=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number 0-15223
HEMACARE CORPORATION
(Exact name of registrant as specified in its charter)
State or other jurisdiction of I.R.S. Employer I.D.
incorporation or organization: California Number: 95-3280412
4954 Van Nuys Boulevard
Sherman Oaks, California 91403
(Address of principal executive offices) (Zip Code)
___________________
Registrant's telephone number, including area code: (818)986-3883
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 / /
As of May 13, 1996, 5,941,765 shares of Common Stock of the Registrant were
issued and outstanding.
=============================================================================
<PAGE> 2
INDEX
HEMACARE CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets--March 31, 1996 and December 31, 1995
Consolidated statements of operations--Three months ended March 31,
1996 and 1995
Consolidated statements of cash flows--Three months ended March 31,
1996 and 1995
Notes to consolidated financial statements--March 31, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
- ------- --------------------
HEMACARE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 820,000 $ 997,000
Accounts receivable, net of allowance for
doubtful accounts - $110,000 (1996) and
$95,000 (1995).................................. 1,373,000 1,627,000
Product inventories............................... 153,000 141,000
Supplies.......................................... 294,000 328,000
Prepaid expenses.................................. 114,000 117,000
Note receivable from officer - current............ 15,000 15,000
------------- -------------
Total current assets......................... $ 2,769,000 $ 3,225,000
Plant and equipment, net of accumulated
depreciation and amortization of
$1,605,000 (1996) and $1,513,000 (1995)........... 994,000 1,051,000
Note receivable from officer - non-current.......... 81,000 94,000
Other assets........................................ 98,000 87,000
------------- -------------
$ 3,942,000 $ 4,457,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 536,000 $ 473,000
Accrued blood purchases........................... 161,000 252,000
Accrued payroll and payroll taxes................. 344,000 310,000
Other accrued expenses............................ 212,000 264,000
Current obligations under capital leases.......... 215,000 209,000
Reserve for discontinued operations - current..... 246,000 336,000
------------- -------------
Total current liabilities................... 1,714,000 1,844,000
Obligations under capital leases, net
of current portion................................ 644,000 649,000
Other accrued employee benefits..................... 176,000 138,000
Reserve for discontinued operations - non-current... 600,000 600,000
Commitments and contingencies
Shareholders' equity:
Common stock, without par value -
20,000,000 shares authorized,
5,929,285 and 5,911,285 issued
and outstanding in 1996 and 1995,
respectively................................. 12,210,000 12,179,000
Accumulated deficit............................... (11,402,000) (10,953,000)
------------- -------------
Total shareholders' equity.................. 808,000 1,226,000
------------- -------------
$ 3,942,000 $ 4,457,000
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
HEMACARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
------------- -------------
<S> <C> <C>
Revenues:
Blood products.................................... $ 1,684,000 $ 1,726,000
Blood services.................................... 1,126,000 960,000
------------ ------------
Total revenues................................ 2,810,000 2,686,000
Operating costs and expenses:
Blood products.................................... 1,874,000 1,262,000
Blood services.................................... 747,000 694,000
------------ ------------
Total operating costs and expenses............ 2,621,000 1,956,000
------------ ------------
Operating profit.............................. 189,000 730,000
General and administrative expense.................. 627,000 488,000
Interest income..................................... 9,000 15,000
Interest expense.................................... (20,000) (8,000)
------------ ------------
Income (loss) from continuing operations before
income taxes...................................... (449,000) 249,000
Provision for income taxes.......................... -- --
Discontinued operations:
Loss from discontinued operations................. -- (297,000)
------------ ------------
Net loss.......................................... $ (449,000) $ (48,000)
============ ============
Per share amounts:
Income (loss) from continuing operations............ $ (0.07) $ 0.04
Discontinued operations:
Loss from discontinued operations................. -- (0.05)
------------ ------------
Net loss.......................................... $ (0.07) $ (0.01)
============ ============
Weighted average common and common
equivalent shares outstanding................... 6,069,642 5,567,628
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
HEMACARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................. $ (449,000) $ (48,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 81,000 128,000
Provision for losses on accounts receivable.... 15,000 16,000
Issuance of common stock for employee
compensation................................. -- 55,000
Changes in operating assets and liabilities:
Decrease in accounts receivable................. 288,000 270,000
Decrease (increase) in inventories, supplies
and prepaid expenses.......................... 25,000 (101,000)
Increase in other assets, net................... (11,000) (7,000)
Decrease in accounts payable and accrued
expenses...................................... (46,000) (428,000)
Increase (decrease) in other accrued employee
benefits..................................... 38,000 (44,000)
Net expenditures for discontinued operations.... (90,000) --
----------- ------------
Net cash used in operating activities............... (149,000) (159,000)
----------- ------------
Cash flows from investing activities:
Decrease (increase) in note receivable from officer.. 13,000 (11,000)
Increase in short-term investments................... -- (4,000)
Purchase of plant and equipment, net................. (36,000) (25,000)
----------- ------------
Net cash used in investing activities................ (23,000) (40,000)
----------- ------------
Cash flows from financing activities:
Proceeds from issuance of common stock............... 31,000 357,000
Principal payments on line of credit and capital
leases............................................ (36,000) (33,000)
----------- ------------
Net cash (used in) provided by financing activities.. (5,000) 324,000
----------- ------------
Increase (decrease) in cash and cash equivalents..... (177,000) 125,000
Cash and cash equivalents at beginning of period..... 997,000 786,000
----------- ------------
Cash and cash equivalents at end of period........... $ 820,000 $ 911,000
=========== ============
Supplemental disclosure:
Interest paid........................................ $ 20,000 $ 8,000
=========== ============
Items not impacting cash flows:
Increase in capital lease obligations................ $ 37,000 $ 167,000
=========== ============
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
HEMACARE CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
Note 1 - Basis of Presentation and General Information
- ------------------------------------------------------
The accompanying unaudited consolidated financial statements of HemaCare
Corporation (the "Company" or "HemaCare") have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. Certain 1995 amounts have
been reclassified to conform to the 1996 presentation. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
From 1990 to November 1995, the Company, through its wholly owned subsidiary,
HemaBiologics, Inc. ("HBI"), conducted research and development of ImmupathTM,
an anti-HIV hyperimmune plasma-based product intended to be used in the
treatment of Acquired Immune Deficiency Syndrome ("AIDS"). The Company had a
license agreement with Medicorp, Inc. ("Medicorp") for the rights to the
United States patent to commercialize Immupath. In November 1995, the
Company's Board of Directors decided to discontinue the operations of HBI.
(Notes 2 and 5).
In September 1995, the Company formed Gateway Community Blood Program, Inc.
("Gateway"), a wholly owned subsidiary incorporated in Missouri, to provide
blood products and services in portions of Missouri and Illinois.
The Company opened its University of Southern California Blood Center ("USC
Blood Center"), a full-service blood donation and services facility, in
February 1996. The USC Blood Center facility is leased from USC and is
staffed and operated by HemaCare under its Food and Drug Administration
("FDA") license. Located on the USC Health Sciences Campus in Los Angeles,
California, the center provides services to the USC/Norris Comprehensive
Cancer Center and Hospital and the USC University Hospital (the "USC
Hospitals"). The USC Hospitals have agreed that HemaCare will be their
primary provider of blood products and therapeutic services for the three-year
period ending February 1999. Pathologists on the USC medical faculty provide
medical direction services for the USC Blood Center as consultants to the
Company.
Note 2 - Discontinued Operations
- --------------------------------
In November 1995, the Company's Board of Directors decided to discontinue the
operations of HBI, including the research and development of Immupath and the
associated specialty plasma business. In connection with this decision, the
Company wrote off the remaining book value of HBI's assets and provided a
reserve for estimated operating losses from the November 30, 1995 measurement
date through December 1996, the expected date of substantial completion of
disposal. The loss on the disposition of HBI's operations has been accounted
for as discontinued operations, and prior year financial statements have been
restated to reflect the discontinuation of these operations. Revenues from
such operations for the three months ended March 31, 1995 were $70,000.
6
<PAGE> 7
Net loss from discontinued operations for the first quarter of 1996 of
$90,000 reduced the reserve for discontinued operations. The operating loss
reserve was estimated based on the best available information. However,
actual operating losses during the disposition period may differ from the
estimate. The Company has been actively pursuing a sale of HBI's research
and development and associated specialty plasma assets, and in May 1996, the
Company signed a definitive agreement to sell substantially all the tangible
assets of the discontinued operations and two of the three remaining FDA
source plasma licenses. Closing of the sale is contingent upon obtaining FDA
approval to transfer the licenses to the purchaser and certain other
conditions.
Note 3 - Line of Credit
- -----------------------
Since August 1991, the Company has maintained a line of credit with a
commercial bank secured by its accounts receivable, inventory and equipment.
At March 31, 1996, the Company was in technical violation of certain of the
covenants of its credit line agreement, due to the write off of the assets of
its discontinued operations (Note 2). However, its lender had waived
compliance with these covenants through April 30, 1996, the credit line
expiration date. Effective May 1, 1996, the credit line was renewed through
April 30, 1997. Under the terms of the new credit line agreement, the
Company may borrow up to 70% of eligible accounts receivable, up to a maximum
of $700,000 and must maintain certain ratios and achieve defined operating
objectives, including maintaining a tangible net worth of not less than
$370,000 prior to September 30, 1996 and not less than $2 million thereafter.
Interest on credit line borrowings is at the lender's prime rate (8.25% at
March 31, 1996) plus one-half of a percentage point. There were no
borrowings outstanding on the credit line at March 31, 1996. On April 17,
1996 and May 7, 1996, the Company borrowed $200,000 and $100,000,
respectively, under the line of credit.
Note 4 - Shareholders' Equity
- -----------------------------
In April 1994, HemaCare sold 250,000 units consisting of one share of common
stock and three warrants to purchase additional shares (at $4.00 per unit) in
an offshore transaction, from which it received net proceeds of approximately
$900,000. The second group of 250,000 warrants was fully exercised in the
first quarter of 1995 and yielded net proceeds of approximately $350,000. In
consideration of this exercise, which was made 45 days prior to the
expiration date, a fourth group of 250,000 warrants exercisable at a price of
$3.50 per share and expiring in December 1998 was granted to the purchaser.
The third group of 250,000 warrants was exercised in June and July 1995,
yielding net proceeds of approximately $390,000. The fourth group of options
remains outstanding at March 31, 1996. In connection with the sale of the
units and the subsequent exercise of related warrants, the Company granted to
the finder warrants to purchase 50,000 shares of the Company's common stock
(Finder Warrants). The Finder Warrants expire five years from their issue
date and are exercisable at prices ranging from $1.45 to $4.00. Up to 12,500
additional Finder Warrants may be issued at $3.50 per share, depending on the
number of the fourth group of 250,000 warrants which are exercised.
In November 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation" ("SFAS 123"). SFAS 123 recommends changes in accounting for
employee stock based compensation plans and requires certain disclosures with
respect to these plans. The Company will adopt SFAS 123 prior to December 31,
1996.
7
<PAGE> 8
Note 5 - Commitments and Contingencies
- --------------------------------------
On March 11, 1994, the Company was served with a lawsuit filed by a former
employee against the Company and its wholly owned subsidiary, HBI, in the
Superior Court of the State of California, related to the termination of this
employee and seeking relief in the amount of $550,000. At this stage in the
proceedings, neither management nor counsel are in a position to evaluate the
probable merits of the claim asserted by this former employee. Accordingly,
the resolution of this lawsuit could have a material impact on the Company's
financial conditions and results of operations.
In September 1995, the Company entered into a letter of intent to make royalty
payments to certain parties in consideration of certain commitments to the
establishment of Gateway. The definitive agreement providing for the payment
of these royalties has not been completed due to a dispute with one of the
parties. The letter of intent provides for cash royalties of 20% of Gateway's
cash flow, as defined, and shares of HemaCare common stock with a value equal
to the cash royalty, up to a maximum of 500,000 shares of HemaCare common
stock. Royalty payments commence after the Company recovers its initial
investment in Gateway, including capital expenditures and operating deficits,
and terminate in 2003.
In November 1995, the Company terminated its license agreement with Medicorp
(Note 1) due to a default by the license holder. The Company also notified
Medicorp that the stock purchase warrants (exercisable for 400,000 shares of
HemaCare common stock at $5.50 per share) issued by the Company to Medicorp
had terminated under their terms, due to the default. Medicorp has denied
that it has breached the license agreement and has alleged that the Company
is liable for royalties under the license agreement of approximately $425,000
and that its warrants remain outstanding. The Company intends to vigorously
defend any legal action which may result from this dispute.
In February 1996, the Company terminated an agreement with a vendor, based on
an unsatisfactory level of performance of the vendor's product. The vendor
is disputing the basis for the termination. The Company intends to vigorously
defend any legal action which may result from this dispute, and the resolution
of this matter is not expected to have a material impact on the Company's
financial position or results of operations.
Note 6 - Related Party Information
- ----------------------------------
In 1995 and 1994, the Company made a series of personal loans to Joshua Levy
totaling $98,307. The proceeds of these loans were used to refinance existing
debt which was collateralized by HemaCare stock owned by Dr. Levy. In January
1996, these individual notes were consolidated into a promissory note,
collateralized by HemaCare stock owned by Dr. Levy, which accrues interest at
a rate equal to the rate the Company pays under its line of credit (Note 3),
adjusted quarterly. Interest accrued related to the loans made to Dr. Levy
for the quarters ended March 31, 1996 and 1995 was $2,126 and $2,221,
respectively. The note requires four annual installment payments of $15,000
due on January 31, with the balance of the principal and accrued interest due
on January 31, 2000. The Company received its first annual installment
payment of $15,000 in January 1996.
Item 2. Mangement's Discussion and Analysis of Financial Condition and
- ------- Results of Operations
--------------------------------------------------------------
All comparisons within the following discussions are to the previous year.
8
<PAGE> 9
In late December 1995, the Gateway Community Blood Program ("Gateway") opened
in St. Louis, Missouri. The University of Southern California (USC) Blood
Center, located in Los Angeles, California, opened in late February 1996.
These new operations are collectively referred to as the "Expansion
Operations" in the following discussions.
Revenues and Operating Profit
- -------------------------
Revenues for the first quarter of 1996, increased 5% ($124,000), as the
result of a 2% decrease in blood products revenues, offset by a 17% increase
in therapeutic services revenues. The Company's total operating profit as a
percentage of sales ("profit margin") decreased to 7% in the first
quarter of 1996 from 27% in the comparable quarter of 1995 due to start-up
losses incurred by the Expansion Operations. The Company's first quarter
gross profit margin before the effect of the Expansion Operations was 27%.
Blood Products
The 2% ($42,000) decrease in blood products revenues for the first quarter of
1996 was due to decreased unit sales of apheresis platelets (10%) and whole-
blood component products (8%), partially offset by price increases for both
products. Revenue from Expansion Operations totaled $59,000 for the 1996
quarter.
Before the effect of the Expansion Operations, first quarter 1996 operating
costs and expenses approximated the 1995 amount, but the 1996 profit margin
decreased to 23% as compared to 28% in 1995. The lower 1996 profit margin
was due to (1) a higher number of imported products sold in the 1996 quarter
and (2) higher fixed costs per sale as a result of a lower volume of units
sold. The first quarter loss from Expansion Operations was $559,000.
Blood Services
Blood services revenues increased 17% ($166,000) in the first quarter of 1996,
primarily as a result of a 6% increase in the number of therapeutic procedures
performed in Los Angeles and a 26% increase in therapeutic procedures
performed in northern Georgia. Both locations also experienced an increase
in the price per procedure in 1996.
The profit margin on blood services increased to 34% in the first quarter of
1996 from 28% in the comparable period of 1995. This increase was due to
(1) lower fixed costs per procedure resulting from the higher number of 1996
procedures and (2) costs incurred in the 1995 quarter associated with the
development of a new therapeutic procedure.
General and Administrative Expense
- ----------------------------------
General and administrative expense increased 29% ($139,000) in the first
quarter of 1996. The increase was primarily due to changes in the
Company's corporate structure necessary to implement its national expansion
strategy, including the addition of a business development department.
