UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 0-19890
LIFECELL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 76-0172936
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
LifeCell Corporation
3606 Research Forest Drive
The Woodlands, Texas 77381
(Address of principal executive office) (zip code)
(281) 367-5368
(Registrant's telephone number, including area code)
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 November 7, 1996, there were outstanding 4,777,640 shares of Common Stock,
par value $.001, of the registrant.
<PAGE>
LIFECELL CORPORATION
Quarter Ended September 30, 1996
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements .............................. 3
Balance Sheets, September 30, 1996
(Unaudited) and December 31, 1995 ................. 4
Statements of Operations, Three
Months and Nine Months Ended
September 30, 1996 and 1995 (Unaudited) ........... 5
Statements of Cash Flows, Nine
Months Ended September 30, 1996 and
1995 (Unaudited) .................................. 6
Notes to Financial Statements ..................... 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations ..................................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ................................. 11
Item 2. Changes in Securities ............................. 11
Item 3. Defaults upon Senior Securities ................... 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information ................................. 13
Item 6. Exhibits and Reports on Form 8-K .................. 16
SIGNATURES ................................................ 17
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
The following audited financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made herein are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with the Company's Annual Report on Form 10-K, as amended, for
the year ended December 31, 1995.
The information presented in the accompanying financial statements is
unaudited, but in the opinion of management, reflects all adjustments (which
include only normal recurring adjustments) necessary to present fairly such
information.
3
<PAGE>
LIFECELL CORPORATION
BALANCE SHEETS
September 30, December 31,
1996 1995
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................... $ 1,139,564 $ 3,015,332
Accounts and other receivables, net .......... 407,714 251,509
Inventories .................................. 767,152 351,502
Prepayments and other ........................ 72,690 51,838
------------ ------------
Total current assets ....................... 2,392,120 3,670,181
FURNITURE AND EQUIPMENT, net ................... 453,463 415,563
INTANGIBLE ASSETS, net ......................... 321,859 290,295
DEFERRED OFFERING COSTS ..................... 315,035 --
------------ ------------
Total assets ............................... $ 3,482,477 $ 4,376,039
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................. $ 747,628 $ 384,780
Accrued liabilities .......................... 385,999 218,351
Notes payable ................................ 384,655 --
Deferred revenues ............................ 169,036 179,002
------------ ------------
Total current liabilities .................. 1,687,318 782,133
Deferred credit .............................. 1,500,000 1,500,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A preferred stock, $.001 par
value, 300,000 shares authorized, 260,000 and
264,500 issued and outstanding respectively $ 5,601,553 $ 5,496,793
Common stock, $.001 par value,
25,000,000 shares authorized,
and 4,776,578 and 4,403,658 shares
issued and outstanding, respectively ....... 4,777 4,404
Warrants outstanding to purchase 236,250
and 574,066 shares of Common Stock,
respectively ............................... 122,760 226,560
Additional paid-in capital ................... 22,415,840 21,160,808
Unearned portion of restricted stock
compensation and warrants .................. -- (19,906)
Accumulated deficit .......................... (27,849,771) (24,774,753)
------------ ------------
Total stockholders' equity ................. 295,159 2,093,906
------------ ------------
Total liabilities and stockholders' equity . $ 3,482,477 $ 4,376,039
============ ============
The accompanying notes are an integral part of these financial statements
4
<PAGE>
LIFECELL CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Product sales ...................... $ 560,672 $ 251,392 $ 1,410,373 $ 479,343
Corporate alliance ................. 121,213 202,500 409,598 624,539
Research and development contracts
and grants ....................... 134,241 60,145 249,787 239,116
----------- ----------- ----------- -----------
Total revenues ................... 816,126 514,037 2,069,758 1,342,998
COSTS AND EXPENSES:
Costs of goods sold ................ $ 355,647 $ 258,052 $ 899,805 $ 542,852
Contract research and development .. 255,454 262,645 659,385 863,655
Proprietary research and development 209,014 232,195 550,354 830,155
General and administrative ......... 423,288 303,612 1,196,104 1,111,052
Selling and marketing .............. 597,214 393,395 1,699,739 1,075,905
----------- ----------- ----------- -----------
Total costs and expenses ........... $ 1,840,617 $ 1,449,898 $ 5,005,387 $ 4,423,619
LOSS FROM OPERATIONS ............... (1,024,491) (935,861) (2,935,629) (3,080,621)
----------- ----------- ----------- -----------
Interest income and other .......... $ 11,988 $ 68,679 $ 55,371 $ 239,162
----------- ----------- ----------- -----------
NET LOSS ........................... $(1,012,503) $ (867,182) $(2,880,258) $(2,841,459)
LOSS PER SHARE BEFORE EFFECT OF
PREFERRED DIVIDENDS AND ACCRETION
OF STOCK ........................... $ (0.22) $ (0.20) $ (0.65) $ (0.66)
EFFECT OF PREFERRED DIVIDENDS,
ACCRETION OF PREFERRED STOCK
AND INDUCEMENTS OF WARRANT
EXERCISE ........................... (0.11) (0.05) (0.18) (0.15)
----------- ----------- ----------- -----------
LOSS PER SHARE ..................... $ (0.33) $ (0.25) $ (0.82) $ (0.81)
----------- ----------- ----------- -----------
SHARES USED IN COMPUTING LOSS PER
SHARE .............................. 4,548,547 4,298,538 4,452,307 4,297,911
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
LIFECELL CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ....................................... $(2,880,258) $(2,841,459)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization .............. 124,332 100,894
Earned portion of restricted stock
compensation and warrants ................ 19,906 186,905
Change in assets and liabilities
(Increase) decrease in accounts and
other receivables ..................... (156,205) (219,891)
(Increase) decrease in inventories ....... (415,651) (308,361)
(Increase) decrease in prepayments and
other ................................. (340,886) (18,190)
Increase (decrease) in accounts payable
and accrued liabilities ............... 530,497 50,372
Increase (decrease) in deferred revenues
and credit ............................ (9,966) (78,898)
----------- -----------
Total Adjustments .............................. (247,973) (287,169)
----------- -----------
Net cash provided by (used in)
operating activities ....................... (3,128,231) (3,128,628)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................... (152,205) (179,590)
Intangible assets .............................. (41,592) (9,520)
Short-term investments ......................... -- 5,154,824
----------- -----------
Net cash used in investing activities .......... (193,797) 4,965,714
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock ................ 1,061,605 --
Proceeds from issuance of notes payable ........ 432,316 --
Payments of notes payable ...................... (47,661) --
----------- -----------
Net cash provided by (used in)
financing activities ....................... 1,446,260 --
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .................................... (1,875,768) 1,837,086
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD ...................................... 3,015,332 1,877,295
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD ......................................... $ 1,139,564 $ 3,714,381
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest ....... $ 6,719 $ --
During 1996 and 1995, the Company recorded
a dividend payable of $317,400 and
$238,050, respectively
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
LIFECELL CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
Note 1. - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim financial statements reflect all adjustments
which, in the opinion of management, are necessary for a fair presentation of
the results for the interim periods presented. These financial statements should
be read in conjunction with the Company's Annual Report on Form 10-K, as
amended, for the year ended December 31, 1995. The interim results are not
necessarily indicative of the results for a full year.
OPERATIONS
The Company has a history of operating losses and anticipates continuing
operating losses through 1996. The Company previously anticipated that its
existing financial resources would be sufficient to satisfy its increased
marketing and manufacturing efforts into the third quarter of 1996. The Company
previously indicated that should additional financing not be obtained by the
beginning of the third quarter of 1996, it would reduce its current operations
and delay certain expenditures in order to conserve its resources and be able to
continue its operations through the end of 1996. In August 1996, the Company
secured a 60-day, $250,000 working capital loan from a bank and raised $770,000
from the exercise of warrants. Based on these events, the Company has not
reduced current operations or delayed expenditures. The Company's existing
capital resources, including proceeds from the loan and exercise of warrants,
however, will not be sufficient to fund operations at current levels beyond
February 1997. Accordingly, although the unaudited financial statements for the
nine-months ended September 30, 1996 have not been audited or reviewed by the
Company's independent public accountants, such accountants have informed the
Company that if the conditions described above continue to exist at the time of
their audit of the financial statements for the year ending December 31, 1996,
their report on those statements will include an explanatory paragraph regarding
substantial doubt about the Company's ability to continue as a going concern.
On November 13, 1996, LifeCell announced that it has made a private offering of
convertible preferred stock and common stock purchase warrants pursuant to which
it expects to raise approximately $12.4 million. The Company made the offering
through a private placement agent to institutional and other investors. The
Company indicated that it expects to close the offering during the week
commencing November 18, 1996. There can be no assurance, however, that the
Company will be able to obtain financing on favorable terms in the foreseeable
future. The unavailability of such financing would delay or prevent the
development and marketing of the Company's products or cause the Company to
cease operations.
CASH, CASH EQUIVALENTS AND SHORT TERM INVESTMENTS
For purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents. The Company invests any excess cash in interest bearing
money market accounts and A1/P1 commercial paper with maturities of one year or
less.
CERTAIN RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 financial statements
contained herein to conform with the classifications presented in 1996.
Note 2. - LOSS PER SHARE
Loss per share has been computed by dividing net loss, which has been increased
for periodic accretion, imputed and stated dividends and the amount of the
incentive to induce the exercise of the warrants, by the weighted average number
of shares of Common Stock outstanding during the periods. In all applicable
years, all Common Stock equivalents, including the Series A Preferred Stock,
were antidilutive and, accordingly, were not included in the computation.
7
<PAGE>
LIFECELL CORPORATION
Note 3. - SERIES A PREFERRED STOCK
On November 10, 1994, the Company raised gross proceeds of approximately $5.3
million in a private offering of units consisting of convertible preferred stock
and warrants. The Company sold 264,500 units at a price of $20 per unit. Each
unit included one share of Series A Convertible Preferred Stock (Series A
Preferred Stock) and one warrant to purchase one share of Common Stock. Each
share of Series A Preferred Stock is convertible into 6.69 shares of Common
Stock. The Series A Preferred Stock is convertible at any time at the option of
the holder. The preferred stock automatically converts to Common Stock on
November 9, 1997 and may be redeemed sooner by the Company if, after November 9,
1995, the closing bid price of LifeCell's Common Stock averages $5.17 per share
for 20 consecutive days. The Series A Preferred Stock bears dividends at annual
rates of $1.20, $1.60, and $2.00 per share for each of the first, second and
third years, respectively, after the date of original issuance. Dividends may be
paid in cash, Common Stock, or any combination of cash and Common Stock at the
Company's discretion. The Series A Preferred Stock is senior to the Company's
Common Stock in liquidation. The Series A Preferred Stock has no ordinary voting
rights. While the preferred shares are outstanding or any dividends are owed
thereon, the Company may not declare or pay cash dividends on its Common Stock.
The units were not registered under the Securities Act of 1933 and may not be
offered or sold absent registration under the Act or an applicable exemption
from registration requirements. Each unit also included a two-year warrant
exercisable for one share of Common Stock at a purchase price of $3.54 per
share. The remaining unexercised warrants were recorded at $ 6,500 in the
accompanying financial statements. As of September 30, 1996, warrants to
purchase an aggregate of 16,250 shares of Common Stock were outstanding. The
private placement agent was issued warrants to purchase 90,816 shares of Common
Stock at $6.00 per share. The agent's warrants were exercised in full prior to
September 30, 1996.
The carrying amount of the Series A Preferred Stock is increased for accrued and
unpaid stated dividends plus periodic accretion, using the effective interest
method, such that the carrying amount equals the redemption amount on the
earliest possible redemption date, November 9, 1997. Series A Preferred Stock is
also increased by imputed dividends resulting from the increasing dividend
rates.
On November 9, 1995, the Company paid dividends on the Series A Preferred Stock
of an aggregate of $317,400 by issuing 103,816 shares of Common Stock.
In August 1996, to secure interim financing, LifeCell offered holders of certain
warrants issued in connection with the Company's private placement of Series A
Preferred Stock in 1994 the opportunity to exercise such warrants at a reduced
price in exchange for the exercise of such warrants prior to August 30, 1996.
LifeCell received $770,000 from such warrant exercises. In September 1996, in
order to secure additional interim financing, LifeCell offered the placement
agent engaged in 1994 for the Company's Series A Preferred Stock offering the
opportunity to exercise warrants issued to this placement agent in connection
with the Series A Preferred Stock offering at a reduced price in exchange for
the exercise of such warrants prior to September 30, 1996. LifeCell received
approximately $281,000 from such warrant exercises.
Note 4. - Other Significant Events
On November 13, 1996, LifeCell announced that it has made a private offering of
convertible preferred stock and common stock purchase warrants pursuant to which
it expects to raise approximately $12.4 million. The Company made the offering
through a private placement agent to institutional and other investors. The
Company indicated that it expects to close the offering during the week
commencing November 18, 1996.
The Company intends to use the proceeds from the offering primarily to
accelerate and expand the marketing activities for the Company's AlloDerm tissue
grafts.
In the private placement, the Company offered units consisting of shares of
Series B Preferred Stock that are convertible into Common Stock at a conversion
price of $3.10 per share and warrants for Common Stock that are exercisable at
$4.13 per share. The Series B Preferred Stock will bear dividends for five
years. Holders of Series B Preferred Stock will have voting rights on all
matters on an as converted to Common Stock basis, and will have the right to
elect three members of the Company's Board of Directors. The Company will file a
shelf registration statement registering the resale of the Common Stock
underlying the Series B Preferred Stock and warrants.
8
<PAGE>
LIFECELL CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Revenues in the third quarter were generated by product sales, a corporate
alliance and research and development contracts and grants.
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995. Total revenues for the third
quarter of 1996 were $816,126, an increase of $302,089 over the same period in
1995. As a result of increased marketing activities, product sales for the
quarter increased $309,280 over the same period in 1995. The Company reported
$121,213 in corporate alliance revenue in the third quarter of 1996, from a
license and development agreement with Medtronic, Inc. (the "Medtronic
Agreement") for the co-development of tissue heart valves, compared with
$202,500 in the same quarter of 1995. The decrease in corporate alliance revenue
was directly related to the maturity of the project and the planned decrease in
activities performed by LifeCell in the third quarter of 1996. The Company had
research and development grant income of $134,241 in the third quarter of 1996
compared with $60,145 in the same quarter of 1995. This increase is due to an
additional research agreement entered into by the Company in 1996. Interest
income decreased by $56,691 for the third quarter of 1996 resulting from a
decrease in average funds available for investment and lower interest rates in
1996 as compared to 1995.
Total costs and expenses for the third quarter of 1996 were $1,840,617, an
increase of $390,719 from the same period in 1995, primarily due to increased
activities in selling and marketing. Costs of goods sold for the third quarter
of 1996 was $355,647 compared to $258,052 for the same period in 1995. This
increase was due to increased sales in 1996 as compared to the same period in
1995 and the shift from the development of AlloDerm to manufacturing, consistent
with taking a product to market. Costs of goods sold as a percentage of sales
decreased as a result of volume efficiencies. Cost of contract research and
development is equal to the total of revenue recorded for research and
development contracts and grants and the corporate alliance, as they are cost
reimbursement contracts. Proprietary research and development expense decreased
to $209,014 in the third quarter of 1996 from $232,195 in the third quarter of
1995 due to the shift in the Company's focus from development to manufacturing.
