-----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, CSVCBXIYEW543n0IAq9TYOj4nZywN5noX9j629/gylV5fHE9/fE6/a8iXn0di+JS nl0gYLn8Qwroci8q0aUpTw== 0000801748-98-000014.txt : 19981106 0000801748-98-000014.hdr.sgml : 19981106 ACCESSION NUMBER: 0000801748-98-000014 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981022 ITEM INFORMATION: FILED AS OF DATE: 19981105 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: 8-K SEC ACT: SEC FILE NUMBER: 000-15223 FILM NUMBER: 98738670 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 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 Date of Report (Date of earliest event reported): October 22, 1998 HEMACARE CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its chapter) California ----------------------------------------------- (State or other jurisdiction of incorporations) 0-15223 95-3280412 ---------------------- ------------------ Commission File Number (IRS Employer Identification No.) 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 ---------------- Item 2. Acquisition or Disposition of Assets. - ------ --------------------------------------- On October 22, 1998, HemaCare Corporation ("HemaCare" or the "Company") through its wholly owned subsidiary Coral Blood Services, Inc. ("CBS"), acquired substantially all 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. The acquired assets include (i) approximately $1.7 million in accounts receivable, $555,000 of which are over 90 days old, (ii) fixed assets and (iii) Coral's rights under its hospital contracts. HemaCare is currently in the process of negotiating separate agreements with the hospitals previously served by Coral and is providing services to most of these hospitals under interim arrangements. CBS also acquired certain equipment formerly used by Coral in providing blood services and products, which the Company intends to continue using for the same purposes. Concurrently with the closing of the asset purchase, HemaCare extended offers of employment to most of Coral's employees. The acquisition price of the assets was $950,000 in cash and 450,000 shares of HemaCare's Series B senior convertible preferred stock. The Company financed the acquisition by (i) utilizing existing cash balances, (ii) borrowing $600,000 on its line of credit and (iii) issuing 450,000 shares of HemaCare Series B senior convertible preferred stock. The Series B preferred stock is convertible into 500,000 shares of HemaCare common stock, at the option of the holder, one year after issuance. In addition, HemaCare has entered into or expects to enter into non-competition agreements with certain former managers of Coral pursuant to which HemaCare expects to make cash payments and issue shares of HemaCare common stock and warrants to purchase HemaCare common stock. HemaCare also expects to satisfy certain liabilities of Coral to its ex-employees and to make payments necessary to maintain essential business relationships. This Form 8-K contains "forward-looking statements" within the meaning of that term in the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). Additional written or oral forward-looking statements may be made by the Registrant from time to time in filings with the Securities and Exchange Commission or otherwise. Statements contained herein that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions referenced above. Forward-looking statements are inherently subject to risks and uncertainties some of which cannot be predicted or quantified based on current expectations. Although the Registrant believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements contained herein 2 3 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. ----------------------------------------------------- (a) Financial Statements of Business Acquired. The financial statements are not available and, accordingly, are not included herein. The Registrant plans to submit the financial statements of the Business required to be filed under this item by amendment not later than 60 days after the date on which this report on Form 8-K must be filed. (b) Pro Forma Financial Information. The Registrant plans to submit the pro forma financial information required to be filed under this item by amendment not later than 60 days after the date on which this report on Form 8-K must be filed. (c) Exhibits 2.1 Foreclosure Sale Agreement dated as of October 22, 1998 (the "Foreclosure Sale Agreement"), by and among HemaCare Corporation, a California corporation (the "Registrant"), Coral Blood Services, Inc., a California corporation and a wholly-owned of the Registrant ("CBS"), Comdisco, Inc., ("Comdisco"), and Comdisco Health Care Group, Inc., as supplemented. (Schedules and Exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Such schedules and exhibits are listed in the Foreclosure Sale Agreement. The Registrant hereby agrees to furnish supplementary to the Securities and Exchange Commission, upon its request, any or all such omitted schedules and exhibits.) 4.1 Certificate of Determination of the Registrant's Series B Senior Convertible Preferred Stock. 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. HEMACARE CORPORATION Date: November 5, 1998 By: /s/ Sharon C. Kaiser ---------------------- Sharon C. Kaiser, Chief Financial Officer and Sr. Vice President, Finance 3 4 INDEX TO EXHIBITS
Exhibit Number Description Sequential Page No. - ------ ------------------------------------------------------- --------------------------- 2.1 Foreclosure Sale Agreement dated as of October 22, 1998 Filed herwith electroncally (the "Foreclosure Sale Agreement"), by and among HemaCare Corporation, a California corporation (the "Registrant"), Coral Blood Services, Inc., a California corporation and a wholly-owned of the Registrant ("CBS"), Comdisco, Inc., ("Comdisco"), and Comdisco Health Care Group, Inc., as supplemented. (Schedules and Exhibits have been omitted pursuant to Rule 601(b)(2) of Regulation S-K. Such schedules and exhibits are listed in the Foreclosure Sale Agreement. The Registrant hereby agrees to furnish supplementary to the Securities and Exchange Commission, upon its request, any or all such omitted schedules and exhibits.) 4.1 Certificate of Determination of the Registrant's Filed herewith electronically Series B Senior Convertible Preferred Stock.
