SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party Other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Material
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
HEMACARE CORPORATION
---------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------
2) Aggregate number of securities to which transactions applies:
-----------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-----------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE> 1
[LOGO]
HEMACARE CORPORATION
____________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 29, 1998
9:30 a.m.
_________________
The 1998 Annual Meeting of Shareholders of HemaCare Corporation (the "Company")
will be held at the Warner Center Marriott Hotel, 21850 Oxnard Street,
Woodland Hills, California 91367, on Monday, June 29, 1998 at
9:30 a.m. (Pacific Time), for the following purposes:
1. To elect three directors for the ensuing year;
2 To approve an amendment to the Company's 1996 Stock
Incentive Plan to increase from 750,000 to 1,400,000 the number
of shares of Common Stock authorized and reserved for issuance
under the Plan;
3. To approve a Reverse Stock Split.
4. Ratification of Appointment of Independent Accountants.
5. To transact such other business as may properly come
before the Meeting or any adjournment or postponement thereof.
Only holders of Common Stock of the Company of record at the close of
business on May 7, 1998 will be entitled to notice of and to vote at the
Meeting.
In order that your shares may be represented at the Meeting and
to assure a quorum, please complete, date and sign the enclosed
Proxy and return it promptly in the self-addressed, stamped
envelope enclosed for that purpose, whether or not you expect to
attend the Meeting in person.
By Order of the Board of Directors
/s/ JoAnn R. Stover
------------------------
JoAnn R. Stover
Secretary
Sherman Oaks, California
May 7, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE MARK,
DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE.
<PAGE> 2
HEMACARE CORPORATION
4954 Van Nuys Boulevard
Sherman Oaks, California 91403
May 7, 1998
__________________________
PROXY STATEMENT
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of HemaCare Corporation (the "Company"), for use only at the
Annual Meeting of Shareholders (the "Meeting") to be held at the Warner
Center Marriott Hotel, 21850 Oxnard Street, Woodland Hills, CA 91367, on
Monday, June 29, 1998 and at any and all adjournments or
postponements thereof. Unless the accompanying Proxy has been
previously revoked, the shares represented by the Proxy will,
unless otherwise directed, be voted at the Meeting for the
nominees for election as directors named below and, with
discretion, on all such other matters as may properly come before
the Meeting. A shareholder of record may revoke the Proxy at
will at any time prior to the voting of shares by voting in
person at the Meeting or by filing with the Secretary of the
Company a duly executed Proxy bearing a later date or an
instrument revoking the Proxy. Shareholders whose shares are
held in street name should consult with their brokers or other
nominees concerning procedures of revocation.
In addition to soliciting Proxies by mail, the Company's
officers, directors and other regular employees, without
additional compensation and upon Company approval, may solicit
Proxies personally or by other appropriate means. The total cost
of solicitation of Proxies will be borne by the Company.
Although there are no formal agreements to do so, it is
anticipated that the Company will reimburse banks, brokerage
houses and other custodians, nominees and fiduciaries for their
reasonable expenses in forwarding any Proxy soliciting materials
to their principals.
It is anticipated that this Proxy Statement and accompanying
Proxy will first be mailed to shareholders on or about May 18,
1998.
VOTING RIGHTS
Holders of the Company's common stock, without par value (the
"Common Stock"), of record as of the close of business on May 7,
1998, will be entitled to vote on all matters presented to the
Meeting. On May 7, 1998, there were outstanding 7,281,120
shares of Common Stock, which constituted all of the outstanding
voting securities of the Company. Each holder of Common Stock is
entitled to one vote for each share held, except that in the
election of directors, each shareholder has cumulative voting
rights and is entitled to as many votes as equal the number of
shares held multiplied by the number of directors to be elected
(three). All such votes may be cast for a single candidate or
distributed among any or all the candidates as the shareholder
sees fit. However, no shareholder shall be entitled to cumulate
votes unless the candidate's name has been placed in nomination
prior to the voting and the shareholder, or any other
shareholder, has given notice at the Meeting prior to the voting
of their intention to cumulate their votes. The Company is
soliciting authority to cumulate votes in the election of
directors, and the enclosed Proxy grants discretionary authority
for such purpose. The election of directors requires the
affirmative vote for each candidate of a plurality of the votes
cast. Approvals of the amendment to the Company's 1996 Stock
Incentive Plan, authorization of a reverse stock split and
ratification of the Company's independent accountants require
the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock present, or represented, and
entitled to vote at the Meeting. Typically, any other matters
that may be presented at the Meeting will require the affirmative
vote of a majority of the shares represented and voting at the
Meeting.
Abstentions, and any shares as to which a broker or nominee has
indicated that it does not have discretionary authority to vote
("broker non-votes"), on a particular matter generally will be
treated as shares that are present and are entitled to vote for
purposes of determining the presence of a quorum (so long as any
broker non-vote shares are voted on at least one matter at the
Meeting) but as unvoted for purposes of determining whether
approval of the shareholders has been obtained with respect to
any such matter. Under California law and the Company's Bylaws,
a quorum consists of the presence in person or by proxy of the
holders of a majority of the shares entitled to vote at the
Meeting, and a matter (other than the election of directors)
voted on by shareholders will be approved if it receives the vote
of a majority of the shares both present and voting, which shares
also constitute a majority of the required quorum, unless the
vote of a greater number of shares is required. Accordingly,
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<PAGE> 3
abstentions and broker non- votes will have no effect on such a
vote; provided, however, that in the event the number of shares
voted affirmatively does not represent a majority of the required
quorum, abstentions and broker non-votes will have the effect of
a "no" vote. Under California law and the Company's Bylaws,
abstentions from voting, broker non-votes and votes otherwise
withheld in the election of directors, which is by plurality,
have no effect. The approval of the amendment to the Company's
1996 Stock Incentive Plan is subject to the requirements of Rule
16b-3 of the Securities and Exchange Commission rather than
California law. Rule 16b-3 requires the affirmative vote of the
holders of a majority of the shares present, or represented, and
entitled to vote at the Meeting, and the staff of the Securities
and Exchange Commission has indicated that under such a voting
requirement, an abstention has the effect of a "no" vote, and a
broker non-vote has no effect on such vote.
ELECTION OF DIRECTORS
Information Concerning the Nominees
- -----------------------------------
The Company's Bylaws provide for seven directors. Currently,
there are three directors; all of whom were newly appointed in
1997. Four vacancies remain on the Board of Directors. The
Company has not identified individuals to fill the vacancies on
the Board of Directors, and Proxies may be voted for not more
than three nominees for director. Each director will hold office
until the next Annual Meeting of Shareholders or until the
election of his or her successor. All Proxies received by the
Board of Directors will be voted for the election, as directors,
of the nominees listed below if no direction to the contrary is
given. In the event that any nominee is unable or declines to
serve, an event that is not anticipated, the Proxies will be
voted for the election of any nominee who may be designated by
the Board of Directors.
The information set forth below is submitted with respect to the
nominees for whom it is intended that Proxies will be voted.
ALAN C. DARLINGTON (47), has been a Director since January 1997
and Chairman of the Board since December 1997. Mr. Darlington is
President of Timpe & Darlington, Inc., a healthcare management
consulting firm specializing in financial advisory services to
physician management companies and to other providers concerning
managed care, which he founded in 1991. Prior to the formation
of Timpe & Darlington, he was employed by Arthur Andersen & Co.
from 1976 to 1991, serving as an audit partner for the last four
years. Mr. Darlington received his Business Administration
degree from the School of Business at California State University
at Los Angeles in 1976 and has been a Certified Public
Accountant since 1978. Mr. Darlington is a member of the Audit
and Compensation committees.
CHARLES R. SCHWAB, JR. (35), has been a Director since December
1997. Since 1994, Mr. Schwab has been the general partner of
Kensington Capital Management, LLC, a private investment fund
which is also a significant shareholder in the Company. From
1990 to 1994, Mr. Schwab was employed as a proprietary money
manager for Paribas Limited in London, England, a subsidiary of
Banque Paribas, a French commercial bank. Mr. Schwab received
his Business Administration degree in 1986 at Northwestern
University and his Masters degree in Finance from the University
of Chicago in 1989. Mr. Schwab was elected Chairman of the
Compensation Committee in December 1997 and is a member of the
Audit Committee.
JULIAN L. STEFFENHAGEN (54), has been a Director since December
1997. Since 1979, Mr. Steffenhagen has held several management
positions at Beckman Coulter, Inc. an international manufacturer
of laboratory equipment and diagnostic reagents. He is currently
the Vice President, Strategic Planning, Corporate Development and
Investor Relations. He earned his Bachelor of Science and Master
of Science degrees from the University of Michigan. Mr.
Steffenhagen was elected Chairman of the Audit Committee in
December 1997 and is a member of the Compensation Committee.
The Board of Directors recommends a vote FOR each director
nominated.
Directors and Executive Officers
- --------------------------------
The Board of Directors consists of the nominees described above.
Mr. Hal I. Lieberman and Ms. Sharon C. Kaiser are the executive
officers of the Company.
HAL I. LIEBERMAN (48), has been President, Chief Executive
Officer since September 1988 and was a board member from
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<PAGE> 4
September 1988 until December 1997. He received his Masters
degree in Health Care Administration from The George Washington
University in 1974. Mr. Lieberman has more than 25 years of
experience in the health care industry, including administrative
positions in hospitals. From 1981 to September 1988, he was Vice
President of MEDIQ Mobile Services, Inc., a national shared
medical service company. Mr. Lieberman was admitted to the
American College of Healthcare Executives in 1980.
SHARON C. KAISER (53), has been Vice President of Finance since
December 1997 and Chief Financial Officer since May 1995. In
December 1997, Ms. Kaiser was appointed Senior Vice President of
Finance. Ms. Kaiser was a member of the board of directors from
May 1996 until December 1997. From 1991 until joining the
Company, Ms. Kaiser acted as an independent financial consultant
to various businesses. Prior to that time, Ms. Kaiser held
senior financial positions at Weyerhaeuser Mortgage Company and
the Koll Company. Ms. Kaiser was with Arthur Andersen & Co. from
1979 to 1987, serving as a senior manager for the last four
years. Ms. Kaiser is a graduate of the University of Southern
California and has been a Certified Public Accountant since 1981.
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
Committees of the Board
- -----------------------
The Board of Directors has had Audit and Compensation committees
since January 1989 and a Nominating Committee since June 1997.
All three Committees are comprised of non-employee board members.
As of January 1998, members of the Audit, Nominating and
Compensation committees include Messrs. Julian Steffenhagen, Alan
Darlington and Charles Schwab, Jr. Mr. Steffenhagen is chairman
of the Audit Committee, Mr. Darlington is chairman of the Nominating
Committee and Mr. Schwab is chairman of the Compensation Committee.
The functions of the Audit Committee include reviewing and making
recommendations to the Board of Directors with respect to: the
engagement or re-engagement of an independent public accounting
firm to audit the Company's financial statements for the then
current fiscal year, and the terms of the engagement; the
policies and procedures of the Company with respect to
maintaining the Company's books and records and furnishing any
necessary information to the independent auditors; the procedures
to encourage access to the Audit Committee and to facilitate the
timely reporting during the year by authorized representatives of
the Company's independent auditors to the Audit Committee of
their recommendations and advice; the implementation by
management of the recommendations made by the independent
auditors in their annual management letter; the adequacy and
implementation of the Company's internal audit controls and the
adequacy and competency of the related personnel; and such other
matters relating to the Company's financial affairs and accounts
as the Audit Committee may in its discretion deem desirable.