General and administrative expenses remained relatively consistent with the same
period of the prior year except for a one-time payment accrued in the 1996
period of a $100,000 termination fee to the Company's placement agent for the
Series A Preferred Stock sold in November 1994. Selling and marketing expenses
increased to $597,214 in the third quarter of 1996 from $393,395 in the third
quarter of 1995 primarily due to the addition of plastic surgery sales personnel
and an increase in promotional activities related to AlloDerm marketing
activities and the commercial introduction of the AlloDerm graft in the
periodontal and plastic surgery markets.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995. Total revenues for the nine-month
period ended September 30, 1996 were $2,069,758, an increase of $726,760 over
the same period in 1995. As a result of increased marketing activities, product
sales for the nine-month period increased $931,030 over the same period in 1995.
The Company reported $409,598 in corporate alliance revenue for the nine-month
period ended September 30, 1996 compared with $624,539 in the same period of
1995. The decrease in corporate alliance revenue was directly related to certain
non-recurring revenue received by LifeCell in the first quarter of 1995 under
the Medtronic Agreement and the planned decrease in activities performed by
LifeCell related to the maturity of the project. The Company had research and
development contracts and grants income of $249,787 for the nine-month period
ended September 30, 1996 compared with $239,116 in the same period of 1995. This
increase is due to an additional research agreement entered into by the Company
in 1996. Interest income decreased by $183,791 for the nine-month period ended
September 30, 1996 resulting from a decrease in average funds available for
investment and lower interest rates in 1996 as compared to 1995.
Total costs and expenses for the nine-month period ended September 30, 1996 were
$5,005,387, an increase of $581,768 compared to the same period of the prior
year due to an increase in cost of goods sold and increased activities in
selling and marketing. Cost of goods sold for the nine-month period ended
September 30, 1996 were $899,805 compared to $542,852 in the same period of
1995. This increase was due to an increase in product sales and the shift from
the development of AlloDerm to processing, consistent with taking a product to
market. Cost of contract research and development is equal to the total of
revenue recorded for research and development contracts and grants and the
corporate alliance, as they are cost reimbursement contracts. Proprietary
research and development expense decreased to $550,354 in the first nine-months
of 1996 from $830,155 in the same period of 1995 primarily due to the shift in
the Company's focus from the development to processing of AlloDerm. General and
administrative expense remained relatively consistent with the prior year except
for a one-time payment of a $100,000 termination fee to the Company's placement
agent for the Series A Preferred Stock offering. Selling and marketing expense
increased to $1,699,739 in the first nine months of 1996 from $1,075,905 in the
same period of 1995 primarily due to the addition of sales personnel and
promotional activities related to AlloDerm marketing activities and the
commercial introduction of the AlloDerm graft in the periodontal and plastic
surgery markets.
9
<PAGE>
LIFECELL CORPORATION
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, LifeCell's principal sources of funds have been equity
offerings, product sales, a corporate alliance, government contracts and grants
and interest on investments.
LifeCell funds research and development activities with external funds from its
corporate alliance and government grants. In April 1996, LifeCell was awarded a
one year $613,000 contract from the U.S. Navy. LifeCell's strategy is to use
existing funds and funds raised from financings to fund a marketing and
distribution effort for AlloDerm.
In 1994, LifeCell entered into agreements with Medtronic pursuant to which
Medtronic paid LifeCell a license fee of $1.5 million and agreed, subject to
certain rights to terminate at Medtronic's discretion, to fund the development
of LifeCell's proprietary tissue processing technology in the field of heart
valves. To date, LifeCell has received approximately $1.6 million in development
funding for this program.
In January 1996, LifeCell borrowed $120,000 from a bank for working capital
purposes. The loan is secured by cash, requires monthly payments of $2,000, plus
interest, matures December 31, 1996 and bears interest at a rate equal to 6.05%
per annum.
In August 1996, LifeCell borrowed $250,000 from the same bank for working
capital purposes. This loan is secured by accounts and other receivables,
matures December 31, 1996, and bears interest at a rate equal to prime plus .25%
per annum (8.5 % at September 30, 1996).
In August 1996, LifeCell was awarded a two-year $300,000 National Science
Foundation Phase II grant related to its keratinocytes program.
In August 1996, to secure interim financing, LifeCell offered holders of certain
warrants issued in connection with the Company's private placement of Series A
Preferred Stock in 1994 the opportunity to exercise such warrants at a reduced
price in exchange for the exercise of such warrants prior to August 30, 1996.
LifeCell received $770,000 from such warrant exercises.
In September 1996, in order to secure additional interim financing, LifeCell
offered the placement agent engaged in 1994 for the Company's Series A Preferred
Stock offering the opportunity to exercise warrants issued to this placement
agent in connection with the Series A Preferred Stock offering at a reduced
price in exchange for the exercise of such warrants prior to September 30, 1996.
LifeCell received approximately $281,000 from the exercise of such warrants.
LifeCell expects to incur substantial expenses related to AlloDerm, including
costs of clinical studies, production, sales and marketing, product
introduction, technical seminars, ongoing administrative activities and research
and development activities, including regulatory and quality assurance programs
and continuing applications for patent protection for the proprietary aspects of
its technology.
The Company has a history of operating losses and anticipates continuing
operating losses through 1996. The Company previously anticipated that its
existing financial resources would be sufficient to satisfy its increased
marketing and processing efforts into the third quarter of 1996. The Company
previously indicated that should additional financing not be obtained by the
beginning of the third quarter of 1996, it would reduce its current operations
and delay certain expenditures in order to conserve its resources and be able to
continue its operations through the end of 1996. In August 1996, the Company
secured the $250,000 loan described above, and the Company raised $1,051,000
from the exercise of warrants described above. Based on these events, the
Company has not reduced current operations or delayed expenditures. The
Company's existing capital resources, including proceeds from the loan and
exercise of warrants, however, will not be sufficient to fund operations at
current levels beyond February 1997. Accordingly, although the unaudited
financial statements for the nine-months ended September 30, 1996 have not been
audited or reviewed by the Company's independent public accountants, such
accountants have informed the Company that if the conditions described above
continue to exist at the time of their audit of the financial statements for the
year ending December 31, 1996, their report on those statements will include an
explanatory paragraph regarding substantial doubt about the Company's ability to
continue as a going concern.
10
<PAGE>
LIFECELL CORPORATION
The Company is currently seeking additional financing pursuant to the private
placement transaction described below in Other Significant Events. There can be
no assurance, however, that the Company will be able to close the private
placement or otherwise to obtain financing on favorable terms in the foreseeable
future. If such financing is not obtained in November 1996, LifeCell intends to
reduce its current operations and delay certain planned expenditures, including
those related to increased marketing efforts, to conserve its resources and
maintain its operations through the end of 1996. The continued unavailability of
such financing would further delay or prevent the development and marketing of
the Company's products or cause the Company to cease operations.
OTHER SIGNIFICANT EVENTS
On November 13, 1996, LifeCell announced that it has made a private offering of
convertible preferred stock and common stock purchase warrants pursuant to which
it expects to raise approximately $12.4 million. The Company made the offering
through a private placement agent to institutional and other investors. The
Company indicated that it expects to close during the week commencing November
18, 1996.
The Company intends to use the proceeds from the offering primarily to
accelerate and expand the marketing activities for the Company's AlloDerm tissue
grafts.
In the private placement, the Company offered units consisting of shares of
Series B Preferred Stock that are convertible into Common Stock at a conversion
price of $3.10 per share and warrants for Common Stock that are exercisable at
$4.13 per share. The Series B Preferred Stock will bear dividends for five
years. Holders of Series B Preferred Stock will have voting rights on all
matters on an as converted to Common Stock basis, and will have the right to
elect three members of the Company's Board of Directors. The Company will file a
shelf registration statement registering the resale of the Common Stock
underlying the Series B Preferred Stock and warrants.
The Series B Preferred Stock and warrants have not been registered under the
Securities Act of 1933 and may not be offered or sold in the United States
absent registration or an applicable exemption from registration requirements.
Because LifeCell's Common Stock is listed on the Nasdaq SmallCap Market, the
Company is subject to certain non- quantitative designation criteria for
continued inclusion of the Common Stock in the market, including compliance with
the Nasdaq Stock Market Voting Rights Policy. The Nasdaq Stock Market has
reviewed the offering transaction and advised the Company that it believes the
consummation of the offering of Series B Preferred Stock and warrants is
consistent with the Voting Rights Policy based on the Company's representations
that the purpose of the transaction is to provide needed capital to the Company
for financial viability purposes and not for the purpose of disenfranchising
existing holders of capital stock of the Company. Pursuant to its policies, the
Nasdaq Stock Market requested the Company to issue an announcement to its
stockholders regarding the offering and the purposes of the offering.
The discussion of the offering contained herein does not constitute an offer to
sell or solicitation of an offer to buy any of the shares of Series B Preferred
Stock or warrants but was being made solely pursuant to the Nasdaq Stock Market
policies described above.
11
<PAGE>
LIFECELL CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
12
<PAGE>
LIFECELL CORPORATION
Item 5. Other Information
Cautionary Statements
The Company's expectations with respect to future results of operations embodied
in oral and written forward-looking statements, including those made in
connection with this Quarterly Report on Form 10-Q, are subject to the following
risks and uncertainties that must be considered when evaluating the likelihood
of the Company's realization of such expectations.
No Assurance of Additional Necessary Capital
The Company anticipates that its current financial resources will be adequate to
maintain its current and planned operations into February 1997. The report of
Arthur Andersen LLP, the Company's independent public accountants, on LifeCell's
financial statements for the year ended December 31, 1995, includes an emphasis
paragraph with respect to the Company's need for future financing to fund the
manufacturing and development of markets for its products. The Company's future
capital requirements will depend on many factors, including successful expansion
of sales of AlloDerm, continued scientific progress with its research and
development programs and expansion of such programs and progress of preclinical
and clinical assessment of products under development. If the Company does not
obtain additional financing in November 1996, it intends to reduce its current
operations and delay certain planned expenditures, including those related to
increased marketing efforts, to conserve its resources and maintain its
operations through the end of 1996. There can be no assurance that the Company
will be successful in obtaining additional capital in amounts sufficient to
continue to fund its operations and product development or on terms satisfactory
to the Company. If the Company is unable to secure such financing, the Company's
ability to sustain operations would be materially adversely affected.
History of Operating Losses
The Company has incurred substantial losses since inception in January 1986,
including losses of approximately $3.4 million, $3.7 million and $3.9 million in
1993, 1994 and 1995, respectively, and had an accumulated deficit of
approximately $27.8 million at September 30, 1996. There can be no assurance
that the Company will ever become profitable. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
FDA Regulatory Status of AlloDerm
In November 1995, following LifeCell's commercial introduction of AlloDerm for
periodontal applications, the Company received a letter from the FDA, stating
that it considered AlloDerm to be a "device" as defined by the United States
Food, Drug and Cosmetics Act (the "FDC Act"), and that a 510(k) premarket
notification was required to be submitted and cleared by the FDA in order to
market the product. Following several months of correspondence and discussions
with the FDA, the Company received a letter from the agency dated September 17,
1996, to the effect that, after considering the information and views that the
Company submitted at its May 1996 meeting with agency officials and in
subsequent correspondence, the FDA agrees with the Company's position that
AlloDerm intended for use for replacement or repair of damaged or inadequate
integumental tissue, including gingival dermis, is banked human tissue within
the meaning of the interim final rule. Consequently, AlloDerm is not subject to
premarket notification or approval by the FDA and the Company may continue to
promote and sell AlloDerm for use in the treatment of wounds, such as
third-degree burns, in periodontal surgical procedures, such as free-gingival
grafting and guided tissue regeneration, and in plastic surgery procedures, such
as contracture release grafting and scar revision. The agency also informed the
Company that this decision applies only to AlloDerm when it is intended for use
in transplantation, and the regulatory status of the product when it is promoted
for other uses, such as a void filler for soft tissue, for cosmetic
augmentation, or as a wound healing agent (the "Additional Indications"), would
need to be determined by the FDA on a case by case basis. To date, a minimal
amount of LifeCell's aggregate product sales are attributable to the Additional
Indications.
While the Company's marketing efforts had not previously focused on the
Additional Indications, as a follow-up to its September 17 letter, the FDA, by
letter dated September 23, 1996, informed the Company that use of AlloDerm for
Additional Indications would have to be formally presented to the FDA to
determine if, with these uses, AlloDerm
13
<PAGE>
LIFECELL CORPORATION
would continue to fall within the scope of the interim rule for banked human
tissue and thus not require premarket clearance. The Company was asked to
indicate what changes in advertisement and promotion it would make for AlloDerm
in response to the September 23, 1996 letter. The Company responded to the FDA
letter on October 8, 1996, and informed the agency that the Company believes
that the distinctions drawn regarding the definition of transplantation and
banked human tissue and between integumental tissue and all other tissue in the
September 17 opinion were fairly novel and ones for which the Company would
require clarification from the FDA as it goes forward. The Company believes that
AlloDerm, when used for augmentation and as a void filler, still qualifies as
banked human tissue. Similarly, the Company advised the FDA that since almost
every replacement or repair of damaged or inadequate tissue involves a cosmetic
aspect, the Company believes that many cosmetic uses of AlloDerm are within the
purview of banked human tissue.
Nevertheless, the Company informed the FDA that it intends to follow the
agency's decision and, until this matter is clarified on a case by case basis,
will not promote AlloDerm for the Additional Indications. The Company also
advised the FDA that it would present its arguments to the agency shortly as to
why it believes that these uses fall within the definition of banked human
tissue. There can be no assurance that the FDA will not finally conclude that
use of AlloDerm for the Additional Indications should be regulated as a medical
device and require a 510(k) premarket notification or PMA for AlloDerm for such
indications. If the FDA were to conclude definitively that the Company is
required to obtain agency clearance of a 510(k) notification or approval of a
PMA for AlloDerm for the Additional Indications, the FDA may require the Company
to conduct laboratory testing and preclinical and clinical studies of AlloDerm
to support a marketing application. Testing, preparation of necessary
applications and processing of those applications by the FDA is expensive and
any required laboratory testing or preclinical or clinical studies that the
Company were required to conduct could take several years to complete. There can
be no assurance that any required testing could be completely successfully, or
that if successfully completed, would provide sufficient data and information to
enable the FDA to determine, on a timely basis, if at all, that when AlloDerm is
used for the Additional Indications, it is substantially equivalent to a legally
marketed predicate device or is safe and effective for the Additional
Indications and permit the product to be marketed for such uses. Failure of the
Company to receive any required FDA clearance or approval of AlloDerm for the
Additional Indications on a timely basis would preclude promotion of AlloDerm
for the Additional Indications and could have a material adverse effect on the
Company's business, financial condition and results of operation.
