Exhibit 10.5


 


CONTINUING
SECURITY AGREEMENT:


RIGHTS
TO PAYMENT AND INVENTORY


 


1.             GRANT OF SECURITY INTEREST. For
valuable consideration, the undersigned HemaCare Corporation and Coral Blood
Services, Inc., or any of them (“Debtor”), hereby grants and transfers to
WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) a security interest in all
accounts, deposit accounts, chattel paper (whether electronic or tangible),
instruments, promissory notes, documents, general intangibles, payment
intangibles, software, letter of credit rights, health-care insurance
receivables and other rights to payment (collectively called “Rights to Payment”),
now existing or at any time hereafter, and prior to the termination hereof,
arising (whether they arise from the sale, lease or other disposition of
inventory or from performance of contracts for service, manufacture,
construction, repair or otherwise or from any other source whatsoever),
including all securities, guaranties, warranties, indemnity agreements,
insurance policies, supporting obligations and other agreements pertaining to
the same or the property described therein, and in all goods returned by or
repossessed from Debtor’s customers, together with a security interest in all
inventory, goods held for sale or lease or to be furnished under contracts for
service, goods so leased or furnished, raw materials, component parts and
embedded software, work in process or materials used or consumed in Debtor’s
business and all warehouse receipts, bills of lading and other documents evidencing
goods owned or acquired by Debtor, and all goods covered thereby, now or at any
time hereafter, and prior to the termination hereof, owned or acquired by
Debtor, wherever located, and all products thereof (collectively called “Inventory”),
whether in the possession of Debtor, warehousemen, bailees or any other person,
or in process of delivery, and whether located at Debtor’s places of business
or elsewhere (with all Rights to Payment and Inventory referred to herein
collectively as the “Collateral”), together with whatever is receivable or
received when any of the Collateral or proceeds thereof are sold, leased,
collected, exchanged or otherwise disposed of, whether such disposition is
voluntary or involuntary, including without limitation, all Rights
to Payment, including returned premiums, with respect to any insurance relating
to any of the foregoing, and all Rights to Payment with respect to any claim or
cause of action affecting or relating to any of the foregoing (hereinafter
called “Proceeds”).


 


2.             OBLIGATIONS SECURED. The obligations secured hereby are
the payment and performance of: (a) all present and future Indebtedness of
Debtor to Bank; (b) all obligations of Debtor and rights of Bank under
this Agreement; and (c) all present and future obligations of Debtor to
Bank of other kinds. The word “Indebtedness” is used herein in its most
comprehensive sense and includes any and all advances, debts, obligations and
liabilities of Debtor, or any of them, heretofore, now or hereafter made, incurred
or created, whether voluntary or involuntary and however arising, whether due
or not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, including under any swap, derivative, foreign exchange, hedge,
deposit, treasury management or other similar transaction or arrangement, and
whether Debtor may be liable individually or jointly with others, or whether
recovery upon such Indebtedness may be or hereafter becomes unenforceable.


 


3.             TERMINATION. This Agreement will
terminate upon the performance of all obligations of
Debtor to Bank, including without limitation, the payment of all Indebtedness
of Debtor to Bank, and the termination of all commitments of Bank to extend
credit to Debtor, existing at the time Bank receives written notice from Debtor
of the termination of this Agreement.


 


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4.             OBLIGATIONS OF BANK. Bank has no
obligation to make any loans hereunder. 
Any money received by Bank in respect of the Collateral may be deposited,
at Bank’s option, into a non-interest bearing account over which Debtor shall
have no control, and the same shall, for all purposes, be deemed Collateral
hereunder.


 


5.             REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants to Bank that: (a) Debtor’s legal name is exactly as set forth on
the first page of this Agreement, and all of Debtor’s organizational
documents or agreements delivered to Bank are complete and accurate in every
respect; (b) Debtor is the owner and has possession or control of the
Collateral and Proceeds; (c) Debtor has the exclusive right to grant a
security interest in the Collateral and Proceeds; (d) all Collateral and
Proceeds are genuine, free from liens, adverse claims, setoffs, default,
prepayment, defenses and conditions precedent of any kind or character, except
the lien created hereby or as otherwise agreed to by Bank, or as heretofore
disclosed by Debtor to Bank, in writing; (e) all statements contained
herein and, where applicable, in the Collateral are true and complete in all
material respects; (f) no financing statement covering any of the
Collateral or Proceeds, and naming any secured party other than Bank, is on
file in any public office; (g) all persons appearing to be obligated on
Rights to Payment and Proceeds have authority and capacity to contract and are
bound as they appear to be; (h) all property subject to chattel paper has
been properly registered and filed in compliance with law and to perfect the
interest of Debtor in such property; and (i) all Rights to Payment and
Proceeds comply with all applicable laws concerning form, content and manner of
preparation and execution, including where applicable Federal Reserve
Regulation Z and any State consumer credit laws.