The functions of the Compensation Committee include reviewing and
making recommendations to the Board of Directors with respect to
the compensation package to be offered to all Company officers
and the incentive programs to be offered to all employees in the
effort to attract and retain qualified personnel.
The functions of the Nominating Committee include recruiting and
recommending candidates for election to the Board of Directors
and reviewing criteria for board membership against current needs
of the Board. The Committee also approves for recommendation to
the Board of Directors the slate of nominees for directors to be
elected by shareholders and performs other functions which from
time to time may be assigned by the Board of Directors.
Meetings and Attendance
- -----------------------
The Board of Directors held eleven meetings and took action by
unanimous written consent (as permitted by California law) on
eight occasions during 1997. During 1997, each Director attended
more than 90% of the total number of meetings of the Board of
Directors held during the period for which he was a Director.
One of the incumbent Directors at December 31, 1997 attended 100%
of such meetings. The Audit Committee met two times and the
Compensation Committee met four times in 1997. Since the
Nominating Committee did not meet in 1997, the nominees for
directors were nominated by the Board of Directors.
-3-
<PAGE> 5
EXECUTIVE COMPENSATION
Summary Compensation Table
- --------------------------
The following table sets forth information concerning the annual
and long-term compensation earned by the Named Executive Officers
for services rendered in all capacities to the Company for the
fiscal years ended December 31, 1997, 1996 and 1995. The "Named
Executive Officers" include (i) each person who served as Chief
Executive Officer during fiscal 1997 (one person), (ii) each
person who served as an executive officer at December 31, 1997
and was among the four most highly paid executive officers of the
Company, not including the Chief Executive Officer, during fiscal
1997 with total annual salary and bonus of more than $100,000
(one person) and (iii) up to two persons who would be included
under clause (ii) above had they served as an executive officer
at December 31, 1997 (none).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
------------------------------------- -----------
Name and Securities All Other
Principal Salary Bonus Other Annual Underlying Compensation
Position Year ($) ($) Compensation(1) Options ($) (2)
- ----------------- ----- -------- ------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Hal I. Lieberman 1997 $150,000 $ 0 -- 125,000 $ 18,012
President & CEO 1996 $134,515(3) $ 0 -- 0 $ 2,530
1995 $150,000 $ 0 -- 25,000 $ 2,347
Sharon C. Kaiser 1997 $125,000 $ 0 -- 7,500 $ 3,068
Sr. Vice Pres- 1996 $125,000 $ 0 -- 48,000 $ 0
ident Finance 1995 $ 56,174(4) $ 0 -- 2,800 $ 0
& CFO
</TABLE>
____________
(1) During fiscal 1995, 1996 and 1997, the Named Executive Officers received
personal benefits, the aggregate amounts of which for each Named Executive
Officer did not exceed the lesser of $50,000 or 10% of the total of the
annual salary and bonus reported for such Named Executive Officer in such
years.
(2) "All Other Compensation" consists of Company contributions to its Emp-
loyee Salary Deferral Plan (401(k)). In the case of Mr. Lieberman, it
also includes $708, $655 and $617 in term life insurance premiums paid
by the Company on Mr. Lieberman's behalf in 1997, 1996 and 1995, respect-
ively. In 1997, Mr. Lieberman did not participate in the Company's 401(k)
Plan but received reimbursement of $17,304 for salary deferred in 1996
(See Footnote 3).
(3) From July 1996 through January 12, 1997, Mr. Lieberman voluntarily defer-
red 20% of his salary.
(4) From April 1995 to December 1995, Ms. Kaiser was an independent
consultant to the Company. Ms. Kaiser became a full-time employee
January 1, 1996.
All stock options granted in the fiscal year ending December 31, 1997 were
granted under the Company's 1996 Stock Incentive Plan (the "1996 Plan").
The following two tables set forth information concerning stock options
granted to, exercised by and owned by the Named Executive Officers.
OPTION/SAR GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
Individual Grants
- -------------------------------------------------------------------------
Potential Realizable
Market Value at Assumed
Number of % of Total Price Annual Rates of Stock
Securities Options on Date Price Appreciation
Underlying Granted to Exercise of for Option Term (1)
Options Employees in Price Grant Expiration ------------------
Name Granted (#) Fiscal Year ($/Sh) ($/Sh) Date 5% ($) 10% ($)
- ---------- ----------- ----------- --------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Hal I.
Lieberman 125,000 51.55% $1.50 $1.50 6/30/07(2) $51,803 $114,471
Sharon C.
Kaiser 7,500 3.09% $1.50 $0.59 12/14/07(2) -- --
</TABLE>
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<PAGE> 6
______________
(1) The dollar amounts under these columns are the result of calculations at
the 5% and 10% annual rates of stock appreciation as required by
rules of the Securities and Exchange Commission and are not intended to
forecast possible future appreciation, if any, of the Company's stock
price. The amount of gain, if any, to the optionee is dependent upon the
increase in the price of the Company's Common Stock, which will benefit
all shareholders commensurately.
(2) The options granted to Ms. Kaiser and Mr. Lieberman, are for a term of
ten years but are subject to earlier termination under certain cir-
cumstances relating to the termination of employment or a change in
control of the Company as provided in the 1996 Plan.
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND FISCAL 1997 YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying
Unexercised Options Value of Unexercised
at Fiscal In-the-Money Options
Year-End (#) at Fiscal Year-End ($)
------------------- ----------------------
Shares Value
Acquired on Realized Exer- Unexer- Exer- Unexer-
Name Exercise (#) ($) ciseable cisable cisable cisable
- ----------- ------------- --------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Hal I.
Lieberman - 0- $ 0 25,000 125,000 $ 0 $ 0
Sharon C.
Kaiser -0- $ 0 26,800 31,500 $ 0 $ 0
</TABLE>
__________
(1) Based on a price per share of $0.47, which was the closing bid price of
the Common Stock on NASDAQ at the close of business on December 31, 1997.
Compensation of Directors
- -------------------------
Directors who are not employees of the Company receive $750 and reimbursement
of travel expenses for each Board meeting attended. From January 1997
through November, 1997, the Chairman received an additional payment of
$2,500 per attended meeting. In December 1997, the Compensation Committee
authorized a monthly payment of $5,000 for six months to Mr. Alan Darlington,
for his responsibilities as Interim Chairman. This fee replaced the $2,500
per meeting fee.
Each person who has not previously served as a director of the Company and who
is initially elected or appointed as an Outside Director, is granted a vested
stock option to purchase 15,000 shares of Common Stock at the market
price on the date of grant.
Employment Agreement and Arrangements
- -------------------------------------
The Company has an Executive Employment Agreement with Hal I. Lieberman,
President and Chief Executive Officer of the Company. The Agreement entitles
Mr. Lieberman to a minimum of one year's notice prior to termination
without cause or payment of up to one year's salary in lieu of such notice.
If Mr. Lieberman elects to terminate his employment with the Company upon a
merger or acquisition, the Company must pay him a lump sum within 30 days of
such termination equal to 1.5 times his then current annual salary plus a
bonus equal to any bonus payments actually made to him during the most recent
twelve-month period. Mr. Lieberman is entitled to the payment of an amount
equal to not more than his annual base salary in the event he elects to
terminate his employment upon the occurrence of certain other changes in
control or the liquidation of the Company. Mr. Lieberman's current
compensation under the agreement entitles him to $150,000 in annual salary.
Sharon C. Kaiser, the Company's senior vice president of finance and chief
financial officer since May 1995, became a full-time employee of the Company
in January 1996. The Company has agreed to give Ms. Kaiser six months'
advance notice of termination of her employment by the Company unless the
termination is for cause or, if shorter notice is given, to make a severance
payment to Ms. Kaiser equal to her salary for the remainder of the six-month
period.
-5-
<PAGE> 7
Stock Option Plans
- -------------------
The Company's 1986 Stock Option Plan (the "1986 Plan") expired
July 9, 1996. As of April 15, 1998, there were options outstanding under the
1986 Plan exercisable for 113,000 shares of Common Stock with exercise prices
ranging from $3.50 to $6.125 and with expiration dates ranging from May 13,
1998 to July 1, 2006. As of April 15, 1998, 325,501 shares of Common Stock
had been issued upon exercise of stock options granted under the 1986 Plan.
In 1996, the Board of Directors, with shareholder approval, adopted the Co-
mpany's 1996 Stock Incentive Plan (the "1996 Plan"). The purposes of the
1996 Plan are to (i) enable the Company to attract, motivate and retain top-
quality directors, officers, employees, consultants and advisors, (ii) provide
substantial incentives for such persons to act in the best interests of the
shareholders of the Company, and (iii) reward extraordinary effort by such
persons on behalf of the Company. The 1996 Plan provides for awards in the
form of stock options, which may be either "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or non-qualified stock options, or restricted stock. The
total number of shares of Common Stock available for distribution under the
1996 Plan is 750,000, however, no award may be made at any time if, after
giving effect to such award, the total number of shares of Common Stock
issuable upon exercise of all outstanding options and warrants of the
Company (whether or not under the 1996 Plan) plus the total number of shares
of Common Stock called for under any stock bonus or similar plan of the
company (including shares of Common Stock underlying awards under the
1996 Plan) would exceed 30% of the total number of shares of Common Stock
outstanding at the time of such award. The total of 1,400,000 shares
authorized for issuance under the 1996 Plan does not reflect the effect of a
Reverse Stock Split, as discussed in Proposal 3. If a Reverse Stock Split
is effected, such authorized number of shares will be proportionately
adjusted pursuant to the provisions of the 1996 Plan. As of April 15, 1998,
there were options outstanding under the 1996 Plan exercisable for 457,000
shares of Common Stock with exercise prices ranging from $0.59 to $3.13 and
with expiration dates ranging from January 29, 2002 to March 31, 2008. As of
April 15, 1998, no shares of Common Stock had been issued upon exercise of
stock options granted under the 1996 Plan.
Compensation Committee Interlocks and Insider Participation
- ------------------------------------------------------------
The Compensation Committee is composed entirely of non-employee
directors none of whom are affiliates of the Company. Mr. Charles R. Schwab,
Jr. was appointed Chairman of the Compensation Committee in December 1997.
Messrs. Alan C. Darlington and Julian Steffenhagen are members of the
Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") reviews and recommends to the
Board of Directors the compensation and other terms and conditions of
employment of the executive officers of the Company, as well as incentive
plan guidelines for HemaCare employees generally. The Committee is composed
entirely of non-employee directors.
The policies underlying the Committee's compensation decisions are designed
to attract and retain the best qualified management personnel available. The
Company compensates its executive officers primarily through salaries. The
Company, at its discretion, may, as it has in other years, reward executive
officers through bonus programs based on profitability and other objectively
measurable performance factors. No bonus programs were in effect in 1997.
The Company also provides incentive compensation in the form of stock options
to its executive officers to align the long-term interests of executives with
those of the Company's shareholders.
In establishing executive compensation, the Committee evaluates individual
performance as it impacts overall Company performance with particular focus
on an individual's contribution to the realization of operating profits
and achievement of strategic business goals including the timely development
and introduction of products and the creation of markets in new geographic
territories. The Committee also considers the performance of the Company
relative to the performance of its competitors and seeks to compensate
executives at levels comparable to the average compensation paid for similar
positions by other companies within the technological services industry which
are of a like size (in terms of net worth and level of business). Market
data on competitive compensation levels were obtained from proxy statements
disclosing compensation paid to executives in comparable positions in small-
to medium-sized businesses within the technological services industry. The
Company has, from time to time, gathered executive compensation information
from salary surveys conducted by outside consulting firms. The Committee
-6-
<PAGE> 8
further attempts to rationalize a particular executive's compensation with
that of other executive officers of the Company in an effort to distribute
compensation fairly among the executive officers. Although the components of
executive compensation (salary and option grants) are reviewed separately,
compensation decisions are made based on a review of otal compensation.
