-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T81nthfe9KVQ8DpIscEiJAfFtAXufBKTLwncaSwB9l2SQhAOLBSnNu8DUJsvdsMj m3noDDmQgjNwNxKfWx7xPg== 0000801748-96-000009.txt : 19960515 0000801748-96-000009.hdr.sgml : 19960515 ACCESSION NUMBER: 0000801748-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEMACARE CORP /CA/ CENTRAL INDEX KEY: 0000801748 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 953280412 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15223 FILM NUMBER: 96563863 BUSINESS ADDRESS: STREET 1: 4954 VAN NUYS BLVD 2ND FLR CITY: SHERMAN OAKS STATE: CA ZIP: 91403 BUSINESS PHONE: 8189863883 MAIL ADDRESS: STREET 1: 4954 VAN NUYS BLVD, 2ND FL. CITY: SHERMAN STATE: CA ZIP: 91403 10-Q 1 EDGAR FILING FOR 1996 FIRST QUARTER 10-Q ============================================================================= SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission File Number 0-15223 HEMACARE CORPORATION (Exact name of registrant as specified in its charter) State or other jurisdiction of I.R.S. Employer I.D. incorporation or organization: California Number: 95-3280412 4954 Van Nuys Boulevard Sherman Oaks, California 91403 (Address of principal executive offices) (Zip Code) ___________________ Registrant's telephone number, including area code: (818)986-3883 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: YES /X/ NO / / As of May 13, 1996, 5,941,765 shares of Common Stock of the Registrant were issued and outstanding. ============================================================================= 2 INDEX HEMACARE CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated balance sheets--March 31, 1996 and December 31, 1995 Consolidated statements of operations--Three months ended March 31, 1996 and 1995 Consolidated statements of cash flows--Three months ended March 31, 1996 and 1995 Notes to consolidated financial statements--March 31, 1996 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K SIGNATURES 2 3 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements - ------- -------------------- HEMACARE CORPORATION CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1996 1995 (Unaudited) ------------ ------------ ASSETS Current assets: Cash and cash equivalents......................... $ 820,000 $ 997,000 Accounts receivable, net of allowance for doubtful accounts - $110,000 (1996) and $95,000 (1995).................................. 1,373,000 1,627,000 Product inventories............................... 153,000 141,000 Supplies.......................................... 294,000 328,000 Prepaid expenses.................................. 114,000 117,000 Note receivable from officer - current............ 15,000 15,000 ------------- ------------- Total current assets......................... $ 2,769,000 $ 3,225,000 Plant and equipment, net of accumulated depreciation and amortization of $1,605,000 (1996) and $1,513,000 (1995)........... 994,000 1,051,000 Note receivable from officer - non-current.......... 81,000 94,000 Other assets........................................ 98,000 87,000 ------------- ------------- $ 3,942,000 $ 4,457,000 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.................................. $ 536,000 $ 473,000 Accrued blood purchases........................... 161,000 252,000 Accrued payroll and payroll taxes................. 344,000 310,000 Other accrued expenses............................ 212,000 264,000 Current obligations under capital leases.......... 215,000 209,000 Reserve for discontinued operations - current..... 246,000 336,000 ------------- ------------- Total current liabilities................... 1,714,000 1,844,000 Obligations under capital leases, net of current portion................................ 644,000 649,000 Other accrued employee benefits..................... 176,000 138,000 Reserve for discontinued operations - non-current... 600,000 600,000 Commitments and contingencies Shareholders' equity: Common stock, without par value - 20,000,000 shares authorized, 5,929,285 and 5,911,285 issued and outstanding in 1996 and 1995, respectively................................. 12,210,000 12,179,000 Accumulated deficit............................... (11,402,000) (10,953,000) ------------- ------------- Total shareholders' equity.................. 808,000 1,226,000 ------------- ------------- $ 3,942,000 $ 4,457,000 ============= =============
See Notes to Consolidated Financial Statements 3 4 HEMACARE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended March 31, 1996 1995 ------------- ------------- Revenues: Blood products.................................... $ 1,684,000 $ 1,726,000 Blood services.................................... 1,126,000 960,000 ------------ ------------ Total revenues................................ 2,810,000 2,686,000 Operating costs and expenses: Blood products.................................... 1,874,000 1,262,000 Blood services.................................... 747,000 694,000 ------------ ------------ Total operating costs and expenses............ 2,621,000 1,956,000 ------------ ------------ Operating profit.............................. 189,000 730,000 General and administrative expense.................. 627,000 488,000 Interest income..................................... 9,000 15,000 Interest expense.................................... (20,000) (8,000) ------------ ------------ Income (loss) from continuing operations before income taxes...................................... (449,000) 249,000 Provision for income taxes.......................... -- -- Discontinued operations: Loss from discontinued operations................. -- (297,000) ------------ ------------ Net loss.......................................... $ (449,000) $ (48,000) ============ ============ Per share amounts: Income (loss) from continuing operations............ $ (0.07) $ 0.04 Discontinued operations: Loss from discontinued operations................. -- (0.05) ------------ ------------ Net loss.......................................... $ (0.07) $ (0.01) ============ ============ Weighted average common and common equivalent shares outstanding................... 6,069,642 5,567,628 ============ ============
See Notes to Consolidated Financial Statements 4 5 HEMACARE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended March 31, 1996 1995 ------------- ------------- Cash flows from operating activities: Net loss............................................. $ (449,000) $ (48,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization.................. 81,000 128,000 Provision for losses on accounts receivable.... 15,000 16,000 Issuance of common stock for employee compensation................................. -- 55,000 Changes in operating assets and liabilities: Decrease in accounts receivable................. 288,000 270,000 Decrease (increase) in inventories, supplies and prepaid expenses.......................... 25,000 (101,000) Increase in other assets, net................... (11,000) (7,000) Decrease in accounts payable and accrued expenses...................................... (46,000) (428,000) Increase (decrease) in other accrued employee benefits..................................... 38,000 (44,000) Net expenditures for discontinued operations.... (90,000) -- ----------- ------------ Net cash used in operating activities............... (149,000) (159,000) ----------- ------------ Cash flows from investing activities: Decrease (increase) in note receivable from officer.. 13,000 (11,000) Increase in short-term investments................... -- (4,000) Purchase of plant and equipment, net................. (36,000) (25,000) ----------- ------------ Net cash used in investing activities................ (23,000) (40,000) ----------- ------------ Cash flows from financing activities: Proceeds from issuance of common stock............... 31,000 357,000 Principal payments on line of credit and capital leases............................................ (36,000) (33,000) ----------- ------------ Net cash (used in) provided by financing activities.. (5,000) 324,000 ----------- ------------ Increase (decrease) in cash and cash equivalents..... (177,000) 125,000 Cash and cash equivalents at beginning of period..... 997,000 786,000 ----------- ------------ Cash and cash equivalents at end of period........... $ 820,000 $ 911,000 =========== ============ Supplemental disclosure: Interest paid........................................ $ 20,000 $ 8,000 =========== ============ Items not impacting cash flows: Increase in capital lease obligations................ $ 37,000 $ 167,000 =========== ============
See Notes to Consolidated Financial Statements 5 6 HEMACARE CORPORATION Notes to Consolidated Financial Statements (Unaudited) Note 1 - Basis of Presentation and General Information - ------------------------------------------------------ The accompanying unaudited consolidated financial statements of HemaCare Corporation (the "Company" or "HemaCare") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. Certain 1995 amounts have been reclassified to conform to the 1996 presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. From 1990 to November 1995, the Company, through its wholly owned subsidiary, HemaBiologics, Inc. ("HBI"), conducted research and development of ImmupathTM, an anti-HIV hyperimmune plasma-based product intended to be used in the treatment of Acquired Immune Deficiency Syndrome ("AIDS"). The Company had a license agreement with Medicorp, Inc. ("Medicorp") for the rights to the United States patent to commercialize Immupath. In November 1995, the Company's Board of Directors decided to discontinue the operations of HBI. (Notes 2 and 5). In September 1995, the Company formed Gateway Community Blood Program, Inc. ("Gateway"), a wholly owned subsidiary incorporated in Missouri, to provide blood products and services in portions of Missouri and Illinois. The Company opened its University of Southern California Blood Center ("USC Blood Center"), a full-service blood donation and services facility, in February 1996. The USC Blood Center facility is leased from USC and is staffed and operated by HemaCare under its Food and Drug Administration ("FDA") license. Located on the USC Health Sciences Campus in Los Angeles, California, the center provides services to the USC/Norris Comprehensive Cancer Center and Hospital and the USC University Hospital (the "USC Hospitals"). The USC Hospitals have agreed that HemaCare will be their primary provider of blood products and therapeutic services for the three-year period ending February 1999. Pathologists on the USC medical faculty provide medical direction services for the USC Blood Center as consultants to the Company. Note 2 - Discontinued Operations - -------------------------------- In November 1995, the Company's Board of Directors decided to discontinue the operations of HBI, including the research and development of Immupath and the associated specialty plasma business. In connection with this decision, the Company wrote off the remaining book value of HBI's assets and provided a reserve for estimated operating losses from the November 30, 1995 measurement date through December 1996, the expected date of substantial completion of disposal. The loss on the disposition of HBI's operations has been accounted for as discontinued operations, and prior year financial statements have been restated to reflect the discontinuation of these operations. Revenues from such operations for the three months ended March 31, 1995 were $70,000. 6 7 Net loss from discontinued operations for the first quarter of 1996 of $90,000 reduced the reserve for discontinued operations. The operating loss reserve was estimated based on the best available information. However, actual operating losses during the disposition period may differ from the estimate. The Company has been actively pursuing a sale of HBI's research and development and associated specialty plasma assets, and in May 1996, the Company signed a definitive agreement to sell substantially all the tangible assets of the discontinued operations and two of the three remaining FDA source plasma licenses. Closing of the sale is contingent upon obtaining FDA approval to transfer the licenses to the purchaser and certain other conditions. Note 3 - Line of Credit - ----------------------- Since August 1991, the Company has maintained a line of credit with a commercial bank secured by its accounts receivable, inventory and equipment. At March 31, 1996, the Company was in technical violation of certain of the covenants of its credit line agreement, due to the write off of the assets of its discontinued operations (Note 2). However, its lender had waived compliance with these covenants through April 30, 1996, the credit line expiration date. Effective May 1, 1996, the credit line was renewed through April 30, 1997. Under the terms of the new credit line agreement, the Company may borrow up to 70% of eligible accounts receivable, up to a maximum of $700,000 and must maintain certain ratios and achieve defined operating objectives, including maintaining a tangible net worth of not less than $370,000 prior to September 30, 1996 and not less than $2 million thereafter. Interest on credit line borrowings is at the lender's prime rate (8.25% at March 31, 1996) plus one-half of a percentage point. There were no borrowings outstanding on the credit line at March 31, 1996. On April 17, 1996 and May 7, 1996, the Company borrowed $200,000 and $100,000, respectively, under the line of credit. Note 4 - Shareholders' Equity - ----------------------------- In April 1994, HemaCare sold 250,000 units consisting of one share of common stock and three warrants to purchase additional shares (at $4.00 per unit) in an offshore transaction, from which it received net proceeds of approximately $900,000. The second group of 250,000 warrants was fully exercised in the first quarter of 1995 and yielded net proceeds of approximately $350,000. In consideration of this exercise, which was made 45 days prior to the expiration date, a fourth group of 250,000 warrants exercisable at a price of $3.50 per share and expiring in December 1998 was granted to the purchaser. The third group of 250,000 warrants was exercised in June and July 1995, yielding net proceeds of approximately $390,000. The fourth group of options remains outstanding at March 31, 1996. In connection with the sale of the units and the subsequent exercise of related warrants, the Company granted to the finder warrants to purchase 50,000 shares of the Company's common stock (Finder Warrants). The Finder Warrants expire five years from their issue date and are exercisable at prices ranging from $1.45 to $4.00. Up to 12,500 additional Finder Warrants may be issued at $3.50 per share, depending on the number of the fourth group of 250,000 warrants which are exercised. In November 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 "Accounting for Stock Based Compensation" ("SFAS 123"). SFAS 123 recommends changes in accounting for employee stock based compensation plans and requires certain disclosures with respect to these plans. The Company will adopt SFAS 123 prior to December 31, 1996. 7 8 Note 5 - Commitments and Contingencies - -------------------------------------- On March 11, 1994, the Company was served with a lawsuit filed by a former employee against the Company and its wholly owned subsidiary, HBI, in the Superior Court of the State of California, related to the termination of this employee and seeking relief in the amount of $550,000. At this stage in the proceedings, neither management nor counsel are in a position to evaluate the probable merits of the claim asserted by this former employee. Accordingly, the resolution of this lawsuit could have a material impact on the Company's financial conditions and results of operations. In September 1995, the Company entered into a letter of intent to make royalty payments to certain parties in consideration of certain commitments to the establishment of Gateway. The definitive agreement providing for the payment of these royalties has not been completed due to a dispute with one of the parties. The letter of intent provides for cash royalties of 20% of Gateway's cash flow, as defined, and shares of HemaCare common stock with a value equal to the cash royalty, up to a maximum of 500,000 shares of HemaCare common stock. Royalty payments commence after the Company recovers its initial investment in Gateway, including capital expenditures and operating deficits, and terminate in 2003. In November 1995, the Company terminated its license agreement with Medicorp (Note 1) due to a default by the license holder. The Company also notified Medicorp that the stock purchase warrants (exercisable for 400,000 shares of HemaCare common stock at $5.50 per share) issued by the Company to Medicorp had terminated under their terms, due to the default. Medicorp has denied that it has breached the license agreement and has alleged that the Company is liable for royalties under the license agreement of approximately $425,000 and that its warrants remain outstanding. The Company intends to vigorously defend any legal action which may result from this dispute. In February 1996, the Company terminated an agreement with a vendor, based on an unsatisfactory level of performance of the vendor's product. The vendor is disputing the basis for the termination. The Company intends to vigorously defend any legal action which may result from this dispute, and the resolution of this matter is not expected to have a material impact on the Company's financial position or results of operations. Note 6 - Related Party Information - ---------------------------------- In 1995 and 1994, the Company made a series of personal loans to Joshua Levy totaling $98,307. The proceeds of these loans were used to refinance existing debt which was collateralized by HemaCare stock owned by Dr. Levy. In January 1996, these individual notes were consolidated into a promissory note, collateralized by HemaCare stock owned by Dr. Levy, which accrues interest at a rate equal to the rate the Company pays under its line of credit (Note 3), adjusted quarterly. Interest accrued related to the loans made to Dr. Levy for the quarters ended March 31, 1996 and 1995 was $2,126 and $2,221, respectively. The note requires four annual installment payments of $15,000 due on January 31, with the balance of the principal and accrued interest due on January 31, 2000. The Company received its first annual installment payment of $15,000 in January 1996. Item 2. Mangement's Discussion and Analysis of Financial Condition and - ------- Results of Operations -------------------------------------------------------------- All comparisons within the following discussions are to the previous year. 8 9 In late December 1995, the Gateway Community Blood Program ("Gateway") opened in St. Louis, Missouri. The University of Southern California (USC) Blood Center, located in Los Angeles, California, opened in late February 1996. These new operations are collectively referred to as the "Expansion Operations" in the following discussions. Revenues and Operating Profit - ------------------------- Revenues for the first quarter of 1996, increased 5% ($124,000), as the result of a 2% decrease in blood products revenues, offset by a 17% increase in therapeutic services revenues. The Company's total operating profit as a percentage of sales ("profit margin") decreased to 7% in the first quarter of 1996 from 27% in the comparable quarter of 1995 due to start-up losses incurred by the Expansion Operations. The Company's first quarter gross profit margin before the effect of the Expansion Operations was 27%. Blood Products The 2% ($42,000) decrease in blood products revenues for the first quarter of 1996 was due to decreased unit sales of apheresis platelets (10%) and whole- blood component products (8%), partially offset by price increases for both products. Revenue from Expansion Operations totaled $59,000 for the 1996 quarter. Before the effect of the Expansion Operations, first quarter 1996 operating costs and expenses approximated the 1995 amount, but the 1996 profit margin decreased to 23% as compared to 28% in 1995. The lower 1996 profit margin was due to (1) a higher number of imported products sold in the 1996 quarter and (2) higher fixed costs per sale as a result of a lower volume of units sold. The first quarter loss from Expansion Operations was $559,000. Blood Services Blood services revenues increased 17% ($166,000) in the first quarter of 1996, primarily as a result of a 6% increase in the number of therapeutic procedures performed in Los Angeles and a 26% increase in therapeutic procedures performed in northern Georgia. Both locations also experienced an increase in the price per procedure in 1996. The profit margin on blood services increased to 34% in the first quarter of 1996 from 28% in the comparable period of 1995. This increase was due to (1) lower fixed costs per procedure resulting from the higher number of 1996 procedures and (2) costs incurred in the 1995 quarter associated with the development of a new therapeutic procedure. General and Administrative Expense - ---------------------------------- General and administrative expense increased 29% ($139,000) in the first quarter of 1996. The increase was primarily due to changes in the Company's corporate structure necessary to implement its national expansion strategy, including the addition of a business development department. 