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, 1998
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: 01-19890
LIFECELL CORPORATION
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
DELAWARE 76-0172936
(State or other jurisdiction (IRS Employer
of Incorporation or Identification No.)
organization
3606 RESEARCH FOREST DRIVE 77381
THE WOODLANDS, TEXAS (zip code)
(Address of principal executive office)
(281) 367-5368
(REGISTRANTS 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 October 30, 1998, there were outstanding 11,301,081 shares of common
stock, par value $.001 per share, and 119,084 of Series B Preferred Stock, par
value $.001 per share (which are convertible into approximately an additional
3,841,419 shares of common stock), of the registrant.
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFECELL CORPORATION
BALANCE SHEETS
September 30, December 31,
1998 1997
------------ -------------
(Unaudited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 10,006,540 $ 20,781,026
Short-term investments 4,001,040 -
Accounts and other receivables, net 1,944,549 1,095,904
Inventories 1,342,178 936,398
Prepayments and other 231,279 98,226
Total current assets 17,525,585 22,911,554
------------- -------------
FURNITURE AND EQUIPMENT, net 1,261,473 864,058
INTANGIBLE ASSETS, net 258,853 379,986
------------- -------------
Total assets $ 19,045,911 $ 24,155,598
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 601,839 $ 780,393
Accrued liabilities 1,328,996 1,556,083
Deferred revenues - 59,519
------------- -------------
Total current liabilities 1,930,835 2,395,995
DEFERRED CREDIT 1,500,000 1,500,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series B preferred stock, $.001 par value, 182,205 shares authorized,
119,614 and 125,441 issued and outstanding, respectively 120 125
Undesignated preferred stock, $.001 par value, 1,817,795 shares
authorized, none issued and outstanding - -
Common stock, $.001 par value, 48,000,000 shares authorized
11,283,985 and 11,012,906 shares issued and outstanding respectively 11,284 11,013
Warrants outstanding to purchase 3,182,188 and 3,163,478
shares of common stock, respectively 298,344 299,480
Additional paid-in capital 56,904,751 56,360,465
Accumulated deficit (41,599,423) (36,411,480)
Total stockholders' equity 15,615,076 20,259,603
Total liabilities and stockholders' equity $ 19,045,911 $ 24,155,598
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIFECELL CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30,
--------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES
Product sales $ 2,007,249 $ 1,409,900
Research funded by others 212,406 223,926
Total revenues 2,219,655 1,633,826
COSTS AND EXPENSES
Cost of goods sold 730,875 694,773
Research and development 878,250 553,750
General and administrative 570,655 516,255
Selling and marketing 1,563,429 1,346,120
Total costs and expenses 3,743,209 3,110,898
LOSS FROM OPERATIONS (1,523,554) (1,477,072)
-------------------------
Interest income and other, net 207,247 83,859
NET LOSS $ (1,316,307) $(1,393,213)
LOSS PER COMMON SHARE-BASIC AND DILUTED $ (0.13) $ (0.23)
============== ============
SHARES USED IN COMPUTING
LOSS PER COMMON SHARE-BASIC AND DILUTED 11,258,924 6,941,013
============== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
LIFECELL CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine months ended September 30,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
REVENUES
Product sales $ 5,825,687 $ 3,238,333
Research funded by others 523,390 779,149
Total revenues 6,349,077 4,017,482
COSTS AND EXPENSES
Costs of goods sold 2,278,088 1,704,963
Research and development 2,504,010 1,668,835
General and administrative 2,330,951 2,007,130
Selling and marketing 4,567,322 3,572,769
Total costs and expenses 11,680,371 8,953,697
LOSS FROM OPERATIONS (5,331,294) (4,936,215)
Interest income and other, net 686,348 320,389
NET LOSS $(4,644,946) $(4,615,826)
LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.46) $ (0.86)
============ ============
SHARES USED IN COMPUTING
LOSS PER COMMON SHARE - BASIC AND DILUTED 11,193,848 6,304,204
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
LIFECELL CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months ended September 30,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (4,644,946) $(4,615,826)
Adjustments to reconcile net loss to net cash used in
operating activities -
Depreciation and amortization 409,466 156,644
Change in assets and liabilities -
(Increase) decrease in accounts and other receivables (848,645) (423,229)
(Increase) decrease in inventories (405,780) (141,496)
(Increase) decrease in prepayments and other (133,052) (98,613)
Increase (decrease) in accounts payable and accrued liabilities (587,718) 206,720
Increase (decrease) in deferred revenues and deferred credit (59,519) (32,281)
------------ ------------
Total adjustments (1,625,248) (332,255
------------ ------------
Net cash used in operating activities (6,270,194) (4,948,081)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (620,591) (498,745)
Intangible assets (65,157) (55,466)
Short-term investments (4,001,040) -
------------ ------------
Net cash used in investing activities (4,686,788) (554,211)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock and warrants 543,417 406,294
Proceeds from issuance of notes payable - 65,369
Deferred offering expenses accrued - (66,838)
Dividends paid (360,921) (79,927)
Payments of notes payable - (35,019)
------------ ------------
Net cash provided by financing activities 182,496 289,879
------------ ------------
Net Decrease in Cash and Cash Equivalents (10,774,486) (5,212,413)
Cash and Cash Equivalents at Beginning of Period 20,781,026 10,748,250
------------ ------------
Cash and Cash Equivalents at End of Period $ 10,006,540 $ 5,535,837
============= ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 1,605 $ 4,059
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONDENSED NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND CERTAIN SIGNIFICANT RISKS:
LifeCell Corporation, a Delaware corporation, ("LifeCell" or the "Company") is a
bioengineering company engaged in the development and commercialization of
tissue regeneration and cell preservation products. The Company was
incorporated on January 6, 1992, for the purpose of merging with its predecessor
entity, which was formed in 1986. LifeCell began commercial sales of its first
transplantable tissue product, AlloDerm(r) acellular dermal graft, during 1994.
The future operating results of the Company will be principally dependent on the
market acceptance of its current and future products, competition from other
products or technologies, protection of the Company's proprietary technology,
and access to funding. Accordingly, there can be no assurance of the Company's
future success. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" elsewhere herein and "Risk Factors" in the
Company's annual report on Form 10-K/A, as amended for the year ended December
31, 1997.
2. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission (the
"Commission"). Certain information and footnote disclosures normally included
in the annual financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to those
rules and regulations. This financial information should be read in conjunction
with the financial statements included within the Company's Annual Report on
Form 10-K/A, as amended for the year ended December 31, 1997.
In the opinion of the management of the Company, the accompanying financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) that are necessary for a fair presentation of financial position
and the results of operations for the periods presented. Financial results for
interim periods are not necessarily indicative of the results for the full year
or future interim periods.
3. INVENTORIES
Inventories consist of products in various stages produced for sale and include
the costs of raw materials, labor and overhead. A summary of inventories is as
follows:
<TABLE>
<CAPTION>
(unaudited)
September 30, December 31,
1998 1997
------------ -------------
<S> <C> <C>
Raw materials used in production $ 619,535 $428,406
Work-in-process 347,140 228,071
Finished goods 375,503 279,921
Total inventories $1,342,178 $936,398
========== ========
</TABLE>
4. DIVIDENDS PAYABLE ON SERIES B PREFERRED STOCK
The Series B Preferred Stock bears cumulative dividends, payable quarterly for
five years ending 2001, at the annual rate of $6.00 per share. Dividends may be
paid in cash, in additional shares of Series B preferred stock based on the
stated value of $100 per share, or any combination of cash and Series B
Preferred Stock at the Company's option.
While the shares of Series B Preferred Stock are outstanding or any dividends
are owed thereon, the Company may not declare or pay cash dividends on its
Common Stock.
During the third quarter of 1998, the Company accrued dividends on the Series B
Preferred Stock of $182,076, payable in cash. Such dividend is payable on
November 15, 1998.