-5- 6 EX-2.1 2 EXHIBIT 2.1 FORECLOSURE SALE AGREEMENT This FORECLOSURE SALE AGREEMENT ("Agreement") is entered into as of October 22, 1998 by and among COMDISCO, INC., a Delaware corporation, COMDISCO HEALTH CARE GROUP, INC. ("Comdisco"), on the one hand, and HEMACARE CORPORATION, a California corporation ("HC"), and CORAL BLOOD SERVICES, INC., a California corporation and a wholly-owned subsidiary of HC ("CBS" and together with HC, "HemaCare"). RECITALS: --------- 1. This sale ("Sale") is made to HemaCare by Comdisco pursuant to Illinois Commercial Code 9504 after default by Coral Therapeutics, Inc. ("Debtor") under the terms of that certain Subordinated Loan and Security Agreement, dated as of September 30, 1997, between Comdisco and Debtor (the "Term Loan Agreement"). 2. The Debtor also has defaulted under equipment leases between Comdisco and the Debtor identified as a Master Lease Agreement dated September 26, 1997 between Comdisco Health Care Group and the Debtor and a Master Lease Agreement dated as of May 28, 1997 between Comdisco and the Debtor (collectively, the "Equipment Leases"), which lease equipment is referred to below. 3. The Debtor also is obligated to Comdisco pursuant to that certain Receivables Loan and Security Agreement dated as of May 29, 1997 between the Debtor and Comdisco (the "Receivables Agreement"), which obligations are past due. 4. Comdisco has not released the Debtor from any of the operative documents nor has it released any of the indebtedness thereunder. 5. The Sale referenced herein is evidenced by a certain Bill of Sale of even date herewith executed by Comdisco in favor of HemaCare in the form of Exhibit A hereto. 6. The Debtor is familiar with the terms of the Sale. 7. HemaCare desires to purchase and Comdisco agrees, upon payment to Comdisco of the purchase price as defined below and the additional consideration recited herein, to sell the personal property referenced herein to HemaCare. -1- 7 AGREEMENT NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Assets. A. The assets which are the subject of this Agreement are all the personal property of the Debtor to the extent that such property constitutes collateral under the Term Loan Agreement pursuant to which the Debtor granted Comdisco a security interest in substantially all of the Debtor's personal property, accounts, chattel paper, general intangibles, inventory, equipment, fixtures, and goods, all as more specifically described Exhibit B hereto (the "Personal Property"). B. Comdisco will release its security interest in the accounts to the extent that the security interests pursuant to the Receivables Agreement may be prior to the security interests of the Term Loan Agreement. Also, Comdisco will abandon and release any interests that it may have in the equipment identified in the Equipment Leases. C. The Personal Property to be transferred specifically includes: all Debtor's customers lists, software, accounts, and trade names and trademarks and other intellectual property rights to which the Debtor has any right, title or interest to the extent such property constitutes collateral under the Term Loan Agreement. 2. Nonassumption of Liability. HemaCare is not assuming any liabilities, debts or obligations of the Debtor whatsoever, including, but not limited to, the Debtor's liability with respect to leases, or to any of the Debtor's creditors or employees or any contracts or agreements to which the Debtor is a party unless otherwise expressly assumed by HemaCare in writing. HemaCare is not obligated to hire any of the Debtors employees; however, it may do so. 3. Purchase Price. The Purchase Price for the assets shall be: A. $950,000 in cash or its equivalent paid by check or wire transfer to the account designated by Comdisco in writing; B. 450,000 shares of Preferred Stock ("Preferred Shares") of HC as described pursuant to the Certificate of Determination of Series A Convertible Preferred Stock, a copy of which is attached hereto as Exhibit C and is referred to more specifically in Paragraph 6 below). C. Seventy-five percent (75%) of the amount, if any, that actual costs and expenses related to the acquisition of Debtor's assets and integration of the Debtor's business with that of HemaCare are less than the amount currently anticipated and budgeted (as more -2- 8 specifically described in Paragraph 8 below and referred to hereinafter as the "Cost Savings"). 4. Terms of Payment. Concurrent with the execution of this Agreement and the consummation of the transactions contemplated hereby, HemaCare shall deliver to "Bank of America 231 S. Lasalle Street Chicago, IL 60697 ABA # - 071000039 For the Account of - Comdisco, Inc. Reference: Coral Therapeutics, Inc. Attention: Dave Reynolds" cash in the amount of $950,000 and a stock certificate representing the Preferred Shares. In addition, at the time when it is determined that the Debtor's business is fully integrated with that of HemaCare which will not be later than 6 months from the date hereof, HemaCare shall deliver to Comdisco a final accounting and, if applicable, payment of the Cost Savings. 5. Delivery of Possession of Assets to HemaCare. A. Comdisco shall deliver to HemaCare a Bill of Sale in the form attached hereto Exhibit A upon the delivery of Item 3(A) and (B) of the Purchase Price and this executed Agreement. B. Comdisco hereby acknowledges that at the time that the Bill of Sale is delivered in exchange for Purchase Price as recited above, it hereby releases any claim it has under the Receivables Loan Agreement to accounts or other collateral identified therein and any claim it has to any of the equipment subject to either Equipment Lease identified in the recitals above which equipment is identified in Exhibit D attached hereto. Comdisco's claims against the Debtor are not extinguished. Comdisco does not know nor represent the location nor existence of any of the equipment. The transfer is on a "where is, as," basis without representation or warranty whatsoever. C. It shall be HemaCare's responsibility to take possession of the Personal Property from the Debtor as the Sale is on a "where is/as is" basis. D. It is HemaCare's responsibility to arrange for any appropriate sublease or possession agreement with either the Debtor or the owner of any site where the Personal Property is located. Comdisco makes no representation or warranty in relation to the availability of any such site. 6. Preferred Stock. The Preferred Shares will contain the terms set forth in the Certificate of Determination of the Series A Convertible Preferred Stock attached hereto as Exhibit C, which represents 450,000 shares of Preferred Stock which may be convertible into 500,000 shares Common Stock of HC upon the terms set forth therein. The Preferred -3- 9 Shares shall be convertible two years after issuance. The Preferred Shares will have a liquidation preference of ninety cents ($0.90) per share. The Preferred Shares also will be entitled to receive dividends equal to those on Common Stock (on an "as if converted basis"). The Preferred Shares and the Common Stock to which it is convertible will be subject to adjustment for stock splits, stock dividends, reclassifications, capital reorganizations and similar transactions. The Common Stock issuable upon conversion of the Preferred Shares will have registration rights as set forth in the Certificate of Determination. 