is in existence.
This Note is delivered to the Payee at one of its offices in
Massachusetts, shall be governed by the laws of the Commonwealth of
Massachusetts, and shall take effect as a sealed instrument.
Each of the Borrower and any endorser and guarantor of this Note
irrevocably submits to the nonexclusive jurisdiction of any federal or state
court sitting in Massachusetts, over any suit, action or proceeding arising
out of or relating to this Note. Each of the Borrower and any endorser and
guarantor irrevocably waives, to the fullest extent it may effectively do so
under applicable law, any objection it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any
such court and any claim that the same has been brought in an inconvenient
forum. Each of the Borrower and any endorser and guarantor irrevocably
appoints the Secretary of State of the Commonwealth of Massachusetts as its
authorized agent to accept and acknowledge on its behalf any and all process
which may be served in any such suit, action or proceeding, consents to such
process being served (i) by
3
<PAGE>
mailing a copy thereof by registered or certified mail, postage prepaid,
return receipt requested, to such Borrower's, endorser's or guarantor's
address shown below or as notified to the Administrative Agent and (ii) by
serving the same upon such agent, and agrees that such service shall in every
respect be deemed effective service upon such Borrower, endorser or guarantor.
EACH OF THE BORROWER, PAYEE, ADMINISTRATIVE AGENT AND ANY ENDORSER AND
GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND AFTER AN
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, WAIVES ANY AND ALL RIGHTS TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS NOTE, ALL
OF THE OBLIGATIONS OF THE BORROWER TO THE PAYEE, AND ALL MATTERS CONTEMPLATED
HEREBY AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH. EACH OF THE BORROWER
AND ANY ENDORSER AND GUARANTOR CERTIFIES THAT NEITHER THE ADMINISTRATIVE
AGENT NOR THE PAYEE NOR ANY OF THEIR REPRESENTATIVES, AGENTS OR COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PAYEE WOULD NOT IN THE EVENT OF
ANY SUCH PROCEEDING SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.
[INTENTIONALLY LEFT BLANK]
4
<PAGE>
Executed as an instrument under seal as of December 21 , 1998.
Witness Borrower:
SeraCare, Inc.
/s/ Barry D. Plost By: /s/ Jerry L. Burdick
- ------------------------- -------------------------
Jerry L. Burdick,
Executive Vice President and
Chief Financial Officer
1925 Century Park East, Suite 1970
Los Angeles, California
90067
STATE OF CALIFORNIA
Los Angeles ss. December 21, 1998
- ------------ ----------- --
Then personally appeared the above-named Jerry L. Burdick, Executive Vice
President and Chief Financial Officer of SeraCare, Inc., and acknowledged the
foregoing instrument to be the free act and deed of SeraCare, Inc., before me,
/s/ Nancy Pau , Notary Public
--------------------
My Commission expires: 2/19/2000
------------
[SEAL]
5
<PAGE>
4.18 REVOLVING TERM NOTE BETWEEN AND SERACARE, INC. AND STATE
STREET BANK & TRUST COMPANY DATED DECEMBER 21, 1998.
<PAGE>
REVOLVING TERM NOTE
December 21, 1998
$5,000,000 Boston, Massachusetts
For value received, the undersigned SeraCare, Inc. (the "Borrower"),
promises to pay to State Street Bank and Trust Company (hereinafter sometimes
referred to as "State Street" and "Payee"), or order, the principal amount of
Five Million Dollars ($5,000,000) or such lesser amount as may be outstanding
under that certain Revolving Credit, Term Loan and Security Agreement, dated
as of even date herewith (the "Loan Agreement"), among the Borrower, Avre
Incorporated, Binary Associates, Inc., SeraCare Acquisitions, Inc., BHM Labs,
Inc., SeraCare Technology, Inc., The Western States Group, Inc., American
Plasma, Inc., Brown Brothers Harriman & Co. ("BBH"), State Street and Brown
Brothers Harriman & Co. as Administrative Agent (the "Administrative Agent"),
an or before December 1, 2000, with interest from the date hereof on the said
principal balance from time to time outstanding. This Note and that certain
Amended and Restated Revolving Term Note from the Borrower to BBH in the face
amount of $5,000,000 dated the date hereof comprise the "Revolving Note" as
defined in the Loan Agreement. The aggregate principal balance outstanding
under this Note shall bear interest thereon at a per annum rate equal to the
Wall Street Journal Prime Rate (as hereinafter defined) plus three-quarters
of one percent (0.75%), payable quarterly in arrears on the first business
day of each fiscal quarter, commencing March 1, 1999. BBH and State Street
are hereinafter collectively referred to as the "Lenders." Capitalized terms
used but not defined herein are as defined in the Loan Agreement.
"Wall Street Journal Prime Rate" means the highest rate published from
time to time by the Wall Street Journal as the Prime Rate, or, in the event
the Wall Street Journal ceases to publish the Prime Rate, the base, reference
or other rate then designated by the Payee for general commercial loan
reference purposes, it being understood that such rate is a reference rate,
not necessarily the lowest, established from time to time, which serves as
the basis upon which effective interest rates are calculated for loans making
reference thereto. The effective interest rate applicable to undersigned's
loans shall change on the date of each change in the Wall Street Journal
Prime Rate.
Principal and interest shall be payable to the Administrative Agent
for the account of the Payee at the Administrative Agent's office at 40 Water
Street, Boston, Massachusetts 02109 (or at such other place as the
Administrative Agent may hereafter direct the Borrower) in lawful money of
the United States of America without set-off, deduction or counterclaim.
Interest shall be calculated on the basis of actual number of days elapsed
and a 360-day year.
This Note is issued pursuant to, is entitled to the benefits of, and
is subject to, the provisions of the Loan Agreement, but neither this
reference to the Loan Agreement nor any provision thereof shall affect or
impair the absolute and unconditional obligation of the Borrower to pay the
principal of and interest on this Note as herein provided.
This Note is a revolving note and subject to the foregoing, the
Borrower may, at its option, at any time prior to demand borrow, pay, prepay
and reborrow hereunder, all in accordance with the provisions hereof and of
any and all other agreements between the Borrower and the Lenders related
hereto; provided, however, that the principal balance outstanding shall at no
time exceed the face amount of this Note.
At the option of the holder, this Note shall become immediately due
and payable without notice or demand upon the occurrence of an Event of
Default under the Loan Agreement.
Any payments received by the Administrative Agent and Payee on account
of this Note shall be applied first, to any costs, expenses or charges then
owed to the Payee and the Administrative Agent by the Borrower; second, to
accrued and unpaid interest; and third, to the unpaid principal balance
hereof. The Borrower hereby authorizes the Payee to charge any deposit
account which the Borrower may maintain with the Payee for any payment
required hereunder.
The Borrower represents to the Administrative Agent and the Payee that
the proceeds of this Note will not be used for personal, family or household
purposes.
<PAGE>
Any and all deposits or other sums at any time credited by or due to
the undersigned or any endorser or guarantor hereof from the Payee or any of
its banking or lending affiliates or any lender acting as a participant under
any loan arrangement between the Payee and the Borrower, any endorser or
guarantor hereof, and any cash, securities, instruments or other property of
the undersigned in the possession of the Payee or any of its banking or
lending affiliates or any lender acting as a participant under any loan
arrangement between the Payee and the Borrower, any endorser or guarantor
hereof, whether for safekeeping or otherwise, or in transit to or from the
Payee or any of its banking or lending affiliates or any such participant,
or in the possession of any third party acting on the Payee's behalf
(regardless of the reason the Payee had received same or whether the Payee
has conditionally released the same) shall at all times constitute security
for all of the liabilities and obligations of the undersigned and any
endorser and guarantor hereof to the Payee and may be applied or set off
against such liabilities and obligations of the undersigned or any endorser
or guarantor hereof to the Payee at any time, whether or not such are then
due, whether or not demand has been made and whether or not other collateral
is then available to the Payee.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of
such holder, nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future
occasion. The Borrower and every other maker and every endorser or guarantor
of this Note, regardless of the time, order or place of signing, waives
presentment, demand, protest and notices of every kind and assents to any
extension or postponement of the time of payment or any other indulgence, to
any substitution, exchange or release of collateral, and to the addition or
release of any other party or person primarily or secondarily liable. The
Borrower and each endorser and guarantor of this Note waive any rights to any
homestead exemptions on record as of the date of this Note respecting any
premises under the provisions of Chapter 188, Section 1, of the General Laws
of Massachusetts.
The Borrower and each endorser and guarantor of this Note shall
indemnify, defend and hold the Payee, the Administrative Agent and their
directors, officers, employees, agents and attorneys harmless against any
claim (as well as from attorneys' reasonable fees and expenses in connection
therewith) brought or threatened against the Administrative Agent or the
Payee by the Borrower, by any endorser or guarantor, or by any other person
on account of the Administrative Agent's or the Payee's relationship with the
Borrower or any endorser or guarantor hereof (each of which may be defended,
compromised, settled or pursued by the Administrative Agent with counsel of
the Administrative Agent's selection, but at the expense of the Borrower and
any endorser and/or guarantor), except (a) in the case of the indemnification
of the Administrative Agent against a claim brought or threatened against the
Administrative Agent, for any claim arising out of the gross negligence or
willful misconduct of the Administrative Agent, as adjudged by a court of
competent jurisdiction, and (b) in the case of the indemnification of Payee
against a claim brought or threatened against Payee, for any claim arising
out of the gross negligence or willful misconduct of Payee, as adjudged by a
court of competent jurisdiction, and (c) in the case of the indemnification
of the Administrative Agent or Payee against a claim brought against the
Administrative Agent by Payee or against Payee by the other Lender or by the
Administrative Agent. The within indemnification shall survive payment of the
Obligations, and/or any termination, release or discharge executed by the
Administrative Agent or Payee in favor of any Obligor. For purposes of
clarification, no Obligor shall have any obligation to indemnify the
Administrative Agent or Payee against any claim brought or threatened against
the Administrative Agent or Payee that any Obligor believes arises out of the
gross negligence or willful misconduct of the Administrative Agent or Payee
if a court of competent jurisdiction has determined that such claim in fact
arose out of the gross negligence or willful misconduct of the Administrative
Agent or Payee, as the case may be. The Payee shall be severally liable to
refund any amounts actually and voluntarily paid by the Obligors to the
Administrative Agent with respect to any such claim, promptly after such
judicial determination. Notwithstanding any provision in this Agreement to
the contrary, the Payee and Administrative Agent agree that neither the Payee
nor the Administrative Agent shall (1) declare an Event of Default or
accelerate the Obligations or (2) set aside or reserve any Collateral or
otherwise exercise any remedies with respect to any Collateral, in each case
based solely
2
<PAGE>
upon an Obligor's failure to pay the amount of any indemnifiable claim
(and/or attorneys' fees and expenses in connection therewith) prior to such
judicial determination, provided, however, that in the Case of an Event of
Default (other than the failure to pay the amount of any indemnifiable claim
and/or attorneys' fees and expenses in connection therewith prior to such
judicial determination), the Payee and the Administrative Agent may
accelerate the Obligations and set aside or reserve any Collateral or
otherwise exercise any remedies with respect to any Collateral.
Notwithstanding any provision in this Agreement to the contrary, in no
circumstance shall the Administrative Agent or Payee seek consequential,
punitive or any other additional damages based upon the failure or the
alleged failure of any Obligor to pay the amount of any indemnifiable claim
and/or attorneys' fees and expenses in connection therewith prior to such
judicial determination.
The Borrower and each endorser and guarantor of this Note agree to pay
to the Administrative Agent and the Payee, upon demand, costs of collection
of the principal of and interest on this Note, including, without limitation,
reasonable attorneys' fees. After demand, interest shall accrue at a rate per
annum equal to the aggregate of four percent (4%) plus the rate provided for
herein. If any payment due under this Note is unpaid for ten (10) days or
more, the Borrower shall pay, in addition to any other sums due under this
Note (and without limiting the holder's other remedies on account thereof), a
late charge equal to five percent (5%) of such unpaid amount.
This Note shall be binding upon the Borrower and each endorser and
guarantor hereof and upon their respective heirs, successors, assigns and
legal representatives, and shall inure to the benefit of the Administrative
Agent and the Payee and their successors, endorsees and assigns.
The liabilities of the Borrower and any endorser or guarantor of this
Note are joint and several; provided, however, the release by the Payee of
the Borrower or any one or more endorser or guarantor shall not release any
other person obligated on account of this Note. Any and all present and
future debts of the Borrower to any endorser or guarantor of this Note are
subordinated to the full payment and performance of all present and future
debts and obligations of the Borrower to the Lenders. Each reference in this
Note to the Borrower, any endorser, and any guarantor, is to such person
individually and also to all such persons jointly. No person obligated on
account of this Note may seek contribution from any other person also
obligated, unless and until all liabilities, obligations and indebtedness to
the Lenders of the person from whom contribution is sought have been
satisfied in full. The release or compromise by the Administrative Agent or
the Payee of any collateral shall not release any person obligated on account
of this Note.
A photographic or other reproduction of this Note may be made by the
Administrative Agent or the Payee if marked "copy" or "duplicate" or with any
similar designation, and any such reproduction shall be admissible in
evidence with the same effect of the original itself in any judicial or
administrative proceeding, whether or not the original is in existence.
This Note is delivered to the Payee at one of its offices in
Massachusetts, shall be governed by the laws of the Commonwealth of
Massachusetts, and shall take effect as a sealed instrument.
Each of the Borrower and any endorser and guarantor of this Note
irrevocably submits to the nonexclusive jurisdiction of any federal or state
court sitting in Massachusetts, over any suit, action or proceeding arising
out of or relating to this Note. Each of the Borrower and any endorser and
guarantor irrevocably waives, to the fullest extent it may effectively do so
under applicable law, any objection it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any
such court and any claim that the same has been brought in an inconvenient
forum. Each of the Borrower and any endorser and guarantor irrevocably
appoints the Secretary of State of the Commonwealth of Massachusetts as its
authorized agent to accept and acknowledge on its behalf any and all process
which may be served in any such suit, action or proceeding, consents to such
process being served (i) by mailing a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to such Borrower's,
endorser's or guarantor's address shown below or as notified to the
Administrative Agent and
3
<PAGE>
(ii) by serving the same upon such agent, and agrees that such service shall
in every respect be deemed effective service upon such Borrower, endorser or
guarantor.
EACH OF THE BORROWER, PAYEE, ADMINISTRATIVE AGENT AND ANY ENDORSER AND
GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND AFTER AN
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, WAIVES ANY AND ALL RIGHTS TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS NOTE, ALL
OF THE OBLIGATIONS OF THE BORROWER TO THE PAYEE, AND ALL MATTERS CONTEMPLATED
HEREBY AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH. EACH OF THE BORROWER
AND ANY ENDORSER AND GUARANTOR CERTIFIES THAT NEITHER THE ADMINISTRATIVE
AGENT NOR THE PAYEE NOR ANY OF THEIR REPRESENTATIVES, AGENTS OR COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PAYEE WOULD NOT IN THE EVENT OF
ANY SUCH PROCEEDING SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.
[INTENTIONALLY LEFT BLANK]
4
<PAGE>
Executed as an instrument under seal as of December 21, 1998.
