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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, 1997
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, 1997, 7,190,710 shares of Common Stock of the Registrant
were issued and outstanding.
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<PAGE>
INDEX
HEMACARE CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets--March 31, 1997 and December 31,
1996
Consolidated statements of operations--Three months ended
March 31, 1997 and 1996
Consolidated statements of cash flows--Three months ended
March 31, 1997 and 1996
Notes to consolidated financial statements--March 31, 1997
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
SIGNATURES
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
HEMACARE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(Unaudited)
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 1,508,000 $ 1,136,000
Marketable securities.................... 384,000 415,000
Accounts receivable, net of allowance
for doubtful accounts - $47,000 at
both dates.............................. 1,538,000 1,722,000
Product inventories...................... 96,000 74,000
Supplies................................. 305,000 306,000
Prepaid expenses......................... 232,000 146,000
Note receivable from officer - current... 15,000 15,000
------------- -------------
Total current assets.......... 4,078,000 3,814,000
Plant and equipment, net of accumulated
depreciation and amortization of
$1,940,000 (1997) and $1,875,000 (1996)... 764,000 823,000
Note receivable from officer - non-current. 75,000 88,000
Other assets............................... 49,000 51,000
------------- -------------
$ 4,966,000 $ 4,776,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $ 985,000 $ 909,000
Accrued blood purchases.................. 150,000 175,000
Accrued payroll and payroll taxes........ 359,000 335,000
Other accrued expenses................... 353,000 284,000
Current obligations under capital leases. 245,000 241,000
Reserve for discontinued operations -
current................................ 306,000 306,000
------------- -------------
Total current liabilities..... 2,398,000 2,250,000
Obligations under capital leases, net
of current portion........................ 454,000 503,000
Commitments and contingencies
Shareholders' equity:
Common stock, without par value -
20,000,000 shares authorized,
7,177,515 issued and outstanding
at both dates.......................... 13,466,000 13,466,000
Accumulated deficit...................... (11,352,000) (11,443,000)
------------- -------------
Total shareholders' equity.... 2,114,000 2,023,000
------------- -------------
$ 4,966,000 $ 4,776,000
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
HEMACARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1996
------------- -------------
<S> <C> <C>
Revenues:
Blood management programs........... $ 1,072,000 $ 351,000
Regional operations
Blood products................... 718,000 1,386,000
Blood services................... 1,034,000 1,073,000
------------ ------------
Total revenues................. 2,824,000 2,810,000
Operating costs and expenses:
Blood management programs........... $ 1,124,000 $ 831,000
Regional operations
Blood products................... 526,000 1,063,000
Blood services................... 685,000 774,000
------------ ------------
Total operating costs
and expenses................. 2,335,000 2,668,000
Operating profit............... 489,000 142,000
General and administrative expense.... 515,000 627,000
Interest expense, net................. 3,000 11,000
------------ ------------
Loss from continuing operations
before income taxes................. (29,000) (496,000)
Provision for income taxes............ - -
------------ ------------
Loss from continuing operations....... (29,000) (496,000)
Discontinued operations:
Gain on disposal of discontinued
operations........................ 120,000 -
------------ ------------
Net income (loss)..................... $ 91,000 $ (496,000)
============ ============
Per share amounts:
Loss from continuing operations....... $ 0.00 $ (0.08)
Discontinued operations:
Gain on disposal of discontinued
operations........................ 0.01 0.00
------------ ------------
Net income (loss)..................... $ 0.01 $ (0.08)
============ ============
Weighted average common and common
equivalent shares outstanding....... 7,202,831 6,069,642
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
HEMACARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ 91,000 $ (496,000)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Gain on disposal of discontinued operations. (120,000) -
Depreciation and amortization............... 65,000 81,000
Provision for losses on accounts receivable. - 15,000
Changes in operating assets and liabilities:
Decrease in accounts receivable............. 184,000 288,000
Decrease (increase) in inventories,
