-----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, Q1vzuHH3dMqfHoUF8B/LPLDpqO42XEwaQ8HS9/iGNBHZ7aDghZV7T/0UEGMLLCWq wFPosdQ/LxAxEX1d5w3icQ== 0000801748-99-000005.txt : 19990518 0000801748-99-000005.hdr.sgml : 19990518 ACCESSION NUMBER: 0000801748-99-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: SEC FILE NUMBER: 000-15223 FILM NUMBER: 99626193 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 QUARTER ENDED MARCH 31, 1999 ============================================================================= 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, 1999 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 14, 1999 7,377,582 shares of Common Stock of the Registrant were issued and outstanding. ============================================================================= INDEX HEMACARE CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated balance sheets - March 31, 1999 (unaudited) and December 31, 1998 Consolidated statements of operations - Three months ended March 31, 1999 and 1998 (unaudited) Consolidated statements of cash flows - Three months ended March 31, 1999 and 1998 (unaudited) Notes to consolidated financial statements - March 31, 1999 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits SIGNATURES 2 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements HEMACARE CORPORATION CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1999 1998 (Unaudited) (Audited) ------------ ----------- ASSETS Current assets: Cash and cash equivalents............................ $ 1,140,000 $ 1,372,000 Marketable securities................................ 576,000 288,000 Accounts receivable, net of allowance for doubtful accounts - $446,000 (1999) and $596,000 (1998)............................................. 2,640,000 3,038,000 Product inventories.................................. 67,000 87,000 Supplies............................................. 710,000 604,000 Prepaid expenses..................................... 120,000 160,000 Note receivable from related party - current......... 21,000 24,000 ------------ ------------ Total current assets..................... 5,274,000 5,573,000 Plant and equipment, net of accumulated depreciation and amortization of $1,912,000 (1999) and $1,869,000 (1998).............. 1,259,000 1,289,000 Goodwill, net of amortization of $32,000............... 721,000 742,000 Note receivable from related party - non-current....... 50,000 49,000 Other assets........................................... 10,000 9,000 ------------ ------------ $ 7,314,000 $ 7,662,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable..................................... $ 1,120,000 $ 1,414,000 Accrued payroll and payroll taxes.................... 706,000 802,000 Accrued professional fees............................ 116,000 173,000 Other accrued expenses............................... 346,000 418,000 Current obligations under capital leases............. 158,000 203,000 Current notes payable................................ 133,000 109,000 Reserve for discontinued operations.................. 110,000 110,000 ------------ ------------ Total current liabilities................ 2,689,000 3,229,000 Obligations under capital leases, net of current portion................................... 609,000 627,000 Notes payable, net of current portion.................. 454,000 491,000 Other long-term liabilities............................ 24,000 24,000 Commitments and contingencies.......................... Shareholders' equity: Preferred stock no par value 5,000,000 shares authorized, 450,0000 issued and outstanding........ 75,000 75,000 Common stock, without par value - 20,000,000 shares authorized, 7,281,120 issued and outstanding in 1999 and 1998........................ 13,588,000 13,584,000 Accumulated deficit.................................. (10,125,000) (10,368,000) ------------ ------------ Total shareholders' equity............... 3,538,000 3,291,000 ------------ ------------ $ 7,314,000 $ 7,662,000 ============ ============
The accompanying notes are an integral part of these consolidated balance sheets. 3 4 HEMACARE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended March 31, 1999 1998 ------------- ------------- Revenues: Blood management programs......................... $ 1,538,000 $ 851,000 Regional operations Blood products.................................. 1,067,000 582,000 Blood services.................................. 1,848,000 1,484,000 ------------ ------------ Total revenue................................. 4,453,000 2,917,000 Operating costs and expenses: Blood management programs......................... 1,460,000 814,000 Regional operations Blood products.................................. 737,000 468,000 Blood services.................................. 1,422,000 1,118,000 ------------ ------------ Total operating costs and expenses........... 3,619,000 2,400,000 ------------ ------------ Operating profit............................. 834,000 517,000 General and administrative expense.................. 686,000 501,000 Gain on sale of Gateway Community Blood Program..... 100,000 - ------------ ------------ Income from continuing operations before income taxes............................... 248,000 16,000 Provision for income taxes.......................... (5,000) - ------------ ------------ Net income..................................... $ 243,000 $ 16,000 ============ ============ Basic and diluted per share amounts: Net income..................................... $ 0.03 $ 0.00 ============ ============ Weighted average shares outstanding - basic......... 7,281,120 7,197,515 ============ ============ Weighted average shares outstanding - dilutive...... 7,797,843 7,197,515 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 5 HEMACARE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended March 31, 1999 1998 ------------ ------------ Cash flows from operating activities: Net Income................................................ $ 243,000 $ 16,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization......................... 63,000 34,000 Issuance of common stock and options for compensation. 4,000 9,000 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable............ 398,000 (266,000) (Increase) decrease in inventories, supplies and prepaid expenses................................. (46,000) 134,000 Increase in other assets, net......................... (1,000) - Increase (decrease) in accounts payable, accrued expenses and other liabilities...................... (519,000) 53,000 Proceeds from discontinued operations................. - 5,000 ------------ ------------ Net cash provided by (used in) operating activities........................................... 142,000 (15,000) Cash flows from investing activities: Decrease in note receivable from related parties.......... 2,000 4,000 Increase in marketable securities......................... (288,000) (309,000) Purchase of plant and equipment, net...................... (12,000) (3,000) ------------ ------------ Net cash used in investing activities..................... (298,000) (308,000) Cash flows from financing activities: Principal payments on line of credit, term loan and capital leases...................................... (76,000) (37,000) ------------ ------------ Net cash used in financing activities..................... (76,000) (37,000) ------------ ------------ Decrease in cash and cash equivalents....................... (232,000) (360,000) Cash and cash equivalents at beginning of period............ 1,372,000 1,249,000 ------------ ------------ Cash and cash equivalents at end of period.................. $ 1,140,000 $ 889,000 ============ ============ Supplemental disclosure: Interest paid............................................. $ 20,000 $ 4,000 ============ ============ Items not impacting cash flows: Increase in capital lease obligations..................... $ - $ 42,000 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 5 6 HemaCare Corporation Notes to Consolidated Financial Statements Note 1 - Basis of Presentation and General Information - ------------------------------------------------------- The accompanying unaudited consolidated financial statements of HemaCare Corporation (the "Company" or "HemaCare") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1999, are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. Certain 1998 amounts have been reclassified to conform to the 1999 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, 1998. Coral Blood Services, Inc. ("CBS"), a wholly owned subsidiary of the Company, was formed in October 1998, for the purpose of purchasing substantially all of the assets of a company which had been in the business of supplying blood products and services to hospitals primarily in the eastern United States. (See Note 2.) Note 2 - Coral Blood Services - ----------------------------- In October 1998, the Company purchased, through its wholly owned subsidiary CBS, substantially all of the assets of Coral Therapeutics, Inc. ("Coral") from Coral's secured lender. Prior to the acquisition, Coral provided blood services to major university, teaching and community hospitals in Maine, New Hampshire, Massachusetts, Connecticut, New York, North Carolina and other states. HemaCare is in the process of negotiating of separate agreements with the hospitals previously served by Coral and is providing services to hospitals that have not signed a new agreement under interim arrangements. Note 3 - Line of Credit and Note Payable - --------------------------------------- Line of Credit The Company maintains a line of credit with a commercial bank secured by its accounts receivable, inventory and equipment. In February 1999, the commercial bank increased the Company's line of credit borrowing limit to $1.2 million, from $700,000, and converted the $600,000 balance then outstanding on the line of credit to a four-year term loan. Under the terms of the credit line agreement, which is in effect until June 1, 1999, the Company may borrow up to 70% of eligible accounts receivable, up to a maximum of $1.2 million at an interest rate of prime plus 0.5% and must maintain certain ratios. The Company was in compliance with all covenants of its borrowing agreement at March 31,1999, and there was no balance outstanding under the line of credit. The Company is in the process of renewing its credit line agreement. 6 7 Note Payable The Company has a term note with a bank, payable in 48 monthly payments of principal and interest of approximately $15,000 through February 2003. The note bears interest at the prime rate plus one percent (8.75% at March 31, 1999). Note 4 - Commitments and Contingencies - -------------------------------------- Since 1976, California law has prohibited the infusion of blood products into patients if the donors of those products were paid unless, in the opinion of the recipient's physician, blood from a non-paid donor was not immediately available. Apheresis platelet products obtained from paid donors, including the Company's Sherman Oaks center's paid donors, are exempted from this law by a state statute which contains a "sunset" provision. Unless a new exemption is obtained, the existing exemption will expire under its sunset provision on December 31, 2001. The Company is evaluating a number of available options with regard to the expiration of the extension. The State and federal laws set forth antikickback and self- referral prohibitions and otherwise regulate financial relationships between blood banks and hospitals, physicians and other persons who refer business to them. While the Company believes its present operations comply with applicable regulations, there can be no assurance that future legislation or rule making, or the interpretation of existing laws and regulations will not prohibit or adversely impact the delivery by HemaCare of its services and products. Note 7 - Segment and Related Party Information - ----------------------------------------------- Business Segments The Company operates in three business segments, each of which represents a separate business activity. The segments and a description of their business activities follows: - - Blood Management Programs ("BMP"). Outsource programs which provide all or a major portion of the blood banking functions to a hospital. - - Blood Products. Apheresis and whole blood derived products. - - Blood Services. Therapeutic apheresis and stem cell collection procedures, autologous interoperative transfusion and donor testing. Management uses more than one measure to measure segment performance. However, the dominant measurements are consistent with the Company's consolidated financial statements which present revenue from external customers and pretax income for each segment. Related Party Loan In 1995 and 1994, the Company made a series of personal loans to Dr. Joshua Levy, then an officer and director of the Company. The Company received installment payments on these loans in 1997 and 1996. Effective July 31, 1997, the Company entered into an agreement with Dr. Levy to forgive the remaining balance of Dr. Levy's loans, including interest accrued at a 10% annual rate, over a five-year period so long as Dr. Levy remains employed by the Company. 7 8 Note 6 - Gain on Disposition - ---------------------------- 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 Missouri and Illinois. In August 1997, Gateway's operations were sold. The Company is entitled to receive a percentage of Gateway's revenues, as defined, over the five years subsequent to the date of sale, up to maximum of $422,000. An additional payment of $100,000 was due when Gateway received a Food and Drug Administration establishment license. In the first quarter of 1999, Gateway received this license, and the Company realized an additional $100,000 gain on the disposition. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HemaCare's operations include blood management programs ("Blood Management Programs" or "BMPs") and regional sales of blood products ("Blood Products") and blood services ("Blood Services"). A HemaCare Blood Management Program allows a hospital to outsource all or a portion of its blood procurement and donor center management operations and other blood related activities. Blood Products include apheresis platelets and whole blood components such as red blood cells and plasma products. Blood Services include therapeutic apheresis procedures, stem cell collection and cryopreservation and donor testing. In October 1998, the Company, through its subsidiary Coral Blood Services, Inc. ("CBS"), acquired existing blood products and services operations in the eastern United States. These consist of Blood Management Programs and other blood services provided to hospitals and medical centers. Presently, CBS is providing services to some of its customers under interim arrangements, while negotiating new contractual agreements. The Company operates five blood management programs. The University of Southern California ("USC") program, initiated in 1996, and four East Coast programs. The East Coast programs are Dartmouth-Hitchcock Medical Center ("DHMC"), Maine Medical Center ("MMC"), St. Vincent Hospital ("St. Vincent") and University of North Carolina ("UNC"). Prior to October 1998, Coral Therapeutics, Inc. operated these programs which are now operated by CBS. The Gateway Community Blood Program ("Gateway") located in St. Louis, Missouri, and the Citrus Valley Health Partners ("Citrus Valley") Blood Management Program, initiated in 1995 and 1996, failed to meet the Company"s profitability criteria. Gateway was sold in August 1997, and the Citrus Valley contract was terminated in July 1998. All comparisons within the following discussions are to the comparable periods of the previous year. 8 9 Revenues and Operating Profit - ----------------------------- Total revenues increased 53% ($1,536,000) in the first quarter of 1999. The increase was due to the addition of the CBS operations and to higher California Blood Products revenue, partially offset by lower California BMP and Blood Services revenue. The decrease in California BMP revenue was due to the termination of the Citrus Valley contract. The Company's operating profit as a percentage of sales ("profit margin") increased to 19% in the first quarter of 1999 from 18% in the comparable quarter of 1998. In addition, the Company realized a $100,000 gain on the sale of Gateway, in the first quarter of 1999. Blood Management Programs Revenue increased 81% ($687,000) and operating profit increased 1% ($41,000) in the first quarter of 1999. The revenue increase was due to the addition of the CBS operations, partially offset by the termination of the Citrus Valley contact. The increase in operating profit resulted from both the addition of CBS operations and the termination of the Citrus Valley contract. Blood Products Blood Products revenues increased 83% ($485,000) in the first quarter of 1999 primarily due to an increase in the volume of apheresis platelet sales in California. This increase was partially offset by a decrease in the average price per product sold. The profit margin on Blood Products sales increased to 31% from 20% in the first quarter of 1999. The increase resulted primarily from a decrease in the average cost per product sold in California, partially offset by a decrease in the average price per products sold. Blood Services Blood Services revenues increased 25% ($364,000) in the first quarter of 1999. The increase resulted from the addition of CBS operations, partially offset by decreases in California-based revenue. In California, albumin sales, the volume of therapeutic procedures and the average price per procedure all decreased in the first quarter of 1999. Albumin, a protein replacement fluid used in certain therapeutic procedures, is offered for sale to non-hospital customers only when the Company is able to obtain an excess supply at a favorable price. The decrease in the average price per California apheresis procedure was due primarily to the mix of procedures performed. The profit margin on Blood Services sales decreased to 23% from 25% in the first three months of 1999. The decrease was due to CBS therapeutic apheresis operations, which have lower profit margins. This decrease was partially offset by increased profit margins in California therapeutic apheresis services, resulting from a lower average cost per procedure. Gain on Disposition - ------------------- As a part of the terms of the sale of Gateway's operations, the Company was entitled to receive a payment of $100,000 when Gateway received a Food and Drug Administration establishment license. In the first quarter of 1999, Gateway received this license, and the Company realized an additional $100,000 gain on the disposition. 