Witness Borrower:
SeraCare, Inc.
/s/ Barry Plost By: /s/ Jerry L. Burdick
- ------------------------- -------------------------
Jerry L. Burdick,
Executive Vice President and
Chief Financial Officer
1925 Century Park East, Suite 1970
Los Angeles, California
90067
STATE OF CALIFORNIA
Los Angeles ss. December 21, 1998
- ------------ ----------- --
Then personally appeared the above-named Jerry L. Burdick, Executive
Vice President and Chief Financial Officer of SeraCare, Inc., and
acknowledged the foregoing instrument to be the free act and deed of
SeraCare, Inc., before me,
/s/ Nancy Pau , Notary Public
--------------------
My Commission expires: 2/19/2000
------------
[SEAL]
5
<PAGE>
4.19 TERM PROMISSORY NOTE AND SERACARE, INC. AND BROWN
BROTHERS HARRIMAN & CO. DATED DECEMBER 21, 1998.
<PAGE>
TERM PROMISSORY NOTE
December 21, 1998
$3,500,000 Boston, Massachusetts
For value received, the undersigned SeraCare, Inc. (the "Borrower"),
promises to pay to Brown Brothers Harriman & Co. (hereinafter sometimes
referred to as "BBH" and "Payee"), or order, the principal amount of Three
Million Five Hundred Thousand Dollars ($3,500,000). This Note is executed
pursuant to that certain Revolving Credit, Term Loan and Security Agreement,
dated as of even date herewith (the "Loan Agreement"), among the Borrower,
Avre Incorporated, Binary Associates, Inc., SeraCare Acquisitions, Inc., BHM
Labs, Inc., SeraCare Technology, Inc., The Western States Group, Inc.,
American Plasma, Inc., BBH, State Street Bank and Trust Company ("State
Street") and Brown Brothers Harriman & Co. as Administrative Agent (the
"Administrative Agent"). This Note and that certain Term Promissory Note from
the Borrower to State Street in the face amount of $3,500,000 dated the date
hereof comprise the "Term Note" as defined in the Loan Agreement. The
aggregate principal balance outstanding under this Note shall bear interest
thereon at a per annum rate equal to the Wall Street Journal Prime Rate (as
hereinafter defined) plus three-quarters of one percent (0.75%), payable
quarterly in arrears on the first business day of each fiscal quarter,
commencing March 1, 1999. BBH and State Street are hereinafter collectively
referred to as the "Lenders." Capitalized terms used but not defined herein
are as defined in the Loan Agreement.
"Wall Street Journal Prime Rate" means the highest rate published from
time to time by the Wall Street Journal as the Prime Rate, or, in the event
the Wall Street Journal ceases to publish the Prime Rate, the base, reference
or other rate then designated by the Payee for general commercial loan
reference purposes, it being understood that such rate is a reference rate,
not necessarily the lowest, established from time to time, which serves as
the basis upon which effective interest rates are calculated for loans making
reference thereto. The effective interest rate applicable to undersigned's
loans shall change on the date of each change in the Wall Street Journal
Prime Rate.
Principal shall be due and payable in arrears under this Note as follows:
1. During the first year of the term of this Note,
(a) $250,000 on June 1, 1999;
(b) $125,000 on September 1, 1999; and
(c) $125,000 on December 1, 1999.
2. During the second year of the term of this Note,
(a) $312,500 on March 1, 2000;
(b) $312,500 on June 1, 2000;
(c) $312,500 on September 1, 2000, and
(d) $312,500 on December 1, 2000.
<PAGE>
3. During the third year of the term of this Note,
(a) $437,500 on March 1, 2001;
(b) $437,500 on June 1, 2001;
(c) $437,500 on September 1, 2001; and
(d) $437,500, plus any interest then remaining unpaid, due
and payable, on December 1, 2001.
In addition to all amounts due and payable in accordance with this
Note, the Borrower shall make annual prepayments of the principal balance
outstanding respecting this Note on the last day of May of each year
commencing May 31, 2000 in an amount equal to the Excess Cash Flow Amount (as
hereinafter defined) x .50. The "Excess Cash Flow Amount" shall mean a number
calculated by multiplying the Excess Cash Flow Percentage (as hereinafter
defined) by the Excess Cash Flow. "Excess Cash Flow" shall mean the
Borrower's EBITDA for the Borrower's latest fiscal year ending prior to the
date any payment is due under this paragraph (the "Applicable Period"),
minus, for the Applicable Period, (i) Borrower's capital expenditures, (ii)
the Borrower's cash tax payments, (iii) payments made by the Borrower on
account of scheduled amortization and voluntary permanent reduction of
indebtedness owing to the Lenders, and (iv) cash interest payments. "Excess
Cash Flow Percentage" shall mean thirty percent (30%). All terms used in this
paragraph shall be defined in accordance with generally accepted accounting
principles consistently applied. Mandatory and voluntary prepayments shall be
applied against unpaid installments of principal of this Note in inverse
order of maturity of such installments.
Principal and interest shall be payable to the Administrative Agent
for the account of the Payee at the Administrative Agent's main office at 40
Water Street, Boston, Massachusetts 02109 (or at such other place as the
Administrative Agent may hereafter direct the Borrower) in lawful money of
the United States of America without set-off, deduction or counterclaim.
Interest shall be calculated on the basis of actual number of days elapsed
and a 360-day year.
This Note is issued pursuant to, is entitled to the benefits of, and
is subject to, the provisions of the Loan Agreement, but neither this
reference to the Loan Agreement nor any provision thereof shall affect or
impair the absolute and unconditional obligation of the Borrower to pay the
principal of and interest on this Note as herein provided.
At the option of the holder, this Note shall become immediately due
and payable without notice or demand upon the occurrence of an Event of
Default under the Loan Agreement.
Any payments received by the Administrative Agent and Payee on account
of this Note shall be applied first, to any costs, expenses or charges then
owed to the Payee and the Administrative Agent by the Borrower; second, to
accrued and unpaid interest; and third, to the unpaid principal balance
hereof. The Borrower hereby authorizes the Payee to charge any deposit
account which the Borrower may maintain with the Payee for any payment
required hereunder.
The Borrower represents to the Administrative Agent and the Payee that
the proceeds of this Note will not be used for personal, family or household
purposes.
Any and all deposits or other sums at any time credited by or due to
the undersigned or any endorser or guarantor hereof from the Payee or any of
its banking or lending affiliates or any lender acting as a participant under
any loan arrangement between the Payee and the Borrower, any endorser or
guarantor hereof, and any cash, securities, instruments or other property of
the undersigned in the possession of the Payee or any of its banking or
lending affiliates or any lender acting as a participant under any loan
arrangement between the Payee and the Borrower, any endorser or guarantor
hereof, whether for safekeeping or otherwise, or in transit to or from the
Payee or any of its banking or lending affiliates or any such participant, or
in the possession of any third party acting on the Payee's behalf (regardless
of the
2
<PAGE>
reason the Payee had received same or whether the Payee has conditionally
released the same) shall at all times constitute security for all of the
liabilities and obligations of the undersigned and any endorser and guarantor
hereof to the Payee and may be applied or set off against such liabilities
and obligations of the undersigned or any endorser or guarantor hereof to the
Payee at any time, whether or not such are then due, whether or not demand
has been made and whether or not other collateral is then available to the
Payee.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of
such holder, nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future
occasion. The Borrower and every other maker and every endorser or guarantor
of this Note, regardless of the time, order or place of signing, waives
presentment, demand, protest and notices of every kind and assents to any
extension or postponement of the time of payment or any other indulgence, to
any substitution, exchange or release of collateral, and to the addition or
release of any other party or person primarily or secondarily liable. The
Borrower and each endorser and guarantor of this Note waive any rights to any
homestead exemptions on record as of the date of this Note respecting any
premises under the provisions of Chapter 188, Section 1, of the General Laws
of Massachusetts.
The Borrower and each endorser and guarantor of this Note shall
indemnify, defend and hold the Payee, the Administrative Agent and their
directors, officers, employees, agents and attorneys harmless against any
claim (as well as from attorneys' reasonable fees and expenses in connection
therewith) brought or threatened against the Administrative Agent or the
Payee by the Borrower, by any endorser or guarantor, or by any other person
on account of the Administrative Agent's or the Payee's relationship with the
Borrower or any endorser or guarantor hereof (each of which may be defended,
compromised, settled or pursued by the Administrative Agent with counsel of
the Administrative Agent's selection, but at the expense of the Borrower and
any endorser and/or guarantor), except (a) in the case of the indemnification
of the Administrative Agent against a claim brought or threatened against the
administrative agent, for any claim arising out of the gross negligence or
willful misconduct of the Administrative Agent, as adjudged by a court of
competent jurisdiction, and (b) in the case of the indemnification of Payee
against a claim brought or threatened against Payee, for any claim arising
out of the gross negligence or willful misconduct of Payee, as adjudged by a
court of competent jurisdiction, and (c) in the case of the indemnification
of the Administrative Agent or Payee against a claim brought against the
Administrative Agent by Payee or against Payee by the other Lender or by the
Administrative Agent. The within indemnification shall survive payment of the
Obligations, and/or any termination, release or discharge executed by the
Administrative Agent or Payee in favor of any Obligor. For purposes of
clarification, no Obligor shall have any obligation to indemnify the
Administrative Agent or Payee against any claim brought or threatened against
the Administrative Agent or Payee that any Obligor believes arises out of the
gross negligence or willful misconduct of the Administrative Agent or Payee
if a court of competent jurisdiction has determined that such claim in fact
arose out of the gross negligence or willful misconduct of the Administrative
Agent or Payee, as the case may be. The Payee shall be severally liable to
refund any amounts actually and voluntarily paid by the Obligors to the
Administrative Agent with respect to any such claim, promptly after such
judicial determination. Notwithstanding any provision in this Agreement to
the contrary, the Payee and Administrative Agent agree that neither the Payee
nor the Administrative Agent shall (1) declare an Event of Default or
accelerate the Obligations or (2) set aside or reserve any Collateral or
otherwise exercise any remedies with respect to any Collateral, in each case
based solely upon an Obligor's failure to pay the amount of any indemnifiable
claim (and/or attorneys' fees and expenses in connection therewith) prior to
such judicial determination, PROVIDED, HOWEVER, that in the case of an Event
of Default (other than the failure to pay the amount of any indemnifiable
claim and/or attorneys' fees and expenses in connection therewith prior to
such judicial determination), the Payee and the Administrative Agent may
accelerate the Obligations and set aside or reserve any Collateral or
otherwise exercise any remedies with respect to any Collateral.
Notwithstanding any provision in this Agreement to the contrary, in no
circumstance shall the administrative agent or payee seek consequential,
punitive or any other additional damages based upon the failure or the
alleged failure of
3
<PAGE>
any Obligor to pay the amount of any indemnifiable claim and/or attorneys' fees
and expenses in connection therewith prior to such judicial determination.
The Borrower and each endorser and guarantor of this Note agree to pay
to the Administrative Agent and the Payee, upon demand, costs of collection
of the principal of and interest on this Note, including, without limitation,
reasonable attorneys' fees. After demand, interest shall accrue at a rate per
annum equal to the aggregate of four percent (4%) plus the rate provided for
herein. If any payment due under this Note is unpaid for ten (10) days or
more, the Borrower shall pay, in addition to any other sums due under this
Note (and without limiting the holder's other remedies on account thereof), a
late charge equal to five percent (5%) of such unpaid amount.
This Note shall be binding upon the Borrower and each endorser and
guarantor hereof and upon their respective heirs, successors, assigns and
legal representatives, and shall inure to the benefit of the Administrative
Agent and the Payee and their successors, endorsees and assigns.
The liabilities of the Borrower and any endorser or guarantor of this
Note are joint and several; provided, however, the release by the Payee of
the Borrower or any one or more endorser or guarantor shall not release any
other person obligated on account of this Note. Any and all present and
future debts of the Borrower to any endorser or guarantor of this Note are
subordinated to the full payment and performance of all present and future
debts and obligations of the Borrower to the Lenders. Each reference in this
Note to the Borrower, any endorser, and any guarantor, is to such person
individually and also to all such persons jointly. No person obligated on
account of this Note may seek contribution from any other person also
obligated, unless and until all liabilities, obligations and indebtedness to
the Lenders of the persons from whom contribution is sought have been
satisfied in full. The release or compromise by the Administrative Agent or
the Payee of any collateral shall not release any person obligated on account
of this Note.
A photographic or other reproduction of this Note may be made by the
Administrative Agent or the Payee if marked "copy" or "duplicate" or with any
similar designation, and any such reproduction shall be admissible in
evidence with the same effect of the original itself in any judicial or
administrative proceeding, whether or not the original is in existence.
This Note is delivered to the Payee at one of its offices in
Massachusetts, shall be governed by the laws of the Commonwealth of
Massachusetts, and shall take effect as a sealed instrument.
Each of the Borrower and any endorser and guarantor of this Note
irrevocably submits to the nonexclusive jurisdiction of any federal or state
court sitting in Massachusetts, over any suit, action or proceeding arising
out of or relating to this Note. Each of the Borrower and any endorser and
guarantor irrevocably waives, to the fullest extent it may effectively do so
under applicable law, any objection it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any
such court and any claim that the same has been brought in an inconvenient
forum. Each of the Borrower and any endorser and guarantor irrevocably
appoints the Secretary of State of the Commonwealth of Massachusetts as its
authorized agent to accept and acknowledge on its behalf any and all process
which may be served in any such suit, action or proceeding, consents to such
process being served (i) by mailing a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to such Borrower's,
endorser's or guarantor's address shown below or as notified to the
Administrative Agent and (ii) by serving the same upon such agent, and agrees
that such service shall in every respect be deemed effective service upon
such Borrower, endorser or guarantor.
EACH OF THE BORROWER, PAYEE, ADMINISTRATIVE AGENT AND ANY ENDORSER AND
GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND AFTER AN
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, WAIVES ANY AND ALL RIGHTS TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS NOTE, ALL
OF
4
<PAGE>
THE OBLIGATIONS OF THE BORROWER TO THE PAYEE, AND ALL MATTERS CONTEMPLATED
HEREBY AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH. EACH OF THE BORROWER
AND ANY ENDORSER AND GUARANTOR CERTIFIES THAT NEITHER THE ADMINISTRATIVE
AGENT NOR THE PAYEE NOR ANY OF THEIR REPRESENTATIVES, AGENTS OR COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PAYEE OR THE ADMINISTRATIVE
AGENT WOULD NOT IN THE EVENT OF ANY SUCH PROCEEDING SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO TRIAL BY JURY.
[INTENTIONALLY LEFT BLANK]
5
<PAGE>
Executed as an instrument under seal as of December 21, 1998.
Witness Borrower:
SeraCare, Inc.