supplies and prepaid expenses.............. (107,000) 72,000
Decrease (increase) in other assets, net.... 2,000 (11,000)
Increase (decrease) in accounts payable and
accrued expenses........................... 144,000 (46,000)
Increase in other accrued employee benefits. - 38,000
Proceeds from (expenditures for)
discontinued operations.................... 120,000 (90,000)
------------ ------------
Net cash provided by (used in) operating
activities.................................... 379,000 (149,000)
------------ ------------
Cash flows from investing activities:
Repayment of note receivable from officer...... 13,000 13,000
Decrease in short-term investments............. 31,000 -
Purchase of plant and equipment, net........... (6,000) (36,000)
------------ ------------
Net cash provided by (used in) by
investing activities.......................... 38,000 (23,000)
------------ -------------
Cash flows from financing activities:
Net proceeds from issuance of common stock..... - 31,000
Principal payments on line of credit and
capital leases................................ (45,000) (36,000)
------------ ------------
Net cash used in financing activities.......... (45,000) (5,000)
------------ ------------
Increase (decrease) in cash and cash
equivalents................................... 372,000 (177,000)
Cash and cash equivalents at beginning
of period..................................... 1,136,000 997,000
------------ ------------
Cash and cash equivalents at end of period..... $ 1,508,000 $ 820,000
============ ============
Supplemental disclosure:
Interest paid.................................. $ 15,000 $ 20,000
============ ============
Items not impacting cash flows:
Increase in capital lease obligations.......... $ - $ 167,000
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
HemaCare Corporation
Notes to Consolidated Financial Statements
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. 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, 1997 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997. Certain
1996 amounts have been reclassified to conform to the 1997
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, 1996.
From 1990 to November 1995, the Company, through its wholly-owned
subsidiary HemaBiologics, Inc. ("HBI"), conducted research and
development of Immupath, an anti-HIV hyperimmune plasma-based
product intended to be used in the treatment of Acquired Immune
Deficiency Syndrome. In November of 1995, the Company discontinued
the operations of HBI. (See Note 2 below.)
In September 1995, the Company formed Gateway Community Blood
Program, Inc., a wholly-owned subsidiary incorporated in Missouri,
to provide blood products and services in Missouri and Illinois.
In the fourth quarter of 1995, the Company began providing blood
management programs to its customers. A blood management program
("Blood Management Program" or "BMP") allows a hospital or
affiliated group of hospitals to outsource many blood-related
operations to HemaCare. HemaCare establishes a local blood donor
center for the BMP hospital and becomes the hospital's primary
provider of blood products and services. HemaCare introduced its
Blood Management Program model at the Gateway Community Blood
Program in St. Louis, Missouri, in December 1995, and established
two Southern California Blood Management Programs with existing
customers in 1996. The University of Southern California Blood
Management Program commenced in February 1996 and the Citrus
Valley Health Partners Blood Management Program commenced in
October 1996.
Note 2 - Discontinued Operations
- --------------------------------
In November 1995, the Company discontinued the operations of HBI,
including the research and development of Immupath and the
associated specialty plasma business. The reserve established for
estimated HBI operating losses during the period of disposal
included a $600,000 contingent liability related to a dispute with
a licensor.
6
<PAGE>
In July 1996, the dispute was settled without any payment by the
Company, and the Company recognized a $600,000 gain on disposal of
discontinued operations. In June 1996, the Company agreed to sell
substantially all the tangible assets of the discontinued
operations and the FDA source plasma licenses. In the first
quarter of 1997, the Company received the final proceeds from the
sale and recognized a $120,000 gain on disposal of discontinued
operations.
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. The credit line is in effect through
April 30, 1998. Under the terms of the 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 financial
ratios. The Company was in compliance with all covenants of its
credit line agreement at March 31, 1997. Interest on credit line
borrowings is at the lender's prime rate (8.5% at March 31, 1997)
plus one-half of a percentage point. As of March 31, 1997, there
was no balance outstanding under the line of credit.