9
<PAGE> 10
Discontinued Operations
- -----------------------
In November 1995, the Company discontinued its Immupath related research and
development activities and established a reserve for operating losses and
contingent liabilities related to the disposal of the research and development
and related specialty plasma businesses. Although the disposal reserve was
estimated based on the best available information, actual losses during the
disposition period may vary from the estimate. The Company is actively
pursuing a sale of the assets of the discontinued operations. (See "Liquidity
and Capital Resources".)
Liquidity and Capital Resources
- -------------------------------
At March 31, 1996, the Company had cash and cash equivalents of $820,000 and
working capital of $1,055,000. The Company's blood products and services
businesses, other than the Expansion Operations, are profitable and cash flow
positive.
The Company has a $700,000 line of credit with a commercial bank which is in
effect through April 30, 1997. Under the terms of the credit line agreement,
the Company may borrow up to 70% of its eligible accounts receivable and
must maintain certain operating ratios and achieve defined operating
objectives, including maintaining a tangible net worth of not less than
$370,000 through September 29, 1996 and $2,000,000 thereafter. In order to
comply with the tangible net worth covenant after September 1996, the Company
will be required to increase its shareholder equity through the sale of
additional equity securities. The Company is currently exploring various
financing alternatives, but no assurance can be given that one or more
financing transactions adequate to satisfy these covenants will be completed
on a timely basis or at all. At March 31, 1996, there were no borrowings
outstanding on the credit line. On April 17, 1996 and May 7, 1996 the
Company borrowed $200,000 and $100,000, respectively under the credit line.
Operating under the terms of its three-year agreements which end in February
1999, the USC Blood Center provides services to USC University Hospital and
the USC/Kenneth Norris Comprehensive Cancer Center and Hospital (the "USC
Hospitals"). The Company is the primary provider of blood products and
services to the USC Hospitals and is entitled to recoup the cost of tenant
improvements for the USC Center through surcharges to the Hospitals. Until
its operations reach break even, the Company will be required to fund the USC
Blood Center's cash flow deficits.
Gateway began conducting blood drives in December 1995. Competing in many of
the same markets as the American Red Cross, Gateway is currently developing
its donor and customer bases. Management believes that Gateway will be able
to capture a sufficient portion of the sales of blood products and services
in its target markets to achieve profitable operations, however, the success
of operations will be dependent on a number of factors and circumstances,
many of which will be outside the Company's control. Accordingly, there can
be no assurance that profitable operations will be achieved. Until Gateway's
operations achieve break even, the Company will be required to fund its
working capital needs.
Management is evaluating a number of additional expansion opportunities,
including blood centers and regional programs similar to the USC Blood Center
and Gateway and operations similar to the Company's existing southern
California business. However, further expansion will require that the
Company obtain additional financing. Various financing arrangements are
under consideration, but there can be no assurance that the Company will be
able to obtain the funds necessary to finance additional expansion projects.
10
<PAGE> 11
Winding down discontinued operations will require funding operating costs,
including salaries and benefits and facilities costs, until disposal of these
operations is complete. A reserve for disposal, net of estimated proceeds
from the disposition of the assets of the discontinued operations, was
established in November 1995. Although the reserve was estimated based on
the best available information, there can be no assurance that the reserve
provided will be sufficient to cover all disposal costs. Approximately
$90,000 of the reserve was funded in the first quarter of 1996. In April,
one FDA source plasma license was sold subject to FDA approval, and in May
1996, the Company signed a definitive agreement to sell substantially all the
tangible assets of the discontinued operations and two of the three remaining
FDA source plasma licenses. Closing of the sale is contingent upon obtaining
FDA approval to transfer the licenses to the purchaser and certain other
conditions.
On March 11, 1994, the Company was served with a lawsuit filed by a former
employee against the Company and its wholly owned subsidiary, HBI, in the
Superior Court of the State of California, related to the termination of this
employee and seeking relief in the amount of $550,000. The case is still in
the discovery stage in the proceedings and neither management nor counsel are
in a position to evaluate the probable merits of the claim asserted by this
former employee. Accordingly, the resolution of this lawsuit could have a
material impact on the Company's financial condition and results of
operations.
In February 1996, the Company terminated an agreement with a vendor, based on
the inability of the vendor's product to perform to the standards outlined in
the agreement. The vendor is disputing the basis for the termination. The
Company intends to vigorously defend any legal action which may result from
this dispute, and the resolution of this matter is not expected to have a
material impact on the Company's financial position or future results of
operations.
The Company anticipates that positive cash flow from its profitable
operations, its cash and investments on hand and funds available under its
credit line will be sufficient to provide funding for the anticipated
operating deficits of the Expansion Operations, fund the costs of disposing
of its discontinued operations and meet its other working capital needs for
the next 12 months.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ------- -----------------
See disclosure in Form 10-K for the year ended December 31, 1995.
11
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
a. Exhibits
2.1 Asset Purchase Agreement among the Registrant,
HemaBiologics, Inc. (a wholly owned subsidiary of the
Registrant) and Atopix Pharmaceuticals Corporation,
dated May 2, 1996. See also Exhibit 99.1.
10.1 Revolving Credit Agreement between the Registrant and
Bank Leumi Le-Israel, B.M., dated April 30, 1996,
promissory note and related security agreement.
See also Exhibit 99.1.
27 Financial Data Schedule for the quarter ending March 31,
1996.
99.1 Agreement to Furnish Exhibits and Schedules.
b. The Company did not file any reports on Form 8-K during
the three months ended March 31, 1996.
SIGNATURES
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, thereunto duly authorized.
Date: May 14, 1996 HEMACARE CORPORATION
---------------------- (Registrant)
\s\ Sharon C. Kaiser
-------------------------
Sharon C. Kaiser, Vice President,
Finance and Chief Financial Officer
12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Method of Filing
----------------
<S> <C> <C>
2.1 Asset Purchase Agreement among the Registrant,
HemaBiologics, Inc. (a wholly owned subsidiary of
the Registrant) and Atopix Pharmaceuticals
Corporation, dated May 2, 1996. See also
Exhbit 99.1 . . . . . . . . . . . . . . . . . . . . . . . Filed herewith electronically
10.1 Revolving Credit Agreement between the Registrant and
Bank Leumi Le-Israel, B.M., dated April 30, 1996,
promissory note and related security agreement.
See Exhibit 99.1. . . . . . . . . . . . . . . . . . . . . Filed herewith electronically
27 Financial Data Schedule for the quarter ending
March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . Filed herewith electronically
99.1 Agreement to Furnish Exhibits and Schedules. . . . . . . . Filed herewith electronically
</TABLE>
13
<PAGE> 14
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of the 2nd day of May 1996, by and among
HEMABIOLOGICS, INC., a California corporation ("Seller"), HEMACARE
CORPORATION, a California corporation of which Seller is a wholly
owned subsidiary ("Parent"), and ATOPIX PHARMACEUTICALS
CORPORATION, a California corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller is the owner of United States Food and Drug
Administration ("FDA") establishment license number 0641-004
bearing the FDA registration number 2077790 (the "San Diego
Establishment License"), under which Seller conducts operations at
3538 30th Street, San Diego, California 92104 (the "San Diego
Center");
WHEREAS, Seller is also the owner of a number of FDA product
licenses associated with the San Diego Establishment License, as
set forth on Schedule A-1 attached to this Agreement (the "San
Diego Product Licenses" and collectively with the San Diego
Establishment License, the "San Diego Licenses");
WHEREAS, Seller is the owner of FDA establishment license
number 0641-007 bearing the FDA registration number 2050075 (the
"Sherman Oaks Establishment License"), under which Seller conducts
operations at its headquarters facilities at 4954 Van Nuys
Boulevard, Sherman Oaks, California 91403 (the "Sherman Oaks
Center");
WHEREAS, Seller is also the owner of a number of FDA product
licenses associated with the Sherman Oaks Establishment License, as
set forth on Schedule A-2 attached to this Agreement (the "Sherman
Oaks Product Licenses" and collectively with the Sherman Oaks
Establishment License, the "Sherman Oaks Licenses") (the San Diego
Licenses and the Sherman Oaks Licenses are sometimes collectively
referred to herein as the "Licenses");
WHEREAS, Seller owns a partially completed biopharmaceutical
manufacturing facility in Valencia, California, at which it has
certain items of equipment; and
WHEREAS, Seller desires to sell to Buyer the Licenses, certain
assets of the San Diego Center and certain of the equipment at its
Valencia, California facility, and Buyer desires to purchase such
assets from Seller and to assume certain liabilities of Seller in
connection therewith, on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1
14
<PAGE> 15
1. PURCHASE AND SALE OF PURCHASED ASSETS. Seller hereby agrees to
sell, transfer, assign and convey to Buyer at the Closing (as
defined below), and Buyer hereby agrees to purchase from Seller at
the Closing, all of Seller's right, title and interest in and to:
(a) the Licenses;
(b) the rights of Seller and/or Parent as lessee to use
and obtain title to the seven (7) Haemonetics PCS
Ultralite plasma collection machines (serial numbers
92M162, 92M168, 92M151, 92M150, 92M170, 93L172 and
93L164) located at the San Diego Center (the
"Haemonetics Equipment");
(c) the rights of Seller under that certain Office Lease
dated as of November 17, 1993, between Harold D. and
Anne M. West as landlord (who have assigned their
rights thereunder to Logan Heights Family Health
Center) and Seller as tenant, for the premises in which
the San Diego Center currently operates and which
expires January 31, 1999 (the "Lease"), which include
the rights of Seller to any and all deposits held by
the landlord under the Lease;
(d) the furniture, fixtures, leasehold improvements and
equipment at the San Diego Center described on
Schedule B attached hereto (the "Other San Diego
Equipment");
(e) those items of materials inventory of the type
described on Schedule C attached hereto as shall be on
hand at the San Diego Center on the Closing Date (as
defined below), with no assurance or guaranty of any
minimum inventory to be on hand on the Closing Date;
(f) originals or copies of business and regulatory
records maintained by Seller with respect to the assets
being purchased hereunder and Seller's operations under
the Licenses (including donor lists and records,
inspection records and FDA-approved Standard Operating
Procedures) that are necessary for Buyer to continue
the operation of the San Diego Center;
(g) the equipment (the "Valencia Equipment") located at
Seller's Valencia, California facility, located at
24963 Tibbits Avenue (the "Valencia Premises"),
described on Schedules D-1 and D-2 attached hereto;
provided, however, that the equipment described on
Schedule D-1 (the "Clean Room Equipment") shall be
subject to purchase and sale under this Agreement only
if (i) it can be removed without damage to the Valencia
Premises and without impairing the ability of Seller to
sublet the Valencia Premises or (ii) Buyer pays for the
costs of restoring the Valencia Premises;
(h) all of Seller's rights under the equipment leases,
purchase obligations, equipment maintenance and service
contracts (unless such maintenance and service
contracts are cancellable by Seller without penalty
2
15
<PAGE> 16
upon thirty (30) days' notice or less) described on
Schedule E-1 attached hereto, and all open contracts
and purchase orders for disposable or consumable
supplies for the San Diego Center as of the Closing
Date (collectively, the "Assumed Contracts"); and
(i) all claims and rights against third parties relating
to the assets being purchased hereunder, including
without limitation manufacturers' and vendors'
warranties (to the extent that such warranties are
transferable by Seller to Buyer), but excluding claims
under any insurance policies maintained by or for the
benefit of Seller.
The foregoing assets are referred to in this Agreement as the
"Purchased Assets." The current equipment lease between Seller or
Parent and Haemonetics (the "Haemonetics Lease") provides for the
lease of equipment in addition to the Haemonetics Equipment, with
respect to which neither the rights nor the obligations of Seller
or Parent are being transferred to or assumed by Buyer. The
Haemonetics Lease provides for Parent and/or Seller to purchase at
specified prices certain minimum quantities of Haemonetics
consumable kits (Haemonetics list number 525) in lieu of lease
payments, which obligations are stated on an aggregate basis rather
than on a per machine basis. As of the date of this Agreement,
Seller and Parent have not satisfied these minimum purchase
obligations.
2. EXECLUDED ASSETS. The Purchased Assets shall include only
those assets described in Section 1 and shall not include any other
assets of Seller or Parent (all of which excluded assets are herein
referred to as the "Excluded Assets"). Without limiting the
description of the Excluded Assets, it is hereby agreed that all of
the following shall be Excluded Assets:
(a) all cash, accounts receivable, bank accounts and
other cash assets;
(b) all plasma inventories;
(c) the Clean Room Equipment to the extent that it is
not subject to purchase and sale under this Agreement
as provided in Section 1(g);
(d) Seller's rights under the lease for the Valencia
Premises;
(e) any tangible or intangible assets of Seller or
Parent located or held for use at the Sherman Oaks
Center other than the Sherman Oaks Licenses;
(f) Seller's rights under any insurance policies with
respect to any of the Purchased Assets, including
without limitation rights to any premiums paid in
respect of any period following the Closing Date; and
(g) Seller's rights under the contracts related to the
operations of the San Diego Center described on
Schedule E-2 attached to this Agreement (the
"Terminable Contracts"), which will be terminated by
Seller on or about the Closing Date.
3
16
<PAGE> 17
Buyer acknowledges its awareness and understanding that
some of the Terminable Contracts, as designated on
Schedule E-2 (the "Essential Contracts"), are essential to
the operations and/or regulatory compliance of the San
Diego Center.
3. ASSUMED LIABILITIES. Buyer shall assume as of the Closing and
perform when due:
(a) Seller's obligations to be performed after the
Closing Date under or in connection with the Lease, the
Assumed Contracts and the Licenses;
(b) Seller's obligations under the Haemonetics Lease
with respect to the Haemonetics Equipment, as it shall
be amended by the Haemonetics Amendment as contemplated
by Section 10(a)(v); and
(c) all trade payables of or relating to the San Diego
Center in respect of the period following the Closing
Date.
The foregoing obligations and liabilities are referred to in this
Agreement as the "Assumed Liabilities." Buyer shall not assume or
be bound by any duties, obligations or liabilities of Seller in
existence on the Closing Date of any kind or nature, known,
unknown, contingent or otherwise, other than the Assumed
Liabilities.
4. PURCHASE PRICES AND TERMS OF PAYMENT; PAYMENT OF OUTSTANDING
OBLIGATION BY BUYER TO SELLER.
(a) Purchase Prices. The purchase price for the
Purchased Assets other than the Valencia Equipment and the Sherman
Oaks Licenses (the "San Diego Assets") shall be One Hundred Sixteen
Thousand Dollars ($116,000) (the "San Diego Purchase Price"), of
which Twenty-One Thousand Dollars ($21,000) is allocated to the San
Diego Assets described in Sections 1(d) and 1(e) and Ninety-Five
Thousand Dollars ($95,000) is allocated to the other San Diego
Assets. The purchase price for the Sherman Oaks Licenses (the
"Sherman Oaks Purchase Price") shall be Twenty-Five Thousand
Dollars ($25,000). The purchase price for the Valencia Equipment
(the "Valencia Purchase Price") shall be Two Hundred Thousand
Dollars ($200,000), and there shall be no deduction from the
Valencia Purchase Price if the Clean Room Equipment becomes part of
the Excluded Assets. The San Diego Purchase Price, the Sherman
Oaks Purchase Price and the Valencia Purchase Prices are
collectively referred to in this Agreement as the "Purchase Price."
Each party agrees to report the purchase and sale of the Purchased
Assets for federal and state tax purposes in accordance with the
allocation of the Purchase Price set forth herein.
(b) Payment of San Diego and Sherman Oaks Purchase
Prices. Each of the San Diego Purchase Price and the Sherman Oaks
Purchase Price shall be payable by certified or bank cashier's
4
17
<PAGE> 18
check at the Closing (or at the Additional Closing (as defined
below) in the case of the Sherman Oaks Purchase Price as provided
in Section 13(c) if on or before the Closing Date the FDA has not
amended the Sherman Oaks Licenses to give effect to their transfer
from Seller to Buyer).
(c) Payment of Valencia Purchase Price and Security
Agreement. The Valencia Purchase Price shall be evidenced by a
negotiable promissory note (the "Note") delivered at Closing
substantially in the form attached hereto as Exhibit 1 and
otherwise satisfactory in form and substance to Seller. The Note
and the other obligations of Buyer to Seller under this Agreement
with respect to the Valencia Equipment will be secured by a first
in priority security interest in the Valencia Assets, which shall
be granted by Buyer to Seller pursuant to a Security Agreement (the
"Security Agreement") entered into at the Closing substantially in
the form attached hereto as Exhibit 2 and otherwise satisfactory in
form and substance to Seller. Prior to the Closing, Buyer and
Seller shall execute a financing statement on Form UCC-1 in form
and substance satisfactory to Buyer (the "Financing Statement"),
which Financing Statement shall be recorded in the Office of the
Secretary of State of California prior to the Closing Date.