7. Investment Representations. Comdisco represents and warrants to HemaCare that (A) Comdisco understands that the offering and sale of the Preferred Shares and the shares of Common Stock issuable upon conversion thereof (collectively, the "Securities") have not been, and will not be, registered under the Securities Act of 1933, as amended (the "Securities 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, (B) Comdisco is acquiring the Securities solely for his own account for investment purposes, and not with a view to the distribution thereof, (C) Comdisco is a sophisticated investor with knowledge and experience in business and financial matters, (D) Comdisco has received certain information concerning HemaCare and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Securities, (E) Comdisco is able to bear the economic risk and lack of liquidity inherent in holding the Securities, and (F) Comdisco is an accredited investor (within the meaning of Regulation D promulgated under the Securities Act). Comdisco acknowledges that the Securities will not be freely transferable, that certificates representing the Securities will bear restrictive legends under applicable federal and state securities laws and shall be subject to stops on transfer. 8. Transaction Costs/Sharing Savings. Attached hereto as Exhibit E is a schedule of anticipated transaction costs to be incurred by HemaCare as part of the acquisition of the Debtor's assets and integration of the Debtor's business with that of HemaCare. To the extent that HemaCare's costs are less than the currently anticipated expenses as set forth in Exhibit E, HemaCare will pay as deferred Purchase Price seventy-five percent (75%) of the amount by which the actual costs are less than the scheduled transaction costs and expenses. The transaction costs and expenses will include, but are not limited to, the legal, accounting and consulting fees relating to HemaCare and the Debtor's advisors, travel expenses associated with the acquisition transaction and the integration activities, obligations to the Debtor's creditors (other than Comdisco) for transactions or services prior to closing, costs of noncompetition agreements with Peter Logue, David Barrone, Dan Reale, Stuart Dinney and Lori Terra-Vassalo and other costs associated with closing the Debtor's Atlanta administrative headquarters and the transfer of management functions to HemaCare's office in Los Angeles, employee severance and other costs associated with the closing of any operations of the Debtor that will not be continued by HemaCare. As part of the transaction costs and in reaching noncompetition agreements -4- 10 HemaCare anticipates that it will pay cash, issue Common Stock and warrants to purchase its Common Stock as settlement of various costs and expenses associated with the acquisition of the Debtor's assets and integration of its business. For purposes of computing transaction costs, to the extent that securities are used to settle obligations of the Debtor, securities will be valued at the amount of the obligation for which the securities were issued in settlement. To the extent that HC's securities are so utilized to settle on the liabilities of the Debtor they will be valued at not more than ninety cents ($.90) per common share. The anticipated stock and equivalents that will be outstanding after the contemplated transactions are reflected on Exhibit D attached hereto. 9. Legal Restraints. Should legal restraint of any type prohibit Comdisco from conducting the Sale as noticed pursuant to the terms hereof on or before October 22, 1998, this Agreement shall terminate. The parties would be free to renegotiate a new transaction. 10. Miscellaneous. A. Each party shall bear its own costs and expenses in relation to this Agreement and the transaction contemplated hereby. B. This Agreement shall be governed by the laws of California. The sale as provided in the loan documents between Comdisco and Debtor is governed by the law of Illinois. C. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered by personal delivery, mail, overnight courier or telecopier. Such communications shall be deemed given, if by personal delivery, when received if by mail, when mailed by certified or registered mail (postage prepaid and return receipt requested); or if by overnight courier or telecopier, when delivered to such courier or sent by telecopier (provided that the party giving the notice has confirmation of such delivery or sending), and in each case, addressed to the party to whom notice is to be given as set forth below: If to Comdisco: Comdisco, Inc. 6111 North River Road Rosemont, IL 60018 Attention: Ron Rapp Telephone: (847) 518-5071 Telecopier: (847) 518-5088 with a copy to: Murphy Sheneman Julian and Rogers 101 California Street, Suite 3900 San Francisco, California 94111 Attn.: John D. Fredericks, Esquire Telephone: (415) 398-4700 Telecopier: (415) 421-7879 -6- 11 if to: HemaCare Corporation 4954 Van Nuys Blvd. Van Nuys, California 91403 Attention: Chief Executive Officer Telephone: (818) 986-3883 Telecopier: (818) 986-1417 copy to: Sheppard, Mullin, Richter & Hampton 333 South Hope Street, 48th Floor Los Angeles, California 90071 Attention: James M. Rene, Esquire Telephone: (213) 620-1780 Telecopier: (213) 620-1398 C. Comdisco and HemaCare agree to cooperate in the completion of the transaction including the providing of such further documents as may be necessary to effect the transfer such an assignment of trademarks, tradenames, or other intellectual property which may be necessary to be recorded in various offices. HemaCare will prepare any such documents at its expense. D. Together with the Bill of Sale and the