Availability of Materials
The Company's business will be dependent on the availability of human cadaveric
skin and cardiovascular tissue to the extent that LifeCell is unable
successfully to develop products using animal tissue. A limited supply of
donated skin is available. Although the Company has established what it believes
to be an adequate source of cadaveric skin to satisfy the expected demand for
AlloDerm, there can be no assurance that the availability of human skin and
cardiovascular tissue will be sufficient to meet LifeCell's demand for such
materials.
Patents and Proprietary Rights
LifeCell's ability to compete effectively with other companies is materially
dependent upon the proprietary nature of its technologies. LifeCell relies
primarily on patents and trade secrets to protect its technologies. LifeCell
currently has the exclusive right to eight patents through a license agreement
with the Board of Regents of the University of Texas System. In addition,
LifeCell has been issued three patents and has five pending United States patent
applications. There can be no assurance that LifeCell will obtain any additional
key patents or other protection, that the patents currently applied for will be
granted, that existing patents or proprietary rights owned by or licensed to
LifeCell will not be invalidated or that patents will provide significant
commercial benefits. Th invalidation of key patents or proprietary rights owned
by or licensed to LifeCell could have a material adverse effect on LifeCell and
on its business prospects.
LifeCell believes that it owns or has the right to use all knowledge necessary
to manufacture and market its current products and planned products without
infringing any existing patent or proprietary rights of others such that it
would be liable for damages or prevented from manufacturing or marketing its
products. No assurances may be given, however,
14
<PAGE>
LIFECELL CORPORATION
that the Company's patents or other proprietary rights may not be subject of an
infringement or other claim that could invalidate to some extent its patents or
other rights. Any successful patent infringement claim could have a material
adverse effect on the Company.
There can be no assurance that LifeCell will not be required to resort to
litigation to protect its patents or other proprietary rights or that the
Company may be subject or patent litigation to defend its patents or other
rights against claims or infringement or other intellectual property claims.
Such litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's financial condition and
results of operations.
LifeCell has also applied for patent protection in several foreign countries.
Because of the differences in patent laws and laws concerning proprietary
rights, the extent of protection provided by United States patents or
proprietary rights owned by or licensed to LifeCell may differ from that of
their foreign counterparts.
15
<PAGE>
LIFECELL CORPORATION
Uncertainty of Market Acceptance
Achieving broad market acceptance for AlloDerm and LifeCell's proposed products
will require substantial additional marketing efforts. There can be no assurance
that AlloDerm or any of LifeCell's proposed products ultimately will achieve
widespread commercial acceptance.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Term Promissory Note, dated October 8, 1996 by LifeCell
Corporation, payable to Texas Commerce Bank National
Association, Security Agreement - Accounts and General
Intangibles, dated August 8, 1996, between LifeCell
Corporation and Texas Commerce Bank, and Security Agreement -
Inventory, dated August 8, 1996, between LifeCell Corporation
and Texas Commerce Bank.
11.1 Statement regarding Computation of Per Share Earnings
27.1 Financial Data Schedule
b. Reports on Form 8-K
None
16
<PAGE>
LIFECELL CORPORATION
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.
LIFECELL CORPORATION
Date: NOVEMBER 14, 1996 By: /s/ PAUL M. FRISON
Paul M. Frison
President and Chief Executive Officer
(authorized officer and principal
financial officer)
17
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description of Exhibits Page
10.1 Term Promissory Note, dated October 8, 1996 by LifeCell
Corporation, payable to Texas Commerce Bank National
Association, Security Agreement - Accounts and General
Intangibles, dated August 8, 1996, between LifeCell Corporation
and Texas Commerce Bank, and Security Agreement - Inventory,
dated August 8, 1996, between LifeCell Corporation and Texas
Commerce Bank.
11.1 Statement regarding Computation of Per Share Earnings
27.1 Financial Data Schedule
18
EXHIBIT 10.1
TERM PROMISSORY NOTE
(FLOATING RATE)
(THIS "NOTE")
THIS IS A RENEWAL, EXTENSION, MODIFICATION
OR DEFERRAL OF NOTE
0040272021-009001
NAME(S) AND ADDRESS(ES) OF BORROWER(S)
LIFECELL CORPORATION
3606 RESEARCH FOREST DRIVE
THE WOODLANDS, TX 77381-
U.S.$ 250,000.00 (THE "DATE") October 8, 1996
ACCOUNT NUMBER/NOTE NUMBER 004-0272021-009001 TRANSACTION CODE 8
TELLER ECH OFFICER 913225
FOR VALUE RECEIVED, the "Borrower," (jointly and severally if more than
one), promises to pay to the order of TEXAS COMMERCE BANK NATIONAL ASSOCIATION
("Bank") on or before December 8, 1996, ("STATED MATURITY DATE") at its office
at 712 MAIN, HOUSTON, TEXAS 77252-2558 or at such other location as Bank may
designate, in immediately available funds,
***TWO HUNDRED FIFTY THOUSAND AND NO/100***
UNITED STATES DOLLARS (U.S. $250,000.00) or so much thereof as may be advanced.
Borrower will also pay interest on the unpaid principal balance outstanding from
time to time at a rate per annum equal to the lesser of (i) the sum of the Prime
Rate (as hereinafter defined) from time to time in effect plus
***ZERO AND 025/1000***
percent (.025%), (the "STATED RATE") or (ii) the maximum nonusurious rate of
interest from time to time permitted by applicable law, (the "HIGHEST LAWFUL
RATE"). If the Stated Rate at any time exceeds the Highest Lawful Rate, the
actual rate of interest to accrue on the unpaid principal amount of this Note
will be limited to the Highest Lawful Rate, but any subsequent reductions in the
Stated Rate due to reductions in the Prime Rate will not reduce the interest
rate payable upon the unpaid principal amount of this Note below the Highest
Lawful Rate until the total amount of interest accrued on this Note equals the
amount of interest which would have accrued if the Stated Rate had at all times
been in effect.
"PRIME RATE" means the rate determined from time to time by Bank as its
prime rate. The Prime Rate will change automatically from time to time without
notice to Borrower or any other person. THE PRIME RATE IS A REFERENCE RATE AND
MAY NOT BE BANK'S LOWEST RATE.
If Texas law determines the Highest Lawful Rate, Bank has elected the
"Indicated" (weekly) ceiling as defined in the Texas Credit Code or any
successor statute.
PAYMENT SCHEDULE
This Note shall be due and payable as follows (check applicable boxes):
[X] (SINGLE PAYMENT) All ACCRUED AND UNPAID INTEREST and PRINCIPAL is finally
due and payable on the Stated Maturity Date.
[_] ACCRUED AND UNPAID INTEREST is due
[_] monthly, beginning on ______________ and continuing on the __day of
each month thereafter.
<PAGE>
[_] quarterly, beginning on ______________ and continuing on the __day of
each third month thereafter.
[_] semiannually,beginning on ______________ and continuing on the __day
of each sixth month thereafter.
[_] annually, beginning on ______________ and continuing on the __day of
each calendar year thereafter.
[_] PRINCIPAL PAYMENTS in the amount of $______________each are due
[_] monthly, beginning on ______________ and continuing on the __day of
each month thereafter.
[_] quarterly, beginning on ______________ and continuing on the __day of
each third month thereafter.
[_] semiannually, beginning on ______________ and continuing on the __day
of each sixth month thereafter.
[_] annually, beginning on ______________ and continuing on the __day of
each calendar year thereafter.
[_] FIXED PAYMENTS (PRINCIPAL AND INTEREST INCLUDED) in the amount of $________
each are due
[_] monthly, beginning on ______________ and continuing on the __day of
each month thereafter.
[_] quarterly, beginning on ______________ and continuing on the __day of
each third month thereafter.
[_] semiannually, beginning on ______________ and continuing on the __day
of each sixth month thereafter.
[_] annually, beginning on ______________ and continuing on the __day of
each calendar year thereafter.
All remaining unpaid principal and accrued and unpaid interest is finally due
and payable at the Stated Maturity Date.
All payments may, at Bank's sole option, be applied to accrued interest, to
principal, or to both.
Interest will be computed on the basis of the actual number of days elapsed
and a year comprised of: [ ] 365 (or 366 as the case may be) days [ x ] 360
days, unless such calculation would result in a usurious interest rate, in which
case such interest will be calculated on the basis of a 365 or 366 day year, as
the case may be.
All past-due principal and, to the extent permitted by applicable law,
interest on this Note will, at Bank's option, bear interest at the Highest
Lawful Rate, or if applicable law does not provide for a maximum nonusurious
rate of interest, at a rate per annum equal to 18%.
In addition to all principal and accrued interest on this Note, Borrower
agrees to pay; (a) all reasonable costs and expenses incurred by Bank and all
owners and holders of this Note in collecting this Note through probate,
reorganization, bankruptcy or any other proceeding; and (b) reasonable
attorney's fees if and when this Note is placed in the hands of an attorney for
collection.
Borrower and Bank intend to conform strictly to applicable usury laws.
Therefore, the total amount of interest (as defined under applicable law)
contracted for, charged or collected under this Note will never exceed the
Highest Lawful Rate. If the Bank contracts for, charges or receives any excess
interest, it will be deemed a mistake. Bank will automatically reform the
contract or charge to conform to applicable law, and if excess interest has been
received, Bank will either refund the excess to Borrower or credit the excess on
the unpaid principal amount of this Note. All amounts constituting interest will
be spread throughout the full term of this Note in determining whether interest
exceeds lawful amounts.
The unpaid principal balance of this Note at any time will be the total
amounts advanced by Bank, less the amount of all payments or prepayments of
principal. Absent manifest error, the records of Bank will be conclusive as to
amounts owed.
<PAGE>
"LOAN DOCUMENT" means this Note and any document or instrument
evidencing, securing, guaranteeing or given in connection with this Note.
"OBLIGATIONS" means all principal, interest and other amounts which are or
become owing under this Note or any other Loan Document. "OBLIGOR" means
Borrower and any guarantor, surety, co-signer, general partner or other person
who may now or hereafter be obligated to pay all or any part of the Obligations.
Where appropriate the neuter gender includes the feminine and the masculine and
the singular number includes the plural number.
Each of the following events or conditions is an "EVENT OF DEFAULT:" (1)
any Obligor fails to pay any of the Obligations when due; (2) any warranty,
representation or statement now or hereafter contained in or made in connection
with any Loan Document was false or misleading in any respect when made; (3) any
Obligor violates any covenant, condition or agreement contained in any Loan
Document; (4) any Obligor fails or refuses to submit financial information
requested by Bank or to permit Bank to inspect its books and records on request
(5) the event of default occurs under any other Document; (6) any Individual
Obligor dies, or any Obligor that is an entity dissolves; (7) a receiver,
conservator or similar official is appointed for any Obligor or any Obligor's
assets; (8) any petition is filed by or against any Obligor under any
bankruptcy, insolvency or similar law; (9) any Obligor makes assignment for the
benefit of creditors; (10) a final judgment is entered against any Obligor and
remains unsatisfied for 30 days after entry, or any property of any Obligor is
attached, garnished or otherwise made subject to legal process; (11) any
material adverse change occurs in the business, assets, affairs or financial
condition of any Obligor; and (12) Borrower is in default of any other
obligation to or any other agreement with Bank.
If any Event of Default occurs, then Bank may do any or all of the
following: (i) declare the Obligations to be immediately due and payable,
without notice of acceleration or of intention to accelerate, presentment and
demand or protest or notice of any kind, all of which are hereby expressly
waived; (ii) set off, in any order, against the Obligations any debt owing by
Bank to any Obligor, including, but not limited to, any deposit account, which
right is herein granted by each Obligor to Bank; and (iii) exercise any and all
other rights under any Loan Document, at law, in equity or otherwise.
No waiver of any default is a waiver of any other default. Bank's delay in
exercising any right or power under any Loan Document is not a waiver of such
right or power.
Each and all Obligors severally waive notice, demand, presentment for
payment, notice of nonpayment, notice of intent to accelerate, notice of
acceleration, protest, notice of protest, and the filing of suit and diligence
in collecting this Note and all other demands and notices, and consent and agree
that their liabilities and obligations shall not be released or discharged by
any or all of the following, whether with or without notice to them or any of
them and whether before or after the stated maturity hereof: (i) extensions of
the time of payment; (ii) renewals; (iii) acceptances of partial payments; (iv)
releases or substitutions of any collateral or any Obligor; and (v) failure, if
any, to perfect or maintain perfection of any security interest in any
collateral. Each Obligor agrees that acceptance of any partial payment shall not
constitute a waiver and that waiver of any default shall not constitute waiver
of any prior or subsequent default.
Borrower warrants and represents to Bank that: all advances evidenced by
this Note are and will be for business, commercial, investment or other similar
purpose and not primarily for personal, family, or household use as such terms
are used in Chapter One of the Texas Credit Code. Borrower represents and
warrants that each of the following statements is true unless the box preceding
that statement is checked and initialed by Borrower at Bank: (i) M _________
________ No advances will be used primarily for agricultural purposes as such
term is used in the Texas Credit Code. M ________ ________ No advances will be
used for the purpose of purchasing or carrying any margin stock as that term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
(the "Board"). Notwithstanding anything contained herein or in any other Loan
Document, if this is a consumer credit obligation (as defined or described in 12
C.F.R 227, Regulation AA, promulgated by the Board), the security for this
credit obligation shall not extend to any non-possessory security interest in
household goods (as defined in Regulation AA) other than a purchase money
security interest, and a waiver of any notice contained herein or therein shall
be construed under any circumstances to extend to any waiver of notice
prohibited by Regulation A.
This Note is governed by Texas law. If any provision of this Note is
illegal or unenforceable, that illegality or unenforceability will not affect
the remaining provisions of this Note. BORROWER(S) AND BANK AGREE THAT THIS NOTE
WILL BE PERFORMED IN THE COUNTY IN WHICH BANK'S
<PAGE>
PRINCIPAL OFFICE IS LOCATED IN TEXAS, AND THAT SUCH COUNTY IS PROPER VENUE FOR
ANY ACTION OR PROCEEDING BROUGHT BY BORROWER(S) OR BANK, WHETHER IN CONTRACT,
TORT, OR OTHERWISE. ANY ACTION OR PROCEEDING AGAINST BORROWER(S) MAY BE BROUGHT
IN ANY STATE OR FEDERAL COURT IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW BORROWER(S) HEREBY
IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B)
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. BORROWER(S) AGREES THAT SERVICE OF PROCESS UPON IT MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS
SPECIFIED ABOVE. BANK MAY SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW AND
MAY BRING ANY ACTION OR PROCEEDING AGAINST BORROWER(S) OR WITH RESPECT TO ANY OF
ITS PROPERTY IN COURTS IN OTHER PROPER JURISDICTIONS OR VENUES.
For purposes of this Note, any assignee or subsequent holder of this Note
will be considered the "Bank," and each successor to Borrower will be
considered the "Borrower."
