SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 19, 1996
HEMACARE CORPORATION
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(Exact name of registrant as specified in its charter)
California 0-15223 95-3280412
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State or other Commission File Number) (IRS Employer
jurisdiction of Identification Number)
incorporation or
organization)
4954 Van Nuys Boulevard
Sherman Oaks, California 91403
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(Address of principal executive offices and Zip Code)
(818) 986-3883
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(Registrant's telephone number, including area code)
(Not Applicable)
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(Former name or former address, if changed since last report)
<PAGE> 1
Item 5. Other Events.
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On July 19, 1996, HemaCare Corporation (the "Registrant") and
Medicorp Inc. ("Medicorp") entered into a Settlement Agreement and
Mutual Release (the "Medicorp Settlement Agreement") resolving all
disputes between them related to their February 1993 License
Agreement. The License Agreement provided for the license by
Medicorp to the Registrant of certain patent rights underlying the
Registrant's research and development of Immupath , an experimental
anti-HIV hyperimmune plasma-based product intended for the
treatment of Acquired Immune Deficiency Syndrome (AIDS). This
project, together with the other related business of the
Registrant's HemaBiologics, Inc. subsidiary ("HBI"), was
discontinued by the Registrant in November 1995. In consideration
of the license rights, the Registrant was obligated to pay monetary
royalties to Medicorp and issued to Medicorp common stock purchase
warrants exercisable through February 17, 2003 for 400,000 shares
of the Registrant's common stock at an exercise price of $5.50 per
share (the "Medicorp Warrants").
Each party to the License Agreement had previously notified the
other party of its termination of the License Agreement due to
alleged breaches of the License Agreement by the other party. The
Registrant further notified Medicorp that the Registrant's
purported termination of the License Agreement for cause also
resulted in the termination of the Medicorp Warrants. Medicorp
denied that it had breached the License Agreement, asserted that
the Medicorp Warrants remained outstanding and asserted that the
Registrant was liable to Medicorp for approximately $425,000 in
past due royalties under the License Agreement.
In the Medicorp Settlement Agreement, the parties agreed (i) to
terminate the License Agreement, (ii) to mutually release each
other from all prior monetary and other breaches of the License
Agreement, (iii) that the Medicorp Warrants would remain
outstanding and exercisable and (iv) that the Registrant would
grant a nonexclusive royalty-free license to Medicorp to certain
research data and other documentation associated with the Immupath
project. The Medicorp Settlement Agreement does not require any
monetary settlement payments by either party.
In November 1995, the Registrant decided to discontinue HBI's research and
development operations and established a reserve in the amount
of approximately $1,035,000 for estimated HBI operating losses during the
period of disposal. Included in this reserve was approximately $600,000 for
the resolution of contingent liabilities in connection with the License
Agreement and the Medicorp Warrants, none of which will be required to be
applied for this purpose. To date, the overall results of the disposal of
discontinued operations, including the resolution of the Medicorp dispute,
have been more favorable than anticipated. Upon the substantial completion
of the disposal, the positive or negative balance of the reserve will be
realized or expensed, as the case may be, on the Registrant's operating
statement with the resulting balance sheet effect of reclassifying the amount
of the reserve from liabilities to shareholders' equity. Although subject to
a number of factors beyond the control of the Registrant, management believes
that the disposal of the remainder of the discontinued HBI operations will be
substantially completed during the third or fourth quarter of 1996.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements.
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None.
(b) Pro forma financial information.
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<TABLE>
<CAPTION>
HEMACARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1996
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Actual
(Unaudited) Adjustment(1) Pro Forma
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<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 995,600 $ 995,600
Other current assets 2,035,900 2,035,900
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3,031,500 3,031,500
Plant and equipment 961,600 961,600
Other long-term assets 182,800 182,800
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$ 4,175,900 $ 4,175,900
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LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities $ 2,282,700 $ 2,282,700
Long-term liabilities 1,411,800 (600,000) 811,800
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3,694,500 3,094,500
Shareholders' Equity
Common Stock 12,312,900 12,312,900
Accumulated Deficit (11,831,500) 600,000 (11,231,500)
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481,400 1,081,400
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$ 4,175,900 $ 4,175,900
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1 Reversal of non-current reserve for discontinued operations which was provided
for resolution of the Medicorp license dispute. The reserve became unnecessary
when the dispute was settled in July 1996 without any cost to the Company.
