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 MARCH 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER: 0-19890
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.)
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 April 30, 1999, there were outstanding 11,863,739 shares of Common Stock,
par value $.001, and 118,424 of Series B Preferred Stock, par value $.001 (which
are convertible into approximately an additional 3,820,129 shares of Common
Stock), of the registrant.
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
LIFECELL CORPORATION
BALANCE SHEETS
March 31, December 31,
1999 1998
------------- --------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $10,116,481 $ 8,025,415
Short-term investments - 4,000,745
Accounts and other receivables, net 1,810,473 1,383,920
Inventories 2,001,512 1,749,023
Prepayments and other 165,454 207,570
------------- --------------
Total current assets 14,093,920 15,366,673
FURNITURE AND EQUIPMENT, net 1,430,247 1,388,339
INTANGIBLE ASSETS, net 304,304 275,687
------------- --------------
Total assets $15,828,471 $ 17,030,699
============= ==============
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES
Accounts payable $ 472,276 $ 704,938
Accrued liabilities 2,429,227 2,065,123
------------- --------------
Total current liabilities 2,901,503 2,770,061
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series B preferred stock, $.001 par value, 182,205 shares
authorized, 118,424 and 119,084 shares issued and
outstanding, respectively 118 119
Undesignated preferred stock, $.001 par value, 1,871,795 shares
authorized, none issued and outstanding - -
Common stock, $.001 par value, 48,000,000 shares authorized,
11,753,239 and 11,612,852 shares issued and outstanding,
respectively 11,753 11,612
Warrants outstanding to purchase 3,182,188 shares of Common
Stock 298,344 298,344
Additional paid-in capital 59,353,038 58,426,555
Accumulated deficit (44,651,841) (37,134,678)
Current year deficit (2,084,444) (7,341,314)
------------- --------------
Total stockholders' equity 12,926,968 14,260,638
------------- --------------
Total liabilities and stockholders' equity $15,828,471 $ 17,030,699
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
LIFECELL CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUES
Product sales . . . . . . . . . . . . . . $ 2,319,074 $ 1,815,114
Research funded by others . . . . . . . . 286,764 142,350
------------ ------------
Total revenues. . . . . . . . . . . . . . 2,605,838 1,957,464
------------ ------------
COSTS AND EXPENSES
Cost of goods sold. . . . . . . . . . . . 806,994 842,281
Research and development. . . . . . . . . 1,062,068 745,900
General and administrative. . . . . . . . 1,307,144 1,010,566
Selling and marketing . . . . . . . . . . 1,643,640 1,415,946
------------ ------------
Total costs and expenses. . . . . . . . 4,819,846 4,014,693
------------ ------------
LOSS FROM OPERATIONS . . . . . . . . . . . (2,214,008) (2,057,229)
------------ ------------
Interest income and other, net. . . . . . 129,564 254,840
------------ ------------
NET LOSS . . . . . . . . . . . . . . . . . $(2,084,444) $(1,802,389)
============ ============
LOSS PER COMMON SHARE - BASIC AND DILUTED. $ (0.19) $ (0.18)
============ ============
SHARES USED IN COMPUTING
LOSS PER COMMON SHARE - BASIC AND DILUTED 11,653,402 11,139,095
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
LIFECELL CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2,084,444) $(1,802,389)
Adjustments to reconcile net loss to net cash used in operating activities-
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 75,318 72,885
Change in assets and liabilities-
(Increase) decrease in accounts and other receivables
(426,553) (259,843)
(Increase) decrease in inventories. . . . . . . . . . . . . . . . . . . (252,489) (5,604)
(Increase) decrease in prepayments and other. . . . . . . . . . . . . . 42,117 216,785
Increase (decrease) in accounts payable and accrued liabilities . . . . 131,442 (155,320)
Increase (decrease) in deferred revenues. . . . . . . . . . . . . . . . - (18,870)
------------ ------------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (430,165) (149,967)
------------ ------------
Net cash used in operating activities . . . . . . . . . . . . . . . . . . (2,514,609) (1,952,356)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . (117,228) (176,182)
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,617) (38,640)
Short-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,745 (4,001,627)
------------ ------------
Net cash provided by investing activities . . . . . . . . . . . . . . . . 3,854,900 (4,216,449)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock . . . . . . . . . . . . . . . . . . . . . . 926,625 381
Dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (175,850) (179,865)
------------ ------------
Net cash provided (used) by financing activities. . . . . . . . . . . . . 750,775 (179,484)
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . . . 2,091,066 (6,348,289)
Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . . . 8,025,415 20,781,026
------------ ------------
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . . . . $10,116,481 $14,432,737
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<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
commercial tissue product, AlloDerm tissue processing technology that provides
an 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 as required.