Each Borrower and cosigner represents and warrants to Bank that if it is
not a natural person, it is duly organized and validly existing and in good
standing under the laws of the state of its incorporation or organization; has
full power to own its properties and to carry on its business as now conducted,
is duly qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by its makes such qualification
desirable; and has not commenced any dissolution proceedings. Each Borrower and
cosigner that is subject to the Texas Revised Partnership Act ("TRPA") agrees
that Bank is not required to comply with Section 3.05(d) of the TRPA and agrees
that Bank may proceed directly against one or more partners or their property
without first seeking satisfaction from partnership property. Each Borrower and
cosigner represents and warrants that if it conducts business under an assumed
business or professional name it has properly filed Assumed Name Certificate(s)
in the office(s) required by Chapter 36 of the Texas Business and Commerce Code.
Each of the persons signing below as Borrower or cosigner represents and
warrants that he/she has full requisite power and authority to execute and
deliver this Note to Bank on behalf of the party for whom he/she signs and to
bind such party to the terms and conditions of this Note and that this Note is
enforceable against such party.
NO COURSE OF DEALING BETWEEN BORROWER AND BANK, NO COURSE OF PERFORMANCE,
NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY NATURE MAY BE USED TO
CONTRADICT OR MODIFY ANY TERM OF THIS NOTE OR ANY OTHER LOAN DOCUMENT.
THIS NOTE AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Borrower has executed this Note effective as of the Date.
Signature(s) of BORROWER(S):
LIFECELL CORPORATION
PAUL M. FRISONPRESIDENT/CEO Date: OCT 8, 1996
BY: TITLE:
Date:
Date:
Date:
Date:
<PAGE>
Date:
The undersigned hereby cosigns this Note:
Signature of COSIGNER: _________________________________________________________
Address of Cosigner: ___________________________________________________________
(Bank's signature is provided as its acknowledgement of the above as the final
written agreement between the parties and as its agreement with each Borrower
subject to TRPA that Bank is not required to comply with Section 3.05(d) of
TRPA.)
BANK: _______TEXAS COMMERCE BANK NATIONAL ASSOCIATION___________________________
By: ____________________________________________________________________________
By: _______________________________VICE PRESIDENT_______________________________
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
SECURITY AGREEMENT -- ACCOUNTS AND GENERAL INTANGIBLES ("this Agreement")
LIFECELL CORPORATION
3606 RESEARCH FOREST DRIVE THE WOODLANDS HARRIS COUNTY TX 77381-0000
hereinafter called "Debtor," and TEXAS COMMERCE BANK NATIONAL ASSOCIATION00
712 MAIN P.O. BOX 2558
HOUSTON, HARRIS COUNTY, TEXAS 77252-2558 hereinafter called "Secured Party,"
agree as follows:
SECTION I. CREATION OF SECURITY INTEREST
In order to secure the prompt and unconditional payment of the indebtedness
herein referred to and the performance of the obligation, covenants, agreements
and undertakings of Debtor herein described, Debtor hereby grants to Secured
Party a security interest in and assigns to Secured Party: (a) all accounts,
receivables, accounts receivable, general intangibles, book debts, contract
rights (including, without limitation, those listed on any schedule or schedules
from time to time attached hereto), instruments and documents (including,
without limitation, all documents of title); (b) all chattel paper, notes,
drafts, acceptances, other evidences and forms of payment under leases of
equipment or contracts for the sale of inventory or the performance of services,
and other forms of obligations received by or belonging to Debtor for goods sold
or leased and/or services rendered by Debtor; (c) all of Debtor's rights in, to
and under all purchase orders, sales contracts, instruments and other documents
evidencing obligations for or representing payment for goods sold or leased
and/or services rendered by Debtor; and (d) all monies due or to become due to
Debtor under all contracts for the sale or lease of goods and/or the performance
of services by Debtor; in each case of whatever nature, now owned by Debtor or
existing or hereafter acquired, created or arising (hereinafter sometimes
collectively called "the Accounts,," or singly "the Account") and the rights
and interest of Debtor in goods, the sale and delivery of which give rise to any
such Account (hereinafter collectively called "the Collateral") and all
proceeds of the Collateral (including but not limited to all insurance and
claims for insurance in respect of the Collateral). Anything to the contrary
foregoing notwithstanding, if and only if this box [N/A] is checked by the
Secured Party, the Collateral shall be solely types of property described in
(a), (b), (c), and (d) above, insofar and insofar only as the same relates to
the accounts described on the schedule or schedules attached hereto, together
with all proceeds thereof. The inclusion of proceeds does not authorize Debtor
to sell, dispose of or otherwise use the Collateral in any manner not authorized
herein.
SECTION II. SECURED INDEBTEDNESS
This Agreement is made to secure and enforce the payment and performance of
all debts, obligations and liabilities of every kind and character of Debtor now
or hereafter existing in favor of Secured Party whether such debts, obligations
or liabilities be direct or indirect, primary or secondary, joint or several,
fixed or contingent, and whether originally payable to Secured Party or to a
third party and subsequently acquired by Secured Party and whether such debts,
obligations or liabilities are evidenced by note, open account, overdraft,
application for letter of credit, endorsement, surety agreement, guaranty or
otherwise, it being contemplated that Debtor may hereafter become indebted to
Secured Party in further sum or sums, and all modifications, renewals or
extensions of or substitutions for, any of the foregoing. All such indebtedness
is hereinafter sometimes called "the secured indebtedness" or "the
indebtedness secured hereby."
SECTION III. DEBTOR'S REPRESENTATIONS AND WARRANTIES
Debtor represents, warrants and covenants that Debtor's location is the
address stated at the beginning of this Agreement; that Debtor is now in a
solvent condition; that no bankruptcy or insolvency proceedings are pending or
contemplated by or against Debtor; that all information, reports, statements and
other data furnished by Debtor to Secured Party prior to, contemporaneously with
or subsequent to the execution of this Agreement or in connection with the
indebtedness secured hereby are and shall be true, correct and complete and do
not and will not omit to state any fact or circumstance necessary to make the
statements contained therein not misleading; that Debtor is the lawful owner of
good and marketable title to the Collateral and has good right and authority to
grant a security interest in the Collateral; that the Collateral is
<PAGE>
free and clear from all security interests and encumbrances except the security
interest evidenced hereby; that there is no financing statement covering the
Collateral or its proceeds on file in any public office; that this Agreement
constitutes the legal, valid and binding obligation or Debtor enforceable
against Debtor in accordance with its terms; that the execution, delivery and
performance of this Agreement do not and will not contravene or violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect and applicable to Debtor or
result in a breach of or constitute a default (with or without the giving of
notice or the lapse of time or both) under any indenture or any loan, credit or
other agreement to which Debtor is a party or by which Debtor may be bound or
affected; that the execution, delivery and performance of this Agreement do not
require the consent or approval of any person, including, without limitation,
any regulatory body or governmental authority; that Debtor will warrant and
forever defend the title to the Collateral and its proceeds against the claims
and demands of all persons whomsoever claiming or to claim the same or any part
thereof; and that Debtor has never changed its name.
IF AND ONLY IF THIS BOX [N/A] IS CHECKED, IN ADDITION, THE DEBTOR
REPRESENTS, WARRANTS AND COVENANTS THAT THE COLLATERAL WILL MEET THE FOLLOWING
REQUIREMENTS CONTINUOUSLY FROM THE TIME EACH PART OF THE COLLATERAL COMES INTO
EXISTENCE UNTIL IT IS COLLECTED IN FULL: (A) THE ACCOUNT SHALL BE DUE AND
PAYABLE NOT MORE THAN N/A DAYS FROM THE DATE OF THE INVOICE OR AGREEMENT
EVIDENCING SAME; (B) THE ACCOUNT AROSE FROM THE PERFORMANCE OF SERVICES BY
DEBTOR WHICH HAVE BEEN FULLY AND SATISFACTORILY PERFORMED OR FROM THE ABSOLUTE
SALE OF GOODS BY DEBTOR IN WHICH DEBTOR HAD THE SOLE AND COMPLETE OWNERSHIP, AND
THE GOODS HAVE BEEN SHIPPED OR DELIVERED TO THE ACCOUNT DEBTOR, EVIDENCING WHICH
DEBTOR OR SECURED PARTY HAS POSSESSION OF SHIPPING AND DELIVERY RECEIPTS; (C)
THE ACCOUNT IS NOT SUBJECT TO SETOFF, COUNTERCLAIM, DEFENSE, ALLOWANCE OR
ADJUSTMENT OTHER THAN DISCOUNTS FOR PROMPT PAYMENT SHOWN ON THE INVOICE OR TO
DISPUTE, OBJECTION OR COMPLAINT BY THE ACCOUNT DEBTOR CONCERNING HIS LIABILITY
ON THE ACCOUNT, AND THE GOODS, THE SALE OF WHICH GIVES RISE TO THE ACCOUNT, HAVE
NOT BEEN RETURNED, REJECTED, LOST OR DAMAGED; (D) THE ACCOUNT AROSE IN THE
ORDINARY COURSE OF DEBTOR'S BUSINESS, AND NO NOTICE OF BANKRUPTCY, INSOLVENCY OR
FINANCIAL EMBARASSMENT OF ACCOUNT DEBTOR HAS BEEN RECEIVED BY DEBTOR; (E) IN THE
EVENT ANY GOODS, THE SALE OR OTHER DISPOSITION OF WHICH CREATES ANY ACCOUNT
WHICH IS INCLUDED IN THE COLLATERAL, ARE RETURNED TO DEBTOR FOR CREDIT, DEBTOR
WILL PROMPTLY PAY TO SECURED PARTY THE FULL AMOUNT OF THE INVOICE PRICE OF SUCH
GOODS, AND UNTIL SUCH PAYMENT HAS BEEN MADE, WILL HOLD SUCH GOODS SEPARATE AND
APART FROM DEBTOR'S OWN PROPERTY IN TRUST FOR SECURED PARTY AND WILL IMMEDIATELY
NOTIFY SECURED PARTY OF SUCH RETURN; (F) DEBTOR HEREBY GRANTS UNTO SECURED PARTY
A SECURITY INTEREST IN SUCH GOODS; (G) DEBTOR SHALL NOT SUBMIT OR REPRESENT TO
SECURED PARTY ANY ACCOUNT AS ONE AGAINST WHICH LOANS MAY BE MADE WHICH DOES NOT
MEET EVERY REQUIREMENT IN EVERY RESPECT PRESCRIBED BY THIS AGREEMENT; AND (H)
DEBTOR SHALL NOTIFY SECURED PARTY PROMPTLY IN WRITING WHEN ANY ACCOUNT AGAINST
WHICH A LOAN WAS OR MAY BE MADE UNDER THIS AGREEMENT CEASES TO MEET ANY OF THE
REQUIREMENTS OF THIS AGREEMENT. NOTHING IN THIS PARAGRAPH SHALL BE CONSTRUED TO
LIMIT OR RELEASE ANY RIGHT OF SECURED PARTY TO ANY COLLATERAL ARISING PURSUANT
TO SECTION I OF THIS AGREEMENT.
SECTION IV. COVENANTS
4.1 Debtor covenants and agrees with Secured Party as follows:
(a) Debtor shall make prompt payment, as the same becomes due, of all
indebtedness secured hereby in accordance with the terms and provisions
of the agreements evidencing such indebtedness.
(b) if Debtor is a corporation, Debtor will continuously maintain
Debtor's corporate existence.
<PAGE>
(c) Debtor shall, as the agent of Secured Party, receive all cash,
checks, notes, drafts and other instruments representing the proceeds of
the Accounts. Debtor shall at Debtor's own expense take all reasonable
and appropriate steps when necessary to enforce the collection of the
Accounts and items representing proceeds thereof.
(d) Debtor shall from time to time at the request of Secured Party
furnish Secured Party with a schedule of each Account constituting the
Collateral and a list of all those liable on checks, notes, drafts and
other instruments representing the proceeds of the Accounts. Secured
Party shall have the right to make test verifications of the Collateral.
(e) Debtor shall at all times keep accurate books and records reflecting
all facts concerning each Account including those pertaining to Debtor's
warranties, representations and agreements under this Agreement. Debtor
will allow Secured Party or its authorized representative to inspect
said books and records and Debtor will assist Secured Party or said
representative in whatever way necessary to make such inspection.
Immediately upon the execution of this Agreement, Debtor will make or
allow Secured Party to make written designation on Debtor's books and
records to reflect thereon the assignment to Secured Party of each
Account covered by this Agreement.
(f) If any part of the Collateral is or becomes subject to the Federal
Assignment of Claims Act. Debtor will execute all instruments and take
all steps required by Secured Party to comply with that act.
(g) Debtor will not agree to a material modification of any of the terms
of any Account without the written consent of Secured Party.
(h) If any part of the Collateral is evidenced by promissory notes,
trade acceptances or other instruments for the payment of money, Debtor
will, at the request of Secured Party, immediately deliver them to
Secured Party, appropriately endorsed to Secured Party's order, and
regardless of the form of endorsement, Debtor waives presentment,
demand, notice of dishonor, protest and notice of protest.
(i) Debtor will cause to be paid prior to delinquency all taxes,
charges, liens and assessments heretofore or hereafter levied or
assessed against the Collateral, or any part thereof, or against the
Secured Party for or on account of the indebtedness secured hereby or
the interest created by this Agreement, and will furnish Secured Party
with receipts or other satisfactory evidence showing payment of such
taxes and assessments at least ten (10) days prior to the applicable
default date therefor.
(j) If the validity or priority of this Agreement or of any rights,
titles, security interests or other interests created or evidenced
hereby shall be attacked, endangered or questioned, or if any legal
proceedings are instituted with respect thereto, Debtor will give prompt
written notice thereof to Secured Party and, at Debtor's own cost and
expenses, will diligently endeavor to cure any defect which may be
developed or claimed, and will take all necessary and proper steps for
the defense of such legal proceedings, and Secured Party (whether or not
named as a party to legal proceedings with respect thereto) is hereby
authorized and empowered to take such additional steps as in its
judgment and discretion may be necessary or proper for the defense of
any such legal proceedings or the protection of the validity or
priority, of this agreement and the rights, titles, security interests
and other interests created or evidenced hereby, and all expenses so
incurred of every kind and character shall be a demand obligation owing
by Debtor and the party incurring such expenses shall be subrogated to
all rights of the person receiving such payment.
(k) Debtor will, on request of Secured Party, (i) promptly correct any
defect, error or omission which may be discovered in the contents of
this Agreement or in any other instrument executed in connection
herewith or in the execution or acknowledgment thereof; (ii) execute,
acknowledge, deliver and record or file such further instrument
(including, without limitation, further security agreements, financing
statements and continuation statements) and do such further acts as may
be necessary, desirable or proper to carry out more effectively the
purpose of this Agreement and such other instruments, and to subject to
the security interests hereof and thereof any property intended by the
terms hereof and thereof to be covered hereby and thereby including
specifically,
<PAGE>
but without limitation, any renewals, additions, substitutions or
replacements to the then Collateral; and (iii) execute, acknowledge,
deliver, procure and record or file any document or instrument
(including specifically any financing statement) deemed advisable by
Secured Party to protect the security interest hereunder against the
rights or interests of third persons, and Debtor will pay all costs
connected with any of the foregoing.