(d) Payment of Outstanding Balance. Buyer remains
indebted to Seller in the amount of Fourteen Thousand
Dollars ($14,000) for prior plasma collection and storage services.
This balance shall be paid in cash on the earlier of the Closing
Date and June 30, 1996. If paid at the Closing, this payment shall
be made by certified or bank cashier's check. Upon the payment in
full of this balance, Seller shall deliver possession to Buyer of
the plasma so collected and stored by Seller. Any payments made by
Buyer to Seller for prior plasma collection and storage services,
including a $40,000 payment made in March 1996 and the $14,000
balance referenced above shall not be refundable in the event of
the termination of this Agreement for any reason.
5. DELIVERY OF VALENCIA EQUIPMENT. At the Closing, Seller shall
deliver possession of the Valencia Equipment to Buyer at the
Valencia Premises. Buyer agrees immediately thereafter to accept
delivery of the Equipment and to remove it, at Buyer's sole risk
and expense, from such location. Notwithstanding any other
provision of this Agreement or the Security Agreement to the
contrary, all risk of loss of the Valencia Equipment shall pass to
and shall be assumed by Buyer as of the Closing. If the Valencia
Equipment is not removed by Buyer from the Valencia Premises within
fifteen (15) days after the Closing Date, Buyer shall pay to Seller
One Hundred and 00/100 Dollars ($100.00) per day for each day
thereafter until the date of removal of all of the Valencia
Equipment from the Valencia Premises. Seller may withhold delivery
of possession of the Valencia Equipment pending the satisfaction of
any amounts due from Buyer under this Section.
6. EQUIPMENT SOLD "AS IS". Seller is selling the Haemonetics
Equipment, the Other San Diego Equipment and the Valencia Equipment
(collectively, the "Equipment") and Buyer agrees to accept the
Equipment, "As Is." Buyer represents and warrants that it has had
sufficient opportunity to inspect the Equipment to its
satisfaction. WITH RESPECT TO THE EQUIPMENT, SELLER HEREBY
DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT
NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
5
18
<PAGE> 19
FOR A PARTICULAR PURPOSE. SELLER FURTHER HEREBY DISCLAIMS ANY AND
ALL LIABILITY FOR CONSEQUENTIAL AND INCIDENTAL DAMAGES ARISING OUT
OF OR IN CONNECTION WITH ANY CLAIM WITH RESPECT TO THE EQUIPMENT,
INCLUDING BUT NOT LIMITED TO CLAIMS OF NEGLIGENCE, STRICT LIABILITY
IN TORT OR BREACH OF CONTRACT.
7. TRANSFER OF LICENSES; ADDITIONAL AUTHORIZATIONS.
(a) Transfer of Licenses. Promptly following the
execution of this Agreement, Seller shall prepare and submit one or
more applications to the FDA seeking amendments to the Licenses for
the assignment and transfer of the Licenses to Buyer. Seller shall
request the FDA to register the assignment and transfer of the San
Diego Licenses and the Sherman Oaks Licenses as of the same
effective date. Buyer shall cooperate with Seller in the
preparation and submission of these applications as requested by
Seller. Seller agrees to use commercially reasonable efforts to
seek the transfer and assignment of the Licenses to Buyer as soon
as possible. If the FDA amends the Licenses to give effect to the
transfer of the Licenses from Seller to Buyer and this Agreement is
subsequently terminated prior to Closing for any reason, Buyer and
Seller shall use their best efforts to cause the FDA to amend the
Licenses to transfer them back to Seller from Buyer. From the date
of any amendment of the Licenses giving effect to their transfer
from Seller to Buyer until the Closing, Buyer shall conduct no
operations under any of the Licenses.
(b) Buyer's Responsibilities for Additional
Authorizations. Buyer acknowledges and agrees that it shall have
the sole responsibility to seek, obtain or make any and all
licenses, permits, qualifications, registrations or other
authorizations (other than the Licenses) from, or filings with,
governmental, regulatory or accreditation authorities necessary for
it to conduct operations under the Licenses or otherwise, including
without limitation applications to the FDA for the relocation of
the Sherman Oaks Licenses to a location of Buyer upon or after the
Closing ("Additional Authorizations"). The purchase and sale of
the Purchased Assets is not and shall not be conditioned in any way
upon the receipt by Buyer of any Additional Authorizations, and
Seller hereby makes no representation or warranty concerning the
need for any Additional Authorizations or the ability of Buyer to
obtain any Additional Authorizations. Notwithstanding any other
provision hereof to the contrary, Buyer shall have no right to
conduct any operations under the Sherman Oaks License in any
facility of Seller or Parent, including without limitation the
Sherman Oaks Center. Buyer hereby acknowledges that Seller has
disclosed to it that Seller has permitted its State of California
Biologics License and CLIA certificate for the Sherman Oaks Center
to expire.
8. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT. Seller and
Parent hereby jointly and severally represent and warrant to Buyer
that:
(a) Each of Seller and Parent is a corporation duly
organized and validly existing in good standing under the laws of
California and, in the case of Seller, with the power to own the
Purchased Assets.
6
19
<PAGE> 20
(b) Each of Seller and Parent has the power and
authority to execute, deliver and perform this Agreement. Such
execution, delivery and performance have been duly authorized by
all necessary action on the part of each of Seller and Parent, do
not and will not require any approvals on behalf of either Seller
or Parent not heretofore obtained and do not and will not
contravene the organizational or charter documents of either Seller
or Parent or conflict with, result in a breach of, or entitle any
party (with due notice or lapse of time or both) to terminate,
accelerate or call a default with respect to, or result in the
creation or imposition of any lien, charge, encumbrance or claim of
any nature whatsoever upon any of the Purchased Assets pursuant to,
any agreement or instrument to which either Seller or Parent is a
party or by which either Seller or Parent or any of their
respective properties or assets is bound, subject to the
procurement of any consents otherwise contemplated hereby. Neither
Seller nor Parent is a party to, or subject to or bound by, any
judgment, injunction or decree of any court or governmental
authority which may restrict or interfere with the performance by
it of this Agreement or the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Seller and
Parent will not result in any violation by either Seller or Parent
of any law, rule or regulation applicable to it or the Purchased
Assets. This Agreement is, and each of the other instruments and
documents to be executed by either Seller or Parent hereunder will
be, a valid and binding obligation of such party enforceable in
accordance with its terms.
(c) Seller has and will convey to Buyer, good and
marketable title to all the Purchased Assets, subject to no
mortgage, security interest, pledge, lien, conditional sales
agreement, claim, restriction, reservation, covenant, encumbrance,
charge, restraint on transfer, or any other title defect of any
nature whatsoever, except for the Assumed Liabilities and, as of
the date of this Agreement but not as of the Closing Date, defaults
under the Haemonetics Lease. There are no liabilities of Seller
with respect to any of the Purchased Assets other than the Assumed
Liabilities for which Buyer will be responsible or to which the
Purchased Assets will be subject upon their sale, assignment,
transfer and conveyance by Seller to Buyer.
(d) Except for the amendment of the Licenses by the FDA
to give effect to the transfer of the Licenses from Seller to
Buyer, no consent, approval, authorization or order of, or
registration, qualification or filing with, any court, regulatory
authority or other governmental body is required for the execution,
delivery and performance by Seller of this Agreement, and the other
instruments and documents required or contemplated hereby. No
consent of any party is required for the execution, delivery and
performance by Seller of this Agreement or such other instruments
and documents, except for the consents of the landlord under the
Lease and the consent of Haemonetics to the Haemonetics Amendment
(as contemplated by Section 10(a)(v).
(e) No material investigation or review by any
governmental entity with respect to any of the Purchased Assets is
pending or, to the best knowledge of Seller's and Parent's
respective senior officers, threatened, nor has any governmental
entity indicated to either Seller or Parent an intention to conduct
such an investigation or review; and there is no action, suit or
7
20
<PAGE> 21
proceeding pending or, to the best knowledge of Seller's and
Parent's respective senior officers, threatened against or
affecting any of the Purchased Assets at law or in equity, or
before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
which either singly or in the aggregate would, if adversely
determined, have a material adverse effect on the ownership,
possession or use of the Purchased Assets by Buyer after the
Closing, or which would impair Seller's ability to perform this
Agreement or the transactions contemplated hereby. To the best
knowledge of the respective senior officers of Seller and Parent,
the operations of neither the San Diego Center nor the Sherman Oaks
Center is being conducted in violation of any applicable law,
ordinance, regulation, decree or order or any court or governmental
entity.
(f) To the best knowledge of Seller's and Parent's
respective senior officers, the Lease and each of the Assumed
Contracts is valid and binding upon each party thereto and is in
full force and effect, there is no material default or claim of
default under any provision thereof and no event has occurred
which, with the passage of time or the giving of notice (or both),
would constitute a material default by Seller (or, to the best
knowledge of Seller's and Parent's respective senior officers, any
other party thereto) under any provision thereof (other than the
Haemonetics Lease with respect to which Seller and/or Parent is
currently in default), or would permit modification, acceleration
or termination of the Lease or any Assumed Contract by any other
party thereto or by Seller (except for the Haemonetics Lease).
(g) Seller is not a "foreign person" as that term is
defined for purposes of the Internal Revenue Code of 1986, as
amended.
9. REPRESENTAITONS AND WARRANTIES OF BUYER. Buyer hereby
represents and warrants to Seller and Parent that:
(a) Buyer is a corporation duly organized and validly
existing in good standing under the laws of California with the
power to acquire and own the Purchased Assets.
(b) Buyer has the power and authority to execute,
deliver and perform this Agreement. Such execution, delivery and
performance have been duly authorized by all necessary action on
the part of Buyer, do not and will not require any approvals on
behalf of Buyer not heretofore obtained and do not and will not
contravene the organizational or charter documents of Buyer or
conflict with, result in a breach of, or entitle any party (with
due notice or lapse of time or both) to terminate, accelerate or
call a default with respect to any agreement or instrument to which
Buyer is a party or by which Buyer or any of its properties or
assets is bound. Buyer is not a party to, or subject to or bound
by, any judgment, injunction or decree of any court or governmental
authority which may restrict or interfere with the performance by
it of this Agreement or the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Buyer will
not result in any violation by Buyer of any law, rule or regulation
applicable to Buyer. This Agreement is, and each of the other
instruments and documents to be executed by Buyer hereunder will
be, a valid and binding obligation of Buyer enforceable in
accordance with its terms.
8
21
<PAGE> 22
(c) All information furnished or to be furnished by
Buyer to Seller or the FDA in connection with seeking the
amendments of the Licenses as contemplated by this Agreement is or
will be true, correct and complete in all material respects.
10. COVENANTS OF THE PARTIES.
(a) Seller's Covenants. Seller (and/or Parent to the
extent provided below) covenants and agrees with Buyer that between
the date of this Agreement and the Closing Date:
(i) Seller will conduct the business of the San Diego
Center in the ordinary course and substantially in the same
manner as heretofore conducted, will perform all acts to be
performed by it pursuant to this Agreement and will refrain
from taking or omitting to take any action that would violate
Seller's and Parent's representations and warranties hereunder
or render them inaccurate as of the date hereof or the Closing
Date or that in any way would prevent the consummation of the
transactions contemplated hereby. Notwithstanding the
foregoing, if the FDA has amended the Licenses giving effect
to the transfer of the Licenses from Seller to Buyer prior to
the Closing, Seller shall cease all operations at the San
Diego Center and the Sherman Oaks Center that are dependent
upon the Licenses.
(ii) Seller will give prompt notice to Buyer of any
breach or default (or notice thereof) of the Lease or any
Assumed Contract or any other event that may have a material
adverse effect on the Purchased Assets following the Closing
Date.
(iii) Seller will permit Buyer and its authorized
representatives at reasonable times to have access to and to
examine the tangible Purchased Assets.
(iv) Seller will use its best efforts to obtain the
consents of other parties required for the consummation of the
transactions contemplated by this Agreement and to cause the
FDA to transfer the Licenses from Seller to Buyer.
(v) Seller and/or Parent will use their best efforts to
enter into a modification of the Haemonetics Lease (the
"Haemonetics Amendment") providing for the waiver and release
of all prior defaults under the Haemonetics Lease with respect
to the Haemonetics Equipment and severable future rights and
obligations with respect to the Haemonetics Equipment on terms
either (A) no more onerous than those applicable to the other
equipment leased thereunder or (B) otherwise reasonably
acceptable to Buyer.
(vi) Seller and Parent will promptly furnish Buyer with
the information necessary to prepare the notice contemplated
by Section 10(b)(v), including all names and businesses
addresses used by Seller within the last three years and the
location of all assets to be transferred under this Agreement.
9
22
<PAGE> 23
(b) Buyer's Covenants. Buyer covenants and agrees with
Seller that between the date of this Agreement and the Closing Date
(or in the case of clause (ii) below, the date of payment in full
of the Note):
(i) Buyer will perform all acts to be performed by it
pursuant to this Agreement and will refrain from taking or
omitting to take any action that would violate its
representations and warranties hereunder or render them
inaccurate as of the date hereof or the Closing Date or that
in any way would prevent the consummation of the transactions
contemplated hereby.
(ii) Buyer will use its best efforts to complete the
Private Placement as soon as practicable.
(iii) Buyer will use its best efforts to cause the
FDA to amend the Licenses to give effect to the transfer of
the Licenses from Seller to Buyer.
(iv) Buyer will arrange to contract with vendors, as of
the Closing Date, for the provision of all goods and services
of the types provided to Seller under the Essential Contracts.
(v) Buyer will promptly give notice, in compliance with
Division 6 of the California Commercial Code, of the transfer
contemplated by this Agreement.
Notwithstanding the compliance by the parties with the requirements
of Division 6 of the California Commercial Code, none of the
parties shall be estopped or prevented from asserting as a bar or
defense to any action or proceeding brought under such law that
such law does not apply to the sale contemplated by this Agreement.
(c) Additional Covenant of Buyer to Maintain Records.
Buyer covenants and agrees with Seller to maintain all records
described in Section 1(f) without alteration for such periods of
time as shall be necessary to satisfy any federal, state or local
legal or regulatory requirements applicable to Seller or Buyer, and
to permit Seller to have access to any and all such transferred
records at reasonable times for the purpose of demonstrating
compliance by Seller with such requirements.
11. CONDITIONS TO OBLIGATIONS OF BUYER. The obligation
of Buyer to purchase the Purchased Assets at the Closing is subject
to the satisfaction of the following conditions on or before the
Closing Date:
(a) Each representation and warranty of Seller and
Parent made in or pursuant to this Agreement shall be true and
correct in all material respects as of the date made and at and as
of the Closing Date, with the same force and effect as though made
at and as of the Closing Date, and Buyer shall have received from
appropriate officers of each of Seller and Parent a certificate or
certificates to such effect, in form and substance reasonably
satisfactory to Buyer.
10
23
<PAGE> 24
(b) Each of Seller and Parent shall have performed and
complied with all the obligations, agreements and conditions
required by this Agreement to be performed or complied with by it
at or prior to the Closing, and Buyer shall have received from
appropriate officers of each of Seller and Parent a certificate or
certificates to such effect, in form and substance reasonably
satisfactory to Buyer.
(c) There shall be no suit, action or other proceeding
pending or threatened before any court or before or by any
governmental agency in which it is sought to restrain, prohibit,
invalidate or set aside in whole or in part the consummation of
this Agreement or the transactions contemplated hereby or to obtain
substantial damages in connection therewith.
(d) Seller and/or Parent shall have obtained the
contractual consents referred to in Section 8(d) or otherwise
required for the sale and assignment to Buyer of the Purchased
Assets or for the consummation of the transactions contemplated
hereby.
(e) The Haemonetics Amendment shall have been entered
into and shall be in full force and effect.
(f) The FDA shall have amended the San Diego Licenses to
give effect to their transfer from Seller to Buyer.
(g) The notice contemplated by Section 10(b)(v) shall
have been in the manner and within the time periods required by
Division 6 of the California Commercial Code.