During the first nine months of 1998, the Company accrued dividends on the
Series B Preferred Stock of $542,998, of which $179,865 was paid in cash on May
15, 1998 and $181,050 on August 15, 1998.
<PAGE>
5. LOSS PER SHARE
Loss per Common share has been computed by dividing net loss, which has been
increased for imputed and stated dividends on outstanding Preferred Stock, by
the weighted average number of shares of Common Stock outstanding during each
period. In all applicable years, all Common Stock equivalents, including the
Series B Preferred Stock were antidilutive and, accordingly, were not included
in the computation.
During 1997, the Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share," and all prior periods have been retroactively
adjusted to conform to this statement. The implementation of Statement 128 had
no effect on the Company's presentation of earnings per share due to the
antidilutive nature of all of the Company's Common Stock equivalents.
Basic loss per Common share was calculated as follows (unaudited):
<TABLE>
<CAPTION>
Three Months ended September 30, Nine Months ended September 30,
-------------------------------- --------------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Loss $(1,316,307) $(1,393,213) $(4,644,946) $(4,615,825)
Less: Preferred dividends (182,076) (187,236) (542,998) (773,279)
------------ ------------ ------------ ------------
Net Loss available per Common Share-basic $(1,498,383) $(1,580,449) $(5,187,944) $(5,389,104)
============ ============ ============ ============
Weighted average shares outstanding-basic 11,258,924 6,941,013 11,193,848 6,304,204
============ ============ ============ ============
Loss per Common Share-basic $ (0.13) $ (0.23) $ (0.46) $ (0.86)
============ ============ ============ ============
</TABLE>
Diluted loss per Common Share is the same as basic loss per share due to the
antidilutive nature of all of the Company's Common Stock equivalents.
4. COMMITMENTS AND CONTINGENCIES
The Company is subject to numerous risks and uncertainties and from time to time
may be subject to various claims in the ordinary course of its operations. The
Company maintains insurance coverage for events and in amounts that it deems
appropriate. There can be no assurance that the level of insurance maintained
will be sufficient to cover any claims incurred by the Company or that the type
of claims will be covered by the terms of insurance coverage.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion of operations and financial condition of LifeCell
should be read in conjunction with the Financial Statements and Notes herein.
Certain statements set forth below constitute "Forward-Looking Statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. See "Special
Note Regarding Forward-Looking Statements and Risk Factors."
GENERAL AND BACKGROUND
LifeCell is a bioengineering company engaged in the development and
commercialization of tissue regeneration and cell preservation products. The
Company's patented tissue processing and cell preservation technologies serve as
platforms for a broad range of potential products addressing significant
clinical needs in multiple markets. The Company's first commercial product is
AlloDerm, a tissue graft consisting of an extracellular tissue matrix that
retains the essential biochemical and structural composition of human dermis.
The Company believes that AlloDerm is the only commercial tissue transplant
product that promotes normal human soft tissue regeneration. The Company
currently markets AlloDerm in the United States and internationally for use in
reconstructive plastic, dental and burn surgery, and it has been successfully
transplanted in approximately 30,000 patients. LifeCell's development programs
include Micronized AlloDerm (tm) (AlloDerm reduced to the size necessary for
needle injection), vascular grafts, nerve connective tissue, heart valves and
ThromboSol(tm) platelet storage solution.
<PAGE>
Since inception, LifeCell's activities have been financed through the public and
private sale of equity securities, through product sales, through a corporate
alliance with Medtronic, Inc. and through the receipt of government grants and
contracts.
LifeCell began the sale of AlloDerm grafts as a dermal replacement in the
grafting of third-degree burns in December 1993 and commenced commercial
activities in 1994. LifeCell commenced the sale of AlloDerm for periodontal
surgery in September 1995 and for reconstructive plastic surgery uses in
November 1995. To date, proceeds from the sale of AlloDerm products have not
been sufficient to fund in full the Company's operating activities.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
The net loss for the three months ended September 30, 1998, decreased 6% to
approximately $1.3 million compared to approximately $1.4 million for the same
period of 1997. The decrease was principally attributable to increased revenues
from product sales, as well as increased income from investments. These
increased revenues were offset in part by higher costs associated with the
Company's increased marketing activities for its AlloDerm products, increased
investment in the Company's product development programs and increased
expenditures for the infrastructure to support these activities.
Total revenues for the three months ended September 30, 1998, increased 36% to
approximately $2.2 million compared to approximately $1.6 million for the same
period of 1997. Approximately $597,000 of such increase was attributable to
increased sales of products, which were the result of expanded sales and
marketing activities and increased distribution activities during the 1998
period.
Cost of goods sold for the three months ended September 30, 1998 was
approximately $731,000, resulting in a gross margin of approximately 64%. The
gross margin for the same period of 1997 was approximately 51%. The increase in
gross margin was principally attributable to the implementation of certain
production efficiencies and the allocation of fixed costs to higher volumes of
products produced in 1998, as well as increases in sales of certain higher
margin AlloDerm products and prices of certain AlloDerm products.
Research and development expenses for the three months ended September 30, 1998,
increased 59% to approximately $878,000 compared to approximately $554,000 for
the comparable period in 1997. The increase in research and development expense
was primarily attributable to increased animal and clinical studies to expand
the uses of AlloDerm. In addition, the Company has dedicated increased
resources to product development programs such as Micronized AlloDerm(tm) and
vascular grafts.
General and administrative expenses during the three months ended September 30,
1998, increased 11% to approximately $571,000 compared to approximately $516,000
for the same period of 1997. The increase was principally attributable to
several factors, including the recruitment and hiring of personnel to support
the expansion of sales of AlloDerm and products under development.
Selling and marketing expenses increased 16% to approximately $1.6 million
during the three months ended September 30, 1998 compared to approximately $1.3
million for the same period of 1997. The increase was primarily attributable to
the addition of domestic sales and marketing personnel and increased
international marketing costs related to AlloDerm.
Interest income and other, net increased 147% to approximately $207,000 during
the three months ended September 30, 1998 compared to approximately $84,000 for
the same period of 1997. The increase was principally attributable to higher
funds available for investment during the current period as a result of the
approximately $16.0 million net proceeds received from the Company's December
1997 public offering of shares of common stock.
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
The net loss for the nine months ended September 30, 1998, increased 1% to
approximately $4.6 million compared to approximately $4.6 million for the same
period of 1997. The increase was principally attributable to higher costs
associated with the Company's increased marketing activities for its AlloDerm
products, increased investment in the Company's product development programs and
increased expenditures for the infrastructure to support these activities. The
increase in net loss was offset partially by increased product sales, as well
as, higher interest income from investments.
Total revenues for the nine months ended September 30, 1998, increased 58% to
approximately $6.3 million compared to approximately $4.0 million for the same
period of 1997. An approximately $2.6 million increase in sales of products
were the result of expanded sales and marketing activities and increased
distribution activities during the 1998 period. This increase was offset in
part by an approximately $256,000 decrease in revenues from funded research and
development. The research and development funding available to the Company
through grants and alliances was lower during the nine months ended September
30, 1998 compared to the same period of 1997. Amounts recognized as revenues
under such cost-reimbursement arrangements are for expenses incurred during the
periods.
Cost of goods sold for the nine months ended September 30, 1998 was
approximately $2.3 million resulting in a gross margin of approximately 61%.
The gross margin for the same period of 1997 was approximately 47%. The
increase in gross margin was principally attributable to the implementation of
certain production efficiencies and the allocation of fixed costs to higher
volumes of products produced in 1998, as well as an increase in sales of certain
higher margin AlloDerm products and prices of certain AlloDerm products.
Research and development expenses for the nine months ended September 30, 1998,
increased 50% to approximately $2.5 million compared to approximately $1.7
million for the comparable period in 1997. The increase in research and
development expense was primarily attributable to increased animal and clinical
studies for the expanding uses of AlloDerm. In addition, the Company has
dedicated increased resources to product development programs such as Micronized
AlloDerm (tm).