9 10 General and Administrative Expense - ---------------------------------- General and administrative expense increased 37% ($185,000) in the first quarter of 1999. The increase reflects costs associated with the addition of the CBS operations. Liquidity and Capital Resources - -------------------------------- At March 31, 1999, the Company had cash and cash equivalents and marketable securities of $1,716,000 and working capital of $2,586,000. The Company has a $1,200,000 line of credit with a commercial bank which is in effect through June 1, 1999. Under the terms of the credit line agreement, which is in the process of renewal, the Company may borrow up to 70% of eligible accounts receivable, up to a maximum of $1,200,000, and must maintain certain financial ratios. The Company was in compliance with all covenants of its borrowing agreement at March 31, 1999, and there were no borrowings outstanding on the line of credit at that date. The Company also has a term note with a bank of $600,000, payable in 48 monthly payments of principal and interest of approximately $15,000 through February 2003. The note bears interest at the prime rate plus one percent (8.75% at March 31, 1999). The term note is cross collateralized with the Company's line of credit. The Company's blood products and services businesses, other than the USC Blood Donor Center (the "Center") are profitable and cash flow positive. The Center operations are expected to continue to be unprofitable until a higher level of Center blood collections can be achieved. The operating losses of the Center reduce the overall profitability of the USC Blood Management Program to the Company. The Company continues to implement changes intended to increase the level of Center collections, but there can be no assurance that the Center will be able to achieve and maintain a breakeven or profitable level of collections. The Company is providing services to many of its East Coast customers under interim arrangements, while negotiating formal contractual agreements. The Company believes that contractual agreements will be satisfactorily concluded with most of these customers. However, there can be no assurance that satisfactory contracts can be negotiated with all major customers, and the loss of one or more major customers could have an adverse effect on the Company's revenue and operating profit. Since 1976, California law has prohibited the infusion of blood products into patients if the donors of those products were paid unless, in the opinion of the recipient's physician, blood from a non-paid donor was not immediately available. Apheresis platelet products obtained from paid donors, including the Company's Sherman Oaks center's paid donors, are exempted from this law by a state statute which contains a "sunset" provision. Unless a new exemption is obtained, the existing exemption will expire under its sunset provision on December 31, 2001, in the event the existing exemption is not extended. The Company is evaluating a number of alternatives with regard to continuing its California based apheresis platelet business after the year 2001. However, there can be no assurance that these initiatives will be successful. Should the Company be unable to continue to sell apheresis platelets collected from paid donors, the Company's revenue and operating profit could be materially adversely effected. 10 11 Joshua Levy, M.D., medical director of the Company and a shareholder, treats patients through his private practice, who require therapeutic services. Amendments to the Federal self-referral laws and related regulations which became effective in 1995 could restrict the Company's ability to provide therapeutic services to Dr. Levy's patients who are covered by Medicare or MediCal. It is estimated that revenues from these patients represented approximately 2% ($295,000) of the Company's 1998 revenues. New regulations which have been proposed but not yet issued may provide an exemption for therapeutic apheresis services. If the new regulations do not provide an exemption for therapeutic apheresis services, the Company could lose the revenue from its services for Dr. Levy's Medicare and MediCal patients. Management is evaluating opportunities to develop and implement new outsourcing models, including its Blood Management Program. Because of the increase in the cost of acquiring red blood cells and their decreasing availability, it is likely that future HemaCare outsourcing arrangements will either involve fixed price supply contracts for these products or will focus on providing specialized donation services, apheresis based products and services, and other technology based blood therapies. However, development and introduction of a revised Blood Management Program model or other outsourcing programs may require that the Company obtain additional financing or partner with other blood product and service providers. There can be no assurance that the Company will be successful in developing and marketing its outsourcing programs, that it will be able to obtain the funds necessary to finance such programs or that required partnering relationships can be developed. The Company anticipates that cash flow from profitable operations, collection of the accounts receivable purchased from Coral, borrowing available from its bank line of credit and its cash and investments on hand will be sufficient to provide funding for its existing needs during the next twelve months. Year 2000 Disclosure - -------------------- The Company has developed and is implementing a comprehensive program to address year 2000 issues. The program considers the effect of the Year 2000 on the Company's internal systems, customers, products and services, production systems, and suppliers and other critical business partners. Implementation of the Company's plan is substantially complete, and the Company believes that all identified potential Year 2000 issues have been effectively resolved. The cost to identify and resolve Year 2000 issues was not material to the Company's financial results and has been expensed as incurred. Management does not believe that there will be a significant disruption to the Company's business due to Year 2000 issues. However, the Company has begun contingency planning to address any situations which may arise in which the planning of the Company or third parties prove to be inadequate, and where practical alternatives are available. There can be no assurance that the Company's Year 2000 program or the programs of critical business partners will be successful, and failure could have a material adverse affect on the Company's business and results of operations. Factors Affecting Forward-Looking Information - --------------------------------------------- The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" from liability for forward-looking statements. Certain information included in this Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by or on behalf months of the Company) are forward-looking, such as statements relating to operational and financing plans, competition, the effects of discontinued operations, 11 12 the effect of state and Federal regulation and demand for the Company's products and services. Such forward-looking statements involve important risks and uncertainties, many of which will be beyond the control of the Company. These risks and uncertainties could significantly affect anticipated results in the future, both short- term and long-term, and accordingly, such results may differ from those expressed in forward-looking statements made by or on behalf months of the Company. These risks and uncertainties include, but are not limited to, those relating to the ability of the Company to expand its operations, obtain additional financing, to repay existing debt, to achieve profitability in its USC Center, to retain existing customers and obtain new customers, to integrate the assets recently acquired from Coral Therapeutic, Inc.'s secured lender, to retain the Coral Therapeutic, Inc. customers, to improve the profitability of the Company's other operations, the effects of the Year 2000 and to comply with the covenants under its bank line of credit. Each of these risks and uncertainties as well as others are discussed in greater detail in the preceding paragraphs of this Management's Discussion and Analysis of Financial Condition and Results of Operations and in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a. Exhibits 4.1 Warrant Agreement between the Registrant and Kibel, Green, Inc., dated March 4, 1999. 4.2 Warrant Agreement between the Registrant and Stuart Dinney, dated March 4, 1999. 10.1 Services Agreement between the Registrant and Alan C. Darlington, dated March 10, 1999. 27 Financial Data Schedule for the Quarter Ending March 31, 1999. 12 13 b. The Company did not file any reports on Form 8-K during the three months ended March 31, 1999. 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 17, 1998 HEMACARE CORPORATION ---------------- (Registrant) /s/ Sharon C. Kaiser ---------------------------- Sharon C. Kaiser, Senior Vice President, Finance and Chief Financial Officer 13 14 INDEX TO EXHIBITS
Method of Filing -------------------------- 4.1 Warrant Agreement between the Registrant and Kibel Green, Inc. dated March 4, 1999 Filed herewith electronically 4.2 Warrant Agreement between the Registrant and Stuart Dinney, dated March 4, 1999 Filed herewith electronically 10.1 Services Agreement between the Registrant and Alan C. Darlington, dated March 10, 1999 Filed herewith electronically 27 Financial Data Schedule for the quarter ending September 30, 1998 Filed herewith electronically
EX-4.1 2 EXHIBIT 4.1 WARRANT AGREEMENT THIS WARRANT AGREEMENT (this "Agreement") is made and entered into as of the 4th day of March, 1999 by and between KIBEL GREEN ISSA, INC. (the Warrantholder") and HEMACARE CORPORATION, a California corporation (the "Company"). WHEREAS, the Warrantholder and the Company are parties to that certain Consulting Agreement dated as of September 4, 1998 (the "Consulting Agreement"), pursuant to which Warrantholder is to receive a warrant to purchase 35,000 shares of the common stock of the Company ("Common Stock"), without par value (the "Common Stock"), subject to vesting as provided herein. NOW, THEREFORE, in consideration of the foregoing, and for the purpose of defining the terms and provisions of such warrants, and the respective rights and obligations of the parties with respect thereto, the Company and the Warrantholder hereby agree as follows: Section 1. Form of Warrants; Limitations on Transferability. 1.1 Form and Registration. A Warrant certificate in the form as set forth in Exhibit A attached hereto, shall be issued to the Warrantholder upon the execution and delivery of this Agreement by the Company and the Warrantholder. The Warrant certificate shall be executed on behalf of the Company by its President or by a Vice President, and attested to by its Secretary or an Assistant Secretary. A Warrant certificate bearing the signature of an individual who was at any time the proper officer of the Company shall bind the Company, notwithstanding that such individual shall have ceased to hold such office prior to the delivery of such Warrant certificate or did not hold such office on the date of this Agreement. The Warrant certificate shall be dated as of the date of signature thereof by the Company either upon initial issuance or upon division, exchange, substitution or transfer. Each Warrant certificate shall be numbered and shall be registered on the books of the Company when issued. 1.2 Transfer. The Warrants shall be transferable only on the books of the Company maintained at its principal office in Sherman Oaks, California, or wherever its principal office may then be located, upon delivery thereof duly endorsed by the Warrantholder or by its duly authorized attorney or representative, accompanied by proper evidence of succession, assignment or authority to transfer. Upon any registration of a valid and proper transfer, the Company shall execute and deliver a new Warrant certificate to the person entitled thereto. 1.3 Limitations on Transfer of the Warrants. The Warrantholder agrees that prior to making any transfer or disposition of the Warrants or the shares purchasable upon exercise of the Warrants (the "Shares") or any interest therein, the Warrantholder shall give written notice to the Company describing briefly the manner in which any such proposed transfer or disposition is to be made together with an opinion of counsel, in form and substance satisfactory to the Company, to the effect that: (i) a registration statement or other notification or post-effective amendment -1- thereto (hereinafter collectively a "Registration Statement") under the Securities Act of 1933, as amended (the "Act") is not required with respect to such transfer or disposition or that such a Registration Statement has been filed with, and declared effective, if necessary, by, the Securities and Exchange Commission (the "Commission"), or (ii) all requirements under any federal, state or foreign securities laws have been satisfied or fulfilled such as to permit the proposed transfer or disposition lawfully pursuant to all such laws. Except as provided in Section 11 hereof, the Company shall not be required to cause the Warrants or the Shares to be registered under any securities laws. The Company will, however, respond to reasonable requests from the Warrantholder for assistance in connection with the perfection or qualification of any exemption from registration under applicable securities laws; provided that the Warrantholder pays or reimburses the Company for its costs and expenses incurred in connection therewith. Unless the context indicates otherwise, the term "Warrantholder" shall include any transferee or transferees of the Warrants, and the term "Warrants" shall include any and all warrants outstanding pursuant to this Agreement, including those evidenced by a certificate or certificates issued upon division, exchange, substitution or transfer pursuant to this Agreement. 1.4 Legend on Shares and Warrants. Warrantholder hereby represents and warrants to the Company that (i) Warrantholder understands that the offering and sale of the Warrants and the shares purchasable upon exercise thereof have not been, and will not be, registered under the Act or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering, and that, as such, the Warrants and the shares purchasable upon exercise thereof will not be freely transferable, that certificates representing the Securities will bear restrictive legends under applicable federal and state securities laws as provided below and shall be subject to stops on transfer. Each certificate for Warrants or Shares issued upon exercise of the Warrants shall bear the following legend, unless, at the time of exercise, such Shares or Warrants are subject to a currently effective Registration Statement under the Act and, if required, are subject to a currently effective qualification or registration under any applicable securities laws of any other jurisdiction: THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS SUCH TRANSACTION IS DULY REGISTERED UNDER THE ACT AND ALL OTHER APPLICABLE SECURITIES LAWS OR UNLESS SUCH TRANSFER IS EXEMPT FROM THE REGISTRATION PROVISIONS OF THE ACT AND ALL OTHER APPLICABLE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER A WARRANT AGREEMENT DATED AS OF MARCH 4, 1999, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER. Any certificate issued at any time in exchange or substitution for any certificate bearing such legends (except a new certificate issued upon completion of a registered distribution as provided above) shall also bear -2- the above legends unless, in the opinion of the Company's counsel, the securities represented thereby need no longer be subject to such restrictions. 1.5 The Warrantholder hereby represents and warrants that it (i) is acquiring the Warrants for its own account for investment purposes only and not with a view to or for sale in connection with a distribution of the Warrants or the Shares; (ii) has relied on its own business and financial knowledge and experience in making the decision to invest in the Warrants; and (iii) has sufficient knowledge and experience in business and financial matters to enable it to use the information made available to it about the Company (including the Company's periodic and other filings with the Securities and Exchange Commission) to evaluate the merits and risks of an investment in the Warrants and to make an informed investment decision with respect thereto. Section 2. Exchange of Warrant Certificate. Any Warrant certificate may be divided, combined or exchanged for another certificate or certificates entitling the Warrantholder to purchase a like aggregate number of Shares as the certificate or certificates surrendered then entitled such Warrantholder to purchase. Any Warrantholder desiring to divide, combine or exchange a Warrant certificate shall make such request in writing delivered to the Company, and shall surrender, properly endorsed, with signatures guaranteed, the certificate evidencing the Warrant to be so exchanged. Thereupon, the Company shall execute and deliver to the person entitled thereto a new Warrant certificate as so requested. Section 3. Term of Warrants; Exercise of Warrants. Subject to the terms of this Agreement, the Warrantholder shall have the right, at any time during the period commencing at 9:00 a.m., Pacific time, on the applicable Vesting Date (as defined in Section 7.1 below), and ending at 5:00 p.m., Pacific time, on September 4, 2003 (unless earlier terminated in accordance herewith), to purchase from the Company (and the Company shall issue and sell to such Warrantholder) any or all of the number of Shares underlying the Warrants which have vested as provided in Section 7.1 below, upon surrender to the Company at its principal office, or upon surrender to any transfer agent designated by the Company for such purposes, of the certificate evidencing the Warrants to be exercised, together with the purchase form attached thereto duly filled in and signed, with signatures guaranteed, and upon payment to the Company of the per share purchase price of $0.31 (the "Warrant Price"), subject to adjustment as provided in Section 8, for the number of Shares in respect of which such Warrant is then exercised, but in no event for less than 500 Shares (unless less than an aggregate of 500 Shares are then purchasable under all outstanding Warrants held by a Warrantholder). Payment of the aggregate Warrant Price shall be made in cash or by cashiers or certified check or bank draft. In lieu of such payment, Warrantholder shall be entitled to receive, without the payment by the Warrantholder of any additional consideration, shares of Common Stock equal to the value of this Warrant or any portion hereof by the surrender of this Warrant or such portion to the company, with the net issue election notice attached hereto as Exhibit B duly executed, at the principal office of the Company. Thereupon, the Company shall issue to the Warrantholder such number of fully paid and nonassessable shares of Common Stock as is computed using the following formula: (A-B) X=Y ------ A Where: X= the number of shares of Common Stock to be issued to the Warrant holder. Y= the number of shares of Common Stock covered by this Warrant in respect of which the net issue election is made. A= the fair market value of one share of Common stock, as determined below, as at the time the net issue election is made. B= the Exercise Price in effect under this Warrant at the time the net issue election is made. For purpose of this Section, fair market value of one share of Common Stock as of a particular date shall mean the closing price of the Company's Common Stock on the OTC Bulletin Board or other quotation medium or stock exchange or which the Common Stock is quoted or listed on the day notice of exercise is provided to the Company as provided above. If the Common Stock is not so quoted or listed as provided above, then the fair market value of one share of Common Stock shall be determined by the Board of Directors of the Company in good faith, which determination shall be conclusive and binding on the Warrantholder. Upon such surrender of the Warrants and payment of such Warrant Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Warrantholder and in the name of the Warrantholder a certificate or certificates for the number of full Shares so purchased upon the exercise of the Warrant, together with cash, as provided in Section 9 hereof, in respect of any