12. CONDITIONS TO OBLIGATIONS OF SELLER. The obligation
of Seller to sell the Purchased Assets at the Closing is subject to
the satisfaction of the following conditions on or before the
Closing Date:
(a) Each representation and warranty of Buyer made in or
pursuant to this Agreement shall be true and correct in all
material respects as of the date made and at and as of the Closing
Date, with the same force and effect as though made at and as of
the Closing Date, and Seller and Parent shall have received from
appropriate officers of Buyer a certificate or certificates to such
effect, in form and substance reasonably satisfactory to Seller.
(b) Buyer shall have performed and complied with all the
obligations, agreements and conditions required by this Agreement
to be performed or complied with by it at or prior to the Closing,
and Seller and Parent shall have received from appropriate officers
of Buyer a certificate or certificates to such effect, in form and
substance reasonably satisfactory to Seller and Parent.
(c) There shall be no suit, action or other proceeding
pending or threatened before any court or before or by any
governmental agency in which it is sought to restrain, prohibit,
invalidate or set aside in whole or in part the consummation of
this Agreement or the transactions contemplated hereby or to obtain
substantial damages in connection therewith.
11
24
<PAGE> 25
(d) Seller and/or Parent shall have obtained the
contractual consents referred to in Section 8(d) or otherwise
required for the sale and assignment to Buyer of the Purchased
Assets or for the consummation of the transactions contemplated
hereby.
(e) The Haemonetics Amendment shall have been entered
into and shall be in full force and effect.
(f) The FDA shall have amended the San Diego Licenses to
give effect to their transfer from Seller to Buyer.
(g) The Financing Statement shall have been duly and
properly recorded by the Office of the Secretary of State of
California sufficient to perfect the security interest to be
granted under the Security Agreement as a first in priority
security interest in the Valencia Equipment, and Seller shall have
received a copy of the recorded Financing Statement, which in form
and substance shall be satisfactory to Seller and its counsel.
(h) The notice contemplated by Section 10(b)(v) shall
have been given in the manner and within the time periods required
by Division 6 of the California Commercial Code.
13. CLOSING. Except as provided in Section 13(c)
below, the transfers and deliveries to be made pursuant to this
Agreement (the "Closing") shall take place at the offices of
Sanders, Barnet, Goldman, Simons & Mosk, A Professional
Corporation, at 4:00 p.m. on such date designated by Seller within
five (5) days after the last to occur of (i) the date of the
consent of the landlord for the assignment of the Lease to Buyer,
(ii) the date of the last contractual consent referred to in
Section 8(d) or otherwise required for the sale and assignment to
Buyer of the Purchased Assets or for the consummation of the
transactions contemplated hereby, (iii) the date on which the
parties receive notice of the amendment of the San Diego Licenses
by the FDA giving effect to the transfer of the San Diego Licenses
from Seller to Buyer and (iv) the effective date of the Haemonetics
Amendment, or such other place, time or date as the parties shall
agree upon in writing. The date on which the Closing is to occur
is herein referred to as the "Closing Date". At the Closing, the
parties shall deliver the following documents or such documents in
substitution therefor as are satisfactory to the recipient:
(a) Deliveries by Seller. Seller (and/or Parent, as the
case may be) shall deliver to Buyer:
(i) Bills of sale, instruments of transfer, assignment
and conveyance, and other instruments in form and substance
satisfactory to Buyer and sufficient to convey, transfer, and
assign to Buyer and effectively vest in Buyer all right, title
and interest in and to the Purchased Assets and good and
marketable title to the Purchased Assets subject only to
exceptions referred to on the Schedules hereto;
12
25
<PAGE> 26
(ii) All required consents to assignments of the Lease
and the Assumed Contracts, including the Haemonetics
Amendment;
(iii) The amendment of the Licenses giving effect to
the transfer of the Licenses from Seller to Buyer;
(iv) The Security Agreement;
(v) Certified copies of the resolutions, duly adopted by
the Board of Directors of Seller, that shall be in full force
and effect at the time of delivery, authorizing the execution,
delivery and performance of this Agreement;
(vi) The certificates executed by officers of Seller and
Parent provided for in Sections 11(a) and 11(b);
(vii) Possession of the Purchased Assets; and
(viii) Such other instruments and documents as may be
reasonably requested by, and in form and substance
satisfactory to, Buyer.
(b) Deliveries by Buyer. Buyer shall deliver to
Seller (and/or Parent, as the case may be):
(i) Certified or bank cashier's checks in the aggregate
amount required by Sections 1(g)(ii), 4(a), 4(d) and 16;
(ii) The Note and the Security Agreement;
(iii) Certified copies of resolutions, duly adopted
by the Board of Directors of Buyer that shall be in full force
and effect at the time of delivery, authorizing the execution,
delivery and performance of this Agreement, the Note and the
Security Agreement;
(iv) The certificates executed by officers of Buyer
provided for in Sections 12(a) and 12(b); and
(v) Such other instruments and documents as may be
reasonably requested by, and in form and substance
satisfactory to, Seller.
(c) Delayed Closing or Termination of Agreement with
Respect to Sherman Oaks Licenses. Notwithstanding any other
provision of this Agreement to the contrary, if the FDA has not
amended the Sherman Oaks Licenses to give effect to their transfer
from Seller to Buyer on or before the Closing Date, the sale,
purchase and transfer of the Sherman Oaks Licenses shall be
excluded from the Closing; provided, however, that the application
to the FDA for the amendment of the Sherman Oaks Licenses to effect
their transfer shall remain pending and the obligations of the
parties hereunder with respect to the sale, purchase and transfer
13
26
<PAGE> 27
of the Sherman Oaks Licenses hereunder shall survive the Closing.
Within five (5) days following the FDA's amendment of the Sherman
Oaks Licenses to give effect to their transfer from Seller to
Buyer, the parties shall conduct an additional closing (the
"Additional Closing") at which Seller shall deliver the items
described in clauses (iii), (v), (vi), (vii) and (viii) of
Section 13(a) with respect to the Sherman Oaks Licenses and Buyer
shall deliver the items described in clauses (i), (iii), (iv) and
(v) of Section 13(b) with respect to the Sherman Oaks Licenses.
Subject to the foregoing, the date, time and place of the
Additional Closing shall be mutually agreed upon by Seller and
Buyer. If the FDA has not amended the Sherman Oaks Licenses to
give effect to their transfer from Seller to Buyer within
ninety (90) days following the Closing, either Seller or Buyer may
terminate its obligations hereunder with respect to the sale,
purchase and transfer of the Sherman Oaks Licenses (except for the
provisions of Sections 15, 16, 19 and 20, which shall continue in
effect) by written notice given to the other party. In the event
of any termination permitted by the preceding sentence, no party
hereto shall have any liability or obligation pursuant to this
Agreement to any other party hereto, except for liabilities or
obligations arising under Sections 15, 16, 19 and 20. Without
prejudice to any other rights or remedies which it may have, either
Seller or Buyer may, prior to the Additional Closing, forthwith
abandon the transactions contemplated hereby to be consummated at
the Additional Closing by written notice to the other party if
there shall have been a failure of condition or a breach of any
representation or warranty contained herein by the other party
(including Parent in the case of Seller) which failure or breach is
not cured or cannot reasonably be cured prior to the Additional
Closing, or if a default shall be made by any other party in the
timely performance of any of that party's agreements or obligations
contained herein.
14. TERMINATION. This Agreement (except for the
provisions of Sections 4(d), 7(a), 15, 16, 19, 20 and 22, which
shall continue in effect) and the transactions contemplated hereby
may be terminated and abandoned at any time prior to the Closing
Date (i) by mutual written agreement of Buyer and Seller, (ii) by
Buyer or Seller upon written notice given to the other party after
entry of a restraining order or injunction restraining or
prohibiting the sale or purchase of the Purchased Assets, or
(iii) by Buyer or Seller upon written notice to the other party if
the Closing shall not have taken place by August 15, 1996, other
than by reason of a matter within the control of the party
asserting such termination. In the event of any termination
permitted by the preceding sentence, no party hereto shall have any
liability or obligation pursuant to this Agreement to any other
party hereto, except for liabilities or obligations arising under
Sections 4(d), 7(a) 15, 16, 19, 20 and 22. Without prejudice to
any other rights or remedies which it may have, either Seller or
Buyer may, prior to the Closing, forthwith abandon the transactions
contemplated hereby to be consummated at the Closing by written
notice to the other party if there shall have been a failure of
condition or a breach of any representation or warranty contained
herein by the other party (including Parent in the case of Seller)
which failure or breach is not cured or cannot reasonably be cured
prior to the Closing, or if a default shall be made by any other
party in the timely performance of any of that party's agreements
or obligations contained herein.
14
27
<PAGE> 28
15. SURVIVAL AND INDEMNIFICATION.
(a) All representations, warranties, covenants,
indemnities and agreements contained in or made pursuant to this
Agreement or in any exhibit, certificate, document or statement
delivered pursuant hereto shall survive the transfer of the
Purchased Assets, subject only to applicable statutes of
limitations.
(b) Buyer hereby agrees to protect, defend, indemnify
and hold harmless Seller, Parent and the respective directors,
officers, employees and agents of Seller and Parent from, and to
reimburse such parties for, any loss, cost, expense, damage,
liability or claim (including, without limitation, any and all
fees, costs and expenses whatsoever, which fees, costs and expenses
shall be paid as incurred, reasonably incurred by any and all such
parties and its or their counsel in investigating, preparing for,
defending against, or providing evidence, producing documents or
taking any other action in respect of any threatened or asserted
claim) arising out of, based upon or resulting from (i) the
inaccuracy as of the date hereof or as of the Closing Date of any
representation or warranty of Buyer which is contained in or made
pursuant to this Agreement; (ii) Buyer's breach of or failure to
perform any of its covenants or agreements contained in or made
pursuant to this Agreement; or (iii) any Assumed Liability.
(c) Seller and Parent jointly and severally hereby agree
to protect, defend, indemnify and hold harmless Buyer and its
directors, officers, employees and agents from, and to reimburse
such parties for, any loss, cost, expense, damage, liability or
claim (including, without limitation, any and all fees, costs and
expenses whatsoever, which fees, costs and expenses shall be paid
as incurred, reasonably incurred by any and all such parties and
its or their counsel in investigating, preparing for, defending
against, or providing evidence, producing documents or taking any
other action in respect of any threatened or asserted claim)
arising out of, based upon, or resulting from (i) the inaccuracy as
of the date hereof or as of the Closing Date of any representation
or warranty of either Seller or Parent which is contained in or
made pursuant to this Agreement; (ii) the breach of or failure to
perform any of the covenants or agreements of either Seller or
Parent contained in or made pursuant to this Agreement; or
(iii) any liability or obligation of Seller that is not expressly
assumed by Buyer under or pursuant to this Agreement asserted after
the Closing and attributable to the period prior to the Closing.
(d) If at any time an indemnified party hereunder learns
of any claim or basis of any claim which could result in liability
of any indemnifying party under its indemnification obligations
hereunder, the indemnified party shall give to the indemnifying
party written notice within such time as is reasonable under the
circumstances, describing such claim in reasonable detail. If such
claim is a third party claim, the indemnifying party shall have
sole control over, and shall assume all expense with respect to,
the defense or settlement of such claim; provided, however, that:
(i) the indemnified party or parties (represented by Buyer or
Seller, as the case may be) shall have the right to approve of
legal counsel selected by the indemnifying party, which approval
shall not be unreasonably withheld; (ii) the indemnified party or
parties shall be entitled to participate in the defense of such
15
28
<PAGE> 29
claim and to employ counsel at its or their own expense to assist
in the handling of such claim; and (iii) the indemnifying party
shall obtain the prior written approval of the indemnified party or
parties, which shall not be unreasonably withheld, before entering
into any settlement, adjustment or compromise of such claim or
ceasing to defend against such claim, if pursuant thereto or as a
result thereof there would be imposed injunctive or other equitable
relief against the indemnified party or parties. If the
indemnifying party does not assume control over the defense or
settlement of such claim as provided above, the indemnified party
or parties shall have the right to defend and settle the claim in
such manner as it or they may deem appropriate at the cost and
expense of the indemnifying party, and the indemnifying party will
promptly reimburse the indemnified party or parties therefor.
16. SALES TAXES; EXPENSES OF TRANSFER AND LEGAL FEES. All
sales or use taxes payable in connection with the transactions
contemplated hereby shall be paid by Buyer, and Buyer shall pay to
Seller together with its payment of the Purchase Price any and all
amounts required to be collected or remitted by Seller in respect
of such taxes. The reasonable fees and expenses of Seller's
counsel in preparing this Agreement and the Terms Sheet leading to
the execution of this Agreement and consummating the transactions
contemplated hereby, and the reasonable fees and expenses of
Buyer's counsel in reviewing this Agreement and consummating the
transactions contemplated by this Agreement, shall be borne equally
by the parties, and each party shall promptly remit to the other
its portion of such fees and expenses upon presentation of an
invoice to the obligated party. Except as set forth above, each
party shall pay all costs and expenses, including without
limitation the fees of counsel and all brokers' or finders' fees,
incurred by or on behalf of such party in connection with this
Agreement and the transactions contemplated hereby. Without
limiting the foregoing, neither Seller nor Parent shall have any
liability or obligation to Buttonwood Financial Corporation, which
has acted as an adviser to Buyer in connection with this Agreement
and the transactions contemplated hereby. If any litigation or
other proceeding between the parties is commenced in connection
with or related to this Agreement, the losing party shall pay the
reasonable attorneys' fees and costs and expenses of the prevailing
party incurred in connection therewith.
17. ENTIRE AGREEMENT. This Agreement, the schedules and
exhibits hereto and the other agreements, documents and instruments
delivered or to be delivered pursuant hereto or contemplated hereby
set forth the entire understanding of the parties with respect to
the subject matter hereof, supersede any and all prior agreements,
arrangements and understandings, and any and all contemporaneous
oral agreements, arrangements and understandings, with respect to
the subject matter hereof. This Agreement may be modified only by
a written instrument duly executed by each party affected by any
such modification. No breach of any covenant, agreement, warranty
or representation made herein or in any such schedules, exhibits,
agreements, documents or instruments shall be deemed waived unless
expressly waived in writing by the party who might assert such
breach.
18. 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.
16
29
<PAGE> 30
19. 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.
20. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be
mailed by registered or certified mail, postage prepaid, return
receipt requested, or delivered in person or by commercial courier
against receipt or by facsimile copy with confirmed receipt, as
follows:
If to Seller or Parent:
HemaBiologics, Inc.
or
HemaCare Corporation (as the case may be)
4954 Van Nuys Boulevard
Sherman Oaks, California 91403
Attention: Hal I. Lieberman, President and
Chief Executive Officer
Telecopier: (818) 386-6522
Telephone: (818) 986-3833
with a copy to:
Sanders, Barnet, Goldman, Simons & Mosk
A Professional Corporation
1901 Avenue of the Stars, Suite 850
Los Angeles, California 90067-6078
Attention: Gordon R. Kanofsky, Esq.
Telecopier: (310) 553-2435
Telephone: (310) 551-8407
If to Buyer:
Atopix Pharmaceuticals Corporation
5 Park Plaza, Suite 600
Irvine, California 92714
Attention: William Pollack, President
Telecopier: (714) 851-1845
Telephone: (714) 622-1845
17
30
<PAGE> 31
with a copy to:
Boldra & Klueger
15760 Ventura Boulevard, Suite 1900
Attention: Robert Klueger, Esq.
Telecopier: (818) 784-9747
Telephone: (818) 784-9601
or to such other address as either party shall have furnished in
writing in accordance with the provisions of this Section. Any
notice or other communication mailed by registered or certified
mail shall be deemed given at the earlier of the time of its
receipt by the addressee or three days after the time of mailing
thereof. Any notice or other communications given by any other
means shall be deemed given at the time of its receipt by the
addressee.
21. ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective
successors, legal representatives and assigns, but this Agreement
may not be assigned by either Buyer or Seller without the written
consent of the other, except that Seller may assign any of its
rights and may delegate any of its duties hereunder to Parent.
22. DISCLOSURES. Without the prior written consent of Seller,
Buyer shall not prior to the Closing make any public disclosure of
or relating to this Agreement or the transactions contemplated
hereby, which consent shall not be unreasonably withheld with
respect to disclosures proposed to be made in securities offerings
documents in connection with the Private Placement.