Certificate of Determination of the Series A Convertible Preferred Stock and the certificates issued thereunder, this is the sole agreement between the parties with reference to the subject matter hereof and may only be amended in writing. This Agreement replaces any prior agreement oral or written relating to the subject matter hereof. F. Delivery of an executed counterpart of the signature page to this Agreement by facsimile shall be as effective as delivery of a manually executed counterpart of this Agreement; provided, that any party so delivering an executed counterpart by facsimile shall thereafter promptly deliver a manually executed counterpart of this Agreement to the other party, but failure to deliver such manually executed counterpart shall not affect the validity, enforceability and binding effect of this Agreement, and (vi) shall be governed by and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, the parties hereby execute this Agreement to be effective as of October 22, 1998. COMDISCO, INC. By: /s/ James P. Labe, President ------------------------------- Comdisco Ventures Division -6- 12 COMDISCO HEALTH CARE GROUP, INC. By: /s/ Doug Berman ------------------------------ Its: Credit Manager HEMACARE CORPORATION By: Alan C. Darlington ------------------------------- Its: Chairman CORAL BLOOD SERVICES, INC. By: William D. Nicely ------------------------------ Its: Chief Executive Officer -7- LIST OF EXHIBITS Exhibit A - Bill of Sale Exhibit B - Description of Assets Exhibit C - Certificate of Determination of Series B Senior Convertible Preferred Stock Exhibit D - List of Leased Equipment Exhibit E - Description of Transaction Costs -8- 13 SUPPLEMENT NO. 1 TO FORECLOSURE SALE AGREEMENT THIS SUPPLEMENT NO. 1 TO FORECLOSURE SALE AGREEMENT (the "Amendment"), is made and entered into as of October 22, 1998, by and among COMDISCO, INC., a Delaware corporation, and COMDISCO HEALTH CARE GROUP, INC. (collectively, "Comdisco"), on the one hand, and HEMACARE CORPORATION, a California corporation ("HC"), and CORAL BLOOD SERVICES, INC., a California corporation and a wholly-owned subsidiary of HC ("CBS" and together with HC, "HemaCare"), on the other hand. Comdisco and HemaCare are referred to collectively below as the "Parties." Recitals 1. The Parties are parties to a Foreclosure Sale Agreement dated as of October 22, 1998 (the "Foreclosure Sale Agreement"). 2. The Parties desire to supplement and amend the Foreclosure Sale Agreement as set forth below. NOW THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: 1. References to Series A Preferred Stock. The Parties agree that all references in the Foreclosure Sale Agreement (and all agreements and documents related thereto) to HC's "Series A Convertible Preferred Stock," "Series A Preferred Stock" or "Preferred Shares" shall be deemed to refer to shares of HC's Series B Senior Convertible Preferred Stock containing the terms and conditions set forth in a Certificate of Determination filed by HC with the California Secretary of State on October 22, 1998. 2. Amendment of Section 6. The reference in the fifth line of Section 6 to "two years" is hereby amended to read "one year." 3. Effectiveness. This Amendment shall be deemed effective as of October 22, 1998 as if executed on such date. Except as supplemented and amended hereby, the Foreclosure Sale Agreement shall remain in full force and effect and shall be otherwise unaffected hereby. 4. Miscellaneous. This Amendment shall be deemed to be a contract made under -1- 14 the laws of the State of California and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state. This Amendment may be executed in any number of counterparts, each of such counterparts shall for all purposes be deemed an original and all such counterparts shall together constitute but one and the same instrument. Delivery of an executed counterpart of the signature page to this Amendment by facsimile shall be as effective as delivery of a manually executed counterpart of this Amendment; provided, that any party so delivering an executed counterpart by facsimile shall thereafter promptly deliver a manually executed counterpart of this Amendment to the other party, but failure to deliver such manually executed counterpart shall not affect the validity, enforceability and binding effect of this Amendment. [SIGNATURE PAGE FOLLOWS] -2- 15 IN WITNESS WHEREOF, the Parties hereby execute this Amendment as of the date first above written. COMDISCO, INC. By: /s/ ----------------------------- Its: COMDISCO HEALTH CARE GROUP, INC. By: /s/ Doug Berman ------------------------------ Its: Credit Manager HEMACARE CORPORATION By:/s/ JoAnn R. Stover ---------------------------------- Its: Secretary CORAL BLOOD SERVICES, INC. By: /s/ JoAnn R. Stover -------------------------------- Its: Secretary -3- 16 EX-4.1 3 EXHIBIT 4.1 CERTIFICATE OF DETERMINATION of the SERIES B SENIOR CONVERTIBLE PREFERRED STOCK (WITHOUT PAR VALUE) of HEMACARE CORPORATION (Pursuant to Section 401 of the General Corporation Law of the State of California) _____________________________________ The undersigned, William D. Nicely and JoAnn R. Stover, DO HEREBY CERTIFY that: 1. They are the Chief Executive Officer and Secretary, respectively, of HemaCare Corporation, a corporation organized and existing under the General Corporation Law of the State of California (the "Company"). 2. The resolution attached hereto as Exhibit A was duly adopted by the Board of Directors of the Company as required by Section 401 of the California General Corporation Law. 3. The number of shares of Series B Senior Convertible Preferred Stock of the Company is 450,000, of which none have been issued. -1- 17 IN WITNESS WHEREOF, on the date set forth below, in the City of Los Angeles in the State of California, each of the undersigned does hereby declare under the penalty of perjury under the laws of the State of California that he/she signed the foregoing certificate in the official capacity set forth beneath his/her signature, and that the statements set forth in said certificate are true and of his/her own knowledge. Signed on October 21, 1998 /s/ William D. Nicely ---------------------------- Name: William D. Nicely Title: Chief Executive Officer /s/ JoAnn R. Stover ---------------------------- Name: JoAnn R. Stover Title: Secretary -2- 18 EXHIBIT A RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of Directors of this Company in accordance with the provisions of the Company's Articles