/s/ Barry Plost By: /s/ Jerry L. Burdick
- ------------------------- -------------------------
Jerry L. Burdick,
Executive Vice President and
Chief Financial Officer
1925 Century Park East, Suite 1970
Los Angeles, California
90067
STATE OF CALIFORNIA
Los Angeles, ss. December 21, 1998
- ------------ ----------- --
Then personally appeared the above-named Jerry L. Burdick, Executive Vice
President and Chief Financial Officer of SeraCare, Inc., and acknowledged the
foregoing instrument to be the free act and deed of SeraCare, Inc., before me,
/s/ Nancy Pau , Notary Public
--------------------
My Commission expires: 2/19/2000
------------
[SEAL]
6
<PAGE>
4.20 TERM PROMISSORY NOTE BETWEEN AND SERACARE, INC. AND STATE STREET BANK &
TRUST COMPANY DATED DECEMBER 21, 1998.
<PAGE>
TERM PROMISSORY NOTE
December 21, 1998
$3,500,000 Boston, Massachusetts
For value received, the undersigned SeraCare, Inc. (the "Borrower"),
promises to pay to State Street Bank and Trust Company (hereinafter sometimes
referred to as "State Street" and "Payee"), or order, the principal amount of
Three Million Five Hundred Thousand Dollars ($3,500,000). This Note is executed
pursuant to that certain Revolving Credit, Term Loan and Security Agreement,
dated as of even date herewith (the "Loan Agreement"), among the Borrower, Avre
Incorporated, Binary Associates, Inc., SeraCare Acquisitions, Inc., BHM Labs,
Inc., SeraCare Technology, Inc., The Western States Group, Inc., American
Plasma, Inc., Brown Brothers Harriman & Co. ("BBH"), State Street and Brown
Brothers Harriman & Co. as Administrative Agent (the "Administrative Agent").
This Note and that certain Term Promissory Note from the Borrower to BBH in the
face amount of $3,500,000 dated the date hereof comprise the "Term Note" as
defined in the Loan Agreement. The aggregate principal balance outstanding under
this Note shall bear interest thereon at a per annum rate equal to the Wall
Street Journal Prime Rate (as hereinafter defined) plus three-quarters of one
percent (0.75%), payable quarterly in arrears on the first business day of each
fiscal quarter, commencing March 1, 1999. BBH and State Street are hereinafter
collectively referred to as the "Lenders." Capitalized terms used but not
defined herein are as defined in the Loan Agreement.
"Wall Street Journal Prime Rate" means the highest rate published from time
to time by the Wall Street Journal as the Prime Rate, or, in the event the Wall
Street Journal ceases to publish the Prime Rate, the base, reference or other
rate then designated by the Payee for general commercial loan reference
purposes, it being understood that such rate is a reference rate, not
necessarily the lowest, established from time to time, which serves as the basis
upon which effective interest rates are calculated for loans making reference
thereto. The effective interest rate applicable to undersigned's loans shall
change on the date of each change in the Wall Street Journal Prime Rate.
Principal shall be due and payable in arrears under this Note as follows:
1. During the first year of the term of this Note,
(a) $250,000 on June 1, 1999;
(b) $125,000 on September 1, 1999; and
(c) $125,000 on December 1, 1999.
2. During the second year of the term of this Note,
(a) $312,500 on March 1, 2000;
(b) $312,500 on June 1, 2000;
(c) $312,500 on September 1, 2000; and
(d) $312,500 on December 1, 2000.
<PAGE>
3. During the third year of the term of this Note,
(a) $437,500 on March 1, 2001;
(b) $437,500 on June 1, 2001;
(c) $437,500 on September 1, 2001; and
(d) $437,500, plus any interest then remaining
unpaid, due and payable, on December 1, 2001.
In addition to all amounts due and payable in accordance with this Note,
the Borrower shall make annual prepayments of the principal balance outstanding
respecting this Note an the last day of May of each year commencing May 31, 2000
in an amount equal to the Excess Cash Flow Amount (as hereinafter defined) x
.50. The "Excess Cash Flow Amount" shall mean a number calculated by multiplying
the Excess Cash Flow Percentage (as hereinafter defined) by the Excess Cash
Flow, "Excess Cash Flow" shall mean the Borrower's EBITDA for the Borrower's
latest fiscal year ending prior to the date any payment is due under this
paragraph (the "Applicable Period"), minus, for the Applicable Period, (i)
Borrower's capital expenditures, (ii) the Borrower's cash tax payments, (iii)
payments made by the Borrower on account of scheduled amortization and voluntary
permanent reduction of indebtedness owing to the Lenders, and (iv) cash interest
payments. "Excess Cash Flow Percentage" shall mean thirty percent (30%). All
terms used in this paragraph shall be defined in accordance with generally
accepted accounting principles consistently applied. Mandatory and voluntary
prepayments shall be applied against unpaid installments of principal of this
Note in inverse order of maturity of such installments.
Principal and interest shall be payable to the Administrative Agent for the
account of the Payee at the Administrative Agent's main office at 40 Water
Street, Boston, Massachusetts 02109 (or at such other place as the
Administrative Agent may hereafter direct the Borrower) in lawful money of the
United States of America without set-off, deduction or counterclaim. Interest
shall be calculated on the basis of actual number of days elapsed and a 360-day
year.
This Note is issued pursuant to, is entitled to the benefits of, and is
subject to, the provisions of the Loan Agreement, but neither this reference to
the Loan Agreement nor any provision thereof shall affect or impair the absolute
and unconditional obligation of the Borrower to pay the principal of and
interest on this Note as herein provided.
At the option of the holder, this Note shall become immediately due and
payable without notice or demand upon the occurrence of an Event of Default
under the Loan Agreement.
Any payments received by the Administrative Agent and Payee on account
of this Note shall be applied first, to any costs, expenses or charges then
owed to the Payee and the Administrative Agent by the Borrower; second, to
accrued and unpaid interest; and third, to the unpaid principal balance
hereof. The Borrower hereby authorizes the Payee to charge any deposit
account which the Borrower may maintain with the Payee for any payment
required hereunder.
The Borrower represents to the Administrative Agent and the Payee that the
proceeds of this Note will not be used for personal, family or household
purposes.
Any and all deposits or other sums at any time credited by or due to the
undersigned or any endorser or guarantor hereof from the Payee or any of its
banking or lending affiliates or any lender acting as a participant under any
loan arrangement between the Payee and the Borrower, any endorser or guarantor
hereof, and any cash, securities, instruments or other property of the
undersigned in the possession of the Payee or any of its banking or lending
affiliates or any lender acting as a participant under any loan arrangement
between the Payee and the Borrower, any endorser or guarantor hereof, whether
for safekeeping or otherwise, or in transit to or from the Payee or any of its
banking or lending affiliates or any such participant, or in the possession of
any third party acting on the Payee's behalf (regardless of the
2
<PAGE>
reason the Payee had received same or whether the Payee has conditionally
released the same) shall at all times constitute security for all of the
liabilities and obligations of the undersigned and any endorser and guarantor
hereof to the Payee and may be applied or set off against such liabilities
and obligations of the undersigned or any endorser or guarantor hereof to the
Payee at any time, whether or not such are then due, whether or not demand
has been made and whether or not other collateral is then available to the
Payee.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of such
holder, nor shall any delay, omission or waiver an any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion. The
Borrower and every other maker and every endorser or guarantor of this Note,
regardless of the time, order or place of signing, waives presentment, demand,
protest and notices of every kind and assents to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange or
release of collateral, and to the addition or release of any other party or
person primarily or secondarily liable. The Borrower and each endorser and
guarantor of this Note waive any rights to any homestead exemptions on record as
of the date of this Note respecting any premises under the provisions of Chapter
188, Section 1, of the General Laws of Massachusetts.
The Borrower and each endorser and guarantor of this Note shall indemnify,
defend and hold the Payee, the Administrative Agent and their directors,
officers, employees, agents and attorneys harmless against any claim (as well as
from attorneys' reasonable fees and expenses in connection therewith) brought or
threatened against the Administrative Agent or the Payee by the Borrower, by any
endorser or guarantor, or by any other person on account of the Administrative
Agent's or the Payee's relationship with the Borrower or any endorser or
guarantor hereof (each of which may be defended, compromised, settled or pursued
by the Administrative Agent with counsel of the Administrative Agent's
selection, but at the expense of the Borrower and any endorser and/or
guarantor), except (a) in the case of the indemnification of the Administrative
Agent against a claim brought or threatened against the Administrative Agent,
for any claim arising out of the gross negligence or willful misconduct of the
Administrative Agent, as adjudged by a court of competent jurisdiction, and (b)
in the case of the indemnification of Payee against a claim brought or
threatened against Payee, for any claim arising out of the gross negligence or
willful misconduct of Payee, as adjudged by a court of competent jurisdiction,
and (c) in the case of the indemnification of the Administrative Agent or Payee
against a claim brought against the Administrative Agent by Payee or against
Payee by the other Lender or by the Administrative Agent. The within
indemnification shall survive payment of the Obligations, and/or any
termination, release or discharge executed by the Administrative Agent or Payee
in favor of any Obligor. For purposes of clarification, no Obligor shall have
any obligation to indemnify the Administrative Agent or Payee against any claim
brought or threatened against the Administrative Agent or Payee that any Obligor
believes arises out of the gross negligence or willful misconduct of the
Administrative Agent or Payee if a court of competent jurisdiction has
determined that such claim in fact arose out of the gross negligence or willful
misconduct of the Administrative Agent or Payee, as the case may be. The Payee
shall be severally liable to refund any amounts actually and voluntarily paid by
the Obligors to the Administrative Agent with respect to any such claim,
promptly after such judicial determination. Notwithstanding any provision in
this Agreement to the contrary, the Payee and Administrative Agent agree that
neither the Payee nor the Administrative Agent shall (1) declare an Event of
Default or accelerate the Obligations or (2) set aside or reserve any Collateral
or otherwise exercise any remedies with respect to any Collateral, in each case
based solely upon an Obligor's failure to pay the amount of any indemnifiable
claim (and/or attorneys' fees and expenses in connection therewith) prior to
such judicial determination, PROVIDED, HOWEVER, that in the case of an Event of
Default (other than the failure to pay the amount of any indemnifiable claim
and/or attorneys' fees and expenses in connection therewith prior to such
judicial determination), the Payee and the Administrative Agent may accelerate
the Obligations and set aside or reserve any Collateral or otherwise exercise
any remedies with respect to any Collateral. Notwithstanding any provision in
this Agreement to the contrary, in no circumstance shall the Administrative
Agent or Payee seek consequential, punitive or any other additional damages
based upon the failure or the alleged failure of
3
<PAGE>
any Obligor to pay the amount of any indemnifiable claim and/or attorneys'
fees and expenses in connection therewith prior to such judicial
determination.
The Borrower and each endorser and guarantor of this Note agree to pay to
the Administrative Agent and the Payee, upon demand, costs of collection of the
principal of and interest on this Note, including, without limitation,
reasonable attorneys' fees. After demand, interest shall accrue at a rate per
annum equal to the aggregate of four percent (4%) plus the rate provided for
herein. If any payment due under this Note is unpaid for ten (10) days or more,
the Borrower shall pay, in addition to any other sums due under this Note (and
without limiting the holder's other remedies on account thereof), a late charge
equal to five percent (5%) of such unpaid amount.
This Note shall be binding upon the Borrower and each endorser and
guarantor hereof and upon their respective heirs, successors, assigns and legal
representatives, and shall inure to the benefit of the Administrative Agent and
the Payee and their successors, endorsees and assigns.
The liabilities of the Borrower and any endorser or guarantor of this Note
are joint and several; provided, however, the release by the Payee of the
Borrower or any one or more endorser or guarantor shall not release any other
person obligated on account of this Note. Any and all present and future debts
of the Borrower to any endorser or guarantor of this Note are subordinated to
the full payment and performance of all present and future debts and obligations
of the Borrower to the Lenders. Each reference in this Note to the Borrower, any
endorser, and any guarantor, is to such person individually and also to all such
persons jointly. No person obligated on account of this Note may seek
contribution from any other person also obligated, unless and until all
liabilities, obligations and indebtedness to the Lenders of the persons from
whom contribution is sought have been satisfied in full. The release or
compromise by the Administrative Agent or the Payee of any collateral shall not
release any person obligated on account of this Note.
A photographic or other reproduction of this Note may be made by the
Administrative Agent or the Payee if marked "copy' or "duplicate" or with any
similar designation, and any such reproduction shall be admissible in evidence
with the same effect of the original itself in any judicial or administrative
proceeding, whether or not the original is in existence.
This Note is delivered to the Payee at one of its offices in Massachusetts,
shall be governed by the laws of the Commonwealth of Massachusetts, and shall
take effect as a sealed instrument.
Each of the Borrower and any endorser and guarantor of this Note
irrevocably submits to the nonexclusive jurisdiction of any federal or state
court sitting in Massachusetts, over any suit, action or proceeding arising out
of or relating to this Note. Each of the Borrower and any endorser and guarantor
irrevocably waives, to the fullest extent it may effectively do so under
applicable law, any objection it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in any such court and any
claim that the same has been brought in an inconvenient forum. Each of the
Borrower and any endorser and guarantor irrevocably appoints the Secretary of
State of the Commonwealth of Massachusetts as its authorized agent to accept and
acknowledge on its behalf any and all process which may be served in any such
suit, action or proceeding, consents to such process being served (i) by mailing
a copy thereof by registered or certified mail, postage prepaid, return receipt
requested, to such Borrower's, endorser's or guarantor's address shown below or
as notified to the Administrative Agent and (ii) by serving the same upon such
agent, and agrees that such service shall in every respect be deemed effective
service upon such Borrower, endorser or guarantor.
EACH OF THE BORROWER, PAYEE, ADMINISTRATIVE AGENT AND ANY ENDORSER AND
GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND AFTER AN
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, WAIVES ANY AND ALL RIGHTS TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS NOTE, ALL OF THE
OBLIGATIONS OF THE BORROWER TO THE PAYEE, AND ALL MATTERS CONTEMPLATED HEREBY
AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH. EACH OF THE BORROWER
4
<PAGE>
AND ANY ENDORSER AND GUARANTOR CERTIFIES THAT NEITHER THE ADMINISTRATIVE AGENT
NOR THE PAYEE NOR ANY OF THEIR REPRESENTATIVES, AGENTS OR COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PAYEE OR THE ADMINISTRATIVE AGENT
WOULD NOT IN THE EVENT OF ANY SUCH PROCEEDING SEEK TO ENFORCE THIS WAIVER OF
RIGHT TO TRIAL BY JURY.
[INTENTIONALLY LEFT BLANK]
5
<PAGE>
Executed as an instrument under seal as of December 21, 1998.
Witness Borrower
SeraCare, Inc.
/s/ [ILLEGIBLE] By: /s/ Jerry L. Burdick
- ---------------------- -----------------------------------
Jerry L. Burdick
Executive Vice President and
Chief Financial Officer
1925 Century Park East, Suite 1970
Los Angeles, California
90067
STATE OF CALIFORNIA
Los Angeles, SS. Dec. 21, 1998
Then personally appeared the above-named Jerry L. Burdick, Executive
Vice President and Chief Financial Officer of SeraCare, Inc., and
acknowledged the foregoing instrument to be the free act and deed of
SeraCare, Inc., before me,
/s/ Nancy Pau, Notary Public
My Commission expires: 2/19/2000
[STAMP]
<PAGE>
4.21 Amended and Restated Borrowing and Agency Agreement between SeraCare,
Inc. and Brown Brothers Harriman & Co. Dated December 21,1998.