Notwithstanding the foregoing, neither Seller nor Parent nor their
respective officers, directors, employees and agents shall have any
responsibility for any alleged or proven misstatements, omissions
or misleading statements contained in such offering documents,
which shall be the sole responsibility of Buyer.
23. HEADINGS. The headings of the Sections herein are inserted
for convenience of reference only and are not intended to be a part
of, or to affect the meaning or interpretation of, this Agreement.
24. SEVERABILITY. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable,
the validity, legality or enforceability of the remaining
provisions of this Agreement will not be affected thereby and the
parties will use all reasonable efforts to substitute one or more
valid, legal and enforceable provisions which, insofar as
practicable, implement the purpose and intent hereof. To the
extent permitted by applicable law, each party waives any provision
of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
25. FURTHER ASSURANCES. After the Closing, for no further
consideration but without incurring any material expense, each of
Seller and Parent shall perform all such other action (including,
without limitation, the use of Seller's best efforts to achieve
transfer of registrations, permits, approvals and the like as
contemplated by this Agreement) and shall execute, acknowledge and
18
31
<PAGE> 32
deliver all such assignments, transfers, consents and other
documents as Buyer or its counsel may reasonably request to vest in
Buyer, and protect Buyer's right, title and interest in, and
enjoyment of, the Purchased Assets. Buyer shall similarly perform
all such other action and shall execute, acknowledge and deliver
all such other documents as Seller, Parent or their counsel may
reasonably request to perfect and protect Seller's and/or Parent's
rights under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
SELLER:
HEMABIOLOGICS, INC.
By: /s/ Hal I. Lieberman
-------------------------
Hal I. Lieberman, President
and Chief Executive Officer
PARENT:
HEMACARE CORPORATION
By: /s/ Hal I. Lieberman
---------------------------
Hal I. Lieberman, President
and Chief Executive Officer
BUYER:
ATOPIX PHARMACEUTICALS CORPORATION
By: /s/ William Pollack
--------------------------
William Pollack, President
19
32
<PAGE> 33
LIST OF EXHIBITS AND SCHEDULES
Exhibit 1 Form of Promissory Note
Exhibit 2 Form of Security Agreement
Schedule A-1 San Diego Product Licenses
Schedule A-2 Sherman Oaks Product Licenses
Schedule B Other San Diego Equipment
Schedule C Description of Materials Inventory-San Diego Center
Schedule D-1 Valencia Clean Room Equipment
Schedule D-2 Other Valencia Equipment
Schedule E-1 Long-Term Assumed Contracts
Schedule E-2 Terminable Contracts
20
33
<PAGE> 34
[LOGO]
BANK LEUMI LE ISRAEL B.M.
CALIFORNIA
<TABLE>
<CAPTION>
LOAN AGREEMENT
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$700,000.00 04-30-1996 04-30-1997 2595 04A0 030 232587 RXB
- ---------------------------------------------------------------------------------------------------------
References in the shaded area are for lender's use only and do not limit the applicability of this
document to-any particular loan or item.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: HEMACARE CORPORATION LENDER: BANK LEUMI LE-ISRAEL, B.M.
4954 VAN NUYS BLVD., #201 8383 WILSHIRE BLVD. STE. 400
SHERMAN OAKS, CA 91403 BEVERLY HILLS, CA 90211
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS LOAN AGREEMENT BETWEEN HEMACARE CORPORATION ("BORROWER") AND BANK LEUMI
LE-ISRAEL, B.M. ("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS AND
CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS
APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER FINANCIAL
ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR
SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL
ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS
FROM LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS
THE "LOAN" AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES
THAT: (A) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING
UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN
THIS AGREEMENT; (B) THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY
LENDER AT ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE JUDGMENT AND
DISCRETION; AND (C) ALL SUCH LOANS SHALL BE AND SHALL REMAIN SUBJECT TO THE
FOLLOWING TERMS AND CONDITIONS OF THIS AGREEMENT.
TERM. This Agreement shall be effective as of APRIL 30, 1996, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings
when used in this Agreement. Terms not otherwise defined in this
Agreement shall have the meanings attributed to such terms in the
Uniform Commercial Code. All references to dollar amounts shall mean
amounts in lawful money of the United States of America.
AGREEMENT. The word "Agreement" means this Loan Agreement, as this
Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Loan Agreement from
time to time.
ACCOUNT. The word "Account" means a trade account, account receivable,
or other right to payment for goods sold or services rendered owing to
Borrower (or to a third party grantor acceptable to Lender).
ACCOUNT DEBTOR. The words "Account Debtor" mean the person or entity
obligated upon an Account.
ADVANCE. The word "Advance" means a disbursement of Loan funds under
this Agreement.
BORROWER. The word "Borrower" means HEMACARE CORPORATION. The word
"Borrower" also includes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates."
BORROWING BASE. The words "Borrowing Base" mean SEVENTY percent
(70.000%) of the Net Face Amount of Debtor's Eligible Accounts, but such
advances shall not exceed $700,000.00 outstanding at any one time.
BUSINESS DAY. The words "Business Day" mean a day on which commercial
banks are open for business in the State of California.
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan,
whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted in
the form of a security interest, mortgage, deed of trust, assignment,
pledge, chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any
other security or lien interest whatsoever, whether created by law,
contract, or otherwise. The word "Collateral" includes without
limitation all collateral described below in the section titled
"COLLATERAL."
DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ELIGIBLE ACCOUNTS. The words "Eligible Accounts" mean, at any time, all
of Borrower's Accounts which contain selling terms and conditions
acceptable to Lender. The net amount of any Eligible Account against
which Borrower may borrow shall exclude all returns, discounts, credits,
and offsets of any nature. Unless otherwise agreed to by Lender in
writing, Eligible Accounts do not include:
(a) Accounts with respect to which the Account Debtor is an officer, an
employee or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary
of, or affiliated with or related to Borrower or its shareholders,
officers, or directors.
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the
Account Debtor may be conditional.
(d) Accounts with respect to which Borrower is or may become liable
to the Account Debtor for goods sold or services rendered by the
Account Debtor to Borrower.
(e) Accounts which are subject to dispute, counterclaim, or setoff.
(f) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account
Debtor.
(g) Accounts with respect to which Lender, in its sole discretion,
deems the creditworthiness or financial condition of the Account
Debtor to be unsatisfactory.
(h) Accounts of any Account Debtor who has filed or has had filed
against it a petition in bankruptcy or an application for relief under
any provision of any state or federal bankruptcy, insolvency, or
debt-in-relief acts; or who has had appointed a trustee,
custodian, or receiver for the assets of such Account Debtor; or who
has made an assignment for the benefit of creditors or has become
insolvent or fails generally to pay its debts (including its payrolls)
as such debts become due.
(i) Accounts with respect to which the Account Debtor is the United
States government or any department or agency of the United States.
(j) Accounts which have not been paid in full within 90 from the
invoice date. The entire balance of any Account of any single Account
debtor will be ineligible whenever the portion of 1he Account which has
not been paid within 90 from the invoice date is in excess of 25.000% of
the total amount outstanding on the Account.
(k) That portion of Accounts due from an Account Debtor which are in
excess of 10.000% of the Debtor's aggregate dollar amount of all
outstanding Accounts.
ELIGIBLE EQUIPMENT. The words "Eligible Equipment" mean, at any time,
all of Borrower's Equipment as defined below except:
(a) Equipment which is not owned by Borrower free and clear of all
security interests, liens, encumbrances, and claims of third parties.
(b) Equipment which Lender, in its sole discretion, deems to be
obsolete, unsalable, damaged, defective, or unfit for operation.
ELIGIBLE INVENTORY. The words "Eligible Inventory" mean, at any time, all
of Borrower's Inventory as defined below except:
(a) Inventory which is not owned by Borrower free and clear of all
security interests, liens, encumbrances, and claims of third parties.
(b) Inventory which Lender, in its sole discretion, deems to be
obsolete, unsalable, damaged, defective, or unfit for further
processing.
EQUIPMENT. The word "Equipment" means all of Borrower's goods used or
bought for use primarily in Borrower's business and which are not
included in inventory, whether now or hereafter existing.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
34
<PAGE> 35
04-30-1996 LOAN AGREEMENT Page 2
(Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EVENT OF DEFAULT. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in the
section titled "EVENTS OF DEFAULT."
EXPIRATION DATE. The words "Expiration Date" mean the date of
termination of Lender's commitment to lend under this Agreement.
GRANTOR. The word "Grantor" means and includes without limitation
each and all of the persons or entities granting a Security Interest
in any Collateral for the Indebtedness, including without limitation
all Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing, voluntary or involuntary, due or
not due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a guarantor, surety, or otherwise;
whether recovery upon such Indebtedness may be or hereafter may
become barred by any statute of limitations; and whether such
Indebtedness may be or hereafter may become otherwise unenforceable.
INVENTORY. The word "Inventory" means all of Borrower's raw
materials, work in process, finished goods, merchandise, parts and
supplies, of every kind and description, and goods held for sale or
lease or furnished under contracts of service in which Borrower now
has or hereafter acquires any right, whether held by Borrower or
others, and all documents of title, warehouse receipts, bills of
lading, and all other documents of every type covering all or any part
of the foregoing. Inventory includes inventory temporarily out of
Borrower's custody or possession and all returns on Accounts.
LENDER. The word "Lender" means BANK LEUMI LE-ISRAEL, B.M., its
successors and assigns.
LINE OF CREDIT. The words "Line of Credit" mean the credit facility
described in the Section titled "LINE OF CREDIT" below.
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on
hand plus Borrower's readily marketable securities.
LOAN. The word "Loan" or "Loans" means and includes without
limitation any and all commercial loans and financial accommodations
from Lender to Borrower, whether now or hereafter existing, and
however evidenced, including without limitation those loans and
financial accommodations described herein or described on any exhibit
or schedule attached to this Agreement from time to time.
NOTE. The word "Note" means and includes without limitation
Borrower's promissory note or notes, if any, evidencing Borrower's
Loan obligations in favor of Lender, as well as any substitute,
replacement or refinancing note or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and
security interests securing Indebtedness owed by Borrower to Lender;
(b) liens for taxes, assessments, or similar charges either not yet
due or being contested in good faith; (c) liens of materialmen,
mechanics, warehousemen, or carriers, or other like liens arising in
the ordinary course of business and securing obligations which are not
yet delinquent; (d) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph
of this Agreement titled "Indebtedness and Liens"; (e) liens and
security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (f) those
liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the net
value of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the
form of a lien, charge, mortgage, deed of trust, assignment, pledge,
chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract,
lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness
and liabilities of Borrower which have been subordinated by written
agreement to indebtedness owed by Borrower to Lender in form and
substance acceptable to Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's
total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expenses, and
similar intangible items, but including leaseholds and leasehold
improvements) less total Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current
liabilities.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make any
Advance to or for the account of Borrower under this Agreement is
subject to the following conditions precedent, with all documents,
instruments, opinions, reports, and other items required under this
Agreement to be in form and substance satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and
all Related Documents have been duly authorized, executed, and
delivered by Borrower to Lender.
(b) Lender shall have received such opinions of counsel,
supplemental opinions, and documents as Lender may request.
(c) The security interests in the Collateral shall have been
duly authorized, created, and perfected with first lien priority
and shall be in full force and effect.
(d) All guaranties required by Lender for the Line of Credit
shall have been executed by each Guarantor, delivered to Lender,
and be in full force and effect.
(e) Lender, at its option and for its sole benefit, shall have
conducted an audit of Borrower's Accounts, Inventory, Equipment
books, records, and operations, and Lender shall be satisfied as
to their condition.
(f) Borrower shall have paid to Lender all fees, costs, and
expenses specified in this Agreement and the Related Documents
as are then due and payable.
(g) There shall not exist at the time of any Advance a condition
which would constitute an Event of Default under this Agreement,
and Borrower shall have delivered to Lender the compliance
certificate called for in the paragraph below titled "Compliance
Certificate."
MAKING LOAN ADVANCES. Advances under the Line of Credit may be
requested either orally or in writing subject to the limitations set
forth below. Lender may, but need not, require that all oral requests
be confirmed in writing. Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of Borrower (a)
when credited to any deposit account of Borrower maintained with
Lender or (b) when advanced in accordance with the instructions of an
authorized person. Lender, at its option, may set a cutoff time,
after which all requests for Advances will be treated as having been
requested on the next succeeding Business Day. Under no circumstances
shall Lender be required to make any Advance in an amount less than
$5,000.00.
MANDATORY LOAN REPAYMENTS. If at any time the aggregate principal
amount of the outstanding Advances shall exceed the applicable
Borrowing Base, Borrower, immediately upon written or oral notice from
Lender, shall pay to Lender an amount equal to the difference between
the outstanding principal balance of the Advances and the Borrowing
Base. On the Expiration Date, Borrower shall pay to Lender in full
the aggregate unpaid principal amount of all Advances then outstanding
and all accrued unpaid interest, together with all other applicable
fees, costs and charges, if any, not yet paid.
LOAN ACCOUNT. Lender shall maintain on its books a record of account
in which Lender shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with the
credit facility. Lender shall provide Borrower with periodic
statements of Borrower's account, which statements shall be considered
to be correct and conclusively binding on Borrower unless Borrower
notifies Lender to the contrary within thirty (30) days after
Borrower's receipt of any such statement which Borrower deems to be
incorrect.
COLLATERAL. To secure payment of the Line of Credit and performance of all
other Loans, obligations and duties owed by Borrower to Lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such
property and assets as Lender may require (the "Collateral"). Lender's
Security Interests in the Collateral shall be continuing liens and shall
include the proceeds and products of the Collateral, including without
limitation the
35
<PAGE> 36
04-30-1996 LOAN AGREEMENT Page 3
(Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
proceeds of any Insurance. With respect to the Collateral, Borrower agrees
and represents and warrants to Lender:
PERFECTION OF SECURITY INTERESTS. Borrower agrees to execute such
financing statements and to take whatever other actions are requested
by Lender to perfect and continue Lender's Security Interests in the
Collateral. Upon request of Lender, Borrower will deliver to Lender
any and all of the documents evidencing or constituting the
Collateral, and Borrower will note Lender's interest upon any and all
chattel paper if not delivered to Lender for possession by Lender.
Contemporaneous with the execution of this Agreement, Borrower will
execute one or more UCC financing statements and any similar
statements as may be required by applicable law, and will file such
financing statements and all such similar statements in the
appropriate location or locations. Borrower hereby appoints Lender as
its irrevocable attorney-in-fact for the purpose of executing any
documents necessary to perfect or to continue any Security Interest.
Lender may at any time, and without further authorization from
Borrower, file a carbon, photograph, facsimile, or other reproduction
of any financing statement for use as a financing statement.
Borrower will reimburse Lender for all expenses for the perfection,
termination, and the continuation of the perfection of Lender's
security interest in the Collateral. Borrower promptly will notify
Lender of any change in Borrower's name including any change to the
assumed business names of Borrower. Borrower also promptly will
notify Lender of any change in Borrower's Social Security Number or
Employer Identification Number. Borrower further agrees to notify
Lender in writing prior to any change in address or location
of Borrower's principal governance office or should Borrower merge or
consolidate with any other entity.
COLLATERAL RECORDS. Borrower does now, and at all times hereafter
shall, keep correct and accurate records of the Collateral, all of
which records shall be available to Lender or Lender's representative
upon demand for inspection and copying at any reasonable time. With
respect to the Accounts, Borrower agrees to keep and maintain such
records as Lender may require, including without limitation
information concerning Eligible Accounts and Account balances and
agings. With respect to the Inventory, Borrower agrees to keep and
maintain such records as Lender may require, including without
limitation information concerning Eligible Inventory and records
itemizing and describing the kind, type, quality, and quantity of
Inventory, Borrower's Inventory costs and selling prices, and the
daily withdrawals and additions to Inventory. With respect to the
Equipment, Borrower agrees to keep and maintain such records as Lender
may require, including without limitation information concerning
Eligible Equipment and records itemizing and describing the kind,
type, quality, and quantity of Equipment, Borrower's Equipment costs,
and the daily withdrawals and additions to Equipment.