9 10 Discontinued Operations - ----------------------- In November 1995, the Company discontinued its Immupath related research and development activities and established a reserve for operating losses and contingent liabilities related to the disposal of the research and development and related specialty plasma businesses. Although the disposal reserve was estimated based on the best available information, actual losses during the disposition period may vary from the estimate. The Company is actively pursuing a sale of the assets of the discontinued operations. (See "Liquidity and Capital Resources".) Liquidity and Capital Resources - ------------------------------- At March 31, 1996, the Company had cash and cash equivalents of $820,000 and working capital of $1,055,000. The Company's blood products and services businesses, other than the Expansion Operations, are profitable and cash flow positive. The Company has a $700,000 line of credit with a commercial bank which is in effect through April 30, 1997. Under the terms of the credit line agreement, the Company may borrow up to 70% of its eligible accounts receivable and must maintain certain operating ratios and achieve defined operating objectives, including maintaining a tangible net worth of not less than $370,000 through September 29, 1996 and $2,000,000 thereafter. In order to comply with the tangible net worth covenant after September 1996, the Company will be required to increase its shareholder equity through the sale of additional equity securities. The Company is currently exploring various financing alternatives, but no assurance can be given that one or more financing transactions adequate to satisfy these covenants will be completed on a timely basis or at all. At March 31, 1996, there were no borrowings outstanding on the credit line. On April 17, 1996 and May 7, 1996 the Company borrowed $200,000 and $100,000, respectively under the credit line. Operating under the terms of its three-year agreements which end in February 1999, the USC Blood Center provides services to USC University Hospital and the USC/Kenneth Norris Comprehensive Cancer Center and Hospital (the "USC Hospitals"). The Company is the primary provider of blood products and services to the USC Hospitals and is entitled to recoup the cost of tenant improvements for the USC Center through surcharges to the Hospitals. Until its operations reach break even, the Company will be required to fund the USC Blood Center's cash flow deficits. Gateway began conducting blood drives in December 1995. Competing in many of the same markets as the American Red Cross, Gateway is currently developing its donor and customer bases. Management believes that Gateway will be able to capture a sufficient portion of the sales of blood products and services in its target markets to achieve profitable operations, however, the success of operations will be dependent on a number of factors and circumstances, many of which will be outside the Company's control. Accordingly, there can be no assurance that profitable operations will be achieved. Until Gateway's operations achieve break even, the Company will be required to fund its working capital needs. Management is evaluating a number of additional expansion opportunities, including blood centers and regional programs similar to the USC Blood Center and Gateway and operations similar to the Company's existing southern California business. However, further expansion will require that the Company obtain additional financing. Various financing arrangements are under consideration, but there can be no assurance that the Company will be able to obtain the funds necessary to finance additional expansion projects. 10 11 Winding down discontinued operations will require funding operating costs, including salaries and benefits and facilities costs, until disposal of these operations is complete. A reserve for disposal, net of estimated proceeds from the disposition of the assets of the discontinued operations, was established in November 1995. Although the reserve was estimated based on the best available information, there can be no assurance that the reserve provided will be sufficient to cover all disposal costs. Approximately $90,000 of the reserve was funded in the first quarter of 1996. In April, one FDA source plasma license was sold subject to FDA approval, and in May 1996, the Company signed a definitive agreement to sell substantially all the tangible assets of the discontinued operations and two of the three remaining FDA source plasma licenses. Closing of the sale is contingent upon obtaining FDA approval to transfer the licenses to the purchaser and certain other conditions. On March 11, 1994, the Company was served with a lawsuit filed by a former employee against the Company and its wholly owned subsidiary, HBI, in the Superior Court of the State of California, related to the termination of this employee and seeking relief in the amount of $550,000. The case is still in the discovery stage in the proceedings and neither management nor counsel are in a position to evaluate the probable merits of the claim asserted by this former employee. Accordingly, the resolution of this lawsuit could have a material impact on the Company's financial condition and results of operations. In February 1996, the Company terminated an agreement with a vendor, based on the inability of the vendor's product to perform to the standards outlined in the agreement. The vendor is disputing the basis for the termination. The Company intends to vigorously defend any legal action which may result from this dispute, and the resolution of this matter is not expected to have a material impact on the Company's financial position or future results of operations. The Company anticipates that positive cash flow from its profitable operations, its cash and investments on hand and funds available under its credit line will be sufficient to provide funding for the anticipated operating deficits of the Expansion Operations, fund the costs of disposing of its discontinued operations and meet its other working capital needs for the next 12 months. PART II. OTHER INFORMATION Item 1. Legal Proceedings - ------- ----------------- See disclosure in Form 10-K for the year ended December 31, 1995. 11 12 Item 6. Exhibits and Reports on Form 8-K - ------- -------------------------------- a. Exhibits 2.1 Asset Purchase Agreement among the Registrant, HemaBiologics, Inc. (a wholly owned subsidiary of the Registrant) and Atopix Pharmaceuticals Corporation, dated May 2, 1996. See also Exhibit 99.1. 10.1 Revolving Credit Agreement between the Registrant and Bank Leumi Le-Israel, B.M., dated April 30, 1996, promissory note and related security agreement. See also Exhibit 99.1. 27 Financial Data Schedule for the quarter ending March 31, 1996. 99.1 Agreement to Furnish Exhibits and Schedules. b. The Company did not file any reports on Form 8-K during the three months ended March 31, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 14, 1996 HEMACARE CORPORATION ---------------------- (Registrant) \s\ Sharon C. Kaiser ------------------------- Sharon C. Kaiser, Vice President, Finance and Chief Financial Officer 12 13 INDEX TO EXHIBITS
Method of Filing ---------------- 2.1 Asset Purchase Agreement among the Registrant, HemaBiologics, Inc. (a wholly owned subsidiary of the Registrant) and Atopix Pharmaceuticals Corporation, dated May 2, 1996. See also Exhbit 99.1 . . . . . . . . . . . . . . . . . . . . . . . Filed herewith electronically 10.1 Revolving Credit Agreement between the Registrant and Bank Leumi Le-Israel, B.M., dated April 30, 1996, promissory note and related security agreement. See Exhibit 99.1. . . . . . . . . . . . . . . . . . . . . Filed herewith electronically 27 Financial Data Schedule for the quarter ending March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . Filed herewith electronically 99.1 Agreement to Furnish Exhibits and Schedules. . . . . . . . Filed herewith electronically
13 14 EX-2.1 2 EXHIBIT 2.1 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the 2nd day of May 1996, by and among HEMABIOLOGICS, INC., a California corporation ("Seller"), HEMACARE CORPORATION, a California corporation of which Seller is a wholly owned subsidiary ("Parent"), and ATOPIX PHARMACEUTICALS CORPORATION, a California corporation ("Buyer"). WITNESSETH: WHEREAS, Seller is the owner of United States Food and Drug Administration ("FDA") establishment license number 0641-004 bearing the FDA registration number 2077790 (the "San Diego Establishment License"), under which Seller conducts operations at 3538 30th Street, San Diego, California 92104 (the "San Diego Center"); WHEREAS, Seller is also the owner of a number of FDA product licenses associated with the San Diego Establishment License, as set forth on Schedule A-1 attached to this Agreement (the "San Diego Product Licenses" and collectively with the San Diego Establishment License, the "San Diego Licenses"); WHEREAS, Seller is the owner of FDA establishment license number 0641-007 bearing the FDA registration number 2050075 (the "Sherman Oaks Establishment License"), under which Seller conducts operations at its headquarters facilities at 4954 Van Nuys Boulevard, Sherman Oaks, California 91403 (the "Sherman Oaks Center"); WHEREAS, Seller is also the owner of a number of FDA product licenses associated with the Sherman Oaks Establishment License, as set forth on Schedule A-2 attached to this Agreement (the "Sherman Oaks Product Licenses" and collectively with the Sherman Oaks Establishment License, the "Sherman Oaks Licenses") (the San Diego Licenses and the Sherman Oaks Licenses are sometimes collectively referred to herein as the "Licenses"); WHEREAS, Seller owns a partially completed biopharmaceutical manufacturing facility in Valencia, California, at which it has certain items of equipment; and WHEREAS, Seller desires to sell to Buyer the Licenses, certain assets of the San Diego Center and certain of the equipment at its Valencia, California facility, and Buyer desires to purchase such assets from Seller and to assume certain liabilities of Seller in connection therewith, on the terms set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1 14 15 1. PURCHASE AND SALE OF PURCHASED ASSETS. Seller hereby agrees to sell, transfer, assign and convey to Buyer at the Closing (as defined below), and Buyer hereby agrees to purchase from Seller at the Closing, all of Seller's right, title and interest in and to: (a) the Licenses; (b) the rights of Seller and/or Parent as lessee to use and obtain title to the seven (7) Haemonetics PCS Ultralite plasma collection machines (serial numbers 92M162, 92M168, 92M151, 92M150, 92M170, 93L172 and 93L164) located at the San Diego Center (the "Haemonetics Equipment"); (c) the rights of Seller under that certain Office Lease dated as of November 17, 1993, between Harold D. and Anne M. West as landlord (who have assigned their rights thereunder to Logan Heights Family Health Center) and Seller as tenant, for the premises in which the San Diego Center currently operates and which expires January 31, 1999 (the "Lease"), which include the rights of Seller to any and all deposits held by the landlord under the Lease; (d) the furniture, fixtures, leasehold improvements and equipment at the San Diego Center described on Schedule B attached hereto (the "Other San Diego Equipment"); (e) those items of materials inventory of the type described on Schedule C attached hereto as shall be on hand at the San Diego Center on the Closing Date (as defined below), with no assurance or guaranty of any minimum inventory to be on hand on the Closing Date; (f) originals or copies of business and regulatory records maintained by Seller with respect to the assets being purchased hereunder and Seller's operations under the Licenses (including donor lists and records, inspection records and FDA-approved Standard Operating Procedures) that are necessary for Buyer to continue the operation of the San Diego Center; (g) the equipment (the "Valencia Equipment") located at Seller's Valencia, California facility, located at 24963 Tibbits Avenue (the "Valencia Premises"), described on Schedules D-1 and D-2 attached hereto; provided, however, that the equipment described on Schedule D-1 (the "Clean Room Equipment") shall be subject to purchase and sale under this Agreement only if (i) it can be removed without damage to the Valencia Premises and without impairing the ability of Seller to sublet the Valencia Premises or (ii) Buyer pays for the costs of restoring the Valencia Premises; (h) all of Seller's rights under the equipment leases, purchase obligations, equipment maintenance and service contracts (unless such maintenance and service contracts are cancellable by Seller without penalty 2 15 16 upon thirty (30) days' notice or less) described on Schedule E-1 attached hereto, and all open contracts and purchase orders for disposable or consumable supplies for the San Diego Center as of the Closing Date (collectively, the "Assumed Contracts"); and (i) all claims and rights against third parties relating to the assets being purchased hereunder, including without limitation manufacturers' and vendors' warranties (to the extent that such warranties are transferable by Seller to Buyer), but excluding claims under any insurance policies maintained by or for the benefit of Seller. The foregoing assets are referred to in this Agreement as the "Purchased Assets." The current equipment lease between Seller or Parent and Haemonetics (the "Haemonetics Lease") provides for the lease of equipment in addition to the Haemonetics Equipment, with respect to which neither the rights nor the obligations of Seller or Parent are being transferred to or assumed by Buyer. The Haemonetics Lease provides for Parent and/or Seller to purchase at specified prices certain minimum quantities of Haemonetics consumable kits (Haemonetics list number 525) in lieu of lease payments, which obligations are stated on an aggregate basis rather than on a per machine basis. As of the date of this Agreement, Seller and Parent have not satisfied these minimum purchase obligations. 2. EXECLUDED ASSETS. The Purchased Assets shall include only those assets described in Section 1 and shall not include any other assets of Seller or Parent (all of which excluded assets are herein referred to as the "Excluded Assets"). Without limiting the description of the Excluded Assets, it is hereby agreed that all of the following shall be Excluded Assets: (a) all cash, accounts receivable, bank accounts and other cash assets; (b) all plasma inventories; (c) the Clean Room Equipment to the extent that it is not subject to purchase and sale under this Agreement as provided in Section 1(g); (d) Seller's rights under the lease for the Valencia Premises; (e) any tangible or intangible assets of Seller or Parent located or held for use at the Sherman Oaks Center other than the Sherman Oaks Licenses; (f) Seller's rights under any insurance policies with respect to any of the Purchased Assets, including without limitation rights to any premiums paid in respect of any period following the Closing Date; and (g) Seller's rights under the contracts related to the operations of the San Diego Center described on Schedule E-2 attached to this Agreement (the "Terminable Contracts"), which will be terminated by Seller on or about the Closing Date. 3 16 17 Buyer acknowledges its awareness and understanding that some of the Terminable Contracts, as designated on Schedule E-2 (the "Essential Contracts"), are essential to the operations and/or regulatory compliance of the San Diego Center. 3. ASSUMED LIABILITIES. Buyer shall assume as of the Closing and perform when due: (a) Seller's obligations to be performed after the Closing Date under or in connection with the Lease, the Assumed Contracts and the Licenses; (b) Seller's obligations under the Haemonetics Lease with respect to the Haemonetics Equipment, as it shall be amended by the Haemonetics Amendment as contemplated by Section 10(a)(v); and (c) all trade payables of or relating to the San Diego Center in respect of the period following the Closing Date. The foregoing obligations and liabilities are referred to in this Agreement as the "Assumed Liabilities." Buyer shall not assume or be bound by any duties, obligations or liabilities of Seller in existence on the Closing Date of any kind or nature, known, unknown, contingent or otherwise, other than the Assumed Liabilities. 4. PURCHASE PRICES AND TERMS OF PAYMENT; PAYMENT OF OUTSTANDING OBLIGATION BY BUYER TO SELLER. (a) Purchase Prices. The purchase price for the Purchased Assets other than the Valencia Equipment and the Sherman Oaks Licenses (the "San Diego Assets") shall be One Hundred Sixteen Thousand Dollars ($116,000) (the "San Diego Purchase Price"), of which Twenty-One Thousand Dollars ($21,000) is allocated to the San Diego Assets described in Sections 1(d) and 1(e) and Ninety-Five Thousand Dollars ($95,000) is allocated to the other San Diego Assets. The purchase price for the Sherman Oaks Licenses (the "Sherman Oaks Purchase Price") shall be Twenty-Five Thousand Dollars ($25,000). The purchase price for the Valencia Equipment (the "Valencia Purchase Price") shall be Two Hundred Thousand Dollars ($200,000), and there shall be no deduction from the Valencia Purchase Price if the Clean Room Equipment becomes part of the Excluded Assets. The San Diego Purchase Price, the Sherman Oaks Purchase Price and the Valencia Purchase Prices are collectively referred to in this Agreement as the "Purchase Price." Each party agrees to report the purchase and sale of the Purchased Assets for federal and state tax purposes in accordance with the allocation of the Purchase Price set forth herein. (b) Payment of San Diego and Sherman Oaks Purchase Prices. Each of the San Diego Purchase Price and the Sherman Oaks Purchase Price shall be payable by certified or bank cashier's 4 17 18 check at the Closing (or at the Additional Closing (as defined below) in the case of the Sherman Oaks Purchase Price as provided in Section 13(c) if on or before the Closing Date the FDA has not amended the Sherman Oaks Licenses to give effect to their transfer from Seller to Buyer). (c) Payment of Valencia Purchase Price and Security Agreement. The Valencia Purchase Price shall be evidenced by a negotiable promissory note (the "Note") delivered at Closing substantially in the form attached hereto as Exhibit 1 and otherwise satisfactory in form and substance to Seller. The Note and the other obligations of Buyer to Seller under this Agreement with respect to the Valencia Equipment will be secured by a first in priority security interest in the Valencia Assets, which shall be granted by Buyer to Seller pursuant to a Security Agreement (the "Security Agreement") entered into at the Closing substantially in the form attached hereto as Exhibit 2 and otherwise satisfactory in form and substance to Seller. Prior to the Closing, Buyer and Seller shall execute a financing statement on Form UCC-1 in form and substance satisfactory to Buyer (the "Financing Statement"), which Financing Statement shall be recorded in the Office of the Secretary of State of California prior to the Closing Date. (d) Payment of Outstanding Balance. Buyer remains indebted to Seller in the amount of Fourteen Thousand Dollars ($14,000) for prior plasma collection and storage services. This balance shall be paid in cash on the earlier of the Closing Date and June 30, 1996. If paid at the Closing, this payment shall be made by certified or bank cashier's check. Upon the payment in full of this balance, Seller shall deliver possession to Buyer of the plasma so collected and stored by Seller. Any payments made by Buyer to Seller for prior plasma collection and storage services, including a $40,000 payment made in March 1996 and the $14,000 balance referenced above shall not be refundable in the event of the termination of this Agreement for any reason. 