<PAGE>
AMENDED AND RESTATED
BORROWING AND AGENCY AGREEMENT
December 21, 1998
Brown Brothers Harriman & Co.
40 Water Street, Boston
Massachusetts 02109
and
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
and
Brown Brothers Harriman * Co. as Administrative Agent
40 Water Street
Boston, Massachusetts 02109
Gentlemen:
The undersigned, SeraCare, Inc., a California Corporation with an address
of 1925 Century Park East, Suite 1970, Los Angeles, California 90067
("SeraCare"), Avre Incorporated, a Nevada corporation with an address of 1925
Century Park East, Suite 1970, Los Angeles, California 90067 ("Avre"); Binary
Associates, Inc., a Colorado corporation with an address of 1925 Century Park
East, Suite 1970, Los Angeles, California 90067 ("Binary"); SeraCare
Acquisitions, Inc., a Nevada corporation with an address of 1925 Century Park
East, Suite 1970, Los Angeles, California 90067 ("Acquisitions"); BHM Labs,
Inc., an Arkansas corporation with an address of 1925 Century Park East, Suite
1970, Los Angeles, California 90067 ("BHM"); SeraCare Technology, Inc., a Nevada
corporation with an address of 2170 Woodward, Austin, Texas 78744
("Technology"); The Western States Group, Inc., a California corporation with an
address of 1935 Avenida del Oro, Suite F, Oceanside, California 92056; and
American Plasma, Inc. a Texas corporation with an address of 719 Sawdust Road,
Suite 205, Spring, Texas 77380 (collectively, the "Principal Obligors") (and
SeraCare is hereinafter referred to in an additional capacity as the "Agent
Borrower"), have requested that the Lenders (as hereinafter defined) establish
certain loan arrangements with them (hereinafter the "Loan Arrangements"), and
are today executing a Revolving Credit, Term Loan and Security Agreement. an
Amended and Restated Revolving Term Note, a Revolving Term Note, two Term
Promissory Notes and other documents with Brown Brothers Harriman & Co.
("8131-1"), State Street Bank and Trust Company ("State Street") (BBH and State
Street are collectively hereinafter referred to as the "Lenders" and sometimes
individually as a "Lender"), and Brown Brothers Harriman & Co. as Administrative
Agent (the "Administrative Agent") for the Lenders, and pursuant to which the
Lenders will make revolving credit loans and term loans. or otherwise extend
credit accommodations to the Principal Obligors, subject to the terms and
conditions
<PAGE>
therein set forth.
The undersigned request that as a convenience to them, such loans as may be
made under the Loan Arrangements be directed to the Agent Borrower which will,
in turn, distribute the proceeds thereof to the Principal Obligors. As an
additional inducement for Lenders to establish the Loan Arrangements and to
direct such loans as may be made thereunder to the Agent Borrower, as described
above, each of the undersigned covenants and agrees as follows:
1 . Loans and advances under the Loan Arrangements shall be requested
solely by the Agent Borrower as agent for the Principal Obligors. In connection
therewith each Principal Obligor has authorized the Agent Borrower to execute
promissory notes to the Lenders from time to time to evidence the liabilities,
obligations and indebtedness of the Principal Obligors to the Lenders. The
authority of the Agent Borrower so to request loans on behalf of, and to bind,
the Principal Obligors, shall continue unless and until Lenders actually receive
written notice of the termination of such authority, which notice is signed by
the respective Presidents or Treasurers of each of the Principal Obligors.
2. Any advances which may be made by Lenders under the Loan Arrangements
which are directed to the Agent Borrower shall be received by the Agent Borrower
in trust for the Principal Obligors. The Agent Borrower shall distribute the
proceeds of any such advances solely to the Principal Obligors for such uses as
are permitted under the Loan Arrangements. Each Principal Obligor shall be
directly indebted to Lenders for each advance distributed to it by the Agent
Borrower as if that amount had been advanced directly by Lenders to the
Principal Obligor which received such proceeds. In addition, the other Principal
Obligors shall also be obligated to Lenders in such amount.
3. All advances by Lenders to and for each Principal Obligor made directly
to the Agent Borrower under the Loan Arrangements (other than the Term Notes)
shall be based on the collective Borrowing Base (as defined in the Revolving
Credit, Term Loan and Security Agreement) of all Principal Obligors pursuant to
the terms of the Revolving Credit, Term Loan and Security Agreement.
4. All notices to be made by Lenders and the Administrative Agent to any or
all Principal Obligors shall be deemed duly given if they are in writing and
addressed to the Agent Borrower at its address as set forth in the Loan
Arrangements, or at any other place such party may designate by notice in
writing in accordance therewith.
5. The Lenders and the Administrative Agent shall have no responsibility to
inquire as to the distribution of loans and advances made by Lenders through the
Agent Borrower as described herein. The Agent Borrower and each of the Principal
Obligors agrees to indemnify, defend, and to hold the Lenders and the
Administrative Agent harmless of, to, and from any liability, claim. demand,
expense, or loss made against Lenders and/or the Administrative Agent on account
of, or arising out of, the Loan Arrangements, and the Lenders' and/or the
Administrative Agent's reliance upon loan requests made by the Agent Borrower.
6. The Administrative Agent may issue one monthly statement to the Agent
Borrower on behalf of all of the Principal Obligors, which statement shall cover
all of the loans and advances made by Lenders through the Agent Borrower as
described herein and shall be
2
<PAGE>
deemed correct and accepted by the Agent Borrower and each of the Principal
Obligors, unless the Administrative Agent is provided within twenty (20) days
after the receipt of that statement by the Agent Borrower with written notice
by the Agent Borrower of exceptions with respect to that monthly statement.
Such notice shall set forth, with reasonable particularity, the reasons for
such exceptions.
7. In consideration of the continuance of the mutually beneficial business
relationships among the Principal Obligors, and to induce the Lenders and the
Administrative Agent to enter into the Loan Arrangements, each of the Principal
Obligors hereby agrees to guarantee the payment when due of the other Principal
Obligors' indebtedness to the Lenders from time to time outstanding in
accordance with the terms of that certain Amended and Restated Cross-Guaranty
Agreement, of even date herewith, by the Principal Obligors in favor of the
Lenders and the Administrative Agent (the "Cross-Guaranty Agreement"). The Board
of Directors of each of the Principal Obligors has determined that the
Cross-Guaranty Agreement is in the best interests of each of the Principal
Obligors.
8. If any term or provision of this Agreement, or the application thereof
to any person or circumstance, shall to any extent be invalid or unenforceable,
the remainder of this Agreement, or the application of such terms or provisions
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Agreement shall be valid and be enforced to THE FULLEST EXTENT PERMITTED by
law.
[INTENTIONALLY LEFT BLANK]
3
<PAGE>
Very truly yours,
PRINCIPAL OBLIGORS:
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
------------------------------------
Barry D. Plost, Chairman and CEO
Avre Incorporated
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
------------------------------------
Barry D. Plost, Chairman and CEO
Binary Associates, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
------------------------------------
Barry D. Plost, Chairman and CEO
SeraCare Acquisitions, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
------------------------------------
Barry D. Plost, Chairman and CEO
BHM Labs, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
------------------------------------
Barry D. Plost, Chairman and CEO
SeraCare Technology, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
------------------------------------
Barry D. Plost, Chairman and CEO
4
<PAGE>
The Western States Group, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
------------------------------------
Barry D. Plost, Chairman and CEO
American Plasma, Inc.
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
------------------------------------
Barry D. Plost, Chairman and CEO
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
------------------------------------
Barry D. Plost, Chairman and CEO
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
------------------------------------
Barry D. Plost, Chairman and CEO
AGENT BORROWER:
SeraCare, Inc.
By: /s/ Barry D. Plost
--------------------------------------
Barry D. Plost, Chairman and CEO
ACCEPTED:
Brown Brothers Harriman & Co.
By: /s/ Joseph E. Hall
----------------------------------
Joseph E. Hall, Deputy Manager
State Street Bank and Trust Company
By: /s/ Bruce S. Daniels
----------------------------------
Name: Bruce S. Daniels
Title: VP
Brown Brothers Harriman & Co. as Administrative Agent
By: /s/ Joseph E. Hall
----------------------------------
Joseph E. Hall, Deputy Manager
5
<PAGE>
4.22 AMENDED AND RESTATED SUBORDINATION AGREEMENT BETWEEN HOLDERS OF THE 12%
SENIOR SUBORDINATED DEBENTURES DUE 2005 OF SERACARE, INC. AND BROWN
BROTHERS HARRIMAN & CO. AND STATE STREET BANK & TRUST COMPANY ("LENDERS")
DATED DECEMBER 21, 1998.
<PAGE>
AMENDED AND RESTATED SUBORDINATION AGREEMENT
This AGREEMENT entered into at Boston, Massachusetts, as of December
21, 1998, between the undersigned holders of the 12% Senior Subordinated
Debentures due 2005 of SeraCare, Inc. (each a "Creditor," and collectively, the
"Creditors"), Brown Brothers Harriman & Co., with an address of 40 Water Street,
Boston, Massachusetts 02109 ("BBH"), State Street Bank and Trust Company, with
an address of 225 Franklin Street, Boston, Massachusetts 02110 ("State Street")
(BBH and State Street are hereinafter collectively referred to as the "Lenders"
and sometimes individually as a "Lender"), and Brown Brothers Harriman & Co. as
Administrative Agent for the Lenders (the "Administrative Agent").
For valuable consideration, receipt whereof is hereby acknowledged,
and in consideration of the loans, advances, discounts, renewals or extensions
now or hereafter made each by Lenders to or for the account of SeraCare, Inc.
(hereinafter called the "Borrower"), Creditors hereby agree with the Lenders and
the Administrative Agent as follows:
1. Creditors represent to the Lenders and the Administrative Agent that
the Borrower now owes Creditors the aggregate principal amount of $16,000,000,
together with accrued and unpaid interest, fees and expenses (the "Debenture
Indebtedness") and that the Debenture Indebtedness has not been assigned to or
subordinated in favor of any other person or entity and that Creditors hold no
security therefor. Creditors further represent that the Debenture Indebtedness
is not represented by any notes or other negotiable instruments, except that
certain 12% Senior Subordinated Debenture, dated February 13, 1998 (the
"Debenture") by the Borrower in favor of the Creditors which contains a legend
indicating that the Debenture is subordinate to the obligations owing by
Borrower to the Lenders under the Revolving Credit, Term Loan and Security
Agreement dated as of December 21, 1998, among the Borrower, the Lenders, the
Administrative Agent and various subsidiaries of the Borrower, as the same may
be amended from time to time (the "Loan Agreement"). Creditors and, by its
acknowledgment and agreement below, Borrower, agree that if at any time the
Debenture Indebtedness is evidenced by any notes, debentures, or instruments
other than the Debenture, Creditors and Borrower shall cause such notes,
debentures, or instruments to contain a legend substantially similar to the
legend contained on the Debenture.
2. Creditors hereby subordinate all present and future indebtedness of
the Borrower to Creditors (collectively, the "Pecks Indebtedness") to any and
all indebtedness now or hereafter owing by the Borrower to the Lenders,
including, but not limited to, any and all indebtedness in connection with the
Loan Agreement, except for any SUBORDINATED indebtedness that may hereafter be
incurred and owing by Borrower to Lenders, (collectively, the "Lender
Indebtedness") and agree not to demand, accept or receive any payment of
principal or interest upon account of the Pecks Indebtedness or any collateral
therefor, until all Lender Indebtedness has been paid in full, except for
regularly scheduled payments of principal and interest respecting the Pecks
Indebtedness, provided there is no existing event of default continuing under
the Lender Indebtedness before or as a consequence of such payment. Creditors
will not commence or join with any other creditor or creditors of Borrower in
commencing any bankruptcy, reorganization or insolvency proceedings against
Borrower. Creditors also subordinate any claims that Creditors might assert
against any guarantor of the Pecks Indebtedness to any and all claims assertable
by the Lenders (whether through the Administrative Agent or otherwise) against
guarantors of the Lender Indebtedness.
<PAGE>
3. Subject to the Lenders' priority of liens in the Lenders' collateral
securing the Lender Indebtedness, nothing in this Agreement shall prohibit
Creditors from taking action (except to commence or join with any other creditor
or creditors of Borrower in commencing any bankruptcy, reorganization or
insolvency proceedings against Borrower) to enforce their rights under the Pecks
Indebtedness after expiration of the Standstill Period (as hereinafter defined)
so long as there continues to be an existing uncured event of default involving
the payment of money under the Pecks Indebtedness. Standstill Period" shall
mean the period of time commencing with the date on which Administrative Agent
notifies Creditors that an event of default has occurred under the Lender
Indebtedness, provided that such event of default has not been cured or waived,
and expiring one hundred and eighty (180) days after such date. If, during the
Standstill Period, the default under the Lender Indebtedness is cured or waived,
the Standstill Period shall cease running, and a new Standstill Period shall
commence running when the Administrative Agent gives notice that an additional
event of default has occurred under the Lender Indebtedness. The Standstill
Period shall be tolled during any period of time that there is in effect an
automatic stay under the Bankruptcy Code or an injunction or restraining order
issued by a court prohibiting Lenders or the Administrative Agent from
exercising their remedies, until a court of competent jurisdiction has lifted
such stay, injunction, or restraint.
4. Should any payment be received by Creditors for or on account of any
of the Pecks Indebtedness in contravention of this Agreement, prior to the
satisfaction of all Lender Indebtedness, Creditors will forthwith deliver the
same to the Administrative Agent, in precisely the form received (except for
Creditors' endorsement where necessary) for application on account of the
Borrower's obligations to the Lenders and, until so delivered, the same shall be
held in trust by Creditors as the property of the Lenders.
5. In order to carry out the terms and the intent of this Agreement more
effectively, Creditors will do all acts and execute all further instruments
reasonably requested by the Lenders and the Administrative Agent as necessary or
convenient to preserve for the Lenders and the Administrative Agent the benefit
of this Agreement.
6. Creditors further waive presentment, notice and protest in connection
with all negotiable instruments evidencing the indebtedness subordinated hereby
or Borrower's indebtedness to Lenders, notice of the acceptance of this
Agreement by Lenders and the Administrative Agent, notice of any loan made,
extension granted or other action taken in reliance hereon and all demands and
notices of every kind in connection with this Agreement, or the indebtedness of
Borrower to Lenders or to Creditors; assent to any renewal, extension or
postponement of the time of payment of the Lender Indebtedness or any other
indulgence with respect thereto, to any substitution, exchange or release of
collateral therefor and to the addition or release of any person primarily or
secondarily liable thereon; and agree to the provisions of any instrument,
security or other writing evidencing the Lender Indebtedness. No action which
the Lenders or the Administrative Agent, or the Borrower with the consent of the
Lenders, may take or refrain from taking with respect to any Lender
Indebtedness, or any note or notes representing the same, or any collateral
therefor, including a waiver or release thereof or any agreement or agreements
(including guaranties) in connection therewith, shall affect this Agreement or
the obligations of Creditors hereunder. If all Lender Indebtedness is at any
time hereafter paid in full and thereafter Borrower again becomes indebted to
the Lenders, the provisions of this Agreement shall apply to said new
indebtedness unless, before the same is incurred, Creditors notify the
Administrative Agent in writing of the cancellation of this Agreement.