(l) Notwithstanding the security interest in proceeds granted herein,
Debtor will not sell, lease, exchange, lend, rent, assign, transfer or
otherwise dispose of all or any part of the Collateral or any interest
therein or permit the title to the Collateral, or any interest therein,
to be vested in any other party, in any manner whatsoever, by operation
of law or otherwise, without the prior written consent of Secured Party.
(m) To the extent not prohibited by law, Debtor will pay, or reimburse
Secured Party for, all costs and expenses, of every character, incurred
or expended from tim to time (including, but not limited to, the fees
and expenses of counsel for Secured Party) in connection with the
negotiation, preparation, execution, filing, recording, refiling and
re-recording of this Agreement and all related financing statements and
the making, servicing and collection of the indebtedness secured hereby;
and any and all stamp, mortgage and recording taxes; the costs of any
lien insurance purchased by Secured Party in connection herewith; and
all costs of negotiation, preparation, execution and delivery of any and
all amendments, modifications, supplements, consents, waivers or other
documents or writings relating to the transactions contemplated by this
Agreement. Debtor will reimburse Secured Party for all amounts expended
by Secured Party to satisfy any obligation of Debtor under this
Agreement or to protect the Collateral. In addition, whether or not a
default shall have occurred, Debtor will pay, or reimburse Secured Party
for, all cost and expenses of every character incurred or expended from
time to time in connection with the evaluation, monitoring,
administration and protection of the Collateral and the exercise by
Secured Party of any of its rights and remedies hereunder or at law
(including, but not limited to, all appraisal fees, consulting fees,
brokerage fees and commissions, insurance premiums, Uniform Commercial
Code search fees, investigation costs, escrow fees, attorney's fees,
legal expenses, fees of auditors and accountants, court costs, fees of
governmental authorities, auctioneer fees and expenses, and all fees and
expenses incurred in connection with the auction and liquidation of the
Collateral). Any amount to be paid or reimbursed by Debtor to Secured
Party shall be a demand obligation owing by Debtor to Secured Party and,
to the extent not prohibited by law, shall bear interest from the date
of expenditure by Secured Party until paid at the same rate provided for
past-due principal and interest in the principal obligation (the "Past
Due Rate"). The principal obligation shall be (1) the note secured
hereby; (2) if more than one note is secured hereby, the note with the
largest face amount; and (3) if no note is secured hereby, the
obligation with the largest face amount.
(n) Debtor shall account fully and faithfully for and, if Secured Party
so elects, shall promptly pay or turn over to Secured Party, the
proceeds in whatever form received from disposition in any manner of any
of the Collateral, whether the indebtedness secured hereby is mature or
not, the order and method of application to be the sole discretion of
Secured Party, except as otherwise specifically authorized herein.
Debtor shall at all times keep the Collateral and its proceeds separate
and distinct from other property of Debtor and shall keep accurate and
complete records of the Collateral and its proceeds.
(o) The Collateral shall remain in Debtor's possession or control at all
times at Debtor's risk of loss at Debtor's location as stated herein and
at such other places as Debtor may specify in writing to Secured Party.
(p) Debtor will not change its address, location, name, identity or
corporate structure without notifying Secured Party of such change in
writing at least thirty (30) days prior to the effective date of such
change.
(q) Debtor shall furnish Secured Party all such information as Secured
Party may request with respect to the Collateral.
<PAGE>
(r) If Secured Party should at any time be of the opinion that the
Collateral is not sufficient or has declined or may decline in value, or
should Secured Party deem payment of Debtor's obligations to be
insecure, then Secured Party may call for additional Collateral
satisfactory to Secured Party, and Debtor promises to furnish such
additional security forthwith. The call for additional security may be
oral or by telegram or by United States Postal Service addressed to the
address of Debtor shown at the beginning of this Agreement.
4.2 Debtor agrees that if Debtor fails to perform any act or to take any
action which hereunder Debtor is required to perform or take, or to pay
any money which hereunder Debtor is required to pay, Secured Party, in
Debtor's name or in its own name, may but shall not be obligated to
perform or cause or be performed such act or take such action or pay
such money, and any expenses so incurred by Secured Party and any money
so paid by Secured Party, shall be a demand obligation owing by Debtor
to Secured Party and Secured Party, upon making such payment, shall be
subrogated to all of the rights of the person, corporation or body
politic receiving such payment. Any amounts due and owing by Debtor to
Secured Party pursuant to this Agreement shall bear interest from the
date of expenditure until paid at the Past Due Rate and shall be a part
of the secured indebtedness and shall be secured by this Agreement and
by any other instrument securing the secured indebtedness.
SECTION V. EVENTS OF DEFAULT.
Debtor shall be in default under this Agreement upon the happening of any
of the following events or conditions, herein called an "Event of Default"):
(a) Debtor's failure to pay when due any of the secured indebtedness; or
(b) default by Debtor or any other person in the punctual performance of
any of the obligations, covenants, terms or provisions contained or
referred to in this Agreement, in any other instrument securing the
secured indebtedness or in any note secured hereby; or
(c) any warranty, representation or statement contained in this
Agreement or made or furnished to Secured Party by or on behalf of
Debtor in connection with this Agreement or to induce Secured Party to
make a loan to Debtor, shall prove to have been false or misleading in
any respect when made or furnished; or
(d) Debtor shall fail to pay at maturity, or within any applicable
period of grace, any principal of or interest on any other obligation or
shall fail to observe or perform any term, covenant or agreement
contained in any agreement or obligation by which Debtor is bound, for
such a period of time as would accelerate, or would permit the holder
thereof, or of any obligation issued thereunder, to accelerate, the
maturity thereof, or of any such obligation; or
(e) loss, theft, substantial damage, destruction, abandonment, sale or
encumbrance of or to any of the Collateral, or the making of any levy,
seizure or attachment thereof or thereon; or
(f) Debtor's death, dissolution, termination of existence, insolvency or
business failure, the failure of Debtor, or of any guarantor or surety
for Debtor generally to pay its debts as they come due; the appointment
of a receiver, trustee, custodian or liquidator of all or any part of
the property of Debtor; an assignment for the benefit of creditors of
Debtor: the calling of a meeting of creditors of Debtor; or the
commencement of any proceeding under any bankruptcy, insolvency or
reorganization laws by or against Debtor or any guarantor or surety for
Debtor, or
(g) any statement of the financial condition of Debtor or of any
guarantor, comaker, surety or endorser of any liability of Debtor
submitted to Secured Party by Debtor or any such guarantor, comaker,
surety or endorser shall prove to be false or misleading in any respect;
or
(h) any guarantor, comaker, surety or endorser for Debtor; defaults in
any obligation or liability; or
(i) any material adverse change shall occur in the assets, liabilities,
financial condition, business operations, affairs or circumstances of
Debtor.
SECTION VI. REMEDIES IN EVENT OF DEFAULT.
<PAGE>
6.1 Upon the occurrence of an Event of Default, or if Secured Party shall
deem payment of Debtor's obligations to be insecure, and at any time
thereafter, Secured Party shall have the option of declaring, without
notice to any person, including, but not limited to, notice of intention
to accelerate and notice of acceleration, all of which are WAIVED, all
indebtedness secured hereby, principal and accrued interest, to be
immediately due and payable.
6.2 Upon the occurrence of an Event of Default, or if Secured Party shall
deem payment of Debtor's obligations to be insecure, and at any time
thereafter, Secured Party is authorized to take possession of the
Collateral and of all books, records and accounts relating thereto, and
to exercise without interference from Debtor any and all rights which
Debtor has with respect to the management, possession, protection or
preservation of the Collateral, including the right to sell the same for
the account of Debtor and to deduct from such sales proceeds all costs,
expenses and liabilities of every character incurred by Secured Party in
collecting such sales proceeds and in managing, selling, maintenance,
protecting or preserving the Collateral, and to apply the remainder of
such rents on the indebtedness secured hereby in such manner as Secured
Party may elect. All such costs, expenses and liabilities incurred by
Secured Party in collecting such sales proceeds or in managing,
maintaining, protecting or preserving such properties, if not paid out
of such sales proceeds as hereinabove provided, shall constitute a
demand obligation owing by Debtor and shall bear interest from the date
of expenditure until paid at the Past Due Rate, all of which shall
constitute a portion of the secured indebtedness. If necessary to obtain
the possession provided for above, Secured Party may invoke any and all
legal remedies to dispossess Debtor, including specifically one or more
actions for forcible entry and detainer, in connection with any action
taken by Secured Party pursuant to this paragraph 6.2, Secured Party
shall not be liable for any loss sustained by Debtor resulting from any
failure to sell the Collateral, or any part thereof, or from other act
or omission of Secured Party in managing the Collateral unless such loss
is caused by the willful misconduct and bad faith of Secured Party, nor
shall Secured Party be obligated to perform or discharge any obligation,
duty or liability under any sale agreement covering Collateral or any
part thereof, or under or by reason of this instrument or exercise of
rights or remedies thereunder.
6.3 Upon the occurrence of an Event of Default, or if Secured Party shall
deem payment of Debtor's obligations to be insecure, and at any time
thereafter, Secured Party shall have all the rights of a secured party
after default under the Uniform Commercial Code of Texas and in
conjunction with, in addition to or in substitution of those rights and
remedies provided for herein:
(a) Secured Party may require Debtor to make the Collateral available at
a place which is mutually convenient to allow Secured Party to take
possession of the Collateral; and
(b) Secured Party may notify or require each Account Debtor or other
obligor obligated on the Collateral or part of it to make payment
directly to Secured Party and Secured Party may take control of the
proceeds paid to Secured Party. Until Secured Party elects to exercise
these rights, Debtor is authorized as agent of Secured Party to collect
and enforce the Collateral. The cost of collection and enforcement,
including attorneys' fees and expenses, shall be borne solely by Debtor
whether incurred by Secured Party or Debtor; and
(c) Secured Party may require that Debtor will, upon receipt of checks,
drafts, cash and other remittances in payment or on account of the
Accounts, deposit all of them in a special bank account over which
Secured Party alone has power of withdrawal. The funds in the account
shall be held by Secured Party as security for all loans made under this
Agreement and all other indebtedness of Debtor to Secured Party secured
by this Agreement. The proceeds shall be deposited in precisely the form
received, except for the endorsement of Debtor where necessary to permit
collection of items. Debtor agrees to make the endorsement and
authorizes Secured Party to make it on Debtor's behalf. Pending
deposits, Debtor agrees that it will not commingle the checks, drafts,
cash and other remittances with Debtor's funds or property, but will
hold them separate and apart and upon an express trust for Secured Party
until deposit in the special account. Secured Party may apply or set off
the deposits against any liability of Debtor to Secured Party; and
<PAGE>
(d) Written notice mailed to Debtor as provided herein ten (10) days
prior to the date of public sale of the Collateral or prior to the date
after which private sale of the Collateral will be made shall constitute
reasonable notice; and
(e) It shall not be necessary that the Collateral or any part thereof be
present at the location of such sale; and
(f) Prior to application of proceeds of disposition of the Collateral to
the secured indebtedness, such proceeds shall be applied to the
reasonable expenses of retaking, holding, preparing for sale, selling
and the like and the attorney's fees and legal expenses incurred by
Secured Party, Debtor to remain liable for any deficiency; and
(g) The sale by Secured Party of less than the whole of the Collateral
shall not exhaust the rights of Secured Party hereunder, and Secured
Party is specifically empowered to make successive sale or sales
hereunder until the whole of the Collateral shall be sold, and, if the
proceeds of such sale of less than the whole of the Collateral shall be
less than the aggregate of the indebtedness secured hereby, this
Agreement and the security interest created hereby shall remain in full
force and effect as to the unsold portion of the Collateral just as
though no sale had been made; and
(h) In the event any sale hereunder is not completed or is defective in
the opinion of Secured Party, such sale shall not exhaust the rights of
Secured Party hereunder and Secured Party shall have the right to cause
a subsequent sale or sales to be made hereunder; and
(i) Any and all statements of fact or other recitals made in any bill of
sale or assignment or other instrument evidencing any foreclosure sale
hereunder as to nonpayment of the indebtedness, or as to the occurrence
of any default, or as to Secured Party's having declared all of such
indebtedness to be due and payable, or as to notice of time, place and
terms of sale and the properties to be sold having been duly given, or
as to any other act or thing having been duly done by Secured Party,
shall be taken as prima facie evidence of the truth of the facts so
stated and recited; and
(j) Secured Party may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held
by Secured Party, including the sending of notices and the conduct of
sale, but in the name and on behalf of Secured Party.
6.4 All remedies herein expressly provided for are cumulative of any and
all other remedies existing at law or in equity and are cumulative of
any and all other remedies provided for in any other instrument securing
the payment of the secured indebtedness or any part thereof or otherwise
benefiting Secured Party, and the resort to any remedy provided for
hereunder or under any such other instrument or provided for by law
shall not prevent the concurrent or subsequent employment of any other
appropriate remedy or remedies.
6.5 Secured Party may resort to any security given by this Agreement or to
any other security now existing or hereafter given to secure the payment
of the secured indebtedness, in whole or in part, and in such portions
and in such order as may seem best to Secured Party in its sole and
uncontrolled discretion, and any such action shall not in anywise be
considered as a waiver of the rights, benefits or security interests
evidenced by this Agreement.
6.6 To the full extent Debtor may do so, Debtor agrees that Debtor will not
at any time insist upon, plead, claim or take the benefit or advantage
of any law now or hereafter in force providing for any appraisement,
valuation, stay, extension or redemption, and Debtor, for Debtor,
Debtor's heirs, devisees, representatives, receivers, trustees,
successors and assigns, and for any and all persons ever claiming any
interest in the Collateral, to the extent permitted by law, hereby
WAIVES and RELEASES all rights of redemption, valuation, appraisement,
stay of execution, notice of intention to mature or declare due the
whole of any secured indebtedness, notice of election to mature or
declare the whole of the secured indebtedness and all rights to a
marshaling of the assets of Debtor, including the Collateral, or to a
sale in inverse order of alienation in the event of foreclosure of the
security interest hereby created.
SECTION VII. ADDITIONAL AGREEMENTS.
<PAGE>
7.1 If all of the secured indebtedness be paid as the same becomes due and
payable, and all obligations of Secured Party to advance money or extend
credit to Debtor have terminated, and if all of the covenants,
warranties, undertakings and agreements made in this Agreement are kept
and performed, then and in that event only, all rights under this
Agreement shall terminate and the Collateral shall become wholly clear
of the security interest evidenced hereby, and such security interest
shall be released by Secured Party in due form at Debtor's cost.
7.2 Secured Party may waive any default without waiving any other prior or
subsequent default. Secured Party may remedy any default without waiving
the default remedied. The failure by Secured Party to exercise any
right, power or remedy upon any default shall not be construed as a
waiver of such default or as a waiver of the right to exercise any such
right, power or remedy at a later date. No single or partial exercise by
Secured Party of any right, power or remedy hereunder shall exhaust the
same or shall preclude any other or further exercise thereof, and every
such right, power or remedy hereunder may be exercised at any time and
from time to time. No modification or waiver of any provision hereof nor
consent to any departure by Debtor therefrom shall in any event be
effective unless the same shall be in writing and signed by Secured
Party and then such waiver or consent shall be effective only in the
specific instances, for the purpose for which given and to the extent
therein specified. No notice to nor demand on Debtor in any case shall
of itself entitle Debtor to any other or further notice of demand in
similar or other circumstances. Acceptance by Secured Party of any
payment in an amount less than the amount then due on any secured
indebtedness shall be deemed an acceptance on account only and shall not
in any way affect the existence of a default hereunder.