</TABLE>
(c) Exhibits.
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10.1 Settlement Agreement and Mutual Release, dated July
19, 1996, between the Registrant and Medicorp Inc.,
including list of omitted appendices
99.1 Agreement to furnish appendices to Exhibit 10.1
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<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
HEMACARE CORPORATION
(Registrant)
Date: July 31, 1996
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By: /s/ Hal I. Lieberman
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Hal I. Lieberman, President
and Chief Executive Officer
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<PAGE> 4
INDEX TO EXHIBITS
Exhibit Method of Filing
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10.1 Settlement Agreement and Mutual
Release, dated July 19, 1996,
between the Registrant and
Medicorp Inc., including list
of omitted appendices.................. Filed herewith electronically
99.1 Agreement to furnish appendices
to Exhibit 10.1........................ Filed herewith electronically
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Exhibit 10.1
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE (this
"Agreement") is made and entered into as of the 19th day of
July 1996, by and between MEDICORP INC., a Quebec corporation
("Medicorp"), and HEMACARE CORPORATION, a California corporation
("HemaCare").
WITNESSETH:
WHEREAS, the parties entered into that certain License
Agreement dated as of February 17, 1993, a copy of which is
attached hereto as Appendix A (the "Initial License Agreement"), as
amended or modified by various letter agreements dated March 1,
1993, April 26, 1993, August 9, 1993 and February 25, 1994, copies
of which are attached hereto as Appendix B (the Initial License
Agreement and such letter agreements and any other amendments to or
modifications of the Initial License Agreement are collectively
referred to herein as the "License Agreement");
WHEREAS, pursuant to the License Agreement, the parties also
entered into that certain Warrant Agreement, dated as of
February 17, 1993 (the "Warrant Agreement"), a copy of which is
attached hereto as Appendix C;
WHEREAS, pursuant to the Warrant Agreement, HemaCare issued to
Medicorp a common stock purchase warrant certificate in the form
attached to the Warrant Agreement, which is exercisable on or
before February 17, 2003, for up to 400,000 shares of the Common
Stock, without par value, of HemaCare at an exercise price of $5.50
per share, subject to adjustment in certain circumstances (the
"Warrant");
WHEREAS, HemaCare and Medicorp have each alleged that the
other has breached various provisions of the License Agreement;
WHEREAS, by letter dated November 21, 1995, HemaCare informed
Medicorp that it was exercising its rights under the License
Agreement to terminate the License Agreement, effective not later
than 180 days after the date of such letter, and HemaCare further
asserted that the Warrant had terminated pursuant to Section 3 of
the Warrant Agreement due to the alleged breaches of the License
Agreement by Medicorp;
WHEREAS, by letter dated December 15, 1995, Medicorp informed
HemaCare that it denied it had breached the License Agreement and
asserted that the Warrant remained outstanding and in full force
and effect;
WHEREAS, by letter dated February 28, 1996, Medicorp informed
HemaCare that it was exercising its rights under the License
Agreement to terminate the License Agreement, effective 30 days
after the date of such letter for breaches of the License Agreement
by HemaCare; and
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<PAGE> A-2
WHEREAS, the parties now desire to settle and resolve all
claims and disputes between them arising out of, in connection with
or relating to the License Agreement and the Warrant Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth in this Agreement, the parties agree as
follows:
1. Defined Terms. All capitalized terms used in this Agreement
without separate definition shall have the same meaning as used in
the License Agreement.
2. Termination of License Agreement. Subject to the provisions of
this Agreement, the License Agreement is hereby terminated by
mutual agreement of the parties.
3. Covenant Not to Sue. Medicorp hereby covenants on behalf of
itself and its Affiliates not to sue or otherwise assert a claim
against HemaCare or any of its Affiliates or their respective
officers, directors, employees, agents, counsel or shareholders, or
any of their respective successors, heirs or assigns, with respect
to the use by HemaCare, its Affiliates and/or their respective
agents of Licensed Product, Licensed Process and Licensed
Information solely for the purpose of continuing, without receiving
compensation therefor, to provide treatments of Licensed Product to
the remaining volunteers in the human clinical trials previously
conducted by HemaCare and/or its Affiliates and to produce or have
produced Licensed Product solely for such purpose.