5. DELIVERY OF VALENCIA EQUIPMENT. At the Closing, Seller shall deliver possession of the Valencia Equipment to Buyer at the Valencia Premises. Buyer agrees immediately thereafter to accept delivery of the Equipment and to remove it, at Buyer's sole risk and expense, from such location. Notwithstanding any other provision of this Agreement or the Security Agreement to the contrary, all risk of loss of the Valencia Equipment shall pass to and shall be assumed by Buyer as of the Closing. If the Valencia Equipment is not removed by Buyer from the Valencia Premises within fifteen (15) days after the Closing Date, Buyer shall pay to Seller One Hundred and 00/100 Dollars ($100.00) per day for each day thereafter until the date of removal of all of the Valencia Equipment from the Valencia Premises. Seller may withhold delivery of possession of the Valencia Equipment pending the satisfaction of any amounts due from Buyer under this Section. 6. EQUIPMENT SOLD "AS IS". Seller is selling the Haemonetics Equipment, the Other San Diego Equipment and the Valencia Equipment (collectively, the "Equipment") and Buyer agrees to accept the Equipment, "As Is." Buyer represents and warrants that it has had sufficient opportunity to inspect the Equipment to its satisfaction. WITH RESPECT TO THE EQUIPMENT, SELLER HEREBY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS 5 18 19 FOR A PARTICULAR PURPOSE. SELLER FURTHER HEREBY DISCLAIMS ANY AND ALL LIABILITY FOR CONSEQUENTIAL AND INCIDENTAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH ANY CLAIM WITH RESPECT TO THE EQUIPMENT, INCLUDING BUT NOT LIMITED TO CLAIMS OF NEGLIGENCE, STRICT LIABILITY IN TORT OR BREACH OF CONTRACT. 7. TRANSFER OF LICENSES; ADDITIONAL AUTHORIZATIONS. (a) Transfer of Licenses. Promptly following the execution of this Agreement, Seller shall prepare and submit one or more applications to the FDA seeking amendments to the Licenses for the assignment and transfer of the Licenses to Buyer. Seller shall request the FDA to register the assignment and transfer of the San Diego Licenses and the Sherman Oaks Licenses as of the same effective date. Buyer shall cooperate with Seller in the preparation and submission of these applications as requested by Seller. Seller agrees to use commercially reasonable efforts to seek the transfer and assignment of the Licenses to Buyer as soon as possible. If the FDA amends the Licenses to give effect to the transfer of the Licenses from Seller to Buyer and this Agreement is subsequently terminated prior to Closing for any reason, Buyer and Seller shall use their best efforts to cause the FDA to amend the Licenses to transfer them back to Seller from Buyer. From the date of any amendment of the Licenses giving effect to their transfer from Seller to Buyer until the Closing, Buyer shall conduct no operations under any of the Licenses. (b) Buyer's Responsibilities for Additional Authorizations. Buyer acknowledges and agrees that it shall have the sole responsibility to seek, obtain or make any and all licenses, permits, qualifications, registrations or other authorizations (other than the Licenses) from, or filings with, governmental, regulatory or accreditation authorities necessary for it to conduct operations under the Licenses or otherwise, including without limitation applications to the FDA for the relocation of the Sherman Oaks Licenses to a location of Buyer upon or after the Closing ("Additional Authorizations"). The purchase and sale of the Purchased Assets is not and shall not be conditioned in any way upon the receipt by Buyer of any Additional Authorizations, and Seller hereby makes no representation or warranty concerning the need for any Additional Authorizations or the ability of Buyer to obtain any Additional Authorizations. Notwithstanding any other provision hereof to the contrary, Buyer shall have no right to conduct any operations under the Sherman Oaks License in any facility of Seller or Parent, including without limitation the Sherman Oaks Center. Buyer hereby acknowledges that Seller has disclosed to it that Seller has permitted its State of California Biologics License and CLIA certificate for the Sherman Oaks Center to expire. 8. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT. Seller and Parent hereby jointly and severally represent and warrant to Buyer that: (a) Each of Seller and Parent is a corporation duly organized and validly existing in good standing under the laws of California and, in the case of Seller, with the power to own the Purchased Assets. 6 19 20 (b) Each of Seller and Parent has the power and authority to execute, deliver and perform this Agreement. Such execution, delivery and performance have been duly authorized by all necessary action on the part of each of Seller and Parent, do not and will not require any approvals on behalf of either Seller or Parent not heretofore obtained and do not and will not contravene the organizational or charter documents of either Seller or Parent or conflict with, result in a breach of, or entitle any party (with due notice or lapse of time or both) to terminate, accelerate or call a default with respect to, or result in the creation or imposition of any lien, charge, encumbrance or claim of any nature whatsoever upon any of the Purchased Assets pursuant to, any agreement or instrument to which either Seller or Parent is a party or by which either Seller or Parent or any of their respective properties or assets is bound, subject to the procurement of any consents otherwise contemplated hereby. Neither Seller nor Parent is a party to, or subject to or bound by, any judgment, injunction or decree of any court or governmental authority which may restrict or interfere with the performance by it of this Agreement or the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Seller and Parent will not result in any violation by either Seller or Parent of any law, rule or regulation applicable to it or the Purchased Assets. This Agreement is, and each of the other instruments and documents to be executed by either Seller or Parent hereunder will be, a valid and binding obligation of such party enforceable in accordance with its terms. (c) Seller has and will convey to Buyer, good and marketable title to all the Purchased Assets, subject to no mortgage, security interest, pledge, lien, conditional sales agreement, claim, restriction, reservation, covenant, encumbrance, charge, restraint on transfer, or any other title defect of any nature whatsoever, except for the Assumed Liabilities and, as of the date of this Agreement but not as of the Closing Date, defaults under the Haemonetics Lease. There are no liabilities of Seller with respect to any of the Purchased Assets other than the Assumed Liabilities for which Buyer will be responsible or to which the Purchased Assets will be subject upon their sale, assignment, transfer and conveyance by Seller to Buyer. (d) Except for the amendment of the Licenses by the FDA to give effect to the transfer of the Licenses from Seller to Buyer, no consent, approval, authorization or order of, or registration, qualification or filing with, any court, regulatory authority or other governmental body is required for the execution, delivery and performance by Seller of this Agreement, and the other instruments and documents required or contemplated hereby. No consent of any party is required for the execution, delivery and performance by Seller of this Agreement or such other instruments and documents, except for the consents of the landlord under the Lease and the consent of Haemonetics to the Haemonetics Amendment (as contemplated by Section 10(a)(v). (e) No material investigation or review by any governmental entity with respect to any of the Purchased Assets is pending or, to the best knowledge of Seller's and Parent's respective senior officers, threatened, nor has any governmental entity indicated to either Seller or Parent an intention to conduct such an investigation or review; and there is no action, suit or 7 20 21 proceeding pending or, to the best knowledge of Seller's and Parent's respective senior officers, threatened against or affecting any of the Purchased Assets at law or in equity, or before any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, which either singly or in the aggregate would, if adversely determined, have a material adverse effect on the ownership, possession or use of the Purchased Assets by Buyer after the Closing, or which would impair Seller's ability to perform this Agreement or the transactions contemplated hereby. To the best knowledge of the respective senior officers of Seller and Parent, the operations of neither the San Diego Center nor the Sherman Oaks Center is being conducted in violation of any applicable law, ordinance, regulation, decree or order or any court or governmental entity. (f) To the best knowledge of Seller's and Parent's respective senior officers, the Lease and each of the Assumed Contracts is valid and binding upon each party thereto and is in full force and effect, there is no material default or claim of default under any provision thereof and no event has occurred which, with the passage of time or the giving of notice (or both), would constitute a material default by Seller (or, to the best knowledge of Seller's and Parent's respective senior officers, any other party thereto) under any provision thereof (other than the Haemonetics Lease with respect to which Seller and/or Parent is currently in default), or would permit modification, acceleration or termination of the Lease or any Assumed Contract by any other party thereto or by Seller (except for the Haemonetics Lease). (g) Seller is not a "foreign person" as that term is defined for purposes of the Internal Revenue Code of 1986, as amended. 9. REPRESENTAITONS AND WARRANTIES OF BUYER. Buyer hereby represents and warrants to Seller and Parent that: (a) Buyer is a corporation duly organized and validly existing in good standing under the laws of California with the power to acquire and own the Purchased Assets. (b) Buyer has the power and authority to execute, deliver and perform this Agreement. Such execution, delivery and performance have been duly authorized by all necessary action on the part of Buyer, do not and will not require any approvals on behalf of Buyer not heretofore obtained and do not and will not contravene the organizational or charter documents of Buyer or conflict with, result in a breach of, or entitle any party (with due notice or lapse of time or both) to terminate, accelerate or call a default with respect to any agreement or instrument to which Buyer is a party or by which Buyer or any of its properties or assets is bound. Buyer is not a party to, or subject to or bound by, any judgment, injunction or decree of any court or governmental authority which may restrict or interfere with the performance by it of this Agreement or the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Buyer will not result in any violation by Buyer of any law, rule or regulation applicable to Buyer. This Agreement is, and each of the other instruments and documents to be executed by Buyer hereunder will be, a valid and binding obligation of Buyer enforceable in accordance with its terms. 8 21 22 (c) All information furnished or to be furnished by Buyer to Seller or the FDA in connection with seeking the amendments of the Licenses as contemplated by this Agreement is or will be true, correct and complete in all material respects. 10. COVENANTS OF THE PARTIES. (a) Seller's Covenants. Seller (and/or Parent to the extent provided below) covenants and agrees with Buyer that between the date of this Agreement and the Closing Date: (i) Seller will conduct the business of the San Diego Center in the ordinary course and substantially in the same manner as heretofore conducted, will perform all acts to be performed by it pursuant to this Agreement and will refrain from taking or omitting to take any action that would violate Seller's and Parent's representations and warranties hereunder or render them inaccurate as of the date hereof or the Closing Date or that in any way would prevent the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, if the FDA has amended the Licenses giving effect to the transfer of the Licenses from Seller to Buyer prior to the Closing, Seller shall cease all operations at the San Diego Center and the Sherman Oaks Center that are dependent upon the Licenses. (ii) Seller will give prompt notice to Buyer of any breach or default (or notice thereof) of the Lease or any Assumed Contract or any other event that may have a material adverse effect on the Purchased Assets following the Closing Date. (iii) Seller will permit Buyer and its authorized representatives at reasonable times to have access to and to examine the tangible Purchased Assets. (iv) Seller will use its best efforts to obtain the consents of other parties required for the consummation of the transactions contemplated by this Agreement and to cause the FDA to transfer the Licenses from Seller to Buyer. (v) Seller and/or Parent will use their best efforts to enter into a modification of the Haemonetics Lease (the "Haemonetics Amendment") providing for the waiver and release of all prior defaults under the Haemonetics Lease with respect to the Haemonetics Equipment and severable future rights and obligations with respect to the Haemonetics Equipment on terms either (A) no more onerous than those applicable to the other equipment leased thereunder or (B) otherwise reasonably acceptable to Buyer. (vi) Seller and Parent will promptly furnish Buyer with the information necessary to prepare the notice contemplated by Section 10(b)(v), including all names and businesses addresses used by Seller within the last three years and the location of all assets to be transferred under this Agreement. 9 22 23 (b) Buyer's Covenants. Buyer covenants and agrees with Seller that between the date of this Agreement and the Closing Date (or in the case of clause (ii) below, the date of payment in full of the Note): (i) Buyer will perform all acts to be performed by it pursuant to this Agreement and will refrain from taking or omitting to take any action that would violate its representations and warranties hereunder or render them inaccurate as of the date hereof or the Closing Date or that in any way would prevent the consummation of the transactions contemplated hereby. (ii) Buyer will use its best efforts to complete the Private Placement as soon as practicable. (iii) Buyer will use its best efforts to cause the FDA to amend the Licenses to give effect to the transfer of the Licenses from Seller to Buyer. (iv) Buyer will arrange to contract with vendors, as of the Closing Date, for the provision of all goods and services of the types provided to Seller under the Essential Contracts. (v) Buyer will promptly give notice, in compliance with Division 6 of the California Commercial Code, of the transfer contemplated by this Agreement. Notwithstanding the compliance by the parties with the requirements of Division 6 of the California Commercial Code, none of the parties shall be estopped or prevented from asserting as a bar or defense to any action or proceeding brought under such law that such law does not apply to the sale contemplated by this Agreement. (c) Additional Covenant of Buyer to Maintain Records. Buyer covenants and agrees with Seller to maintain all records described in Section 1(f) without alteration for such periods of time as shall be necessary to satisfy any federal, state or local legal or regulatory requirements applicable to Seller or Buyer, and to permit Seller to have access to any and all such transferred records at reasonable times for the purpose of demonstrating compliance by Seller with such requirements. 11. CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer to purchase the Purchased Assets at the Closing is subject to the satisfaction of the following conditions on or before the Closing Date: (a) Each representation and warranty of Seller and Parent made in or pursuant to this Agreement shall be true and correct in all material respects as of the date made and at and as of the Closing Date, with the same force and effect as though made at and as of the Closing Date, and Buyer shall have received from appropriate officers of each of Seller and Parent a certificate or certificates to such effect, in form and substance reasonably satisfactory to Buyer. 10 23 24 (b) Each of Seller and Parent shall have performed and complied with all the obligations, agreements and conditions required by this Agreement to be performed or complied with by it at or prior to the Closing, and Buyer shall have received from appropriate officers of each of Seller and Parent a certificate or certificates to such effect, in form and substance reasonably satisfactory to Buyer. (c) There shall be no suit, action or other proceeding pending or threatened before any court or before or by any governmental agency in which it is sought to restrain, prohibit, invalidate or set aside in whole or in part the consummation of this Agreement or the transactions contemplated hereby or to obtain substantial damages in connection therewith. (d) Seller and/or Parent shall have obtained the contractual consents referred to in Section 8(d) or otherwise required for the sale and assignment to Buyer of the Purchased Assets or for the consummation of the transactions contemplated hereby. (e) The Haemonetics Amendment shall have been entered into and shall be in full force and effect. (f) The FDA shall have amended the San Diego Licenses to give effect to their transfer from Seller to Buyer. (g) The notice contemplated by Section 10(b)(v) shall have been in the manner and within the time periods required by Division 6 of the California Commercial Code. 12. CONDITIONS TO OBLIGATIONS OF SELLER. The obligation of Seller to sell the Purchased Assets at the Closing is subject to the satisfaction of the following conditions on or before the Closing Date: (a) Each representation and warranty of Buyer made in or pursuant to this Agreement shall be true and correct in all material respects as of the date made and at and as of the Closing Date, with the same force and effect as though made at and as of the Closing Date, and Seller and Parent shall have received from appropriate officers of Buyer a certificate or certificates to such effect, in form and substance reasonably satisfactory to Seller. (b) Buyer shall have performed and complied with all the obligations, agreements and conditions required by this Agreement to be performed or complied with by it at or prior to the Closing, and Seller and Parent shall have received from appropriate officers of Buyer a certificate or certificates to such effect, in form and substance reasonably satisfactory to Seller and Parent. (c) There shall be no suit, action or other proceeding pending or threatened before any court or before or by any governmental agency in which it is sought to restrain, prohibit, invalidate or set aside in whole or in part the consummation of this Agreement or the transactions contemplated hereby or to obtain substantial damages in connection therewith. 