The number of shares covered by option grants is determined in the
context of this review. Because the Committee establishes the size of option
grants based on its evaluation of an individual's performance and competitive
factors, as described above, it does not consider options previously granted
in determining the size of any executive's option grant in a particular year.
As described above, the Company has a written employment agreement with its
chief executive officer which sets forth compensation and other terms
and conditions of his employment by the Company. The agreement required the
payment of an annual salary of $150,000 in 1997. In July 1996, the Company,
as part of its efforts to improve its financial condition, requested a
temporary, voluntary salary deferral from its employees. In response to this
appeal, Mr. Lieberman took a 20% salary deferral from July 1996 through
January 1997. Repayment of Mr. Lieberman's deferred salary was made in
December 1997. Mr. Lieberman has not received a salary increase for 1998.
Since the Company's historical levels of executive compensation have been
substantially less than $1,000,000 per employee annually, the Compensation
Committee has not yet established a policy with respect to qualifying
compensation to the Company's executive officers for deductibility under
Section 162(m) of the Internal Revenue Code of 1986, as amended.
Compensation Committee
- ----------------------
Charles R. Schwab, Jr., Chairman
Julian Steffenhagen
Alan C. Darlington
STOCK PERFORMANCE
Set forth below is a graph comparing the yearly cumulative total
shareholder return on the Company's Common Stock, with the yearly cumulative
total return on (a) the Nasdaq Stock Market (U.S. Companies) Index and (b)
the Nasdaq Health Services Stock Index. The graph assumes $100 invested on
December 31, 1992 in each of the Company's Common Stock, the NASDAQ Stock Market
Index and the NASDAQ Health Services Index. The comparison assumes that
all dividends are reinvested.
The comparisons in the graph below are based on historical data
and are not indicative of, or intended to forecast, the possible future
performance of the Company's Common Stock.
-7-
<PAGE> 9
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR HEMACARE CORPORATION
(PERFORMANCE GRAPH INSERTED)
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
HemaCare
Corporation 100.0 83.6 47.3 54.5 45.5 6.8
Nasdaq Stock
Market 100.0 114.8 112.2 158.7 195.2 239.5
(U.S. Companies)
Nasdaq Health
Services Stocks 100.0 115.4 123.8 157.2 157.3 160.3
</TABLE>
PRINCIPAL SHAREHOLDERS
The following table sets forth the ownership of the Company's Common Stock
as of April 30, 1998 by (i) all persons known to the Company to own
beneficially more than 5% of the outstanding Common Stock, (ii) each director
(and nominee for director) of the Company, (iii) each Named Executive Officer
and (iv) all executive officers and directors of the Company as a group.
Except as otherwise indicated, each of the persons named below has sole voting
and investment power with respect to the shares of Common Stock owned by such
shareholder.
<TABLE>
<CAPTION>
Number of Percent of
Shares Outstanding
Beneficially Common
Name Owned Stock
- ------------------------------------- --------------- ------------
<S> <C> <C>
Mellon Bank Corporation (1) 959,700 (2) 13.18%
Charles R. Schwab, Jr. (1) 607,100 (3)(4) 8.32
Kensington Capital Management, Inc.(1) 588,100 (5) 8.08
Hal I. Lieberman 172,100 (6) 2.32
Alan C. Darlington 70,000 (7) 0.96
Sharon C. Kaiser 38,300 (8) 0.52
Julian Steffenhagen 15,000 (9) 0.21
All executive officers and
directors as a group (5 persons) 902,500 11.96%
</TABLE>
___________
(1) The address of Mellon Bank Corporation is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258. The address of Kensington Capital
Management, Inc. ("Kensington") and Charles R. Schwab, Jr. is 230 S.
LaSalle Street, #688, Chicago, Illinois 60606. The foregoing infor-
-8-
<PAGE> 10
mation was obtained from a Schedule 13D/A dated December 5, 1997 filed
by Kensington with the Commission, and a Schedule 13G/A dated January
27, 1998 filed by Mellon with the Commission.
(2) Includes 950,000 shares beneficially owned by The Dreyfus Corporation, of
which 600,000 shares are beneficially owned by Premier Strategic Growth
Fund, and 9,700 shares beneficially owned by Mellon Bank, N.A. The
Dreyfus Corporation and Mellon Bank, N.A. are subsidiaries of Mellon Bank
Corporation. Premier Strategic Growth Fund is an investment company
managed by The Dreyfus Corporation.
(3) Includes 588,100 shares held by Kensington, of which Mr. Schwab is the
president and majority shareholder. Mr. Schwab disclaims beneficial
ownership of the shares beneficially owned by Kensington.
(4) Includes 15,000 shares issuable upon exercise of currently exercisable
options.
(5) Charles R. Schwab, Jr. is the president and majority shareholder of
Kensington. See Note 3.
(6) Includes 150,000 shares issuable upon exercise of stock options
exercisable within 60 days of April 30, 1998.
(7) Includes 50,000 shares issuable upon exercise of stock options
exercisable within 60 days of April 30, 1998.
(8) Includes 34,300 shares issuable upon exercise of stock options
exercisable within 60 days of April 30, 1998.
(9) Represents shares issuable upon exercise of currently exercisable stock
options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the directors
and officers of the Company and persons who own more than ten percent
of the Company's Common Stock to file with the Securities and Exchange
Commission ("SEC") reports of initial ownership and changes in ownership
of the Company's Common Stock. On December 15, 1997, Messrs. Schwab and
Steffenhagen were appointed to the Board of Directors. The Securities and
Exchange Commission requires a Form 3 to be filed within 10 days of
appointment. Both Messrs. Schwab and Steffenhagen's Form 3's were
inadvertently filed 10 days late.
CERTAIN TRANSACTIONS
Joshua Levy, M.D., a former director and current medical director of the
Company, through his private practice, treats patients who require
therapeutic services. Sales by the Company to unaffiliated hospital customers
for therapeutic services provided to Dr. Levy's patients amounted to
approximately 5% ($584,000) of the Company's total revenues for 1997.
There are no agreements between Dr. Levy, or the Company, and the Company's
hospital customers that require the hospitals to select HemaCare to provide
therapeutic services to their patients.
Federal self-referral laws and related regulations could restrict the
Company's ability to provide therapeutic services to Dr. Levy's patients
who are covered by Medicare or MediCal (approximately 50% of Dr. Levy's
therapeutics patients). These regulations are complex, and in 1996, the
Company requested a clarification from the Health Care Financing
Administration ("HCFA") of their application to its business. In early 1997,
the Company's legal counsel was informed by HCFA that new regulations were
under discussion, and the Company's request for clarification could not be
answered at that time. In January 1998, the proposed new regulations were
issued for comment. Since the proposed regulations do not specifically
address therapeutic apheresis services, the Company has requested a revision
of these regulations to provide a clear exemption for these services. The
comment period for the proposed regulations ends in May 1998, and the new
regulations will be issued sometime after that date. If the new regulations
do not provide an exemption for therapeutic apheresis services, the Company
could lose the revenue from its services for Dr. Levy's Medicare and MediCal
patients (approximately $292,000 in 1997).
COMPANY PROPOSALS
The following proposal will be submitted for shareholder consideration and
voting at the Meeting.
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<PAGE> 11
Proposal 1 - Election of Directors
- -----------------------------------
Each of the following persons nominated for election as a
director to hold office until the next Annual Meeting of Shareholders and
until the election of his or her successor:
Alan C. Darlington
Charles R. Schwab, Jr.
Julian L. Steffenhagen
Each nominee listed above is a member of the Board of Directors. All proxies
received by the Board of Directors will be voted for the nominee if no
directions to the contrary are given. In the event that any nominee is unable
or declines to serve, an event that is not anticipated, the proxies will be
voted for the election of a nominee by the Board of Directors, or if none
are so designated, will be voted according to the judgement of the person
or persons voting the proxy.
Vote Required
- -------------
The election of directors requires the affirmative vote for each candidate of
a plurality of the votes cast. Votes withheld from any director are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business, but have no other legal effect.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE NOMINEES
Proposal # 2 - Amendment to the Company's 1996 Stock Incentive Plan to
increase from 750,000 to 1,400,000 the number of shares of Common Stock
authorized and reserved for issuance under the Plan
- ------------------------------------------------------------------------
In March 1998, the Board of Directors unanimously approved,
subject to shareholder approval at the Meeting, an amendment to the Company's
1996 Stock Incentive Plan (the "1996 Plan") to increase the number of shares
of Common Stock covered by the 1996 Plan from 750,000 to 1,400,000. The
total of 1,400,000 shares authorized for issuance under the 1996 Plan does
not reflect the effect of a Reverse Stock Split, as discussed in Proposal 3.
If a Reverse Stock Split is effected, such authorized number of shares will
be proportionately adjusted pursuant to the provisions of the 1996 Plan.
The Board of Directors believes that the selective grant of stock options is
a cost effective means of attracting, motivating and retaining key employees,
officers, directors, consultants, business associates and others having
important business relationships with the Company and that the availability
of the greater number of shares covered by the 1996 Plan, as amended, is
important to the success of the Company. As of April 15, 1998, no options
had been exercised and 457,500 options were outstanding, leaving 292,500
shares available for future option grants under the 1996 Plan. The total of
1,400,000 shares authorized for issuance under the 1996 Plan would represent
approximately 19.2% of the outstanding shares of Common Stock. The
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present, or represented, at the Annual Meeting is required for
approval of the amendment.
Principal Provisions of the 1996 Plan
- -------------------------------------
A summary of the principal provisions of the 1996 Plan is set forth below
and is qualified in its entirety by reference to the 1996 Plan. A
copy of the 1996 Plan is available from the Company's Secretary upon request.
Shares. The total number of shares of Common Stock available
for distribution under the 1996 Plan is 750,000 provided, however, that no
award may be made at any time if, after giving effect to such award, the
total number of shares of Common Stock issuable upon exercise of all
outstanding options and warrants of the Company (whether or not under the 1996
Plan) plus the total number of shares of Common Stock called for under any
stock bonus or similar plan of the Company (including shares of Common Stock
underlying awards under the 1996 Plan) would exceed 30% of the total number
of shares of Common Stock outstanding at the time of such award. For
purposes of the foregoing: (i) those shares issuable upon exercise of rights,
options or warrants, or under a stock purchase plan, meeting certain
requirements specified in the Rules of the California Commissioner of
Corporations are not counted against the 30% limitation; (ii) any outstanding
preferred or senior common shares of the Company convertible into Common
Stock are to be deemed converted in determining the total number of
-10-
<PAGE> 12
outstanding shares of Common Stock at any time; and (iii) any shares of
Stock subject to promotional waivers under the Rules of the California
Commissioner of Corporations are not be deemed to be outstanding.
Shares awarded under the 1996 Plan may be authorized and unissued shares
or treasury shares. If shares subject to an option under the 1996 Plan
cease to be subject to such option, or shares under the 1996 Plan are
forfeited, such shares will again be available for future distribution under
the 1996 Plan, unless the forfeiting participant received any benefits of
ownership such as dividends from the forfeited award.