7.3 Secured Party may at any time and from time to time in writing (a)
waive compliance by Debtor with any covenant herein made by Debtor to
the extent and in the manner specified in such writing; (b) consent to
Debtor's doing any act which hereunder Debtor is prohibited from doing,
or consent to Debtor's failing to do any act which hereunder Debtor is
required to do, to the extent and in the manner specified in such
writing; or (c) release any part of the Collateral, or any interest
therein, from the security interest of this Agreement; or (d) release
any party liable, either directly or indirectly, for the secured
indebtedness or for any covenant herein or in any other instrument now
or hereafter securing the payment of the secured indebtedness, without
impairing or releasing the liability of any other party. No such act
shall in any way impair the rights of Secured Party hereunder except to
the extent specifically agreed by Secured Party in such writing.
7.4 The security interest and other rights of Secured Party hereunder shall
not be impaired by any indulgence, moratorium or release granted by
Secured Party, including but not limited to (a) any renewal, extension
or modification which Secured Party may grant with respect to any
secured indebtedness; (b) any surrender, compromise, release, renewal,
extension, exchange or substitution which Secured Party may grant in
respect of any item of the Collateral or any part thereof or any
interest therein; or (c) any release or indulgence granted to any
endorser, guarantor, comaker or surety of any secured indebtedness.
7.5 Secured Party may call at Debtor's place or places of business at
intervals to be determined by Secured party and without hindrance or
delay, inspect, audit, check and make extracts from and copies of the
books, records, journals, orders, receipts, correspondence and other
data relating to the Collateral or to any transaction between Debtor and
Secured Party, and Debtor shall assist Secured Party in making any such
inspection.
7.6 Secured Party may subrogate to all of Debtor's interests, rights and
remedies in respect to any Account.
7.7. Secured Party may render and send to Debtor a statement of account
showing loans made, all other charges, expenses and items chargeable to
Debtor, payment made by Debtor against the loans, proceeds collected and
applied to the loans, other appropriate debits and credits, and the
total of Debtors's indebtedness on the loans as of the date of the
statement of account, and the statement of account shall be considered
correct in all respects and accepted by and conclusively binding upon
Debtor, except for specified objections which Debtor makes in writing
within five days from the date upon which the statement of account is
sent.
<PAGE>
7.8 A carbon, photographic or other reproduction of this Agreement or of
any financing statement relating to this Agreement shall be sufficient
as a financing statement.
7.9 Debtor will cause all financing statements and continuation statements
relating hereto to be recorded, filed, re-recorded and refiled in such
manner and in such places as Secured Party shall reasonably request, and
will pay all such recording, filing, re-recording and refiling taxes,
fees and other charges.
7.10 In the event the ownership of the Collateral or any part thereof
becomes vested in a person other than Debtor, Secured Party may, without
notice to Debtor, deal with such successor or successors in interest
with reference to this Agreement and to the indebtedness secured hereby
in the same manner as with Debtor, without in any way vitiating or
discharging Debtor's liability hereunder or on the indebtedness secured
hereby, the same manner as with Debtor, without in any way vitiating or
discharging Debtor's liability hereunder or on the indebtedness secured
hereby. No sale of the Collateral, and no forbearance on the part of
Secured Party and no extension of the time for the payment of the
indebtedness secured hereby given by Secured Party shall operate to
release, discharge, modify, change or affect, in whole or in part, the
liability of Debtor hereunder or for the payment of the indebtedness
secured hereby or the liability of any other person hereunder or for the
payment of the indebtedness secured hereby, except as agreed in writing
by the Secured Party.
7.11 To the extent that proceeds of the secured indebtedness are used to
pay indebtedness secured by any outstanding lien, security interest,
charge or prior encumbrance against the Collateral, such proceeds have
been advanced by Secured Party at Debtor's request and Secured Party
shall be subrogated to any and all rights, security interests and liens
owned by any owner or holder of such outstanding liens, security
interests, charges or encumbrances, irrespective of whether said liens,
security interests, charges or encumbrances are released.
7.12 If any part of the secured indebtedness cannot be lawfully secured by
this Agreement, or if any part of the Collateral cannot be lawfully
subject to the security interest hereof to the full extent of such
indebtedness, then all payments made shall be applied on said
indebtedness first in discharge of that portion thereof which is not
secured by this Agreement.
7.13 Secured Party may assign this Agreement so that the assignee shall be
entitled to the rights and remedies of Secured Party hereunder and in
the event of such assignment, Debtor will asset no claims or defenses it
may have against the assignee except those granted in this Agreement.
7.14 Any notice, request, demand or other communication required or
permitted hereunder, or under any note, guaranty, loan or agreement or
other instrument securing the payment of the secured indebtedness
(unless otherwise expressly provided herein); shall be given in writing
by delivering same in person to the intended addressee, or by United
States Postal Service, postage prepaid, registered or certified mail,
return receipt requested, or by prepaid telegram (provided that such
telegram is confirmed by mail in the manner previously described), sent
to the intended addressee at the address shown herein, or to such
different address as the addressee shall have designated by written
notice sent in accordance herewith and actually received by the other
party at least ten (10) days in advance of the date upon which such
change of address shall be effective.
7.15 This Agreement shall be binding upon Debtor, and the heirs, devisees,
representatives, receivers, trustees, successors and assigns of Debtor,
including all successors in interest of Debtor in and to all or any part
of the Collateral, and shall inure to the benefit of Secured Party and
the successors and assigns of Secured Party. All references in this
Agreement to Debtor or Secured Party shall be deemed to include all such
other persons and entities.
7.16 Secured Party in its discretion may, whether or not any of the
indebtedness secured hereby be due, in its name or in the name of Debtor
or otherwise, demand, sue for, collect or receive any money or other
property at any time payable or receivable on account of or in exchange
for, or make any compromise settlement deemed desirable with respect to,
any of the Collateral, but Secured Party shall be under no obligation so
to do.
<PAGE>
7.17 Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law. A determination that any provision of this Agreement is
unenforceable or invalid shall not affect the enforceability or validity
of any other provision; and any determination that the application of
any provision of this Agreement to any person or circumstance is illegal
or unenforceable shall not affect the enforceability or validity of such
provision as it may apply to any other person or circumstances.
7.18 Secured Party may, by any employee or employees it designates,
execute, sign, endorse, transfer or deliver in the name of Debtor,
notes, checks, drafts or other instruments for the payment of money and
receipts or any other documents necessary to evidence, perfect and
realize upon the security interests and obligations of this Agreement.
7.19 Notwithstanding anything to the contrary contained herein, if any
secured indebtedness shall be indebtedness resulting from an extension
of credit to a consumer (as such terms are defined or described in 12
C.F.R. 227, Regulation AA of the Federal Reserve Board) hereinafter
referred to as "consumer credit obligation," then the collateral
securing any such consumer credit obligation shall not extend to any
nonpossessory security interest in household goods which is not a
purchase money security interest (as defined in said Regulation AA), and
no waiver of any notice herein shall be construed under any
circumstances to extend to any waiver of notice which is prohibited by
Regulation AA.
7.20 The term "Debtor" as used in this Agreement shall be construed as
singular or plural to correspond with the number of persons executing
this Agreement as Debtor. The pronouns used in this Agreement are in the
neuter gender, but shall be construed as feminine or masculine as
occasion may require.
7.21 If more than one person executes this Agreement as Debtor, their
obligations under this Agreement shall be joint and several.
7.22 The section headings appearing in this Agreement have been inserted
for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this
Agreement. Unless otherwise defined herein, terms used in this Agreement
which are defined in the Texas Uniform Commercial Code are used with the
meanings as therein defined.
7.23 This Agreement shall be governed by and construed in accordance with
the laws of the state of Texas and the United States of America.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SIGNATURE(S) OF DEBTOR:
___________________________________________ Date 8/8/96________________________
LIFECELL CORPORATION
___________________________________________ Date ______________________________
___________________________________________ Date ______________________________
___________________________________________ Date ______________________________
___________________________________________ Date ______________________________
___________________________________________ Date ______________________________
SECURED PARTY: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
BY: ____________________________________________________________________________
TITLE: _________________________________________________________________________
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
SECURITY AGREEMENT -- INVENTORY
LIFECELL CORPORATION
3606 RESEARCH FOREST DRIVE, THE WOODLANDS, HARRIS COUNTY TX 77381
hereinafter called "Debtor," and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, 712
MAIN, P.O. BOX 2558, HOUSTON, HARRIS COUNTY, TEXAS 77252-2558 hereinafter called
"Secured Party," agree as follows:
SECTION I. CREATION OF SECURITY INTEREST.
In order to secure the prompt and unconditional payment of the indebtedness
herein referred to and the performance of the obligations, covenants, agreements
and undertakings of Debtor herein described, Debtor hereby grants to Secured
Party a security interest in all goods, merchandise, raw materials, goods in
process, finished goods, and other tangible personal property of whatever nature
now owned by Debtor or hereafter from time to time existing or acquired, and
held for sale or lease or furnished or to be furnished under contracts of
service or used or usable or consumed or consumable in Debtor's business and all
accessions and appurtenances thereto, and all accounts, receivables, accounts
receivables, instruments, notes, chattel paper, documents (including without
limitation, all documents of title), contract rights and general intangibles,
arising in connection with any of the foregoing (hereinafter collectively called
the "Collateral") and all products and proceeds of the Collateral (including,
without limitation, all insurance and claims for insurance affected or held for
the benefit of Debtor or Secured Party in respect of the "Collateral"). If,
and only if, this [ ] is checked, the Collateral shall be solely that inventory
described on the Page 4 hereof under Collateral Description, together with
accessions and appurtenances thereto and proceeds thereof. The inclusion of
proceeds does not authorize Debtor to sell, dispose of or otherwise use the
Collateral in any manner not authorized herein.
SECTION II. SECURED INDEBTEDNESS.
This Security Agreement-Inventory (hereinafter called this "Agreement")
is made to secure and enforce the payment and performance of all debts,
obligations and liabilities of every kind and character of Debtor now or
hereafter existing in favor of Secured Party whether such debts, obligations or
liabilities be direct or indirect, primary or secondary, joint or several, fixed
or contingent, and whether originally payable to Secured Party or to a third
party and subsequently acquired by Secured Party and whether such debts,
obligations or liabilities are evidenced by note, open account, overdraft,
application for letter of credit, endorsement, surety agreement, guaranty or
otherwise, it being contemplated that Debtor may hereafter become indebted to
Secured Party in further sum or sums, and all modifications, renewals or
extensions of or substitutions for, any of the foregoing. All such indebtedness
is hereinafter sometimes called the "secured indebtedness" or the
"indebtedness secured hereby."
SECTION III. REPRESENTATIONS AND WARRANTIES.
Debtor represents, warrants and covenants that Debtor is now in a solvent
condition; that no bankruptcy or insolvency proceedings are pending or
contemplated by or against Debtor; that all information, reports, statements and
other data furnished by or on behalf of Debtor to Secured Party prior to
contemporaneously with or subsequent to the execution of this Agreement or in
connection with the indebtedness secured hereby are and shall be true and
correct and do not and will not omit to state any fact or circumstance necessary
to make the statements contained therein not misleading; that Debtor is the
lawful owner of good and marketable title to the Collateral and has good right
and authority to grant a security interest in the Collateral; that the
Collateral is free and clear from all security interests and encumbrances except
the security interest evidenced hereby; that the Collateral is not and will not
become subject to setoff, counterclaim, defense, allowance or adjustment (other
than warranty claims, the aggregate amount of which shall not be material) other
than the security interest of Secured Party under this Agreement; that there is
no financing statement covering any interest of any kind in the Collateral or
its proceeds on file in any public office; that the Collateral and the intended
use thereof by Debtor comply with all applicable laws, rules and regulations;
that the Collateral is free from damage caused by fire or other casualty; that
this Agreement constitutes the legal, valid and bind obligation of Debtor
enforceable against Debtor in accordance with its terms; that the execution,
delivery and performance of this Agreement do not
<PAGE>
and will not contravene or violate any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award presently in
effect and applicable to Debtor or result in a breach of or constitute a default
(with or without the giving of notice or the lapse of time or both) under any
indenture or any loan, credit or other agreement to which Debtor is a party or
by which Debtor or any of Debtor's property may be bound or affected; that the
execution, delivery and performance of this Agreement does not require the
consent or approval of any person including, without limitation, any regulatory
body or governmental authority; and that Debtor will warrant and forever defend
the title to the Collateral and its proceeds against the claims of all persons
whomsoever claiming or to claim the same or any part thereof; that the location
of Debtor is the address set forth at the beginning of this Agreement and in
this regard. Debtor's location is defined to mean (i) Debtor's place of business
if Debtor has only one such place of business; (ii) Debtor's chief executive
office if Debtor has more than one place of business; or (iii) Debtor's
residence if Debtor has no place of business; that all of Debtor's books and
records with regard to its accounts, contract rights, general intangibles and
leases which are a part of the collateral are maintained and kept at the address
of Debtor set forth in this Agreement; that Debtor has never changed its name,
whether by amendment of its organizational documents or otherwise; that no part
of the Collateral is covered by a certificate of title or subject to any
certificate of title law; and that no part of the Collateral consists or will
consist of consumer goods, farm products, timber, minerals and the like
(including oil and gas) or accounts resulting from the sale thereof.
SECTION IV. COVENANTS.
4.1 Debtor covenants and agrees with Secured Party as follows:
(a) Debtor shall make prompt payment, as the same becomes due, of all
indebtedness secured hereby in accordance with the terms and
provisions of the agreements evidencing such indebtedness.
(b) If Debtor is a corporation, Debtor will continuously maintain
Debtor's corporate existence.
(c) Debtor will cause the Collateral to be maintained in accordance
with all applicable laws and rules, regulations and orders promulgated
by all duly constituted authorities. Debtor will not do or suffer to
be done any act whereby the value of any part of the Collateral may be
lessened. Debtor will allow Secured Party or its authorized
representative to inspect the Collateral and inspect, audit and copy
Debtor's books and records pertaining thereto and Debtor will assist
Secured Party or said representative in whatever way necessary to make
such inspection. If Debtor receives notice from any federal, state or
other governmental entity that the Collateral or any use thereof is
not in compliance with any applicable law, rule, regulation or order,
Debtor will promptly furnish a copy of such notice to Secured Party.
(d) Debtor will cause all debts and liabilities of any character
including, without limitation, all debts and liabilities for labor,
material and equipment, incurred in the maintenance of the Collateral
to be promptly paid.