fractional Shares otherwise issuable upon such surrender. Such certificate or certificates shall be deemed to have been issued and the Warrantholder shall be deemed to have become a holder of record of such securities as of the date of surrender of the Warrants and payment of the Warrant Price, as aforesaid, notwithstanding that the certificate or certificates representing such securities shall not actuallyhave been delivered or that the stock transfer book of the Company shall then be closed. The Warrants shall be exercisable, at the election of the Warrantholder, either in full or from time to time in part and, in the event that a certificate evidencing the Warrants is exercised in respect of less than all of the Shares specified therein at any time prior to the termination date, a new certificate evidencing the remaining portion of the Warrants will be issued by the Company. Upon the exercise of a Warrant at a time when there is not in effect under the Act a registration statement relating to the Shares issuable upon exercise thereof and available for delivery to the Warrantholder a prospectus meeting the requirements of Section 10(a)(3) of the Act, the Warrantholder shall represent and warrant in writing to the Company that the Shares purchased are being acquired for investment and not with a view to the distribution thereof. No Shares shall be issuable upon the exercise of any Warrant unless and until any then applicable requirements of the Securities and Exchange Commission, the California Corporations Commissioner, or other regulatory agencies having jurisdiction, and of any exchanges upon which common stock of the Company may be listed, shall have been complied with in full. -4- Section 4. Payment of Taxes. The Company will pay all United States documentary stamp taxes, if any, attributable to the initial issuance of the Shares issuable upon the exercise of the Warrants; provided, however, the Company shall not be required to pay any foreign documentary stamp taxes or tax which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for shares of Common Stock in a name other than that of the registered holder of Warrants in respect of which such shares are issued, and in such case neither the Company nor the Warrant Agent shall be required to issue or deliver any certificate for shares of Common Stock or any Warrant certificate until the person requesting the same has paid to the Company the amount of such tax or has established to the Company?s satisfaction that such tax has been paid. Section 5. Mutilated or Missing Warrants. In case the certificate or certificates evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the Company may at its discretion, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant certificate or certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant certificate and a bond of indemnity, if requested, also satisfactory in form and amount at the applicant's cost. Applicants for such substitute Warrant certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. Section 6. Reservation of Shares. There has been reserved, and the Company shall at all times keep reserved so long as the Warrants remain outstanding, out of its authorized Common Stock, such number of shares of Common Stock as shall be subject to purchase under the Warrants. Every transfer agent for the Common Stock issuable upon the exercise of the Warrants will be irrevocably authorized and directed at all times to reserve such number of authorized and unissued shares as shall be requisite for such purpose. The Company will keep a copy of this Agreement on file with every transfer agent for the Common Stock issuable upon the exercise of the Warrants. The Company will supply every such transfer agent with duly executed stock and other certificates, as appropriate, for such purpose and will provide or otherwise make available any cash which may be payable as provided in Section 9 hereof. Section 7. Vesting Date; Early Termination. The applicable "Vesting Date" of the Warrants shall be the earliest to occur of (i) September 4, 1998, (ii) the sale of all or substantially all the assets of the Company and (iii) the 15th day prior to the date fixed as the record date or the date of closing the stock transfer books of the Company for the determination of the stockholders entitled to any rights to receive merger consideration or other rights in connection with any proposed merger or consolidation of the Company with respect to which the Company would not be the surviving entity. -5- 7.2 Notwithstanding any other provision of this Agreement to the contrary, the Warrants shall immediately terminate and shall not be or become exercisable upon (a) the breach by Warrantholder of any provision of the Noncompetition Agreement, or (b) the termination of Warrantholder's employment with the company for Cause (as defined below). Cause shall mean (i) the conviction of a felony in a court of law, (ii) a material breach of fiduciary duty owed to the Company, or (iii) gross neglect of duties by the Warrantholder. Section 8. Adjustments. The number and kind of securities purchasable upon the exercise of the Warrants and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events, as follows: 8.1 Adjustments. The number of Shares purchasable upon the exercise of the Warrants shall be subject to adjustment as follows: (a) In case the Company shall (i) pay a dividend in Common Stock or make a distribution in Common Stock, (ii) subdivide its outstanding Common Stock, (iii) combine its outstanding Common Stock into a smaller number of shares of Common Stock, or (iv) issue, by reclassification of its Common Stock, other securities of the Company, the number of Shares purchasable upon exercise of the Warrants immediately prior thereto shall be adjusted so that the Warrantholder shall be entitled to receive the kind and number of Shares or other securities of the Company which the Warrantholder would have owned or would have been entitled to receive immediately after the happening of any of the events described above, had the Warrants been exercised immediately prior to the happening of such event or any record date with respect thereto. Any adjustment made pursuant to this subsection 8.1(a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) No adjustment in the number of Shares purchasable pursuant to the Warrants shall be required unless such adjustment would require an increase or decrease of at least one percent in the number of Shares then purchasable upon the exercise of the Warrants; provided, however, that any adjustments which by reason of this subsection 8.1(b) are not required to be made immediately shall be carried forward and taken into account in any subsequent adjustment. (c) Whenever the number of shares of Common Stock purchasable upon the exercise of a Warrant is adjusted as herein provided, the Warrant Price payable upon exercise of the Warrant shall be adjusted by multiplying such Warrant Price by a fraction, the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of such Warrant immediately prior to such adjustment, and the denominator of which shall be the number of Shares of Common Stock so purchasable immediately thereafter. (d) Whenever the number of Shares purchasable upon the exercise of the Warrants is adjusted as herein provided, the Company shall cause to be promptly mailed to the Warrantholder by certified or registered mail, return receipt requested, postage prepaid, notice of such adjustment and a certificate of the chief financial officer of the Company setting forth the number of Shares purchasable upon the exercise of the Warrants after such adjustment, a brief statement of the facts requiring such adjustment and the computation by which such adjustment was made. -6- (e) For the purpose of this subsection 8.1, the term "Common Stock" shall mean the class of stock designated as the Common Stock of the Company at the date of this Agreement. In the event that at any time, as a result of an adjustment made pursuant to this Section 8, the Warrantholder shall become entitled to purchase any securities of the Company other than Common Stock, (i) if the Warrantholder's right to purchase is on any other basis than that available to all holders of the Company's Common Stock, the Company shall obtain an opinion of an independent investment banking firm valuing such other securities and (ii) thereafter the number of such other securities so purchasable upon exercise of the Warrants shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Shares contained in this Section 8. 8.2 No Adjustment for Dividends. Except as provided in subsection 8.1, no adjustment in respect of any dividends or distributions out of earnings shall be made during the term of the Warrants or upon the exercise of the Warrants. Subject to any requirements of California corporate laws and regulations, applicable federal and state securities laws and regulations and any securities exchanges or over-the-counter markets upon which the Common Stock is listed or qualified for trading enacted or adopted after the date of this Agreement, the record date for the payment of any dividend or distribution out of earnings made while any of the Warrants are outstanding shall be not less than thirty (30) days after the public announcement of the declaration of such dividend or distribution. 8.3 Preservation of Purchase Rights upon Merger or Consolidation. In case of any consolidation of the Company with or merger of the Company into another corporation or in case of any sale or conveyance to another corporation of the property, assets or business of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing corporation, as the case may be, shall execute with the Warrantholder an agreement that the Warrantholder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase, upon exercise of the Warrants, the kind and amount of shares and other securities and property which it would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had the Warrants been exercised immediately prior to such action. In the event of a triangular merger in which the Company is the surviving corporation, the right to purchase Shares under the Warrants shall terminate on the date of such merger and thereupon the Warrants shall become null and void, but only if the controlling corporation shall agree to substitute for the Warrants its warrant which entitles the holder thereof to purchase upon its exercise the kind and amount of shares and other securities and property which it would have owned or been entitled to receive had the Warrants been exercised immediately prior to such merger. Any such agreements referred to in this subsection 8.3 shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 8 hereof. The provisions of this subsection 8.3 shall similarly apply to successive consolidations, mergers, sales or conveyances. 8.4 Independent Public Accountants. The Company may retain a firm of independent public accountants of recognized national standing (which may be any such firm regularly employed by the Company) to make any computation required under this Section 8, and a certificate signed by such firm shall be presumptive evidence of the correctness of any computation made under -7- this Section 8. 8.5 Statement on Warrant Certificates. Irrespective of any adjustments in the number of securities issuable upon exercise of Warrants, Warrant certificates theretofore or thereafter issued may continue to express the same number of securities as are stated in the similar Warrant certificates initially issuable pursuant to this Agreement. However, the Company may, at any time in its sole discretion (which shall be conclusive), make any change in the form of Warrant certificate that it may deem appropriate and that does not affect the substance thereof; and any Warrant certificate thereafter issued, whether upon registration of transfer of, or in exchange or substitution for, an outstanding Warrant certificate, may be in the form so changed. Section 9. Fractional Interests. The Company shall not be required to issue fractional Shares on the exercise of the Warrants. If any fraction of a Share would, except for the provisions of this Section 9, be issuable on the exercise of the Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the then Current Market Price multiplied by such fraction. For purposes of this Agreement, the term "Current Market Price" shall mean (i) if the Common Stock is traded in the over-the-counter market and not in the Nasdaq National Market System nor on any national securities exchange, the average of the per share closing bid prices of the Common Stock on the 30 consecutive trading days immediately preceding the date in question, as reported by Nasdaq or an equivalent generally accepted reporting service, or (ii) if the Common Stock is traded in the Nasdaq National Market System or on a national securities exchange, the average for the 30 consecutive trading days immediately preceding the date in question of the daily per share closing prices of the Common Stock in the Nasdaq National Market System or on the principal stock exchange on which it is listed, as the case may be. For purposes of clause (i) above, if trading in the Common Stock is not reported by Nasdaq, the bid price referred to in said clause shall be the lowest bid price as reported in the "pink sheets" published by National Quotation Bureau, Incorporated. The closing price referred to in clause (ii) above shall be the last reported sale price or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, in either case in the Nasdaq National Market System or on the national securities exchange on which the Common Stock is then listed. Section 10. No Rights as Shareholder; Notices to Warrantholder. Nothing contained in this Agreement or in the Warrants shall be construed as conferring upon the Warrantholder any rights as a stockholder of the Company, including the right to vote, receive dividends, consent or receive notices as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or any other matter. If, however, at any time following the Vesting Date and prior to the expiration of the Warrants and prior to their exercise, any one or more of the following events shall occur: (a) any action which would require an adjustment pursuant to Section 8.1 or 8.3; (b) the Company shall make a declaration for the payment of any other dividend or the making of any other distribution upon the Common Stock; -8- (c) the Company shall make an offer to the holders of Common Stock for the subscription or purchase by them any share of any class or any other rights; (d) the capital reorganization of the Company or the reclassification of the capital stock of the Company; or (e) the consolidation or merger of the Company with or into another entity, the sale of all or substantially all of the assets of the Company or the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall give notice in writing of such event to the Warrant- holder, as provided in Section 12 hereof, at least 20 days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to any relevant dividend, distribution, subscription rights or other rights or for the determination of stockholders entitled to vote on such proposed dissolution, liquidation or winding up. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to mail or receive such notice or any defect therein shall not affect the validity of any action taken with respect thereto. Section 11. Registration Rights. (a) Whenever the Company proposes to file with the Commission a Registration Statement (other than a registration statement on Form S-4 or S-8 or any corresponding future forms, or any other form for a limited purpose which excludes registration of the Shares, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation) in connection with the registration of its Common Stock, the Company shall, at least fifteen (15) days prior to each such filing, give written notice of such proposed filing to the Warrantholder and each holder of the Shares, and shall use its reasonable efforts to include in such filing any proposed disposition of the Shares (issued or issuable upon the exercise of Warrants which are then vested in accordance with Section 7, herein) upon receipt by the Company of a written request therefor, given within ten (10) days after such notice is given by the Company, setting forth the facts with respect to such proposed disposition and all other information with respect to such person necessary to be included in such Registration Statement; provided that the Company shall have the right to postpone or withdraw any registration of its Common Stock (and the corresponding registration effected pursuant to this Section 11) without obligation to the Warrantholder or any holder of the Shares. (b) Notwithstanding the foregoing, the Company shall not be required to include any Shares in an underwritten public offering unless the Warrantholder or holder of the Shares accepts the terms of the underwriting as agreed upon between the Company and the underwriter(s) selected by it, and then only in such quantity as will not, in the opinion of the managing underwriter(s), jeopardize or be detrimental to the success of the offering (including price) by the Company. In the event that the managing underwriter(s) advise the Company in writing that the inclusion of all or any portion of the Shares in the offering would jeopardize or be detrimental to the success of the offering, the number of the Shares to be included in the offering shall be reduced to the number of Shares, if any, that the managing underwriter(s) believe may be sold without causing such adverse effect. In the event that the managing underwriter(s) advise the Company in writing that the inclusion of a portion of such Shares in the offering would not jeopardize or be detrimental to the success of the offering, and such portion is less than the amount requested for inclusion by all persons having registration rights in respect of the offering, then the amount to be included shall be prorated among the requesting -9- Warrantholder, requesting holders of the Shares and other security holders of the Company possessing similar registration rights in accordance with their relative holdings, it being agreed to by the Company that no person who does not possess such registration rights shall be allowed to participate in the offering to the exclusion of any Shares requested to be included by any holder of the Warrants or the Shares, and such Shares shall be offered and sold on the same terms and conditions as the shares of Common Stock, if any, being offered by the Company in such offering. In the event that any of the Shares are registered in connection with the registration of an underwritten public offering but are not included in such underwritten public offering, those Shares which are excluded from the offering shall be withheld from the market by the Warrantholder or the holder(s) of such Shares for a period, not to exceed 120 days, which the managing underwriter(s) reasonably determine is necessary in order to effect the underwritten public offering. The Company shall use its best efforts to keep effective any Registration Statement covering any of the Shares not subject to or included in an underwritten public offering for a period of 90 days after the later of the effective date of such Registration Statement or the date, if any, that the underwriter(s) specify to be the date upon which such Shares may first be distributed. (c) All fees, disbursements and out-of-pocket expenses (other than brokerage or underwriting fees and commissions and legal fees of counsel to the Warrantholder or any holder of the Shares, if any) in connection with the filing of any Registration Statement under this Section 11 and in complying with applicable securities and Blue Sky laws shall be borne by the Company; provided, however, that all underwriting discounts and selling commissions applicable to the Shares covered by registrations effected pursuant to this Section 11 shall not be borne by the Company but shall be borne by the Warrantholder and each holder of the Shares benefited thereby. Notwithstanding the foregoing, the Company shall not be required to register the Shares or perfect any exemption for the offering and sale of the Shares under (i) the securities laws of any foreign jurisdiction or (ii) the securities laws of any State, territory or possession of the United States in the event that registration or the perfection of an exemption under the law of any such State, territory or possession would, in the opinion of the Company, result in the imposition of unreasonable restrictions on the Company or its shareholders, officers, directors or employees. The Company at its expense will supply the Warrantholder and any holder of the Shares with copies of such Registration Statement and the prospectus included therein and other related documents in such quantities as may be reasonably requested by the Warrantholder or holder of the Shares. In addition, the Company shall have no obligation to register the Shares in the event the Warrantholder is free to sell such securities under Rule 144 under the Act. Section 12. Notices. Any notice pursuant to this Agreement by the Company or by a Warrantholder or a holder of Shares shall be in writing and shall be deemed to have been duly given if delivered or mailed by certified mail, return receipt requested: (a) If to the Warrantholder or a holder of Shares - addressed to Kibel Green Issa, Inc., 2001 Wilshire Boulevard, Suite 420, Santa Monica, CA 90403-5640, Attention: Steven J. Green, President. (b) If to the Company - addressed to it at 4954 Van Nuys Boulevard, Sherman Oaks, California 91403, Attention: William D. Nicely, Chief Executive Officer, with a copy to Sheppard, Mullin Richter & Hampton, LLP, 333 South Hope Street, 48th Floor, Los Angeles, California 90071, Attention: James M. Rene, Esquire. -10- Each party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. Section 13. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company, the Warrantholder or the holders of Shares shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 14. Survival of Representations and Warranties. All statements contained in any schedule, exhibit, certificate or other instrument delivered by or on behalf of the parties hereto, or in connection with the transactions contemplated by this Agreement, shall be deemed to be representations and warranties hereunder. Notwithstanding any investigations made by or on behalf of the parties to this Agreement, all representations, warranties and agreements made by the parties to this Agreement or pursuant hereto shall survive. Section 15. Applicable Law. This Agreement shall be deemed to be a contract made under the laws of the State of California and for all purposes shall be construed in accordance with the laws of said State. This Agreement has been executed and delivered by the parties in the State of California. Section 16. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrantholder and the holders of Shares any legal or equitable right, remedy or claim under this Agreement. This Agreement shall be for the sole and exclusive benefit of the Company, the Warrantholder and the holders of Shares. Section 17. Entire Agreement; Amendments. This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, supersedes any and all prior agreements with respect to the subject matter hereof,and may be modified only by a written instrument duly executed by each party affected by any such modification. Section 18. Descriptive Headings. The descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. -11- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, all as of the day and year first above written. HEMACARE CORPORATION (CORPORATE SEAL) By: /s/ William D. Nicely ________________________ William D. Nicely Chief Executive Officer ATTEST: /s/ JoAnn Stover ____________________________ JoAnn R. Stover, Secretary /s/ Steven J. Green __________________________ Steven J. Green, President KIBEL GREEN ISSA, INC. -12- EXHIBIT A THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS SUCH TRANSACTION IS DULY REGISTERED UNDER THE ACT AND ALL OTHER APPLICABLE SECURITIES LAWS OR UNLESS SUCH TRANSFER IS EXEMPT FROM THE REGISTRATION PROVISIONS OF THE ACT AND ALL OTHER APPLICABLE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER A WARRANT AGREEMENT DATED AS OF ______________, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER. WARRANT CERTIFICATE NO. __________ WARRANT TO PURCHASE _______ SHARES OF COMMON STOCK VOID AFTER 5:00 P.M., PACIFIC TIME, ON ___________, 20__ HEMACARE CORPORATION INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA This certifies that, for value received, _____________________ or permitted assigns (the"Holder"), is entitled to purchase from HEMACARE CORPORATION, a California corporation (the "Company"), at any time before 5:00 p.m., Pacific Time, on _______, 200_, at a per share purchase price of $_____ (the "Warrant Price"), the number of shares of Common Stock, without par value, of the Company set forth above (the "Shares"). The number of Shares purchasable upon exercise of this Warrant and the Warrant Price are subject to adjustment from time to time as set forth in the Warrant Agreement referred to below. This Warrant may be exercised in whole or in part by presentation of this certificate with the Purchase Form attached hereto duly executed (with a signature guarantee as provided on such Purchase Form) and simultaneous payment of the Warrant Price (subject to adjustment) at the principal office of the Company or at the office of any stock transfer agent designated by the Company for such purposes. Payment of such price shall be made at the option of the Holder in cash or by certified check or bank draft, all as provided in the Warrant Agreement. This Warrant is part of a duly authorized issue of Common Stock Purchase Warrants with rights to purchase an aggregate of up to ________ Shares of Common Stock of the Company and are issued under and in accordance with a Warrant Agreement dated as of ________, 19__, between the Company and _____________ (the "Warrant Agreement") and are subject to the terms and provisions contained in the Warrant Agreement, to all of which the Holder of this Warrant certificate by acceptance hereof consents. A copy of the Warrant Agreement may be obtained for inspection by the Holder hereof upon written request to the Company. The Warrant Agreement provides for the early termination of this Warrant upon the occurrence of certain events. Upon any partial exercise of this Warrants, there shall be countersigned and issued to the Holder a new Warrant certificate in respect of the Shares as to which this Warrant has not been exercised. This Warrant certificate may be exchanged at the principal office of the Company, or at the office of any stock transfer agent designated by the Company for such purposes, by surrender of this Warrant certificate properly endorsed (with a signature guarantee) either separately or in combination with one or more other Warrants for one or more new Warrants to purchase the same aggregate number of Shares evidenced by the Warrant or Warrants exchanged. No fractional Shares will be issued upon the exercise of this Warrant, but the Company shall pay the cash value of any fractional share otherwise issuable upon the exercise of this Warrant. This Warrant is transferable at the principal office of the Company, or at the office of any stock transfer agent designated by the Company for such purposes, in the manner and subject to the limitations set forth in the Warrant Agreement. The Holder hereof may be treated by the Company and all other persons dealing with this Warrant certificate as the absolute owner hereof for all purposes and as the person entitled to exercise the rights represented hereby, any notice to the contrary notwithstanding, and until such transfer is entered on such books, the Company may treat the Holder hereof as the owner for all purposes. This Warrant certificate does not entitle the Holder hereof to any of the rights of a shareholder of the Company. Dated as of: ___________ HEMACARE CORPORATION By: ------------------------ William D. Nicely Chief Executive Officer ATTEST: ___________________________ JoAnn R. Stover, Secretary HEMACARE CORPORATION PURCHASE FORM Mailing Address: HemaCare Corporation 4954 Van Nuys Boulevard Sherman Oaks, California 91403 The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder,_______ Shares of Common Stock provided for therein, and requests that certificates f or such Shares be issued in the name of: ________________________________________________________________ (Please Print or Type Name, Address and Social Security Number) ________________________________________________________________ and, if said number of Shares shall not be all the Shares purchasable hereunder, that a new Warrant certificate for the balance of the Shares purchasable under the within Warrant certificate be registered in the name of the undersigned Holder or his Assignee as below indicated and delivered to the address stated below. I hereby make the following representations and warranties with respect to the Shares I am hereby acquiring: (i) I am purchasing the Shares for my own account, for investment purposes only and not with a view to or for sale in connection with the distribution of such Shares; (ii) I have relied on my own business and financial knowledge and experience in making the decision to invest in the Shares; (iii) I have sufficient knowledge and experience in business and financial matters to enable me to use the information made available to me about the Company (including the Company's periodic and other filings with the Securities and Exchange Commission) to evaluate the merits and risks of an investment in the Shares and to make an informed investment decision with respect thereto; and (iv) I have no reason to anticipate any change in circumstances, financial or otherwise, that necessitate or require any sale or distribution of the Shares. Dated: ___________________________________________ Name of Holder or Assignee: ______________________________________________ (Please Print) Address: __________________________________________________________________ __________________________________________________________________ Signature:_________________________________________________________________ Note: The above signature must correspond with the name as it appears upon the face of the within Warrant certificate in every particular, without alteration or enlargement or any change whatever, unless this Warrant has been assigned Signature Guaranteed: ________________________________________________________________ (Signature must be guaranteed by a bank or trust company having an office or correspondent in the United States or by a member firm of a registered securities exchange or the National Association of Securities Dealers, Inc. The guarantor of signature must be a participant in the Medallion Stamp Program.) ASSIGNMENT (To be signed only upon assignment of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ___________________________________________________________________ (Name and Address of Assignee Must Be Printed or Typewritten) the within Warrant, hereby irrevocably constituting and appointing ______________________ Attorney to transfer said Warrant on the books of the Company, with full power of substitution in the premises. Dated: _____________ __________________________________________________ Signature of Registered Holder The signature on this assignment must correspond with the name as it appears upon the face of the within Warrant certificate in every particular, without alteration or enlargement or any change whatever. Signature Guaranteed: ____________________________________________________________ (Signature must be guaranteed by a bank or trust company having an office or correspondent in the United States or by a member firm of a registered securities exchange or the National Association of Securities Dealers, Inc. The guarantor of signature must be a participant in the Medallion Stamp Program.) EXHIBIT B Net Issue Election HemaCare Corporation 4954 Van Nuys Boulevard Sherman Oaks, CA 91403 Ladies and Gentlemen: The undersigned hereby elects under Section __ of the Warrant dated ________ (the "Warrant"), to exercise its right to receive ________ shares of Common Stock pursuant to the Warrant. The certificate(s) for such shares issuable upon such net issue election shall be issued in the name of the undersigned or as otherwise indicated below: Name for Registration: _________________________________________________ Mailing Address: _________________________________________________ _________________________________________________ Name: _____________________________________ By: _____________________________________ Its: _____________________________________ EX-4.2 3 EXHIBIT 4.2 WARRANT AGREEMENT THIS WARRANT AGREEMENT (this "Agreement") is made and entered into as of the 4th day of March, 1999 by and between STUART DINNEY (the "Warrantholder") and HEMACARE CORPORATION, a California corporation (the "Company"). WHEREAS, the Warrantholder and the Company are parties to that certain Noncompetition Agreement dated as of December 30, 1998 (the "Noncompetition Agreement"), pursuant to which Warrantholder is to receive a warrant to purchase 60,000 shares of the common stock of the Company ("Common Stock"), without par value (the "Common Stock"), subject to vesting as provided herein. NOW, THEREFORE, in consideration of the foregoing, and for the purpose of defining the terms and provisions of such warrants, and the respective rights and obligations of the parties with respect thereto, the Company and the Warrantholder hereby agree as follows: Section 1. Form of Warrants; Limitations on Transferability. 1.1 Form and Registration. A Warrant certificate in the form as set forth in Exhibit A attached hereto, shall be issued to the Warrantholder upon the execution and delivery of this Agreement by the Company and the Warrantholder. The Warrant certificate shall be executed on behalf of the Company by its President or by a Vice President, and attested to by its Secretary or an Assistant Secretary. A Warrant certificate bearing the signature of an individual who was at any time the proper officer of the Company shall bind the Company, notwithstanding that such individual shall have ceased to hold such office prior to the delivery of such Warrant certificate or did not hold such office on the date of this Agreement. The Warrant certificate shall be dated as of the date of signature thereof by the Company either upon initial issuance or upon division, exchange, substitution or transfer. Each Warrant certificate shall be numbered and shall be registered on the books of the Company when issued. 1.2 Transfer. The Warrants shall be transferable only on the books of the Company maintained at its principal office in Sherman Oaks, California, or wherever its principal office may then be located, upon delivery thereof duly endorsed by the Warrantholder or by its duly authorized attorney or representative, accompanied by proper evidence of succession, assignment or authority to transfer. Upon any registration of a valid and proper transfer, the Company shall execute and deliver a new Warrant certificate to the person entitled thereto. 1.3 Limitations on Transfer of the Warrants. The Warrantholder agrees that prior to making any transfer or disposition of the Warrants or the shares purchasable upon exercise of the Warrants (the "Shares") or any interest therein, the Warrantholder shall give written notice to the Company describing briefly the manner in which any such proposed transfer or disposition is to be made together with an opinion of counsel, in form and substance satisfactory to the Company, to the effect that: -1- (i) a registration statement or other notification or post-effective amendment thereto (hereinafter collectively a "Registration Statement") under the Securities Act of 1933, as amended (the "Act") is not required with respect to such transfer or disposition or that such a Registration Statement has been filed with, and declared effective, if necessary, by, the Securities and Exchange Commission (the "Commission"), or (ii) all requirements under any federal, state or foreign securities laws have been satisfied or fulfilled such as to permit the proposed transfer or disposition lawfully pursuant to all such laws. Except as provided in Section 11 hereof, the Company shall not be required to cause the Warrants or the Shares to be registered under any securities laws. The Company will, however, respond to reasonable requests from the Warrantholder for assistance in connection with the perfection or qualification of any exemption from registration under applicable securities laws; provided that the Warrantholder pays or reimburses the Company for its costs and expenses incurred in connection therewith. Unless the context indicates otherwise, the term "Warrantholder" shall include any transferee or transferees of the Warrants, and the term "Warrants" shall include any and all warrants outstanding pursuant to this Agreement, including those evidenced by a certificate or certificates issued upon division, exchange, substitution or transfer pursuant to this Agreement. 1.4 Legend on Shares and Warrants. Warrantholder hereby represents and warrants to the Company that (i) Warrantholder understands that the offering and sale of the Warrants and the shares purchasable upon exercise thereof have not been, and will not be, registered under the Act or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering, and that, as such, the Warrants and the shares purchasable upon exercise thereof will not be freely transferable, that certificates representing the Securities will bear restrictive legends under applicable federal and state securities laws as provided below and shall be subject to stops on transfer. Each certificate for Warrants or Shares issued upon exercise of the Warrants shall bear the following legend, unless, at the time of exercise, such Shares or Warrants are subject to a currently effective Registration Statement under the Act and, if required, are subject to a currently effective qualification or registration under any applicable securities laws of any other jurisdiction: THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS SUCH TRANSACTION IS DULY REGISTERED UNDER THE ACT AND ALL OTHER APPLICABLE SECURITIES LAWS OR UNLESS SUCH TRANSFER IS EXEMPT FROM THE REGISTRATION PROVISIONS OF THE ACT AND ALL OTHER APPLICABLE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER A WARRANT AGREEMENT DATED AS OF MARCH 4, 1999, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER. Any certificate issued at any time in exchange or substitution for any certificate bearing such legends (except a new certificate -2- issued upon completion of a registered distribution as provided above) shall also bear the above legends unless, in the opinion of the Company's counsel, the securities represented thereby need no longer be subject to such restrictions. 