COLLATERAL SCHEDULES. Concurrently with the execution and delivery of
this Agreement, Borrower shall execute and deliver to Lender schedules
of Accounts, Inventory and Equipment and schedules of Eligible
Accounts, Eligible Inventory and Eligible Equipment, in form and
substance satisfactory to the Lender. Thereafter Supplemental
schedules shall be delivered according to the following schedule:
SUBMISSION OF MONTHLY ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AGINGS
WITHIN TWENTY (20) DAYS OF THE FOLLOWING MONTH.
REPRESENTATIONS AND WARRANTIES CONCERNING ACCOUNTS. With respect to
the Accounts, Borrower represents and warrants to Lender: (a) Each
Account represented by Borrower to be an Eligible Account for purposes
of this Agreement conforms to the requirements of the definition of an
Eligible Account; (b) All Account information listed on schedules
delivered to Lender will be true and correct, subject to immaterial
variance; and (c) Lender, its assigns, or agents shall have the right
at any time and at Borrower's expense to inspect, examine, and audit
Borrower's records and to confirm with Account Debtors the accuracy of
such Accounts.
REPRESENTATIONS AND WARRANTIES CONCERNING INVENTORY. With respect to
the Inventory, Borrower represents and warrants to Lender: (a) All
Inventory represented by Borrower to be Eligible Inventory for
purposes of this Agreement conforms to the requirements of the
definition of Eligible Inventory; (b) All Inventory values listed on
schedules delivered to Lender will be true and correct, subject to
immaterial variance; (c) The value of the Inventory will be determined
on a consistent accounting basis; (d) Except as agreed to the contrary
by Lender in writing, all Eligible Inventory is now and at all times
hereafter will be in Borrower's physical possession and shall not be
held by others on consignment, sale on approval, or sale or return;
(e) Except as reflected in the Inventory schedules delivered to
Lender, all Eligible Inventory is now and at all times hereafter will
be of good and merchantable quality, free from defects; (f) Eligible
Inventory is not now and will not at any time hereafter be stored with
a bailee, warehouseman, or similar party without Lender's prior
written consent, and, in such event, Borrower will concurrently at the
time of bailment cause any such bailee, warehouseman, or similar party
to issue and deliver to Lender, in form acceptable to Lender,
warehouse receipts in Lender's name evidencing the storage of
Inventory; and (g) Lender, its assigns, or agents shall have the right
at any time and at Borrower's expense to inspect and examine the
Inventory and to check and test the same as to quality, quantity,
value, and condition.
REPRESENTATIONS AND WARRANTIES CONCERNING EQUIPMENT. With respect to
the Equipment, Borrower represents and warrants to Lender: (a) All
Equipment represented by Borrower to be Eligible Equipment for
purposes of this Agreement conforms to the requirements of the
definition of Eligible Equipment; (b) All Equipment values listed on
schedules delivered to Lender will be true and correct, subject to
immaterial variance; (c) The value of the Equipment will be determined
on a consistent accounting basis; (d) Except as agreed to the contrary
by Lender in writing, all Eligible Equipment is now and at all times
hereafter will be in Borrower's physical possession; (e) Except as
reflected in the Equipment schedules delivered to Lender, all Eligible
Equipment is now and at all times hereafter will be of good and
merchantable quality, free from defects; (f) Eligible Equipment is not
now and will not at any time hereafter be stored with a bailee,
warehouseman, or similar party without Lender's prior written consent,
and, in such event, Borrower will concurrently at the time of bailment
cause any such bailee, warehouseman, or similar party to issue and
deliver to Lender, in form acceptable to Lender, warehouse receipts in
Lender's name evidencing the storage of Equipment; and (g) Lender, its
assigns, or agents shall have the right at any time and at Borrower's
expense to inspect and examine the Equipment and to check and test the
same as to quality, quantity, value, and condition.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of
California and is validly existing and in good standing in all states
in which Borrower is doing business. Borrower has the full power and
authority to own its properties and to transact the businesses in
which it is presently engaged or presently proposes to engage.
Borrower also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so qualify would
have a material adverse effect on its businesses or financial
condition.
AUTHORIZATION. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly
authorized by all necessary action by Borrower; do not require the
consent or approval of any other person, regulatory authority or
governmental body; and do not conflict with, result in a violation of,
or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other
instrument binding upon Borrower or (b) any law, governmental
regulation, court decree, or order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied
to Lender truly and completely disclosed Borrower's financial
condition as of the date of the statement, and there has been no
material adverse change in Borrower's financial condition subsequent
to the date of the most recent financial statement supplied to Lender.
Borrower has no material contingent obligations except as disclosed in
such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective
terms.
PROPERTIES. Except for Permitted Liens, Borrower owns and has good
title to all of Borrower's properties free and clear of all Security
Interests, and has not executed any security documents or financing
statements relating to such properties. All of Borrower's properties
are titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least the
last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used
in this Agreement, shall have the same meanings as set forth in the
"CERCLA," "SARA," the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of
Division 20 of the California Health and Safety Code, Section 25100,
et seq., or other applicable state or Federal laws, rules, or
regulations adopted pursuant to any of the foregoing. Except as
disclosed to and acknowledged by Lender in writing, Borrower
represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any person on, under,
about or from any of the properties. (b) Borrower has no knowledge of,
or reason to believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened
release of any hazardous waste or substance on, under, about or from
the properties by any prior owners or occupants of any of the
properties, or (ii) any actual or threatened litigation or claims of
any kind by any person relating to such matters. (c) Neither
Borrower nor any tenant, contractor, agent or other authorized user of
any of the properties shall use, generate, manufacture, store, treat,
dispose of, or release any hazardous waste or substance on, under,
about or from any of the properties; and any such activity shall be
conducted in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation those
laws, regulations and ordinances described above. Borrower authorizes
Lender and its agents to enter upon the properties to make such
inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and
for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to
any other person. The representations and warranties contained herein
are based on Borrower's due diligence in investigating the properties
for hazardous waste and hazardous substances. Borrower hereby (a)
releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section
of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release
occurring prior to Borrower's ownership or interest in the properties,
whether or not the same was or should have been known to Borrower.
The provisions
36
<PAGE> 37
04-30-1996 LOAN AGREEMENT PAGE 4
(CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
of this section of the Agreement, including the obligation to
indemnity, shall survive the payment of the Indebtedness and the
termination or expiration of this Agreement and shall not be affected
by Lender's acquisition of any interest in any of the properties,
whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those for
unpaid taxes) against Borrower is pending or threatened, and no other
event has occurred which may materially adversely affect Borrower's
financial condition or properties, other than litigation, claims, or
other events, if any, that have been disclosed to and acknowledged by
Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and
reports of Borrower that are or were required to be filed, have been
filed, and all taxes, assessments and other governmental charges have
been paid in full, except those presently being or to be contested by
Borrower in good faith in the ordinary course of business and for
which adequate reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
and all of the Related Documents are binding upon Borrower as well as
upon Borrower's successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which
Borrower may have any liability complies in all material respects with
all applicable requirements of law and regulations, and (i) no
Reportable Event nor Prohibited Transaction (as defined in ERISA) has
occurred with respect to any such plan, (ii) Borrower has not
withdrawn from any such plan or initiated steps to do so, (iii) no
steps have been taken to terminate any such plan, and (iv) there are
no unfunded liabilities other than those previously disclosed to
Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of
business, or Borrower's Chief executive office, if Borrower has more
than one place of business, is located at 4954 VAN NUYS BLVD., #201,
SHERMAN OAKS, CA 91403. Unless Borrower has designated otherwise in
writing this location is also the office or offices where Borrower
keeps its records concerning the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations
and warranties shall be continuing in nature and shall remain in full
force and effect until such time as Borrower's Indebtedness shall be
paid in full, or until this Agreement shall be terminated in the
manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all
existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or
any Guarantor which could materially affect the financial condition of
Borrower or the financial condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent
basis, and permit Lender to examine and audit Borrower's books and
records at all reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but
in no event later than ninety (90) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year
ended, audited by a certified public accountant satisfactory to
Lender, and, as soon as available, but in no event later than twenty
(20) days after the and of each month, Borrower's balance sheet and
profit and loss statement for the period ended, prepared and certified
as correct to the best knowledge and belief by Borrower's chief
financial officer or other officer or person acceptable to Lender.
All financial reports required to be provided under this Agreement
shall be prepared in accordance with generally accepted accounting
principles, applied on a consistent basis, and certified by Borrower
as being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and
other reports with respect to Borrower's financial condition and
business operations as Lender may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants
and ratios:
TANGIBLE NET WORTH. Maintain a minimum Tangible Net Worth of
not less than $370,000.00 through September 29, 1996 and
$2,000,000.00 from September 30, 1996.
NET WORTH RATIO. Maintain a ratio of Total Liabilities to
Tangible Net Worth of less than 2.10 to 1.00 after SEPTEMBER 30,
1996.
WORKING CAPITAL. Maintain Working Capital in excess of
$500,000.00.
CURRENT RATIO. Maintain a ratio of Current Assets to Current
Liabilities in excess of 1.20 to 1.00.
CASH FLOW REQUIREMENTS. Maintain Cash Flow at not less than the
following level: DRAWINGS ON LINE OF CREDIT WILL BE MADE
AVAILABLE ONLY IN ACCORDANCE WITH AMOUNTS AND DATA AS PROVIDED IN
THE ATTACHED EXHIBIT "A". AFTER MAY 1996, DRAWINGS ARE
CONTINGENT UPON RECEIPT OF MONTHLY FINANCIAL RESULTS AND CASH
FLOW WITH COMPARISON TO CASH FLOW PROJECTION (EXHIBIT "A"). IF
ACTUAL LOSSES OR DEFICIT CASH FLOW EXCEED THE CASH FLOW
PROJECTION (EXHIBIT "A") BY 10.000% OR MORE, IN ANY MONTH, OR ON
A CUMULATIVE BASIS, NO DRAWS WILL BE ALLOWED. Except as provided
above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in
accordance with generally accepted accounting principles, applied
on a consistent basis, and certified by Borrower as being true
and correct.
INSURANCE. Maintain fire and other risk insurance, public
liability insurance, and such other insurance as Lender may
require with respect to Borrower's properties and operations,
in form, amounts, coverages and with insurance companies
reasonably acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled or
diminished without at least ten (10) days' prior written notice
to Lender. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not
be impaired in any way by any act, omission or default of
Borrower or any other person. In connection with all policies
covering assets in which Lender holds or is offered a security
interest for the Loans, Borrower will provide Lender with
such loss payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following:
(a) the name of the insurer; (b) the risks insured; (c) the amount of
the policy; (d) the properties insured; (e) the then current property
values on the basis of which insurance has been obtained, and the
manner of determining those values; and (f) the expiration date of the
policy. In addition, upon request of Lender (however not more often
than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash
value or replacement cost of any Collateral. The cost of such
appraisal shall be paid by Borrower.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and
any other party and notify Lender immediately in writing of any
default in connection with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (a) the
legality of the same shall be contested in good faith by appropriate
proceedings, and (b) Borrower shall have established on its books
adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish
to Lender evidence of payment of the assessments, taxes, charges,
levies, liens and claims and will authorize the appropriate
governmental official to deliver to Lender at any time a written
statement of any assessments, taxes, charges, levies, liens and
claims against Borrower's properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions,
and provisions set forth in this Agreement and in the Related
Documents in a timely manner, and promptly notify Lender if Borrower
learns of the occurrence of any event which constitutes an Event of
Default under this Agreement or under any of the Related Documents.
OPERATIONS. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive
37
<PAGE> 38
04-30-1996 LOAN AGREEMENT PAGE 5
(CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and management personnel; provide written notice to Lender of any
change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner and in compliance with all
applicable federal, state and municipal laws, ordinances, rules and
regulations respecting its properties, charters, businesses and
operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards
and other requirements of ERISA and other laws applicable to
Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable
time to inspect any and all Collateral for the Loan or Loans and
Borrower's other properties and to examine or audit Borrower's books,
accounts, and records and to make copies and memoranda of Borrower's
books, accounts, and records. If Borrower now or at any time
hereafter maintains any records (including without limitation computer
generated records and computer software programs for the generation of
such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free
access to such records at all reasonable times and to provide Lender
with copies of any records it may request, all at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide
Lender at least annually and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying
that the representations and warranties set forth in this Agreement
are true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no Event of
Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with all environmental protection federal, state and local
laws, statutes, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on its part or on the part of any third party, on property
owned and/or occupied by Borrower, any environmental activity where
damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection
with any environmental activity whether or not there is damage to the
environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security Interests.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(c) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
CAPITAL EXPENDITURES. Make or contract to make capital expenditures,
including leasehold improvements, in any fiscal year in excess of
$500,000.00 or incur liability for rentals of property (including both
real and personal property) in an amount which, together with capital
expenditures, shall in any fiscal year exceed such sum.
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume additional indebtedness for
borrowed money, including capital leases, in excess of the aggregate
amount of U.S. $250,000.00, (b) except as allowed as a Permitted Lien,
sell, transfer, mortgage, assign, pledge, lease, grant a security
interest in, or encumber any of Borrower's assets, or (c) sell with
recourse any of Borrowers accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change ownership, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other than
dividends payable in its stock), provided, however that
notwithstanding the foregoing, but only so long as no Event of Default
has occurred and is continuing or would result from the payment of
dividends, if Borrower is a "Subchapter S Corporation" (as defined in
the Internal Revenue Code of 1986, as amended), Borrower may pay cash
dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and
make estimated income tax payments to satisfy their liabilities under
federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership
of shares of stock of Borrower, or (d) purchase or retire any of
Borrower's outstanding shares or alter or amend Borrower's capital
structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any
other enterprise or entity, or (c) incur any obligation as surety or
guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES. If lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs A material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good faith deems itself insecure, even
though no Event of Default shall have occurred.
NOTICE OF LITIGATION. Debtor will promptly give notice to Lender in writing of
any proceedings against Debtor involving amounts in excess of $25,000.00 not
fully covered by insurance, any substantial claim or dispute which may exist
between Debtor and any Person, any labor controversy resulting in or threatening
to result in a strike against Debtor, or any proposal by any public authority to
acquire a material portion of the assets or business of Debtor.
NOTICE OF UNINSURED LOSS. Debtor shall give Lender written notice of any
uninsured loss in excess of $25,000.00 in each instance.
ADDITIONAL FINANCIAL COVENANT. Quarterly 10Q no later than Forty Five (45) days
after the close of each quarter.