11 24 25 (d) Seller and/or Parent shall have obtained the contractual consents referred to in Section 8(d) or otherwise required for the sale and assignment to Buyer of the Purchased Assets or for the consummation of the transactions contemplated hereby. (e) The Haemonetics Amendment shall have been entered into and shall be in full force and effect. (f) The FDA shall have amended the San Diego Licenses to give effect to their transfer from Seller to Buyer. (g) The Financing Statement shall have been duly and properly recorded by the Office of the Secretary of State of California sufficient to perfect the security interest to be granted under the Security Agreement as a first in priority security interest in the Valencia Equipment, and Seller shall have received a copy of the recorded Financing Statement, which in form and substance shall be satisfactory to Seller and its counsel. (h) The notice contemplated by Section 10(b)(v) shall have been given in the manner and within the time periods required by Division 6 of the California Commercial Code. 13. CLOSING. Except as provided in Section 13(c) below, the transfers and deliveries to be made pursuant to this Agreement (the "Closing") shall take place at the offices of Sanders, Barnet, Goldman, Simons & Mosk, A Professional Corporation, at 4:00 p.m. on such date designated by Seller within five (5) days after the last to occur of (i) the date of the consent of the landlord for the assignment of the Lease to Buyer, (ii) the date of the last contractual consent referred to in Section 8(d) or otherwise required for the sale and assignment to Buyer of the Purchased Assets or for the consummation of the transactions contemplated hereby, (iii) the date on which the parties receive notice of the amendment of the San Diego Licenses by the FDA giving effect to the transfer of the San Diego Licenses from Seller to Buyer and (iv) the effective date of the Haemonetics Amendment, or such other place, time or date as the parties shall agree upon in writing. The date on which the Closing is to occur is herein referred to as the "Closing Date". At the Closing, the parties shall deliver the following documents or such documents in substitution therefor as are satisfactory to the recipient: (a) Deliveries by Seller. Seller (and/or Parent, as the case may be) shall deliver to Buyer: (i) Bills of sale, instruments of transfer, assignment and conveyance, and other instruments in form and substance satisfactory to Buyer and sufficient to convey, transfer, and assign to Buyer and effectively vest in Buyer all right, title and interest in and to the Purchased Assets and good and marketable title to the Purchased Assets subject only to exceptions referred to on the Schedules hereto; 12 25 26 (ii) All required consents to assignments of the Lease and the Assumed Contracts, including the Haemonetics Amendment; (iii) The amendment of the Licenses giving effect to the transfer of the Licenses from Seller to Buyer; (iv) The Security Agreement; (v) Certified copies of the resolutions, duly adopted by the Board of Directors of Seller, that shall be in full force and effect at the time of delivery, authorizing the execution, delivery and performance of this Agreement; (vi) The certificates executed by officers of Seller and Parent provided for in Sections 11(a) and 11(b); (vii) Possession of the Purchased Assets; and (viii) Such other instruments and documents as may be reasonably requested by, and in form and substance satisfactory to, Buyer. (b) Deliveries by Buyer. Buyer shall deliver to Seller (and/or Parent, as the case may be): (i) Certified or bank cashier's checks in the aggregate amount required by Sections 1(g)(ii), 4(a), 4(d) and 16; (ii) The Note and the Security Agreement; (iii) Certified copies of resolutions, duly adopted by the Board of Directors of Buyer that shall be in full force and effect at the time of delivery, authorizing the execution, delivery and performance of this Agreement, the Note and the Security Agreement; (iv) The certificates executed by officers of Buyer provided for in Sections 12(a) and 12(b); and (v) Such other instruments and documents as may be reasonably requested by, and in form and substance satisfactory to, Seller. (c) Delayed Closing or Termination of Agreement with Respect to Sherman Oaks Licenses. Notwithstanding any other provision of this Agreement to the contrary, if the FDA has not amended the Sherman Oaks Licenses to give effect to their transfer from Seller to Buyer on or before the Closing Date, the sale, purchase and transfer of the Sherman Oaks Licenses shall be excluded from the Closing; provided, however, that the application to the FDA for the amendment of the Sherman Oaks Licenses to effect their transfer shall remain pending and the obligations of the parties hereunder with respect to the sale, purchase and transfer 13 26 27 of the Sherman Oaks Licenses hereunder shall survive the Closing. Within five (5) days following the FDA's amendment of the Sherman Oaks Licenses to give effect to their transfer from Seller to Buyer, the parties shall conduct an additional closing (the "Additional Closing") at which Seller shall deliver the items described in clauses (iii), (v), (vi), (vii) and (viii) of Section 13(a) with respect to the Sherman Oaks Licenses and Buyer shall deliver the items described in clauses (i), (iii), (iv) and (v) of Section 13(b) with respect to the Sherman Oaks Licenses. Subject to the foregoing, the date, time and place of the Additional Closing shall be mutually agreed upon by Seller and Buyer. If the FDA has not amended the Sherman Oaks Licenses to give effect to their transfer from Seller to Buyer within ninety (90) days following the Closing, either Seller or Buyer may terminate its obligations hereunder with respect to the sale, purchase and transfer of the Sherman Oaks Licenses (except for the provisions of Sections 15, 16, 19 and 20, which shall continue in effect) by written notice given to the other party. In the event of any termination permitted by the preceding sentence, no party hereto shall have any liability or obligation pursuant to this Agreement to any other party hereto, except for liabilities or obligations arising under Sections 15, 16, 19 and 20. Without prejudice to any other rights or remedies which it may have, either Seller or Buyer may, prior to the Additional Closing, forthwith abandon the transactions contemplated hereby to be consummated at the Additional Closing by written notice to the other party if there shall have been a failure of condition or a breach of any representation or warranty contained herein by the other party (including Parent in the case of Seller) which failure or breach is not cured or cannot reasonably be cured prior to the Additional Closing, or if a default shall be made by any other party in the timely performance of any of that party's agreements or obligations contained herein. 14. TERMINATION. This Agreement (except for the provisions of Sections 4(d), 7(a), 15, 16, 19, 20 and 22, which shall continue in effect) and the transactions contemplated hereby may be terminated and abandoned at any time prior to the Closing Date (i) by mutual written agreement of Buyer and Seller, (ii) by Buyer or Seller upon written notice given to the other party after entry of a restraining order or injunction restraining or prohibiting the sale or purchase of the Purchased Assets, or (iii) by Buyer or Seller upon written notice to the other party if the Closing shall not have taken place by August 15, 1996, other than by reason of a matter within the control of the party asserting such termination. In the event of any termination permitted by the preceding sentence, no party hereto shall have any liability or obligation pursuant to this Agreement to any other party hereto, except for liabilities or obligations arising under Sections 4(d), 7(a) 15, 16, 19, 20 and 22. Without prejudice to any other rights or remedies which it may have, either Seller or Buyer may, prior to the Closing, forthwith abandon the transactions contemplated hereby to be consummated at the Closing by written notice to the other party if there shall have been a failure of condition or a breach of any representation or warranty contained herein by the other party (including Parent in the case of Seller) which failure or breach is not cured or cannot reasonably be cured prior to the Closing, or if a default shall be made by any other party in the timely performance of any of that party's agreements or obligations contained herein. 14 27 28 15. SURVIVAL AND INDEMNIFICATION. (a) All representations, warranties, covenants, indemnities and agreements contained in or made pursuant to this Agreement or in any exhibit, certificate, document or statement delivered pursuant hereto shall survive the transfer of the Purchased Assets, subject only to applicable statutes of limitations. (b) Buyer hereby agrees to protect, defend, indemnify and hold harmless Seller, Parent and the respective directors, officers, employees and agents of Seller and Parent from, and to reimburse such parties for, any loss, cost, expense, damage, liability or claim (including, without limitation, any and all fees, costs and expenses whatsoever, which fees, costs and expenses shall be paid as incurred, reasonably incurred by any and all such parties and its or their counsel in investigating, preparing for, defending against, or providing evidence, producing documents or taking any other action in respect of any threatened or asserted claim) arising out of, based upon or resulting from (i) the inaccuracy as of the date hereof or as of the Closing Date of any representation or warranty of Buyer which is contained in or made pursuant to this Agreement; (ii) Buyer's breach of or failure to perform any of its covenants or agreements contained in or made pursuant to this Agreement; or (iii) any Assumed Liability. (c) Seller and Parent jointly and severally hereby agree to protect, defend, indemnify and hold harmless Buyer and its directors, officers, employees and agents from, and to reimburse such parties for, any loss, cost, expense, damage, liability or claim (including, without limitation, any and all fees, costs and expenses whatsoever, which fees, costs and expenses shall be paid as incurred, reasonably incurred by any and all such parties and its or their counsel in investigating, preparing for, defending against, or providing evidence, producing documents or taking any other action in respect of any threatened or asserted claim) arising out of, based upon, or resulting from (i) the inaccuracy as of the date hereof or as of the Closing Date of any representation or warranty of either Seller or Parent which is contained in or made pursuant to this Agreement; (ii) the breach of or failure to perform any of the covenants or agreements of either Seller or Parent contained in or made pursuant to this Agreement; or (iii) any liability or obligation of Seller that is not expressly assumed by Buyer under or pursuant to this Agreement asserted after the Closing and attributable to the period prior to the Closing. (d) If at any time an indemnified party hereunder learns of any claim or basis of any claim which could result in liability of any indemnifying party under its indemnification obligations hereunder, the indemnified party shall give to the indemnifying party written notice within such time as is reasonable under the circumstances, describing such claim in reasonable detail. If such claim is a third party claim, the indemnifying party shall have sole control over, and shall assume all expense with respect to, the defense or settlement of such claim; provided, however, that: (i) the indemnified party or parties (represented by Buyer or Seller, as the case may be) shall have the right to approve of legal counsel selected by the indemnifying party, which approval shall not be unreasonably withheld; (ii) the indemnified party or parties shall be entitled to participate in the defense of such 15 28 29 claim and to employ counsel at its or their own expense to assist in the handling of such claim; and (iii) the indemnifying party shall obtain the prior written approval of the indemnified party or parties, which shall not be unreasonably withheld, before entering into any settlement, adjustment or compromise of such claim or ceasing to defend against such claim, if pursuant thereto or as a result thereof there would be imposed injunctive or other equitable relief against the indemnified party or parties. If the indemnifying party does not assume control over the defense or settlement of such claim as provided above, the indemnified party or parties shall have the right to defend and settle the claim in such manner as it or they may deem appropriate at the cost and expense of the indemnifying party, and the indemnifying party will promptly reimburse the indemnified party or parties therefor. 16. SALES TAXES; EXPENSES OF TRANSFER AND LEGAL FEES. All sales or use taxes payable in connection with the transactions contemplated hereby shall be paid by Buyer, and Buyer shall pay to Seller together with its payment of the Purchase Price any and all amounts required to be collected or remitted by Seller in respect of such taxes. The reasonable fees and expenses of Seller's counsel in preparing this Agreement and the Terms Sheet leading to the execution of this Agreement and consummating the transactions contemplated hereby, and the reasonable fees and expenses of Buyer's counsel in reviewing this Agreement and consummating the transactions contemplated by this Agreement, shall be borne equally by the parties, and each party shall promptly remit to the other its portion of such fees and expenses upon presentation of an invoice to the obligated party. Except as set forth above, each party shall pay all costs and expenses, including without limitation the fees of counsel and all brokers' or finders' fees, incurred by or on behalf of such party in connection with this Agreement and the transactions contemplated hereby. Without limiting the foregoing, neither Seller nor Parent shall have any liability or obligation to Buttonwood Financial Corporation, which has acted as an adviser to Buyer in connection with this Agreement and the transactions contemplated hereby. If any litigation or other proceeding between the parties is commenced in connection with or related to this Agreement, the losing party shall pay the reasonable attorneys' fees and costs and expenses of the prevailing party incurred in connection therewith. 17. ENTIRE AGREEMENT. This Agreement, the schedules and exhibits hereto and the other agreements, documents and instruments delivered or to be delivered pursuant hereto or contemplated hereby set forth the entire understanding of the parties with respect to the subject matter hereof, supersede any and all prior agreements, arrangements and understandings, and any and all contemporaneous oral agreements, arrangements and understandings, with respect to the subject matter hereof. This Agreement may be modified only by a written instrument duly executed by each party affected by any such modification. No breach of any covenant, agreement, warranty or representation made herein or in any such schedules, exhibits, agreements, documents or instruments shall be deemed waived unless expressly waived in writing by the party who might assert such breach. 18. COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed to constitute an original. 16 29 30 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS RULES AND LAWS. 20. NOTICES. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, return receipt requested, or delivered in person or by commercial courier against receipt or by facsimile copy with confirmed receipt, as follows: If to Seller or Parent: HemaBiologics, Inc. or HemaCare Corporation (as the case may be) 4954 Van Nuys Boulevard Sherman Oaks, California 91403 Attention: Hal I. Lieberman, President and Chief Executive Officer Telecopier: (818) 386-6522 Telephone: (818) 986-3833 with a copy to: Sanders, Barnet, Goldman, Simons & Mosk A Professional Corporation 1901 Avenue of the Stars, Suite 850 Los Angeles, California 90067-6078 Attention: Gordon R. Kanofsky, Esq. Telecopier: (310) 553-2435 Telephone: (310) 551-8407 If to Buyer: Atopix Pharmaceuticals Corporation 5 Park Plaza, Suite 600 Irvine, California 92714 Attention: William Pollack, President Telecopier: (714) 851-1845 Telephone: (714) 622-1845 17 30 31 with a copy to: Boldra & Klueger 15760 Ventura Boulevard, Suite 1900 Attention: Robert Klueger, Esq. Telecopier: (818) 784-9747 Telephone: (818) 784-9601 or to such other address as either party shall have furnished in writing in accordance with the provisions of this Section. Any notice or other communication mailed by registered or certified mail shall be deemed given at the earlier of the time of its receipt by the addressee or three days after the time of mailing thereof. Any notice or other communications given by any other means shall be deemed given at the time of its receipt by the addressee. 21. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, legal representatives and assigns, but this Agreement may not be assigned by either Buyer or Seller without the written consent of the other, except that Seller may assign any of its rights and may delegate any of its duties hereunder to Parent. 22. DISCLOSURES. Without the prior written consent of Seller, Buyer shall not prior to the Closing make any public disclosure of or relating to this Agreement or the transactions contemplated hereby, which consent shall not be unreasonably withheld with respect to disclosures proposed to be made in securities offerings documents in connection with the Private Placement. Notwithstanding the foregoing, neither Seller nor Parent nor their respective officers, directors, employees and agents shall have any responsibility for any alleged or proven misstatements, omissions or misleading statements contained in such offering documents, which shall be the sole responsibility of Buyer. 23. HEADINGS. The headings of the Sections herein are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement. 24. SEVERABILITY. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Agreement will not be affected thereby and the parties will use all reasonable efforts to substitute one or more valid, legal and enforceable provisions which, insofar as practicable, implement the purpose and intent hereof. To the extent permitted by applicable law, each party waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 25. FURTHER ASSURANCES. After the Closing, for no further consideration but without incurring any material expense, each of Seller and Parent shall perform all such other action (including, without limitation, the use of Seller's best efforts to achieve transfer of registrations, permits, approvals and the like as contemplated by this Agreement) and shall execute, acknowledge and 18 31 32 deliver all such assignments, transfers, consents and other documents as Buyer or its counsel may reasonably request to vest in Buyer, and protect Buyer's right, title and interest in, and enjoyment of, the Purchased Assets. Buyer shall similarly perform all such other action and shall execute, acknowledge and deliver all such other documents as Seller, Parent or their counsel may reasonably request to perfect and protect Seller's and/or Parent's rights under this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. SELLER: HEMABIOLOGICS, INC. By: /s/ Hal I. Lieberman ------------------------- Hal I. Lieberman, President and Chief Executive Officer PARENT: HEMACARE CORPORATION By: /s/ Hal I. Lieberman --------------------------- Hal I. Lieberman, President and Chief Executive Officer BUYER: ATOPIX PHARMACEUTICALS CORPORATION By: /s/ William Pollack -------------------------- William Pollack, President 19 32 33 LIST OF EXHIBITS AND SCHEDULES Exhibit 1 Form of Promissory Note Exhibit 2 Form of Security Agreement Schedule A-1 San Diego Product Licenses Schedule A-2 Sherman Oaks Product Licenses Schedule B Other San Diego Equipment Schedule C Description of Materials Inventory-San Diego Center Schedule D-1 Valencia Clean Room Equipment Schedule D-2 Other Valencia Equipment Schedule E-1 Long-Term Assumed Contracts Schedule E-2 Terminable Contracts 20 33 EX-10.1 3 34 [LOGO] BANK LEUMI LE ISRAEL B.M. CALIFORNIA
LOAN AGREEMENT - --------------------------------------------------------------------------------------------------------- PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS $700,000.00 04-30-1996 04-30-1997 2595 04A0 030 232587 RXB - --------------------------------------------------------------------------------------------------------- References in the shaded area are for lender's use only and do not limit the applicability of this document to-any particular loan or item. - ---------------------------------------------------------------------------------------------------------