1.5 The Warrantholder hereby represents and warrants that it (i) is acquiring the Warrants for its own account for investment purposes only and not with a view to or for sale in connection with a distribution of the Warrants or the Shares; (ii) has relied on its own business and financial knowledge and experience in making the decision to invest in the Warrants; and (iii) has sufficient knowledge and experience in business and financial matters to enable it to use the information made available to it about the Company (including the Company's periodic and other filings with the Securities and Exchange Commission) to evaluate the merits and risks of an investment in the Warrants and to make an informed investment decision with respect thereto. Section 2. Exchange of Warrant Certificate. Any Warrant certificate may be divided, combined or exchanged for another certificate or certificates entitling the Warrantholder to purchase a like aggregate number of Shares as the certificate or certificates surrendered then entitled such Warrantholder to purchase. Any Warrantholder desiring to divide, combine or exchange a Warrant certificate shall make such request in writing delivered to the Company, and shall surrender, properly endorsed, with signatures guaranteed, the certificate evidencing the Warrant to be so exchanged. Thereupon, the Company shall execute and deliver to the person entitled thereto a new Warrant certificate as so requested. Section 3. Term of Warrants; Exercise of Warrants. Subject to the terms of this Agreement, the Warrantholder shall have the right, at any time during the period commencing at 9:00 a.m., Pacific time, on the applicable Vesting Date (as defined in Section 7.1 below), and ending at 5:00 p.m., Pacific time, on October 23, 2003 (unless earlier terminated in accordance herewith), to purchase from the Company (and the Company shall issue and sell to such Warrantholder) any or all of the number of Shares underlying the Warrants which have vested as provided in Section 7.1 below, upon surrender to the Company at its principal office, or upon surrender to any transfer agent designated by the Company for such purposes, of the certificate evidencing the Warrants to be exercised, together with the purchase form attached thereto duly filled in and signed, with signatures guaranteed, and upon payment to the Company of the per share purchase price of $0.90 (the "Warrant Price"), subject to adjustment as provided in Section 8, for the number of Shares in respect of which such Warrant is then exercised, but in no event for less than 500 Shares (unless less than an aggregate of 500 Shares are then purchasable under all outstanding Warrants held by a Warrantholder). Payment of the aggregate Warrant Price shall be made in cash or by cashiers or certified check or bank draft. In lieu of such payment, Warrantholder shall be entitled to receive, without the payment by the Warrantholder of any additional consideration, shares of Common Stock equal to the value of this Warrant or any portion hereof by the surrender of this Warrant or such portion to the company, with the net issue election notice attached hereto as Exhibit B duly executed, at the principal office of the Company. Thereupon, the Company shall issue to the Warrantholder such number of fully paid and nonassessable shares of Common Stock as is computed using the following formula: -3- (A-B) X=Y ------- A Where: X= the number of shares of Common Stock to be issued to the Warrant holder. Y= the number of shares of Common Stock covered by this Warrant in respect of which the net issue election is made. A= the fair market value of one share of Common stock, as determined below, as at the time the net issue election is made. B= the Exercise Price in effect under this Warrant at the time the net issue election is made. For purpose of this Section, fair market value of one share of Common Stock as of a particular date shall mean the closing price of the Company's Common Stock on the OTC Bulletin Board or other quotation medium or stock exchange or which the Common Stock is quoted or listed on the day notice of exercise is provided to the Company as provided above. If the Common Stock is not so quoted or listed as provided above, then the fair market value of one share of Common Stock shall be determined by the Board of Directors of the Company in good faith, which determination shall be conclusive and binding on the Warrantholder. Upon such surrender of the Warrants and payment of such Warrant Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Warrantholder and in the name of the Warrantholder a certificate or certificates for the number of full Shares so purchased upon the exercise of the Warrant, together with cash, as provided in Section 9 hereof, in respect of any fractional Shares otherwise issuable upon such surrender. Such certificate or certificates shall be deemed to have been issued and the Warrantholder shall be deemed to have become a holder of record of such securities as of the date of surrender of the Warrants and payment of the Warrant Price, as aforesaid, notwithstanding that the certificate or certificates representing such securities shall not actually have been delivered or that the stock transfer book of the Company shall then be closed. The Warrants shall be exercisable, at the election of the Warrantholder, either in full or from time to time in part and, in the event that a certificate evidencing the Warrants is exercised in respect of less than all of the Shares specified therein at any time prior to the termination date, a new certificate evidencing the remaining portion of the Warrants will be issued by the Company. Upon the exercise of a Warrant at a time when there is not in effect under the Act a registration statement relating to the Shares issuable upon exercise thereof and available for delivery to the Warrantholder a prospectus meeting the requirements of Section 10(a)(3) of the Act, the Warrantholder shall represent and warrant in writing to the Company that the Shares purchased are being acquired for investment and not with a view to the distribution thereof. No Shares shall be issuable upon the exercise of any Warrant unless and until any then applicable requirements of the Securities and Exchange Commission, the California Corporations Commissioner, or other regulatory agencies having jurisdiction, and of any exchanges upon which common stock of the Company may be listed, shall have been complied with in full. -4- Section 4. Payment of Taxes. The Company will pay all United States documentary stamp taxes, if any, attributable to the initial issuance of the Shares issuable upon the exercise of the Warrants; provided, however, the Company shall not be required to pay any foreign documentary stamp taxes or tax which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for shares of Common Stock in a name other than that of the registered holder of Warrants in respect of which such shares are issued, and in such case neither the Company nor the Warrant Agent shall be required to issue or deliver any certificate for shares of Common Stock or any Warrant certificate until the person requesting the same has paid to the Company the amount of such tax or has established to the Company's satisfaction that such tax has been paid. Section 5. Mutilated or Missing Warrants. In case the certificate or certificates evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the Company may at its discretion, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant certificate or certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant certificate and a bond of indemnity, if requested, also satisfactory in form and amount at the applicant's cost. Applicants for such substitute Warrant certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. Section 6. Reservation of Shares. There has been reserved, and the Company shall at all times keep reserved so long as the Warrants remain outstanding, out of its authorized Common Stock, such number of shares of Common Stock as shall be subject to purchase under the Warrants. Every transfer agent for the Common Stock issuable upon the exercise of the Warrants will be irrevocably authorized and directed at all times to reserve such number of authorized and unissued shares as shall be requisite for such purpose. The Company will keep a copy of this Agreement on file with every transfer agent for the Common Stock issuable upon the exercise of the Warrants. The Company will supply every such transfer agent with duly executed stock and other certificates, as appropriate, for such purpose and will provide or otherwise make available any cash which may be payable as provided in Section 9 hereof. Section 7. Vesting Date; Early Termination. 7.1 The applicable "Vesting Date" of the Warrants shall be the earliest to occur of (i) the following vesting dates: Number of Shares Vesting Date ---------------- ------------- 20,000 April 1, 1999 20,000 July 1, 1999 20,000 October 1, 1999 (ii) the sale of all or substantially all the assets of the Company and (iii) the 15th day prior to the date fixed as the record date or the date -5- of closing the stock transfer books of the Company for the determination of the stockholders entitled to any rights to receive merger consideration or other rights in connection with any proposed merger or consolidation of the Company with respect to which the Company would not be the surviving entity. 7.2 Notwithstanding any other provision of this Agreement to the contrary, the Warrants shall immediately terminate and shall not be or become exercisable upon (a) the breach by Warrantholder of any provision of the Noncompetition Agreement, or (b) the termination of Warrantholder's employment with the company for Cause (as defined below). Cause shall mean (i) the conviction of a felony in a court of law, (ii) a material breach of fiduciary duty owed to the Company, or (iii) gross neglect of duties by the Warrantholder. Section 8. Adjustments. The number and kind of securities purchasable upon the exercise of the Warrants and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events, as follows: 8.1 Adjustments. The number of Shares purchasable upon the exercise of the Warrants shall be subject to adjustment as follows: (a) In case the Company shall (i) pay a dividend in Common Stock or make a distribution in Common Stock, (ii) subdivide its outstanding Common Stock, (iii) combine its outstanding Common Stock into a smaller number of shares of Common Stock, or (iv) issue, by reclassification of its Common Stock, other securities of the Company, the number of Shares purchasable upon exercise of the Warrants immediately prior thereto shall be adjusted so that the Warrantholder shall be entitled to receive the kind and number of Shares or other securities of the Company which the Warrantholder would have owned or would have been entitled to receive immediately after the happening of any of the events described above, had the Warrants been exercised immediately prior to the happening of such event or any record date with respect thereto. Any adjustment made pursuant to this subsection 8.1(a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) No adjustment in the number of Shares purchasable pursuant to the Warrants shall be required unless such adjustment would require an increase or decrease of at least one percent in the number of Shares then purchasable upon the exercise of the Warrants; provided, however, that any adjustments which by reason of this subsection 8.1(b) are not required to be made immediately shall be carried forward and taken into account in any subsequent adjustment. (c) Whenever the number of shares of Common Stock purchasable upon the exercise of a Warrant is adjusted as herein provided, the Warrant Price payable upon exercise of the Warrant shall be adjusted by multiplying such Warrant Price by a fraction, the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of such Warrant immediately prior to such adjustment, and the denominator of which shall be the number of Shares of Common Stock so purchasable immediately thereafter. -6- (d) Whenever the number of Shares purchasable upon the exercise of the Warrants is adjusted as herein provided, the Company shall cause to be promptly mailed to the Warrantholder by certified or registered mail, return receipt requested, postage prepaid, notice of such adjustment and a certificate of the chief financial officer of the Company setting forth the number of Shares purchasable upon the exercise of the Warrants after such adjustment, a brief statement of the facts requiring such adjustment and the computation by which such adjustment was made. (e) For the purpose of this subsection 8.1, the term "Common Stock" shall mean the class of stock designated as the Common Stock of the Company at the date of this Agreement. In the event that at any time, as a result of an adjustment made pursuant to this Section 8, the Warrantholder shall become entitled to purchase any securities of the Company other than Common Stock, (i) if the Warrantholder's right to purchase is on any other basis than that available to all holders of the Company's Common Stock, the Company shall obtain an opinion of an independent investment banking firm valuing such other securities and (ii) thereafter the number of such other securities so purchasable upon exercise of the Warrants shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Shares contained in this Section 8. 8.2 No Adjustment for Dividends. Except as provided in subsection 8.1, no adjustment in respect of any dividends or distributions out of earnings shall be made during the term of the Warrants or upon the exercise of the Warrants. Subject to any requirements of California corporate laws and regulations, applicable federal and state securities laws and regulations and any securities exchanges or over-the-counter markets upon which the Common Stock is listed or qualified for trading enacted or adopted after the date of this Agreement, the record date for the payment of any dividend or distribution out of earnings made while any of the Warrants are outstanding shall be not less than thirty (30) days after the public announcement of the declaration of such dividend or distribution. 8.3 Preservation of Purchase Rights upon Merger or Consolidation. In case of any consolidation of the Company with or merger of the Company into another corporation or in case of any sale or conveyance to another corporation of the property, assets or business of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing corporation, as the case may be, shall execute with the Warrantholder an agreement that the Warrantholder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase, upon exercise of the Warrants, the kind and amount of shares and other securities and property which it would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had the Warrants been exercised immediately prior to such action. In the event of a triangular merger in which the Company is the surviving corporation, the right to purchase Shares under the Warrants shall terminate on the date of such merger and thereupon the Warrants shall become null and void, but only if the controlling corporation shall agree to substitute for the Warrants its warrant which entitles the holder thereof to purchase upon its exercise the kind and amount of shares and other securities and property which it would have owned or been entitled to receive had the Warrants been exercised immediately prior to such merger. Any such agreements referred to in this subsection 8.3 shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 8 hereof. The provisions of this subsection 8.3 shall similarly apply to successive consolidations, mergers, sales or conveyances. -7- 8.4 Independent Public Accountants. The Company may retain a firm of independent public accountants of recognized national standing (which may be any such firm regularly employed by the Company) to make any computation required under this Section 8, and a certificate signed by such firm shall be presumptive evidence of the correctness of any computation made under this Section 8. 8.5 Statement on Warrant Certificates. Irrespective of any adjustments in the number of securities issuable upon exercise of Warrants, Warrant certificates theretofore or thereafter issued may continue to express the same number of securities as are stated in the similar Warrant certificates initially issuable pursuant to this Agreement. However, the Company may, at any time in its sole discretion (which shall be conclusive), make any change in the form of Warrant certificate that it may deem appropriate and that does not affect the substance thereof; and any Warrant certificate thereafter issued, whether upon registration of transfer of, or in exchange or substitution for, an outstanding Warrant certificate, may be in the form so changed. Section 9. Fractional Interests. The Company shall not be required to issue fractional Shares on the exercise of the Warrants. If any fraction of a Share would, except for the provisions of this Section 9, be issuable on the exercise of the Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the then Current Market Price multiplied by such fraction. For purposes of this Agreement, the term "Current Market Price" shall mean (i) if the Common Stock is traded in the over-the- counter market and not in the Nasdaq National Market System nor on any national securities exchange, the average of the per share closing bid prices of the Common Stock on the 30 consecutive trading days immediately preceding the date in question, as reported by Nasdaq or an equivalent generally accepted reporting service, or (ii) if the Common Stock is traded in the Nasdaq National Market System or on a national securities exchange, the average for the 30 consecutive trading days immediately preceding the date in question of the daily per share closing prices of the Common Stock in the Nasdaq National Market System or on the principal stock exchange on which it is listed, as the case may be. For purposes of clause (i) above, if trading in the Common Stock is not reported by Nasdaq, the bid price referred to in said clause shall be the lowest bid price as reported in the "pink sheets" published by National Quotation Bureau, Incorporated. The closing price referred to in clause (ii) above shall be the last reported sale price or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, in either case in the Nasdaq National Market System or on the national securities exchange on which the Common Stock is then listed. Section 10. No Rights as Shareholder; Notices to Warrantholder. Nothing contained in this Agreement or in the Warrants shall be construed as conferring upon the Warrantholder any rights as a stockholder of the Company, including the right to vote, receive dividends, consent or receive notices as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or any other matter. If, however, at any time following the Vesting Date and prior to the expiration of the Warrants and prior to their exercise, any one or more of the following events shall occur: (a) any action which would require an adjustment pursuant to Section 8.1 -8- or 8.3; (b) the Company shall make a declaration for the payment of any other dividend or the making of any other distribution upon the Common Stock; (c) the Company shall make an offer to the holders of Common Stock for the subscription or purchase by them any share of any class or any other rights; (d) the capital reorganization of the Company or the reclassification of the capital stock of the Company; or (e) the consolidation or merger of the Company with or into another entity, the sale of all or substantially all of the assets of the Company or the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall give notice in writing of such event to the Warrantholder, as provided in Section 12 hereof, at least 20 days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to any relevant dividend, distribution, subscription rights or other rights or for the determination of stockholders entitled to vote on such proposed dissolution, liquidation or winding up. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to mail or receive such notice or any defect therein shall not affect the validity of any action taken with respect thereto. Section 11. Registration Rights. (a) Whenever the Company proposes to file with the Commission a Registration Statement (other than a registration statement on Form S-4 or S-8 or any corresponding future forms, or any other form for a limited purpose which excludes registration of the Shares, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation) in connection with the registration of its Common Stock, the Company shall, at least fifteen (15) days prior to each such filing, give written notice of such proposed filing to the Warrantholder and each holder of the Shares, and shall use its reasonable efforts to include in such filing any proposed disposition of the Shares (issued or issuable upon the exercise of Warrants which are then vested in accordance with Section 7, herein) upon receipt by the Company of a written request therefor, given within ten (10) days after such notice is given by the Company, setting forth the facts with respect to such proposed disposition and all other information with respect to such person necessary to be included in such Registration Statement; provided that the Company shall have the right to postpone or withdraw any registration of its Common Stock (and the corresponding registration effected pursuant to this Section 11) without obligation to the Warrantholder or any holder of the Shares. (b) Notwithstanding the foregoing, the Company shall not be required to include any Shares in an underwritten public offering unless the Warrantholder or holder of the Shares accepts the terms of the underwriting as agreed upon between the Company and the underwriter(s) selected by it, and then only in such quantity as will not, in the opinion of the managing underwriter(s), jeopardize or be detrimental to the success of the offering (including price) by the Company. In the event that the managing underwriter(s) advise the Company in writing that the inclusion of all or any portion of the Shares in the offering would jeopardize or be detrimental to the success of the offering, the number of the Shares to be included in the offering shall be reduced to the number of Shares, if any, that the managing underwriter(s) believe -9- may be sold without causing such adverse effect. In the event that the managing underwriter(s) advise the Company in writing that the inclusion of a portion of such Shares in the offering would not jeopardize or be detrimental to the success of the offering, and such portion is less than the amount requested for inclusion by all persons having registration rights in respect of the offering, then the amount to be included shall be prorated among the requesting Warrantholder, requesting holders of the Shares and other security holders of the Company possessing similar registration rights in accordance with their relative holdings, it being agreed to by the Company that no person who does not possess such registration rights shall be allowed to participate in the offering to the exclusion of any Shares requested to be included by any holder of the Warrants or the Shares, and such Shares shall be offered and sold on the same terms and conditions as the shares of Common Stock, if any, being offered by the Company in such offering. In the event that any of the Shares are registered in connection with the registration of an underwritten public offering but are not included in such underwritten public offering, those Shares which are excluded from the offering shall be withheld from the market by the Warrantholder or the holder(s) of such Shares for a period, not to exceed 120 days, which the managing underwriter(s) reasonably determine is necessary in order to effect the underwritten public offering. The Company shall use its best efforts to keep effective any Registration Statement covering any of the Shares not subject to or included in an underwritten public offering for a period of 90 days after the later of the effective date of such Registration Statement or the date, if any, that the underwriter(s) specify to be the date upon which such Shares may first be distributed. (c) All fees, disbursements and out-of-pocket expenses (other than brokerage or underwriting fees and commissions and legal fees of counsel to the Warrantholder or any holder of the Shares, if any) in connection with the filing of any Registration Statement under this Section 11 and in complying with applicable securities and Blue Sky laws shall be borne by the Company; provided, however, that all underwriting discounts and selling commissions applicable to the Shares covered by registrations effected pursuant to this Section 11 shall not be borne by the Company but shall be borne by the Warrantholder and each holder of the Shares benefited thereby. Notwithstanding the foregoing, the Company shall not be required to register the Shares or perfect any exemption for the offering and sale of the Shares under (i) the securities laws of any foreign jurisdiction or (ii) the securities laws of any State, territory or possession of the United States in the event that registration or the perfection of an exemption under the law of any such State, territory or possession would, in the opinion of the Company, result in the imposition of unreasonable restrictions on the Company or its shareholders, officers, directors or employees. The Company at its expense will supply the Warrantholder and any holder of the Shares with copies of such Registration Statement and the prospectus included therein and other related documents in such quantities as may be reasonably requested by the Warrantholder or holder of the Shares. In addition, the Company shall have no obligation to register the Shares in the event the Warrantholder is free to sell such securities under Rule 144 under the Act. Section 12. Notices. Any notice pursuant to this Agreement by the Company or by a Warrantholder or a holder of Shares shall be in writing and shall be deemed to have been duly given if delivered or mailed by certified mail, return receipt requested: (a) If to the Warrantholder or a holder of Shares - addressed to Stuart Dinney, 13726 Callington Drive, Wellington, FL 33414. (b) If to the Company - addressed to it at 4954 Van Nuys Boulevard, Sherman Oaks, California 91403, Attention: William D. -10- Nicely, Chief Executive Officer, with a copy to Sheppard, Mullin Richter & Hampton, LLP, 333 South Hope Street, 48th Floor, Los Angeles, California 90071, Attention: James M. Rene, Esquire. Each party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. Section 13. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company, the Warrantholder or the holders of Shares shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 14. Survival of Representations and Warranties. All statements contained in any schedule, exhibit, certificate or other instrument delivered by or on behalf of the parties hereto, or in connection with the transactions contemplated by this Agreement, shall be deemed to be representations and warranties hereunder. Notwithstanding any investigations made by or on behalf of the parties to this Agreement, all representations, warranties and agreements made by the parties to this Agreement or pursuant hereto shall survive. Section 15. Applicable Law. This Agreement shall be deemed to be a contract made under the laws of the State of California and for all purposes shall be construed in accordance with the laws of said State. This Agreement has been executed and delivered by the parties in the State of California. Section 16. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrantholder and the holders of Shares any legal or equitable right, remedy or claim under this Agreement. This Agreement shall be for the sole and exclusive benefit of the Company, the Warrantholder and the holders of Shares. Section 17. Entire Agreement; Amendments. This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, supersedes any and all prior agreements with respect to the subject matter hereof, and may be modified only by a written instrument duly executed by each party affected by any such modification. Section 18. Descriptive Headings. The descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. -11- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, all as of the day and year first above written. HEMACARE CORPORATION (CORPORATE SEAL) By: /s/ William D. Nicely ------------------------ William D. Nicely, Chief Executive Officer ATTEST: /s/ JoAnn Stover ____________________________ JoAnn R. Stover, Secretary /s/ Stuart Dinney ___________________________ STUART DINNEY -12- EXHIBIT A THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS SUCH TRANSACTION IS DULY REGISTERED UNDER THE ACT AND ALL OTHER APPLICABLE SECURITIES LAWS OR UNLESS SUCH TRANSFER IS EXEMPT FROM THE REGISTRATION PROVISIONS OF THE ACT AND ALL OTHER APPLICABLE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER A WARRANT AGREEMENT DATED AS OF ______________, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER. WARRANT CERTIFICATE NO. __________ WARRANT TO PURCHASE _______ SHARES OF COMMON STOCK VOID AFTER 5:00 P.M., PACIFIC TIME, ON ___________, 20__ HEMACARE CORPORATION INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA This certifies that, for value received,_______________ or permitted assigns (the "Holder"), is entitled to purchase from HEMACARE CORPORATION, a California corporation (the "Company"), at any time before 5:00 p.m., Pacific Time, on _______, 200_, at a per share purchase price of $_____ (the "Warrant Price"), the number of shares of Common Stock, without par value, of the Company set forth above (the "Shares"). The number of Shares purchasable upon exercise of this Warrant and the Warrant Price are subject to adjustment from time to time as set forth in the Warrant Agreement referred to below. This Warrant may be exercised in whole or in part by presentation of this certificate with the Purchase Form attached hereto duly executed (with a signature guarantee as provided on such Purchase Form) and simultaneous payment of the Warrant Price (subject to adjustment) at the principal office of the Company or at the office of any stock transfer agent designated by the Company for such purposes. Payment of such price shall be made at the option of the Holder in cash or by certified check or bank draft, all as provided in the Warrant Agreement. This Warrant is part of a duly authorized issue of Common Stock Purchase Warrants with rights to purchase an aggregate of up to ________ Shares of Common Stock of the Company and are issued under and in accordance with a Warrant Agreement dated as of ________, 19__, between the Company and _____________ (the "Warrant Agreement") and are subject to the terms and provisions contained in the Warrant Agreement, to all of which the Holder of this Warrant certificate by acceptance hereof consents. A copy of the Warrant Agreement may be obtained for inspection by the Holder hereof upon written request to the Company. The Warrant Agreement provides for the early termination of this Warrant upon the occurrence of certain events. Upon any partial exercise of this Warrants, there shall be countersigned and issued to the Holder a new Warrant certificate in respect of the Shares as to which this Warrant has not been exercised. This Warrant certificate may be exchanged at the principal office of the Company, or at the office of any stock transfer agent designated by the Company for such purposes, by surrender of this Warrant certificate properly endorsed (with a signature guarantee) either separately or in combination with one or more other Warrants for one or more new Warrants to purchase the same aggregate number of Shares evidenced by the Warrant or Warrants exchanged. No fractional Shares will be issued upon the exercise of this Warrant, but the Company shall pay the cash value of any fractional share otherwise issuable upon the exercise of this Warrant. This Warrant is transferable at the principal office of the Company, or at the office of any stock transfer agent designated by the Company for such purposes, in the manner and subject to the limitations set forth in the Warrant Agreement. The Holder hereof may be treated by the Company and all other persons dealing with this Warrant certificate as the absolute owner hereof for all purposes and as the person entitled to exercise the rights represented hereby, any notice to the contrary notwithstanding, and until such transfer is entered on such books, the Company may treat the Holder hereof as the owner for all purposes. This Warrant certificate does not entitle the Holder hereof to any of the rights of a shareholder of the Company. Dated as of: ___________ HEMACARE CORPORATION By: __________________________ William D. Nicely Chief Executive Officer ATTEST: ___________________________ JoAnn R. Stover, Secretary HEMACARE CORPORATION PURCHASE FORM Mailing Address: HemaCare Corporation 4954 Van Nuys Boulevard Sherman Oaks, California 91403 The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ______ Shares of Common Stock provided for therein, and requests that certificates for such Shares be issued in the name of: ________________________________________________________________ (Please Print or Type Name, Address and Social Security Number) ________________________________________________________________ and, if said number of Shares shall not be all the Shares purchasable hereunder, that a new Warrant certificate for the balance of the Shares purchasable under the within Warrant certificate be registered in the name of the undersigned Holder or his Assignee as below indicated and delivered to the address stated below. I hereby make the following representations and warranties with respect tothe Shares I am hereby acquiring: (i) I am purchasing the Shares for my own account, for investment purposes only and not with a view to or for sale in connection with the distribution of such Shares; (ii) I have relied on my own business and financial knowledge and experience in making the decision to invest in the Shares; (iii) I have sufficient knowledge and experience in business and financial matters to enable me to use the information made available to me about the Company (including the Company's periodic and other filings with the Securities and Exchange Commission) to evaluate the merits and risks of an investment in the Shares and to make an informed investment decision with respect thereto; and (iv) I have no reason to anticipate any change in circumstances, financial or otherwise, that necessitate or require any sale or distribution of the Shares. Dated: ___________________________________________ Name of Holder or Assignee: __________________________________________ (Please Print) Address: _______________________________________________________ _______________________________________________________ Signature: _______________________________________________________ Note: The above signature must correspond with the name as it appears upon the face of the within Warrant certificate in every particular, without alteration or enlargement or any change whatever, unless this Warrant has been assigned Signature Guaranteed: ________________________________________________________________ (Signature must be guaranteed by a bank or trust company having an office or correspondent in the United States or by a member firm of a registered securities exchange or the National Association of Securities Dealers, Inc. The guarantor of signature must be a participant in the Medallion Stamp Program.) ASSIGNMENT (To be signed only upon assignment of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _____________________________________________________________ (Name and Address of Assignee Must Be Printed or Typewritten) _____________________________________________________________ the within Warrant, hereby irrevocably constituting and appointing __________________________ Attorney to transfer said Warrant on the books of the Company, with full power of substitution in the premises. Dated: _____________ _____________________________________________ Signature of Registered Holder The signature on this assignment must correspond with the name as it appears upon the face of the within Warrant certificate in every particular, without alteration or enlargement or any change whatever. Signature Guaranteed: ____________________________________________________________ (Signature must be guaranteed by a bank or trust company having an office or correspondent in the United States or by a member firm of a registered securities exchange or the National Association of Securities Dealers, Inc. The guarantor of signature must be a participant in the Medallion Stamp Program.) EXHIBIT B Net Issue Election HemaCare Corporation 4954 Van Nuys Boulevard Sherman Oaks, CA 91403 Ladies and Gentlemen: The undersigned hereby elects under Section __ of the Warrant dated ________ (the "Warrant"), to exercise its right to receive ________ shares of Common Stock pursuant to the Warrant. The certificate(s) for such shares issuable upon such net issue election shall be issued in the name of the undersigned or as otherwise indicated below: Name for Registration:____________________________________________ Mailing Address: _________________________________________________ _________________________________________________ Name: ___________________________________ By: _______________________________ Its: ______________________________ EX-10.1 4 EXHIBIT 10.1 SERVICES AGREEMENT THIS SERVICES AGREEMENT (this "Agreement") is entered into by and between HemaCare Corporation (the "Company"), located at 4954 Van Nuys Boulevard, Sherman Oaks, CA 91403, and Alan C. Darlington ("Darlington") as of March 10, 1999 (the "Effective Date"). I. Employment The Company engages Darlington and Darlington accepts such engagement (hereinafter, the "Engagement") upon the terms and conditions of this Agreement. II. Duties Darlington shall perform the duties of Executive Chairman and such other duties consistent with such position as may be prescribed from time to time by the Board of Directors of the Company (the "Board"). During the Engagement, Executive shall report to the Board. During the Engagement, Darlington shall devote substantially all his time to the business of the Company but shall be permitted to participate in other business activities (whether or not such business activity is pursued for gain, profit or other pecuniary advantage), including without limitation the business activities in which Darlington heretofore has participated, to the extent such activities shall not unreasonably interfere with Darlington's duties hereunder. III. Compensation A. Base Pay The Company shall pay Darlington for all services rendered a salary of $200,000 per year which may be increased by the Board of Directors of the Company as recommended by the Board Compensation Committee (as adjusted, the "Base Pay"), payable in semi-monthly installments or in such other manner as the Company shall pay its executives. Such payments shall be deemed to have commenced hereunder as of December 1, 1998 (it being agreed that promptly following the execution hereof the Company shall pay all amounts earned from such date to the Effective Date). -1- B. Incentive Compensation Annually the Company shall pay to Darlington a bonus (the "Bonus Payment") in the manner set forth on Exhibit A hereto. In the event this Agreement terminates on the Initial Termination Date (as hereinafter defined), Darlington shall be entitled to receive a Bonus Payment (to the extent a Bonus Payment is earned as set forth in Exhibit A hereto) for the year ending December 31, 1999. C. Stock Options Upon commencement of the Engagement, all prior options held by Darlington shall be deemed cancelled and of no further force and effect and Darlington is hereby granted an option to purchase 250,000 shares ("Option Shares") of HemaCare Corporation common stock ("Common Stock") at an exercise price per share of $0.40. Such grant is subject to the terms and conditions of the HemaCare Corporation Incentive Stock Option Plan of 1996 and the form of Non-Qualified Stock Option Agreement attached hereto as Exhibit B. Such options shall vest as follows: (i) on the Effective Date, 62,500 Option Shares shall vest immediately; (ii) on the date on which the average closing price of Common Stock for the thirty (30) prior trading days is $1.25 or higher, 62,500 Option Shares shall vest, (iii) on the date on which the average closing price of Common Stock for the thirty (30) prior trading days is $1.50 or higher, 62,500 Option Shares shall vest, and (iii) on the date on which the average closing price of Common Stock for the thirty (30) prior trading days is $1.75 or higher, 62,500 Option Shares shall vest; provided, that in the event (a) Option Shares have not vested as of December 31, 2001, and at such time this Agreement is still in effect, or (b) Option Shares remain unvested as of the Termination Date relating to a termination under paragraph IV(e) or IV(f) below, all Option Shares not then vested shall immediately vest. D. Fringe Benefits Darlington shall receive the following fringe benefits: 1. Health/Dental Insurance on a basis consistent with such insurance benefits which are from time to time provided to the Company's senior executives. 