of Incorporation, as amended (the "Articles of Incorporation"), this Board of Directors hereby authorizes the issuance to Comdisco,Inc. ("Holder") of a series of the serial Preferred Stock of the Company (the "Preferred Stock") which shall consist of 450,000 shares of the Company's Preferred Stock, and hereby fixes the powers, designations, preferences, and relative, participating, optional, or other special rights, and the qualifications, limitations, or restrictions thereof, of the shares of such series (in addition to the powers, designations, preferences, and relative, participating, optional or other special rights, and the qualifications, limitations, or restrictions thereof, set forth in the Articles of Incorporation of the Company which are applicable to the Preferred Stock) as follows: Series B Senior Convertible Preferred Stock: Section 1. Designation and Amount. The shares of such series shall be designated as "Series B Senior Convertible Preferred Stock" (the "Series B Preferred Stock") and the number of shares constituting the Series B Preferred Stock shall be 450,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, however, that no decrease shall reduce the number of shares of Series B Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights, or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series B Preferred Stock. Section 2. Optional Conversion. Each nine-tenths (9/10) of a share of Series B Preferred Stock shall be convertible, at the option of the Holder, at any time after the first anniversary of the date of issuance of such share, into one share of Common Stock (the "Series B Conversion Ratio") of the Company ("Common Stock"). The Series B Conversion Ratio shall be adjusted as hereinafter provided. The Holder may exercise such conversion right by delivering to the Company during regular business hours, at the office of the Company or any transfer agent for the Series B Preferred Stock as may be designated by the Company, the certificate or certificates for the shares to be converted, duly endorsed or assigned in blank to the Company, accompanied by written notice stating that the Holder elects to convert such shares. Conversion shall be deemed to have been effected on the date when the aforesaid delivery is made (the "Conversion Date"). As promptly as practicable after the Conversion Date, the Company shall issue and deliver to or upon the written order of the Holder, to the place designated by the Holder, a certificate to which the Holder is entitled and a check or cash in respect of any fractional interest in a share of Common Stock as hereinafter provided. Upon such conversion, the Holder shall be deemed to have become a Common Stock holder of record on the applicable Conversion Date unless -3- 19 the transfer books of the Company are closed on that date, in which event the Holder shall be deemed to have become a Common Stock holder of record on the next succeeding date on which the transfer books are open, but the Series B Conversion Ratio shall be as in effect on the Conversion Date. Upon conversion of only a portion of the number of shares covered by a certificate representing shares of Series B Preferred Stock surrendered for conversion, the Company shall issue and deliver to or upon the written order of the Holder, at the expense of the Company, a new certificate covering the number of shares of Series B Preferred Stock representing the unconverted portion of the certificate so surrendered. (1) Adjustment of Series B Conversion Ratio. The Series B Conversion Ratio shall be subject to adjustment as follows. (1) If, at any time after the issuance of Series B Preferred Stock, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock (other than a stock dividend payable in respect of both Common Stock and Series B Preferred Stock in proportion to the Conversion Ratio) or by a subdivision or split-up of shares of Common Stock, then, following the record date fixed for the determination of holders of Common Stock entitled to receive such stock dividend, subdivision or split-up, the Series B Conversion Ratio shall be appropriately increased and the number of shares of Common Stock issuable upon conversion of each share of Series B Preferred Stock shall be appropriately increased, in each case, in proportion to such increase in outstanding shares. (2) If, at any time after the issuance of Series B Preferred Stock, the number of shares of Common Stock outstanding is decreased by a combination of the outstanding shares of Common Stock, then, following the record date for such combination, the Series B Conversion Ratio shall be appropriately decreased and the number of shares of Common Stock issuable upon conversion of each share of Series B Preferred Stock shall be appropriately decreased, in each case, in proportion to such decrease in outstanding shares. (3) In case, at any time after the issuance of Series B Preferred Stock, of any capital reorganization, or any reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), or the consolidation or merger of the Company with or into another person (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any change in the Common Stock) or of the sale or other disposition of all or substantially -4- 20 all the properties and assets of the Company as an entirety to any other person, or the sale or exchange of all of the outstanding capital stock of the Company, each share of Series B Preferred Stock shall after such reorganization, reclassification, consolidation, merger, exchange or sale or other disposition be convertible into the kind and number of shares of stock or other securities or property of the corporation resulting from such consolidation or surviving such merger or to which such properties and assets or stock shall have been sold or otherwise disposed to which the holder of the number of shares of Common Stock deliverable upon conversion of such shares of Series B Preferred Stock would have been entitled upon such reorganization, reclassification, consolidation, merger, exchange or sale or other disposition had they been converted into Common Stock immediately prior to the time of such reorganization, reclassification, consolidation, merger, exchange or sale or other disposition. The provisions of this Section 2 (a)(iii) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, exchanges or sales or other dispositions. (4) All calculations under this Section 2 shall be made to the nearest one-thousandth (1/1000) of a share. (2) No fractional shares. No fractional shares of Common Stock or scrip shall be issued upon conversion of shares of Series B Preferred Stock. If more than one share of Series B Preferred Stock shall be surrendered for conversion at any one time, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of such Series B Preferred Stock so surrendered. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of Series B Preferred Stock, the Company shall pay a cash adjustment in respect of such fractional interest in an amount equal to the current fair market value of a share of Common Stock (as determined in good faith by the Board of Directors of the Company) multiplied by such fractional interest. Fractional interests shall not be entitled to dividends, and the holders of fractional interests shall not be entitled to any rights as shareholders of the Company in respect of such fractional interest. Section 3. Reservation of Shares. The Company shall at all times when the Series B Preferred Stock shall be outstanding reserve and keep available out of its authorized but unissued stock, for the purposes of effecting the conversion of the Series B Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B Preferred Stock. -5- 21 Section 4. Status After Conversion. All shares of Series B Preferred Stock which shall have been surrendered upon optional conversion as herein provided shall no longer be deemed to be outstanding, and all rights with respect to such shares shall forthwith cease and terminate except only the right of the Holder to receive shares of Common Stock in exchange therefor. Section 5. Notices to Holder. Any notice required or permitted to be given by the Company to the Holder shall be deemed given upon the earlier of actual receipt or seventy-two (72) hours after the same has been deposited in the United States mail, by certified or registered mail, return receipt requested, postage prepaid, and addressed to the Holder at the Holder's address appearing on the books of the Company. Section 6 Dividends. The Holder shall be entitled, from the date of issuance, to receive dividends when and as declared by the Board of Directors and out of any funds legally available therefor. In addition, if the Board of Directors shall declare any dividends on the Common Stock, then the Board of Directors shall also, at the same time and as of the same record date as the dividends declared on the Common Stock, declare dividends on the Series B Preferred Stock, payable in the same form as the dividends so declared on the Common Stock, in an amount per share of Series B Preferred Stock equal to the amount of the dividends so declared per share of Common Stock multiplied by the Series B Conversion Ratio as of the time of declaration of the dividend. No dividend shall be declared or payable on Common Stock unless dividends are so declared and payable on the Series B Preferred Stock. Section 7. Liquidation Rights of Preferred Stock. (3) Preference. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the Holder of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its shareholders, whether such assets are capital, surplus or earnings, before any payment or declaration and setting apart for payment of any amount shall be made in respect of the Common Stock or any stock ranking junior to the Series B Preferred Stock upon liquidation, dissolution or winding up, an amount equal to $0.90 per share (which amount shall be adjusted appropriately to reflect any adjustment in the Series B Conversion Ratio), plus previously declared but unpaid dividends to the date of distribution. If upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, the assets to be distributed to the Holder of the Series B Preferred Stock and all other outstanding capital stock of the Company ranking on a parity with the Series B Preferred Stock shall be insufficient to permit the payment to the Holder the full preferential amounts to be distributed to the Holder as aforesaid, then the Holder of Series B Preferred Stock and such other outstanding capital stock of the Company ranking on a parity with the Series B Preferred Stock shall share ratably, in -6- 22 proportion to the full respective preferential amounts to which they are entitled, in the maximum distribution permitted by the assets of the Company. A consolidation or merger of the Company with or into another corporation, or in which the capital stock of the Company is converted solely into capital stock of such other corporation or of a direct or indirect parent corporation of such other corporation (except for cash in lieu of fractional shares), shall not be considered to be a liquidation, dissolution or winding up for this purpose. (4) Remaining Assets. After the payment or distribution of the full preferential amounts aforesaid, all remaining assets of the Company shall be distributed ratably among the holders of the Common Stock. Section 8. Redemption. The Series B Preferred Stock is not redeemable or subject to call by the Company. Section 9. Voting Rights. Except as provided by law or pursuant to Section 14 hereof, the Series B Preferred Stock is not entitled to any voting rights. Section 10. Preemptive Rights. The Series B Preferred Stock is not entitled to any preemptive or subscription rights in respect of any securities of the Company. Section 11. Registration Rights. (5) Certain Definitions. For purposes of this Section 11, the following terms shall have the respective meanings set forth below: "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Registrable Securities" shall mean those shares of Common Stock acquired or acquirable upon conversion of the Series B Preferred Stock in accordance with the terms hereof, but excluding any shares which, as of the date of any demand registration pursuant to Section 11(b) below, may be resold to the public without registration pursuant to Rule 144 or another comparable rule under the Securities Act. "Registration Statement" shall mean any registration statement or comparable document under the Securities Act through which a public sale or disposition of the shares of Common Stock may be registered or exempted from registration. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. -7- 23 (b) Demand Registration. If the Company shall receive at any time after the first anniversary of the date of issuance of the Preferred Stock a written request from the Holder that the Company register Registrable Securities under the Securities Act, then the Company shall effect as soon as practicable the registration under the Securities Act of the Registrable Securities specified in such request (a "Demand Registration"). If the Holder intends to distribute the Registrable Securities covered by its request as part of an underwritten offering, it shall so advise the Company as a part of its request referred to above. The underwriter will be selected by the Company and shall be reasonably acceptable to the Holder. As part of such underwritten offering, the Holder shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company as described above. The Company may at its option include in such underwritten offering securities to be sold for its own account. In such event, notwithstanding any other provision hereof, if the underwriter shall advise the Company in writing that, in its judgment, marketing factors require a limitation of the number of shares to be underwritten, the shares so offered shall be allocated between the Company and the Holder in the following order of priority: (A) first, the maximum number of securities to be sold for the Holder's own account, and (B) the maximum number of Registrable Securities which the Company proposes to register. The Company shall not be obligated to effect more than one (1) Demand Registration pursuant hereto. (c) Incidental Registration. If, following the first anniversary of the date of issuance of any share of Series B Preferred Stock, the Company proposes to file a Registration Statement for an offering of securities for its own account, the Company shall take the following steps with respect to such Registration Statement: (1) Mail a written notice to the Holder at the address shown on the books and records of the Company at least thirty (30) days prior to the proposed filing date of any such Registration Statement; and (2) Include in such Registration Statement any and all Registrable Securities specified in a notice by the Holder which is received by the Company not less than twenty (20) days following the mailing of the notice specified in Section 11(c)(i). Notwithstanding any other provision hereof, if the Company intends to effect such registration by means of an underwriting and the underwriter shall advise the Company in writing that, in its judgment, marketing factors require a limitation of the number of shares to be underwritten, the Company shall so advise the Holder, and the number of Registrable Securities to be included in such registration shall be allocated in the following order of priority: (A) first, -8- 24 the maximum number of securities to be sold for the Company's own account, and (B) the maximum number of Registrable Securities which the Holder has requested be registered. (d) Postponement. The Company may postpone the filing or the effectiveness of a registration requested pursuant hereto if the Company reasonably determines that (i) such registration may have an adverse effect on any plan or proposal by the Company or any of its subsidiaries with respect to any financing, acquisition, recapitalization, reorganization or other material transaction involving the Company or any of its subsidiaries; (ii) the Company is in possession of material non-public information and disclosure of such information is not in the best interests of the Company or any of its subsidiaries; provided, however, that as soon as the conditions permitting such delay no longer exist, the Company shall give notice of that fact to the Holder, and shall proceed with the registration unless the Holder shall have elected, at any time prior to the close of business on the tenth (10th) business day after the Company has so notified the Holder, to withdraw its request for registration, in which case such withdrawn request shall not constitute a request for registration hereunder; or (iii) such registration would contravene any law, rule or regulation applicable to the Company or any of its subsidiaries. (e) Registration Procedures. Whenever the Company shall register any securities as provided herein, the following actions shall be taken: (i) The Holder shall provide the Company with such information about the Holder and its intended manner of distributing the Registrable Securities, and shall otherwise cooperate with the Company and any underwriter(s) as may be needed or helpful in the reasonable opinion of the Company to satisfy any obligation of the Company hereunder. (ii) The Company shall notify the Holder promptly (i) of any request by the SEC for the amending or supplementing of such registration statement or prospectus or for additional information, and (ii) after it shall receive notice thereof, of the date and time when such registration statement and each post-effective amendment thereto has become effective or a supplement to any prospectus forming a part of such registration statement has been filed. (iii) The Company shall furnish to the Holder such number of copies of a summary prospectus or other prospectus (including any amendments and supplements thereto and a preliminary prospectus in conformity with the requirements of the Securities Act) and -9- 25 such other documents as the Holder may reasonably request in order to facilitate the public sale or other disposition of such securities. (iv) The Company shall use its best efforts to register or qualify the securities covered by such Registration Statement under the securities or "blue sky" laws of such jurisdictions as the Holder shall reasonably request (provided, however, that the Company shall not be required (i) to consent to, or take any action which would subject it to, general service of process for all purposes or (ii) to qualify to do business in any jurisdiction where it is not then subject or qualified) and do any and all other acts or things which may be reasonably necessary or advisable to enable the Holder to consummate the public sale or other disposition of such securities in such jurisdictions. (v) At any time when a sale or other public disposition pursuant to a Registration Statement is subject to a prospectus delivery requirement, the Company shall promptly notify the Holder of the occurrence of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. Upon receipt of such a notice, the Holder shall immediately discontinue sales or other dispositions of Registrable Securities pursuant to the Registration Statement. The Holder may resume sales only upon receipt of amended prospectuses or after the