General and administrative expenses during the nine months ended September 30,
1998 increased 16% to approximately $2.3 million compared to approximately $2.0
million for the same period of 1997. The increase was attributable to various
factors, including the fee paid during the second quarter to NASDAQ in
connection with the listing of the Company's common stock on the NASDAQ National
Market System. In addition, the increase was related to a reduction in the
value of certain intangible assets recorded in the first quarter of 1998, the
costs associated with retaining a financial advisor for the company's business
development activities and the recruitment and hiring of additional personnel to
support the Company's commercialization of AlloDerm and products under
development.
Selling and marketing expenses increased 28% to approximately $4.6 million
during the nine months ended September 30, 1998, compared to approximately $3.6
million for the same period of 1997. The increase was primarily attributable to
the addition of domestic sales and marketing personnel, expansion of marketing
activities as well as increased international selling and marketing costs
related to AlloDerm.
Interest income and other, net, increased 114% to approximately $686,000 during
the nine months ended September 30, 1998, compared to approximately $320,000 for
the same period of 1997. The increase was principally attributable to higher
funds available for investment during the current period as a result of the
approximately $16.0 million net proceeds received from the Company's December
1997, public offering of shares of common stock.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, LifeCell's principal sources of funds have been equity
offerings, product sales, external funding of research activities and interest
on investments.
LifeCell expects to incur substantial expenses in connection with its efforts to
expand sales and marketing of AlloDerm, develop expanded uses for AlloDerm,
conduct the Company's product development programs (including costs of clinical
studies), prepare and make any required regulatory filings, introduce products,
participate in technical seminars and support ongoing administrative and
research and development activities. The Company currently intends to fund
these activities from its existing cash resources, sales of products and
research and development funding received from others. While the Company
believes that its existing available funds will be sufficient to meet its
current operating and capital requirements through at least mid 2000, there can
be no assurance that such sources of funds will be sufficient to meet these
future expenses. If adequate funds are not available, the Company expects it
will be required to delay, scale back or eliminate one or more of its product
development programs. The Company's need for additional financing will be
principally dependent on the degree of market acceptance achieved by the
Company's products and the extent to which the Company can achieve substantial
growth in product sales during the remainder of 1998 and 1999, and the extent to
which the Company may decide to expand its product development efforts. There
can be no assurance that the Company will be able to obtain any such additional
financing on acceptable terms, if at all.
In June 1998, LifeCell received proceeds of $500,000 from to the sale of the
Company's Common Stock to an unaffiliated party in connection with the
settlement of prior litigation. The selling price, as determined by the
settlement agreement, was $7.62 per share.
LifeCell has incurred losses since inception and therefore has not been subject
to federal income taxes. As of December 31, 1997, LifeCell had net operating
loss (NOL) and research and development tax credit carryforwards for income tax
purposes of approximately $31.8 million and $420,000, respectively, available to
reduce future income tax and tax liabilities. Federal tax laws provide for a
limitation on the use of NOL and tax credit carryforwards following certain
ownership changes that could limit LifeCell's ability to use its NOL and tax
credit carryforwards. The Company's sale of common stock in a public offering
in December 1997 resulted in an ownership change for federal income tax
purposes. Taking into account the ownership change, the Company estimates that
the amount of NOL carryforwards and the credits available to offset taxable
income will be approximately $2.6 million per year on a cumulative basis.
Accordingly, if LifeCell generates taxable income in any year in excess of its
then cumulative limitation, the Company may be required to pay federal income
taxes even though it has unexpired NOL and tax credit carryforwards.
YEAR 2000 COMPLIANCE.
In recent years, the Company has been replacing and enhancing its information
systems to gain operational efficiencies and keep pace with the Company's
growth. In conjunction with these activities, the Company has been preparing
its information systems for the year 2000.
The Company has completed a comprehensive assessment of the impact of the year
2000 on its internal information systems and applications and intends to make
the necessary revisions or upgrades to its systems to render them year 2000
compliant. The Company is also focusing on compliance attainment efforts and
key interfaces with vendors. To date, all of the Company's critical software
applications have been certified Year 2000 compliant. The Company's computer
hardware is in the process of final testing, and the Company expects that it
will be compliant by the first quarter of 1999. Notwithstanding the Company's
efforts, the Company could experience disruptions to some aspects of its
activities and operations as a result of non-compliant systems utilized by the
Company or unrelated third parties. The Company is, developing, therefore,
contingency plans to mitigate the extent of any such potential disruption to
business operations. The Company does not expect that the costs of addressing
potential year 2000 issues will have a material adverse impact on the Company's
results of operations or financial position.
There can be no assurances that the efforts or the contingency plans related to
the Company's systems, or those of others relied upon by the Company, will be
successful or that any failure to convert, upgrade or plan appropriately for
contingencies would not have a material adverse effect on the Company.
The foregoing statements are intended to be and are hereby designated "Year 2000
Readiness Disclosure" statements within the meaning of the Year 2000 Information
and Readiness Disclosure Act.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS.
Certain of the statements contained in this report are Forward-Looking
Statements. While these statements reflect the Company's beliefs as of the date
of this report, they are subject to uncertainties and risks that could cause
actual results to differ materially. In addition, the operations and activities
of the Company and investments in its securities are subject to certain
significant risks. These risks include, but are not limited to, the demand for
the Company's products and services, economic and competitive conditions,
competitive products and technologies, uncertainty of patent protection, access
to borrowed or equity capital on favorable terms, and other risks detailed in
the Company's annual report on Form 10-K/A, as amended, for the year ended
December 31, 1997.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company from time to time may be subject to various claims in the ordinary
course of its operations. The Company maintains insurance coverage for events
and in amounts that it deems appropriate.
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.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
10.1 Agreement dated August 19, 1998 between LifeCell Corporation and Paul
M. Frison
10.2 Agreement dated October 5, 1998 between LifeCell Corporation and Paul
G. Thomas
10.3 Letter agreement dated September 8, 1998 between LifeCell Corporation
and Paul G. Thomas, as amended by letter agreements dated September 9,
1998 and September 29, 1998
27.1 Financial Data Schedule
b. Reports on Form 8-K
NONE
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused report to be signed on its behalf by the undersigned
thereunto duly authorized.
LIFECELL CORPORATION
Date: November 13, 1998 By: /s/ Paul G. Thomas
---------------------
Paul G. Thomas
President and Chief
Executive Officer
Date: November 13, 1998 By: /s/ Lynne P. Hohlfeld
------------------------
Lynne P. Hohlfeld
Controller, Principal
Accounting Officer
<PAGE>
EXHIBIT INDEX
10.1 Agreement dated August 19, 1998 between LifeCell Corporation and Paul
M. Frison
10.2 Agreement dated October 5, 1998 between LifeCell Corporation and Paul
G. Thomas
10.3 Letter agreement dated September 8, 1998 between LifeCell Corporation
and Paul G. Thomas, as amended by letter agreements dated September 9,
1998 and September 29, 1998
27.1 Financial Data Schedule
Exhibit 10.1
LIFECELL CORPORATION
PAUL M. FRISON
AGREEMENT
---------
This Agreement (this "Agreement") is made effective for all purposes and in
all respects as of August 19, 1998, by and between LifeCell Corporation, a
Delaware corporation (the "Company"), and Paul M. Frison (the "Executive").