7. No waiver shall be deemed to be made any Lender or the Administrative
Agent of any of its rights hereunder unless the same shall be in writing and
shall be a waiver only with respect to the specific instance involved unless
otherwise provided for in such waiver; and it shall in no way impair any
Lender's or the Administrative Agent's rights or Creditors' obligations to it in
any other respect or any other time.
2
<PAGE>
This Agreement incorporates all discussions and negotiations between Creditors
and Lenders and the Administrative Agent concerning the subordination provided
by Creditors hereby, and no such discussions or negotiations shall limit, modify
or otherwise affect the provisions hereof, and no provision hereof may be
altered, amended, waived, canceled or modified, except by a written instrument
executed and delivered by a duly authorized officer of each Lender.
8. The rights granted to the Lenders and the Administrative Agent
hereunder are solely for their protection and nothing herein contained shall
impose on any Lender or the Administrative Agent any duties with respect to any
property of the Borrower or Creditors received hereunder, beyond reasonable care
in its custody and preservation while in the Lenders' or the Administrative
Agent's possession. The Lenders and the Administrative Agent shall have no duty
to preserve rights against prior parties in any instrument or chattel paper
received hereunder or pursuant to this Agreement.
9. In the event of a conflict between the terms of this Agreement and
the terms of Section 8 of that certain Securities Purchase Agreement, dated
as of February 13, 1998, among Borrower, Avre, Incorporated, Binary
Associates, Inc., BHM Labs, Inc., SeraCare Acquisitions, Inc., SeraCare
Technology, Inc., and the Creditors, the terms of this Agreement shall
govern. This Agreement shall bind Creditors and Creditors' heirs, successors,
assigns and legal representatives and shall inure to the benefit of the
Lenders and the Administrative Agent and their successors and assigns, and
shall be governed by and construed in conformity with the laws of the
Commonwealth of Massachusetts.
[INTENTIONALLY LEFT BLANK]
3
<PAGE>
EXECUTED under seal as of the date first above written.
Witness: Creditors:
DECLARATION OF TRUST
FOR DEFINED BENEFIT PLANS
OF ZENECA HOLDINGS INC.
DECLARATION OF TRUST
FOR DEFINED BENEFIT PLANS
OF ICI AMERICAN HOLDINGS INC.
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
THE J. W. MCCONNELL FAMILY
FOUNDATION
By: Pecks Management Partners Ltd.,
Its Investment Advisor
By: /s/ Robert J. Cresci
- ------------------------------ ---------------------------------
Robert J. Cresci, General Partner
ACCEPTED:
BROWN BROTHERS HARRIMAN & CO.
By: /s/ Joseph E. Hall
------------------------------
Joseph E. Hall, Deputy Manager
STATE STREET BANK AND TRUST COMPANY
By: /s/ Bernie S. Daniels
------------------------------
Name: Bernie S. Daniels
Title: VP
BROWN BROTHERS HARRIMAN & CO. AS ADMINISTRATIVE AGENT
By: /s/ Joseph E. Hall
------------------------------
Joseph E. Hall, Deputy Manager
4
<PAGE>
The Borrower above named hereby acknowledges notice of the within and
foregoing subordination and agrees to be bound by all the terms,
provisions and conditions thereof.
Witness Borrower:
/s/ Jerry L. Burdick By: /s/ Barry D. Plost
------------------------- ---------------------------------
Barry D. Plost, Chairman and CEO
5
<PAGE>
4.23 SUBORDINATION AGREEMENT BETWEEN BARRY D. PLOST AND BROWN BROTHERS HARRIMAN
& CO. AND STATE STREET BANK & TRUST COMPANY ("LENDERS") DATED DECEMBER 21,
1998.
<PAGE>
SUBORDINATION AGREEMENT
This AGREEMENT entered into at Boston, Massachusetts, as of December
21, 1998, among Barry D. Plost, with an address of c/o SeraCare, Inc., 1925
Century Park East, Suite 1970, Los Angeles, California 90067 (the "Creditor"),
Brown Brothers Harriman & Co., with an address of 40 Water Street, Boston,
Massachusetts 02109 ("BBH"), State Street Bank and Trust Company, with an
address of 225 Franklin Street, Boston, Massachusetts 02110 ("State Street")
(BBH and State Street are hereinafter collectively referred to as the "Lenders"
and sometimes individually as a "Lender"), and Brown Brothers Harriman & Co. as
Administrative Agent for the Lenders (the "Administrative Agent").
For valuable consideration, receipt whereof is hereby acknowledged,
and in consideration of the loans, advances, discounts, renewals or extensions
now or hereafter made each by Lenders to or for the account of SeraCare, Inc.
(hereinafter called the "Borrower"), the Creditor hereby agrees with the Lenders
and the Administrative Agent as follows:
1. Creditor represents to the Lenders and the Administrative Agent that
the Borrower now owes Creditor the principal amount of $472,500 together with
accrued and unpaid interest, fees and expenses (the "Plost Indebtedness") and
that the Plost Indebtedness has not been assigned to or subordinated in favor of
any other person or entity and that Creditor holds no security therefor.
Creditor further represents that the Plost Indebtedness is not represented by
any notes or other negotiable instruments, except (a) that certain promissory
note in the original principal amount of $400,000, dated as of July 2, 1996, (b)
that certain promissory note in the original principal amount of $150,000, dated
as of May 5, 1997, and (c) that certain promissory note in the original
principal amount of $125,000, dated as of May 19, 1997 (collectively, the "Plost
Notes") by the Borrower in favor of the Creditor. Creditor and, by its
acknowledgment and agreement below, Borrower, agree that if at any time the
Plost Indebtedness is evidenced by any notes, debentures, or instruments other
than the Plost Notes, Creditor and Borrower shall cause each of such notes,
debentures, or instruments to contain a legend indicating that such note,
debenture or instrument, as the case may be, is subordinate to the obligations
owing by Borrower to the Lenders.
2. Creditor hereby subordinates the Plost Indebtedness and any and all
other present and future indebtedness of the Borrower to Creditor (collectively,
the "Creditor Indebtedness") to any and all indebtedness now or hereafter owing
by the Borrower to the Lenders (collectively, the "Lender Indebtedness") and
agrees not to demand, accept or receive any payment of principal or interest
upon account of the Creditor Indebtedness or any collateral therefor, until all
Lender Indebtedness has been paid in full, except for regularly scheduled
payments of interest respecting the Creditor Indebtedness, provided there is no
existing event of default continuing under the Lender Indebtedness before or as
a consequence of such payment. Creditor will not commence or join with any other
creditor or creditors of Borrower in commencing any bankruptcy, reorganization
or insolvency proceedings against Borrower. Creditor also subordinates any
claims that Creditor might assert against any guarantor of the Creditor
Indebtedness to any and all claims assertable by the Lenders (whether through
the Administrative Agent or otherwise) against guarantors of the Lender
Indebtedness.
3. Subject to the Lenders' priority of liens in the Lenders' collateral
securing the Lender Indebtedness, nothing in this Agreement shall prohibit
Creditor from taking action (except to commence or join with any other creditor
or creditors of Borrower in commencing any bankruptcy, reorganization or
insolvency proceedings against Borrower) to enforce his rights under the
Creditor Indebtedness after expiration of the Standstill Period (as hereinafter
defined) so long as there continues to be an existing uncured event of default
involving the payment of money under the Creditor Indebtedness. "Standstill
<PAGE>
Period" shall mean the period of time commencing with the date on which the
Administrative Agent notifies the Creditor that an event of default has occurred
under the Lender Indebtedness, provided that such event of default has not been
cured or waived, and expiring one hundred and eighty (180) days after such date.
If, during the Standstill Period, the default under the Lender Indebtedness is
cured or waived, the Standstill Period shall cease running, and a new Standstill
Period shall commence running when the Administrative Agent gives notice to
Creditor that an additional event of default has occurred under the Lender
Indebtedness. The Standstill Period shall be tolled during any period of time
that there is in effect an automatic stay under the Bankruptcy Code or an
injunction or restraining order issued by a court prohibiting Lenders or the
Administrative Agent from exercising their remedies, until a court of competent
jurisdiction has lifted such stay, injunction, or restraint.
4. Should any payment be received by Creditor for or on account of any of
the Creditor Indebtedness in contravention of this Agreement, prior to the
satisfaction of all Lender Indebtedness, Creditor will forthwith deliver the
same to the Administrative Agent, in precisely the form received (except for
Creditor's endorsement where necessary) for application on account of the
Borrower's obligations to the Lenders and, until so delivered, the same shall be
held in trust by Creditor as the property of the Lenders.
5. In order to carry out the terms and the intent of this Agreement more
effectively, Creditor will do all acts and execute all further instruments in
each case as may be reasonably requested by the Lenders and the Administrative
Agent as necessary or convenient to preserve for the Lenders and the
Administrative Agent the benefit of this Agreement.
6. Creditor further waives presentment, notice and protest in connection
with all negotiable instruments evidencing the indebtedness subordinated hereby
or Borrower's indebtedness to Lenders, notice of the acceptance of this
Agreement by Lenders and the Administrative Agent, notice of any loan made,
extension granted or other action taken in reliance hereon and all demands and
notices of every kind in connection with this Agreement, or the indebtedness of
Borrower to Lenders or to Creditor, assents to any renewal, extension or
postponement of the time of payment of the Lender Indebtedness or any other
indulgence with respect thereto, to any substitution, exchange or release of
collateral therefor and to the addition or release of any person primarily or
secondarily liable thereon; and agrees to the provisions of any instrument,
security or other writing evidencing the Lender Indebtedness. No action which
the Lenders or the Administrative Agent, or the Borrower with the consent of the
Lenders, may take or refrain from taking with respect to any Lender
Indebtedness, or any note or notes representing the same, or any collateral
therefor, including a waiver or release thereof or any agreement or agreements
(including guaranties) in connection therewith, shall affect this Agreement or
the obligations of Creditor hereunder. If all Lender Indebtedness is at any time
hereafter paid in full and thereafter Borrower again becomes indebted to the
Lenders, the provisions of this Agreement shall apply to said new indebtedness
unless, before the same is incurred, Creditor notifies the Administrative Agent
in writing of the cancellation of this Agreement.
7. No waiver shall be deemed to be made by any Lender or the
Administrative Agent of any of its rights hereunder unless the same shall be
in writing and shall be a waiver only with respect to the specific instance
involved unless otherwise provided for in such waiver; and it shall in no way
impair any Lender's or the Administrative Agent's rights or Creditor's
obligations to it in any other respect or any other time. This Agreement
incorporates all discussions and negotiations between Creditor and Lenders
and the Administrative Agent concerning the subordination provided by
Creditor hereby, and no such discussions or negotiations shall limit, modify
or otherwise affect the provisions hereof, and no provision hereof may be
altered, amended, waived, canceled or modified, and this Agreement may not be
terminated, except by a written instrument executed and delivered by a duly
authorized officer of each Lender.
8. The rights granted to the Lenders and the Administrative Agent
hereunder are solely for their protection and nothing herein contained shall
impose on any Lender or the Administrative Agent any
2
<PAGE>
duties with respect to any property of the Borrower or Creditor received
hereunder, beyond reasonable care in its custody and preservation while in the
Lenders' or the Administrative Agent's possession. The Lenders and the
Administrative Agent shall have no duty to preserve rights against prior parties
in any instrument or chattel paper received hereunder or pursuant to this
Agreement.
9. This Agreement shall bind Creditor and Creditor's heirs, successors,
assigns and legal representatives and shall inure to the benefit of the Lenders
and the Administrative Agent and their successors and assigns, and shall be
governed by and construed in conformity with the laws of the Commonwealth of
Massachusetts.
[INTENTIONALLY LEFT BLANK]
3
<PAGE>
EXECUTED under seal as of the date first above written.
Witness: Creditor:
/s/ Jerry L. Burdick /s/ Barry Plost
- ------------------------------ ------------------------------
Barry D. Plost
ACCEPTED:
BROWN BROTHERS HARRIMAN & CO.
By: [Illegible]
--------------------------
Joseph E. Hall, Deputy Manager
STATE STREET BANK AND TRUST COMPANY
By: /s/ [Illegible]
--------------------------
Name: [Illegible]
Title: VP
BROWN BROTHERS HARRIMAN & CO. AS ADMINISTRATIVE AGENT
By: /s/ Joseph E. Hall
--------------------------
Joseph E. Hall, Deputy Manager
The Borrower above named hereby acknowledges notice of the within and foregoing
subordination and agrees to be bound by all the terms, provisions and conditions
thereof.
Witness: Borrower:
SeraCare, Inc.
By: /s/ Barry Plost
----------------------------------
Barry D. Plost, Chairman and CEO
4
<PAGE>
4.24 WARRANT TO PURCHASE COMMON STOCK OF SERACARE, INC. ISSUED TO BROWN
BROTHERS HARRIMAN & CO. DATED DECEMBER 21, 1998.
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS WARRANT
OR THE SHARES PURCHASABLE HEREUNDER SHALL BE MADE EXCEPT PURSUANT TO
REGISTRATION UNDER THE SECURITIES ACT, AND APPLICABLE STATE SECURITIES LAWS, OR
PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH ACT AND SUCH STATE LAWS AND THE
RESPECTIVE RULES AN REGULATIONS THEREUNDER.
-----------------------------------
WARRANT TO PURCHASE COMMON STOCK OF
SERACARE, INC.
-----------------------------------
Exercisable as of the
Commencement Date
(as defined below)
Void After
the Expiration Date
(as defined below)
THIS CERTIFIES that, for value received, Brown Brothers Harriman & Co., or
registered assigns, is entitled, subject to the terms and conditions set forth
in this Warrant, to purchase from SERACARE, INC., a Delaware corporation (the
"Company") subject to adjustment as provided in Section 3 of this Warrant
5,556, fully paid and nonassessable shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock"), at any time commencing on the date
hereof (the "Commencement Date") and continuing up to 5:00 p.m. New York time on
the fifth anniversary of the date hereof (the "Expiration Date"), at a price of
$.01 per share (the "Exercise Price").
This Warrant is subject to the following provisions:
SECTION 1. EXERCISE OF WARRANT.
This Warrant may be exercised by the holder hereof, in whole or in part
(but not as to a fractional share), by the presentation and surrender of this
Warrant with the form of election to purchase attached hereto as EXHIBIT A,
properly completed and executed by the holder by certified mail, by overnight
courier, in person or by a legal representative or attorney duly authorized to
do so in writing, at the principal office of the Company (or at such other
address as the Company may designate by notice in writing to the holder hereof
at the address of such holder appearing on the books of the Company), and upon
payment to the Company of an
<PAGE>
amount equal to the exercise price multiplied by the number of shares being
purchased pursuant to such exercise, payable by payment to the Company in
cash, by certified check or by wire transfer.
The shares of Common Stock so purchased pursuant to the preceding paragraph
shall be deemed to be issued to the holder hereof as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares. Certificates for the shares
of Common Stock so purchased shall be delivered or mailed to the holder promptly
after this Warrant shall have been so exercised, and, unless this Warrant has
expired or has been exercised in full, a new Warrant identical in form but
representing the number of shares of Common Stock with respect to which this
Warrant shall not then have been exercised shall also be issued to the holder
hereof at the expense of the Company.