Holder has been advised by the Company that the use of the previous prospectus may be legally resumed. (vi) The Company agrees to promptly notify the Holder (i) of the issuance by the SEC of any stop order or order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose, or (ii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction, or the initiation of any proceedings for such purpose. The Company, with the reasonable cooperation of the Holder, shall make reasonable effort to contest any such proceedings and to obtain the withdrawal of any such order at the earliest possible moment. (vii) The Company agrees that it will indemnify the Holder (and any of its officers, directors and persons who control the Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) against all claims, losses, damages, liabilities and expenses (including those relating to settlements approved by the Company) -10- 26 resulting from any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or in any other document incident to that registration) or from any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company shall not be liable in any such case to any such indemnified person to the extent that any such loss, claim, damage, liability or action (including any legal or other expenses incurred) arises out of or is based upon an untrue statement or allegedly untrue statement or omission or alleged omission made in such Registration Statement in reliance upon and in conformity with written information furnished to the Company by or on behalf of such indemnified person or underwriter specifically for use in the preparation thereof. (viii) The Holder will indemnify the Company, any underwriter, and any other person selling under the applicable Registration Statement (and any of the officers and directors and persons who control any of the foregoing within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) against all claims, losses, damages, liabilities and expenses (including those relating to settlements approved by the Holder) resulting from any untrue statement or alleged untrue statement of a material fact contained in any registration statement (or in any other document incident to that registration) or from any omission or alleged omission to state a material fact required to be stated or necessary to make the information therein not misleading, but only to the extent based upon or arising from any information furnished in writing to the Company by the Holder expressly for inclusion in that Registration Statement (or such other document incidental to that registration). (ix) Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in clauses (vii) and (viii) above, such indemnified party will, if a claim in respect thereof is made against an indemnified party, give written notice to the indemnifying party of the commencement of such action; provided, however, that the indemnified party's failure to give such notice shall not release, relieve or in any, way affect the indemnifying party's obligation hereunder to indemnify the indemnified party unless and then only to the extent that the rights of the indemnifying party are prejudiced thereby. In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate in and to assume the defense thereo, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice -11- 27 from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided, however, that if any indemnified party shall have reasonably concluded (based on the written advice of counsel) that there may be one or more legal or equitable defenses available to such indemnified party which are additional to or conflict with those available to the indemnifying party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity agreement provided herein, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party and such indemnifying party shall reimburse such indemnified party and any person controlling such indemnified party for that portion of the fees and expenses of any counsel retained by the indemnified party which is reasonably related to the matters covered by the indemnity agreement provided herein. (x) If the indemnification provided for herein is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such loss, claim, damage, liability or action as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties, relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (xi) The Company shall bear all expenses (other than the Holder's share of any brokerage or underwriting fees, expenses or commissions) incurred in connection with any Registration Statement, including, without limitation, all registration and filing fees (including all expenses incident to filing with the NASD, fees and expenses of complying with securities and blue sky laws, printing expenses and fees and disbursements of the independent certified public accountants and of the Company's counsel). -12- 28 (xii) With a view to making available to the Holder the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit the Holder to sell securities of the Company to the public without registration generally or pursuant to a registration on Form S-3, the Company agrees to (a) make and keep adequate public information available, as those terms are understood and defined in SEC Rule 144, at all times; (b) use all reasonable commercial efforts to qualify, and maintain qualification, for registration on Form S-3; and (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act. Section 12. Effect. The Holder, by acceptance of the issuance of the Preferred Stock, hereby agrees to be bound by and subject to all the terms, conditions and obligations set forth herein. Such terms, conditions and obligations shall be binding upon and inure to the benefit of the Company and the Holder and their respective legal successors, representatives and assigns. Section 13. Reacquired Shares. Any shares of Series B Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, or in any other Certificate of Determination creating a series of Preferred Stock or any similar stock or as otherwise required by law. Section 14. Amendment. The Articles of Incorporation and any Certificates of Determination issued under the authority of the Articles of Incorporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series B Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least a majority of the outstanding shares of Series B Preferred Stock, voting together as a single class. -13- -----END PRIVACY-ENHANCED MESSAGE-----