Note 4 - 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. A trial date has been set for October 29,
1997; however, at this stage in the proceedings, neither
management nor counsel is 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,
adverse impact on the Company's financial condition and results
of operations.
Note 5 - Related Party Information
- ----------------------------------
In 1995 and 1994, the Company made a series of personal loans to
Joshua Levy, then an officer and director of the Company, totaling
$98,000. In January 1996, these individual notes were consolidated
into a promissory note and collateralized by HemaCare stock owned
by Dr. Levy. The note accrues interest at a rate equal to the rate
the Company pays under its line of credit, adjusted quarterly.
Interest accrued for the three months ended March 31, 1997 and
1996 totaled $2,282 and $2,126, respectively. The note requires
four annual installment payments of $15,000 due from 1996 to 1999
and the balance of the principal and accrued interest is due on
January 31, 2000. The Company received annual installment
payments of $15,000 in January 1996 and January 1997.
Note 6 - Recent Auditing Pronouncement
- --------------------------------------
In March 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings per Share" (SFAS 128) and SFAS No. 129,
"Disclosure of Information about Capital Structure" (SFAS 129).
SFAS 128 revises and simplifies the computation of earnings per
share and requires certain additional disclosures. SFAS 129
requires additional disclosures regarding the Company's capital
structure. The Company will adopt both standards in the fourth
quarter of 1997. Management does not expect that the adoption of
theses standards will have a material effect on the Company's
financial position or results of operations.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
All comparisons within the following discussions are to the comparable
period of the previous year.
In 1995, HemaCare developed and introduced a program which allows a
hospital or affiliated hospital group to outsource many of its blood-
related operations. The Company's blood management program ("Blood
Management Program" or "BMP") model is customized to meet the needs of
each customer hospital, its patients and physicians. Operating under
its Federal Drug Administration license, HemaCare establishes a local
blood donor center to provide collection and other blood banking
services to patients and physicians of the BMP hospital and supplies
the hospital with products collected at its own BMP donor center as
well as products collected at other HemaCare donation sites and
purchased products.
In December 1995, the Gateway Community Blood Program regional BMP
("Gateway") opened in St. Louis, Missouri, and two Southern California
Blood Management Programs were established with existing customers in
1996. The University of Southern California ("USC") Blood Management
Program commenced in February 1996 and the Citrus Valley Health
Partners ("Citrus Valley") Blood Management Program commenced in
October 1996. Both the USC and Citrus Valley BMP agreements have
three-year terms. These BMPs are collectively referred to as the
"Programs" in the following discussions.
Revenues and Operating Profit
- -----------------------------
Total revenues for the first quarter of 1997 were comparable to the
first quarter of 1996. An increase in Program revenues was offset by a
decrease in Regional Blood Products and Blood Services revenues. The
Company's operating profit as a percentage of sales ("profit margin")
increased to 17% in the first quarter of 1997 from 5% in the comparable
quarter of 1996 due to higher Program revenues and lower costs at
Gateway. Regional Blood Products sales and operating profit in both
quarters were adversely affected by pricing practices employed by the
American Red Cross ("ARC") which the Company has alleged violate
antitrust laws. These pricing practices may compel Los Angeles area ARC
customers to purchase certain blood products from the ARC at higher
prices than those offered by the Company. In December 1995, the Company
filed an antitrust and unfair competition complaint against ARC with
the United States District Court in the Central District of California
to recover damages and secure injunctive relief.
Blood Management Programs
- -------------------------
The 205% ($721,000) increase in first quarter 1997 Program revenues was
due to higher sales volumes at Gateway and USC and the conversion of
Citrus Valley to a Blood Management Program customer. First quarter
1997 Program operating loss decreased by 89% ($428,000), due largely to
higher revenue generated by USC and Gateway operations and lower
Gateway operating costs. The volume of products purchased by the USC
hospitals increased in the first quarter of 1997 compared to the 1996
quarter, when the program was initiated. In June of 1996, the Company
evaluated Gateway's operations and refocused its strategic direction.
As a result of this change, apheresis platelet production and sales
were increased and overhead costs for the operation were significantly
reduced.