Administration. The 1996 Plan will be administered by the Compensation
Committee of the Board of Directors of the Company (the "Board") or such
other committee of directors as the Board shall designate, which committee
shall consist of not less than two disinterested persons (as such term is
defined in Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange
Act") or any successor rule ("Rule 16b-3")) who shall serve at the pleasure of
the Board, each of whom shall also be an "outside director" within the meaning
of Section 162(m) of the Internal Revenue Code and Section 1.162-27 of the
Treasury Regulations or any successor provision(s) thereto ("Section 162(m)");
provided, owever, that for so long as the version of Rule 16b-3 in effect
prior to May 1, 1991 is applicable with respect to the Company, such committee
shall consist of not less than three persons meeting the foregoing qualifica-
tions; and provided, further, that if there are not two or three persons, as the
case may be, on the Board who meet the foregoing qualifications, any such comm-
ittee may be comprised of two or more Outside Directors of the Company. An Out-
side Director is defined under the 1996 Plan as a director other than one who is
an officer (other than a non-employee Chairman of the Board of the Company)
or employee of the Company. If no such committee has been appointed by the
Board, the 1996 Plan will be administered by the Board. Such committee as
shall be designated to administer the 1996 Plan or the Board is hereinafter
referred to as the "Committee."
Initially, the 1996 Plan will be administered by the Compensation Committee,
which is currently comprised of the Company's three Outside Directors. The
Company believes that each of the members of the Compensation Committee meets
the conditions for being an "outside director" under Section 162(m).
The Committee is authorized to, among other things, set the terms of
awards to participants, other than Outside Directors, and waive compliance
with the terms of such awards. The provisions attendant to the grant of an
award under the 1996 Plan may vary from participant to participant. The
Committee has the authority to interpret the 1996 Plan and adopt
administrative regulations, but it may not vary the amount or terms of
awards to Outside Directors from those set forth in the 1996 Plan. The
Committee may from time to time delegate to one or more officers of the
Company any or all of its authorities under the 1996 Plan, except with
respect to awards granted to persons subject to Section 16 of the Exchange
Act. The Committee must specify the maximum number of shares that the
officer or officers to whom such authority is delegated may award, and the
Committee may in its discretion specify any other limitations or restrictions
ont he authority delegated to such officer or officers.
Participation. The Committee may make awards to officers, employees,
consultants, advisers and independent contractors of the Company or
a Related Company. A "Related Company" is any corporation, partnership,
joint venture or other entity in which the Company owns, directly or
indirectly, at least a 20% beneficial ownership interest. The participants
in the 1996 Plan, other than Outside Directors, are selected from among
those eligible in the sole discretion of the Committee.
The 1996 Plan also provides for each person who has not previously served
as a director of the Company and who is initially elected or appointed as an
Outside Director on or after the effective date of the 1996 Plan to be
granted, as of the date of such initial election or appointment, a stock option
to purchase 15,000 shares of Common Stock. The terms of stock options to
Outside Directors are described below.
-11-
<PAGE> 13
Awards to Participants Other Than Outside Directors.
1. Stock Options.
Incentive stock options ("ISOs") and non-qualified stock options may be
granted for such number of shares of Common Stock as the Committee
determines; provided, that no participant may be granted stock options in
any calendar year on more than 250,000 shares of Common Stock. A stock
option will be exercisable at such times, over such term and subject to
such terms and conditions as the Committee determines, provided that in
the case of participants other than officers, consultants or independent
contractors stock options must become exercisable at the rate of at least
20% per year over five years from the date the stock option is granted.
The exercise price of stock options is determined by the Committee, but
may not be less than the per share fair market value of the Common Stock
on the date of grant, or 110% of such fair market value if the recipient
owns, or would be considered to own by reason of Section 424(d) of the
Code, more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary of the Company. (ISOs
are subject to restrictions as to exercise period and exercise price as
required by the Code.)
Payment of the exercise price may be made in such manner as the Committee
may provide, including cash, delivery of shares of Common Stock already
owned or subject to award under the 1996 Plan. The Committee may provide
that all or part of the shares received upon exercise of an option using
restricted stock will be restricted stock.
Upon an optionee's termination of employment or other qualifying relation-
ship, the option will be exercisable to the extent determined by the
Committee; provided, however, that unless employment or such other
qualifying relationship is terminated for cause (as may be defined by the
Committee in connection with the grant of any stock option), the Stock
Option shall remain exercisable (to the extent that it was otherwise
exercisable on the date of termination) for at least six months from the
date of termination if termination was caused by death or disability or
at least 90 days from the date of termination if termination was caused
by other than death or disability. The Committee may provide that an
option that is outstanding on the date of an optionee's death will remain
outstanding for an additional period after the date of such death,
notwithstanding that such option would expire earlier under its terms.
A stock option agreement may permit an optionee to transfer the stock
option to his or her children, grandchildren or spouse ("Immediate
Family"), to one or more trusts for the benefit of such Immediate Family
members, or to one or more partnerships in which such Immediate Family
members are the only partners if (i) the agreement setting forth the
stock option expressly provides that the option may be transferred only
with the express written consent of the Committee, and (ii) the optionee
does not receive any consideration in any form whatsoever for such
transfer. Any stock option so transferred will continue to be subject to
the same terms and conditions as were applicable to the option
immediately prior to its transfer. Except as described above, stock
options are not transferable by the optionee otherwise than by will or
by the laws of descent and distribution.
2. Restricted Stock.
In making an award of restricted stock, the Committee will determine the
periods, if any, during which the stock is subject to forfeiture, and the
purchase price, if any, for the stock. The vesting of restricted stock may
be unconditional or may be conditioned upon the completion of a specified
period of service with the Company or a Related Company, as defined in the
1996 Plan, the attainment of specific performance goals or such other
criteria as the Committee may determine.
During the restricted period, the award holder may not sell, transfer,
pledge or assign the restricted stock, except as may be permitted by
the Committee. The certificate evidencing the restricted stock will be
registered in the award holder's name, although the Committee may direct
that it remain in the possession of the Company until the restrictions
have lapsed. Except as may otherwise be provided by the Committee, upon
the termination of the award holder's service with the Company or a
Related Company for any reason during the period before all restricted
stock has vested, or in the event the conditions to vesting are not
satisfied, all restricted stock that has not vested will be subject to
forfeiture and the Committee may provide that any purchase price paid
by the award holder, or an amount equal to the restricted stock's
fair market value on the date of forfeiture, if lower, will be paid
to the award holder. During the restricted period, the award holder
will have the right to vote the restricted stock and to receive any cash
-12-
<PAGE> 14
dividends, if so provided by the Committee. Stock dividends will be
treated as additional shares of restricted stock and will be subject to
the same terms and conditions as the initial grant, unless otherwise
provided by the Committee.
Awards to Outside Directors. As described above, upon initial election or
appointment as a director of the Company, each Outside Director will be
granted a stock option to purchase 15,000 shares of Common Stock. The
exercise price for each stock option granted to an Outside Director will
be equal to the closing per share bid price of the Common Stock on the date
of grant, and may be paid in cash or shares of Common Stock that have been
owned by the optionee for a period of at least six months (with such shares
valued at the closing per share bid price of the Common Stock on the date of
delivery). Options granted to Outside Directors are immediately exercisable
and expire 10 years from the date of grant, subject to earlier termination
upon termination of the optionee's service as a director. If an optionee's
status as a director of the Company is terminated for cause (as defined in
the 1996 Plan), such director's options will terminate on the date of
such termination of service. If an optionee's status as a director is
terminated for any reason other than death or termination for cause, such
director's options may be exercised only within 90 days of such termination
of service. If an optionee's status as a director of the Company is
terminated by reason of the optionee's death, such director's options
may be exercised by his or her legal representatives only within one
year following the director's death. Stock options granted to Outside
Directors are not transferable except by will or by the laws of descent
and distribution.
Change of Control Provisions. If there is a Change of Control of the
Company (as defined below), all stock options which are not then exercisable
will become fully exercisable and vested, and the restrictions applicable to
restricted stock will lapse and such shares and awards will be deemed fully
vested, unless otherwise determined by the Committee at the time of grant. A
Change of Control occurs on the date that any person or group (other than the
Company or certain of its affiliates) becomes a beneficial owner of 40% or
more of the Company's voting securities, the date on which a majority of the
Board of Directors consists of persons other than Incumbent Directors (as
defined in the 1996 Plan) or the date of approval by the shareholders of
certain agreements providing or the merger, consolidation or disposition
of all or substantially all the assets of the Company.
Amendment and Termination. No awards may be granted under the 1996 Plan
more than 10 years after the date of approval of the 1996 Plan by the
shareholders of the Company. The Board may discontinue the 1996 Plan at any
earlier time and may amend it from time to time, except that no amendment or
discontinuation may adversely affect any outstanding award without the
holder's written consent. Amendments to provisions governing awards to
Outside Directors may not be made more than once every six months, except
as required by law. Amendments may be made without shareholder approval
except as required to satisfy any applicable mandatory legal or regulatory
requirements, or as required for the 1996 Plan to satisfy the requirements
of Rule 16b-3, Section 162(m), Section 422 of the Code or any other non-
mandatory legal or regulatory requirements if the Board of Directors deems
it desirable for the 1996 Plan to satisfy any such requirements.
Adjustment. In the event of any merger, reorganization, consolidation,
sale of substantially all assets, recapitalization, stock dividend, stock
split, spin-off, split-up, split-off, distribution of assets or other change
in corporate structure affecting the Common Stock, a substitution or
adjustment, as may be determined to be appropriate by the Committee in its
sole discretion, will be made in the aggregate number of shares reserved
for issuance under the 1996 Plan, the maximum number of shares with respect
to which stock options may be granted to any participant during any calendar
year, the number of shares subject to outstanding awards and the amounts to
be paid by award holders or the Company, as the case may be, with respect to
outstanding awards. No such adjustment may increase the aggregate value of
any outstanding award. If the Committee makes any adjustment under this
provision to outstanding stock options, a similar adjustment will
automatically be made with respect to stock options granted and to be
granted to Outside Directors.
Substitute Options in Business Combinations. If the Company succeeds to
the business of another corporation through a merger or consolidation, or
through the acquisition of stock or assets of such corporation, stock options
may be granted under the 1996 Plan to those employees of such corporation or
its related companies who become employees of the Company or a Related
Company in substitution for options to purchase stock of the acquired
corporation held by them at the time of such succession. The Committee,
in its sole discretion, will determine the extent to which and the terms
on which any such substitute stock options will be granted. The exercise
price of each substitute stock option will be an amount such that, in the sole
judgment of the Committee (and if the stock options to be granted are intended
to be ISOs, in compliance with the Code), the economic benefit provided by
such substitute stock option is not greater than the economic benefit
-13-
<PAGE> 15
represented by the stock option of the acquired corporation as of the date
of the acquisition. Any substitute stock option will expire upon the
expiration date of such other stock option or, if earlier, 10 years after
the date of grant of the substitute stock option, and will be exercisable
during the period(s) in which the other stock option would have been
exercisable.
Certain Federal Income Tax Consequences. The following is a summary of
certain federal income tax aspects of awards made under the 1996 Plan based
upon the laws in effect on April 1, 1998.
1. Incentive Stock Options.
Generally, no taxable income is recognized by the participant upon the
grant of an ISO or upon the exercise of an ISO during the period of
the participant's employment with the Company or one of its subsidiaries
or within three months (12 months, in the event of permanent and total
disability, or the term of the option, in the event of death) after
termination. However, the exercise of an ISO may result in an alternative
minimum tax liability to the participant. If the participant continues
to hold the shares acquired upon the exercise of an ISO for at least two
years from the date of grant and one year from the transfer of the shares
to the participant, then generally: (a) upon the sale of the shares, any
amount realized in excess of the option price will be taxed as long-term
capital gain; and (b) no deduction will be allowed to the employer
corporation for federal income tax purposes.