(e) Debtor will cause to be paid prior to delinquency all taxes and
assessments heretofore or hereafter levied or assessed against the
Collateral, or any part thereof, or against the Secured Party for or
on account of the indebtedness secured hereby or the interest created
by this Agreement and will furnish Secured Party with receipts showing
payment of such taxes and assessments at least ten (10) days prior to
the applicable default date thereof.
(f) Debtor will keep that portion of the Collateral which is tangible
personal property insured in an amount equal to the full insurable
value thereof against loss or damage by fire, theft, collision and
other hazards as may be required by Secured Party by policies of fire,
extended coverage and other insurance in such company or companies,
and in the case of motor vehicles, collision insurance, in such
amounts, upon such terms and provisions, and with such endorsements,
all as may be acceptable to Secured Party. Such insurance polices
shall also contain a standard mortgagee's endorsement providing for
payment of any loss to Secured Party. All policies of insurance shall
provide for ten (10) days written minimum cancellation notice to
Secured Party. All drafts or instruments of any kind evidencing
payment under any such insurance policies which come into the
possession of Debtor shall be immediately delivered to Secured Party.
No
<PAGE>
such policies shall be payable to any party other than Secured Party
and Debtor. Debtor shall furnish Secured Party with certificates or
other evidence satisfactory to Secured Party of compliance with the
foregoing insurance provisions. Duplicate originals of all policies,
verifications, binders and cover notes covering any of the Collateral
shall be delivered to Secured Party upon demand. Secured Party may act
as attorney for Debtor in obtaining, adjusting, settling and
cancelling such insurance and endorsing any drafts drawn by insurers
of the Collateral. Secured Party may apply any proceeds of such
insurance which may be received by it in payment on account of the
obligations secured hereby, whether due or not.
(g) If the validity or priority of this Agreement or of any rights,
titles, security interests or other interests created or evidenced
hereby shall be attacked, endangered or questioned, or if any legal
proceedings are instituted with respect thereto, Debtor will give
prompt written notice thereof to Secured Party and, at Debtor's own
cost and expense, will diligently endeavor to cure any defect that may
be developed or claimed, and will take all necessary and proper steps
for the defense of such legal proceedings, and Secured Party (whether
or not named as a party to legal proceedings with respect thereto) is
hereby authorized and empowered to take such additional steps as in
its judgment and discretion may be necessary or proper for the defense
of any such legal proceedings or the protection of the validity or
priority of this Agreement and the rights, titles, security interests
and other interests created or evidenced hereby, and all expenses so
incurred of every kind and character shall be a demand obligation
owing by Debtor and shall bear interest from date of expenditure until
paid at the same rate provided for past-due principal and interest in
the principal obligation (the "Past Due Rate"). The principal
obligation shall be (1) the note secured hereby; (2) if more than one
note is secured hereby, the note with the largest face amount; and (3)
if no note is secured hereby, the obligation with the largest face
amount.
(h) Debtor will, on request of Secured Party, (i) promptly correct
any defect, error or omission which may be discovered in the contents
of this Agreement or in any other instrument executed in connection
herewith or in the execution or acknowledgement thereof; (ii) execute,
acknowledge, deliver, and record or file such further instruments
(including without limitation further security agreements, financing
statements and continuation statements) and do such further acts as
may be necessary, desirable or proper to carry out more effectively
the purposes of this Agreement and such other instruments and to
subject to the security interest hereof and thereof any property
intended by the terms hereof and thereof to be covered hereby and
thereby including specifically, but without limitation, any renewals,
additions, substitutions, replacements or appurtenances to the then
Collateral; and (iii) execute, acknowledge, deliver, procure, and
record or file any document or instrument (including specifically any
financial statement) deemed advisable by Secured Party to protect the
security interest hereunder against the rights or interests of third
persons, and Debtor will pay all costs connected with any of the
foregoing.
(i) Notwithstanding the security interest in proceeds granted herein,
Debtor will not sell, lease, exchange, lend, rent, assign, transfer or
otherwise dispose of all or any part of the Collateral or any interest
therein or permit the title to the Collateral, or any interest therein, to
be vested in any other party, in any manner whatsoever, by operation of law
or otherwise, except for sales in the ordinary course of business or sales
as authorized in this Agreement or in writing by Secured Party.
(j) To the extent not prohibited by law, Debtor will pay, or reimburse
Secured Party for, all costs and expenses, of every character, incurred or
expended from time to time (including, but not limited to, the fees and
expenses of counsel for Secured Party) in connection with the negotiation,
preparation, execution, filing, recording, refiling and re-recording of
this Agreement and all related financing statements and the making,
servicing and collection of the indebtedness secured hereby; any and all
stamp, mortgage and recording taxes; the costs of any title insurance or
lien insurance purchased by Secured Party in connection herewith; all costs
of negotiation, preparation, execution and delivery of any and all
amendments, modifications, supplements, consents, waivers or other
documents or writings relating to the transactions contemplated by this
Agreement; and all costs (including attorneys' fees) of reviewing title
opinions and security opinions relating to the indebtedness secured hereby.
Debtor will reimburse Secured Party for all amounts expended by Secured
Party to satisfy any obligation of Debtor
<PAGE>
under this Agreement or to protect the Collateral. In addition, whether or
not a default shall have occurred, Debtor will pay, or reimburse Secured
Party for, all costs and expenses, of every character incurred or expended
from time to time in connection with the evaluation, monitoring,
administration and protection of the Collateral and the exercise by Secured
Party of any of its rights and remedies hereunder or at law (including, but
not limited to, all appraisal fees, consulting fees, brokerage fees and
commissions, insurance premiums, Uniform Commercial Code search fees, fees
incident to title searches and reports, investigation costs, escrow fees,
attorneys' fees, legal expenses, fees of auditors and accountants, court
costs, fees of governmental authorities, auctioneer fees and expenses, and
all fees and expenses incurred in connection with the marshalling,
guarding, management, operation, removal, maintenance, cleanup, storage,
auction and liquidation of the Collateral). Any amount to be paid or
reimbursed by Debtor to Secured Party shall be a demand obligation owing by
Debtor to Secured Party and, to the extent not prohibited by law, shall
bear interest from the date of expenditure by Secured Party until paid at
the Past Due Rate.
(k) Debtor shall account fully and faithfully for and, if Secured
Party so elects, shall promptly pay or turn over to Secured Party the
proceeds in whatever form received from the sale or disposition in any
manner of any of the Collateral, whether the indebtedness secured hereby is
mature or not, the order and method of application to be in the sole
discretion of Secured Party, except as otherwise specifically authorized
herein. Debtor shall at all times keep the Collateral and its proceeds
separate and distinct from other property of Debtor's and shall keep
accurate and complete records of the Collateral and its proceeds.
(l) Subject to Subsection 4.1(m). of this Agreement, the Collateral is
and shall remain in Debtor's possession or control at all times at Debtor's
risk of loss and be kept at
3606 RESEARCH FOREST DRIVE THE WOODLANDS TX
where Secured Party may inspect it at any time, except for its temporary
removal in connection with its ordinary use or unless Debtor notifies
Secured Party in writing and Secured Party consents in writing in advance
of its removal to another location.
(m) If the security interest evidenced hereby is a purchase money
security interest and the Collateral is not located at the place indicated
above in Subsection 4.1(l) as of the date of this Agreement, the Collateral
shall come into Debtor's possession at the place shown above in Subsection
4.1(l) within thirty (30) days from the date of this Agreement. If the
security interest evidenced hereby is not a purchase money security
interest and the Collateral is not in the state of Texas as of the date of
this Agreement, the security interest in such Collateral shall not attach
to such Collateral until it arrives in the state of Texas.
(n) Debtor will not change its address, location, name, identity or
structure without notifying Secured Party of such change in writing at
least thirty (30) days prior to the effective date of such change.
4.2 Debtor agrees that, if Debtor fails to perform any act or to take any
action which hereunder Debtor is required to perform or take, or to pay any
money which hereunder Debtor is required to pay, Secured Party, in Debtor's name
or in its own name, may but shall not be obligated to perform or cause to be
performed such act or take such action or pay such money, and any expenses so
incurred by Secured Party and any money so paid by Secured Party shall be a
demand obligation owing by Debtor to Secured Party, and Secured Party, upon
making such payment, shall be subrogated to all of the rights of the person,
corporation or body politic receiving such payment. Any amounts due and owing by
Debtor to Secured Party pursuant to this Agreement shall bear interest from the
date such amount is expended by the Secured Party until paid at the Past Due
Rate and shall be a part of the secured indebtedness and shall be secured by
this Agreement and by any other instrument securing the secured indebtedness.
4.3 Until default, Debtor may use the Collateral in any lawful manner not
inconsistent with this Agreement or with the terms or conditions of any policy
of insurance thereon and may also sell or lease the Collateral in the ordinary
course of business, subject to the following additional limitations, if any:
NONE
<PAGE>
A sale in the ordinary course of business does not include a transfer in
partial or total satisfaction of a debt. Until default, Debtor may also use
and consume any raw materials or supplies, the use and consumption of which
are necessary to carry on a Debtor's business.
4.4 At any time prior to the termination of this Agreement, Secured Party
may notify the account debtors or obligors of any accounts, chattel paper,
negotiable instruments or other evidences of indebtedness remitted by Debtor to
Secured Party as proceeds to pay Secured Party directly. Until Secured Party
elects to exercise these rights, Debtor is authorized as agent of Secured Party
to collect and enforce the accounts. The costs of collection and enforcement,
including attorneys' fees and expenses, shall be borne solely by Debtor whether
incurred by Secured Party or Debtor.
SECTION V. EVENTS OF DEFAULT
Debtor shall be in default under this Agreement upon the happening of any
of the following events or conditions (herein called an "Event of Default"):
(a) Debtor shall fail to pay any principal of or interest on any
secured indebtedness as and when due; or
(b) Debtor does not pay any other borrowed money obligation when due
or if the holder of such other obligation declares, or may declare, such
obligation due prior to its stated maturity because of Debtor's default
thereunder; or is in default or in violation of any law or regulation of
any governmental authority having jurisdiction over Debtor or its assets or
property; or
(c) any representation or warranty made in connection with the
execution and delivery of this Agreement, any note evidencing the secured
indebtedness or any other instrument now or hereafter securing the
indebtedness secured hereby shall prove to have been incorrect, false or
misleading when made; or
(d) default shall occur in the punctual performance of any covenant of
Debtor or any other person contained in any note evidencing the secured
indebtedness, this Agreement or in any other instrument now or hereafter
securing or guaranteeing the indebtedness secured hereby; or
(e) a final judgment for the payment of money shall be rendered
against Debtor and the same shall remain undischarged for a period of
thirty (30) days during which execution shall not be effectively stayed; or
(f) Debtor shall make a general assignment for the benefit of
creditors or shall commence (or suffer to be commenced against it) any
proceeding under any bankruptcy, insolvency or reorganization law; or
(g) Debtor shall fail generally to pay its debts as they become due,
or suffer any writ of attachment or execution or any similar process to be
issued or levied against it or substantially all of its property which is
not released, stayed, bonded or vacated within thirty (30) days after its
issue or levy; or
(h) the death, dissolution, liquidation or termination of existence,
insolvency or business failure of Debtor or the sale, conveyance, lease or
other disposition or a substantial part of the assets of Debtor; or
(i) a material adverse change shall occur in the business or financial
condition of Debtor.
SECTION VI. REMEDIES IN EVENT OF DEFAULT
6.1 Upon the occurrence of an Event of Default, or if Secured Party shall
deem payment of Debtor's obligations to be insecure, and at any time
thereafter, Secured Party shall have the option of declaring, without
notice to any person, all indebtedness secured hereby, principal and
accrued interest, to be immediately due and payable.
6.2 Upon the occurrence of an Event of Default, or if Secured Party shall
deem payment of Debtor's obligations to be insecure, and at any time
thereafter, Secured Party is authorized to take possession of the
Collateral and of all books, records and accounts relating thereto and
to exercise without interference from Debtor any and all rights which
Debtor has with respect to the management, possession, operation,
protection or preservation of the Collateral, including the
<PAGE>
right to sell the same for the account of Debtor and to deduct from such
sales proceeds all costs, expenses and liabilities of every character
incurred by Secured Party in collecting such sales proceeds, in managing
and operating, maintaining, protecting or preserving the Collateral and
to apply the remainder of such sales proceeds on the indebtedness
secured hereby in such manner as Secured Party may elect. All such
costs, expenses and liabilities incurred by Secured Party in collecting
such sales proceeds and in managing, operating, maintaining, protecting
or preserving such properties, if not paid out of such sales proceeds as
hereinabove provided, shall constitute a demand obligation owing by
Debtor and shall bear interest from the date of expenditure until paid
at the Past Due Rate, all of which shall constitute a portion of the
secured indebtedness. If necessary, to obtain the possession provided
for above, Secured Party may invoke any and all legal remedies to
dispossess Debtor, including specifically one or more actions for
forcible entry and detainer. In connection with any action taken by
Secured Party pursuant to this paragraph 6.2., Secured Party shall not
be liable for any loss sustained by Debtor resulting from any failure to
sell the Collateral, or any part thereof, or from other act or omission
of Secured Party in managing the Collateral unless such loss is caused
by the willful misconduct and bad faith of Secured Party, nor shall
Secured Party be obligated to perform or discharge any obligation, duty
or liability under any sales agreement covering the Collateral or any
part thereof, or under or by reason of this instrument or the exercise
of rights or remedies hereunder.
6.3 Upon the occurrence of an Event of Default, or if Secured Party shall
deem payment of Debtor's obligations to be insecure and at any time
thereafter, Secured Party shall have all the rights of a secured party
after default under the Uniform Commercial Code of Texas and in
conjunction with, in addition to or in substitution for those rights and
remedies and the rights and remedies provided herein:
(a) Secured Party may enter upon Debtor's premises to take possession
of, assemble and collect the Collateral or to render it unusable; and
(b) Secured Party may require Debtor to assemble the Collateral and make
it available at a place Secured Party designates which is mutually
convenient to allow Secured Party to take possession or dispose of the
collateral; and
(c) Written notice mailed to Debtor as provided herein ten (10) days
prior to the date of public sale of the Collateral or prior to the date
after which private sale of the Collateral will be made shall constitute
reasonable notice; and
(d) It shall not be necessary that Secured Party take possession of the
Collateral or any part thereof prior to the time that any sale pursuant
to the provisions of this paragraph is conducted, and it shall not be
necessary that the Collateral or any part thereof be present at the
location of such sale; and
(e) Prior to application of proceeds of disposition of the Collateral to
the secured indebtedness, such proceeds shall be applied to the expenses
of retaking, holding, preparing for sale or lease, selling, leasing and
the like and the attorneys' fees and legal expenses incurred by Secured
Party, Debtor to remain liable for any deficiency; and
(f) The sale by Secured Party of less than the whole of the Collateral
shall not exhaust the rights of Secured Party hereunder, and Secured
Party is specifically empowered to make successive sale or sales
hereunder until the whole of the Collateral shall be sold; and, if the
proceeds of such sale of less than the whole of the Collateral shall be
less than the aggregate or the indebtedness secured hereby, this
Agreement and the security interest created hereby shall remain in full
force and effect as to the unsold portion of the Collateral just as
though no sale had been made; and
(g) In the event any sale hereunder is not completed or is defective in
the opinion of Secured Party, such sale shall not exhaust the rights of
Secured Party hereunder and Secured Party shall have the right to cause
a subsequent sale or sales to be made hereunder; and
(h) Any and all statements of fact or other recitals made in any bill
of sale or assignment or other instrument evidencing any foreclosure
sale hereunder as to nonpayment of the indebtedness or as to the
occurrence of any default, or as to Secured Party having declared all of
such
<PAGE>
indebtedness to be due and payable, or as to notice of time, place and
terms of sale and the properties to be sold having been duly given, as
to any other act or thing having been duly done by Secured Party, shall
be taken as prima facie evidence of the truth of the facts so stated and
recited; and
(i) Secured Party may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held
by Secured Party, including the sending of notices and the conduct of
sale, but in the name and on behalf of Secured Party.