WHEREAS, the Executive has served the Company as its chief executive
officer since May 1986;
WHEREAS, both the Company and the Executive have determined that it is in
the Company's best interest to effect an executive succession plan in respect of
the executive services rendered by the Executive;
WHEREAS, the Executive's knowledge, expertise, experience and skills are
valuable to the Company and will continue to be so upon and after the date (the
"Successor Effective Date") on which the first successor to the Executive (the
"Successor") has been elected President and Chief Executive Officer of the
Company by the Board of Directors of the Company (the "Board") and has assumed
such offices;
NOW, THEREFORE, in view of the foregoing, and in recognition of the
Executive's valuable contributions to the success of the Company, the mutual
promises and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Executive, intending legally to be bound, agree as follows:
1. Term. Subject to the specific provisions for termination set forth
----
herein, the term of this Agreement shall be for the period beginning on the date
hereof and ending on the later of (i) the last day of the calendar month in
which occurs the fourth anniversary of the Successor Effective Date, or (ii)
October 31, 2002. This Agreement shall terminate upon the occurrence of an
event specified in Section 8, or upon payment of all amounts due hereunder after
the death of the Executive. The Executive shall be employed by the Company in
accordance with the provisions hereof during the period beginning on the date
hereof and ending on the date the Agreement terminates under the preceding
provisions of this Section 1 (the "Term"). The Term shall consist of two
periods, the Initial Period and the Subsequent Period. The Initial Period shall
commence on the date hereof and terminate on the last day of the calendar month
in which occurs the second anniversary of the Successor Effective Date. The
Subsequent Period shall commence on the date immediately succeeding the date of
expiration of the Initial Period and terminate on the date of expiration of the
Term.
2. Nature of Relationship. During the Term, the Executive shall be an
------------------------
employee of, rather than an independent contractor with respect to, the Company.
3. Duties of Executive.
---------------------
(a) Prior to Successor Effective Date. Prior to the Successor
---------------------------------
Effective Date, the Executive shall continue to serve the Company as Chairman of
the Board, President and Chief Executive Officer and shall perform all the
proper duties, functions and authorities of those offices.
(b) Upon Successor Effective Date. Commencing on the Successor
------------------------------
Effective Date, the Executive will serve as an employee of the Company in such
advisory capacities as reasonably may be designated by the Board from time to
time during the remainder of the Term, and shall render such advisory services
as are reasonably consistent with such capacities.
(c) Other Activities. Notwithstanding the provisions of this
----------------
Section 3 or any other provisions hereof, it is understood that commencing on
the Successor Effective Date, the Executive may engage in such activities on
such terms and conditions for such other person as the Executive in his sole
discretion shall desire so long as such activities do not interfere materially
with or detract materially from the Executive's performance of his duties
hereunder. Notwithstanding the immediately preceding sentence, during the Term
the Executive may not engage in any activities for Advanced Tissue Sciences,
Inc., Genzyme Corporation, Organogenesis, Inc, Ortec International, Inc. or any
other company that currently or in the future is engaged in any manner in any
business relating to tissue regeneration products.
4. Compensation During the Initial Period. For all the duties to be
-----------------------------------------
performed by the Executive hereunder during the portion of the Initial Period
commencing on the date hereof and terminating on the Successor Effective Date,
the Executive shall receive a base salary at an annual rate of $250,000 during
the duration of such portion of the Initial Period, which monthly amount of such
base salary currently is and shall continue to be $20,833.33. For all the
duties to be performed by the Executive during the portion of the Initial period
commencing on the first day succeeding the Successor Effective Date and
terminating on the date of expiration of the Initial Period, the Executive shall
receive a base salary at an annual rate of $238,000 during the duration of such
portion of the Initial Period, which monthly amount of such base salary shall be
$19,833.33. Such base salaries shall be payable to the Executive in
installments in accordance with the Company's policy for the payment of
executive salaries as in effect from time to time during the Initial Period.
5. Benefits During the Initial Period.
--------------------------------------
During the Initial Period:
(a) Disability Coverage. The Executive shall continue to
--------------------
participate in any disability program maintained by the Company in which he is a
participant on the date hereof and shall be eligible to participate in any other
disability program generally offered to other executive employees of the Company
from time to time after the date hereof, or, in the event and to the extent such
participation is not permitted pursuant to the terms thereof, the Company shall
provide the Executive with substantially the same benefits thereof, to the
extent that the Executive continues to contribute to the cost thereof to the
same extent that such contribution is required of the other executive officers
of the Company, until the first to occur of the following: (i) the date on which
coverage ceases under the terms of the program as a result of the Executive's
failure to make timely contributions or premium payments required under the
program, (ii) the date on which the disability program is terminated without the
establishment of a successor disability program or (iii) the expiration of the
Initial Period.
(b) Group Life and AD&D Insurance. The Executive shall continue to
-----------------------------
participate in any group life and accidental death and dismemberment insurance
program maintained by the Company in which he is a participant on the date
hereof and shall be eligible to participate in any other group life and
dismemberment insurance program generally offered to other executive employees
of the Company from time to time after the date hereof, or, in the event and to
the extent such participation is not permitted pursuant to the terms thereof,
the Company shall provide the Executive with substantially the same benefits
thereof, to the extent that the Executive continues to contribute to the cost
thereof to the same extent that such contribution is required of the other
executive officers of the Company, until the first to occur of the following:
(i) the date on which coverage ceases under the terms of the program as a result
of the Executive's failure to make timely contributions or premium payments
required under the program, (ii) the date on which the program is terminated
without the establishment of a successor group life insurance program or (iii)
the expiration of the Initial Period.
(c) Medical, Vision and Dental Benefits. The Executive and his
-----------------------------------
eligible dependents shall continue to participate in any medical, vision and
dental benefit program maintained by the Company under which they are covered on
the date hereof and shall be eligible to participate in any other medical,
vision or dental benefit program generally offered to other executive employees
of the Company from time to time after the date hereof, or, in the event and to
the extent such participation is not permitted pursuant to the terms thereof,
the Company shall provide the Executive with substantially the same benefits
thereof, to the extent that the Executive continues to contribute to the cost
thereof to the same extent that such contribution is required of the other
executive officers of the Company, until the first to occur of the following:
(i) the date on which coverage ceases under the terms of a program as a result
of the Executive's failure to make timely contributions or premium payments
required under the program, (ii) the date on which a program is terminated
without the maintenance of any successor program or (iii) the later to occur of
(A) April 1, 2002, and (B) the expiration of the Initial Period, and, in
addition, upon the expiration of such coverage under any such medical, vision or
dental benefit program, the Executive and his eligible dependents will have the
right to continue coverage under the program to the extent required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(d) Personal Life Insurance Plan. The Company shall, at its own
------------------------------
expense,continue in force the Executive's personal life insurance policies, the
expenses of which are currently borne by the Company, until the expiration of
the Initial Period, provided, however, that in the event the aggregate annual
expenses incurred by the Company in any calendar year during the Term to
continue such policies in force exceed $6,000, and the Company notifies the
Executive on or before the January 15 immediately following any such calendar
year of the amount of any such excess, the Company shall not be obligated to
continue such policies in force unless the Executive reimburses to the Company
the amount of any such excess on or before the January 31 immediately following
any such calendar year.
(e) Vacation. The Executive shall continue to ccrue vacation
--------
benefitsin accordance with the terms of the Company's vacation policy in effect
on the date hereof and as such policy may be changed from time to time
thereafter by the Company, until the Successor Effective Date.
(f) Section 401(k) Plan. At the Executive's option, he may
--------------------
continue to participate in the Company's qualified cash or deferred arrangement
described in section 401(k) of the Internal Revenue Code of 1986, as amended, in
accordance with the terms of such plan, until the expiration of the Initial
Period.
(g) Stock Purchase Plan. The Executive shall be eligible to
---------------------
participate in the LifeCell Corporation Employee Stock Purchase Plan to the
extent that he satisfies the eligibility requirements of that plan, until the
expiration of the Initial Period.
(h) Equivalent Participation. The terms and conditions of the
-------------------------
Executive's participation in the benefit programs specified in this Section 5
shall be substantially equivalent to the terms and conditions of participation
in such programs by other executives of the Company.
(i) Life Insurance Policy Purchase Option. Upon expiration of the
--------------------------------------
Initial Period, the Executive shall have the option to acquire any life
insurance policies on his life upon payment to the Company of the cash surrender
value, if any, of such policies.