If Common Stock acquired upon the exercise of an ISO is disposed of prior
to the expiration of the one-year and two-year holding periods described
above (a "disqualifying disposition"), then generally: (a) the
participant will recognize ordinary income in an amount equal to the
excess, if any, of the fair market value of the shares on the date of
exercise (or, if less, the amount realized on disposition of the shares)
over the option exercise price; and (b) the employer corporation will be
entitled to deduct any such recognized amount. Any further gain
recognized by the participant on such disposition generally will be
taxed as short-term or long-term capital gain, depending on whether the
shares were held by the participant for more than one year, but such
additional amounts will not be deductible by the employer corporation.
According to proposed Treasury Regulations, in general, no gain or loss
will be recognized by a participant who uses shares of Common Stock
rather than cash to exercise an ISO. A number of new shares of Common
Stock acquired equal to the number of shares surrendered will have a basis
and capital gain holding period equal to those of the shares surrendered
(although such shares will be subject to new holding periods for
disqualifying disposition purposes beginning on the acquisition date).
To the extent new shares of Common Stock acquired pursuant to the exercise
of the ISO exceed the number of shares surrendered, such additional shares
will have a zero basis and will have a holding period beginning on the
date the ISO is exercised. The use of Common Stock acquired through
exercise of an ISO to exercise an ISO will constitute a disqualifying
disposition with respect to such Common Stock if the applicable holding
period requirement has not been satisfied.
2. Non-Qualified Stock Options.
Except as noted below with respect to officers and directors subject to
Section 16 of the Exchange Act ("Insiders"), with respect to non-qualified
stock options: (a) no income is recognized by the participant at the time
the option is granted; (b) generally upon exercise of the option, the
participant recognizes ordinary income in an amount equal to the difference
between the option exercise price and the fair market value of the shares
on the date of exercise and the employer corporation will be entitled to a
tax deduction in the same amount, to the extent that such income is
considered reasonable compensation; and (c) at disposition, any appreciation
after the date of exercise generally is treated either as short-term or
long-term capital gain, depending on whether the shares were held by the
participant for more than one year, and such appreciation is not deductible
by the employer corporation.
No gain or loss will be recognized by a participant with respect to shares
of Common Stock surrendered to exercise a non-qualified stock option. A
number of new shares acquired equal to the number of shares surrendered will
have a tax basis and capital gain holding period equal to those of the shares
surrendered. The participant will recognize ordinary income in an amount
equal to the fair market value of the additional shares acquired at the time
of exercise (except as noted below with respect to Insiders). Such additional
shares will be deemed to have been acquired on the date of such recognition
of income and will have a tax basis equal to their fair market value on such
date.
-14-
<PAGE> 16
3. Restricted Stock.
A participant receiving restricted stock generally will recognize income
in the amount of the fair market value of the restricted stock at the time
the stock is no longer either non-transferable or subject to a substantial
risk of forfeiture, whichever comes first, less the consideration, if any,
paid for the stock. However, a participant may elect, under Section 83(b)
of the Code, to recognize ordinary income on the date of grant in an
amount equal to the excess of the fair market value of the shares on
such date (determined without regard to the restrictions other than
restrictions which by their terms will never lapse) over their purchase
price. The holding period to determine whether the participant has long-
term or short-term capital gain on a subsequent disposition of the shares
generally begins when income was recognized, and the tax basis for such
shares generally will be the amount of income that was recognized (i.e.,
the fair market value of such shares on such date).
4. Special Rules Applicable to Insiders.
If an Insider exercises a non-qualified stock option within six months of its
grant, the income recognition date is generally the date six months after the
date of grant, unless the Insider makes an election under Section 83(b) of
the Code to recognize income as of the date of exercise. The Insider recog-
nizes ordinary income equal to the excess of the fair market value of the
shares on the income recognition date over the option exercise price, and the
holding period for treating any subsequent gain as long-term capital gain
begins on the income recognition date.
5. Dividends.
Dividends paid on restricted stock prior to the date on which the forfeiture
restrictions lapse generally will be treated as compensation that is taxable
as ordinary income to the participant and will be deductible by the employer
corporation. If, however, the participant makes a Section 83(b) election
with respect to the restricted stock, the dividends will be taxable
as ordinary dividend income to the participant and will not be deductible
by the employer corporation.
6. Withholding Taxes.
A participant in the 1996 Plan may be required to pay the employer
corporation an amount necessary to satisfy the applicable federal and
state law requirements with respect to the withholding of taxes on
wages, or to make some other arrangements to comply with such
requirements. The employer has the right to withhold from salary or
otherwise to cause a participant (or the executor or administrator of
the participant's estate or the participant's distributee or transferee)
to make payment of any federal, state, local or other taxes required to
be withheld with respect to any award under the 1996 Plan. The 1996
Plan authorizes the Committee to permit participants to use the shares
payable under the 1996 Plan to satisfy withholding obligations.
7. Company Deductions.
As a general rule, the Company or one of its subsidiaries will be
entitled to a deduction for federal income tax purposes at the same
time and in the same amount that an Outside Director or other
participant in the 1996 Plan recognizes ordinary income from awards
under the 1996 Plan, to the extent that such income is considered
reasonable compensation and currently deductible (and not capitalized)
under the Code. However, Section 162(m) of the Code limits to $1
million the annual tax deduction that the Company and its subsidiaries
can take with respect to the compensation of each of certain
executive officers unless the compensation qualifies as
"performance based" or certain other exemptions apply.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL #2
-15-
<PAGE> 17
Proposal #3 - Proposal to Approve a Reverse Stock Split
- --------------------------------------------------------
General
The Company's Board of Directors adopted a resolution on April 8,
1998, authorizing amendment of the Articles of Incorporation of the
company, to effect a not less than One-For-Two nor greater than One-For-Ten
reverse stock split of the presently issued and outstanding shares of the
Company's common stock (the "Reverse Stock Split"), subject to ratification
by the Company's shareholders.
The Board of Directors adopted such resolution due to the fact that, within
the past year, the Company's common stock has been trading on the National
Association of Securities Dealers Automatic Quotation-Small Cap system
("NASDAQ") at prices as low as $0.38 per share. Pursuant to the new minimum
bid price requirements in NASD Marketplace Rule 4310(c)(04) (the "Rule"),
for continued listing on NASDAQ, it is necessary that, among other things,
the minimum bid price of the Company's shares of common stock exceed $1.00
per share. On February 27, 1998, NASDAQ notified the Company that it is
not in compliance with the minimum bid requirement. As a result, the
Company's shares are in danger of being delisted from NASDAQ. To avoid
delisting of its common stock on NASDAQ, the Company has until May 28, 1998
to regain compliance with the Rule.
If this Reverse Stock Split proposal is approved by the shareholders, the
Board of directors will be given the authority and discretion to effect a
Reverse Stock Split, not less than One-For-Two nor greater than One-For-Ten,
without further shareholder action, or to effect no Reverse Stock Split. The
Board of Directors believes that this latitude is necessary, given the
changing market price of the Company's common stock to levels in compliance
with the Rule and more acceptable to investors and the securities industry
generally. If the trading price of the Company's common stock increases,
a Reverse Stock Split or lessor proportions would be required than would
be necessary if the trading price decreases or remains constant.
If a Reverse Stock Split is approved by the shareholders of the Company, a
Reverse Stock Split will be effected only upon a determination by the
Board of Directors that a Reverse Stock Split will increase the marketability
and liquidity of the Company's common stock and is in the best interests
of the Company and its shareholders. In connection with any determination
by the Board of Directors to such effect, the Board will also select, in
its discretion, one of the Reverse Stock Splits based upon its determination
of which of them results in the greatest marketability and liquidity of the
Company's common stock, on prevailing market conditions, on the likely
effect on the market price of the Common stock, and other relevant factors.
The Board of directors will have one year from the date of shareholder
approval to effect such Reverse Stock Split. The remaining alternative
Reverse Stock Splits would be abandoned by the Board pursuant to Section
242(c) of the California General Corporate Law without further action by
the shareholders of the Company.
The Board of Directors may consider a variety of factors in determining
whether or not to proceed with a Reverse Stock Split, including, but not
limited to, overall trends in the stock market, recent trends and anticipated
trends in the per share market price of the Company's common stock, business
developments and the Company's actual and projected financial performance.
The effect of the Reverse Stock Split upon holders of the Company's common
stock will be that the total number of shares of the Company's common stock
held by each shareholder will be automatically converted into the number of
whole shares of common stock equal to the number of shares of common stock
owned immediately prior to the Reverse Stock Split divided by the appropriate
fraction of the Company's common stock, adjusted, as described below for
fractional shares.
Shareholders holding a small amount of shares of the Company's common stock
may have only a fractional interest after the Reverse Stock Split. As a
result, those shareholders would receive payment for their fractional
interest as set forth below, and would cease to be holders of the
Company's common stock.
No certificates or scrip representing fractional shares of the Company's
common stock will be issued to shareholders because of the Reverse Stock
Split. In lieu of any such fractional interest, each holder of the Company's
common stock who would otherwise be entitled to receive a fractional share
of the Company's common stock will be paid cash by the Company upon
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<PAGE> 18
surrender of certificates held by such shareholder in an amount equal
to the product of such fraction multiplied by the closing price of the
common stock as reported on NASDAQ on a date to be determined by the
Board of Directors prior to the effective date of a Reverse Stock Split.
Reasons for the Reverse Split
To avoid delisting of its common stock on NASDAQ, the Company has until May
28, 1998 to regain compliance with the Rule. Compliance may be achieved if
the Company's stock trades at or above the minimum requirement of $1.00 for
at least 10 consecutive trading days. If the Company is unable to achieve
compliance by May 28, 1998, NASDAQ has informed the Company that it will
issue a delisting letter which will identify the review procedures available
to the Company at this time. Management believes that if a Reverse Stock
Split is approved by the shareholders, and the Reverse Stock Split is
effectuated by the Board of Directors, then the company's shares of
common stock will have a minimum bid price in excess of $1.00 per share,
and therefore, continue to be listed and traded on NASDAQ. Given that
the Meeting is after the May 28, 1998 NASDAQ deadline, the Company intends to
request that NASDAQ not issue a delisting letter until after the
shareholders vote on the Reverse Stock Split and the Reverse Stock Split, if
approved, is effected.
If the Reverse Stock Split is not approved by the shareholders, then it is
highly likely that the Company's shares of common stock will cease to be
listed and traded on NASDAQ. In such event, the shares of common stock will
likely be quoted in the OTC Bulletin Board or the "pink sheets" maintained by
the National Quotation Bureau, Inc. In such an event, the spread between
the bid and ask price of the shares of common stock is likely to be greater
than at present and shareholders may experience a greater degree in
difficulty in engaging in trades of shares of common stock.
However, no assurance can be given that any or all of these effects will
occur; including, without limitation, that the market price per share of
common stock after the Reverse Stock Split will exceed the price required by
the Rule or will be proportionately greater than the market price per share
of common stock before the Reverse Stock Split, or that such price will
either exceed or remain in excess of the current market price. Further,
no assurance can be given that the market for the Company's common stock
will be improved. Shareholders should note that the Board of directors
cannot predict what effect a Reverse Stock Split will have on the market
price of the Company's common stock.
Implementation of the Reverse Stock Split
The Reverse Stock Split will be formally implemented by amending the present
Article Three of the Company's Restated Articles of Incorporation to add the
following:
"Effective as of _____, Pacific Standard Time, on ______, 1998, all
outstanding shares of common stock held by each holder of record on
such date shall be automatically combined at the rate of _____
without any further action on the part of the holders thereof or its
corporation. No fractional shares shall be issued. In lieu of any
such fractional interests, each holder of the Company's common stock
who would otherwise be entitled to receive a fractional share of
the Company's common stock will be paid cash by the Company upon
surrender of the certificates held by such shareholder in an
amount equal to the product of such fraction multiplied by the
closing price of the common stock as reported on NASDAQ on a
date to be determined by the Board of Directors prior to
the effective date of a Reverse Stock Split."