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 for the year ended December 31, 1998.
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 for the year ended December 31, 1998.
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>
March 31, December 31,
1999 1998
---------- -------------
<S> <C> <C>
Raw materials used in production $ 902,406 $ 723,921
Work-in-process. . . . . . . . . 469,809 423,839
Finished goods . . . . . . . . . 629,297 601,263
---------- -------------
Total inventories . . . . . . . $2,001,512 $ 1,749,023
========== =============
</TABLE>
4. DIVIDENDS PAYABLE ON SERIES B PREFERRED STOCK
The Series B Preferred Stock bears cumulative dividends, payable quarterly
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 first quarter of 1999, the Company accrued dividends on the Series B
Preferred Stock of $175,850, payable in cash. Such dividend is payable on May
15, 1999.
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 periods, all Common Stock equivalents, including the
Series B Preferred Stock, were antidilutive and, accordingly, were not included
in the computation.
5
<PAGE>
Basic loss per Common share was calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net Loss. . . . . . . . . . . . . . . . . . . . $(2,084,444) $(1,802,389)
Less: Preferred dividends . . . . . . . . . . . (175,850) (179,865)
------------ ------------
Net Loss available to common stockholders-basic $(2,260,294) $(1,982,254)
============ ============
Weighted average shares outstanding-basic . . . 11,653,402 11,139,095
============ ============
Loss per common chare-basic . . . . . . . . . . $ (0.19) $ (0.18)
============ ============
</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.
6. 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 processing technology that provides a 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 provides a complete template
for the regeneration of normal human soft tissue. AlloDerm currently is being
marketed in the United States and internationally for use in reconstructive
plastic, dental and burn surgery and has been successfully transplanted in over
40,000 patients. LifeCell's development programs include Micronized AlloDerm ,
vascular grafts, nerve connective tissue and ThromboSol platelet storage
solution.
Since inception, LifeCell has been financed through the public and private sale
of equity securities, through product sales, through corporate alliances and
through the receipt of government grants and contracts.
LifeCell began the sale of AlloDerm 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 MARCH 31, 1999 AND 1998
The net loss for the three months ended March 31, 1999, increased 16% to
approximately $2.1 million compared to approximately $1.8 million for the same
period of 1998. 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
increased investment in these activities was partially offset by a rise in
product sales as discussed below.
6
<PAGE>
Total revenues for the three months ended March 31, 1999, increased 33% to
approximately $2.6 million compared to approximately $2.0 million for the same
period of 1998. Approximately $504,000 of such increase was attributable to
increased sales of products, which were the result of expanded sales and
marketing activities and higher pricing of certain AlloDerm products during the
1999 period. Revenues from funded research and development increased $144,000
for the three months ended March 31, 1999 compared to the same period of 1998.
The increase was attributable to funding by the Department of Defense of
LifeCell's platelet and red blood cell preservation research programs. Amounts
recognized as revenues under such cost-reimbursement arrangements relate to the
expenses incurred under such arrangements during the periods.
Cost of goods sold for the three months ended March 31, 1999 was approximately
$807,000 resulting in a gross margin of approximately 65%. The gross margin for
the same period of 1998 was approximately 54%. The increase in gross margin was
principally attributable to the implementation of certain production
efficiencies, the allocation of fixed costs to higher volumes of products
produced in 1999, an increase in sales of certain higher margin AlloDerm
products and an increase in the price of certain AlloDerm products.
Research and development expenses for the three months ended March 31, 1999,
increased 42% to approximately $1.1 million compared to approximately $746,000
for the comparable period in 1998. The increase in research and development
expense was primarily attributable to the increased animal and clinical studies
for the expanding uses of AlloDerm. In addition, increased resources have been
expended on the ThromboSol platelet storage solutions and red blood cell
preservation research as a result of the Department of Defense funding of these
programs.
General and administrative expenses during the three months ended March 31,
1999, increased 29% to approximately $1.3 million compared to approximately $1.0
million for the same period of 1998. The increase is principally attributable
the costs associated with professional fees incurred in relation to a
distribution agreement entered into during March 1999 with Boston Scientific
Corporation.