6. Compensation and Benefits During the Subsequent Period. For all the
------------------------------------------------------
duties to be performed by the Executive hereunder during the Subsequent Period,
the Executive shall receive a base salary at an annual rate of $12,000 during
the duration of the Term. The monthly amount of such base salary shall be
$1,000. Such base salary shall be payable to the Executive in installments in
accordance with the Company's policy for the payment of executive salaries as in
effect from time to time during the Subsequent Period. During the Subsequent
Period, the Executive shall not be entitled to participate in any bonus or other
benefit program maintained by the Company, other than (a) in respect of any
stock options held by the Executive on the date hereof, (b) pursuant to the
provisions of Section 5(c)(iii) hereof or (c) pursuant to any program in which
the participation of the Executive is required pursuant to applicable law or the
terms of such program and may not be declined or waived by the Executive.
7. Miscellaneous Provisions Regarding Duties, Compensation and
----------------------------------------------------------------
Benefits.
- --------
(a) Service on Board of Directors. The Company shall take all
-------------------------------
efforts reasonably within its control to cause the Executive to remain a member
of the Board and the Chairman of the Board of Directors until the annual meeting
of stockholders of the Company held in 1999, subject to any actions taken or not
taken by any person in respect of compliance with any applicable fiduciary
duties.
(b) Performance Bonus. Irrespective of the date of the occurrence
------------------
of the Successor Effective Date, the Company shall pay the Executive a cash
bonus in accordance with the provisions of the Company's 1998 incentive bonus
program in the amount equal to the amount that would have been paid to him under
such program had he remained the President and Chief Executive Officer of the
Company through December 31, 1998.
(c) Stock Options. The Executive currently holds the stock
--------------
options described on Annex A hereto represented by the stock option agreements
-------
attached as Attachments 1 through 6 thereto.
-------------- -
(d) Expenses. The Executive shall be reimbursed for his
--------
reasonable business and travel expenses in accordance with the general
reimbursement policy of the Company then in effect with respect to its
executives and as such policy may be changed from time to time thereafter by the
Company, until the expiration of the Term, provided that the expenses are
incurred in connection with the performance of services by the Executive
specifically requested by the Board, and the Executive has submitted to the
Company on a timely basis such documentation as may be necessary to substantiate
such expenses and the business purpose thereof.
(e) Deductions. All compensation of any nature whatsoever payable
----------
to the Executive hereunder shall be subject to deductions by the Company for
applicable social security taxes, federal, state and municipal taxes and other
charges as may now be in effect but which may hereinafter be enacted or required
with respect to compensation paid to an employee.
(f) Legal Status. The parties acknowledge that the Company
-------------
makes no representation or warranty with respect to the status of the
compensation paid or benefits provided to Executive hereunder under any
applicable tax or other laws or regulations.
8. Termination for Cause. Upon an Event of Termination for Cause, this
---------------------
Agreement shall terminate and the Company will pay to the Executive and provide
to the Executive only the compensation and benefits provided for herein earned
and due but unpaid through the date of such termination. An "Event of
Termination for Cause" shall have occurred if (a) the Executive has been
convicted by a court of competent jurisdiction of a crime involving moral
turpitude, including but not limited to fraud, theft, embezzlement or any crime
that results in or is intended to result in personal enrichment at the expense
of the Company or (b) the Executive has committed acts amounting to gross
negligence or willful misconduct to the material detriment of the Company.
Whether an Event of Termination for Cause has occurred shall be determined by an
independent arbitrator under the rules of the American Arbitration Association.
9. Severability. If any provision of this Agreement shall be held by a
------------
court of competent jurisdiction invalid or unenforceable, the remainder of this
Agreement shall nevertheless remain in full force and effect. If any provision
is held by a court of competent jurisdiction invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full force
and effect in all other circumstances.
10. Inurement. This Agreement shall be binding upon, and shall inure to
---------
the benefit of, the Company and the Executive and their respective heirs,
personal and legal representatives, successors and assigns. With respect to and
not in limitation of the provisions of the immediately preceding sentence, it is
understood that in the event of the death of the Executive during the Term, all
amounts that would have become payable thereafter to the Executive pursuant to
Section 4, 6, 7(b) and 7(d) hereof had he survived to the end of the Term and
performed all services required hereunder shall become immediately due and
payable to the Executive's heirs and personal and legal representatives.
11. Governing Law. This Agreement and the rights and obligations of
--------------
the parties hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Texas and, to the extent controlling,
applicable federal laws of the United States of America.
12. Notices. Any notice required to be given shall be sufficient if it
-------
is in writing, hand delivered or sent by certified or registered mail, return
receipt requested, first-class postage prepaid, in the case of the Executive, to
his residence at the address set forth on the signature page hereof or such
other address of which the Executive may hereafter notify the Company, and, in
the case of the Company, to the office address of the Chief Financial Officer of
the Company set forth on the signature page hereof or such other address of
which the Company may hereafter notify the Executive.
13. Entire Agreement. Except as specified herein, this Agreement
-----------------
contains the entire agreement and understanding by and between the Company and
the Executive with respect to the subject matter hereof, and supersedes all
other representations, promises, agreements, understandings or negotiations
between the parties regarding the subject matter hereof, whether written or
oral, not contained herein, including without limitation thereto, that certain
Agreement dated as of July 1, 1997, between the Company and the Executive.
Notwithstanding the foregoing, nothing in this Agreement shall supersede the
Confidentiality, Inventions and Discoveries and Non-Competition Agreement, dated
as of January 25, 1992, between the Company and the Executive, which agreement
the Company and the Executive hereby acknowledge, confirm and agree is in full
force and effect.
14. Amendments and Waivers. No change or modification of this
------------------------
Agreement shall be valid or binding unless it is in writing and duly executed by
both parties hereto. No waiver of any provision of this Agreement shall be
valid unless it is in writing and signed by the party to be charged thereby. No
valid waiver of any provision of this Agreement at any time shall be deemed a
waiver of any other provision of this Agreement at such time or at any other
time.
15. Assignments. This Agreement is a personal services contract. The
-----------
rights and obligations of the Executive hereunder may not be sold, transferred,
delegated, assigned, pledged or hypothecated and any attempted assignment,
transfer or sale shall be void.
16. Captions. The captions of the various sections and subsections of
--------
this Agreement have been inserted only for purposes of convenience and shall not
be deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first above written.
"Company":
---------
LIFECELL CORPORATION
By /s/ Michael E. Cahr
------------------------
Michael E. Cahr, Chairman of the
Compensation Committee of the
Board of Directors
By /s/ J. Donald Payne
----------------------
J. Donald Payne
Vice President and Chief Financial Officer
3606 Research Forest Drive
The Woodlands, Texas 77381
"Executive":
---------
By /s/ Paul M. Frison
---------------------
Paul M. Frison
102 North Wynden Estates Court
Houston, Texas 77056
<PAGE>
LIFECELL CORPORATION
SECOND AMENDED AND RESTATED 1992 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
This stock option agreement amends and restates in its entirety that
certain stock option agreement dated June 8,1994 by and between LifeCell
Corporation (the "Company") and Paul M. Frison.
Under the terms and conditions of the Second Amended and Restated 1992
Stock Option Plan (the "Plan"), a copy of which is attached hereto and
incorporated herein by reference, LifeCell Corporation hereby grants Paul M.
Frison (the "Optionee") the option to purchase 38,319 shares of the Company's
Common Stock, $.001 par value, at the price of $3.00 per share, subject to
adjustment as provided in the Plan.
This option shall be for a term commencing on the date hereof and ending June 7,
2004 unless sooner terminated by reason of your termination of employment, as
provided in the Plan.
This option shall be exercisable at the rate and in the following manner:
Vesting Date Vesting Percentage
------------- -------------------
June 8, 1995 25%
June 8, 1996 50%
June 8, 1997 75%
June 8, 1998 100%
This option is an incentive stock option which is intended to be governed
by Section 422 of the Internal Revenue Code of 1986, as amended.