OPERATIONS. No new start-up operations will be undertaken without Lender's
prior written consent, until equity offering is completed and equity reaches
$2,000,000.00. Only one acquisition of an existing business for an amount not to
exceed $100,000.00 in cash payments may be undertaken until completion of
company's equity offering and equity reaches $2,000,000.00.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when
due on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with
or to perform when due any other term, obligation, covenant or
condition contained in this Agreement or in any of the Related
Documents, or failure of Borrower to comply with or to perform any
other term, obligation, covenant or condition contained in any other
agreement between Lender and Borrower.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as
a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency laws
by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrowers deposit
accounts with Lender. However,
38
<PAGE> 39
04-30-1996 LOAN AGREEMENT PAGE 6
(CONTINUED)
===============================================================================
this Event of Default shall not apply if there is a good faith dispute
by Borrower or Grantor, as the case may be, as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding, and if Borrower or Grantor gives Lender written
notice of the creditor or forfeiture proceeding and furnishes reserves
or a surety bond for the creditor or forfeiture proceeding
satisfactory to Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of,
or liability under, any Guaranty of the Indebtedness. Lender, at its
option, may, but shall not be required to, permit the Guarantor's
estate to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so, cure
the Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHT TO CURE. If any default, other than a Default on Indebtedness,
is curable and if Borrower or Grantor, as the case may be, has not
been given a notice of a similar default within the preceding twelve
(12) months, it may be cured (and no Event of Default will have
occurred) if Borrower or Grantor, as the case may be, after receiving
written notice from Lender demanding cure of such default: (a) cures
the default within fifteen (15) days; or (b) if the cure requires more
than fifteen (15) days, immediately initiates steps which Lender deems
in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's
option, all Indebtedness immediately will become due and payable, all
without notice of any kind to Borrower, except that in the case of an
Event of Default of the type described in the "Insolvency" subsection
above, such acceleration shall be automatic and not optional. In addition,
Lender shall have all the rights and remedies provided in the Related
Documents or available at law, in equity, or otherwise. Except as may be
prohibited by applicable law, all of Lender's rights and remedies shall be
cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right
to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in writing
and signed by the party or parties sought to be charged or bound by
the alteration or amendment.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND
ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A
LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF LOS ANGELES COUNTY, THE STATE OF
CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER
LENDER OR BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower
under this Agreement shall be joint and several, and all references to
Borrower shall mean each and every Borrower. This means that each of
the Borrowers signing below is responsible for ALL obligations in this
Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of one or more
participation interests in the Loans to one or more purchasers,
whether related or unrelated to Lender. Lender may provide, without
any limitation whatsoever, to any one or more purchasers, or potential
purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower
hereby waives any rights to privacy it may have with respect to such
matters. Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of
such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as
the absolute owners of such interests in the Loans and will have all
the rights granted under the participation agreement or agreements
governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or
later against Lender or against any purchaser of such a participation
interest and unconditionally agrees that either Lender or such
purchaser may enforce Borrower's obligation under the Loans
irrespective of the failure or insolvency of any holder of any
interest in the Loans. Borrower further agrees that the purchaser of
any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of
Lender's expenses, including without limitation attorneys' fees,
incurred in connection with the preparation, execution, enforcement,
modification and collection of this Agreement or in connection with
the Loans made pursuant to this Agreement. Lender may pay someone
else to help collect the Loans and to enforce this Agreement, and
Borrower will pay that amount. This includes, subject to any limits
under applicable law, Lender's attorneys' fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorneys' fees
for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-
judgment collection services. Borrower also will pay any court costs,
in addition to all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall
be given in writing, may be sent by telefacsimilie, and shall be
effective when actually delivered or when deposited with a nationally
recognized overnight courier or deposited in the United States mail,
first class, postage prepaid, addressed to the party to whom the
notice is to be given at the address shown above. Any party may
change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of
the notice is to change the party's address. To the extent permitted
by applicable law, if there is more than one Borrower, notice to any
Borrower will constitute notice to all Borrowers. For notice
purposes, Borrower will keep Lender informed at all times of
Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken and
all other provisions of this Agreement in all other respects shall
remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used herein shall include all subsidiaries and
affiliates of Borrower. Notwithstanding the foregoing however, under
no circumstances shall this Agreement be construed to require Lender
to make any Loan or other financial accommodation to any subsidiary or
affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or
on behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent
of Lender.
SURVIVAL. All warranties, representations, and covenants made by
Borrower In this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of
this Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any
right shall operate as a waiver of such right or any other right. A
waiver by Lender of a provision of this Agreement shall not prejudice
or constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations of
Borrower or of any Grantor as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the granting
of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is
required, and in all cases such consent may be granted or withheld in
the sole discretion of Lender.
39
<PAGE> 40
04-30-1996 LOAN AGREEMENT PAGE 7
(CONTINUED)
===============================================================================
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
AS OF APRIL 30, 1996.
BORROWER:
HEMACARE CORPORATION
BY: /s/ Hal I. Lieberman BY: /s/ Thomas M. Asher
--------------------------- -------------------------
HAL I. LIEBERMAN, PRESIDENT THOMAS M. ASHER, CHAIRMAN
LENDER:
BANK LEUMI LE-ISRAEL, B.M.
BY: /s/ Ron Berkowitz
--------------------------
AUTHORIZED OFFICER
===============================================================================
40
<PAGE> 41
[LOGO]
BANK LEUMI LE ISRAEL B.M.
CALIFORNIA
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$700,000.00 04-30-1996 04-30-1997 2595 04A0 030 232587 RXB
- --------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: HEMACARE CORPORATION LENDER: BANK LEUMI LE-ISRAEL, B.M.
4954 VAN NUYS BLVD., #201 8383 WILSHIRE BLVD. STE. 400
SHERMAN OAKS, CA 91403 BEVERLY HILLS, CA 90211
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate (0.500% over designated rate as
established by Bank Leumi from time to time as its base rate., making an
initial rate of 8.750%), Revolving Line of Credit Loan to a Corporation for
$700,000.00 due on April 30, 1997. This is an unsecured renewal loan.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
/ / PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL INVESTMENT.
/X/ BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
SPECIFIC PURPOSE. The specific purpose of this loan is: WORKING CAPITAL.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will
be disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $700,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO BORROWER DIRECTLY: $0.00
AMOUNT PAID ON BORROWER'S ACCOUNT: $700,000.00
$700,000.00 Payment on Loan # 2595(RENEWAL)
-----------
NOTE PRINCIPAL: $700,000.00
</TABLE>
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
<TABLE>
<S> <C>
PREPAID FINANCE CHARGES PAID IN CASH: $0.00
OTHER CHARGES PAID IN CASH: $250.00
$150.00 Documentation Fee
$100.00 Recording Fees
-----------
TOTAL CHARGES PAID IN CASH: $250.00
</TABLE>
AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender automatically to
deduct from Borrower's account numbered 02-01660-6 the amount of any
loan payment. If the funds in the account are insufficient to cover
any payment, Lender shall not be obligated to advance funds to cover
the payment. At any time and for any reason, Borrower or Lender
may voluntarily terminate Automatic Payments.
COSTS AND CHARGES. DEBIT DDA #O2-01660-6 FOR THE FEES SHOWN ABOVE.
(RECORDING FEES ARE AN ESTIMATE ONLY AND MAY REQUIRE ADJUSTMENT WHEN BILLS
ARE RECEIVED).
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT
AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO
LENDER. THIS AUTHORIZATION IS DATED APRIL 30,1996.
BORROWER:
HEMACARE CORPORATION
BY: /s/ Hal I. Lieberman BY: /s/ Thomas M. Asher
- -------------------------------- -----------------------------------
HAL I. LIEBERMAN, PRESIDENT THOMAS M. ASHER, CHAIRMAN
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
41
<PAGE> 42
[LOGO]
BANK LEUMI LE ISRAEL B.M.
CALIFORNIA
PROMISSORY NOTE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$700,000.00 04-30-1996 04-30-1997 2595 04A0 030 232587 RXB
- -------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of
this document to any particular loan or item.
- -------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: HEMACARE CORPORATION LENDER: BANK LEUMI LE-ISRAEL, B.M.
4954 VAN NUYS BLVD., #201 8383 WILSHIRE BLVD. STE. 400
SHERMAN OAKS, CA 91403 BEVERLY HILLS, CA 90211
================================================================================
PRINCIPAL AMOUNT: $700,00O.00 INITIAL RATE: 8.750% DATE OF NOTE: April 30, 1996
PROMISE TO PAY. HEMACARE CORPORATION ("BORROWER") PROMISES TO PAY TO BANK LEUMI
LE-ISRAEL, B.M. ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF
AMERICA, THE PRINCIPAL AMOUNT OF SEVEN HUNDRED THOUSAND & 00/100 DOLLARS
($700,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE
UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE
CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON APRIL 30, 1997. IN ADDITION,
BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING
MAY 31, 1996, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE LAST DAY OF
EACH MONTH AFTER THAT. Interest on this Note is computed on a 365/360 simple
interest basis; that is, by applying the ratio of the annual interest rate over
a year of 360 days, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding. Borrower
will pay Lender at Lender's address shown above or at such other place as Lender
may designate in writing. Unless otherwise agreed or required by applicable
law, payments will be applied first to accrued unpaid interest, then to
principal, and any remaining amount to any unpaid collection costs and late
charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the designated rate as
established by Bank Leumi from time to time as its base rate. (the "Index").
The Index is not necessarily the lowest rate charged by Lender on its loans and
is set by Lender in its sole discretion. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notifying Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The interest rate change will not occur more often than
each day. THE INDEX CURRENTLY IS 8.250% PER ANNUM. THE INTEREST RATE TO BE
APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 0.500
PERCENTAGE POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 8.750% PER
ANNUM. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Note, Borrower understands that Lender is entitled to a MINIMUM INTEREST
CHARGE OF $250.00. Other than Borrower's obligation to pay any minimum interest
charge, Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
3.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT OR $25.00,
WHICHEVER IS GREATER.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note
or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Any representation or statement made or furnished
to Lender by Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at the time made or furnished. (d) Borrower
becomes insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the benefit of creditors, or any proceeding is
commenced either by Borrower or against Borrower under any bankruptcy or
insolvency laws. (e) Any creditor tries to take any of Borrower's property on or
in which Lender has a lien or security interest. This includes a garnishment of
any of Borrower's accounts with Lender. (f) Any guarantor dies or any of the
other events described in this default section occurs with respect to any
guarantor of this Note. (g) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of the Indebtedness is impaired. (h) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within fifteen (15) days; or (b) if
the cure requires more than fifteen (15) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, increase the variable interest rate on this Note to 5.500 percentage points
over the index. Lender may hire or pay someone else to help collect this Note
if Borrower does not pay. Borrower also will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses whether or not there is a lawsuit, including
attorneys' fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay any court
costs, in addition to all other sums provided by law. THIS NOTE HAS BEEN
DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA. IF THERE
IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF LOS ANGELES COUNTY, THE STATE OF CALIFORNIA.
LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE
OTHER. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested either orally or in writing by Borrower or as
provided in this paragraph. Lender may, but need not, require that all oral
requests be confirmed in writing. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office shown above. The following party or parties are authorized as provided
in this paragraph to request advances under the line of credit until Lender
receives from Borrower at Lender's address shown above written notice of
revocation of their authority: HAL I. LIEBERMAN, PRESIDENT; AND THOMAS M. ASHER,
CHAIRMAN. (MINIMUM OF $5,000.00 PER REQUEST). Borrower agrees to be liable for
all sums either: (a) advanced in accordance with the instructions of an
authorized person or (b) credited to any of Borrower's accounts with Lender.
The unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (a) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under this Note or any
other agreement between Lender and Borrower.
42
<PAGE> 43
04-30-1996 PROMISSORY NOTE Page 2
(CONTINUED)
================================================================================
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law,
waive any applicable statute of limitations, presentment, demand for payment,
protest and notice of dishonor. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this
Note, whether as maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All
such parties also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the modification is
made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.
BORROWER:
HEMACARE CORPORATION
By: /s/ Hal I. Lieberman By: /s/ Thomas M. Asher
---------------------------- ---------------------------
HAL I. LIEBERMAN, PRESIDENT THOMAS M. ASHER, CHAIRMAN
================================================================================
43
<PAGE> 44
[LOGO]
BANK LEUMI LE ISRAEL B.M.
CALIFORNIA
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$700,000.00 04-30-1996 04-30-1997 2595 04A0 030 232587 RXB
- ---------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: HEMACARE CORPORATION LENDER: BANK LEUMI LE-ISRAEL, B.M.
4954 VAN NUYS BLVD., #201 8383 WILSHIRE BLVD. STE. 400
SHERMAN OAKS, CA 91403 BEVERLY HILLS, CA 90211
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN HEMACARE
CORPORATION (REFERRED TO BELOW AS "GRANTOR"); AND BANK LEUMI LE-ISRAEL, B.M.
(REFERRED TO BELOW AS "LENDER"). FOR VALUABLE CONSIDERATION, GRANTOR GRANTS
TO LENDER A SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS
AND AGREES THAT LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH
RESPECT TO THE COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY
HAVE BY LAW.
DEFINITIONS. The following words shall have the following meanings when
used in this Agreement. Terms not otherwise defined in this Agreement shall
have the meanings attributed to such terms in the Uniform Commercial Code.
All references to dollar amounts shall mean amounts in lawful money of the
United States of America.
AGREEMENT. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Commercial Security Agreement from time to time.
COLLATERAL. The word "Collateral" means the following described
property of Grantor, whether now owned or hereafter acquired, whether
now existing or hereafter arising, and wherever located:
ALL INVENTORY, CHATTEL PAPER, ACCOUNTS, EQUIPMENT AND GENERAL
INTANGIBLES
In addition, the word "Collateral" includes all the following, whether
now owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all replacements of and
substitutions for any property described above.
(b) All products and produce of any of the property described
in this Collateral section.
(c) All accounts, general intangibles, instruments, rents,
monies, payments, and all other rights, arising out of a sale,
lease, or other disposition of any of the property described in
this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.
(e) All records and data relating to any of the property
described in this Collateral section, whether in the form of a
writing, photograph, microfilm, microfiche, or electronic media,
together with all of Grantor's right, title, and interest in and
to all computer software required to utilize, create, maintain,
and process any such records or data on electronic media.
EVENT OF DEFAULT. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in the
section titled "Events Of Default."
GRANTOR. The word "Grantor" means HEMACARE CORPORATION, its
successors and assigns.
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties
in connection with the Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness
evidenced by the Note, including all principal and interest, together
with all other indebtedness and costs and expenses for which Grantor
is responsible under this Agreement or under any of the Related
Documents. In addition, the word "Indebtedness" includes all other
obligations, debts and liabilities, plus interest thereon, of Grantor,
or any one or more of them, to Lender, as well as all claims by Lender
against Grantor, or any one or more of them, whether existing now or
later; whether they are voluntary or involuntary, due or not due,
direct or indirect, absolute or contingent, liquidated or
unliquidated; whether Grantor may be liable individually or jointly
with others; whether Grantor may be obligated as guarantor, surety,
accommodation party or otherwise; whether recovery upon such
indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may
become otherwise unenforceable.
LENDER. The word "Lender" means BANK LEUMI LE-ISRAEL, B.M., its
successors and assigns.
NOTE. The word "Note" means the note or credit agreement dated
April 30, 1996, in the principal amount of $700,000.00 from HEMACARE
CORPORATION to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and substitutions
for the note or credit agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory
security interest in and hereby assigns, conveys, delivers, pledges, and
transfers all of Grantor's right, title and interest in and to Grantor's
accounts with Lender (whether checking, savings, or some other account),
including all accounts held jointly with someone else and all accounts
Grantor may open in the future, excluding, however, all IRA and Keogh
accounts, and all trust accounts for which the grant of a security
interest would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all Indebtedness
against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such
financing statements and to take whatever other actions are requested
by Lender to perfect and continue Lender's security interest in the
Collateral. Upon request of Lender, Grantor will deliver to Lender
any and all of the documents evidencing or constituting the
Collateral, and Grantor will note Lender's interest upon any and all
chattel paper if not delivered to Lender for possession by Lender.
Grantor hereby appoints Lender as its irrevocable attorney-in-fact
for the purpose of executing any documents necessary to perfect or to
continue the security interest granted in this Agreement. Lender may
at any time, and without further authorization from Grantor, file a
carbon, photographic or other reproduction of any financing statement
or of this Agreement for use as a financing statement. Grantor will
reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of
Grantor. THIS IS A CONTINUING SECURITY AGREEMENT AND WILL CONTINUE IN
EFFECT EVEN THOUGH ALL OR ANY PART OF THE INDEBTEDNESS IS PAID IN FULL
AND EVEN THOUGH FOR A PERIOD OF TIME GRANTOR MAY NOT BE INDEBTED TO
LENDER.
NO VIOLATION. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is
a party, and its certificate or articles of incorporation and bylaws
do not prohibit any term or condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists
of accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies
with applicable laws concerning form, content and manner of
preparation and execution, and all persons appearing to be obligated
on the Collateral have authority and capacity to contract and are in
fact obligated as they appear to be on the Collateral. At the time
any account becomes subject to a security interest in favor of Lender,
the account shall be a good and valid account representing an
undisputed, bona fide indebtedness incurred by the account debtor, for
merchandise held subject to delivery instructions or theretofore
shipped or delivered pursuant to a contract of sale, or for services
theretofore performed by Grantor with or for the account debtor;
there shall be no setoffs or counterclaims against any such account;
and no agreement under which any deductions or discounts may be
claimed shall have been made with the account debtor except those
disclosed to Lender in writing.
LOCATION OF THE COLLATERAL. Grantor, upon request of Lender, will
deliver to Lender in form satisfactory to Lender a schedule of real
properties and Collateral locations relating to Grantor's operations,
including without limitation the following: (a) all real property
owned or being purchased
44
<PAGE> 45
04-30-1996 COMMERCIAL SECURITY AGREEMENT Page 2
(CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
by Grantor; (b) all real property being rented or leased by Grantor;
(c) all storage facilities owned, rented, leased, or being used by
Grantor; and (d) all other properties where Collateral is or may be
located. Except in the ordinary course of its business, Grantor
shall not remove the Collateral from its existing locations without
the prior written consent of Lender.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the
extent the Collateral consists of intangible property such as
accounts, the records concerning the Collateral) at Grantor's address
shown above, or at such other locations as are acceptable to Lender.