2. Long term disability insurance equal to two-thirds (2/3) of Base Pay. 3. Term Life Insurance: Benefits equal to five (5) times Darlington's annual Base Pay. -2- IV. Term and Termination The term of this Agreement shall begin on the Effective Date and shall continue until December 31, 1999 (the "Initial Termination Date") and shall automatically be extended for successive one-year terms (as so extended, the "Term") unless, at least thirty (30) days prior to an applicable termination date hereunder, either the Company or Darlington provides the other party written notice of such party's intention not to extend the term for an additional one-year period, in which event this Agreement shall terminate upon the then scheduled termination date. Notwithstanding the foregoing, Darlington's Engagement under this Agreement shall terminate on the first to occur (the "Termination Date") of: (a) the effective date of Darlington's resignation determined pursuant to paragraph V below; (b) Darlington's death; (c) the inability of Darlington to perform all of his duties hereunder by reason of illness, physical, mental or emotional disability or other incapacity, which inability shall continue for more than three (3) successive months or six (6) months in the aggregate during any period of twelve (12) consecutive months ("Incapacity"); (d) the date Darlington's Engagement is terminated by the Board for "Cause" (it being agreed that termination pursuant to this subparagraph may only occur after written notice from the Company to Darlington specifying the grounds for termination and Darlington fails within ten (10) days after receipt of such notice to cure such failure). Cause shall mean: (i) the willful failure of Darlington (other than due to Incapacity) to substantially perform his duties hereunder. No act, or failure to act, on Darlington's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company; (ii) conviction of a crime involving a felony, fraud, embezzlement or the like, (iii) the engaging by Darlington in conduct, or the taking by Darlington of any action, which is materially injurious to the Company, -3- (iv) insobriety or abuse of a controlled substance, (v) misappropriation of the Company's funds, or (vi) the failure of Darlington to comply with the provisions of Paragraph VII below. (e) the date on which the Company determines, in its sole discretion, to terminate Darlington's Engagement with the Company other than for any of the reasons specified in subparagraphs (a), (b), (c) or (d) above (in which case Darlington will be entitled to the severance benefits described in paragraph VI below and such severance benefits shall be Darlington's sole remedy with respect to such termination); or (f) the date Darlington terminates the Engagement as a result of the failure of the Company to observe or comply with any of the material terms or provisions of this Agreement after written notice from Darlington to the Company specifying the grounds for termination and the Company fails within ten (10) days after receipt of such notice to cure such failure (in which case Darlington will be entitled to the severance benefits described in paragraph VI below and such severance benefits shall be Darlington's sole remedy with respect to such termination). Upon any termination of this Agreement, Darlington shall be deemed to have resigned from the Board without any further action unless the Company and Darlington agree otherwise. V. Resignation Darlington agrees to give the Company at least thirty (30) days prior written notice of Darlington's resignation (which notice shall not constitute a breach of this Agreement). The Board may, in its sole discretion, accelerate the effective date of Darlington's resignation; provided, however, that the Board's acceleration of the effective date of Darlington's resignation shall not affect the fact that Darlington's Engagement was terminated as a result of Darlington's resignation. VI. Severance (a) In the event Darlington's Engagement is terminated by the Board pursuant to subparagraph IV(e) above, or by Darlington pursuant to subparagraph IV(f) above, the Company will pay to -4- Darlington a severance payment (the "Severance Payment") equal to: (i) Two Hundred Thousand Dollars ($200,000.00) (the "Salary Component"), and (ii) the greater of (A) fifty percent (50%) of the amount of the Bonus Payment (defined below), if any, for the most recent fiscal year ended prior to the Termination Date (unless the Termination Date occurs prior to December 31, 1999, in which event this subparagraph (ii) shall not apply), and (B) fifty percent (50%) of the average of the Bonus Payments, if any, for the two most recent fiscal years ended prior to the Termination Date (the "Bonus Component") unless the Termination Date occurs on or prior to December 31, 2000 (in which event this clause (B) shall not apply and only clause (A) shall be used in determining the amount due Darlington under this subparagraph (ii)). The Severance Payment shall be paid by the Company in twelve (12) equal monthly installments as follows: (a) with respect to the Salary Component, commencing on the last business day of the month in which the Termination Date occurs and continuing on the last business day of each month thereafter until paid in full, and (b) with respect to the Bonus Component, on the last business day of the month in which the anniversary date of the Termination Date occurs and continuing on the last business day of each month thereafter until paid in full. After the Termination Date, Darlington shall be entitled to no further benefits other than as required under the terms and conditions of the benefit plans provided under subparagraph III(D) or to the extent mandated by law. (b) In the event of a Change of Control which occurs during the Engagement and within twelve months thereafter the Engagement is terminated by the Board pursuant to subparagraph IV(e) above, Darlington shall be entitled to receive two (2) times the amount of the Severance Payment determined pursuant to subparagraph VI(a) above. (c) The Company may, at its option and at any time, discharge all its obligations to Darlington under this paragraph in a single payment in an amount equal to the net present value (at a discount rate equal to the prime rate announced from time to time by Bank of America NT&SA) of all amounts then payable hereunder. As of the date of payment of all amounts required to be paid by the Company under this paragraph, the Company will have no further obligation to Darlington with respect to the payment of severance pay. -5- VII. Non-Disclosure; Nonsolicitation; Nondisparagement A. Darlington shall not during the Term or at any time thereafter (i) disclose to any person not employed by the Company or any person, firm or corporation engaged to render services to Company except during the Term for the benefit of Company, or (ii) use for the benefit of himself, or others, any Confidential Information (as defined below) obtained by Darlington prior to the Effective Date, during the Term or any time thereafter, including, without limitation, "know-how", trade secrets, details of the Company's contracts with third parties, pricing policies, financial data, operational methods, marketing and sales information or strategies, product development techniques or plans or any strategies relating thereto, technical processes, designs and design projects, and other proprietary information of Company ("Confidential Information"); provided, however, that this provision shall not preclude Darlington from (x) upon advice of counsel and after reasonable notice to Company, making any disclosure required by any applicable law or (y) using or disclosing information known generally to the public (other than information known generally to the public as a result of any violation of this paragraph VII by or on behalf of Darlington). B. As requested by the Company from time to time and upon the termination of the Engagement for any reason, Darlington will promptly deliver to the Company all copies and embodiments, in whatever form, of all Confidential Information in Darlington's possession or within Darlington's control (including, but not limited to, written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any such Confidential Information) regardless of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company. C. Darlington shall not, either directly or indirectly, call on, solicit or take away or assist to be called on, solicited or taken away, any of the customers, other employees or independent contractors of the Company on whom Darlington called or with whom Darlington became acquainted during Darlington's Engagement with or hiring by the Company, either for Darlington's own benefit, or for the benefit of any other person, firm or corporation. Darlington shall not disclose the name of any employee, customer, sales representative or other employee of the Company to any third party, unless the disclosure occurs during Darlington's Engagement with the Company and is reasonably required by Darlington's position with the Company. Darlington shall not now or in the future disrupt, damage, impair or interfere with the business of the Company in any manner, including, without limitation, inducing an employee to leave the employ of the Company or inducing an employee, a consultant, a sales representative or an independent contractor to sever that person's relationship with the Company either by interfering with -6- or raiding the Company's employees or sales representatives, disrupting its relationships with customers, agents, independent contractors, representatives or vendors, or otherwise. In the event of a breach or threatened breach by Darlington of the provisions of this paragraph, the Company will be entitled to injunctive or other equitable relief restraining Darlington from any breach or threatened breach of this paragraph VII. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from Darlington. VIII. Expenses Darlington may incur reasonable expenses, in accordance with Company policies for such expenses, for promoting the Company's business, including expenses for entertainment, travel and similar items. The Company will reimburse Darlington for all such expenses upon Darlington's presentation of an itemized account of such expenditures and supporting documentation, in accordance with Company policy. IX. Waiver of Breach The waiver by either party of a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any subsequent breach. X. Arbitration Any dispute arising out of or relating to this Agreement or the transactions contemplated hereby shall be finally resolved and determined by mandatory, binding arbitration before a single arbitrator in Los Angeles, California, in accordance with the then-prevailing commercial arbitration rules of the American Arbitration Association; provided, however, that no claim for specific performance or injunctive relief shall be required to be submitted to arbitration; provided, further, that the arbitrator shall apply the internal laws of the State of California. Each of the parties hereto submits to the jurisdiction of the arbitrator appointed in accordance with such rules and (without limiting the effect of the foregoing arbitration clause) to the jurisdiction of any state or federal court sitting in Los Angeles County, California, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each of the parties hereto waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. Nothing in this paragraph X, however, shall affect the right of -7- any party to bring any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in any other court or to serve legal process in any other manner permitted by law or at equity, for the purposes of compelling arbitration, enforcing any award in arbitration, or seeking specific performance or injunctive relief. Any party hereto may make service on any other party by sending or delivering a copy of the process to the party to be served at the address and in the manner provided for the giving of notices in paragraph XIV hereof. Each party hereto agrees that a final award in any such arbitration or final judgment in any such action or proceeding so brought shall be conclusive and may be enforced by entry of such award in any court of competent jurisdiction, suit on the award or judgment, or in any other manner provided by law or at equity. In the event of legal action or arbitration to construe or enforce this Agreement, the prevailing party (as determined by the court or arbitrator, as applicable) shall be entitled to recover its reasonable attorneys' fees and costs. XI. Assignment The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company, but the rights and obligations of Darlington are personal and may not be assigned or delegated without the Company's prior written consent. XII. Entire Agreement This Agreement and the Exhibits attached herein, contains the entire Agreement of the parties and may not be changed orally, but only by an agreement in writing executed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. XIII. Law Applicable This Agreement shall be governed in all respects, whether as to validity, construction, capacity, performance or otherwise, by the laws of the State of California. In the event any provision of this Agreement shall be held invalid by a court with jurisdiction over the parties to this Agreement, such provision shall be deleted from the Agreement, which shall then be construed to give effect to the remaining provisions thereof. -8- XIV. Notices Any notice to the Company required or permitted under this Agreement shall be given in writing to Company, either by personal service or by registered or certified mail, postage prepaid, addressed to the Chief Executive Officer of the Company at its then principal place of business. Any such notice to Darlington shall be given in a like manner and, if mailed, shall be addressed to Darlington at his home address then shown in the Company's files. For the purpose of determining compliance with any time limit in this Agreement, a notice shall be deemed to have been duly given (a) on the date of service, if served personally on the party to whom notice is to be given, or (b) on the second business day after mailing, if mailed to the party to whom the notice is to be given in the manner provided in this paragraph. IN WITNESS WHEREOF, the parties intending to be legally bound, have executed this Agreement the day and year first above stated. HEMACARE CORPORATION DARLINGTON /s/ Charles Schwab, Jr. /s/ Alan C. Darlington __________________________ ________________________ Charles Schwab, Jr. Alan C. Darlington Chairman, Compensation Committee May 13, 1999 May 13, 1999 __________________________ _______________________ Date Date -9- EXHIBIT A Within sixty (60) days following the filing by the Company of Form 10-K for the year ending December 31, 1999 and for each full calendar year thereafter in which this Agreement is in effect, the Company shall pay to Darlington a bonus equal to the lower of (i) the percentage growth in the Company's net income ("Net Income Growth") for the year ending December 31, 1999 (the "Initial Year"), and each full calendar year thereafter while this Agreement is in effect (the "Applicable Years"), such comparisons to be made for the Initial Year or the Applicable Year to the next preceding fiscal year, or (ii) the percentage growth in the Company's fully diluted earnings per share ("EPS Growth") for the Initial Year and each Applicable Year, such comparisons to be made for the Initial Year or the Applicable Year to the next preceding fiscal year, based on the following formula: At the discretion of the Board if the Company achieves less than 25% Net Income Growth or EPS Growth, as applicable 75% of Base Pay if the Company achieves 25% Net Income Growth or EPS Growth, as applicable 100% of Base Pay if the Company achieves 30% Net Income Growth or EPS Growth, as applicable 125% of Base Pay if the Company achieves 35% Net Income Growth or EPS Growth, as applicable 150% of Base Pay if the Company achieves 40% Net Income Growth or EPS Growth, as applicable Proportionate incremental increases based on the foregoing formula Examples (and applicable guidelines) for determining bonuses hereunder are attached hereto. C-1 EXHIBIT B FORM OF STOCK OPTION AGREEMENT HEMACARE CORPORATION NON-QUALIFIED STOCK OPTION AGREEMENT [1996 STOCK INCENTIVE PLAN] (Non-Qualified Stock Option Agreement Form 96-2) _______________________________ Date Option Granted: ____________ Name of Optionee _______________________________ No. of Shares: ____________ Address _______________________________ Option No.: ____________ City, State, Zip THIS AGREEMENT is made as of the date set forth above, between HEMACARE CORPORATION, a California corporation (hereinafter called the "Company"), and the optionee named above (hereinafter called the "Optionee"). RECITAL The Board of Directors of the Company (the "Board"), or the Compensation Committee of the Board or such other committee of directors as the Board of Directors of the Company shall designate in accordance with the HemaCare Corporation 1996 Stock Incentive Plan (the "Plan"), has determined that it is to the advantage and interest of the Company and its shareholders to grant the option provided for herein to the Optionee as an inducement to remain in the service of the Company (or any corporation, partnership, joint venture or other entity in which the Company owns, directly or indirectly, at least a 20% beneficial ownership interest (a "Related Company")) and as an incentive for increased effort during such service. Such committee as shall be designated to administer the Plan (or, if none, the Board) is referred to herein as the Committee. In consideration of the mutual covenants herein contained, the parties agree as follows: 1. Grant of Option. The Company hereby grants to the Optionee the right and option (the "Option") to purchase on the terms and conditions set forth herein and in the Plan all or any part of an aggregate of ______ shares (the "Shares") of the Common Stock of the Company (whether authorized and unissued or treasury shares) at the purchase price of $______ per Share as the Optionee may, from time to time, elect. The Option shall vest and become exercisable on a cumulative basis as follows: (i) On or after ___________, ______ shares; (ii) On or after ___________, ______ shares; (iii) On or after ___________, ______ shares; (iv) On or after ___________, ______ shares; and (v) On or after ___________, ______ shares. Nothing contained herein shall be construed to limit or restrict the right of the Company or any Related Company to terminate the Optionee's employment or other Relationship at any time, with or without cause, or to increase or decrease the Optionee's compensation from the rate in existence at the time the Option is granted. As used herein, the term "Relationship" shall mean that the Optionee is or has agreed to become an officer, director, employee, consultant, adviser, independent contractor or agent of the Company or any Related Company. The Option is not intended to meet the requirements of an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. 