The Optionee hereby accepts and agrees to be bound by all the terms and
conditions of the Plan which pertain to incentive stock options granted under
the Plan.
Granted the 8th day of June, 1994.
"Company"
---------
LIFECELL CORPORATION
By /s/ Stephen A. Livesey
-------------------------
Stephen A. Livesey, M.D., Ph.D.
Executive Vice President and
Chief Scientific Officer
ACCEPTED:
"Optionee"
/s/ Paul M. Frison
- ---------------------
Paul M Frison
Date /d/ June 21, 1994
--------------------
<PAGE>
LIFECELL CORPORATION
SECOND AMENDED AND RESTATED 1992 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
This stock option dated as of December 13, 1995, is by and between LifeCell
Corporation and Paul M. Frison.
Under the terms and conditions of the Second Amended and Restated 1992 Stock
Option
Plan (the "Plan"), a copy of which is attached hereto as Exhibit A and
---------
incorporated herein by
reference, the Company hereby grants to Paul M. Frison (the "Optionee") in the
substitution for
those certain options set forth in Exhibit B hereto the previously granted under
---------
the Plan (the "prior
Options") the option to purchase 57,008 shares of the Company's Common Stock,
$.001 par value
per share, at the price of $2.50 per share, subject to adjustment as provided in
the Plan (the
"Option").
The Option shall be for a term commencing on the date hereof and ending
December 12, 2005, unless sooner terminated by reason of your termination of
employment, as provided in the Plan.
The Option shall be exercisable at the rate and in the following manner:
Vesting Date Vesting Percentage
December 13, 1995 50%
June 4, 1996 75%
June 4, 1997 100%
The Optionee agrees that upon execution of this Option Agreement by the
Company and the Optionee, the Prior Options shall terminate and the Optionee
will surrender to the Company for cancellation the stock option agreement or
agreements evidencing the Prior Options.
The Option is an incentive stock option which is intended to be governed by
Section 422 of the Internal Revenue Code of 1986, as amended.
The Optionee hereby accepts and agrees to be bound by all of the terms and
conditions of the Plan which pertain to incentive stock options granted under
the Plan.
Granted the 13th day of December, 1995.
"Company"
LifeCell Corporation
By /s/ Stephen A. Livesey
-------------------------
Stephen A. Livesey
EVP & Chief Scientific Officer
ACCEPTED:
"Optionee"
By /s/ Paul M. Frison /d/ January 17, 1996
-------------------------------------------------
Paul M. Frison Date
<PAGE>
LIFECELL CORPORATION
SECOND AMENDED AND RESTATED 1992 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
This stock option dated as of December 13, 1995, is by and between LifeCell
Corporation (the "Company") and Paul M. Frison. (This stock option agreement is
a corrected version of the original stock option agreement dated December
13,1995)
Under the terms and conditions of the Second Amended and Restated 1992
Stock Option Plan (the "Plan"), a copy of which is attached hereto as Exhibit A
and incorporated herein by reference, the Company hereby grants to Paul M.
Frison (the "Optionee") in the substitution for those certain options set forth
in Exhibit B hereto the previously granted under the Plan (the "Prior Options")
the option to purchase 17,992 shares of the Company's Common Stock, $.001 par
value per share, at the price of $2.50 Per share, subject to adjustment as
provided in the Plan (the "Option").
The Option shall be for a term commencing on the date hereof and ending
December 12, 2005, unless sooner terminated by reason of your termination of
employment, as provided in the Plan.
The Option shall be exercisable at the rate and in the following manner:
Vesting Date Vesting Percentage
December 13, 1995 50%
June 4, 1996 75%
June 4, 1997 100%
The Optionee agrees that upon execution of this Option Agreement by the
company and the Optionee, the Prior Options shall terminate and the Optionee
will surrender to the Company for cancellation the stock option agreement or
agreements evidencing the Prior Options.
The Option is a non-incentive stock option which is not intended to be
governed by Section 422 of the Internal Revenue Code of 1986, as amended.
The Optionee hereby accepts and agrees to be bound by all of the terms and
conditions of the Plan which pertain to the incentive stock options granted
under the Plan.
Granted the 13th day of December, 1995.
"Company"
LifeCell Corporation
By /s/ Stephen A. Livesey
-------------------------
Stephen A. Livesey
Executive Vice President and
Chief Science Officer
ACCEPTED:
"Optionee"
By /s/ Paul M. Frison
--------------------------------
Paul M. Frison Date
<PAGE>
LIFECELL CORPORATION
SECOND AMENDED AND RESTATED 1992 STOCK OPTION PLAN, AS AMENDED
INCENTIVE STOCK OPTION AGREEMENT
This stock option dated as of August 16, 1996, is by and between LifeCell
Corporation (the "Company") and Paul M. Frison.
Under the terms and conditions of the Second Amended and Restated 1992
Stock Option Plan, as amended, (the "Plan") a copy of which is attached hereto
and incorporated herein by reference, LifeCell Corporation hereby grants Paul M.
Frison (the "Optionee") the option to purchase 28,504 shares of the Company's
Common Stock, $.001 par value, at the price of $3.75 per share, subject to
adjustment as provided in the Plan.
This option shall be for a term commencing on the date hereof and ending
August 15, 2006, unless sooner terminated by reason of your termination of
employment, as provided in the Plan.
This option shall be exercisable at the rate and in the following manner:
Vesting Date Vesting Percentage
------------- -------------------
August 16, 1997 33%
August 16, 1998 66%
August 16, 1999 100%
This option is an incentive stock option which is intended to be governed
by Section 422 of the Internal Revenue Code of 1986, as amended.
The Optionee hereby accepts and agrees to be bound by all the terms and
conditions of the Plan which pertain to incentive stock options granted under
the Plan.
Granted the 16th day of August, 1996.
"Company"
---------
LIFECELL CORPORATION
By /s/ Stephen A. Livesey
-------------------------
Stephen A. Livesey
Executive Vice President
Chief Scientific Officer
ACCEPTED:
"Optionee"
/s/ Paul M. Frison /d/ September 26, 1996
- --------------------- -------------------------
Paul M. Frison Date
<PAGE>
LIFECELL CORPORATION
SECOND AMENDED AND RESTATED 1992 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
This stock option dated as of August 16, 1996, is by and between LifeCell
Corporation (the "Company") and Paul M. Frison. (This stock option agreement is
a corrected version of the original stock option agreement dated August 16,
1996)
Under the terms and conditions of the Second Amended and Restated 1992
Stock Option Plan, as amended, (the "Plan"), a copy of which is attached hereto
and incorporated herein by reference, the Company hereby grants to Paul M.
Frison (the "Optionee") the option to purchase 136,496 shares of the Company's
Common Stock, $.001 par value per share, at the price of $3.75 per share,
subject to adjustment as provided in the Plan (the "Option").
The Option shall be for a term commencing on the date hereof and ending
August 15, 2006, unless sooner terminated by reason of your termination of
employment, as provided in the Plan.
The Option shall be exercisable at the rate and in the following manner.
Vesting Date Vesting Percentage
August 16, 1997 33%
August 16, 1998 66%
August 16, 1999 100%
The Option is a non-incentive stock option which is not intended to be
governed by Section 422 of the Internal Revenue Code of 1986, as amended.
The Optionee hereby accepts and agrees to be bound by all of the terms and
conditions of the Plan which pertain to the incentive stock options granted
under the Plan.
Granted the 16th day of August, 1996.
"Company"
LifeCell Corporation
By /s/ Stephen A. Livesey
-------------------------
Stephen A. Livesey
Executive Vice President and
Chief Science Officer
ACCEPTED:
"Optionee"
By /s/ Paul M. Frison
-------------------------------
Paul M. Frison Date
<PAGE>
Exhibit 10.2
AGREEMENT
THIS AGREEMENT between LifeCell Corporation, a Delaware corporation (the
"Company"), and Paul G. Thomas (the "Employee") is dated as of October 5, 1998
(the "Effective Date").