4. Delivery and License of Research Data. Not later than
August 31, 1996, HemaCare shall deliver to Medicorp copies of all
of the following in the possession of HemaCare or its Affiliates
relating to or in connection with the past efforts by HemaCare and
its Affiliates to develop a treatment for Acquired Immune
Deficiency Syndrome (AIDS) using Licensed Process and/or Licensed
Information: primary, tabulated and statistically analyzed
clinical data; records concerning manufacturing and quality control
procedures, documents and costs, including but not limited to
Standard Operating Procedures and Standard Quality Control and
Assurance Procedures; virus challenge/inactivation studies and
tests; correspondence to and from the United States Food and Drug
Administration and the Food and Drug Branch of the Department of
Health of the State of California (collectively, the "Regulatory
Authorities"); filings made with either of the Regulatory
Authorities; minutes of any meetings with either of the Regulatory
Authorities; and similar records (the "Research Data"). HemaCare
hereby grants to Medicorp a nonexclusive, royalty-free, perpetual,
transferable license to the Research Data. HemaCare represents and
warrants that it has the right to grant the license rights to the
Research Data provided for in this Section. HemaCare makes no
representation or warranty with respect to the content, quality or
nature of any of the Research Data, and HemaCare shall have no
liability or responsibility whatsoever, including without
limitation for consequential damages, to Medicorp or others under
any legal principle for any use of or reliance upon the Research
Data. Each of HemaCare and its Affiliates and Medicorp and its
Affiliates shall have the right to provide the Research Data to
other parties on such terms as shall be determined in their sole
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<PAGE> A-3
discretion without incurring any obligation to the other party to
this Agreement. Notwithstanding any other provision of this
Agreement to the contrary, the Research Data specifically excludes
any and all physical inventory of Licensed Product, and any plasma
obtained from HIV positive donors from which Licensed Product may
be produced, that is currently in the possession of HemaCare or its
Affiliates, which HemaCare or its Affiliates may sell, transfer or
otherwise dispose of in the sole discretion of HemaCare or any of
its Affiliates without incurring any obligation to Medicorp.
5. Survival of Confidentiality and Indemnification Provisions.
Sections 8 and 10.1 of the License Agreement shall survive the
termination of the License Agreement.
6. Mutual General Releases.
(a) Medicorp, on behalf of itself and its Affiliates,
and their respective successors and assigns, does hereby
absolutely, fully and forever release, waive, relinquish and
discharge HemaCare, its Affiliates and their respective officers,
directors, employees, agents, counsel and shareholders, and each of
their respective successors, heirs and assigns, of and from all
claims or causes of action of any nature whatsoever, known or
unknown, fixed or contingent, which Medicorp or such other persons
have or hereafter may have based on, arising from or relating to
the License Agreement and its execution, delivery, performance or
breach, except as expressly provided in this Agreement. This
release does not extend to this Agreement or to any of the
provisions of the License Agreement to the extent this Agreement
expressly provides that such provisions shall survive the
termination of the License Agreement.
(b) HemaCare, on behalf of itself and its Affiliates,
and their respective successors and assigns, does hereby
absolutely, fully and forever release, waive, relinquish and
discharge Medicorp, its Affiliates and their respective officers,
directors, employees, agents, counsel and shareholders, and each of
their respective successors, heirs and assigns, of and from all
claims or causes of action of any nature whatsoever, known or
unknown, fixed or contingent, which HemaCare or such other persons
have or hereafter may have based on, arising from or relating to
the License Agreement and its execution, delivery, performance or
breach, except as expressly provided in this Agreement. This
release does not extend to this Agreement or to any of the
provisions of the License Agreement to the extent this Agreement
expressly provides that such provisions shall survive the
termination of the License Agreement.
(c) In entering into this Agreement, neither party
admits that it or any of its Affiliates has done anything wrong or
is liable to the other party for any damages.
(d) Each party promises and agrees for the benefit of
the parties released by it pursuant to this Agreement never to
initiate a lawsuit, arbitration or administrative proceeding
asserting any claims that are released hereby, and if any such
proceedings are ever prosecuted, the complaining party waives and
agrees not to take any award of money or other damages from such
proceeding.