 


6.             COVENANTS OF DEBTOR.


 


(a)           Debtor agrees in general: (i) to pay Indebtedness
secured hereby when due; (ii) to indemnify Bank against all losses,
claims, demands, liabilities and expenses of every kind caused by property
subject hereto; (iii) to permit Bank to exercise its powers; (iv) to
execute and deliver such documents as Bank deems necessary to create, perfect
and continue the security interests contemplated hereby; (v) not to change
its name, and as applicable, its chief executive office, its principal
residence or the jurisdiction in which it is organized and/or registered
without giving Bank prior written notice thereof; (vi) not to change the
places where Debtor keeps any Collateral or Debtor’s records concerning the
Collateral and Proceeds without giving Bank prior written notice of the address
to which Debtor is moving same; and (vii) to cooperate with Bank in
perfecting all security interests granted herein and in obtaining such
agreements from third parties as Bank deems necessary, proper or convenient in
connection with the preservation, perfection or enforcement of any of its
rights hereunder.


 


(b)           Debtor agrees with regard to the Collateral and Proceeds,
unless Bank agrees otherwise in writing: (i) that Bank is authorized to
file financing statements in the name of Debtor to perfect Bank’s security
interest in Collateral and Proceeds; (ii) to insure Inventory and, where
applicable, Rights to Payment with Bank named as loss payee, in form, substance
and amounts, under agreements, against risks and liabilities, and with
insurance companies satisfactory to Bank; (iii) not to use any Inventory
for any unlawful purpose or in any way that would void any insurance required
to be carried in connection therewith; (iv) not to remove Inventory from
Debtor’s premises except in the ordinary course of Debtor’s business; (v) not
to permit any lien on the Collateral or Proceeds, including without limitation,
liens arising from the storage of Inventory, except in favor of Bank; (vi) not
to sell, hypothecate or dispose of, nor permit the transfer by operation of law
of, any of the Collateral or Proceeds or any interest therein, except sales of
Inventory to buyers in the ordinary course of Debtor’s business; (vii) to
furnish reports to Bank of all acquisitions, returns, sales and other
dispositions of Inventory in such form and 


 


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detail and at such times as Bank may require; (viii) to permit Bank
to inspect the Collateral at any time; (ix) to keep, in accordance with
generally accepted accounting principles, complete and accurate records
regarding all Collateral and Proceeds, and to permit Bank to inspect the same
and make copies thereof at any reasonable time; (x) if requested by Bank,
to receive and use reasonable diligence to collect Rights to Payment and
Proceeds, in trust and as the property of Bank, and to immediately endorse as
appropriate and deliver such Rights to Payment and Proceeds to Bank daily in
the exact form in which they are received together with a collection report in
form satisfactory to Bank; (xi) not to commingle Rights to Payment, Proceeds or
collections thereunder with other property; (xii) to give only normal
allowances and credits and to advise Bank thereof immediately in writing if
they affect any Rights to Payment or Proceeds in any material respect; (xiii)
on demand, to deliver to Bank returned property resulting from, or payment
equal to, such allowances or credits on any Rights to Payment or Proceeds or to
execute such documents and do such other things as Bank may reasonably request
for the purpose of perfecting, preserving and enforcing its security interest
in such returned property; (xiv) from time to time, when requested by Bank, to
prepare and deliver a schedule of all Collateral and Proceeds subject to this
Agreement and to assign in writing and deliver to Bank all accounts, contracts,
leases and other chattel paper, instruments, documents and other evidences
thereof; (xv) in the event Bank elects to receive payments of Rights to Payment
or Proceeds hereunder, to pay all expenses incurred by Bank in connection
therewith, including expenses of accounting, correspondence, collection
efforts, reporting to account or contract debtors, filing, recording, record
keeping and expenses incidental thereto; and (xvi) to provide any service and
do any other acts which may be necessary to maintain, preserve and protect all
Collateral and, as appropriate and applicable, to keep all Collateral in good
and saleable condition, to deal with the Collateral in accordance with the
standards and practices adhered to generally by users and manufacturers of like
property, and to keep all Collateral and Proceeds free and clear of all
defenses, rights of offset and counterclaims.