W I T N E S S E T H:
-----------------------------
WHEREAS, the Employee has been elected President and Chief Executive
Officer of the Company on the Effective Date; and
WHEREAS, the parties desire to implement a 12-month severance arrangement set
forth in connection with such election; and
WHEREAS, the parties have set forth the substance of such severance
arrangement in this Agreement and desire to execute this Agreement for purposes
of implementing that severance arrangement;
NOW, THEREFORE, the parties agree as follows:
Section 1. Term of this Agreement. The term of this Agreement shall
----------- -------------------------
begin on the Effective Date and, unless automatically extended pursuant to the
second sentence of this Section 1, shall expire on the first to occur of:
(i) the Employee's death, the Employee's Disability (as determined in
accordance with the Company's disability policy at the time in effect) or
the Employee's Retirement (in accordance with the Company's retirement
policy at the time in effect), which events shall also be deemed
automatically to terminate Employee's employment by the Company;
(ii) the termination by the Employee of the Employee's employment by
the Company; or
(iii) the date immediately preceding the first anniversary of the
Effective Date (the "Expiration Date") if no Termination without Cause (as
defined in Section 4 hereof) shall have occurred during that one-year
period (or any period for which the term of this Agreement shall have been
automatically extended.)
If the term of this Agreement shall not have expired as a result of the
occurrence of one of the events described in clause (i) or (ii) of the
immediately preceding sentence and the Company shall not have given notice to
the Employee at least 30 days before the Expiration Date that the term of this
Agreement will expire on the Expiration Date, then the term of this Agreement
shall be automatically extended for successive one-year periods (the first such
period to begin on the day immediately following the Expiration Date) unless the
Company shall have given notice to the Employee at least 90 days before the end
of any one-year period for which the term of this Agreement shall have been
automatically extended that such term will expire at the end of that one-year
period.
Section 2. Event of Termination for Cause. An "Event of Termination
---------- -------------------------------
for Cause" shall have occurred if, after the Effective Date, the Board of
Directors of the Company in its good faith opinion concludes that any of the
following events has occurred: (i) Employee has been convicted of a crime
involving moral turpitude, including but not limited to fraud, theft,
embezzlement or any crime that results in or is intended to result in personal
enrichment at the expense of the Company, (ii) there has been a material breach
by Employee of this Agreement or of that certain Employee Confidentiality,
Inventions, Discoveries and Non-Competition Agreement dated as of September 8,
1998, between Employee and the Company that substantially impairs the Company's
interest herein or therein, or (iii) Employee has committed acts that in the
judgment of the Company's Board of Directors constitutes willful misconduct to
the material detriment of the Company.
Section 3. An Event of Termination for Good Reason. An Event of
---------- -------------------------------------------
"Termination for Good Reason" shall have occurred if, after the Effective Date,
the Company shall:
(i) assign to the Employee any duties inconsistent with the Employee's
position (including offices, titles and reporting requirements), authority,
duties or responsibilities with the Company;
(ii) remove the Employee from, or fail to re-elect or appoint the
Employee to, any duties or positions with the Company or any of its Affiliates
that were assigned or held by the Employee immediately after the Effective Date,
except that a nominal change in the Employee's title that is merely descriptive
and does not affect rank or status shall not constitute such an event;
(iii) reduce the Employee's annual base salary as in effect
immediately after the Effective Date or as the Employee's annual base salary may
be increased from time to time thereafter;
(iv) fail to continue to provide the Employee with benefits
substantially similar to those enjoyed by the Employee under any of the
Company's employee benefits plans, policies, programs and arrangements,
including, but not limited to, life insurance, medical, dental, health,
hospital, accident or disability plans, in which the Employee was a participant
immediately after the Effective Date; or
(v) fail to continue to provide the Employee with office space,
related facilities and support personnel (including, but not limited to,
administrative and secretarial assistance) (a) that are both commensurate with
Employee's responsibilities to and position with the Company immediately after
the Effective Date and not materially dissimilar to the office space, related
facilities and support personnel provided to other employees of the Company
having comparable responsibility to the Employee, or (b) that are physically
located at the Company's principal executive offices; or
(vi) relocate the Employee's principal office outside of the
metropolitan area of Houston, Texas
Section 4. Benefits Payable on Termination Without Cause. If the
----------- ---------------------------------------------
Employee's employment by the Company is terminated by the Company otherwise than
as a result of the Employee's death, the Employee's Disability, the Employee's
Retirement, or the occurrence of an Event of Termination for Cause, or if the
employee's employment by the Company is terminated by the Employee as a result
of an Event of Termination for Good Reason ("Termination without Cause"), then
the Employee shall be entitled to the following benefits:
(i) the Company shall pay to the Employee, on the first day of
each calendar month occurring during the period commencing on the
effective date of such termination (the "Termination Date") and ending
on the first anniversary of the Termination Date, an amount equal to
one-twelfth (1/12th) of the sum of Employee's annual base salary as in
effect immediately before the Termination Date plus the amount of the
bonus paid to the Employee in respect of the fiscal year immediately
preceding the Termination Date; and
(ii) during such 12-month period, the Company shall either
continue Employee's health and medical benefits and life insurance
coverage as in effect immediately before the Termination Date or, if a
continuation of such coverages is not permitted pursuant to the terms
of a plan or other applicable instrument, the Company shall provide
Employee with substantially the same benefits that were provided under
such coverages.
Upon payment by the Company to the Employee of the amounts and other benefits
required to be paid pursuant to the foregoing provisions of this Section the
Company shall no longer be obligated to pay any other amounts or benefits to the
Employee, other than benefits that, at the time of termination of the Employee's
employment by the Company, had vested in the Employee as a result of the
Employee's participation in any Company benefit plan. The provisions of this
Section 4 shall survive any termination of this Agreement.
Section 5. Certain Benefit Payable Upon Certain Terminations. If
----------- ---------------------------------------------------
the Employee's employment by the Company is terminated otherwise than as a
result of a Termination without Cause, then the Company shall pay to the
Employee within ten calendar days after the Termination Date an amount equal to
the product of (i) the bonus paid by the Company to the Employee in respect of
the fiscal year immediately preceding the Termination Date and (ii) a fraction,
the numerator of which is the number of days in the current fiscal year of the
Company through the Termination Date and the denominator which is 365. The
provisions of this Section 5 shall survive any termination of this Agreement.
Section 6. Notice. Notices required or permitted to be given
----------- -------
by either party pursuant to this Agreement shall be in writing and shall be
deemed to have been given when delivered personally to the other party or when
deposited with the United States Postal Service as registered mail with postage
prepaid and addressed:
(i) if to the Employee, at the Employee's address last shown on
the Company's records; and
(ii) if to the Company, at 3606 Research Forest Drive, The
Woodlands, Texas 77381, directed to the attention of Chief Financial
Officer.
or, in either case, to such other address as the party to whom or which such
notice is to be given shall have specified by notice given to the other party.
Section 7 Withholding Taxes. The Company may withhold from all
---------- -------------------
payments to be paid to the Employee pursuant to this Agreement all taxes that,
by applicable federal or state law, the Company is required to so withhold.
Section 8. Amendment and Waiver. No provision of this Agreement may be
----------- ---------------------
amended or waived (whether by act or course of conduct or omission or otherwise)
unless that amendment or waiver is by written instrument signed by the parties
hereto. No waiver by either party of any breach of this Agreement shall be
deemed a waiver of any other or subsequent breach.
Section 9. Governing Law. The validity, interpretation, construction
----------- --------------
and enforceability of this Agreement shall be governed by the laws of the State
of Texas.
Section 10. Validity The invalidity or unenforceability of any
------------ --------
provision of this Agreement shall not affect the validity or enforceability of
-
any other provision of this Agreement which shall remain in full force and
effect.