8
<PAGE>
Regional Operations
- -------------------
Blood Products
The 48% ($668,000) decrease in Blood Products revenues for the
first quarter of 1997 was due to decreases in the sales volume and
prices of apheresis platelet and whole blood component products.
Approximately 40% of the decrease in apheresis sales volume and 60% of
the decrease in whole blood component sales volume was due to the
conversion of Citrus Valley to a BMP customer. The remainder of the
decrease in platelet sales volumes resulted from the loss of customers,
primarily due to ARC pricing practices, while whole blood component
sales were lower due to a shortage of red blood cells available for
sale. The prices of both apheresis platelets and red blood cells
decreased in the first quarter of 1997 due to competitive pressures.
First quarter 1997 operating profit on Blood Product sales increased to
27% from 23% in the first quarter of 1996. The increase was due to
lower cost of sales for apheresis platelets and the more profitable mix
of whole blood components products sold in 1997.
Blood Services
Blood Services revenues decreased 4% ($39,000) in the first quarter of
1997 due primarily to the elimination of revenue from the Company's
Atlanta-based therapeutic services operation, which was closed in July
1996. This decrease was partially offset by increased testing services
revenue.
The profit margin on Blood Services revenues increased in the first
quarter of 1997 due to a small increase in the average operating profit
per therapeutic procedure, elimination of losses from the Atlanta
operation and increased testing services operating profits.
General and Administrative Expense
- ----------------------------------
General and administrative expense decreased 18% ($112,000) in the
first quarter of 1997 as compared to the first quarter of 1996. The
decrease was primarily due to spending controls initiated in June of
1996.
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.
The reserve amount, which included $600,000 for a contingent liability
related to a dispute with a licensor, was net of the proceeds expected
to be realized from the sale of research and development assets.
In July 1996, the dispute with the licensor was settled without any
payment by the Company. As a result of this settlement, the Company
recognized a $600,000 gain on disposal of discontinued operations in
the third quarter of 1996.
In March 1997, the Company completed disposition of the assets of the
discontinued operations and recognized a further $120,000 gain on
disposal. The Company does not expect the discontinued operations to
have a material impact on its future operating performance.
9
<PAGE>
Liquidity and Capital Resources
- -------------------------------
At March 31, 1997, the Company had cash and cash equivalents of
$1,508,000 and working capital of $1,680,000. The Company's Blood
Management Programs, other than Gateway, and its regional Blood
Products and Blood Services businesses are profitable and cash flow
positive. However, the loss of three significant apheresis platelet
customers during the first quarter of 1997 is expected to have a
continuing negative impact on regional Blood Products revenue until
these sales can be replaced. In light of current ARC pricing practices,
which the Company believes limit its ability to obtain and retain blood
products customers, there can be no assurance that these sales can be
replaced.
The Company has a $700,000 line of credit with a commercial bank which
is in effect through April 30, 1998. Under the terms of the 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
financial ratios including working capital, as defined, of $500,000 and
a tangible net worth of not less than $1.75 million. The Company was in
compliance with all covenants of its borrowing agreement at March 31,
1997, and there were no borrowings outstanding on the line of credit at
that date.
At March 31, 1997, the Citrus Valley Program Center was operating at a
temporary facility provided by the Citrus Valley hospitals. The
permanent center, which the Company is obligated to equip and operate,
is expected to open in the second quarter of 1997. The costs of
equipping the center are expected to be financed through a lease.
Gateway sustained a large net loss in 1996, and continued to incur
substantial losses in the first quarter of 1997. In June 1996,
Gateway's strategic direction was refocused to market a more profitable
mix of blood products and services to specific hospital customers.
These changes resulted in increased revenue and significant reductions
in personnel and other costs. However, the success of Gateway's current
strategy is dependent on a number of factors and circumstances, many of
which are outside the Company's control. There can be no assurance that
Gateway will be able to achieve and maintain a profitable level of
collections and sales. If profitable operations can not be achieved,
Gateway will be closed. The costs of such a closure are not expected to
be material to the Company's financial position.