 


7.             POWERS
OF BANK. Debtor appoints Bank its true attorney in fact to perform any of the following powers,
which are coupled with an interest, are irrevocable until termination of this
Agreement and may be exercised from time to time by Bank’s officers and
employees, or any of them, whether or not Debtor is in default: (a) to
perform any obligation of Debtor hereunder in Debtor’s name or otherwise; (b) to
give notice to account debtors or others of Bank’s rights in the Collateral and
Proceeds, to enforce or forebear from enforcing the same and make extension or
modification agreements with respect thereto; (c) to release persons
liable on Collateral or Proceeds and to give receipts and acquittances and
compromise disputes in connection therewith; (d) to release or substitute
security; (e) to resort to security in any order; (f) to prepare,
execute, file, record or deliver notes, assignments, schedules, designation
statements, financing statements, continuation statements, termination
statements, statements of assignment, applications for registration or like
papers to perfect, preserve or release Bank’s interest in the Collateral and
Proceeds; (g) to receive, open and read mail addressed to Debtor; (h) to
take cash, instruments for the payment of money and other property to which
Bank is entitled; (i) to verify facts concerning the Collateral and
Proceeds by inquiry of obligors thereon, or otherwise, in its own name or a
fictitious name; (j) to endorse, collect, deliver and receive payment
under instruments for the payment of money constituting or relating to
Proceeds; (k) to prepare, adjust, execute, deliver and receive payment
under insurance claims, and to collect and receive payment of and endorse any
instrument in payment of loss or returned premiums or any other insurance
refund or return, and to apply such amounts received by Bank, at Bank’s sole
option, toward repayment of the Indebtedness; (I) to exercise all rights,
powers and remedies which Debtor would have, but for this Agreement, with
respect to all Collateral and Proceeds subject hereto; (m) to make
withdrawals from and to close deposit accounts or other accounts with any
financial institution, wherever located, into which Proceeds may have been 


 


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deposited, and to apply funds so withdrawn to payment of the Indebtedness;
(n) to preserve or release the interest evidenced by chattel paper to
which Bank is entitled hereunder and to endorse and deliver any evidence of
title incidental thereto; and (o) to do all acts and things and execute
all documents in the name of Debtor or otherwise, deemed by Bank as necessary,
proper and convenient in connection with the preservation and perfection of its
rights hereunder or enforcement of its rights hereunder after an Event of
Default. Notwithstanding anything to the contrary provided in this Section 7,
the Bank shall only exercise its rights and remedies under this Section 7(a),
(b), (c), (d), (e), (g), (h), (j), (k), (I) and (m) when Debtor is in
default.


 


8.             PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND
ASSESSMENTS.  Debtor agrees to pay, prior
to delinquency, all insurance premiums, taxes, charges, liens and assessments
against the Collateral and Proceeds, and upon the failure of Debtor to do so,
Bank at its option may pay any of them and shall be the sole judge of the
legality or validity thereof and the amount necessary to discharge the same.
Any such payments made by Bank shall be obligations of Debtor to Bank, due and
payable immediately upon demand, together with interest at a rate determined in
accordance with the provisions of this Agreement, and shall be secured by the
Collateral and Proceeds, subject to all terms and conditions of this Agreement.


 


9.             EVENTS OF DEFAULT. The occurrence of any of the
following shall constitute an “Event of Default” under this Agreement: (a) any
default in the payment or performance of any obligation, or any defined event
of default, under (i) any contract or instrument evidencing any
Indebtedness, or (ii) any other agreement between Debtor and Bank,
including without limitation any loan agreement, relating to or executed in
connection with any Indebtedness; (b) any representation or warranty made
by Debtor herein shall prove to be incorrect, false or misleading in any
material respect when made; (c) Debtor shall fail to observe or perform
any obligation or agreement contained herein; (d) any impairment in the
rights of Bank in any Collateral or Proceeds, or any attachment or like levy on
any property of Debtor; and (e) Bank, in good faith, believes any or all
of the Collateral and/or Proceeds to be in danger of misuse, dissipation,
commingling, loss, theft, damage or destruction, or otherwise in jeopardy or
unsatisfactory in character or value.