Selling and marketing expenses increased 16% to approximately $1.6 million
during the three months ended March 31, 1999 compared to approximately $1.4
million for the same period of 1998. The increase was primarily attributable to
increased promotional activities and the addition of sales personnel related to
AlloDerm marketing.
Interest income and other, net decreased 49% to approximately $130,000 during
the three months ended March 31, 1999 compared to approximately $255,000 for the
same period of 1998. The decrease was principally attributable to a decrease in
funds available for investment during the current period.
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 products, develop expanded uses for
AlloDerm products, 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 present operating and capital requirements through at least 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 1999 and 2000, as well as 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.
During March 1999, LifeCell received gross proceeds of $1 million from the sale
of shares of the Company's common stock to Boston Scientific Corporation in
connection with the signing of a distribution agreement.
LifeCell has had losses since inception and therefore has not been subject to
federal income taxes. As of December 31, 1998, LifeCell had available net
operating loss "NOL" and research and development tax credit carryforwards for
income tax purposes of approximately $40.5 million and $395,000, 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 sale of common stock in a public
offering in December 1997 resulted in an ownership change for federal income tax
purposes. The Company estimates that the amount of NOL carryforwards and the
credits available to offset taxable income as of December 31, 1998 was
approximately $14.0 million 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 carryforwards.
7
<PAGE>
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 for the year ended December 31, 1998.
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 second 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 therefore, developing
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.
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. CHANGE IN SECURITIES.
During the three months ended March 31, 1999, the Company sold 108,577 shares of
its common stock, $0.001 par value per share, for an aggregate consideration of
$1 million to Boston Scientific Corporation, pursuant to the signing of a
distribution agreement. This issuance did not involve an underwriter. The
Company considers these securities to have been offered and sold in transactions
not involving a public offering and, therefore, to be exempted from registration
under Section 4(2) of the Securities Act of 1933, as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
10.1 Voting Agreement dated November 18, 1996, as amended as of April
15, 1999, among LifeCell Corporation and certain stockholders named therein.
27.1 Financial Data Schedule
8
<PAGE>
b. Reports on Form 8-K
None
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: May 12, 1999 By: /s/ Paul G. Thomas
-----------------------
Paul G. Thomas
President and Chief
Executive Officer
Date: May 12, 1999 By: /s/ Lynne P. Hohlfeld
--------------------------
Lynne P. Hohlfeld
Controller, Principal
Accounting Officer
9
<PAGE>
EXHIBIT INDEX
10.1 Voting Agreement, as amended
27.1 Financial Data Schedule
10
<PAGE>
Exhibit 10.1
Amended and Restated Voting Agreement
-----------------------------------------
This Amended and Restated Voting Agreement (this "Agreement") is made as of
---------
April 15, 1999, among LifeCell Corporation, a Delaware corporation (the
"Company"), and the Stockholders (as defined below).
Vector Later-Stage Equity Fund, L.P. ("Vector"), CIBC Wood Gundy Ventures,
Inc. ("CIBC-WG"), and the other Persons identified as "Stockholders" on Annex A
-------
attached hereto (collectively, the "Stockholders") and the Company are parties
to that certain Securities Purchase Agreement dated November 18, 1996 (the
"Purchase Agreement"), pursuant to which the Stockholders purchased shares of
-------------------
the Company's Series B Preferred Stock, par value $.001 per share (the "Series B
--------
Preferred"), and warrants to purchase shares of the Company's common stock, par
- ---------
value $.001 per share (each, a "Warrant"). The Investors and the Company also
-------
are parties to that certain Voting Agreement dated November 18, 1996 (the
"Voting Agreement"), entered into in connection with the Purchase Agreement.
Subsequent to the execution and delivery of the Voting Agreement, certain events
have occurred that have caused the Stockholders and the Company to desire to
amend the Voting Agreement to take into account such events, and the
Stockholders and the Company desire to enter into certain other amendments to
the Voting Agreement. Accordingly, the Stockholders and the Company desire to
enter into this Agreement to effect such amendments to the Voting Agreement by
amending and restating the Voting Agreement in its entirety.
The Company and the Stockholders hereby agree as follows:
1. Certain Definitions.
--------------------
Capitalized terms used but not defined herein shall have the meanings
assigned such terms in the Purchase Agreement.