Principal Effects of the Reverse Split
Shareholders have no right under California law or under the Company's
Certificate of Incorporation or Bylaws to dissent from the Reverse Stock
Split or to dissent from the payment of cash for any fractional share
resulting from the Reverse Stock Split in lieu of issuing fractional shares.
The Company had an authorized capital of 20,000,000 shares of common stock
and 5,000,000 shares of preferred stock, as of March 27, 1998. The
authorized capital stock of the Company will not be reduced or otherwise
effected by the Reverse Stock Split. Consequently, there will be an
increase in authorized but unissued shares of common stock as a result
of the Reverse Stock Split. Such shares may be issued by the Board of
Directors in its discretion. Any such future issuance will have the effect
of diluting the percentage of stock ownership and voting rights of the
present holders of common stock. The Board of Directors has no present
plans with respect to such an issuance.
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<PAGE> 19
Moreover, while the Board of Directors believes it advisable to authorize and
approve a Reverse Stock Split for the reasons set forth above, the Board of
Directors is aware that the increase in the number of authorized by unissued
shares of common stock of the Company may have a potential anti-takeover
effect in that it would enhance the ability of the Company to issue
additional shares which could be used to thwart persons, or otherwise
dilute the stock ownership of shareholders, seeking to control the Company.
The number of issued and outstanding shares of common stock of the Company as
of March 27, 1998, was 7,281,120. Because a Reverse Stock Split, if effected,
may range from One-For-Two or One-For-Ten, existing shareholders cannot now
predict the number of shares of the Company's common stock that they will
hold after a Reverse Stock Split, and cannot predict the total number of
shares of common stock that will be outstanding or authorized but unissued
after a Reverse Stock Split.
As of December 31, 1997, the Company had outstanding options and warrants to
purchase 495,800 and 810,000 shares, respectively, of the Company's common
stock with exercise prices per share that ranged from $0.59 to $6.13 for
options and $1.45 to $6.50 for warrants. Of such options, 128,300 were
issued pursuant to the 1986 Employee Stock Option Plan, which expired in
July 1996 (the "1986 Plan"), and 372,500 were issued pursuant to
the 1996 Stock Inventive Plan (the "1996 Plan" and together with the
1986 Plan, the "Plans"). Upon the effectiveness of a Reverse Stock Split,
the Plans and the various Warrant Agreements provide for a proportional
downward adjustment to the number of shares subject to outstanding
options and warrants and a corresponding upward adjustment in the
per share exercise prices to reflect a Reverse Stock Split.
Exchange of Stock Certificates
Assuming a Reverse Stock Split is approved by the shareholders, at the
time the Board of Directors effectuates such Reverse Stock Split, the
shareholders will be required to exchange their stock certificates for new
certificates representing the shares of new common stock. Shareholders
will be furnished with the necessary materials and instructions for
the surrender and exchange of stock certificates at the appropriate
time by U.S. Stock Transfer Corporation, the Company's transfer agent.
Shareholders will not be required to pay a transfer or other fee in
connection with the exchange of certificates. Shareholders should not
submit any certificate unless requested to do so.
Federal Income Tax Consequences
The following description of Federal income tax consequences is based upon
the Internal Revenue Code of 1986, as amended, the applicable Treasury
Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices as in effect on the date of this
Proxy Statement. This discussion is for general information only and does
not discuss consequences which may apply to special classes of taxpayers
(e.g., nonresident aliens, broker dealers, or insurance companies).
Shareholders are urged to consult their own tax advisors to determine the
particular consequences to them.
The Company has not sought and will not seek a ruling from the Internal
Revenue Service or an opinion of counsel regarding the federal income tax
consequences of the Reverse Stock Split. However, the Company believes that
because (1) the Reverse Stock Split should not result in any increase of a
shareholder's proportionate interest in the assets or earnings and profits of
the Company, (2) no shareholder has the choice nor may make an election to
receive cash or other property in lieu of Company common stock, and (3) the
Reverse Stock Split will not result in the receipt of preferred stock by
some common shareholders and common stock by other common shareholders,
the Reverse Stock Split should have the below described tax effects.
The exchange of shares of common stock for shares of new common stock will
not result in recognition of gain or loss. The holding period of the
shares of new common stock will include the shareholders holding period for
the shares of common stock exchanged therefore, provided that the shares of
common stock were held as a capital asset. The adjusted basis of the shares
of new common stock will be the same as for the adjusted basis of the shares
of common stock exchanged therefore.
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<PAGE> 20
Voting Required
The affirmative vote of a majority of shares of common stock of the Company
is required to approve the Reverse Stock Split.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 3
Proposal #4 - Ratification of Appointment of Independent Accountants
- ---------------------------------------------------------------------
The independent public accountants appointed to audit the Company's 1997
financial statements were Arthur Andersen LLP, who continue to serve in
such capacity for the current year. A representative of Arthur Andersen
LLP is expected to be present at the Meeting with the opportunity to
make a statement if he or she so desires and to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL #4
FUTURE PROPOSALS OF SHAREHOLDERS
Any shareholder intending to submit to the Company a proposal for
inclusion in the Company's Proxy Statement and form of Proxy for the
1999 Annual Meeting of Shareholders must submit such proposal sufficiently
far in advance so that it is received by the Company not later than December
23, 1998.
FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 (excluding the exhibits thereto), as filed with
the Securities and Exchange Commission, accompanies this Proxy Statement, but
it is not deemed to be a part of the proxy soliciting material. The Company
will provide a copy of the exhibits to its Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 upon the written request of any
beneficial owner of the Company's securities as of the record date for the
Annual Meeting and reimbursement of the Company's reasonable expenses. Such
request should be addressed to the Company c/o JoAnn Stover, Corporate
Secretary, at 4954 Van Nuys Boulevard, Sherman Oaks, California 91403.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Shareholders calls for the transaction
of such other business as may properly come before the Meeting, the
Board of Directors has no knowledge of any matters to be presented for
action by the shareholders at the Meeting, other than as set forth above.
The enclosed Proxy gives discretionary authority, however, in the event that
any additional matters should be presented.
SHAREHOLDERS ARE URGED IMMEDIATELY TO COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED, TO WHICH NO
POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
/s/ JoAnn R. Stover
----------------------
JoAnn R. Stover
Secretary
Sherman Oaks, California
May 7, 1998
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<PAGE> A-1
Appendix A
HEMACARE CORPORATION
1996 STOCK INCENTIVE PLAN
(As Amended)
SECTION 1. Purposes.
---------
The purposes of the HemaCare Corporation 1996 Stock Incentive Plan (the
"Plan") are to (i) enable HemaCare Corporation (the "Company") and Related
Companies (as defined below) to attract, motivate and retain top-quality
directors, officers, employees, consultants, advisers and independent
contractors (including without limitation dealers, distributors and other
business entities or persons providing services on behalf of the Company or a
Related Company), (ii) provide substantial incentives for such directors,
officers, employees, consultants, advisers and independent contractors of the
Company or a Related Company ("Participants") to act in the best interests of
the shareholders of the Company and (iii) reward extraordinary effort by
Participants on behalf of the Company or a Related Company. For purposes of
the Plan, a "Related Company" means any corporation, partnership, joint venture
or other entity in which the Company owns, directly or indirectly, at least a
twenty percent (20%) beneficial ownership interest.
SECTION 2. Types of Awards. Awards under the Plan may be in the form of
----------------
(i) Stock Options or (ii) Restricted Stock.
SECTION 3. Administration.
---------------
3.1 Except as otherwise provided herein, the Plan shall be administered
by the Compensation Committee of the Board of Directors of the Company (the
"Board") or such other committee of directors as the Board shall designate,
which committee in either such case shall consist solely of not less than two
"non-employee directors" (as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor rule
("Rule 16b-3")) who shall serve at the pleasure of the Board, each of whom
shall also be an "outside director" within the meaning of Section 162(m) of
the Internal Revenue Code and Section 1.162-27 of the Treasury Regulations or
any successor provision(s) thereto ("Section 162(m)"); provided, however, that
if there are not two persons on the Board who meet the foregoing qualifications,
any such committee may be comprised of two or more directors of the Company,
none of which is an officer (other than a non-employee Chairman of the Board
of the Company) or an employee of the Company or a Related Company. If no
such committee has been appointed by the Board, the Plan shall be administered
by the Board, and the Plan shall be administered by the Board to the extent
provided in the last sentence of this Section. Such committee as shall be
designated to administer the Plan, if any, or the Board is referred to herein
as the "Committee." Nothwithstanding any other provision of the Plan to the
contrary, if such a committee has been designated to administer the Plan, all
actions with respect to the administration of the Plan in respect of the
members of such committee shall be taken by the Board.
3.2 The Committee shall have the following authority with respect to
awards under the Plan to Participants: to grant awards to eligible Participants
under the Plan; to adopt, alter and repeal such administrative rules, guidelines
and practices governing the Plan as it shall deem advisable; to interpret the
terms and provisions of the Plan and any award granted under the Plan; and to
otherwise supervise the administration of the Plan. In particular, and without
limiting its authority and powers, the Committee shall have the authority:
(a) to determine whether and to what extent any award or
combination of awards will be granted hereunder;
(b) to select the Participants to whom awards will be
granted;
(c) to determine the number of shares of the common stock of
the Company (the "Stock") to be covered by each award granted
hereunder, provided that no Participant will be granted Stock
Options on or with respect to more than 250,000 shares of Stock in
any calendar year;
A-1
<PAGE> A-2
(d) to determine the terms and conditions of any award
granted hereunder, including, but not limited to, any vesting or
other restrictions based on performance and such other factors as
the Committee may determine, and to determine whether the terms and
conditions of the award are satisfied;
(e) to determine the treatment of awards upon a
Participant's retirement, disability, death, termination for cause
or other termination of employment or other qualifying relationship
with the Company or a Related Company;
(f) to determine that amounts equal to the amount of any
dividends declared with respect to the number of shares covered by
an award (i) will be paid to the Participant currently or (ii) will
be deferred and deemed to be reinvested or (iii) will otherwise be
credited to the Participant, or that the Participant has no rights
with respect to such dividends;
(g) to determine whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an
award will be deferred either automatically or at the election of a
Participant, including providing for and determining the amount (if
any) of deemed earnings on any deferred amount during any deferral
period;
(h) to provide that the shares of Stock received as a result
of an award shall be subject to a right of first refusal, pursuant
to which the Participant shall be required to offer to the Company
any shares that the Participant wishes to sell, subject to such
terms and conditions as the Committee may specify;
(i) to amend the terms of any award, prospectively or
retroactively; provided, however, that no amendment shall impair the
rights of the award holder without his or her consent; and
(j) to substitute new Stock Options for previously granted
Stock Options, or for options granted under other plans, in each
case including previously granted options having higher option
prices.
3.3 All determinations made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company and
all Participants.
3.4 The Committee may from time to time delegate to one or more officers
of the Company any or all of its authorities granted hereunder except with
respect to awards granted to persons subject to Section 16 of the Exchange Act.
The Committee shall specify the maximum number of shares that the officer or
officers to whom such authority is delegated may award, and the Committee may in
its discretion specify any other limitations or restrictions on the authority
delegated to such officer or officers.
SECTION 4. Stock Subject to Plan.