BORROWER: HEMACARE CORPORATION LENDER: BANK LEUMI LE-ISRAEL, B.M. 4954 VAN NUYS BLVD., #201 8383 WILSHIRE BLVD. STE. 400 SHERMAN OAKS, CA 91403 BEVERLY HILLS, CA 90211 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS LOAN AGREEMENT BETWEEN HEMACARE CORPORATION ("BORROWER") AND BANK LEUMI LE-ISRAEL, B.M. ("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS AND CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER FINANCIAL ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS THE "LOAN" AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES THAT: (A) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS AGREEMENT; (B) THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY LENDER AT ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE JUDGMENT AND DISCRETION; AND (C) ALL SUCH LOANS SHALL BE AND SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS AGREEMENT. TERM. This Agreement shall be effective as of APRIL 30, 1996, and shall continue thereafter until all Indebtedness of Borrower to Lender has been performed in full and the parties terminate this Agreement in writing. DEFINITIONS. The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. All references to dollar amounts shall mean amounts in lawful money of the United States of America. AGREEMENT. The word "Agreement" means this Loan Agreement, as this Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Loan Agreement from time to time. ACCOUNT. The word "Account" means a trade account, account receivable, or other right to payment for goods sold or services rendered owing to Borrower (or to a third party grantor acceptable to Lender). ACCOUNT DEBTOR. The words "Account Debtor" mean the person or entity obligated upon an Account. ADVANCE. The word "Advance" means a disbursement of Loan funds under this Agreement. BORROWER. The word "Borrower" means HEMACARE CORPORATION. The word "Borrower" also includes, as applicable, all subsidiaries and affiliates of Borrower as provided below in the paragraph titled "Subsidiaries and Affiliates." BORROWING BASE. The words "Borrowing Base" mean SEVENTY percent (70.000%) of the Net Face Amount of Debtor's Eligible Accounts, but such advances shall not exceed $700,000.00 outstanding at any one time. BUSINESS DAY. The words "Business Day" mean a day on which commercial banks are open for business in the State of California. CERCLA. The word "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. CASH FLOW. The words "Cash Flow" mean net income after taxes, and exclusive of extraordinary gains and income, plus depreciation and amortization. COLLATERAL. The word "Collateral" means and includes without limitation all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. The word "Collateral" includes without limitation all collateral described below in the section titled "COLLATERAL." DEBT. The word "Debt" means all of Borrower's liabilities excluding Subordinated Debt. ELIGIBLE ACCOUNTS. The words "Eligible Accounts" mean, at any time, all of Borrower's Accounts which contain selling terms and conditions acceptable to Lender. The net amount of any Eligible Account against which Borrower may borrow shall exclude all returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts do not include: (a) Accounts with respect to which the Account Debtor is an officer, an employee or agent of Borrower. (b) Accounts with respect to which the Account Debtor is a subsidiary of, or affiliated with or related to Borrower or its shareholders, officers, or directors. (c) Accounts with respect to which goods are placed on consignment, guaranteed sale, or other terms by reason of which the payment by the Account Debtor may be conditional. (d) Accounts with respect to which Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the Account Debtor to Borrower. (e) Accounts which are subject to dispute, counterclaim, or setoff. (f) Accounts with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account Debtor. (g) Accounts with respect to which Lender, in its sole discretion, deems the creditworthiness or financial condition of the Account Debtor to be unsatisfactory. (h) Accounts of any Account Debtor who has filed or has had filed against it a petition in bankruptcy or an application for relief under any provision of any state or federal bankruptcy, insolvency, or debt-in-relief acts; or who has had appointed a trustee, custodian, or receiver for the assets of such Account Debtor; or who has made an assignment for the benefit of creditors or has become insolvent or fails generally to pay its debts (including its payrolls) as such debts become due. (i) Accounts with respect to which the Account Debtor is the United States government or any department or agency of the United States. (j) Accounts which have not been paid in full within 90 from the invoice date. The entire balance of any Account of any single Account debtor will be ineligible whenever the portion of 1he Account which has not been paid within 90 from the invoice date is in excess of 25.000% of the total amount outstanding on the Account. (k) That portion of Accounts due from an Account Debtor which are in excess of 10.000% of the Debtor's aggregate dollar amount of all outstanding Accounts. ELIGIBLE EQUIPMENT. The words "Eligible Equipment" mean, at any time, all of Borrower's Equipment as defined below except: (a) Equipment which is not owned by Borrower free and clear of all security interests, liens, encumbrances, and claims of third parties. (b) Equipment which Lender, in its sole discretion, deems to be obsolete, unsalable, damaged, defective, or unfit for operation. ELIGIBLE INVENTORY. The words "Eligible Inventory" mean, at any time, all of Borrower's Inventory as defined below except: (a) Inventory which is not owned by Borrower free and clear of all security interests, liens, encumbrances, and claims of third parties. (b) Inventory which Lender, in its sole discretion, deems to be obsolete, unsalable, damaged, defective, or unfit for further processing. EQUIPMENT. The word "Equipment" means all of Borrower's goods used or bought for use primarily in Borrower's business and which are not included in inventory, whether now or hereafter existing. ERISA. The word "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 34 35 04-30-1996 LOAN AGREEMENT Page 2 (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EVENT OF DEFAULT. The words "Event of Default" mean and include without limitation any of the Events of Default set forth below in the section titled "EVENTS OF DEFAULT." EXPIRATION DATE. The words "Expiration Date" mean the date of termination of Lender's commitment to lend under this Agreement. GRANTOR. The word "Grantor" means and includes without limitation each and all of the persons or entities granting a Security Interest in any Collateral for the Indebtedness, including without limitation all Borrowers granting such a Security Interest. GUARANTOR. The word "Guarantor" means and includes without limitation each and all of the guarantors, sureties, and accommodation parties in connection with any Indebtedness. INDEBTEDNESS. The word "Indebtedness" means and includes without limitation all Loans, together with all other obligations, debts and liabilities of Borrower to Lender, or any one or more of them, as well as all claims by Lender against Borrower, or any one or more of them; whether now or hereafter existing, voluntary or involuntary, due or not due, absolute or contingent, liquidated or unliquidated; whether Borrower may be liable individually or jointly with others; whether Borrower may be obligated as a guarantor, surety, or otherwise; whether recovery upon such Indebtedness may be or hereafter may become barred by any statute of limitations; and whether such Indebtedness may be or hereafter may become otherwise unenforceable. INVENTORY. The word "Inventory" means all of Borrower's raw materials, work in process, finished goods, merchandise, parts and supplies, of every kind and description, and goods held for sale or lease or furnished under contracts of service in which Borrower now has or hereafter acquires any right, whether held by Borrower or others, and all documents of title, warehouse receipts, bills of lading, and all other documents of every type covering all or any part of the foregoing. Inventory includes inventory temporarily out of Borrower's custody or possession and all returns on Accounts. LENDER. The word "Lender" means BANK LEUMI LE-ISRAEL, B.M., its successors and assigns. LINE OF CREDIT. The words "Line of Credit" mean the credit facility described in the Section titled "LINE OF CREDIT" below. LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on hand plus Borrower's readily marketable securities. LOAN. The word "Loan" or "Loans" means and includes without limitation any and all commercial loans and financial accommodations from Lender to Borrower, whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time. NOTE. The word "Note" means and includes without limitation Borrower's promissory note or notes, if any, evidencing Borrower's Loan obligations in favor of Lender, as well as any substitute, replacement or refinancing note or notes therefor. PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security interests securing Indebtedness owed by Borrower to Lender; (b) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (c) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (d) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (e) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (f) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower's assets. RELATED DOCUMENTS. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. SECURITY AGREEMENT. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest. SECURITY INTEREST. The words "Security Interest" mean and include without limitation any type of collateral security, whether in the form of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act of 1986 as now or hereafter amended. SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness and liabilities of Borrower which have been subordinated by written agreement to indebtedness owed by Borrower to Lender in form and substance acceptable to Lender. TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's total assets excluding all intangible assets (i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items, but including leaseholds and leasehold improvements) less total Debt. WORKING CAPITAL. The words "Working Capital" mean Borrower's current assets, excluding prepaid expenses, less Borrower's current liabilities. LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time from the date of this Agreement to the Expiration Date, provided the aggregate amount of such Advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing limits, Borrower may borrow, partially or wholly prepay, and reborrow under this Agreement as follows. CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make any Advance to or for the account of Borrower under this Agreement is subject to the following conditions precedent, with all documents, instruments, opinions, reports, and other items required under this Agreement to be in form and substance satisfactory to Lender: (a) Lender shall have received evidence that this Agreement and all Related Documents have been duly authorized, executed, and delivered by Borrower to Lender. (b) Lender shall have received such opinions of counsel, supplemental opinions, and documents as Lender may request. (c) The security interests in the Collateral shall have been duly authorized, created, and perfected with first lien priority and shall be in full force and effect. (d) All guaranties required by Lender for the Line of Credit shall have been executed by each Guarantor, delivered to Lender, and be in full force and effect. (e) Lender, at its option and for its sole benefit, shall have conducted an audit of Borrower's Accounts, Inventory, Equipment books, records, and operations, and Lender shall be satisfied as to their condition. (f) Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due and payable. (g) There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement, and Borrower shall have delivered to Lender the compliance certificate called for in the paragraph below titled "Compliance Certificate." MAKING LOAN ADVANCES. Advances under the Line of Credit may be requested either orally or in writing subject to the limitations set forth below. Lender may, but need not, require that all oral requests be confirmed in writing. Each Advance shall be conclusively deemed to have been made at the request of and for the benefit of Borrower (a) when credited to any deposit account of Borrower maintained with Lender or (b) when advanced in accordance with the instructions of an authorized person. Lender, at its option, may set a cutoff time, after which all requests for Advances will be treated as having been requested on the next succeeding Business Day. Under no circumstances shall Lender be required to make any Advance in an amount less than $5,000.00. MANDATORY LOAN REPAYMENTS. If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable Borrowing Base, Borrower, immediately upon written or oral notice from Lender, shall pay to Lender an amount equal to the difference between the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to Lender in full the aggregate unpaid principal amount of all Advances then outstanding and all accrued unpaid interest, together with all other applicable fees, costs and charges, if any, not yet paid. LOAN ACCOUNT. Lender shall maintain on its books a record of account in which Lender shall make entries for each Advance and such other debits and credits as shall be appropriate in connection with the credit facility. Lender shall provide Borrower with periodic statements of Borrower's account, which statements shall be considered to be correct and conclusively binding on Borrower unless Borrower notifies Lender to the contrary within thirty (30) days after Borrower's receipt of any such statement which Borrower deems to be incorrect. COLLATERAL. To secure payment of the Line of Credit and performance of all other Loans, obligations and duties owed by Borrower to Lender, Borrower (and others, if required) shall grant to Lender Security Interests in such property and assets as Lender may require (the "Collateral"). Lender's Security Interests in the Collateral shall be continuing liens and shall include the proceeds and products of the Collateral, including without limitation the 35 36 04-30-1996 LOAN AGREEMENT Page 3 (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- proceeds of any Insurance. With respect to the Collateral, Borrower agrees and represents and warrants to Lender: PERFECTION OF SECURITY INTERESTS. Borrower agrees to execute such financing statements and to take whatever other actions are requested by Lender to perfect and continue Lender's Security Interests in the Collateral. Upon request of Lender, Borrower will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Borrower will note Lender's interest upon any and all chattel paper if not delivered to Lender for possession by Lender. Contemporaneous with the execution of this Agreement, Borrower will execute one or more UCC financing statements and any similar statements as may be required by applicable law, and will file such financing statements and all such similar statements in the appropriate location or locations. Borrower hereby appoints Lender as its irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue any Security Interest. Lender may at any time, and without further authorization from Borrower, file a carbon, photograph, facsimile, or other reproduction of any financing statement for use as a financing statement. Borrower will reimburse Lender for all expenses for the perfection, termination, and the continuation of the perfection of Lender's security interest in the Collateral. Borrower promptly will notify Lender of any change in Borrower's name including any change to the assumed business names of Borrower. Borrower also promptly will notify Lender of any change in Borrower's Social Security Number or Employer Identification Number. Borrower further agrees to notify Lender in writing prior to any change in address or location of Borrower's principal governance office or should Borrower merge or consolidate with any other entity. COLLATERAL RECORDS. Borrower does now, and at all times hereafter shall, keep correct and accurate records of the Collateral, all of which records shall be available to Lender or Lender's representative upon demand for inspection and copying at any reasonable time. With respect to the Accounts, Borrower agrees to keep and maintain such records as Lender may require, including without limitation information concerning Eligible Accounts and Account balances and agings. With respect to the Inventory, Borrower agrees to keep and maintain such records as Lender may require, including without limitation information concerning Eligible Inventory and records itemizing and describing the kind, type, quality, and quantity of Inventory, Borrower's Inventory costs and selling prices, and the daily withdrawals and additions to Inventory. With respect to the Equipment, Borrower agrees to keep and maintain such records as Lender may require, including without limitation information concerning Eligible Equipment and records itemizing and describing the kind, type, quality, and quantity of Equipment, Borrower's Equipment costs, and the daily withdrawals and additions to Equipment. COLLATERAL SCHEDULES. Concurrently with the execution and delivery of this Agreement, Borrower shall execute and deliver to Lender schedules of Accounts, Inventory and Equipment and schedules of Eligible Accounts, Eligible Inventory and Eligible Equipment, in form and substance satisfactory to the Lender. Thereafter Supplemental schedules shall be delivered according to the following schedule: SUBMISSION OF MONTHLY ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AGINGS WITHIN TWENTY (20) DAYS OF THE FOLLOWING MONTH. REPRESENTATIONS AND WARRANTIES CONCERNING ACCOUNTS. With respect to the Accounts, Borrower represents and warrants to Lender: (a) Each Account represented by Borrower to be an Eligible Account for purposes of this Agreement conforms to the requirements of the definition of an Eligible Account; (b) All Account information listed on schedules delivered to Lender will be true and correct, subject to immaterial variance; and (c) Lender, its assigns, or agents shall have the right at any time and at Borrower's expense to inspect, examine, and audit Borrower's records and to confirm with Account Debtors the accuracy of such Accounts. REPRESENTATIONS AND WARRANTIES CONCERNING INVENTORY. With respect to the Inventory, Borrower represents and warrants to Lender: (a) All Inventory represented by Borrower to be Eligible Inventory for purposes of this Agreement conforms to the requirements of the definition of Eligible Inventory; (b) All Inventory values listed on schedules delivered to Lender will be true and correct, subject to immaterial variance; (c) The value of the Inventory will be determined on a consistent accounting basis; (d) Except as agreed to the contrary by Lender in writing, all Eligible Inventory is now and at all times hereafter will be in Borrower's physical possession and shall not be held by others on consignment, sale on approval, or sale or return; (e) Except as reflected in the Inventory schedules delivered to Lender, all Eligible Inventory is now and at all times hereafter will be of good and merchantable quality, free from defects; (f) Eligible Inventory is not now and will not at any time hereafter be stored with a bailee, warehouseman, or similar party without Lender's prior written consent, and, in such event, Borrower will concurrently at the time of bailment cause any such bailee, warehouseman, or similar party to issue and deliver to Lender, in form acceptable to Lender, warehouse receipts in Lender's name evidencing the storage of Inventory; and (g) Lender, its assigns, or agents shall have the right at any time and at Borrower's expense to inspect and examine the Inventory and to check and test the same as to quality, quantity, value, and condition. REPRESENTATIONS AND WARRANTIES CONCERNING EQUIPMENT. With respect to the Equipment, Borrower represents and warrants to Lender: (a) All Equipment represented by Borrower to be Eligible Equipment for purposes of this Agreement conforms to the requirements of the definition of Eligible Equipment; (b) All Equipment values listed on schedules delivered to Lender will be true and correct, subject to immaterial variance; (c) The value of the Equipment will be determined on a consistent accounting basis; (d) Except as agreed to the contrary by Lender in writing, all Eligible Equipment is now and at all times hereafter will be in Borrower's physical possession; (e) Except as reflected in the Equipment schedules delivered to Lender, all Eligible Equipment is now and at all times hereafter will be of good and merchantable quality, free from defects; (f) Eligible Equipment is not now and will not at any time hereafter be stored with a bailee, warehouseman, or similar party without Lender's prior written consent, and, in such event, Borrower will concurrently at the time of bailment cause any such bailee, warehouseman, or similar party to issue and deliver to Lender, in form acceptable to Lender, warehouse receipts in Lender's name evidencing the storage of Equipment; and (g) Lender, its assigns, or agents shall have the right at any time and at Borrower's expense to inspect and examine the Equipment and to check and test the same as to quality, quantity, value, and condition. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of Loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists: ORGANIZATION. Borrower is a corporation which is duly organized, validly existing, and in good standing under the laws of the State of California and is validly existing and in good standing in all states in which Borrower is doing business. Borrower has the full power and authority to own its properties and to transact the businesses in which it is presently engaged or presently proposes to engage. Borrower also is duly qualified as a foreign corporation and is in good standing in all states in which the failure to so qualify would have a material adverse effect on its businesses or financial condition. AUTHORIZATION. The execution, delivery, and performance of this Agreement and all Related Documents by Borrower, to the extent to be executed, delivered or performed by Borrower, have been duly authorized by all necessary action by Borrower; do not require the consent or approval of any other person, regulatory authority or governmental body; and do not conflict with, result in a violation of, or constitute a default under (a) any provision of its articles of incorporation or organization, or bylaws, or any agreement or other instrument binding upon Borrower or (b) any law, governmental regulation, court decree, or order applicable to Borrower. FINANCIAL INFORMATION. Each financial statement of Borrower supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements. LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement required hereunder to be given by Borrower when delivered will constitute, legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. PROPERTIES. Except for Permitted Liens, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used, or filed a financing statement under, any other name for at least the last five (5) years. HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance," "disposal," "release," and "threatened release," as used in this Agreement, shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section 25100, et seq., or other applicable state or Federal laws, rules, or regulations adopted pursuant to any of the foregoing. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (a) During the period of Borrower's ownership of the properties, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any hazardous waste or substance by any person on, under, about or from any of the properties. (b) Borrower has no knowledge of, or reason to believe that there has been (i) any use, generation, manufacture, storage, treatment, disposal, release, or threatened release of any hazardous waste or substance on, under, about or from the properties by any prior owners or occupants of any of the properties, or (ii) any actual or threatened litigation or claims of any kind by any person relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the properties shall use, generate, manufacture, store, treat, dispose of, or release any hazardous waste or substance on, under, about or from any of the properties; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation those laws, regulations and ordinances described above. Borrower authorizes Lender and its agents to enter upon the properties to make such inspections and tests as Lender may deem appropriate to determine compliance of the properties with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower's due diligence in investigating the properties for hazardous waste and hazardous substances. Borrower hereby (a) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (b) agrees to indemnify and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release occurring prior to Borrower's ownership or interest in the properties, whether or not the same was or should have been known to Borrower. The provisions 36 37 04-30-1996 LOAN AGREEMENT PAGE 4 (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- of this section of the Agreement, including the obligation to indemnity, shall survive the payment of the Indebtedness and the termination or expiration of this Agreement and shall not be affected by Lender's acquisition of any interest in any of the properties, whether by foreclosure or otherwise. LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing. TAXES. To the best of Borrower's knowledge, all tax returns and reports of Borrower that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided. LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral. BINDING EFFECT. This Agreement, the Note, all Security Agreements directly or indirectly securing repayment of Borrower's Loan and Note and all of the Related Documents are binding upon Borrower as well as upon Borrower's successors, representatives and assigns, and are legally enforceable in accordance with their respective terms. COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for business or commercial related purposes. EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may have any liability complies in all material respects with all applicable requirements of law and regulations, and (i) no Reportable Event nor Prohibited Transaction (as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower has not withdrawn from any such plan or initiated steps to do so, (iii) no steps have been taken to terminate any such plan, and (iv) there are no unfunded liabilities other than those previously disclosed to Lender in writing. LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business, or Borrower's Chief executive office, if Borrower has more than one place of business, is located at 4954 VAN NUYS BLVD., #201, SHERMAN OAKS, CA 91403. Unless Borrower has designated otherwise in writing this location is also the office or offices where Borrower keeps its records concerning the Collateral. INFORMATION. All information heretofore or contemporaneously herewith furnished by Borrower to Lender for the purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all information hereafter furnished by or on behalf of Borrower to Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified; and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees that Lender, without independent investigation, is relying upon the above representations and warranties in extending Loan Advances to Borrower. Borrower further agrees that the foregoing representations and warranties shall be continuing in nature and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while this Agreement is in effect, Borrower will: LITIGATION. Promptly inform lender in writing of (a) all material adverse changes in Borrower's financial condition, and (b) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor. FINANCIAL RECORDS. Maintain its books and records in accordance with generally accepted accounting principles, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times. FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no event later than ninety (90) days after the end of each fiscal year, Borrower's balance sheet and income statement for the year ended, audited by a certified public accountant satisfactory to Lender, and, as soon as available, but in no event later than twenty (20) days after the and of each month, Borrower's balance sheet and profit and loss statement for the period ended, prepared and certified as correct to the best knowledge and belief by Borrower's chief financial officer or other officer or person acceptable to Lender. All financial reports required to be provided under this Agreement shall be prepared in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct. ADDITIONAL INFORMATION. Furnish such additional information and statements, lists of assets and liabilities, agings of receivables and payables, inventory schedules, budgets, forecasts, tax returns, and other reports with respect to Borrower's financial condition and business operations as Lender may request from time to time. FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and ratios: TANGIBLE NET WORTH. Maintain a minimum Tangible Net Worth of not less than $370,000.00 through September 29, 1996 and $2,000,000.00 from September 30, 1996. NET WORTH RATIO. Maintain a ratio of Total Liabilities to Tangible Net Worth of less than 2.10 to 1.00 after SEPTEMBER 30, 1996. WORKING CAPITAL. Maintain Working Capital in excess of $500,000.00. CURRENT RATIO. Maintain a ratio of Current Assets to Current Liabilities in excess of 1.20 to 1.00. CASH FLOW REQUIREMENTS. Maintain Cash Flow at not less than the following level: DRAWINGS ON LINE OF CREDIT WILL BE MADE AVAILABLE ONLY IN ACCORDANCE WITH AMOUNTS AND DATA AS PROVIDED IN THE ATTACHED EXHIBIT "A". AFTER MAY 1996, DRAWINGS ARE CONTINGENT UPON RECEIPT OF MONTHLY FINANCIAL RESULTS AND CASH FLOW WITH COMPARISON TO CASH FLOW PROJECTION (EXHIBIT "A"). IF ACTUAL LOSSES OR DEFICIT CASH FLOW EXCEED THE CASH FLOW PROJECTION (EXHIBIT "A") BY 10.000% OR MORE, IN ANY MONTH, OR ON A CUMULATIVE BASIS, NO DRAWS WILL BE ALLOWED. Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct. INSURANCE. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, coverages and with insurance companies reasonably acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days' prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such loss payable or other endorsements as Lender may require. INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (a) the name of the insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties insured; (e) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (f) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower. OTHER AGREEMENTS. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements. LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing. TAXES, CHARGES AND LIENS. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (a) the legality of the same shall be contested in good faith by appropriate proceedings, and (b) Borrower shall have established on its books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with generally accepted accounting practices. Borrower, upon demand of Lender, will furnish to Lender evidence of payment of the assessments, taxes, charges, levies, liens and claims and will authorize the appropriate governmental official to deliver to Lender at any time a written statement of any assessments, taxes, charges, levies, liens and claims against Borrower's properties, income, or profits. PERFORMANCE. Perform and comply with all terms, conditions, and provisions set forth in this Agreement and in the Related Documents in a timely manner, and promptly notify Lender if Borrower learns of the occurrence of any event which constitutes an Event of Default under this Agreement or under any of the Related Documents. OPERATIONS. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive 37 38 04-30-1996 LOAN AGREEMENT PAGE 5 (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner and in compliance with all applicable federal, state and municipal laws, ordinances, rules and regulations respecting its properties, charters, businesses and operations, including without limitation, compliance with the Americans With Disabilities Act and with all minimum funding standards and other requirements of ERISA and other laws applicable to Borrower's employee benefit plans. INSPECTION. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense. COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender at least annually and at the time of each disbursement of Loan proceeds with a certificate executed by Borrower's chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement. ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects with all environmental protection federal, state and local laws, statutes, regulations and ordinances; not cause or permit to exist, as a result of an intentional or unintentional action or omission on its part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources. ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests. RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law, rule, regulation or guideline, or the interpretation or application of any thereof by any court or administrative or governmental authority (including any request or policy not having the force of law) shall impose, modify or make applicable any taxes (except U.S. federal, state or local income or franchise taxes imposed on Lender), reserve requirements, capital adequacy requirements or other obligations which would (a) increase the cost to Lender for extending or maintaining the credit facilities to which this Agreement relates, (b) reduce the amounts payable to Lender under this Agreement or the Related Documents, or (c) reduce the rate of return on Lender's capital as a consequence of Lender's obligations with respect to the credit facilities to which this Agreement relates, then Borrower agrees to pay Lender such additional amounts as will compensate Lender therefor, within five (5) days after Lender's written demand for such payment, which demand shall be accompanied by an explanation of such imposition or charge and a calculation in reasonable detail of the additional amounts payable by Borrower, which explanation and calculations shall be conclusive in the absence of manifest error. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender: CAPITAL EXPENDITURES. Make or contract to make capital expenditures, including leasehold improvements, in any fiscal year in excess of $500,000.00 or incur liability for rentals of property (including both real and personal property) in an amount which, together with capital expenditures, shall in any fiscal year exceed such sum. INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume additional indebtedness for borrowed money, including capital leases, in excess of the aggregate amount of U.S. $250,000.00, (b) except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets, or (c) sell with recourse any of Borrowers accounts, except to Lender. CONTINUITY OF OPERATIONS. (a) Engage in any business activities substantially different than those in which Borrower is presently engaged, (b) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change ownership, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, (c) pay any dividends on Borrower's stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding shares or alter or amend Borrower's capital structure. LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money or assets, (b) purchase, create or acquire any interest in any other enterprise or entity, or (c) incur any obligation as surety or guarantor other than in the ordinary course of business. CESSATION OF ADVANCES. If lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (a) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs A material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender; or (e) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred. NOTICE OF LITIGATION. Debtor will promptly give notice to Lender in writing of any proceedings against Debtor involving amounts in excess of $25,000.00 not fully covered by insurance, any substantial claim or dispute which may exist between Debtor and any Person, any labor controversy resulting in or threatening to result in a strike against Debtor, or any proposal by any public authority to acquire a material portion of the assets or business of Debtor. NOTICE OF UNINSURED LOSS. Debtor shall give Lender written notice of any uninsured loss in excess of $25,000.00 in each instance. ADDITIONAL FINANCIAL COVENANT. Quarterly 10Q no later than Forty Five (45) days after the close of each quarter. OPERATIONS. No new start-up operations will be undertaken without Lender's prior written consent, until equity offering is completed and equity reaches $2,000,000.00. Only one acquisition of an existing business for an amount not to exceed $100,000.00 in cash payments may be undertaken until completion of company's equity offering and equity reaches $2,000,000.00. RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts. EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due on the Loans. OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to perform when due any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents, or failure of Borrower to comply with or to perform any other term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. FALSE STATEMENTS. Any warranty, representation or statement made or furnished to Lender by or on behalf of Borrower or any Grantor under this Agreement or the Related Documents is false or misleading in any material respect at the time made or furnished, or becomes false or misleading at any time thereafter. DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any Security Agreement to create a valid and perfected Security Interest) at any time and for any reason. INSOLVENCY. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower, any creditor of any Grantor against any collateral securing the Indebtedness, or by any governmental agency. This includes a garnishment, attachment, or levy on or of any of Borrowers deposit accounts with Lender. However, 38 39 04-30-1996 LOAN AGREEMENT PAGE 6 (CONTINUED) =============================================================================== this Event of Default shall not apply if there is a good faith dispute by Borrower or Grantor, as the case may be, as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding, and if Borrower or Grantor gives Lender written notice of the creditor or forfeiture proceeding and furnishes reserves or a surety bond for the creditor or forfeiture proceeding satisfactory to Lender. EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. Lender, at its option, may, but shall not be required to, permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure the Event of Default. CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. ADVERSE CHANGE. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. INSECURITY. Lender, in good faith, deems itself insecure. RIGHT TO CURE. If any default, other than a Default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured (and no Event of Default will have occurred) if Borrower or Grantor, as the case may be, after receiving written notice from Lender demanding cure of such default: (a) cures the default within fifteen (15) days; or (b) if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: AMENDMENTS. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LOS ANGELES COUNTY, THE STATE OF CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. CAPTION HEADINGS. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower under this Agreement shall be joint and several, and all references to Borrower shall mean each and every Borrower. This means that each of the Borrowers signing below is responsible for ALL obligations in this Agreement. CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interests in the Loans to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy it may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loans and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loans irrespective of the failure or insolvency of any holder of any interest in the Loans. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender. COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's expenses, including without limitation attorneys' fees, incurred in connection with the preparation, execution, enforcement, modification and collection of this Agreement or in connection with the Loans made pursuant to this Agreement. Lender may pay someone else to help collect the Loans and to enforce this Agreement, and Borrower will pay that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post- judgment collection services. Borrower also will pay any court costs, in addition to all other sums provided by law. NOTICES. All notices required to be given under this Agreement shall be given in writing, may be sent by telefacsimilie, and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address shown above. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. To the extent permitted by applicable law, if there is more than one Borrower, notice to any Borrower will constitute notice to all Borrowers. For notice purposes, Borrower will keep Lender informed at all times of Borrower's current address(es). SEVERABILITY. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used herein shall include all subsidiaries and affiliates of Borrower. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any subsidiary or affiliate of Borrower. SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on behalf of Borrower shall bind its successors and assigns and shall inure to the benefit of Lender, its successors and assigns. Borrower shall not, however, have the right to assign its rights under this Agreement or any interest therein, without the prior written consent of Lender. SURVIVAL. All warranties, representations, and covenants made by Borrower In this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement shall be considered to have been relied upon by Lender and will survive the making of the Loan and delivery to Lender of the Related Documents, regardless of any investigation made by Lender or on Lender's behalf. TIME IS OF THE ESSENCE. Time is of the essence in the performance of this Agreement. WAIVER. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any obligations of Borrower or of any Grantor as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent in subsequent instances where such consent is required, and in all cases such consent may be granted or withheld in the sole discretion of Lender. 39 40 04-30-1996 LOAN AGREEMENT PAGE 7 (CONTINUED) =============================================================================== BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF APRIL 30, 1996. BORROWER: HEMACARE CORPORATION BY: /s/ Hal I. Lieberman BY: /s/ Thomas M. Asher --------------------------- ------------------------- HAL I. LIEBERMAN, PRESIDENT THOMAS M. ASHER, CHAIRMAN LENDER: BANK LEUMI LE-ISRAEL, B.M. BY: /s/ Ron Berkowitz -------------------------- AUTHORIZED OFFICER =============================================================================== 40 41 [LOGO] BANK LEUMI LE ISRAEL B.M. CALIFORNIA DISBURSEMENT REQUEST AND AUTHORIZATION