 


10.           REMEDIES. Upon the occurrence of
any Event of Default, Bank shall have the right to declare immediately due and
payable all or any Indebtedness secured hereby and to terminate any commitments
to make loans or otherwise extend credit to Debtor. Bank shall have all other
rights, powers, privileges and remedies granted to a secured party upon default
under the California Uniform Commercial Code or otherwise provided by law,
including without limitation, the right (a) to contact all persons
obligated to Debtor on any Collateral or Proceeds and to instruct such persons
to deliver all Collateral and/or Proceeds directly to Bank, and (b) to
sell, lease, license or otherwise dispose of any or all Collateral. All rights,
powers, privileges and remedies of Bank shall be cumulative. No delay, failure
or discontinuance of Bank in exercising any right, power, privilege or remedy
hereunder shall affect or operate as a waiver of such right, power, privilege
or remedy; nor shall any single or partial exercise of any such right, power,
privilege or remedy preclude, waive or otherwise affect any other or further
exercise thereof or the exercise of any other right, power, privilege or
remedy. Any waiver, permit, consent or approval of any kind by Bank of any
default hereunder, or any such waiver of any provisions or conditions hereof,
must be in writing and shall be effective only to the extent set forth in
writing. It is agreed that public or private sales or other dispositions, for
cash or on credit, to a wholesaler or retailer or
investor, or user of property of the types subject to this Agreement, or public
auctions, are all commercially reasonable since differences in the prices
generally realized in the different kinds of dispositions are ordinarily offset
by the differences in the costs and credit risks of such dispositions. While an
Event of Default exists: (a) Debtor will deliver to 


 


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Bank
from time to time, as requested by Bank, current lists of all Collateral and
Proceeds; (b) Debtor will not dispose of any Collateral or Proceeds except
on terms approved by Bank; (c) at Bank’s request, Debtor will assemble and
deliver all Collateral and Proceeds, and books and records pertaining thereto,
to Bank at a reasonably convenient place designated by Bank; and (d) Bank
may, without notice to Debtor, enter onto Debtor’s premises and take possession
of the Collateral. With respect to any sale by Bank of any Collateral subject
to this Agreement, Debtor hereby expressly grants to Bank the right to sell
such Collateral using any or all of Debtor’s trademarks, trade names, trade
name rights and/or proprietary labels or marks. Debtor further agrees that Bank
shall have no obligation to process or prepare any Collateral for sale or other
disposition.


 


11.           DISPOSITION OF COLLATERAL AND
PROCEEDS; TRANSFER OF INDEBTEDNESS. In disposing of Collateral hereunder, Bank
may disclaim all warranties of title, possession, quiet enjoyment and the like.
Any proceeds of any disposition of any Collateral or Proceeds, or any part
thereof, may be applied by Bank to the payment of expenses incurred by Bank in
connection with the foregoing, including reasonable attorneys’ fees, and the
balance of such proceeds may be applied by Bank toward the payment of the
Indebtedness in such order of application as Bank may from time to time elect.
Upon the transfer of all or any part of the Indebtedness, Bank may transfer all
or any part of the Collateral or Proceeds and shall be fully discharged
thereafter from all liability and responsibility with respect to any of the
foregoing so transferred, and the transferee shall be vested with all rights
and powers of Bank hereunder with respect to any of the foregoing so
transferred; but with respect to any Collateral or Proceeds not so transferred,
Bank shall retain all rights, powers, privileges and remedies herein given.


 


12.           STATUTE OF
LIMITATIONS. Until all Indebtedness shall have been paid in full and all
commitments by Bank to extend credit to Debtor have been terminated, the power
of sale or other disposition and all other rights, powers, privileges and
remedies granted to Bank hereunder shall continue to exist and may be exercised
by Bank at any time and from time to time irrespective of the fact that the
Indebtedness or any part thereof may have become barred by any statute of
limitations, or that the personal liability of Debtor may have ceased, unless
such liability shall have ceased due to the payment in full of all Indebtedness
secured hereunder.