Section 11. Counterparts. This Agreement may be executed in
------------ -------------
counterparts, each of which shall be deemed an original but all of which
together will constitute the same instrument.
Section 12. Assignment. This Agreement shall insure to the benefit of
----------- ----------
and be enforceable by the Employee's legal representative. This Agreement shall
be binding upon and inure to the benefit of the Company and its successors.
Section 13. Interpretation
- ------------ --------------
(a) In the event of the enactment of any successor provision to any
statute or rule cited in this Agreement, references in this Agreement to such
statute or rule shall be to such successor provision.
(b) The headings of Sections of this Agreement shall not control the
meaning or interpretation of this Agreement.
(c) References in this Agreement to any Section are to the
corresponding Section of this Agreement unless the context otherwise indicates.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the Effective Date.
LIFECELL CORPORATION
By /s/ Paul M. Frison
---------------------
Paul M. Frison
Chairman of the Board
By /s/ Michael E. Cahr
----------------------
Michael E. Cahr
Chairman of the Compensation Committee of the
Board of Directors
Paul G. Thomas
By /s/ Paul G. Thomas
---------------------
<PAGE>
Exhibit 10.3
[COMPANY LETTERHEAD]
September 8, 1998
VIA FEDERAL EXPRESS
Mr. Paul G. Thomas
7 McKay Drive
Bridgewater, NJ 08807
Dear Paul,
It is with great pleasure that the Board of Directors offers you the position of
President and Chief Executive Officer of LifeCell Corporation.
Upon acceptance of this offer, please sign and return this letter along with the
signed Confidentiality, Inventions and Discoveries and Non-Competition
Agreement, the filled-in reference and background release form, and indicate
your availability for us to schedule a physical with a local physician.
You will be eligible for all of our standard company benefits, including three
weeks' vacation, sick leave, health, life, AD&D insurance and short- and
long-term disability insurance. Your employment should commence as soon as
possible but, no later than October 1, 1998. In this regard, the following
offer will remain in effect until September 14, 1998:
<TABLE>
<CAPTION>
<C> <S>
- - Salary 275,000 annually, paid semi-monthly on the 15th and the last
day of every month.
- - Bonus You will participate in our incentive compensa-tion plan,
effective January 1, 1999. Based on 100% achievement of
milestones mutually agreed-upon with the Board of Directors,
your bonus will be 50% of your annual salary.
- - Equity A stock option grant of 500,000 shares of common stock priced
at the closing bid price on your first day of employment. It is a
10-year option vesting 25% per year over a four-year period; it is
fully vested after four years but need not be exercised prior to ten years.
- - Temporary Housing Based on our understanding that your family will remain in New
Jersey until year-end, we will pay for your personal lodging for
an apartment in The Woodlands or surrounding area through
Decem-ber 31, 1998. A rental car will also be provided, if
desired.
- - Travel Arrangements LifeCell will reimburse up to two round-trip airfares per month
for you to return to New Jersey through year-end. To assist in
locating a home in the area, we will reimburse the cost of up to
three round-trip airfares for your wife, Patty, to visit The
Woodlands between now and December 31, 1998.
</TABLE>
<PAGE>
LIFECELL CORPORATION
September 8, 1998
Page Two
<TABLE>
<CAPTION>
<C> <S>
- - Housing and LifeCell will reimburse all reasonable moving costs regarding
Relocation household goods and relocation of your family, including up to
two vehicles to The Woodlands. The Company agrees to pay
closing costs on the sale of your home in New Jersey.
</TABLE>
We look forward to a long, productive, synergistic relationship as we move
forward to ensure the company's continued success. Please feel free to contact
me directly at 800-654-0889, extension 211, if you have any questions regarding
this offer.
Very sincerely,
By /s/ Michael E. Cahr
----------------------
Michael E. Cahr
Chairman, Compensation Committee
LifeCell Corporation Board of Directors
MEC/jhc
Agreed and Accepted:
By /s/ Paul G. Thomas* 9/8/98
---------------------- ------
Paul G. Thomas Date
Available Schedule for corporate physical:
-----------------------
*subject to amendments as discussed w/ Michael Cahr 9/8/98
<PAGE>
[COMPANY LETTERHEAD]
September 9, 1998
VIA FEDERAL EXPRESS
Mr. Paul G. Thomas
7 McKay Drive
Bridgewater, NJ 08807
Dear Paul,
Welcome aboard. I certainly enjoyed our conversation last night and anticipate
your excitement is equal to ours regarding your decision to join LifeCell. For
your review, I have documented the final items we discussed:
- Your date of hire will be September 8, 1998, with the understanding
thatyour salary and benefits will commence upon your election
by the Board of Directors to the position of President and Chief
Executive Officer.
- As we agreed, the price of your stock options will be granted 9/8/98
at an exercise price of $3.875 (the closing bid on that date).
- LifeCell will pay reasonable legal expenses for your choice of
counsel to review your offer letter and enclosed agreements.
- LifeCell will reimburse such travel and relocation expenses as set
forth in the signed offer letter dated September 8, 1998, to cover
the amount of the expense plus any applicable taxes.
- Attached is a draft of the agreement covering termination without
cause (as we agreed, a one-year severance will be provided), draft
of stock option agreement with accompanied plan, and our
confidentiality agreement.
Please give me a call if you have any additional concerns.
Sincerely,
By /s/ Michael E. Cahr
----------------------
Michael E. Cahr
Chairman, Compensation Committee
LifeCell Corporation Board of Directors
MEC/jhc
Agreed and Accepted:
/s/ Paul G. Thomas 10/2/98
- --------------------- -------
Paul G. Thomas Date
<PAGE>
[COMPANY LETTERHEAD]
REVISED
September 29, 1998
VIA FEDERAL EXPRESS
Mr. Paul G. Thomas
7 McKay Drive
Bridgewater, NJ 08807
Dear Paul,
Welcome aboard. I certainly enjoyed our conversation last night and anticipate
your excitement is equal to ours regarding your decision to join LifeCell. For
your review, I have documented the final items we discussed:
- Your date of hire will be September 8, 1998, with the understanding
that your salary and benefits will commence upon your election
by the Board of Directors to the position of President and Chief
Executive Officer.
- As we agreed, the price of your stock options will be granted 9/8/98
at an exercise price of $3.875 (the closing bid on that date).
- LifeCell will pay reasonable legal expenses for your choice of
counsel to review your offer letter and enclosed agreements.
- LifeCell will reimburse such travel and relocation expenses as set
forth in the signed offer letter dated September 8, 1998, to cover
the amount of the expense plus any applicable taxes.
- Attached is a draft of the agreement covering termination without
cause (as we agreed, a one-year severance will be provided), draft
of stock option agreement with accompanied plan, and our
confidentiality agreement.
- YOUR BASE SALARY WILL BE A MINIMUM OF $275,000 PER YEAR.
Please give me a call if you have any additional concerns.
Sincerely,
By /s/ Michael E. Cahr
----------------------
Michael E. Cahr
Chairman of the Compensation Committee
of the Board of Directors
MEC/jhc
Agreed and Accepted:
By /s/ Paul G. Thomas 10/2/98
--------------------- -------
Paul G. Thomas Date
<PAGE>
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<MULTIPLIER> 1
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 10006540
<SECURITIES> 4001040
<RECEIVABLES> 1944549
<ALLOWANCES> 0
<INVENTORY> 1342178
<CURRENT-ASSETS> 17525585
<PP&E> 2824377
<DEPRECIATION> (1562904)
<TOTAL-ASSETS> 19045911
<CURRENT-LIABILITIES> 1930835
<BONDS> 0
<COMMON> 11284
0
120
<OTHER-SE> 298344
<TOTAL-LIABILITY-AND-EQUITY> 15615076
<SALES> 5825687
<TOTAL-REVENUES> 7035425
<CGS> 2278088
<TOTAL-COSTS> 11680371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4644946)
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<INCOME-CONTINUING> (4644946)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4644946)
<EPS-PRIMARY> (.46)
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