- -------------------------------------------------------------------------------------------------------------------------- PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS $700,000.00 04-30-1996 04-30-1997 2595 04A0 030 232587 RXB - -------------------------------------------------------------------------------------------------------------------------- References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. - --------------------------------------------------------------------------------------------------------------------------
BORROWER: HEMACARE CORPORATION LENDER: BANK LEUMI LE-ISRAEL, B.M. 4954 VAN NUYS BLVD., #201 8383 WILSHIRE BLVD. STE. 400 SHERMAN OAKS, CA 91403 BEVERLY HILLS, CA 90211 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- LOAN TYPE. This is a Variable Rate (0.500% over designated rate as established by Bank Leumi from time to time as its base rate., making an initial rate of 8.750%), Revolving Line of Credit Loan to a Corporation for $700,000.00 due on April 30, 1997. This is an unsecured renewal loan. PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for: / / PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL INVESTMENT. /X/ BUSINESS (INCLUDING REAL ESTATE INVESTMENT). SPECIFIC PURPOSE. The specific purpose of this loan is: WORKING CAPITAL. DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be disbursed until all of Lender's conditions for making the loan have been satisfied. Please disburse the loan proceeds of $700,000.00 as follows: AMOUNT PAID TO BORROWER DIRECTLY: $0.00 AMOUNT PAID ON BORROWER'S ACCOUNT: $700,000.00 $700,000.00 Payment on Loan # 2595(RENEWAL) ----------- NOTE PRINCIPAL: $700,000.00
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges: PREPAID FINANCE CHARGES PAID IN CASH: $0.00 OTHER CHARGES PAID IN CASH: $250.00 $150.00 Documentation Fee $100.00 Recording Fees ----------- TOTAL CHARGES PAID IN CASH: $250.00
AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender automatically to deduct from Borrower's account numbered 02-01660-6 the amount of any loan payment. If the funds in the account are insufficient to cover any payment, Lender shall not be obligated to advance funds to cover the payment. At any time and for any reason, Borrower or Lender may voluntarily terminate Automatic Payments. COSTS AND CHARGES. DEBIT DDA #O2-01660-6 FOR THE FEES SHOWN ABOVE. (RECORDING FEES ARE AN ESTIMATE ONLY AND MAY REQUIRE ADJUSTMENT WHEN BILLS ARE RECEIVED). FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS AUTHORIZATION IS DATED APRIL 30,1996. BORROWER: HEMACARE CORPORATION BY: /s/ Hal I. Lieberman BY: /s/ Thomas M. Asher - -------------------------------- ----------------------------------- HAL I. LIEBERMAN, PRESIDENT THOMAS M. ASHER, CHAIRMAN - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 41 42 [LOGO] BANK LEUMI LE ISRAEL B.M. CALIFORNIA PROMISSORY NOTE
- ------------------------------------------------------------------------------------------------- PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS $700,000.00 04-30-1996 04-30-1997 2595 04A0 030 232587 RXB - ------------------------------------------------------------------------------------------------- References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. - -------------------------------------------------------------------------------------------------
BORROWER: HEMACARE CORPORATION LENDER: BANK LEUMI LE-ISRAEL, B.M. 4954 VAN NUYS BLVD., #201 8383 WILSHIRE BLVD. STE. 400 SHERMAN OAKS, CA 91403 BEVERLY HILLS, CA 90211 ================================================================================ PRINCIPAL AMOUNT: $700,00O.00 INITIAL RATE: 8.750% DATE OF NOTE: April 30, 1996 PROMISE TO PAY. HEMACARE CORPORATION ("BORROWER") PROMISES TO PAY TO BANK LEUMI LE-ISRAEL, B.M. ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF SEVEN HUNDRED THOUSAND & 00/100 DOLLARS ($700,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE. PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON APRIL 30, 1997. IN ADDITION, BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING MAY 31, 1996, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE LAST DAY OF EACH MONTH AFTER THAT. Interest on this Note is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an index which is the designated rate as established by Bank Leumi from time to time as its base rate. (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans and is set by Lender in its sole discretion. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. Borrower understands that Lender may make loans based on other rates as well. The interest rate change will not occur more often than each day. THE INDEX CURRENTLY IS 8.250% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 0.500 PERCENTAGE POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 8.750% PER ANNUM. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Note, Borrower understands that Lender is entitled to a MINIMUM INTEREST CHARGE OF $250.00. Other than Borrower's obligation to pay any minimum interest charge, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. Rather, they will reduce the principal balance due. LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged 3.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT OR $25.00, WHICHEVER IS GREATER. DEFAULT. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment when due. (b) Borrower breaks any promise Borrower has made to Lender, or Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note or any agreement related to this Note, or in any other agreement or loan Borrower has with Lender. (c) Any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is false or misleading in any material respect either now or at the time made or furnished. (d) Borrower becomes insolvent, a receiver is appointed for any part of Borrower's property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws. (e) Any creditor tries to take any of Borrower's property on or in which Lender has a lien or security interest. This includes a garnishment of any of Borrower's accounts with Lender. (f) Any guarantor dies or any of the other events described in this default section occurs with respect to any guarantor of this Note. (g) A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. (h) Lender in good faith deems itself insecure. If any default, other than a default in payment, is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured (and no event of default will have occurred) if Borrower, after receiving written notice from Lender demanding cure of such default: (a) cures the default within fifteen (15) days; or (b) if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, without notice, and then Borrower will pay that amount. Upon Borrower's failure to pay all amounts declared due pursuant to this section, including failure to pay upon final maturity, Lender, at its option, may also, if permitted under applicable law, increase the variable interest rate on this Note to 5.500 percentage points over the index. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower also will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also will pay any court costs, in addition to all other sums provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LOS ANGELES COUNTY, THE STATE OF CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on this Note against any and all such accounts. LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested either orally or in writing by Borrower or as provided in this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above. The following party or parties are authorized as provided in this paragraph to request advances under the line of credit until Lender receives from Borrower at Lender's address shown above written notice of revocation of their authority: HAL I. LIEBERMAN, PRESIDENT; AND THOMAS M. ASHER, CHAIRMAN. (MINIMUM OF $5,000.00 PER REQUEST). Borrower agrees to be liable for all sums either: (a) advanced in accordance with the instructions of an authorized person or (b) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (a) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; (d) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender; or (e) Lender in good faith deems itself insecure under this Note or any other agreement between Lender and Borrower. 42 43 04-30-1996 PROMISSORY NOTE Page 2 (CONTINUED) ================================================================================ GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. BORROWER: HEMACARE CORPORATION By: /s/ Hal I. Lieberman By: /s/ Thomas M. Asher ---------------------------- --------------------------- HAL I. LIEBERMAN, PRESIDENT THOMAS M. ASHER, CHAIRMAN ================================================================================ 43 44 [LOGO] BANK LEUMI LE ISRAEL B.M. CALIFORNIA COMMERCIAL SECURITY AGREEMENT
- --------------------------------------------------------------------------------------------------------------- PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS $700,000.00 04-30-1996 04-30-1997 2595 04A0 030 232587 RXB - --------------------------------------------------------------------------------------------------------------- References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. - ---------------------------------------------------------------------------------------------------------------
BORROWER: HEMACARE CORPORATION LENDER: BANK LEUMI LE-ISRAEL, B.M. 4954 VAN NUYS BLVD., #201 8383 WILSHIRE BLVD. STE. 400 SHERMAN OAKS, CA 91403 BEVERLY HILLS, CA 90211 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN HEMACARE CORPORATION (REFERRED TO BELOW AS "GRANTOR"); AND BANK LEUMI LE-ISRAEL, B.M. (REFERRED TO BELOW AS "LENDER"). FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER A SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES THAT LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO THE COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW. DEFINITIONS. The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. All references to dollar amounts shall mean amounts in lawful money of the United States of America. AGREEMENT. The word "Agreement" means this Commercial Security Agreement, as this Commercial Security Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Commercial Security Agreement from time to time. COLLATERAL. The word "Collateral" means the following described property of Grantor, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located: ALL INVENTORY, CHATTEL PAPER, ACCOUNTS, EQUIPMENT AND GENERAL INTANGIBLES In addition, the word "Collateral" includes all the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located: (a) All attachments, accessions, accessories, tools, parts, supplies, increases, and additions to and all replacements of and substitutions for any property described above. (b) All products and produce of any of the property described in this Collateral section. (c) All accounts, general intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, or other disposition of any of the property described in this Collateral section. (d) All proceeds (including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this Collateral section. (e) All records and data relating to any of the property described in this Collateral section, whether in the form of a writing, photograph, microfilm, microfiche, or electronic media, together with all of Grantor's right, title, and interest in and to all computer software required to utilize, create, maintain, and process any such records or data on electronic media. EVENT OF DEFAULT. The words "Event of Default" mean and include without limitation any of the Events of Default set forth below in the section titled "Events Of Default." GRANTOR. The word "Grantor" means HEMACARE CORPORATION, its successors and assigns. GUARANTOR. The word "Guarantor" means and includes without limitation each and all of the guarantors, sureties, and accommodation parties in connection with the Indebtedness. INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the Note, including all principal and interest, together with all other indebtedness and costs and expenses for which Grantor is responsible under this Agreement or under any of the Related Documents. In addition, the word "Indebtedness" includes all other obligations, debts and liabilities, plus interest thereon, of Grantor, or any one or more of them, to Lender, as well as all claims by Lender against Grantor, or any one or more of them, whether existing now or later; whether they are voluntary or involuntary, due or not due, direct or indirect, absolute or contingent, liquidated or unliquidated; whether Grantor may be liable individually or jointly with others; whether Grantor may be obligated as guarantor, surety, accommodation party or otherwise; whether recovery upon such indebtedness may be or hereafter may become barred by any statute of limitations; and whether such indebtedness may be or hereafter may become otherwise unenforceable. LENDER. The word "Lender" means BANK LEUMI LE-ISRAEL, B.M., its successors and assigns. NOTE. The word "Note" means the note or credit agreement dated April 30, 1996, in the principal amount of $700,000.00 from HEMACARE CORPORATION to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions for the note or credit agreement. RELATED DOCUMENTS. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security interest in and hereby assigns, conveys, delivers, pledges, and transfers all of Grantor's right, title and interest in and to Grantor's accounts with Lender (whether checking, savings, or some other account), including all accounts held jointly with someone else and all accounts Grantor may open in the future, excluding, however, all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Grantor authorizes Lender, to the extent permitted by applicable law, to charge or setoff all Indebtedness against any and all such accounts. OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows: PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing statements and to take whatever other actions are requested by Lender to perfect and continue Lender's security interest in the Collateral. Upon request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Grantor will note Lender's interest upon any and all chattel paper if not delivered to Lender for possession by Lender. Grantor hereby appoints Lender as its irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue the security interest granted in this Agreement. Lender may at any time, and without further authorization from Grantor, file a carbon, photographic or other reproduction of any financing statement or of this Agreement for use as a financing statement. Grantor will reimburse Lender for all expenses for the perfection and the continuation of the perfection of Lender's security interest in the Collateral. Grantor promptly will notify Lender before any change in Grantor's name including any change to the assumed business names of Grantor. THIS IS A CONTINUING SECURITY AGREEMENT AND WILL CONTINUE IN EFFECT EVEN THOUGH ALL OR ANY PART OF THE INDEBTEDNESS IS PAID IN FULL AND EVEN THOUGH FOR A PERIOD OF TIME GRANTOR MAY NOT BE INDEBTED TO LENDER. NO VIOLATION. The execution and delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and its certificate or articles of incorporation and bylaws do not prohibit any term or condition of this Agreement. ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of accounts, chattel paper, or general intangibles, the Collateral is enforceable in accordance with its terms, is genuine, and complies with applicable laws concerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the Collateral have authority and capacity to contract and are in fact obligated as they appear to be on the Collateral. At the time any account becomes subject to a security interest in favor of Lender, the account shall be a good and valid account representing an undisputed, bona fide indebtedness incurred by the account debtor, for merchandise held subject to delivery instructions or theretofore shipped or delivered pursuant to a contract of sale, or for services theretofore performed by Grantor with or for the account debtor; there shall be no setoffs or counterclaims against any such account; and no agreement under which any deductions or discounts may be claimed shall have been made with the account debtor except those disclosed to Lender in writing. LOCATION OF THE COLLATERAL. Grantor, upon request of Lender, will deliver to Lender in form satisfactory to Lender a schedule of real properties and Collateral locations relating to Grantor's operations, including without limitation the following: (a) all real property owned or being purchased 44 45 04-30-1996 COMMERCIAL SECURITY AGREEMENT Page 2 (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- by Grantor; (b) all real property being rented or leased by Grantor; (c) all storage facilities owned, rented, leased, or being used by Grantor; and (d) all other properties where Collateral is or may be located. Except in the ordinary course of its business, Grantor shall not remove the Collateral from its existing locations without the prior written consent of Lender. REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent the Collateral consists of intangible property such as accounts, the records concerning the Collateral) at Grantor's address shown above, or at such other locations as are acceptable to Lender. Except in the ordinary course of its business, including the sales of inventory, Grantor shall not remove the Collateral from its existing locations without the prior written consent of Lender. To the extent that the Collateral consists of vehicles, or other titled property, Grantor shall not take or permit any action which would require application for certificates of title for the vehicles outside the State of California, without the prior written consent of Lender. TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts collected in the ordinary course of Grantor's business, Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor is not in default under this Agreement, Grantor may sell inventory, but only in the ordinary course of its business and only to buyers who quality as a buyer in the ordinary course of business. A sale in the ordinary course of Grantor's business does not include a transfer in partial or total satisfaction of a debt or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance, or charge, other than the security interest provided for in this Agreement, without the prior written consent of Lender. This includes security interests even if junior in right to the security interests granted under this Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral (for whatever reason) shall be held in trust for Lender and shall not be commingled with any other funds; provided however, this requirement shall not constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such proceeds to Lender. TITLE. Grantor represents and warrants to Lender that it holds good and marketable title to the Collateral, free and clear of all liens and encumbrances except for the lien of this Agreement. No financing statement covering any of the Collateral is on file in any public office other than those which reflect the security interest created by this Agreement or to which Lender has specifically consented. Grantor shall defend Lender's rights in the Collateral against the claims and demands of all other persons. COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require, and insofar as the Collateral consists of accounts and general intangibles, Grantor shall deliver to Lender schedules of such Collateral, including such information as Lender may require, including without limitation names and addresses of account debtors and agings of accounts and general intangibles. Insofar as the Collateral consists of inventory and equipment, Grantor shall deliver to Lender, as often as Lender shall require, such lists, descriptions, and designations of such Collateral as Lender may require to identify the nature, extent, and location of such Collateral. Such information shall be submitted for Grantor and each of its subsidiaries or related companies. MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all tangible Collateral in good condition and repair. Grantor will not commit or permit damage to or destruction of the Collateral or any part of the Collateral. Lender and its designated representatives and agents shall have the right at all reasonable times to examine, inspect, and audit the Collateral wherever located. Grantor shall immediately notify Lender of all cases involving the return, rejection, repossession, loss or damage of or to any Collateral; of any request for credit or adjustment or of any other dispute arising with respect to the Collateral; and generally of all happenings and events affecting the Collateral or the value or the amount of the Collateral. TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes, assessments and liens upon the Collateral, its use or operation, upon this Agreement, upon any promissory note or notes evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may withhold any such payment or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Lender's interest in the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is subjected to a lien which is not discharged within fifteen (15) days, Grantor shall deposit with Lender cash, a sufficient corporate surety bond or other security satisfactory to Lender in an amount adequate to provide for the discharge of the lien plus any interest, costs, attorneys' fees or other charges that could accrue as a result of foreclosure or sale of the Collateral. In any contest Grantor shall defend itself and Lender and shall satisfy any final adverse judgment before enforcement against the Collateral. Grantor shall name Lender as an additional obligee under any surety bond furnished in the contest proceedings. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly with all laws, ordinances, rules and regulations of all governmental authorities, now or hereafter in effect, applicable to the ownership, production, disposition, or use of the Collateral. Grantor may contest in good faith any such law, ordinance or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Lender's interest in the Collateral, in Lender's opinion, is not jeopardized. HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral never has been, and never will be so long as this Agreement remains a lien on the Collateral, used for the generation, manufacture, storage, transportation, treatment, disposal, release or threatened release of any hazardous waste or substance, as those terms are defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section 25100, et seq., or other applicable state or Federal laws, rules, or regulations adopted pursuant to any of the foregoing. The terms "hazardous waste" and "hazardous substance" shall also include, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos. The representations and warranties contained herein are based on Grantor's due diligence in investigating the Collateral for hazardous wastes and substances. Grantor hereby (a) releases and waives any future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any such laws, and (b) agrees to indemnify and hold harmless Lender against any and all claims and losses resulting from a breach of this provision of this Agreement. This obligation to indemnify shall survive the payment of the Indebtedness and the satisfaction of this Agreement. MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all risks insurance, including without limitation fire, theft and liability coverage together with such other insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and basis reasonably acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days' prior written notice to Lender and not including any disclaimer of the insurer's liability for failure to give such a notice. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Grantor or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest, Grantor will provide Lender with such loss payable or other endorsements as Lender may require. If Grantor at any time fails to obtain or maintain any insurance as required under this Agreement, Lender may (but shall not be obligated to) obtain such insurance as Lender deems appropriate, including if it so chooses "single interest insurance", which will cover only Lender's interest in the Collateral. APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of any loss or damage to the Collateral. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. All proceeds of any insurance on the Collateral, including accrued proceeds thereon, shall be held by Lender as part of the Collateral. If Lender consents to repair or replacement of the damaged or destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost of repair or restoration. If Lender does not consent to repair or replacement of the Collateral, Lender shall retain a sufficient amount of the proceeds to pay all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds which have not been disbursed within six (6) months after their receipt and which Grantor has not committed to the repair or restoration of the Collateral shall be used to prepay the Indebtedness. INSURANCE RESERVES. Lender may require Grantor to maintain with Lender reserves for payment of insurance premiums, which reserves shall be created by monthly payments from Grantor of a sum estimated by Lender to be sufficient to produce, at least fifteen (15) days before the premium due date, amounts at least equal to the insurance premiums to be paid. If fifteen (15) days before payment is due, the reserve funds are insufficient, Grantor shall upon demand pay any deficiency to Lender. The reserve funds shall be held by Lender as a general deposit and shall constitute non-interest-bearing account which Lender may satisfy by payment of the insurance premiums required to be paid by Grantor as they become due. Lender does not hold the reserve funds in trust for Grantor, and Lender is not the agent of Grantor for payment of the insurance premiums required to be paid by Grantor. The responsibility for the payment of premiums shall remain Grantor's sole responsibility. INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender reports on each existing policy of insurance showing such information as Lender may reasonably request including the following: (a) the name of the insurer; (b) the risks insured; (c) the amount of the policy; (d) the property insured; (e) the then current value on the basis of which insurance has been obtained and the manner of determining that value; and (f) the expiration date of the policy. In addition, Grantor shall upon request by Lender (however not more often than annually) have an independent appraiser satisfactory to Lender determine, as applicable, the cash value or replacement cost of the Collateral. GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except as otherwise provided below with respect to accounts, Grantor may have possession of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful manner not inconsistent with this Agreement or the Related Documents, provided that Grantor's right to possession and beneficial use shall not apply to any Collateral where possession of the Collateral by Lender is required by law to perfect Lender's security interest in such Collateral. Until otherwise notified by Lender, Grantor may collect any of the Collateral consisting of accounts. At any time and though no Event of Default exists, Lender may exercise its rights to collect the accounts and to notify account debtors to make payments directly to Lender for application to the Indebtedness. 45 46 04-30-1996 COMMERCIAL SECURITY AGREEMENT Page 3 (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- If Lender at any time has possession of any Collateral, whether before or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and preservation of the collateral if lender takes such action for that purpose as Grantor shall request or as Lender, in Lender's sole discretion, shall deem appropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be a failure to exercise reasonable care. Lender shall not be required to take any steps necessary to preserve any rights in the Collateral against prior parties, nor to protect, preserve or maintain any security interest given to secure the Indebtedness. EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but shall not be obligated to) discharge or pay any amounts required to be discharged or paid by Grantor under this Agreement, including without limitation all taxes, liens, security interests, encumbrances, and other claims, at any time levied or placed on the collateral. lender also may (but shall not be obligated to) pay all costs for insuring, maintaining and preserving the Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses shall become a part of the Indebtedness and, at Lender's option, will (a) be payable on demand, (b) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (i) the term of any applicable insurance policy or (ii) the remaining term of the Note, or (c) be treated as a balloon payment which will be due and payable at the Note's maturity. This Agreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon the occurrence of an Event of Default. EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due on the Indebtedness. OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or in any other agreement between Lender and Grantor. FALSE STATEMENTS. Any warranty, representation or statement made or furnished to Lender by or on behalf of Grantor under this Agreement, the Note or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished. DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral documents to create a valid and perfected security interest or lien) at any time and for any reason. INSOLVENCY. The dissolution or termination of Grantor's existence as a going business, the insolvency of Grantor, the appointment of a receiver for any part of Grantor's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Grantor. CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any governmental agency against the Collateral or any other collateral securing the Indebtedness. This includes a garnishment of any of Grantor's deposit accounts with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lender written notice of the creditor or forfeiture proceeding and deposits with lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or such Guarantor dies or becomes incompetent. Lender, at its option, may, but shall not be required to, permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure the Event of Default. ADVERSE CHANGE. A material adverse change occurs in Grantor's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. INSECURITY. Lender, in good faith, deems itself insecure. RIGHT TO CURE. If any default, other than Default on Indebtedness, is curable and if Grantor has not been given a prior notice of a breach of the same provision of this Agreement, it may be cured (and no Event of Default will have occurred) if Grantor, after Lender sends written notice demanding cure of such default, (a) cures the default within fifteen (15) days; or (b), if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement, at any time thereafter, Lender shall have all the rights of a secured party under the California Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of the following rights and remedies: ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness, including any prepayment penalty which Grantor would be required to pay, immediately due and payable, without notice. ASSEMBLE COLLATERAL. Lender may require grantor to deliver to lender all or any portion of the Collateral and any and all certificates of title and other documents relating to the Collateral. Lender may require Grantor to assemble the Collateral and make it available to Lender at a place to be designated by Lender. Lender also shall have full power to enter upon the property of Grantor to take possession of and remove the Collateral. If 1he Collateral contains other goods not covered by this Agreement at the time of repossession, Grantor agrees Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Grantor after repossession. SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in its own name or that of Grantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender will give Grantor reasonable notice of the time after which any private sale or any other intended disposition of the Collateral is to be made. The requirements of reasonable notice shall be met if such notice is given at least ten (10) days, or such lesser time as required by state law, before the time of the sale or disposition. All expenses relating to the disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shall become a part of the Indebtedness secured by this Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure until repaid. APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall have the following rights and remedies regarding the appointment of a receiver: (a) Lender may have a receiver appointed as a matter of right, (b) the receiver may be an employee of Lender and may serve without bond, and (c) all fees of the receiver and his or her attorney shall become part of the Indebtedness secured by this Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure until repaid. COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a receiver, may collect the payments, rents, income, and revenues from the Collateral. Lender may at any time in its discretion transfer any Collateral into its own name or that of its nominee and receive the payments, rents, income, and revenues therefrom and hold the same as security for the Indebtedness or apply it to payment of the Indebtedness in such order of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles, insurance policies, instruments, chattel paper, choses in action, or similar property, Lender may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as Lender may determine, whether or not Indebtedness or Collateral is then due. For these purposes, Lender may, on behalf of and in the name of Grantor, receive, open and dispose of mail addressed to Grantor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment, or storage of any Collateral. To facilitate collection, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender. OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment against Grantor for any deficiency remaining on the Indebtedness due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement. Grantor shall be liable for a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper. OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code, as may be amended from time to time. In addition, Lender shall have and may exercise any or all other rights and remedies it may have available at law, in equity, or otherwise. CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced by this Agreement or the Related Documents or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Agreement, after Grantor's failure to perform, shall not affect Lender's right to declare a default and exercise its remedies. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: AMENDMENTS. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. APPLICABLE LOW. This Agreement has been delivered to Lender and accepted by Lender in the State of California. If there is a lawsuit, Grantor agrees upon Lender's request to submit to the jurisdiction of the courts of LOS ANGELES County, State of California. Lender and Grantor 46 47 04-30-1996 COMMERCIAL SECURITY AGREEMENT Page 4 (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Grantor against the other. This Agreement shall be governed by and construed in accordance with the laws of the State of California. ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of Lender's costs and expenses, including attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may pay someone else to help enforce this agreement, and Grantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Grantor also shall pay all court costs and such additional fees as may be directed by the court. CAPTION HEADINGS. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Grantor under this Agreement shall be joint and several, and all references to Grantor shall mean each and every Grantor. This means that each of the Borrowers signing below is responsible for ALL obligations in this Agreement. NOTICES. ALL notices required to be given under this Agreement shall be given in writing, may be sent by telefacsimilie, and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address shown above. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. To the extent permitted by applicable law, if there is more than one Grantor, notice to any Grantor will constitute notice to all Grantors. For notice purposes, Grantor will keep Lender informed at all times of Grantor's current address(es). POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful attorney-in-fact, irrevocably, with full power of substitution to do the following: (a) to demand, collect, receive, receipt for, sue and recover all sums of money or other property which may now or hereafter become due, owing or payable from the Collateral; (b) to execute, sign and endorse any and all claims, instruments, receipts, checks, drafts or warrants issued in payment for the Collateral; (c) to settle or compromise any and all claims arising under the Collateral, and, in the place and stead of Grantor, to execute and deliver its release and settlement for the claim; and (d) to file any claim or claims or to take any action or institute or take part in any proceedings, either in its own name or in the name of Grantor, or otherwise, which in the discretion of lender may seem to be necessary or advisable. This power is given as security for the Indebtedness, and the authority hereby conferred is and shall be irrevocable and shall remain in full force and effect until renounced by Lender. PREFERENCE PAYMENTS. Any monies Lender pays because of an asserted preference claim in Borrower's bankruptcy will become a part of the indebtedness and, at Lender's option, shall be payable by Borrower as provided above in the "EXPENDITURES BY LENDER" paragraph. SEVERABILITY. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. SUCCESSOR INTERESTS. Subject to the limitations set forth above on transfer of the Collateral, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. WAIVER. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. WAIVER OF CO-OBLIGOR'S RIGHTS. If more than one person is obligated for the Indebtedness, Borrower irrevocably waives, disclaims and relinquishes all claims against such other person which Borrower has or would otherwise have by virtue of payment of the Indebtedness or any part thereof, specifically including but not limited to all rights of indemnity, contribution or exoneration. GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED APRIL 30, 1996. GRANTOR: HEMACARE CORPORATION BY: /s/ Hal I. Lieberman BY: /s/ Thomas M. Asher ----------------------------- ----------------------------- HAL I. LIEBERMAN, PRESIDENT THOMAS M. ASHER, CHAIRMAN =============================================================================== 47 EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary information extracted from unaudited financial statements contained in Form 10-Q for the quarter ending March 31, 1996 and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1996 MAR-31-1996 820,000 0 1,483,000 110,000 447,000 2,769,000 2,599,000 1,605,000 3,942,000 1,714,000 0 0 0 12,210,000 (11,402,000) 3,942,000 2,810,000 2,810,000 2,621,000 2,621,000 627,000 15,000 20,000 (449,000) 0 (449,000) 0 0 0 (449,000) (.07) (.07)
EX-99.0 5 48 EXHIBIT 99.1 AGREEMENT TO FURNISH EXHIBITS AND SCHEDULES HemaCare Corporation (the "Registrant") hereby agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted exhibit or schedule to the Asset Purchase Agreement, dated as of May 2, 1996, among HemaBiologics, Inc. (a wholly owned subsidiary of the Registrant), the Registrant and Atopix Pharmaceuticals Corporation (the "Asset Purchase Agreement"), filed with this Report as Exhibit 2.1. The Asset Purchase Agreement includes a list briefly identifying the omitted exhibits and schedules. HemaCare Corporation also agrees to furnish supplementally a copy of Exhibit A - 1996 Cash Flow Requirements for Financial Covenant Purposes to the Revolving Credit Agreement, dated April 30, 1996, between the Registrant and Bank Leumi Le-Israel, B.M., filed with this Report as Exhibit 10.1. 48 -----END PRIVACY-ENHANCED MESSAGE-----