The Company shall pay all documentary, stamp or other transactional taxes
attributable to the issuance or delivery of shares of capital stock of the
Company upon exercise of this Warrant; PROVIDED, HOWEVER, that the Company shall
not be required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares in a
name other than that of the holder of this Warrant in respect of which such
shares are being issued.
SECTION 2. REPLACEMENT.
This Warrant is exchangeable, upon its surrender by the holder at the
principal office of the Company, for new Warrants (containing the same terms as
this Warrant) each representing the right to purchase such number of shares of
Common Stock as shall be designated by such holder at the time of surrender (but
not exceeding in the aggregate the remaining number of shares of Common Stock
which may be purchased hereunder). Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and upon
delivery of indemnity satisfactory to the Company (or, in the case of
mutilation, upon surrender of this Warrant), the Company will issue to the
holder a replacement Warrant (containing the same terms as this Warrant). The
unsecured undertaking of the original holder of this Warrant or any of its
assigns shall constitute satisfactory indemnity for purposes of this paragraph.
As used herein, "Warrant" shall include this Warrant and all new Warrants issued
in exchange for or replacement of this Warrant.
SECTION 3. ADJUSTMENT OF NUMBER OF SHARES.
If the number of shares of Common Stock outstanding at any time hereafter
is increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, following the record
date fixed for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split-up, the number of shares of Common
Stock issuable on exercise of this Warrant shall be increased in proportion to
such increase in outstanding shares.
If at any time hereafter the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock or a reverse stock-split, following
2
<PAGE>
the record date for such combination, the number of shares of Common Stock
issuable on exercise of this Warrant shall be decreased in proportion to such
decrease in outstanding shares.
If at any time hereafter any reorganization, reclassification of the
capital stock of the Company (other than a change in par value or from par value
to no par value or from no par value to par value or as a result of a stock
dividend or subdivision, split-up or combination of shares), consolidation or
merger (including a merger in which the Company is the surviving entity), sale
or other disposition of all or substantially all of the Company's assets or a
distribution of property to shareholders (other than distributions payable out
of earnings or retained earnings) shall occur, then this Warrant shall (in lieu
of or, in respect of sales of all or substantially all assets or distribution of
property to shareholders, in addition to, being exercisable for shares of Common
Stock) after such reorganization, reclassification, consolidation or merger be
exercisable into the kind and number of shares of stock or other securities or
property (including cash) of the company or of the corporation resulting from
such consolidation or surviving such merger or to which such properties and
assets shall have been sold or otherwise disposed of or distributed to which the
holder of the number of shares of Common Stock deliverable (immediately prior to
the time of such reorganization, reclassification, consolidation, merger, sale
or other disposition or distribution) upon exercise of such Warrant would have
been entitled upon such reorganization, reclassification, consolidation, merger,
sale or other disposition or distribution. The provisions of this section shall
similarly apply to successive reorganizations, reclassifications and other
transactions contemplated above.
All calculations under this Section 3 shall be made to the nearest cent
($.01) or to the nearest whole share, as the case may be.
In any case in which the provisions of this Section 3 shall require that an
adjustment of the number of shares of Common Stock issuable upon exercise of
this Warrant shall become effective immediately after a record date for an
event, the Company may, until the occurrence of such date and before the
occurrence of such event set aside and withhold the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon exercise before
giving effect to such adjustment; PROVIDED, HOWEVER, that the Company shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
Whenever the number of shares of Common Stock issuable upon exercise of
this Warrant shall be adjusted as provided in this Section 3, the Company shall
promptly thereafter file, at its principal office or at such other place as may
be designated by the Company, a statement, signed by its president or chief
financial officer and by its treasurer, showing in reasonable detail the facts
requiring such adjustment and the number of shares of Common Stock issuable upon
exercise of this Warrant that shall be in effect after such adjustment. The
Company shall cause a copy of such statement to be sent by first-class,
certified mail, return receipt requested, postage prepaid, to each holder of
this Warrant at such holder's address appearing in the Company's records.
3
<PAGE>
The Company will not, by amendment of its Articles of Incorporation or
By-laws or through any reorganization, transfer of assets, reclassification,
merger, dissolution, issue or sale of securities or otherwise, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed by the Company hereunder but will at all times in good faith assist in
the carrying of all the provisions hereof and in the taking of all such actions
as may be necessary or appropriate in order to protect the rights of the holders
of this Warrant against impairment.
SECTION 4. FRACTIONAL SHARES.
No fractional shares shall be issued upon exercise of this Warrant. In the
case of this Warrant being exercised in part only, the Company shall, upon such
exercise, execute and deliver to the holder thereof, at the expense of the
Company, a new Warrant or Warrants equal to the unexercised portion of such
Warrant. Instead of issuing any fractional shares of Common Stock that would
otherwise be issuable upon exercise of this Warrant, the Company shall round off
to the nearest whole number of shares of Common Stock.
SECTION 5. OBLIGATIONS OF THE COMPANY.
The Company will at all times reserve, free from any preemptive rights, and
keep available out of its authorized Common Stock, solely for the purpose of
issue upon the exercise of Warrants as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of all outstanding
Warrants. The Company covenants and agrees that all shares of Common Stock which
shall be so issuable will, upon issuance, be duly authorized and issued, fully
paid and nonassessable. The Company will not take any action which results in
any adjustment of the number of shares of Common Stock issuable upon exercise of
this Warrant if the total number of shares of Common Stock issuable after such
action upon exercise of this Warrant would (a) exceed the total number of shares
of Common Stock then authorized by the Company's Articles of Incorporation in
effect at such time or (b) would conflict with, or result in any violation of,
or require the consent or approval (unless the same shall be obtained) of any
court or administrative or governmental body pursuant to, or result in a breach
of the terms, conditions, or provisions of, or constitute a default under, the
Articles of Incorporation or Bylaws of the Company or any agreement or
instrument to which the Company is then subject. The Company will take all such
action as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable requirements of any exchange upon
which the Common Stock of the Company may be listed or in respect of which the
Common Stock has qualified for unlisted trading privileges.
The Company will not close its books against the issuance or transfer of
any shares of Common Stock issuable upon exercise of this Warrant.
4
<PAGE>
SECTION 6. TRANSFERABILITY.
This Warrant and all rights hereunder are transferable, in whole or in
part, without charge to the holder, upon surrender of this Warrant with a
properly executed Assignment, in the form annexed hereto as EXHIBIT B, properly
executed by the holder hereof and the assignee.
If this Warrant, or any part hereof, is transferred to another holder and
such holder shall have designated in writing the address to which communications
with respect to this Warrant shall be mailed, all notices, certificates,
requests, statements and other documents required to be delivered to the
transferring holder by reason for the holding of this Warrant shall also be
delivered to such holder.
SECTION 7. "PIGGYBACK" REGISTRATION RIGHTS.
(a) Subject to Sections 7(b) through 7(d) below, if the Company shall
determine to proceed with the preparation and filing of a registration statement
under the Securities Act of 1933, as amended, in connection with the proposed
offer and sale of any of its securities by it or any of its security holders,
the Company will give written notice of its determination to the holder of this
Warrant. Upon the written request from the holder of this Warrant, within twenty
(20) days after receipt of any such notice from the Company (and receipt by the
Company of any information from the holder of this Warrant which is required to
be included in a registration statement), the Company will, except as provided
in this Section 7 and at the Company's expense, cause all shares of the
Company's Common Stock issuable upon the exercise of this Warrant to be included
in such registration statement, all to the extent requisite to permit the sale
or other disposition by the prospective seller or sellers of the securities to
be so registered; provided, further, that nothing herein shall prevent the
Company from, at any time, abandoning or delaying any registration. If any
registration shall be underwritten in whole or in part, the Company may require
that the securities requested for inclusion pursuant to this section be included
in the underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters.
(b) Notwithstanding the foregoing, if the managing underwriter determines
and advises in writing that the inclusion of the shares of the Company's Common
Stock issuable upon the exercise of this Warrant proposed to be included in the
underwritten public offering would interfere with the successful marketing of
such offering, then the number of such shares that the managing underwriter
believes may be sold in such underwritten public offering shall be allocated for
inclusion in any registration statement in the following order of priority: (i)
the securities being offered by the Company; (ii) the securities being offered
by the Investors (as such term is defined in Section 7(c) below); (iii) the
securities being offered by the Holders (as such term is defined in that certain
Registration Rights Agreement dated February 13, 1998 by and between Sutro & Co.
Incorporated, a Delaware corporation, or its permitted assigns, and the
Company); (iv) the securities being sought to be registered by the holder of
this Warrant, on a PRO RATA basis based upon the number of securities sought to
be registered by such holder and the number of securities sought to be
registered by all persons other than those identified in clauses (i) through
(iii) above.
5
<PAGE>
(c) Notwithstanding the provisions of Section 7(a), the holder of this
Warrant shall have no rights to registration or to otherwise participate in any
underwritten public offering of the Company's Common Stock effected pursuant to
Section 2.1 of that certain Registration Rights Agreement (the "Senior
Agreement") dated as of February 13, 1998 by and among the Company and the
investors named therein (the "Investors') unless: (i) the managing underwriter
of such offering shall have advised each holder of Registerable Securities (as
such term is defined in the Senior Agreement) to be covered by the registration
statement that the inclusion of the securities registerable hereunder would not,
in such underwriter's reasonable judgment, adversely affect the marketing or the
selling price of the Registerable Securities to be covered by such registration
statement; and (ii) the holders of a majority of the Registerable Securities to
be covered by such registration statement shall have consented in writing to the
inclusion of the securities registerable hereunder.
(d) The rights granted to the holder of this Warrant under this Section 7
shall terminate at such time as the shares of Common Stock issued pursuant to
the exercise of this Warrant become freely transferable by the holder of such
shares pursuant to Rule 144 under the Securities Act of 1933, as amended.
SECTION 8. GOVERNING LAW.
This Warrant shall be construed and enforced in accordance with the laws
of the State of Delaware without regard to principles of conflicts of law or
choice of law.
SECTION 9. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY.
This Warrant shall not entitle the holder hereof to any voting rights or
other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the holder hereof to exercise this Warrant, and
no enumeration herein of the rights or privileges of such holder shall give rise
to any liability of such holder for the exercise price of the shares acquirable
by exercise hereof or as a stockholder of the Company.
SECTION 10. NOTICES.
Except as otherwise expressly provided herein, all notices and deliveries
referred to in this Warrant shall be in writing, shall be delivered personally,
sent by registered or certified mail, return receipt requested and
postage-prepaid or sent via nationally recognized overnight courier or via
facsimile, and shall be deemed to have been given when so delivered (or when
received, if delivered by any other method) if sent (i) to the Company, at its
principal executive offices and (ii) to the holder of this Warrant, at such
holder's address as it appears in the records of the Company (unless otherwise
indicated by any such holder).
SECTION 11. AMENDMENT AND WAIVER.
Except as otherwise provided herein, the provisions of this Warrant may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required
6
<PAGE>
to be performed by it, only if the Company has obtained the prior written
consent of the holder of this Warrant.
SECTION 12. MISCELLANEOUS.
Brown Brothers Harriman & Co. acknowledges and agrees, for itself and on
behalf of its registered assigns, that this Warrant is being issued by the
Company as partial consideration by the Company solely for the making by
Brown Brothers Harriman & Co. of a term loan to the Company pursuant to that
certain Term Promissory Note, in the original principal amount of $3,500,000,
executed by the Company in favor of Brown Brothers Harriman & Co.
Notwithstanding the foregoing, except as otherwise provided in this Warrant, the
rights of Brown Brothers Harriman & Co. and its registered assigns under this
Warrant shall not be affected by any failure of Brown Brothers Harriman & Co. to
extend any other or further credit to the Company or otherwise to perform any
obligation or covenant under any agreement or contract with the Company other
than any obligation or covenant pursuant to this Warrant.
(INTENTIONALLY LEFT BLANK]
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer on this 21st day of December, 1998.
SERACARE, INC.
By: /s/ Barry Plost
-------------------------------------
Barry D. Plost
Chairman and Chief Executive Officer
8
<PAGE>
EXHIBIT A
FORM OF ELECTION TO PURCHASE
SERACARE, INC.
The undersigned holder of this Warrant (1) hereby irrevocably elects to
exercise the right to purchase hereunder ___ fully paid shares of the Common
Stock of SERACARE, INC., (2) makes payment in full of the purchase price of
such shares, (3) requests that certificates for such shares be issued in the
name of ___________, and (4) if said number of shares shall not be all the
shares the holder is entitled to purchase under this Warrant, requests that a
new Warrant for the unexercised and unexpired portion of this Warrant be
issued.
By: _______________________________
Dated: __________, 199__
9
<PAGE>
EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant
with respect to the number of the shares covered thereby set forth below,
unto:
<TABLE>
<CAPTION>
Name of Assignee Address No. of Shares
---------------- ------- -------------
<S> <C> <C>
</TABLE>
Dated: Signature _________________________
Witness _________________________
Each assignee of the Warrant hereby acknowledges and agrees that this
Warrant and the securities into which this Warrant may be exercised have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities laws, and that no sale, transfer, pledge or other
disposition of this Warrant or the shares purchasable hereunder shall be made
except pursuant to registration under the Securities Act and any applicable
state securities laws or pursuant to an exemption therefrom.
Dated: _____________________________________
Signature of Assignee
Dated: _____________________________________
Signature of Assignee
10
<PAGE>
4.25 Warrant To Purchase Common Stock of SeraCare, Inc. issued to State
Street Bank dated December 21, 1998.
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS WARRANT
OR THE SHARES PURCHASABLE HEREUNDER SHALL BE MADE EXCEPT PURSUANT TO
REGISTRATION UNDER THE SECURITIES ACT, AND APPLICABLE STATE SECURITIES LAWS, OR
PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH ACT AND SUCH STATE LAWS AND THE
RESPECTIVE RULES AN REGULATIONS THEREUNDER.
-------------------------------------------
WARRANT TO PURCHASE COMMON STOCK OF
SERACARE, INC.
-------------------------------------------
Exercisable as of the
Commencement Date
(as defined below)
Void After
the Expiration Date
(as defined below)
THIS CERTIFIES that, for value received, SSB Investments, Inc., or
registered assigns, is entitled, subject to the terms and conditions set forth
in this Warrant, to purchase from SERACARE, INC., a Delaware corporation (the
"Company") subject to adjustment as provided in Section 3 of this Warrant, 5,556
fully paid and nonassessable shares of Common Stock, par value $.001 per share,
of the Company (the "Common Stock"), at any time commencing on the date hereof
(the "Commencement Date") and continuing up to 5:00 p.m. New York time on the
fifth anniversary of the date hereof (the "Expiration Date"), at a price of $.01
per share (the "Exercise Price").