6.4 All remedies herein expressly provided for are cumulative of any and
all other remedies, existing at law or in equity and are cumulative of
any and all other remedies provided for in any other instrument securing
the payment of the secured indebtedness, or any part thereof, or
otherwise benefitting Secured Party, and the resort to any remedy
provided for hereunder or under any such other instrument provided for
by law shall not prevent the concurrent or subsequent employment of any
other appropriate remedy or remedies.
6.5 Secured Party may resort to any security given by this Agreement or to
any other security now existing or hereafter given to secure the payment
of the secured indebtedness, in whole or in part, and in such portions
and in such order as may seem best to Secured Party in its sole and
uncontrolled discretion, and any such action shall not in any wise be
considered as a waiver of any of the rights, benefits or security
interests evidenced by this Agreement.
6.6 To the full extent Debtor may do so, Debtor agrees that Debtor will
not at any time insist upon, plead, claim or take the benefit or
advantage of any law now or hereafter in force, providing for any
appraisement, valuation, stay, extension or redemption, and Debtor, for
Debtor, Debtor's heirs, devisees, executors, administrators,
representatives, successors, receivers, trustees, and assigns, and for
any and all persons ever claiming any interest in the Collateral, to the
extent permitted by law, hereby waives and releases all rights of
redemption, valuation, appraisement, stay of execution, notice of
intention to mature or declare due the whole of the secured
indebtedness, notice of election to mature or declare due the whole of
the secured indebtedness and all rights to a marshalling of the assets
of Debtor, including the Collateral, or to a sale in inverse order of
alienation in the event of foreclosure of the security interest hereby
created.
SECTION VII. ADDITIONAL AGREEMENTS
7.1 If all of the secured indebtedness be paid as the same becomes due
and payable and if all of the covenants, warranties, undertakings and
agreements made in this Agreement are kept and performed, then and in
that event only, all rights under this Agreement shall terminate and
the agreements made in this Agreement are kept and performed, then
and in that event only, all rights under this Agreement shall
terminate and the Collateral shall become wholly clear of the
security interest evidenced hereby, and such security interest shall
be released by Secured Party in due form at Debtor's cost.
7.2 Secured Party may waive any default without waiving any other prior
to subsequent default. Secured Party may remedy any default without
waiving the default remedied. The failure by Secured Party to
exercise any right, power or remedy upon any default shall not be
construed as a waiver of such default or as a waiver of the right to
exercise any such right, power or remedy at a later date. No single
or partial exercise by Secured Party of any right, power or remedy
hereunder shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right, power or remedy
hereunder may be exercised at any time and from time to time. No
modification or waiver of any provision hereof nor consent to any
departure by Debtor therefrom shall in any event be effective unless
the same shall be in writing and signed by Secured Party and then
such waiver or consent shall be effective only in the specific
instances, for the purpose for which given and to the extent therein
specified. No notice to nor demand on Debtor in any case shall of
itself entitle Debtor to any other or further notice of demand in
similar or other circumstances. Acceptance by Secured Party of any
payment in an amount less than the amount then due on any secured
indebtedness shall be deemed an acceptance on account only and shall
not in any way affect the existence of a default hereunder.
<PAGE>
7.3 Secured Party may at any time and from time to time in writing (a)
waive Debtor's compliance with any covenant herein made by Debtor to
the extent and in the manner specified in such writing; (b) consent
to Debtor's doing any act which hereunder Debtor is prohibited from
doing, or consent to Debtor's failing to do any act which hereunder
Debtor is required to do, to the extent and in the manner specified
in such writing; or (c) release any part of the collateral or any
interest therein from the security interest of his Agreement; or (d)
release any party liable, either directly or indirectly, for the
secured indebtedness or for any covenant herein or in any other
instrument now or hereafter securing the payment of the secured
indebtedness. No such act shall in any way impair the rights of
Secured Party hereunder except to the extent specifically agreed to
by Secured Party in such writing.
7.4 The security interest and other rights of Secured Party hereunder
shall not be impaired by any indulgence, moratorium or release
granted by Secured Party, including but not limited to (a) any
renewal, extension or modification which Secured Party may grant with
respect to any secured indebtedness; (b) any surrender, compromise,
release, renewal, extension, exchange or substitution which Secured
Party may grant in respect of any item of the Collateral, or any part
thereof or any interest therein; or (c) any release or indulgence
granted to any endorser, guarantor or surety of any secured
indebtedness.
7.5 A carbon, photographic or other reproduction of this Agreement or of
any financing statement relating to this Agreement shall be
sufficient as a financing statement.
7.6 Debtor will cause all financing statements and continuation
statements relating hereto to be recorded, filed, re-recorded and
refiled in such manner and in such places as Secured Party shall
reasonably request, and will pay all such recording, filing,
re-recording and refiling taxes, fees and other charges.
7.7 In the event the ownership of the Collateral or any part thereof
becomes vested in a person other than Debtor, Secured Party may,
without notice to Debtor, deal with such person with reference to
this Agreement and to the indebtedness secured hereby in the same
manner as with Debtor without in any way vitiating or discharging
Debtor's liability hereunder or upon the indebtedness secured hereby.
No sale of the Collateral, no forbearance on the part of Secured
Party and no extension of the time for the payment of the
indebtedness secured hereby given by Secured Party shall operate to
release, discharge, modify, change or affect, in whole or in part,
the liability of Debtor hereunder for the payment of the indebtedness
secured hereby or the liability of any other person hereunder or for
the payment of the indebtedness secured hereby, except as agreed in
writing by Secured Party.
7.8 To the extent that proceeds of the secured indebtedness are used to
pay indebtedness secured by any outstanding lien, security interest,
charge or prior encumbrance against the Collateral, such proceeds
have been advanced by Secured Party at Debtor's request and Secured
Party shall be subrogated to any and all rights, security interests
and liens owned by any owner or holder of such outstanding liens,
security interests, charges or encumbrances, irrespective of whether
said liens, security interests, charges or encumbrances are released.
7.9 If any part of the secured indebtedness cannot be lawfully secured
by this Agreement or if any part of the Collateral cannot be lawfully
subject to the security interest hereof to the full extent of such
indebtedness, then all payments made shall be applied on said
indebtedness first in discharge of that portion thereof which is not
secured by this Agreement.
7.10 Secured Party may assign this Agreement so that the assignee shall
be entitled to the rights and remedies of Secured Party hereunder and
in the event of such assignment, Debtor will assert no claims or
defenses it may have against the assignee except those granted in
this Agreement.
7.11 Any notice, request, demand or other communication required or
permitted hereunder shall be given in writing by delivering same in
person to the intended addressee, or by United States Postal Service,
postage prepaid, registered or certified mail, return receipt
requested, or by prepaid telegram (provided that such telegram is
confirmed by mail in the manner previously described), sent to the
intended addressee at the address shown herein, or to such different
<PAGE>
address as the addressee shall have designated by written notice sent
in accordance herewith and actually received by the other party at
least ten (10) days in advance of the date upon which such change of
address shall be effective.
7.12 This Agreement shall be binding upon Debtor, and the heirs,
devisees, administrators, executors, personal representatives,
successors, receivers, trustees and assigns of Debtor, including all
successors in interest of Debtor in and to all or any part of the
Collateral, and shall inure to the benefit of Secured Party and the
successors and assigns of Secured Party. All references in this
Agreement to Debtor or Secured Party shall be deemed to include all
such parties.
7.13 Secured Party in its discretion may, whether or not any of the
indebtedness secured hereby be due, in its name or in the name of
Debtor or otherwise, demand, sue for, collect or receive any money or
other property at any time payable or receivable on account of or in
exchange for, or make any compromise settlement deemed desirable with
respect to, any of the Collateral, but Secured Party shall be under
no obligation to do so.
7.14 Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law. A determination that any provision of this Agreement
is unenforceable or invalid shall not affect the enforceability or
validity of any other provision, affect the enforceability or
validity of such provision as it may apply to any other persons or
circumstances.
7.15 A determination that any provision of this Agreement is
unenforceable or invalid shall not affect the enforceability or
validity of any other unenforceable shall not affect the
enforceability or validity of such provisions it may apply to any
other persons or circumstances.
7.16 Secured Party may, by any employee or employees it designates,
execute, sign, endorse, transfer or deliver in the name of Debtor,
notes, checks, drafts or other instruments for the payment of money
and receipts or any other documents necessary to evidence, perfect
and realize upon the security interests and obligations of this
Agreement.
7.17 Notwithstanding anything to the contrary contained herein, if any
secured indebtedness shall be indebtedness resulting from an
extension of credit to a consumer (as such terms are defined or
described in 12 C.F.R. 227, Regulation AA of the Federal Reserve
Board) hereinafter referred to as "consumer credit obligation" then
the collateral securing any such consumer credit obligation shall not
extend to any nonpossessory security interest in household goods
which is not a purchase money security interest (as defined in said
Regulation AA), and no waiver of any notice herein shall be construed
under any circumstances to extend to any waiver of notice which is
prohibited by Regulation AA.
7.18 The term "Debtor" as used in this Agreement shall be construed as
singular or plural to correspond with the number of persons executing
this Agreement as Debtor. The pronouns used in this Agreement are in
the masculine and neuter gender but shall be construed as feminine,
masculine or neuter as occasion may require.
7.19 If more than one person executes this Agreement as Debtor, their
obligations under this Agreement shall be joint and several.
7.20 The section headings appearing in this Agreement have been inserted
for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this
Agreement. Terms used in this Agreement which are defined in the
Texas Uniform Commercial Code are used with the meanings as therein
defined.
7.21 This Agreement shall be governed by and construed in accordance with
the laws of the state of Texas and the United States of America.
COLLATERAL DESCRIPTION
The Collateral of this Security Agreement is of the following description:
SEE SECTION I
<PAGE>
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SIGNATURE(S) OF DEBTOR:
___________________________________________ Date 8/8/96________________________
LIFECELL CORPORATION
___________________________________________ Date ______________________________
___________________________________________ Date ______________________________
___________________________________________ Date ______________________________
___________________________________________ Date ______________________________
___________________________________________ Date ______________________________
SECURED PARTY: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
BY: ____________________________________________________________________________
TITLE: _________________________________________________________________________
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
The following reflects the information used in calculating the number of
shares in the computation of net loss per share for each of the periods set
forth in the Statements of Operations.
3RD QUARTER ENDED SEPTEMBER 30, 1996
WEIGHTED AVERAGE SHARES OUTSTANDING:
1-Jul-96 4,403,658 shares X 24 days = 105,687,792
25-Jul-96 4,408,658 shares X 7 days = 30,860,606
1-Aug-96 4,408,658 shares X 8 days = 35,269,264
9-Aug-96 4,608,658 shares X 10 days = 46,086,580
19-Aug-96 4,618,270 shares X 7 days = 32,327,890
26-Aug-96 4,630,770 shares X 1 days = 4,630,770
27-Aug-96 4,634,020 shares X 1 days = 4,634,020
28-Aug-96 4,662,770 shares X 2 days = 9,325,540
30-Aug-96 4,664,020 shares X 2 days = 9,328,040
1-Sep-96 4,664,020 shares X 11 days = 51,304,220
12-Sep-96 4,677,400 shares X 13 days = 60,806,200
25-Sep-96 4,685,762 shares X 5 days = 23,428,810
30-Sep-96 4,776,578 shares X 1 days = 4,776,578
---- -----------
92 418,466,310 4,548,547
==== =========== ===============
NET LOSS ($1,012,503)
DIVIDEND ($105,800.00)
AMORTIZATION OF INCREASING
DIVIDEND ($40,881)
INDUCEMENT OF WARRANT
EXERCISE ($351,916)
---------------
($1,511,100.00)
---------------
EPS ($0.33)
===============
YEAR TO DATE ENDED SEPTEMBER 30, 1996
WEIGHTED AVERAGE SHARES OUTSTANDING:
1-Jan-96 4,403,658 shares X 31 days = 136,513,398
1-Feb-96 4,403,658 shares X 29 days = 127,706,082
1-Mar-96 4,403,658 shares X 31 days = 136,513,398
1-Apr-96 4,403,658 shares X 30 days = 132,109,740
1-May-96 4,403,658 shares X 31 days = 136,513,398
1-Jun-96 4,403,658 shares X 30 days = 132,109,740
1-Jul-96 4,403,658 shares X 24 days = 105,687,792
25-Jul-96 4,408,658 shares X 7 days = 30,860,606
1-Aug-96 4,408,658 shares X 8 days = 35,269,264
9-Aug-96 4,608,658 shares X 10 days = 46,086,580
19-Aug-96 4,618,270 shares X 7 days = 32,327,890
26-Aug-96 4,630,770 shares X 1 days = 4,630,770
27-Aug-96 4,634,020 shares X 1 days = 4,634,020
28-Aug-96 4,662,770 shares X 2 days = 9,325,540
30-Aug-96 4,664,020 shares X 2 days = 9,328,040
1-Sep-96 4,664,020 shares X 11 days = 51,304,220
12-Sep-96 4,677,400 shares X 13 days = 60,806,200
25-Sep-96 4,685,762 shares X 5 days = 23,428,810
30-Sep-96 4,776,576 shares X 1 days = 4,776,578
---- -------------
274 1,219,932,066 4,452,307
==== ============= ===============
NET LOSS ($2,880,258)
DIVIDEND ($317,400)
AMORTIZATION OF INCREASING
DIVIDEND ($122,643)
INDUCEMENT OF WARRANT
EXERCISE ($351,916)
---------------
($3,672,217.00)
---------------
EPS ($0.82)
===============
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,139,564
<SECURITIES> 0
<RECEIVABLES> 407,714
<ALLOWANCES> 0
<INVENTORY> 767,152
<CURRENT-ASSETS> 2,707,155
<PP&E> 453,463
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,482,477
<CURRENT-LIABILITIES> 1,687,318
<BONDS> 0
0
5,691,553
<COMMON> 4,746
<OTHER-SE> 5,523,900
<TOTAL-LIABILITY-AND-EQUITY> 3,482,477
<SALES> 560,672
<TOTAL-REVENUES> 816,126
<CGS> 355,647
<TOTAL-COSTS> 1,840,617
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,012,503)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,012,503)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,012,503)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> 0
</TABLE>