2. Term of Option. The right to exercise the Option granted hereunder, to the extent unexercised, shall remain in effect until __________ unless sooner terminated in accordance with Section 5 hereof (the "Term"). 3. Method of Exercise. (a) To the extent that the Option has become exercisable hereunder, the Option may be exercised in whole or in part at any time during the Term by giving written notice of exercise to the Company specifying the number of Shares to be purchased, accompanied by payment of the purchase price therefor. Payment of the purchase price for such Shares shall be made (i) in cash, (ii) by certified or cashier's check payable to the order of the Company, (iii) other cash equivalents acceptable to the Committee in its sole discretion, (iv) by delivery of shares of the Common Stock of the Company already owned by the Optionee or subject to vested stock options under the Plan, subject to such delivery being permissible under the General Corporation Law of the State of California, including without limitation Chapter 5 thereof, or (v) any combination of the foregoing. If requested by the Committee, prior to the delivery of any Shares, the Optionee, or any other person entitled to exercise the Option, shall supply the Committee with a representation that the Shares are not being acquired with a view to distribution and will be sold or otherwise disposed of only in accordance with applicable federal and state statutes, rules and regulations. As soon after the notice of exercise as the Company is reasonably able to comply, the Company shall, without transfer or issue tax to the Optionee or other person entitled to exercise the Option, deliver to the Optionee or such other person, at the principal office of the Company or such other place as shall be mutually acceptable, a certificate or certificates for the Shares being purchased. (b) If payment is made with shares of Common Stock of the Company already owned by the Optionee, the Optionee, or other person entitled to exercise the Option, shall deliver to the Company with the notice of exercise certificates representing the number of shares of Common Stock in payment for the Shares, duly endorsed for transfer to the Company. In addition, prior to the acceptance of such certificates in payment for the Shares, the Optionee, or any other person entitled to exercise the Option, shall supply the Company with a written representation and warranty that he or she has good and marketable title to the shares represented by the certificate(s), free and clear of liens and encumbrances. The value of the shares of Common Stock so tendered in payment for the Shares being purchased shall be their Fair Market Value Per Share (as defined below) on the date of the Optionee's notice of exercise. Any Shares purchased upon exercise of the Option which are paid for using Restricted Stock (as defined in the Plan) shall be restricted in accordance with the original terms of the award of such Restricted Stock. (c) If payment is to be made in shares of Common Stock subject to vested stock options under the Plan, the per share value attributable to the shares underlying the stock option(s) to be surrendered or canceled shall be the Fair Market Value Per Share of such shares less the exercise price per share of such option(s). The Company and the Optionee or other person entitled to exercise the Option shall execute and deliver such instruments or modifications of stock options as shall be necessary to give effect to such an exercise of the Option. (d) If for any reason a purported exercise of the Option providing for payment to be made in whole or in part through the delivery of shares of Common Stock already owned or underlying vested stock options is not permitted, such purported exercise shall not be effective unless, following notice thereof from the Company, the Optionee or other person entitled to exercise the Option promptly pays the exercise price in an acceptable form. (e) If the Optionee or other person entitled to exercise the Option desires to exercise the Option with funds borrowed from a broker-dealer in a margin transaction under Regulation T of the Board of Governors of the Federal Reserve System, the Optionee's notice of exercise may be delivered to the Company by such broker- dealer and the Company may deliver the certificate(s) for the Shares being purchased to such broker-dealer on behalf of the Optionee or other person entitled to exercise the Option. (f) For purposes hereof, the "Fair Market Value Per Share" of the Company's Common Stock shall mean, if the Common Stock is publicly traded, the closing per share bona fide bid price of the Common Stock on such date. In any situation not covered by the preceding sentence, the Fair Market Value Per Share shall be determined by the Committee in accordance with one of the valuation methods described in Section 20.2031-2 of the Federal Estate Tax Regulations (or any successor provision thereto), which determination shall be final, binding and conclusive. (g) Notwithstanding the foregoing, the Company shall have the right to postpone the time of exercise of the Option or the delivery of the Shares for such period as may be required for the Company (i) to comply with any applicable listing, registration or qualification requirements of any national securities exchange or over-the-counter market or under any federal or state law or (ii) to obtain the consent or approval of any government regulatory body. In addition, in connection with any exercise of the Option, the Committee may require the Optionee to agree not to dispose of any of the Shares acquired upon exercise thereof except upon the satisfaction of specified conditions which the Committee, in its sole discretion, then deems necessary or desirable in connection with any then existing and effective requirement or interpretation of any applicable federal or state securities law, rule or regulation. (h) The Option may be exercised for less than the total number of Shares for which the Option is then exercisable, provided that a partial exercise may not be for less than 100 Shares, except in the final year of the Term, and shall not, in any event, include any fractional Shares. 4. Tax Withholding. The Optionee shall, no later than the date as of which any value attributed to the Option first becomes includible in the Optionee's gross income for applicable tax purposes, pay to the Company, or make arrangements (which may include delivery of shares of Common Stock already owned by the Optionee or subject to awards under the Plan subject to and in accordance with the provisions of Section 3(b) or Section 3(c), as applicable) regarding payment of, any federal, state, local or other taxes of any kind required by law to be withheld with respect thereto. The obligations of the Company hereunder shall be conditional on such payment or arrangements, and the Company (and, where applicable, any Related Company), shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Optionee. 5. Termination of Option. (a) If the Optionee ceases to have a Relationship for any reason other than his death or Permanent Disability (as defined in Section 5(d)), the Option shall terminate 90 days from the date on which such Relationship terminates. During such 90-day period, the Optionee may exercise the Option but only to the extent the Option was exercisable on the date of termination of his Relationship and provided that the Option has not expired in accordance with Section 2 or otherwise terminated as provided herein. Notwithstanding the foregoing, if the Relationship is terminated for cause (as defined in Section 5(d)), the Option shall terminate upon the termination of the Relationship. (b) For purposes hereof, termination of Optionee's Relationship for reasons other than for cause, death or Permanent Disability shall be deemed to take place upon the earliest to occur of the following: (i) the date of the Optionee's retirement from employment under the normal retirement policies of the Company or any subsidiary of the Company; (ii) the date of the Optionee's retirement from employment with the approval of the Committee because of disability other than Permanent Disability; (iii) the date the Optionee receives notice or advice that his employment or other Relationship is terminated; (iv) the date the Optionee ceases to render the services for which the Optionee was employed, engaged or retained by the Company or any Related Company (absences for temporary illness, emergencies and vacations or leaves of absence approved in writing by the Committee excepted); or (v) in the case of a director of the Company, the date on which such person ceases to be a director of the Company unless such person has an other Relationship at such time. The fact that the Optionee may receive payment from the Company or any Related Company after termination for vacation pay, for services rendered prior to termination, for salary in lieu of notice or for other benefits shall not affect the termination date. (c) If the Optionee shall die at a time when the Optionee is in a Relationship or if the Optionee shall cease to have a Relationship by reason of Permanent Disability, the Option shall terminate six months from the date of the Optionee's death or termination of Relationship due to Permanent Disability unless by its terms it shall expire before such date or otherwise terminate as provided herein, and shall only be exercisable to the extent that it would have been exercisable on the date of the Optionee's death or the Optionee's termination of Relationship due to Permanent Disability. In the case of death, the Option may be exercised by the person or persons to whom the Optionee's rights under the Option shall pass by will or by the laws of descent and distribution. (d) As used herein, the term "Permanent Disability" shall mean termination of a Relationship with the Company or any Related Company with the consent of the Company or such Related Company by reason of permanent and total disability within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended. As used herein, the term "for cause" shall mean that the Relationship is terminated by the Company due to (i) the commission by the Optionee of a substantial violation, through intentional conduct or through a pattern of behavior not corrected within a reasonable period of time after written notice to the Optionee by the Company of such behavior (in either case, whether by action or omission), of the Optionee's duties on behalf of the Company or a Related Company or the workplace policies or rules of the Company or a Related Company which conduct or behavior actually results in substantial harm to the Company or a Related Company or could reasonably be expected to put personnel of the Company or a Related Company in serious jeopardy of imminent harm to their safety, health or well-being or to cause substantial harm to the business of the Company or a Related Company or (ii) the commission by the Optionee of any act or acts constituting dishonesty, a felony or fraud. For purposes of the Option, whether a Relationship is or has been terminated "for cause" shall be finally determined by the president of the Company, or if the Optionee is a person subject to Section 16 of the Securities Exchange Act of 1934, as amended, by the Committee. 6. Adjustments. In the event of any merger, reorganization, consolidation, sale of substantially all assets, recapitalization, stock dividend, stock split, spin-off, split-up, split-off, distribution of assets or other change in corporate structure affecting the Common Stock, a substitution or adjustment, as may be determined to be appropriate by the Committee in its sole discretion, shall be made in the aggregate number of Shares then subject to this Agreement and the purchase price to be paid by the Optionee hereunder; provided, however, that no such adjustment shall increase the aggregate value of the Option. 7. Change of Control. This Agreement and the Option hereunder are subject to the change of control provisions set forth in the Plan. 8. Provisions Regarding Transferability. The Optionee may transfer the Option solely for estate planning purposes to the Optionee's children, grandchildren or spouse ("Immediate Family"), to one or more trusts for the benefit of the Optionee's Immediate Family members, or to one or more partnerships in which such Immediate Family members are the only partners only upon the express written consent of the Committee, and provided the Optionee does not receive any consideration in any form whatsoever for such transfer. Upon any such transfer of the Option, the Option shall continue to be subject to the terms and conditions as were applicable to the Option immediately prior to the transfer thereof. Except as expressly provided in the first sentence of this Section 8, the Option is not assignable or transferable by the Optionee, either voluntarily or by operation of law, otherwise than by will or by the laws of descent and distribution, and is exercisable, during the Optionee's lifetime, only by the Optionee. 9. No Shareholder Rights. The Optionee or other person entitled to exercise the Option shall have no rights to dividends or other rights of a shareholder with respect to any Shares subject hereto until the Optionee or such person has given written notice of exercise of the Option with respect to such Shares and has paid the purchase price for such Shares, and no adjustment (except such adjustments as may be effected pursuant to the provisions of Section 6 hereof) shall be made for dividends or distributions of rights in respect of such Shares if the record date is prior to the date by which the Optionee or such person has both given such written notice and paid such purchase price. 10. Investment Representation. The Optionee hereby represents that the Option and any Shares purchased hereunder are being acquired for the Optionee's own account and not with a view to or for sale in connection with any distribution thereof except as may be permitted by the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 11. Conditions to Issuance of Shares. THE COMPANY'S OBLIGATION TO ISSUE OR DELIVER SHARES OF ITS COMMON STOCK UPON EXERCISE OF THE OPTION IS EXPRESSLY CONDITIONED UPON THE COMPLETION BY THE COMPANY OF ANY REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES UNDER ANY STATE AND/OR FEDERAL LAW OR RULINGS OR REGULATIONS OF ANY GOVERNMENT REGULATORY BODY OR THE MAKING OF SUCH INVESTMENT REPRESENTATIONS OR OTHER REPRESENTATIONS AND AGREEMENTS BY THE OPTIONEE (OR ANY PERSON ENTITLED TO EXERCISE THE OPTION) IN ORDER TO COMPLY WITH THE REQUIREMENTS OF ANY EXEMPTION FROM ANY SUCH REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES WHICH THE COMMITTEE SHALL, IN ITS SOLE DISCRETION, DEEM NECESSARY OR ADVISABLE. SUCH REQUIRED REPRESENTATIONS AND AGREEMENTS MAY INCLUDE REPRESENTATIONS AND AGREEMENTS THAT THE OPTIONEE, OR ANY OTHER PERSON ENTITLED TO EXERCISE THE OPTION, (A) IS NOT PURCHASING SUCH SHARES FOR DISTRIBUTION AND (B) AGREES TO HAVE PLACED UPON THE FACE AND/OR REVERSE OF ANY CERTIFICATES FOR SUCH SHARES A LEGEND SETTING FORTH ANY REPRESENTATIONS AND AGREEMENTS WHICH HAVE BEEN GIVEN TO THE COMMITTEE OR A REFERENCE THERETO AND STATING THAT, PRIOR TO MAKING ANY SALE OR OTHER DISPOSITION OF ANY SUCH SHARES, THE OPTIONEE, OR ANY OTHER PERSON ENTITLED TO EXERCISE THE OPTION, WILL GIVE THE COMPANY NOTICE OF INTENTION TO SELL OR DISPOSE OF THE SHARES NOT LESS THAN FIVE DAYS PRIOR TO SUCH SALE OR DISPOSITION. 12. Method of Acceptance. This Agreement is addressed to the Optionee in duplicate and shall not be effective until the Optionee executes the acceptance below and returns one copy to the Company, thereby acknowledging that he has read and agreed to all the terms and conditions of this Agreement and the Plan. 13. Plan Terms. The Option shall be subject to and governed by the terms and provisions of the Plan, which by this reference are incorporated herein. In the event of any conflict between the provisions of this Agreement and the Plan, the Plan shall govern. All determinations and interpretations thereof made by the Committee shall be conclusive and binding on all parties hereto and upon their successors and assigns. Executed as of this ______ day of _______, 1999. HEMACARE CORPORATION By: _____________________________ ACCEPTED: _____________________________ _________________ Signature of Optionee Date EXHIBIT C As used in this Agreement, the phrase "Change in Control" shall mean: (a) Except as provided by subparagraph (b) hereof, the acquisition by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company; or (b) Approval by the Board of a reorganization, merger or consolidation of the Company with any other person, entity or corporation, other than: (i) a merger or consolidation which would result in the voting securities of the Company immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of another entity) more than 50% of the combined voting power of the securities entitled to vote generally in the election of directors of the Company or such other entity outstanding immediately after such merger or consolidation; or (ii) a merger or consolidation effected to implement a recapitalization of the Company or similar transaction in which no person, entity or group acquires beneficial ownership of 50% or more of the combined voting power of the securities entitled to vote generally in the election of directors of the Company outstanding immediately after such merger or consolidation; or (iii) Approval by the Board of a plan of complete liquidation of the Company or an agreement for the sale or other disposition by the Company of all or substantially all of the Company's assets pursuant to which all or substantially all of the Company's assets continue to be owned by an affiliate of the Company. EX-27 5
5 This schedule contains summary information extracted from unaudited financial statements contained in Form 10-Q for the quarter ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1999 MAR-31-1999 1,140,000 576,000 3,086,000 446,000 777,000 5,274,000 3,171,000 1,912,000 7,314,000 2,689,000 0 0 75,000 13,588,000 (10,125,000) 7,314,000 4,453,000 4,453,000 3,619,000 3,619,000 664,000 0 22,000 248,000 5,000 248,000 0 0 0 248,000 .03 .03
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