----------------------
4.1 The total number of shares of Stock reserved and available for
distribution under the Plan shall be 1,400,000 (subject to adjustment as
provided in Section 4.3); provided, however, that no award of a Stock Option
or Restricted Stock may be made at any time if, after giving effect to such
award, the total number of shares of Stock issuable upon exercise of all
outstanding options and warrants of the Company (whether or not under the Plan)
plus the total number of shares of Stock called for under any stock bonus or
similar plan of the Company (including shares of Stock underlying awards of
Stock Options or Restricted Stock under the Plan) would exceed thirty percent
(30%) of the total number of shares of Stock outstanding at the time of such
award. For purposes of the foregoing: (i) those shares issuable upon exercise
of rights, options or warrants, or under a stock purchase plan, meeting the
requirements for exclusion set forth at any time and from time to time in Rule
260.140.45 of the California Commissioner ofCorporations shall not be counted
against the thirty percent (30%) limitation; (ii) any outstanding preferred or
senior common shares of the Company convertible into Stock shall be deemed
converted in determining the total number of outstanding shares of Stock at
any time; and (iii) any shares of Stock subject to promotional waivers under
Rule 260.141 of the California Commissioner of Corporations shall not be
A-2
<PAGE> A-3
deemed to be outstanding. Shares of Stock issuable in connection with any
award under the Plan may consist of authorized but unissued shares or treasury
shares.
4.2 To the extent a Stock Option terminates without having been
exercised, or shares awarded are forfeited, the shares subject to such award
shall again be available for distribution in connection with future awards under
the Plan, subject to the limitations set forth in Section 4.1, unless the
forfeiting Participant received any benefits of ownership such as dividends from
the forfeited award.
4.3 In the event of any merger, reorganization, consolidation, sale of
substantially all assets, recapitalization, Stock dividend, Stock split, spin-
off, split-up, split-off, distribution of assets or other change in corporate
structure affecting the Stock, a substitution or adjustment, as may be
determined to be appropriate by the Committee in its sole discretion, shall
be made in the aggregate number of shares reserved for issuance under the Plan,
the number of shares subject to outstanding awards and the amounts to be paid by
award holders or the Company, as the case may be, with respect to outstanding
awards; provided, however, that no such adjustment shall increase the aggregate
value of any outstanding award. In the event any change described in this
Section 4.3 occurs and an adjustment is made in the outstanding Stock Options,
a similar adjustment shall be made in the maximum number of shares covered by
Stock Options that may be granted to any employee pursuant to Section 3.2(c).
SECTION 5. Eligibility.
------------
Participants under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible.
SECTION 6. Stock Options.
--------------
6.1 The Stock Options awarded to officers and employees under the Plan
may be of two types: (i) Incentive Stock Options within the meaning of
Section 422 of the Internal Revenue Code or any successor provision thereto
("Section 422"); and (ii) Non-Qualified Stock Options. If any Stock Option does
not qualify as an Incentive Stock Option, or the Committee at the time of grant
determines that any Stock Option shall be a Non-Qualified Stock Option, it shall
constitute a Non-Qualified Stock Option. Stock Options awarded to any
Participant who is not an officer or employee of the Company or a Related
Company shall be Non-Qualified Stock Options.
6.2 Subject to the following provisions, Stock Options awarded to
Participants under the Plan shall be in such form and shall have such terms and
conditions as the Committee may determine:
(a) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the
Committee; provided, however, that the option price per share of
Stock shall be not less than one hundred percent (100%) of the "Fair
Market Value" (as defined below) of the Stock on the date of grant
of the Stock Option; and provided, further, that if at the time of
grant the Participant owns, or would be considered to own by reason
of Section 424(d) of the Internal Revenue Code or any successor
provision thereto, more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any parent or
subsidiary of the Company, the option price per share of Stock shall
be not less than one hundred ten percent (110%) of the Fair Market
Value of the Stock on the date of grant of the Stock Option. For
purposes of the Plan, "Fair Market Value" in relation to a share of
the Stock means, if the Stock is publicly traded, the closing per
share bona fide bid price of the Stock on such date. In any
situation not covered above, the Fair Market Value shall be
determined by the Committee in accordance with one of the valuation
methods described in Section 20.2031-2 of the Federal Estate Tax
Regulations or any successor provision thereto.
(b) Option Term. The term of each Stock Option shall be
fixed by the Committee, but in no event longer than one hundred
twenty (120) months after the date of grant of such Stock Option.
(c) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall
be determined by the Committee; provided, however, that in the case
of Stock Options awarded to Participants other than directors,
officers, consultants or independent contractors, Stock Options
under any award shall become exercisable at the rate of at least
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<PAGE> A-4
twenty percent (20%) per year over five (5) years from the date the
Stock Option is granted. If the Committee provides that any Stock
Option is exercisable only in installments, the Committee may waive
such installment exercise provisions at any time in whole or in
part.
(d) Method of Exercise. Stock Options may be exercised in
whole or in part at any time during the option period by giving
written notice of exercise to the Company specifying the number of
shares to be purchased, accompanied by payment of the purchase
price. Payment of the purchase price shall be made in such manner
as the Committee may provide in the award, which may include cash
(including cash equivalents), delivery of shares of Stock already
owned by the optionee or subject to awards hereunder, any other
manner permitted by law as determined by the Committee, or any
combination of the foregoing. The Committee may provide that all or
part of the shares received upon the exercise of a Stock Option
which are paid for using Restricted Stock shall be restricted in
accordance with the original terms of the award in question.
(e) No Shareholder Rights. An optionee shall have no rights
to dividends or other rights of a shareholder with respect to shares
subject to a Stock Option until the optionee has given written
notice of exercise and has paid for such shares.
(f) Surrender Rights. The Committee may provide that Stock
Options may be surrendered for cash upon any terms and conditions
set by the Committee.
(g) Non-Transferability; Limited Transferability. A Stock
Option Agreement may permit an optionee to transfer the Stock Option
to his or her children, grandchildren or spouse ("Immediate
Family"), to one or more trusts for the benefit of such Immediate
Family members, or to one or more partnerships in which such
Immediate Family members are the only partners if (i) the agreement
setting forth such Stock Option expressly provides that such Stock
Option may be transferred only with the express written consent of
the Committee, and (ii) the optionee does not receive any
consideration in any form whatsoever for such transfer. Any Stock
Option so transferred shall continue to be subject to the same terms
and conditions as were applicable to such Stock Option immediately
prior to the transfer thereof. Any Stock Option not (x) granted
pursuant to any agreement expressly allowing the transfer of such
Stock Option or (y) amended expressly to permit its transfer shall
not be transferable by the optionee otherwise than by will or by the
laws of descent and distribution, and such Stock Option shall be
exercisable during the optionee's lifetime only by the optionee.
(h) Termination of Relationship. If an optionee's
employment or other qualifying relationship with the Company or a
Related Company terminates by reason of death, disability,
retirement, voluntary or involuntary termination or otherwise, the
Stock Option shall be exercisable to the extent determined by the
Committee; provided, however, that unless employment or such other
qualifying relationship is terminated for cause (as may be defined
by the Committee in connection with the grant of any Stock Option),
the Stock Option shall remain exercisable (to the extent that it was
otherwise exercisable on the date of termination) for (A) at least
six (6) months from the date of termination if termination was
caused by death or disability or (B) at least ninety (90) days from
the date of termination if termination was caused by other than
death or disability. The Committee may provide that,
notwithstanding the option term fixed pursuant to Section 6.2(b), a
Stock Option which is outstanding on the date of an optionee's death
shall remain outstanding for an additional period after the date of
such death.
(i) Option Grants to Participants Subject to Section 16. If
for any reason any Stock Option granted to a Participant subject to
Section 16 of the Exchange Act is not approved in the manner
provided for in clause (d)(1) or (d)(2) of Rule 16b-3, neither the
Stock Option (except upon its exercise) nor the Stock underlying the
Stock Option may be disposed of by the Participant until six months
have elapsed following the date of grant of the Stock Option, unless
the Committee otherwise specifically permits such disposition.
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<PAGE> A-6
6.3 Notwithstanding the provisions of Section 6.2, no Incentive Stock
Option shall (i) have an option price which is less than one hundred
percent (100%) of the Fair Market Value of the Stock on the date of the award of
the Stock Option (or less than one hundred ten percent (110%) of the Fair Market
Value of the Stock on the date of award of the Stock Option if the Participant
owns, or would be considered to own by reason of Section 424(d) of the Internal
Revenue Code or any successor provision thereto, more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
parent or subsidiary of the Company at the time of the grant of the Stock
Option), (ii) be exercisable more than ten (10) years after the date such
Incentive Stock Option is awarded (five (5) years after the date of award if the
Participant owns, or would be considered to own by reason of Section 424(d) of
the Internal Revenue Code or any successor provision thereto, more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary of the Company at the time of the grant of
the Stock Option), (iii) be awarded more than ten (10) years after the effective
date of the Plan (or the latest restatement of the Plan) or (iv) be transferable
other than by will or by the laws of descent and distribution. In addition, the
aggregate Fair Market Value (determined as of the time a Stock Option is
granted)of Stock with respect to which Incentive Stock Options granted after
December 31, 1986 are exercisable for the first time by a Participant in any
calendar year (under the Plan and any other plans of the Company or any
subsidiary or parent corporation) shall not exceed $100,000.
SECTION 7. Restricted Stock.
-----------------
Subject to the following provisions, all awards of Restricted Stock to
Participants shall be in such form and shall have such terms and conditions as
the Committee may determine:
(a) The Restricted Stock award shall specify the number of
shares of Restricted Stock to be awarded, the price, if any, to be
paid by the recipient of the Restricted Stock and the date or dates
on which, or the conditions upon the satisfaction of which, the
Restricted Stock will vest. The vesting of Restricted Stock may be
conditioned upon the completion of a specified period of service
with the Company or a Related Company, upon the attainment of
specified performance goals or upon such other criteria as the
Committee may determine.
(b) Stock certificates representing the Restricted Stock
awarded to an employee shall be registered in the Participant's
name, but the Committee may direct that such certificates be held by
the Company on behalf of the Participant. Except as may be
permitted by the Committee, no share of Restricted Stock may be
sold, transferred, assigned, pledged or otherwise encumbered by the
Participant until such share has vested in accordance with the terms
of the Restricted Stock award. At the time Restricted Stock vests,
a certificate for such vested shares shall be delivered to the
Participant (or his or her designated beneficiary in the event of
death), free of all restrictions.
(c) The Committee may provide that the Participant shall
have the right to vote or receive dividends, or both, on Restricted
Stock. The Committee may provide that Stock received as a dividend
on, or in connection with a stock split of, Restricted Stock shall
be subject to the same restrictions as the Restricted Stock.
(d) Except as may be provided by the Committee, in the event
of a Participant's termination of employment or other qualifying
relationship with the Company or a Related Company before all of his
or her Restricted Stock has vested, or in the event any conditions
to the vesting of Restricted Stock have not been satisfied prior to
any deadline for the satisfaction of such conditions set forth in
the award, the shares of Restricted Stock which have not vested
shall be forfeited, and the Committee may provide that the lower of
(i) any purchase price paid by the Participant and (ii) the
Restricted Stock's aggregate Fair Market Value on the date of
forfeiture shall be paid in cash to the Participant.
(e) The Committee may waive, in whole or in part, any or all
of the conditions to receipt of, or restrictions with respect to,
any or all of the Participant's Restricted Stock.