"Stockholder Shares" means, as of any particular time, (i) any Common Stock
------------------
purchased or otherwise acquired by any Stockholder, (ii) any Common Stock issued
or issuable directly or indirectly upon conversion of Preferred Stock or upon
exercise of Warrants, in each case, owned by a Stockholder, (iii) any capital
stock or other equity securities issued or issuable directly or indirectly with
respect to Common Stock referred to in clause (i) or clause (ii) above by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes
of this Agreement, any Person who holds Preferred Stock or Warrants shall be
deemed to be a Stockholder and the holder of Stockholder Shares issued or
issuable upon conversion of such Preferred Stock or exercise of such Warrants
(as the case may be) in connection with the transfer thereof or otherwise and
regardless of any restriction or limitation on the conversion or exercise
thereof.
<PAGE>
2. Board of Directors.
--------------------
(a) From and after the date of this Agreement, each holder of
Stockholder Shares shall vote all of its Stockholder Shares and shall take all
other necessary or desirable actions within its control (whether in its capacity
as a stockholder or as an officer or director of the Company or otherwise, and
including, without limitation, attendance at meetings in person or by proxy for
the purposes of obtaining a quorum and execution of written consents in lieu of
meetings), and the Company shall take all necessary and desirable actions within
its control (including, without limitation, calling special Board and
stockholder meetings), so that:
(i) the maximum authorized number of directors on the Board shall be
established initially at nine directors and shall be reduced in accordance with
clauses (viii) and (ix) of this Section 2(a);
(ii) the following individuals shall be elected to the Board:
(A) two representatives (the "Investor Directors") designated by holders of
------------------
a majority of the Underlying Common Stock (the "Majority Investors"), which
------------------
Investor Directors shall include one representative designated by Vector (the
"Vector Representative"), which Vector Representative currently is K. Flynn
----------------------
McDonald, and one representative designated by CIBC-WG (the "CIBC-WG
-- -------
Representative"), which CIBC-WG Representative currently is Lori G. Koffman;
- --------------
(B) the Chief Executive Officer of the Company (who currently is Paul G.
Thomas), Stephen A. Livesey and Paul M. Frison (each, a "Company Director");
----------------
(C) one individual who is neither a member of the Company's management nor
an employee or an officer of the Company (the "Initial Outside Director"), who
currently is Michael E. Cahr, and two individuals jointly designated by the
Investor Directors and the Company Directors each of whom is neither a member of
the Company's management nor an employee or an officer of the Company (the
"Additional Outside Directors"), one of which Additional Outside Directors
------------------------------
currently is David A. Thompson, and one of which directorships currently is
vacant; and
(D) one representative (the "Medtronic Director") designated by Medtronic,
------------------
Inc., a Minnesota corporation ("Medtronic"), who currently is James G. Foster;
---------
-2-
<PAGE>
(iii) the removal from the Board (with or without cause) of any Vector
Representative, any CIBC-WG Representative or any Majority Investors
Representative shall be at the written request of Vector, CIBC-WG or the
Majority Investors, respectively, but only upon such written request and under
no other circumstances;
(iv) the removal from the Board (with or without cause) of any Company
Director or the Initial Outside Director shall be at the written request of the
majority of the other directors then in office, but only upon such written
request and under no other circumstances;
(v) the removal from the Board (with or without cause) of the Medtronic
Director shall be only in accordance with and as contemplated by Section 6.3 of
the Investment Agreement dated May 3, 1994 between the Company and Medtronic
(the "Medtronic Investment Agreement"); provided that the Company shall not
--------------------------------
agree to any amendment to such Section 6.3 without the prior consent of the
Majority Investors;
(vi) in the event that any Investor Director or any Additional Outside
Director designated hereunder for any reason ceases to serve as a member of the
Board during his or her term of office, the resulting vacancy on the Board shall
be filled in the manner set forth above in clause (ii) of this Section 2(a) by a
representative designated by the same group that designated the member that will
no longer serve on the Board; provided that if such group fails to designate a
representative to fill such vacancy, the election of an individual to fill such
vacancy shall be accomplished in accordance with the Company's bylaws and
applicable law; provided, further, that the Stockholders shall thereafter vote
to remove such individual if the group which failed to designate a
representative to fill such vacancy pursuant to this Section 2(a) so directs;
(vii) in the event that the Initial Outside Director for any reason
ceases to serve as a member of the Board during his term of office, the
resulting vacancy shall be filled by the vote of a majority of the other
directors then in office;
(viii) in the event that any Company Director (other than the Chief
Executive Officer) for any reason ceases to serve as a member of the Board
during his term of office, the resulting vacancy shall not be filled and the
number of authorized directors on the Board shall be reduced by the number of
such directors who have ceased to serve on the Board; and
(ix) at such time when Medtronic no longer has the right to appoint a
director pursuant to Section 6.3 of the Medtronic Investors Agreement, the
number of authorized directors on the Board shall be reduced by one and the
resulting directorship shall not be filled.