Management is evaluating a number of opportunities to implement its
Blood Management Program concept in a variety of healthcare settings
and is considering ways to expand the Company's existing regional
operations. However, further expansion may require that the Company
obtain additional financing to fund start-up, equipment and marketing
costs. There can be no assurance that the Company will be able to
obtain the funds necessary to finance additional Blood Management
Programs or expand existing regional operations.
In March 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,
adverse impact on the Company's financial condition and results of
operations.
10
<PAGE>
The Company anticipates that cash flow from profitable operations,
borrowing available from its bank line of credit and its cash and
investments on hand will be sufficient to provide funding for its
existing needs during the next twelve months.
Factors Affecting Forward-Looking Information
- ---------------------------------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" from liability for forward-looking statements. Certain
information included in this Form 10-Q and other materials filed or to
be filed by the Company with the Securities and Exchange Commission (as
well as information included in oral statements or other written
statements made or to be made by or on behalf of the Company) are
forward-looking, such as statements relating to operational and
financing plans, competition, demand for the Company's products and
services, and the anticipated outcome of contingent claims against the
Company. Such forward-looking statements involve important risks and
uncertainties, many of which will be beyond the control of the Company.
These risks and uncertainties could significantly affect anticipated
results in the future, both short-term and long-term, and accordingly,
such results may differ from those expressed in forward-looking
statements made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, those relating to the
ability of the Company to obtain additional financing, to achieve
profitability in its Blood Management Programs, to improve the
profitability of the Company's other operations, to expand its
operations, to comply with the covenants under its bank line of credit,
to effectively compete against the ARC and other competitors, and to
resolve favorably through negotiation or litigation claims asserted by
or against the Company. Each of these risks and uncertainties as well
as others are discussed in greater detail in the preceding paragraphs
of this Management's Discussion and Analysis of Financial Condition and
Results of Operations and in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See disclosure in Form 10-K for the year ended December 31,
1996.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Revolving Credit Agreement between the Registrant and
Bank Leumi Le-Israel, B.M., dated April 30, 1997.
27 Financial Data Schedule for the Quarter Ending
March 31, 1997
b. The Company did not file any reports on Form 8-K during
the three months ended March 31, 1997.
11
<PAGE>
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, 1997 HEMACARE CORPORATION
---------------- --------------------------------
(Registrant)
/s/ Sharon C. Kaiser
--------------------------------
Sharon C. Kaiser, Vice President,
Finance and Chief Financial Officer
12
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Method of Filing
<S> <C> <C>
10.1 Resolving Credit Agreement between
the Registrant and Bank Leumi Le-Israel,
B.M., dated April 30, 1997. . . . . . . . . Filed herewith electronically
27 Financial Data Schedule for the quarter
ending March 31, 1997 . . . . . . . . . . . Filed herewith electronically
</TABLE>
13
<PAGE>
[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 04-30-1997 04-30-1998 04A0 030 0201660600 KXA
- ---------------------------------------------------------------------------------------------------------
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, 1997, 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 1) SEVENTY percent
(70.000%) of Eligible Accounts. Lender may, in its discretion, from time to
time, upon not less than five (5) days prior notice to Borrower, reduce the
Borrowing Base to the extent that Lender determines in good faith that:
(a) the dilution with respect to the Accounts for any period (based on the
ratio of (i) the aggregate amount of reductions in Accounts other than
as a result of payments in cash to (ii) the aggregate amount of total
sales) has increased in any material respect or may be reasonably
anticipated to increase in any material respect above historical levels, or
(b) the general creditworthiness of Account Debtors has declined.
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
debtor-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 days 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 days 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
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04-30-1997 LOAN AGREEMENT Page 2
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included in inventory, whether now or hereafter existing.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
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.
LETTER OF CREDIT. The words "Letter of Credit" mean a letter of
credit issued by Lender on behalf of Borrower as described below in
the section entitled "Letter of Credit Facility."