This Warrant is subject to the following provisions:
SECTION 1. EXERCISE OF WARRANT
This Warrant may be exercised by the holder hereof, in whole or in part
(but not as to a fractional share), by the presentation and surrender of this
Warrant with the form of election to purchase attached hereto as EXHIBIT A,
properly completed and executed by the holder by certified mail, by overnight
courier, in person or by a legal representative or attorney duly authorized to
do so in writing, at the principal office of the Company (or at such other
address as the Company may designate by notice in writing to the holder hereof
at the address of such holder appearing on the books of the Company), and upon
payment to the Company of an
<PAGE>
amount equal to the exercise price multiplied by the number of shares being
purchased pursuant to such exercise, payable by payment to the Company in cash,
by certified check or by wire transfer.
The shares of Common Stock so purchased pursuant to the preceding
paragraph shall be deemed to be issued to the holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such shares. Certificates for
the shares of Common Stock so purchased shall be delivered or mailed to the
holder promptly after this Warrant shall have been so exercised, and, unless
this Warrant has expired or has been exercised in full, a new Warrant identical
in form but representing the number of shares of Common Stock with respect to
which this Warrant shall not then have been exercised shall also be issued to
the holder hereof at the expense of the Company.
The Company shall pay all documentary, stamp or other transactional
taxes attributable to the issuance or delivery of shares of capital stock of the
Company upon exercise of this Warrant; PROVIDED, HOWEVER, that the Company shall
not be required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares in a
name other than that of the holder of this Warrant in respect of which such
shares are being issued.
SECTION 2. REPLACEMENT.
This Warrant is exchangeable, upon its surrender by the holder at the
principal office of the Company, for new Warrants (containing the same terms as
this Warrant) each representing the right to purchase such number of shares of
Common Stock as shall be designated by such holder at the time of surrender (but
not exceeding in the aggregate the remaining number of shares of Common Stock
which may be purchased hereunder). Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and upon
delivery of indemnity satisfactory to the Company (or, in the case of
mutilation, upon surrender of this Warrant), the Company will issue to the
holder a replacement Warrant (containing the same terms as this Warrant). The
unsecured undertaking of the original holder of this Warrant or any of its
assigns shall constitute satisfactory indemnity for purposes of this paragraph.
As used herein, "Warrant" shall include this Warrant and all new Warrants issued
in exchange for or replacement of this Warrant.
SECTION 3. ADJUSTMENT OF NUMBER OF SHARES.
If the number of shares of Common Stock outstanding at any time
hereafter is increased by a stock dividend payable in shares of Common Stock or
by a subdivision or split-up of shares of Common Stock, then, following the
record date fixed for the determination of holders of Common Stock entitled to
receive such stock dividend, subdivision or split-up, the number of shares of
Common Stock issuable on exercise of this Warrant shall be increased in
proportion to such increase in outstanding shares.
If at any time hereafter the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock or a reverse stock-split, following
2
<PAGE>
the record date for such combination, the number of shares of Common Stock
issuable on exercise of this Warrant shall be decreased in proportion to such
decrease in outstanding shares.
If at any time hereafter any reorganization, reclassification of the
capital stock of the Company (other than a change in par value or from par value
to no par value or from no par value to par value or as a result of a stock
dividend or subdivision, split-up or combination of shares), consolidation or
merger (including a merger in which the Company is the surviving entity), sale
or other disposition of all or substantially all of the Company's assets or a
distribution of property to shareholders (other than distributions payable out
of earnings or retained earnings) shall occur, then this Warrant shall (in lieu
of or, in respect of sales of all or substantially all assets or distribution of
property to shareholders, in addition to, being exercisable for shares of Common
Stock) after such reorganization, reclassification, consolidation or merger be
exercisable into the kind and number of shares of stock or other securities or
property (including cash) of the company or of the corporation resulting from
such consolidation or surviving such merger or to which such properties and
assets shall have been sold or otherwise disposed of or distributed to which the
holder of the number of shares of Common Stock deliverable (immediately prior to
the time of such reorganization, reclassification, consolidation, merger, sale
or other disposition or distribution) upon exercise of such Warrant would have
been entitled upon such reorganization, reclassification, consolidation, merger,
sale or other disposition or distribution. The provisions of this section shall
similarly apply to successive reorganizations, reclassifications and other
transactions contemplated above.
All calculations under this Section 3 shall be made to the nearest cent
($.01) or to the nearest whole share, as the case may be.
In any case in which the provisions of this Section 3 shall require that
an adjustment of the number of shares of Common Stock issuable upon exercise of
this Warrant shall become effective immediately after a record date for an
event, the Company may, until the occurrence of such date and before the
occurrence of such event set aside and withhold the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon exercise before
giving effect to such adjustment; PROVIDED, HOWEVER, that the Company shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
Whenever the number of shares of Common Stock issuable upon exercise of
this Warrant shall be adjusted as provided in this Section 3, the Company shall
promptly thereafter file, at its principal office or at such other place as may
be designated by the Company, a statement, signed by its president or chief
financial officer and by its treasurer, showing in reasonable detail the facts
requiring such adjustment and the number of shares of Common Stock issuable upon
exercise of this Warrant that shall be in effect after such adjustment. The
Company shall cause a copy of such statement to be sent by first-class,
certified mail, return receipt requested, postage prepaid, to each holder of
this Warrant at such holder's address appearing in the Company's records.
3
<PAGE>
The Company will not, by amendment of its Articles of Incorporation or
By-laws or through any reorganization, transfer of assets, reclassification,
merger, dissolution, issue or sale of securities or otherwise, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed by the Company hereunder but will at all times in good faith assist in
the carrying of all the provisions hereof and in the taking of all such actions
as may be necessary or appropriate in order to protect the rights of the holders
of this Warrant against impairment.
SECTION 4. FRACTIONAL SHARES.
No fractional shares shall be issued upon exercise of this Warrant. In
the case of this Warrant being exercised in part only, the Company shall, upon
such exercise, execute and deliver to the holder thereof, at the expense of the
Company, a new Warrant or Warrants equal to the unexercised portion of such
Warrant. Instead of issuing any fractional shares of Common Stock that would
otherwise be issuable upon exercise of this Warrant, the Company shall round
off to the nearest whole number of shares of Common Stock.
SECTION 5. OBLIGATIONS OF THE COMPANY.
The Company will at all times reserve, free from any preemptive rights,
and keep available out of its authorized Common Stock, solely for the purpose of
issue upon the exercise of Warrants as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of all outstanding
Warrants. The Company covenants and agrees that all shares of Common Stock which
shall be so issuable will, upon issuance, be duly authorized and issued, fully
paid and nonassessable. The Company will not take any action which results in
any adjustment of the number of shares of Common Stock issuable upon exercise of
this Warrant if the total number of shares of Common Stock issuable after such
action upon exercise of this Warrant would (a) exceed the total number of shares
of Common Stock then authorized by the Company's Articles of Incorporation in
effect at such time or (b) would conflict with, or result in any violation of,
or require the consent or approval (unless the same shall be obtained) of any
court or administrative or governmental body pursuant to, or result in a breach
of the terms, conditions, or provisions of, or constitute a default under, the
Articles of Incorporation or Bylaws of the Company or any agreement or
instrument to which the Company is then subject. The Company will take all such
action as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable requirements of any exchange upon
which the Common Stock of the Company may be listed or in respect of which the
Common Stock has qualified for unlisted trading privileges.
The Company will not close its books against the issuance or transfer of
any shares of Common Stock issuable upon exercise of this Warrant.
4
<PAGE>
SECTION 6. TRANSFERABILITY.
This Warrant and all rights hereunder are transferable, in whole or in
part, without charge to the holder, upon surrender of this Warrant with a
properly executed Assignment, in the form annexed hereto as EXHIBIT B, properly
executed by the holder hereof and the assignee.
If this Warrant, or any part hereof, is transferred to another holder
and such holder shall have designated in writing the address to which
communications with respect to this Warrant shall be mailed, all notices,
certificates, requests, statements and other documents required to be delivered
to the transferring holder by reason for the holding of this Warrant shall also
be delivered to such holder.
SECTION 7. "PIGGYBACK" REGISTRATION RIGHTS.
(a) Subject to Sections 7(b) through 7(d) below, if the Company
shall determine to proceed with the preparation and filing of a registration
statement under the Securities Act of 1933, as amended, in connection with
the proposed offer and sale of any of its securities by it or any of its
security holders, the Company will give written notice of its determination
to the holder of this Warrant. Upon the written request from the holder of
this Warrant, within twenty (20) days after receipt of any such notice from
the Company (and receipt by the Company of any information from the holder of
this Warrant which is required to be included in a registration statement),
the Company will, except as provided in this Section 7 and at the Company's
expense, cause all shares of the Company's Common Stock issuable upon the
exercise of this Warrant to be included in such registration statement, all
to the extent requisite to permit the sale or other disposition by the
prospective seller or sellers of the securities to be so registered;
provided, further, that nothing herein shall prevent the Company from, at any
time, abandoning or delaying any registration. If any registration shall be
underwritten in whole or in part, the Company may require that the securities
requested for inclusion pursuant to this section be included in the
underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters.
(b) Notwithstanding the foregoing, if the managing underwriter
determines and advises in writing that the inclusion of the shares of the
Company's Common Stock issuable upon the exercise of this Warrant proposed to be
included in the underwritten public offering would interfere with the successful
marketing of such offering, then the number of such shares that the managing
underwriter believes may be sold in such underwritten public offering shall be
allocated for inclusion in any registration statement in the following order of
priority: (i) the securities being offered by the Company; (ii) the securities
being offered by the Investors (as such term is defined in Section 7(c) below);
(iii) the securities being offered by the Holders (as such term is defined in
that certain Registration Rights Agreement dated February 13, 1998 by and
between Sutro & Co. Incorporated, a Delaware corporation, or its permitted
assigns, and the Company); (iv) the securities being sought to be registered by
the holder of this Warrant, on a PRO RATA basis based upon the number of
securities sought to be registered by such holder and the number of securities
sought to be registered by all persons other than those identified in clauses
(i) through (iii) above.
5
<PAGE>
(c) Notwithstanding the provisions of Section 7(a), the holder of
this Warrant shall have no rights to registration or to otherwise participate in
any underwritten public offering of the Company's Common Stock effected pursuant
to Section 2.1 of that certain Registration Rights Agreement (the "Senior
Agreement") dated as of February 13, 1998 by and among the Company and the
investors named therein (the "Investors") unless: (i) the managing underwriter
of such offering shall have advised each holder of Registerable Securities (as
such term is defined in the Senior Agreement) to be covered by the registration
statement that the inclusion of the securities registerable hereunder would not,
in such underwriter's reasonable judgment, adversely affect the marketing or the
selling price of the Registerable Securities to be covered by such registration
statement; and (ii) the holders of a majority of the Registerable Securities to
be covered by such registration statement shall have consented in writing to the
inclusion of the securities registerable hereunder.
(d) The rights granted to the holder of this Warrant under this
Section 7 shall terminate at such time as the shares of Common Stock issued
pursuant to the exercise of this Warrant become freely transferable by the
holder of such shares pursuant to Rule 144 under the Securities Act of 1933, as
amended.
SECTION 8. GOVERNING LAW.
This Warrant shall be construed and enforced in accordance with the
laws of the State of Delaware without regard to principles of conflicts of
law or choice of law.
SECTION 9. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY.
This Warrant shall not entitle the holder hereof to any voting rights or
other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the holder hereof to exercise this Warrant, and
no enumeration herein of the rights or privileges of such holder shall give rise
to any liability of such holder for the exercise price of the shares acquirable
by exercise hereof or as a stockholder of the Company.
SECTION 10. NOTICES.
Except as otherwise expressly provided herein, all notices and
deliveries referred to in this Warrant shall be in writing, shall be delivered
personally, sent by registered or certified mail, return receipt requested and
postage-prepaid or sent via nationally recognized overnight courier or via
facsimile, and shall be deemed to have been given when so delivered (or when
received, if delivered by any other method) if sent (i) to the Company, at its
principal executive offices and (ii) to the holder of this Warrant, at such
holder's address as it appears in the records of the Company (unless otherwise
indicated by any such holder).
SECTION 11. AMENDMENT AND WAIVER.
Except as otherwise provided herein, the provisions of this Warrant may
be amended and the Company may take any action herein prohibited, or omit to
perform any act herein required
6
<PAGE>
to be performed by it, only if the Company has obtained the prior written
consent of the holder of this Warrant.
SECTION 12. MISCELLANEOUS.
SSB Investments, Inc. (for itself and on behalf of its registered
assigns) and the Company acknowledge and agree that this Warrant is being issued
by the Company to SSB Investments, Inc. as designee of State Street Bank and
Trust Company as partial consideration by the Company solely for the making by
State Street Bank and Trust Company of a term loan to the Company pursuant to
that certain Term Promissory Note, in the original principal amount of
$3,500,000, executed by the Company in favor of State Street Bank and Trust
Company. Notwithstanding the foregoing, except as otherwise provided in this
Warrant, the rights of SSB Investments, Inc. and its registered assigns under
this Warrant shall not be affected by any failure of State Street Bank and Trust
Company to extend any other or further credit to the Company or otherwise to
perform any obligation or covenant under any agreement or contract with the
Company other than any obligation or covenant pursuant to this Warrant.
[INTENTIONALLY LEFT BLANK]
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer on this 21st day of December, 1998.
SERACARE, INC.
By: /s/ Barry D. Plost
---------------------
Barry D. Plost
Chairman and Chief Executive Officer
8
<PAGE>
EXHIBIT A
FORM OF ELECTION TO PURCHASE
SERACARE, INC.
The undersigned holder of this Warrant (1) hereby irrevocably elects
to exercise the right to purchase hereunder ___ fully paid shares of the
Common Stock of SERACARE, INC., (2) makes payment in full of the purchase
price of such shares, (3) requests that certificates for such shares be
issued in the name of ______________, and (4) if said number of shares shall
not be all the shares the holder is entitled to purchase under this Warrant,
requests that a new Warrant for the unexercised and unexpired portion of this
Warrant be issued.
By:
------------------------
Dated: , 199
------------- ---
9
<PAGE>
EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant
with respect to the number of the shares covered thereby set forth below,
unto:
Name of Assignee Address No. of Shares
---------------- ------- -------------
Dated: Signature
----------------------------
Witness
----------------------------
Each assignee of the Warrant hereby acknowledges and agrees that this
Warrant and the securities into which this Warrant may be exercised have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities laws, and that no sale, transfer, pledge or other
disposition of this Warrant or the shares purchasable hereunder shall be made
except pursuant to registration under the Securities Act and any applicable
state securities laws or pursuant to an exemption therefrom.
Dated:
----------------------------------------
Signature of Assignee
Dated:
----------------------------------------
Signature of Assignee
10
<PAGE>
4.26 ASSET PURCHASE AGREEMENT BY AND BETWEEN AMEX PLASMA MANAGEMENT, INC. AND
SERACARE, INC. DATED OCTOBER 30, 1998.
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND BETWEEN SERACARE., INC.
AND
AMEX PLASMA MANAGEMENT, INC.
<PAGE>
This Asset Purchase Agreement ("Agreement") is made and entered into
this 30th day of October, 1998 by and between SeraCare, Inc., a Delaware
Corporation with its principal place of business at 1925 Century Park East,
Suite 1970, Los Angeles, CA. 90067 ("Purchaser") and Amex Plasma Management,
Inc. with its principal place of business at 177 U.S. Highway One, Suite 285,
Tequesta, Florida, 33469 ("Seller").