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<PAGE> A-4
7. Waiver of Rights Under California Civil Code Section 1542.
The parties hereto respectively acknowledge that this Agreement is
effective asa full and final accord, satisfaction and settlement of and
bar to each and every claim and cause of action referred to and released
by virtue of Section 6 above. In furtherance of their respective
intention, the parties hereto respectively acknowledge their
familiarity with Section 1542 of the Civil Code of the State of
California, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
The parties hereto respectively hereby expressly waive and
relinquish any and all rights and benefits which they have or may
have under Civil Code Section 1542 or any similar provision or law
to the full extent that they may lawfully waive such rights and
benefits. The parties hereto further respectively acknowledge that
they are aware that they or their attorneys may hereafter discover
facts different from or in addition to the facts of which they or
their attorneys now are aware with respect to the subject matter of
this Agreement and that they nevertheless intend hereby fully,
finally, absolutely and forever to settle the matters released by
virtue of Section 6 above, notwithstanding the discovery of any
such different or additional facts.
8. No Expiration or Termination of Warrant. HemaCare acknowledges
and agrees that the termination of the License Agreement has and
shall have no effect whatsoever on the Warrant, which shall remain
outstanding and exercisable to the same extent as prior to such
termination.
9. Authority to Contract; Effectiveness of Agreement. The parties
hereto represent and warrant to each other that they have taken all
action necessary to authorize, and that they have the authority to
enter into and deliver, this Agreement on behalf of themselves and
all others whom they purport to represent herein and have not
heretofore assigned or transferred, or purported to assign or
transfer, to any person or entity any debt due, liability, demand,
obligation, cost, expense, debt, sum of money, controversy, damage,
account, reckoning, lien, claim or cause of action (including
claims for punitive or other extra-contractual damages), or any
part or portion thereof, involved or referred to herein. Each of
the parties hereto agrees to indemnify and hold harmless the other
parties hereto from and against all adverse consequences of any
actual or purported transfer or assignment. This Agreement shall
become effective immediately upon its execution and delivery by the
parties.
10. Entire Agreement. This Agreement contains the entire
agreement between the parties concerning the subject matter hereof
and supersedes and replaces all prior negotiations and agreements,
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<PAGE> A-5
written and oral. No waiver, amendment or modification of any of
the provisions hereof shall be of any force or effect unless
contained in a writing signed by the parties hereto. Each of the
parties hereto acknowledges: (i) that no other party and no agent
or attorney of any such other party has made any promise,
representation or warranty whatsoever, express or implied, not
contained herein; and (ii) that it has not executed this Agreement
in reliance upon any promise, representation or warranty not
contained herein.
11. Expenses. Each party shall pay its own expenses, including
the fees of counsel, in connection with the preparation and
execution of this Agreement.
12. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the
same agreement and each of which shall be deemed to constitute an
original.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California,
without giving effect to conflicts of laws rules and laws. la
demande des parties, cette convention a ete redigee en anglais. At
the request of the parties, this Agreement has been drafted in the
English language.
14. Binding Effect. This Agreement shall be binding on the
legal representatives and successors and assigns of the respective
parties hereto.
15. Attorneys' Fees. If any litigation or any other proceeding
is commenced in connection with or related to this Agreement, the
losing party or parties shall pay the reasonable attorneys' fees of
the prevailing party or parties.
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<PAGE> A-6
16. Headings. The section headings contained herein are for
the convenience of the parties only and are not intended to affect
the interpretation of this Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
MEDICORP INC.
By: /s/ Elliot Block
---------------------------
Elliott Block, Ph.D.,
President
HEMACARE CORPORATION
By: /s/ Hal I. Lieberman
----------------------------
Hal I. Lieberman, President
and Chief Executive Officer
A-6
<PAGE> A-7
LIST OF APPENDICES
Appendix A License Agreement dated as of February 17, 1993,
between HemaCare Corporation and Medicorp Inc.
Appendix B Letter agreements dated March 1, 1993, April 26,
1993, August 9, 1993 and February 25, 1994
amending or modifying the License Agreement
Appendix C Warrant Agreement dated as of February 17, 1993,
between HemaCare Corporation and Medicorp Inc.
A-7
Exhibit 99.1
AGREEMENT TO FURNISH APPENDICES
HemaCare Corporation (the "Registrant") hereby agrees to furnish
supplementally to the Securities and Exchange Commission a copy of
any omitted appendix to the Settlement Agreement and Mutual Release
dated July 19, 1996, between the Registrant and Medicorp Inc. (the
"Settlement Agreement"), filed with this Report as Exhibit 10.1.
The Settlement Agreement includes a list briefly identifying the
omitted appendices.
A-8