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(f) If for any reason any Restricted Stock awarded to a
Participant subject to Section 16 of the Exchange Act is not
approved in the manner provided for in clause (d)(1) or (d)(2) of
Rule 16b-3, the Restricted Stock may not be disposed of by the
Participant until six months have elapsed following the date of
award of the Restricted Stock, unless the Committee otherwise
specifically permits such disposition.
SECTION 8. Substitute Options in Business Combinations.
--------------------------------------------
If the Company at any time should succeed to the business of another
corporation through a merger or consolidation, or through the acquisition of
stock or assets of such corporation, Stock Options may be granted under the Plan
to those employees of such corporation or its related companies who, in
connection with such succession, become employees of the Company or a Related
Company in substitution for options to purchase stock of such acquired
corporation held by them at the time of such succession. The Committee, in its
sole discretion, shall determine the extent to which such substitute Stock
Options shall be granted (if at all), the persons to receive such substitute
Stock Options (who need not be all optionees of such corporation), the number
and type of Stock Options to be received by each such person, the exercise price
of such Stock Options (which may be determined without regard to Section 6) and
the terms and conditions of such substitute Stock Options; provided, however,
that the exercise price of each substitute Stock Option shall be an amount such
that, in the sole judgment of the Committee (and if the Stock Options to be
granted are intended to be Incentive Stock Options, in compliance with Section
424(a) of the Code), the economic benefit provided by such Stock Option is not
greater than the economic benefit represented by the stock option of the
acquired corporation as of the date of the Company's acquisition of such
corporation. Any substitute Stock Option granted under this Section 8 shall
expire upon the expiration date of such other stock option or, if earlier, ten
(10) years after the date of grant of the substitute Stock Option, and,
notwithstanding Section 6, shall be exercisable during the period(s) in which
the other stock option would have been exercisable. Any provision of this
Section 8 to the contrary notwithstanding, no Stock Option shall be granted,
nor any action taken, permitted or omitted, which would have the effect of
causing the Plan or any awards hereunder to fail to qualify for exemption
under Rule 16b-3, without the express approval of the Board.
SECTION 9. Election to Defer Awards.
-------------------------
The Committee may permit a Participant to elect to defer receipt of an
award for a specified period or until a specified event, upon such terms as are
determined by the Committee.
SECTION 10. Tax Withholding.
----------------
10.1 Each Participant shall, no later than the date as of which the value
of an award first becomes includible in such person's gross income for
applicable tax purposes, pay to the Company, or make arrangements satisfactory
to the Committee (which may include delivery of shares of Stock already owned
by the optionee or subject to awards hereunder) regarding payment of, any
federal, state, local or other taxes of any kind required by law to be withheld
with respect to the award. The obligations of the Company under the Plan shall
be conditional on such payment or arrangements, and the Company (and, where
applicable, any Related Company), shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due
to the Participant.
10.2 To the extent permitted by the Committee, and subject to such terms
and conditions as the Committee may provide, a Participant may elect to have the
withholding tax obligation, or any additional tax obligation with respect to any
awards hereunder, satisfied by (i) having the Company withhold shares of Stock
otherwise deliverable to such person with respect to the award or (ii)
delivering to the Company shares of unrestricted Stock.
SECTION 11. Amendments and Termination.
---------------------------
No awards may be granted under the Plan more than ten (10) years after the
date of approval of the Plan by the shareholders of the Company. The Board may
discontinue the Plan at any earlier time and may amend it from time to time. No
amendment or discontinuation of the Plan shall adversely affect any award
previously granted without the award holder's written consent. Amendments may
be made without shareholder approval except (i) if and to the extent necessary
to satisfy any applicable mandatory legal or regulatory requirements (including
the requirements of any stock exchange or over-the-counter market on which the
Stock is listed or qualified for trading and any requirements imposed under any
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state securities laws or regulations as a condition to the registration of
securities distributable under the Plan or otherwise), or (ii) as required for
the Plan to satisfy the requirements of Section 162(m), Section 422 or any other
non-mandatory legal or regulatory requirements if the Board of Directors deems
it desirable for the Plan to satisfy any such requirements.
SECTION 12. Change of Control.
------------------
12.1 In the event of a Change of Control, unless otherwise determined by
the Committee at the time of grant or by amendment (with the holder's consent)
of such grant:
(a) all outstanding Stock Options awarded under the Plan
shall become fully exercisable and vested; and
(b) the restrictions applicable to any outstanding
Restricted Stock awards under the Plan shall lapse and such shares
and awards shall be deemed fully vested.
12.2 A "Change of Control" shall be deemed to occur if:
(a) individuals who, as of July 19, 1996, constitute the
entire Board of Directors of the Company ("Incumbent Directors")
cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to such date whose election, or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the then Incumbent Directors (other than an election or
nomination of an individual whose assumption of office is the result
of an actual or threatened election contest relating to the election
of directors of the Company, as such terms are used in Rule 14a-11
under the Exchange Act), also shall be an Incumbent Director;
(b) the shareholders of the Company shall approve (i) any
merger, consolidation or recapitalization of the Company (or, if the
capital stock of the Company is affected, any subsidiary of the
Company) or any sale, lease, or other transfer (in one transaction
or a series of transactions contemplated or arranged by any party as
a single plan) of all or substantially all of the assets of the
Company (each of the foregoing being an "Acquisition Transaction")
where (1) the shareholders of the Company immediately prior to such
Acquisition Transaction would not immediately after such Acquisition
Transaction beneficially own, directly or indirectly, shares
representing in the aggregate more than fifty percent (50%) of
(A) the then outstanding common stock of the corporation surviving
or resulting from such merger, consolidation or recapitalization or
acquiring such assets of the Company, as the case may be (the
"Surviving Corporation"), (or of its ultimate parent corporation, if
any) and (B) the Combined Voting Power (as defined below) of the
then outstanding Voting Securities (as defined below) of the
Surviving Corporation (or of its ultimate parent corporation, if
any) or (2) the Incumbent Directors at the time of the initial
approval of such Acquisition Transaction would not immediately after
such Acquisition Transaction constitute a majority of the Board of
Directors of the Surviving Corporation (or of its ultimate parent
corporation, if any) or (ii) any plan or proposal for the
liquidation or dissolution of the Company; or
(c) any Person (as defined below) shall become the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of securities of the Company
representing in the aggregate forty percent (40%) or more of either
(i) the then outstanding shares of Company Common Stock or (ii) the
Combined Voting Power of all then outstanding Voting Securities of
the Company; provided, however, that notwithstanding the foregoing,
a Change of Control of the Company shall not be deemed to have
occurred for purposes of this clause (c) solely as the result of:
(1) an acquisition of securities by the Company which,
by reducing the number of shares of Company Common Stock or
other Voting Securities outstanding, increases (i) the
proportionate number of shares of Company Common Stock
beneficially owned by any Person to forty percent (40%) or
more of the shares of Company Common Stock then outstanding or
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<PAGE> A-8
(ii) the proportionate voting power represented by the Voting
Securities beneficially owned by any Person to forty
percent (40%) or more of the Combined Voting Power of all then
outstanding Voting Securities; or
(2) an acquisition of securities directly from the
Company except that this paragraph (2) shall not apply to:
(A) any conversion of a security that was not
acquired directly from the Company; or
(B) any acquisition of securities if the
Incumbent Directors at the time of the initial approval
of such acquisition would not immediately after (or
otherwise as a result of) such acquisition constitute a
majority of the Board of the Company;
provided, however, that if any Person referred to in
clauses (1) or (2) of this clause (c) shall thereafter become
the beneficial owner of any additional shares of Company
Common Stock or other Voting Securities of the Company (other
than pursuant to a stock split, stock dividend or similar
transaction or an acquisition exempt under such clause (2)),
then a Change of Control shall be deemed to have occurred for
purposes of this clause (c).
For purposes of this Section 12.2:
(i) "Person" shall mean any individual, entity (including,
without limitation, any corporation, partnership, trust, joint
venture, association or governmental body) or group (as defined in
Section 13(d)(3) or 14(d)(2) of the Exchange Act and the rules and
regulations thereunder); provided, however, that "Person" shall not
include the Company, any of its subsidiaries, any employee benefit
plan of the Company or any of its majority-owned subsidiaries or any
entity organized, appointed or established by the Company or such
subsidiary for or pursuant to the terms of any such plan.
(ii) "Voting Securities" shall mean all securities of a
corporation having the right under ordinary circumstances to vote in
an election of the Board of Directors of such corporation.
(iii) "Combined Voting Power" shall mean the aggregate votes
entitled to be cast generally in the election of directors of a
corporation by holders of then outstanding Voting Securities of such
corporation.
SECTION 13. General Provisions.
-------------------
13.1 If the granting of any award under the Plan or the issuance, purchase
or delivery of Stock thereunder shall require, in the determination of the
Committee from time to time and at any time, (i) the listing, registration or
qualification of the Stock subject or related thereto upon any securities
exchange or over-the-counter market or under any federal or state law or (ii)
the consent or approval of any government regulatory body, then any such award
shall not be granted or exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions, if any, as shall be acceptable to the Committee. In
addition, in connection with the granting or exercising of any award under the
Plan, the Committee may require the recipient to agree not to dispose of any
Stock issuable in connection with such award, except upon the satisfaction of
specified conditions, if the Committee determines such agreement is necessary or
desirable in connection with any requirement or interpretation of any federal or
state securities law, rule or regulation.
13.2 Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements. Neither the adoption of the Plan
nor any award hereunder shall confer upon any employee of the Company, or of a
Related Company, any right to continued employment, and no award under the Plan
shall confer upon any director any right to continued service as a director.
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13.3 Determinations by the Committee under the Plan relating to the form,
amount, and terms and conditions of awards need not be uniform, and may be made
selectively among persons who receive or are eligible to receive awards under
the Plan, whether or not such persons are similarly situated.
13.4 No member of the Board or the Committee, nor any officer or employee
of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination or interpretation taken or made
with respect to the Plan, and all members of the Board or the Committee and all
officers or employees of the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
SECTION 14. Effective Date of Plan.
-----------------------
The Plan shall be effective upon the later of (i) the approval of the Plan
by the shareholders of the Company by a majority of the votes cast at a duly
held meeting of shareholders at which a quorum representing at least a
majority of the outstanding shares is, either in person or by proxy, present and
voting on the Plan, (ii) August 15, 1996, and (iii) the date upon which the
Company becomes subject to the version of Rule 16b-3 adopted by the Securities
and Exchange Commission in Release No. 34-37260 promulgated under the Exchange
Act.
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APPENDIX II
HEMACARE CORPORATION
This proxy is solicited on behalf of the Board of Directors
The undersigned appoints either or both Alan C. Darlington or Hal I.
Lieberman as Proxy, with the power to appoint their respective substitutes,
and authorizes either or both of them to represent and to vote, as designated
below, all the shares of Common Stock of HemaCare Corporation held of record
by the undersigned on May 7,1998 at the Annual Meeting of Shareholders to be
held on June 29, 1998 or any adjournment or postponement thereof.
1. ELECTION OF DIRECTORS:
Please mark only one box per nominee.
Vote For Withhold Authority to Vote
-------- --------------------------
ALAN C. DARLINGTON [ ] [ ]
CHARLES R. SCHWAB, Jr. [ ] [ ]
JULIEN L. STEFFENHAGEN [ ] [ ]
2. PROPOSAL TO AMEND THE COMPANY'S 1996 STOCK INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO AUTHORIZE A REVERSE STOCK SPLIT
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on back)
<PAGE> A-11
This proxy, when properly executed will be voted in the manner directed
by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1, 2, 3 and 4. Please sign exactly as name appears
below. When shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated:..............................., 1998
___________________________
___________________________
(Signature if jointly held)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE>