RECITALS
WHEREAS, Purchaser wishes to acquire from Seller and the Seller wishes
to sell to Purchaser, upon the terms and subject to the conditions set forth
herein, the Purchased Assets (defined below) which shall include all of the
operating assets of the plasmapheresis donor center located at 4226 Plank Road,
Baton Rouge, LA 70805 (the "Plasma Center").
AGREEMENTS
Seller agrees to sell to Purchaser all rights and interests in the
Purchased Assets, leases, leasehold improvements, fixed assets, intangible
assets, licenses, certifications and/or any other personal or intangible
property attributable to the Plasma Center.
PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of this
Agreement, on the Closing Date, as defined herein, Seller shall sell, assign,
transfer, convey and deliver to Purchaser (or its designee), and Buyer (or its
designee) shall purchase, acquire and accept from Seller, all of the assets,
properties, rights, privileges, claims and rights of every kind and nature,
tangible and intangible, absolute or contingent, used by Seller in connection
with the Plasma Center, excluding cash, accounts receivable and plasma inventory
(the "Purchased Assets"), which Purchased Assets shall include an assignment of
the leases, leasehold improvements, fixed assets, all rights and obligations
attributable to sales contracts to customers, intangible assets (including
goodwill), plus ownership in any and all other rights or assets attributable to
the Plasma Center, including the rights to any FDA or QPP licenses and/or
certifications pertaining to such plasma center, and including any other asset
or license which attach or may attach to the Plasma Center and the operation
thereof.
ASSUMPTION OF CERTAIN LIABILITIES. Upon the terms and subject to the conditions
contained herein, on the Closing Date Purchaser shall assume the following
liabilities:
1. The lease for the facilities located at 4226 Plank Road, Baton
Rouge, LA 70805, a copy of which is attached hereto as Exhibit 1.
2. The obligations under the Plasma Purchase Agreement with Alpha
Therapeutics Company, a copy of which is attached as exhibit 2
3. All other contracts, agreements policies, licenses, permits and
certifications in effect on the Closing Date and which are listed
on Schedule 2 attached hereto under the heading "Other Contracts
and Obligations".
4. Other than those liabilities and obligations listed on Schedule
2, Purchaser assumes no responsibility for any other liability,
obligation or account payable
2
<PAGE>
relating to the period up to and including October 31, 1998.
Accounts payable, such as utility bills, which cover periods
before and after October 31, 1998 will be prorated, with
Purchaser paying only for the period beginning November 1, 1998.
CONSIDERATION
PURCHASE CONSIDERATION. As consideration to Seller, Purchaser agrees to
deliver 50,000 shares of .001 par value common stock of the Purchaser issued
with a Rule 144 legend and a five year warrant to purchase 50,000 shares of
.001 par value common stock at a price of $6.00 per common share. Such share
certificate and warrant shall be issued within fifteen days of the Closing
Date. As additional consideration, the Purchaser hereby agrees to negotiate
in good faith a definitive development agreement for the construction of
additional plasmapheresis centers by Seller to be acquired by Purchaser on a
"Turn Key" basis.
PIGGY- BACK RIGHTS.
As part of the consideration, Purchaser agrees that Seller shall have Piggy-Back
Registration Rights with regard to both the common stock shares issued hereunder
and any common stock shares issued pursuant to the exercise of the warrant
issued hereunder. Purchaser hereby agrees to provide Seller with prompt written
notice of any proposed registration together with a list of the jurisdictions in
which the SeraCare, Inc. intends to attempt to qualify such securities under
applicable state securities laws. Upon written request from the Seller given 30
days after receipt of such notice from the Purchaser, the Purchaser shall cause
to be included in the noticed registration statement all of the common shares
that the Seller has requested, subject only to restrictions and conditions
imposed by the underwriters.
CONDITIONS PRECEDENT TO CLOSING
BY SELLER. Seller shall fulfill all of the following before Purchaser is
obligated to close:
a. have provided Purchaser with copies of all documents listed on
Schedule 2.
b. have provided Purchaser with a Lease Assignment signed by the
appropriate landlord for all leases listed on Schedule 2 in a
form reasonably satisfactory to Purchaser.
c. have provided purchaser with a waiver of Alpha Therapeutic
Corporation's First Right of Refusal re: the Plasma Center and a
written consent and assignment to SeraCare, Inc. (or its
designate) of the obligations, rights and privileges of the
Plasma Purchase and Sale Agreement from Alpha Therapeutic
Corporation.
d. have provided documented evidence that all FDA licenses and QPP
certifications are valid and in good standing with the
appropriate authority and that there no outstanding issues with
any such authority.
e. have delivered all other consents, approvals and assignments
required in connection with the completion of the transaction
contemplated by this
3
<PAGE>
Agreement in form and content reasonably satisfactory to the
Purchaser.
BY PURCHASER. Purchaser shall fulfill all of the following before Seller is
obligated to close:
a. have provided Seller with a copy of a Board of Directors
resolution authorizing the transaction contemplated by this
agreement.
b. have provided Seller with a Draft letter instructing the
Purchaser's transfer agent to issue 50,000 shares of .001 par
value Common Stock of SeraCare, Inc. to the Seller.
c. have provided Seller with a Draft copy of a five-year warrant to
purchase 50,000 shares of .001 par value common stock.
d. have delivered all consents, approvals and assignments required
in connection with the completion of the transaction contemplated
by this Agreement in form and content reasonably satisfactory to
the Seller.
REPRESENTATIONS AND WARRANTIES
Seller hereby represents and warrants to the Purchaser as follows (with the
understanding that the Purchaser is relying materially on each such
representation and warranty in entering into and executing this Agreement):
A. OWNERSHIP IN THE LEASES. RIGHTS AND INTERESTS BEING ACQUIRED BY THE
PURCHASER FREE AND CLEAR OF ALL ENCUMBRANCES. Seller hereby represents
and warrants that he has good title, valid rights and ownership free and
clear of all encumbrances to the Transferred Assets with every authority
to transfer, assign and sell such interest, right or ownership to the
Purchaser as contemplated by this Agreement.
B. All FDA LICENSES, QPP CERTIFICATIONS AND ANY OTHER LICENSE OR PERMITS
NEEDED TO OPERATE THE PLASMA CENTER ARE IN GOOD STANDING WITH NO
OUTSTANDING AND/OR UNRESOLVED ISSUES. Seller hereby represents and
warrants that All FDA licenses, QPP certifications and any other license
or permits needed to operate the Plasma Center are in good standing with
no outstanding and/or unresolved issues. Seller further represents and
warrants that there are no unresolved audit issues with Alpha
Therapeutic Corporation.
C. DUE AUTHORIZATION. The Seller has full power and authority as a Company
to enter into and perform the obligations under this Agreement and each
agreement, instrument and document to be executed by the Seller in
accordance herewith.
D. ALL LIABILITIES AND OBLIGATIONS HAVE BEEN LISTED ON SCHEDULE 2. Seller
hereby represents and warrants that all leases, contracts or other
obligations to be assumed by the Purchaser have been listed on Schedule
2 and that Seller knows of no other leases, contracts or other
obligations relating to the Plasma Center. Seller understands that any
leases, finder's fees, commissions, contracts or other obligations not
listed on Schedule 2 will not be assumed by Purchaser.
4
<PAGE>
E. COMPLIANCE WITH LAWS: ENVIRONMENT MATTERS. Seller hereby represents and
warrants that conduct of Seller has not violated any laws, the
non-compliance with which could have a materiel adverse effect on the
Purchaser or the operation of the Plasma Center as a plasma collection
center. The Seller has compiled in all material respects with all
judicial and governmental requirements relating to any federal, state or
local environmental laws, regulations or ordinances, the non-compliance
with which would have a material adverse effect on the Purchaser or the
operation of the Plasma Center.
F. LEGAL PROCEEDINGS. Seller hereby represents and warrants that there is
no Order or Action pending, or to the best knowledge of the Seller,
threatened which affects or may affect Seller or the Transferred Assets
that individually or when aggregated with one or more other Orders or
Actions has or could reasonably be expected to have a material adverse
effect on the Plasma Center or on the Sellers ability to perform Sellers
obligations under the terms of this Agreement.
G. NO BROKERS OR FINDERS. Seller hereby represents and warrants that no
agent, broker, finder, or investment or commercial banker, or other
Person or firm engaged by or acting on behalf of Seller or any of
Sellers relatives or affiliates in connection with the negotiation,
execution or performance of the transaction contemplated by this
Agreement, is or will be entitled to any brokerage or finder's or
similar fee or other commission as a result of this Agreement or the
transaction contemplated hereby.
H. INDEMNIFICATION OF PURCHASER. Seller hereby agrees to indemnify and hold
harmless the Purchaser, affiliates of the Purchaser, and any officer,
director, employee and consultant of the Purchaser (collectively, the
"Indemnified Parties") from and against any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs and
expenses which any of the Indemnified Parties may sustain, or to which
any of the Indemnified Parties may be subjected, arising out of any
breach or default by the Seller, excluding actions or omissions of the
Purchaser, of or under any of the representations, warranties,
covenants, agreements or other provisions of this Agreement or any
agreement or document executed in connection herewith.
I. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Regardless of any
investigation at any time made by or on behalf of any party hereto or of
any information any party may have in respect thereof, all covenants,
agreements, indemnities, representations and warranties made hereunder
or pursuant hereto or in connection with the transactions contemplated
hereby shall survive the execution of this Agreement for a period of
thirty six months following the date hereof.
J. NO MATERIAL ADVERSE CHANGE. Between the date of the signing of this
Agreement and November 1, 1998, Seller has no knowledge of any
circumstance, change in business conditions, or other event which may
occur or continue to occur which could reasonably expected to have a
material adverse effect on the Plasma Center. During that period, Seller
will continue to direct the activities of the Plasma Center in a prudent
business manner.
K. NON COMPETITION AGREEMENT. Seller hereby agrees that for a period of
five years from the Closing Date, Seller will not (i) directly or
indirectly, either alone or with others, as principal, agent, partner,
investor, lender, guarantor, distributor, promoter
5
<PAGE>
or advertiser, or advisor, or in any other capacity, carry on, be
engaged in, or have any interest or otherwise be connected or affiliated
or associated with any corporation, partnership, limited liability
company or partnership, proprietorship, firm, association or other
entity which is engaged in any manner in, or otherwise competes with,
the Purchaser (ii) engage in any activities which are or could
reasonably be expected to have an adverse affect upon the operations of
the Purchaser (iii) open or acquire any new center that will be in the
business of collecting, analyzing, processing and selling human blood
plasma and/or human biological products or components (iii) directly or
indirectly, solicit, or request that any person who is currently
donating, or in the one year prior to the Closing Date has donated,
plasma at The Plasma Center or at any other center owned or controlled
by the Purchaser or any affiliated (as that term is defined by the
Securities Exchange Commission) entity of the Purchaser. Both Seller and
Purchaser hereby agree that the covenants of non-competition and
non-solicitation are reasonable covenants under the circumstances.
Seller agrees that any breach or threatened breach of the covenants
contained in this paragraph K would irreparably injure the Purchaser.
Accordingly, Seller hereby agrees that, in such event, the Buyers shall
be entitled, without the necessity of proving damages or posting bond,
and notwithstanding any election by Purchaser to claim damages, to
obtain a temporary and/or permanent injunction (without proving a breach
therefor) to restrain any such breach or threatened breach or to obtain
specific performance of any such provisions, all without prejudice to
any and all remedies which the Purchaser may have at law or in equity.
CLOSING DATE. The closing date of the transaction contemplated by this Agreement
shall take place on October 31, 1998, at the offices of the Purchaser (the
"Closing" or "Closing Date") or at some other time, date and place agreed upon
by both the Seller and the Purchaser.
CONFIDENTIALITY. The parties agree the material terms of this Agreement shall
remain absolutely confidential. In the event any party or any officer, director,
shareholder or representative of either party to this agreement is required to
disclose the existence or terms of this Agreement by subpoena, discovery or
legal process, then such party shall utilize its best efforts to notify the
opposing parties prior to any disclosure so as to provide the opposing parties
with an opportunity to intervene for the purpose of protecting its interests in
non-disclosure.
JOINT DRAFTING. Both Seller and Purchaser have jointly participated in the
negotiations and drafting of this Agreement. In the event of a question of
intent or interpretation arises, this Agreement shall be construed as having
been drafted by both parties.
ATTORNEY'S FEES. In the event of any dispute arising out of or related to this
Agreement, the prevailing party shall be entitled to recover, in addition to any
other damages afforded by law, all reasonable attorney's fees incurred in the
prosecution and defense of such and action.
APPLICABLE LAW. This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
ENTIRE AGREEMENT. This Agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to the
transaction contemplated by this Agreement. Each party to this Agreement
acknowledges that no
6
<PAGE>
representation, inducements, promises, or agreements, orally or otherwise, have
been made by any party, or anyone acting on behalf of any party, which are not
embodied herein, and that no other agreement, statement, or promise not
contained in this Agreement shall be valid or binding on either party.
MODIFICATIONS. Any modification of this Agreement shall be effective only if it
is in writing and signed by both parties to this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first written above.
SELLER:
AMEX PLASMA MANAGEMENT,, INC.
By: /s/ June L. Ferren
--------------------------
Name: June L. Ferren
Title: President
PURCHASER:
SERACARE, INC.
By: /s/ Barry Plost
--------------------------
Barry D. Plost
President and CEO
7
<PAGE>
23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
SeraCare, Inc.
Los Angeles, California
We consent to the incorporation by reference in the Registration Statements on
Form S-3 No 333-74663 and No. 333-57943 of SeraCare, Inc. of our report dated
May 18, 1999, relating to the consolidated balance sheet of SeraCare, Inc. and
Subsidiaries as of February 28, 1999 and the related consolidated statements of
income, stockholders' equity (deficit), and cash flows for the year then ended,
which report appears in the February 28, 1999 annual report on Form 10-KSB of
SeraCare, Inc. and Subsidiaries.
BDO Seidman, LLP
Los Angeles, California
May 18,1999
53
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 843,226
<SECURITIES> 0
<RECEIVABLES> 13,619,739
<ALLOWANCES> 0
<INVENTORY> 10,659,226
<CURRENT-ASSETS> 25,703,074
<PP&E> 4,632,159
<DEPRECIATION> 0
<TOTAL-ASSETS> 64,576,262
<CURRENT-LIABILITIES> 15,979,490
<BONDS> 22,895,014
60,107
37
<COMMON> 7,644
<OTHER-SE> 25,633,970
<TOTAL-LIABILITY-AND-EQUITY> 64,576,262
<SALES> 49,010,389
<TOTAL-REVENUES> 49,698,207
<CGS> 0
<TOTAL-COSTS> 39,128,393
<OTHER-EXPENSES> 4,180,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,294,302
<INCOME-PRETAX> 2,722,016
<INCOME-TAX> 17,014
<INCOME-CONTINUING> 2,705,002
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,705,002
<EPS-BASIC> $.37
<EPS-DILUTED> $.24
</TABLE>