 


13.           MISCELLANEOUS.  When there is more than one
Debtor named herein: (a) the word “Debtor” shall mean all or any one or more
of them as the context requires; (b) the obligations of each Debtor
hereunder are joint and several; and (c) until all Indebtedness shall have
been paid in full, no Debtor shall have any right of subrogation or
contribution, and each Debtor hereby waives any benefit of or right to
participate in any of the Collateral or Proceeds or any other security now or
hereafter held by Bank. Debtor hereby waives any right to require Bank to (i) proceed
against Debtor or any other person, (ii) marshal assets or proceed against
or exhaust any security from Debtor or any other person, (iii) perform any
obligation of Debtor with respect to any Collateral or Proceeds, and (d) make
any presentment or demand, or give any notice of nonpayment or nonperformance,
protest, notice of protest or notice of dishonor hereunder or in connection
with any Collateral or Proceeds. Debtor further waives any right to direct the application of
payments or security for any Indebtedness of Debtor or indebtedness of
customers of Debtor.


 


14.           NOTICES.  All notices, requests and
demands required under this Agreement must be in writing, addressed to Bank at the
address specified in any other loan documents entered into between Debtor and
Bank and to Debtor at the address of its chief executive office (or principal
residence, if applicable) specified below or to such other address as any party
may designate by written notice to each other party, and shall be deemed to
have been given or made as follows: (a) if personally delivered, upon
delivery; (b) if sent by mail, upon the earlier of the date of receipt or
three (3) days after deposit in the U.S. mail, first class and postage
prepaid; and (c) if sent by telecopy, upon receipt.


 


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15.           COSTS, EXPENSES AND ATTORNEYS’ FEES. Debtor shall pay to
Bank immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys’ fees (to include
outside counsel fees and all allocated costs of Bank’s in-house counsel),
expended or incurred by Bank in connection with (a) the perfection and
preservation of the Collateral or Bank’s interest therein, and (b) the
realization, enforcement and exercise of any right, power, privilege or remedy
conferred by this Agreement, whether incurred at the trial or appellate level,
in an arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding, contested matter or motion brought by
Bank or any other person) relating to Debtor or in any way affecting any of the
Collateral or Bank’s ability to exercise any of its rights or remedies with
respect thereto. All of the foregoing shall be paid by Debtor with interest
from the date of demand until paid in full at a rate per annum equal to the
greater of ten percent (10%) or Bank’s Prime Rate in effect from time to time.


 


16.           SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the parties, and may be
amended or modified only in writing signed by Bank and Debtor.


 


17.           SEVERABILITY OF PROVISIONS. If any
provision of this Agreement shall be held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or any remaining provisions of this Agreement.


 


18.           GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.


 


Debtor
warrants that Debtor is an organization registered under the laws of
California.


 


Debtor
warrants that its chief executive office (or principal residence, if
applicable) is located at the following address: 15350 Sherman Way, Suite #350,
Van Nuys, CA 91406.


 


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Debtor
warrants that the Collateral (except goods in transit) is located or domiciled
at the following additional addresses: 2250 Alcazar Street, #136, Los Angeles,
CA 90033; 300 Professional Drive, Scarborough, ME 04074; 152 U.S. Route 1,
Scarborough, ME 04074; 992 Union Street, Bangor, ME 04401; 120 Bloomingdale
Road, Suite #4401, White Plains, NY 10605 and 3347 S. Hoover Street, Suite C-10,
Los Angeles, CA 90007.


 


IN WITNESS WHEREOF, this
Agreement has been duly executed as of December 4, 2009.


 


	
  HEMACARE CORPORATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ John Doumitt

  	
   

  
	
   

  	
  John Doumitt

  	
   

  
	
   

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Robert S. Chilton

  	
   

  
	
   

  	
  Robert S. Chilton

  	
   

  
	
   

  	
  Executive Vice President and Chief Financial
  Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CORAL BLOOD SERVICES, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ John Doumitt

  	
   

  
	
   

  	
  John Doumitt

  	
   

  
	
   

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Robert S. Chilton

  	
   

  
	
   

  	
  Robert S. Chilton
  Chief Financial Officer

  	
   

  



 


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