Except in the ordinary course of its business, including the sales of
inventory, Grantor shall not remove the Collateral from its existing
locations without the prior written consent of Lender. To the extent
that the Collateral consists of vehicles, or other titled property,
Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the
State of California, without the prior written consent of Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business,
Grantor shall not sell, offer to sell, or otherwise transfer or
dispose of the Collateral. While Grantor is not in default under this
Agreement, Grantor may sell inventory, but only in the ordinary course
of its business and only to buyers who quality as a buyer in the
ordinary course of business. A sale in the ordinary course of
Grantor's business does not include a transfer in partial or total
satisfaction of a debt or any bulk sale. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject to
any lien, security interest, encumbrance, or charge, other than the
security interest provided for in this Agreement, without the prior
written consent of Lender. This includes security interests even if
junior in right to the security interests granted under this
Agreement. Unless waived by Lender, all proceeds from any disposition
of the Collateral (for whatever reason) shall be held in trust for
Lender and shall not be commingled with any other funds; provided
however, this requirement shall not constitute consent by Lender to
any sale or other disposition. Upon receipt, Grantor shall immediately
deliver any such proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it holds good
and marketable title to the Collateral, free and clear of all liens
and encumbrances except for the lien of this Agreement. No financing
statement covering any of the Collateral is on file in any public
office other than those which reflect the security interest created by
this Agreement or to which Lender has specifically consented. Grantor
shall defend Lender's rights in the Collateral against the claims and
demands of all other persons.
COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require,
and insofar as the Collateral consists of accounts and general
intangibles, Grantor shall deliver to Lender schedules of such
Collateral, including such information as Lender may require,
including without limitation names and addresses of account debtors
and agings of accounts and general intangibles. Insofar as the
Collateral consists of inventory and equipment, Grantor shall deliver
to Lender, as often as Lender shall require, such lists, descriptions,
and designations of such Collateral as Lender may require to identify
the nature, extent, and location of such Collateral. Such information
shall be submitted for Grantor and each of its subsidiaries or related
companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not
commit or permit damage to or destruction of the Collateral or any
part of the Collateral. Lender and its designated representatives and
agents shall have the right at all reasonable times to examine,
inspect, and audit the Collateral wherever located. Grantor shall
immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any Collateral; of
any request for credit or adjustment or of any other dispute arising
with respect to the Collateral; and generally of all happenings and
events affecting the Collateral or the value or the amount of the
Collateral.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon
this Agreement, upon any promissory note or notes evidencing the
Indebtedness, or upon any of the other Related Documents. Grantor may
withhold any such payment or may elect to contest any lien if Grantor
is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the Collateral
is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs,
attorneys' fees or other charges that could accrue as a result of
foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender
as an additional obligee under any surety bond furnished in the
contest proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable to
the ownership, production, disposition, or use of the Collateral.
Grantor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral,
in Lender's opinion, is not jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this
Agreement remains a lien on the Collateral, used for the generation,
manufacture, storage, transportation, treatment, disposal, release or
threatened release of any hazardous waste or substance, as those terms
are defined in the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through
7.7 of Division 20 of the California Health and Safety Code, Section
25100, et seq., or other applicable state or Federal laws, rules, or
regulations adopted pursuant to any of the foregoing. The terms
"hazardous waste" and "hazardous substance" shall also include,
without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos. The representations and warranties
contained herein are based on Grantor's due diligence in investigating
the Collateral for hazardous wastes and substances. Grantor hereby
(a) releases and waives any future claims against Lender for indemnity
or contribution in the event Grantor becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims and losses resulting from a
breach of this provision of this Agreement. This obligation to
indemnify shall survive the payment of the Indebtedness and the
satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain
all risks insurance, including without limitation fire, theft and
liability coverage together with such other insurance as Lender may
require with respect to the Collateral, in form, amounts, coverages
and basis reasonably acceptable to Lender and issued by a company or
companies reasonably acceptable to Lender. Grantor, upon request of
Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished
without at least ten (10) days' prior written notice to Lender and not
including any disclaimer of the insurer's liability for failure to
give such a notice. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of Grantor or any
other person. In connection with all policies covering assets in which
Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may
require. If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but shall not
be obligated to) obtain such insurance as Lender deems appropriate,
including if it so chooses "single interest insurance", which will
cover only Lender's interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify
Lender of any loss or damage to the Collateral. Lender may make proof
of loss if Grantor fails to do so within fifteen (15) days of the
casualty. All proceeds of any insurance on the Collateral, including
accrued proceeds thereon, shall be held by Lender as part of the
Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof
of expenditure, pay or reimburse Grantor from the proceeds for the
reasonable cost of repair or restoration. If Lender does not consent
to repair or replacement of the Collateral, Lender shall retain a
sufficient amount of the proceeds to pay all of the Indebtedness, and
shall pay the balance to Grantor. Any proceeds which have not been
disbursed within six (6) months after their receipt and which Grantor
has not committed to the repair or restoration of the Collateral shall
be used to prepay the Indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with
Lender reserves for payment of insurance premiums, which reserves
shall be created by monthly payments from Grantor of a sum estimated
by Lender to be sufficient to produce, at least fifteen (15) days
before the premium due date, amounts at least equal to the insurance
premiums to be paid. If fifteen (15) days before payment is due, the
reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a
general deposit and shall constitute non-interest-bearing account
which Lender may satisfy by payment of the insurance premiums required
to be paid by Grantor as they become due. Lender does not hold the
reserve funds in trust for Grantor, and Lender is not the agent of
Grantor for payment of the insurance premiums required to be paid by
Grantor. The responsibility for the payment of premiums shall remain
Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following:
(a) the name of the insurer; (b) the risks insured; (c) the amount of
the policy; (d) the property insured; (e) the then current value on
the basis of which insurance has been obtained and the manner of
determining that value; and (f) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement cost of the
Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts, Grantor may
have possession of the tangible personal property and beneficial use of all
the Collateral and may use it in any lawful manner not inconsistent with
this Agreement or the Related Documents, provided that Grantor's right to
possession and beneficial use shall not apply to any Collateral where
possession of the Collateral by Lender is required by law to perfect
Lender's security interest in such Collateral. Until otherwise notified
by Lender, Grantor may collect any of the Collateral consisting of
accounts. At any time and though no Event of Default exists, Lender
may exercise its rights to collect the accounts and to notify account
debtors to make payments directly to Lender for application to the
Indebtedness.
45
<PAGE> 46
04-30-1996 COMMERCIAL SECURITY AGREEMENT Page 3
(CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If Lender at any time has possession of any Collateral, whether before or
after an Event of Default, Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the collateral if lender
takes such action for that purpose as Grantor shall request or as Lender, in
Lender's sole discretion, shall deem appropriate under the circumstances,
but failure to honor any request by Grantor shall not of itself be deemed to
be a failure to exercise reasonable care. Lender shall not be required to
take any steps necessary to preserve any rights in the Collateral against
prior parties, nor to protect, preserve or maintain any security interest
given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may
(but shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the collateral. lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender
for such purposes will then bear interest at the rate charged under the Note
from the date incurred or paid by Lender to the date of repayment by
Grantor. All such expenses shall become a part of the Indebtedness and, at
Lender's option, will (a) be payable on demand, (b) be added to the balance
of the Note and be apportioned among and be payable with any installment
payments to become due during either (i) the term of any applicable
insurance policy or (ii) the remaining term of the Note, or (c) be treated
as a balloon payment which will be due and payable at the Note's maturity.
This Agreement also will secure payment of these amounts. Such right shall
be in addition to all other rights and remedies to which Lender may be
entitled upon the occurrence of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when
due on the Indebtedness.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any
other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents or in any other agreement
between Lender and Grantor.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement,
the Note or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any collateral documents to create a valid and perfected security
interest or lien) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as
a going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor's property, any assignment for the
benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency laws
by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any of
Grantor's deposit accounts with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Grantor as
to the validity or reasonableness of the claim which is the basis of
the creditor or forfeiture proceeding and if Grantor gives Lender
written notice of the creditor or forfeiture proceeding and deposits
with lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in its sole discretion,
as being an adequate reserve or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor
dies or becomes incompetent. Lender, at its option, may, but shall
not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure the Event of Default.
ADVERSE CHANGE. A material adverse change occurs in Grantor's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHT TO CURE. If any default, other than Default on Indebtedness,
is curable and if Grantor has not been given a prior notice of a
breach of the same provision of this Agreement, it may be cured (and
no Event of Default will have occurred) if Grantor, after Lender sends
written notice demanding cure of such default, (a) cures the default
within fifteen (15) days; or (b), if the cure requires more than
fifteen (15) days, immediately initiates steps which Lender deems in
Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the California Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following
rights and remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to
pay, immediately due and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require grantor to deliver to lender
all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may
require Grantor to assemble the Collateral and make it available to
Lender at a place to be designated by Lender. Lender also shall have
full power to enter upon the property of Grantor to take possession
of and remove the Collateral. If 1he Collateral contains other goods
not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes
reasonable efforts to return them to Grantor after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell,
lease, transfer, or otherwise deal with the Collateral or proceeds
thereof in its own name or that of Grantor. Lender may sell the
Collateral at public auction or private sale. Unless the Collateral
threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Lender will give Grantor reasonable
notice of the time after which any private sale or any other intended
disposition of the Collateral is to be made. The requirements of
reasonable notice shall be met if such notice is given at least ten
(10) days, or such lesser time as required by state law, before the
time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and
selling the Collateral, shall become a part of the Indebtedness
secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender
shall have the following rights and remedies regarding the appointment
of a receiver: (a) Lender may have a receiver appointed as a matter of
right, (b) the receiver may be an employee of Lender and may serve
without bond, and (c) all fees of the receiver and his or her attorney
shall become part of the Indebtedness secured by this Agreement and
shall be payable on demand, with interest at the Note rate from date
of expenditure until repaid.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from
the Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the
Indebtedness in such order of preference as Lender may determine.
Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or
similar property, Lender may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the Collateral
as Lender may determine, whether or not Indebtedness or Collateral is
then due. For these purposes, Lender may, on behalf of and in the
name of Grantor, receive, open and dispose of mail addressed to
Grantor; change any address to which mail and payments are to be sent;
and endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payment, shipment, or storage of
any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to
Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any
deficiency remaining on the Indebtedness due to Lender after
application of all amounts received from the exercise of the rights
provided in this Agreement. Grantor shall be liable for a deficiency
even if the transaction described in this subsection is a sale of
accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform
Commercial Code, as may be amended from time to time. In addition,
Lender shall have and may exercise any or all other rights and
remedies it may have available at law, in equity, or otherwise.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Grantor
under this Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and exercise its
remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in writing
and signed by the party or parties sought to be charged or bound by
the alteration or amendment.
APPLICABLE LOW. This Agreement has been delivered to Lender and
accepted by Lender in the State of California. If there is a lawsuit,
Grantor agrees upon Lender's request to submit to the jurisdiction of
the courts of LOS ANGELES County, State of California. Lender and
Grantor
46
<PAGE> 47
04-30-1996 COMMERCIAL SECURITY AGREEMENT Page 4
(CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Grantor against the other.
This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this
Agreement. Lender may pay someone else to help enforce this
agreement, and Grantor shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's attorneys' fees and
legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (and including
efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services.
Grantor also shall pay all court costs and such additional fees as may
be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Grantor
under this Agreement shall be joint and several, and all references to
Grantor shall mean each and every Grantor. This means that each of
the Borrowers signing below is responsible for ALL obligations in this
Agreement.
NOTICES. ALL notices required to be given under this Agreement shall
be given in writing, may be sent by telefacsimilie, and shall be
effective when actually delivered or when deposited with a nationally
recognized overnight courier or deposited in the United States mail,
first class, postage prepaid, addressed to the party to whom the
notice is to be given at the address shown above. Any party may
change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of
the notice is to change the party's address. To the extent permitted
by applicable law, if there is more than one Grantor, notice to any
Grantor will constitute notice to all Grantors. For notice purposes,
Grantor will keep Lender informed at all times of Grantor's current
address(es).
POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and
lawful attorney-in-fact, irrevocably, with full power of substitution
to do the following: (a) to demand, collect, receive, receipt for, sue
and recover all sums of money or other property which may now or
hereafter become due, owing or payable from the Collateral; (b) to
execute, sign and endorse any and all claims, instruments, receipts,
checks, drafts or warrants issued in payment for the Collateral; (c)
to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Grantor, to execute and
deliver its release and settlement for the claim; and (d) to file any
claim or claims or to take any action or institute or take part in any
proceedings, either in its own name or in the name of Grantor, or
otherwise, which in the discretion of lender may seem to be necessary
or advisable. This power is given as security for the Indebtedness,
and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Lender.
PREFERENCE PAYMENTS. Any monies Lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the
indebtedness and, at Lender's option, shall be payable by Borrower as
provided above in the "EXPENDITURES BY LENDER" paragraph.
SEVERABILITY. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to any
person or circumstance, such finding shall not render that provision
invalid or unenforceable as to any other persons or circumstances. If
feasible, any such offending provision shall be deemed to be modified
to be within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken and
all other provisions of this Agreement in all other respects shall
remain valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns.
WAIVER. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any
right shall operate as a waiver of such right or any other right. A
waiver by Lender of a provision of this Agreement shall not prejudice
or constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Grantor, shall constitute a waiver of any of
Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance
shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted
or withheld in the sole discretion of Lender.
WAIVER OF CO-OBLIGOR'S RIGHTS. If more than one person is obligated
for the Indebtedness, Borrower irrevocably waives, disclaims and
relinquishes all claims against such other person which Borrower has
or would otherwise have by virtue of payment of the Indebtedness or
any part thereof, specifically including but not limited to all rights
of indemnity, contribution or exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT
IS DATED APRIL 30, 1996.
GRANTOR:
HEMACARE CORPORATION
BY: /s/ Hal I. Lieberman BY: /s/ Thomas M. Asher
----------------------------- -----------------------------
HAL I. LIEBERMAN, PRESIDENT THOMAS M. ASHER, CHAIRMAN
===============================================================================
47
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from unaudited financial
statements contained in Form 10-Q for the quarter ending March 31, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 820,000
<SECURITIES> 0
<RECEIVABLES> 1,483,000
<ALLOWANCES> 110,000
<INVENTORY> 447,000
<CURRENT-ASSETS> 2,769,000
<PP&E> 2,599,000
<DEPRECIATION> 1,605,000
<TOTAL-ASSETS> 3,942,000
<CURRENT-LIABILITIES> 1,714,000
<BONDS> 0
0
0
<COMMON> 12,210,000
<OTHER-SE> (11,402,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,942,000
<SALES> 2,810,000
<TOTAL-REVENUES> 2,810,000
<CGS> 2,621,000
<TOTAL-COSTS> 2,621,000
<OTHER-EXPENSES> 627,000
<LOSS-PROVISION> 15,000
<INTEREST-EXPENSE> 20,000
<INCOME-PRETAX> (449,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (449,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (449,000)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
<PAGE> 48
EXHIBIT 99.1
AGREEMENT TO FURNISH EXHIBITS AND SCHEDULES
HemaCare Corporation (the "Registrant") hereby agrees to furnish
supplementally to the Securities and Exchange Commission a copy
of any omitted exhibit or schedule to the Asset Purchase
Agreement, dated as of May 2, 1996, among HemaBiologics, Inc. (a
wholly owned subsidiary of the Registrant), the Registrant and
Atopix Pharmaceuticals Corporation (the "Asset Purchase
Agreement"), filed with this Report as Exhibit 2.1. The Asset
Purchase Agreement includes a list briefly identifying the
omitted exhibits and schedules.
HemaCare Corporation also agrees to furnish supplementally a copy of
Exhibit A - 1996 Cash Flow Requirements for Financial Covenant
Purposes to the Revolving Credit Agreement, dated April 30, 1996,
between the Registrant and Bank Leumi Le-Israel, B.M., filed with
this Report as Exhibit 10.1.
48