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
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04-30-1997 LOAN AGREEMENT Page 3
(Continued)
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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
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.
ADDITIONAL CREDIT FACILITIES. In addition to the Line of Credit facility, the
following credit accomodations are either in place or will be made available to
Borrower:
LETTER OF CREDIT FACILITY. Subject to the terms of this Agreement,
Lender will issue standby letters of credit letters of credit (each a
"Letter of Credit") on behalf of the Borrower. At no time, however,
shall the total face amount of all Letters of Credit outstanding, less
any partial draws paid under the Letters of Credit, exceed the sume of
$50,000.00.
(a) Upon Lender's request, Borrower promptly shall pay to
Lender issuance fees and such other fees, commissions, costs,
and any out-of-pocket expenses charged or incurred by Lender
with respect to any Letter of Credit.
(b) The commitment of Lender to issue Letters of credit shall,
unless earlier terminated in accordance with the terms of this
Agreement, automatically terminate on the Expiration Date and
no Letter of Credit shall expire on a date which is after the
Expiration Date.
(c) Each Letter of Credit shall be in form and substance
satisfactory to Lender and in favor of beneficiaries
satisfactory to Lender, provided that Lender may refuse to issue
a Letter of Credit due to the nature of the transaction or
its terms or in connection with any transaction where Lender,
due to the beneficiary or the nationality or residence
of the beneficiary, would be prohibited by any applicable law,
regulation, or order from issuing such Letter of Credit.
(d) Prior to the issuance of each Letter of Credit, and in all
events prior to any daily cutoff time Lender may have
established for purposes thereof, Borrower shall deliver to
Lender a duly executed form of Lender's standard form of
application for issuance of letter of credit with proper
insertions.
LENDER'S RIGHTS UPON DEFAULT. Upon the occurrence of any Event of
Default, Lender may, at its sole and absolute discretion and in addition
to any other remedies available to it under this Agreement or otherwise,
require Borrower to pay immediately to Lender, for application against
drawings under any outstanding Letters of Credit, the outstanding
principal amount of any such Letters of Credit which have not
expired. Any portion of the amount so paid to Lender which is not
applied to satisfy draws under any such Letters of Credit or any
other obligations of Borrower to the Lender shall be repaid to Borrower
without interest.
LENDER'S COSTS AND EXPENSES. Borrower shall, upon Lender's request,
promptly pay to and reimburse Lender for all costs incurred and payments
made by Lender by reason of any future assessment, reserve, deposit, or
similar requirement or any surcharge, tax, or fee imposed upon Lender or
as a result of Lender's compliance with any directive or requirement of
any regulatory authority pertaining or relating to any Letter of
Credit.
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
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04-30-1997 LOAN AGREEMENT PAGE 4
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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 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 forty-
five (45) days after the end of each fiscal quarter, 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 $1,750,000.00.
NET WORTH RATIO. Maintain a ratio of Total Liabilities to
Tangible Net Worth of less than 2.00 to 1.00.
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 1.25 to 1.00. Except as provided above,
all comutations 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
<PAGE>
04-30-1997 LOAN AGREEMENT PAGE 5
(CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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:
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, (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. Monthly internal financial statements and
cash flows within Twenty (20) days of the following month.
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,
<PAGE>
04-30-1997 LOAN AGREEMENT PAGE 6
(CONTINUED)
===============================================================================
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, 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.
<PAGE>
04-30-1997 LOAN AGREEMENT PAGE 7
(CONTINUED)
===============================================================================
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.
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, 1997.
BORROWER:
HEMACARE CORPORATION
BY: /s/ Hal I. Lieberman BY: /s/ Sharon C. Kaiser
--------------------------- -------------------------
HAL I. LIEBERMAN, PRESIDENT SHARON C. KAISER, CFO
AND CEO
LENDER:
BANK LEUMI LE-ISRAEL, B.M.
BY: /s/ Katherine Arredondo
--------------------------
AUTHORIZED OFFICER
<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, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
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0
0
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</TABLE>