-3-
<PAGE>
(b) The Company shall pay all out-of-pocket travel and other expenses
incurred by each director in connection with attending the meetings of the Board
or any committee thereof. So long as any Investor Director serves on the Board
and for three years thereafter, the Company shall maintain directors and
officers indemnity insurance coverage satisfactory to the Majority Investors,
and the Company's certificate of incorporation and by laws shall provide for
indemnification and exculpation of directors to the fullest extent permitted
under applicable law.
3. Stockholder Covenant. No holder of Stockholder Shares shall grant
---------------------
any proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
4. Termination. This Agreement shall terminate at the later of (i)
-----------
such time when none of the Series B Preferred is outstanding and (ii) such time
when the Company no longer has any obligation to deliver financial and other
information to certain Investors pursuant to Section 6.8 of the Purchase
Agreement.
5. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
6. Remedies. Each Stockholder shall be entitled to enforce its rights
--------
under this Agreement specifically, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights existing in
their favor. Each Stockholder hereby acknowledges that money damages would not
be an adequate remedy for any breach of the provisions of this Agreement and
that each Stockholder may in its sole discretion apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive
relief (without posting a bond or other security) in order to enforce or prevent
any violation of the provisions of this Agreement.
7. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Stockholder at the address indicated on Annex A hereto (which
-------
address is the same address set forth on Annex A to the Voting Agreement ) or at
-------
such address or to the attention of such other person (including any subsequent
holder of Stockholder Shares) as the recipient party has specified by prior
written notice to the sending party. Notices shall be deemed to have been given
hereunder when delivered personally, three days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service.
8. Amendment and Waiver. This Agreement may be amended, modified and
----------------------
supplemented, and compliance with any term, covenant, agreement or condition
contained herein may be waived either generally or in particular instances, and
either retroactively or prospectively, only by a written instrument executed by
(a) the Company and (b) the Majority Investors. No course of dealing between or
among any persons having any interest in this Agreement will be deemed effective
to modify, amend or discharge any part of this Agreement or any rights or
obligations of any person under or by reason of this Agreement.
-4-
<PAGE>
9. Governing Law. The corporate law of the State of Delaware shall
--------------
govern all issues and questions concerning the rights of the Company and the
rights of the Stockholders relative to the Company. All other issues and
questions concerning the construction, validity, interpretation and
enforceability of this Agreement and the exhibits and schedules hereto shall be
governed by, and construed in accordance with, the laws of the State of New
York, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of New York.
10. Descriptive Headings. The descriptive headings of this Agreement
---------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
11. Entire Agreement. This Agreement sets forth the entire agreement
-----------------
among the parties hereto with respect to the subject matter hereof, and
supersedes any prior oral or written agreement among the parties, including
without limitation thereto the Voting Agreement.
12. Holdings of Series B Preferred. Based on the Company's records,
----------------------------------
each Stockholder holds the shares of Series B Preferred set forth on Annex A
-------
hereto.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company and the undersigned Stockholders
(constituting the Majority Investors) have executed this Agreement as of the day
and year first above written.
LIFECELL CORPORATION
By /s/ Paul G. Thomas
-------------------------
Paul G. Thomas
President and Chief Executive Officer
VECTOR LATER-STAGE EQUITY FUND, LP
By Vector Fund Management, L.P., its General Partner
By /s/ K. Flynn McDonald
----------------------------
Name: K. Flynn McDonald
-------------------
Title: Managing Director
-------------------
CBIC WOOD GUNDY VENTURES, INC.
By /s/ Lori Koffman
------------------------
Name: Lori Koffman
-------------------
Title: Managing Director
-------------------
-6-
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
LISTING OF SERIES B SHAREHOLDERS
TAX ID NAME TOTAL OUTSTANDING
<S> <C>
Robert M. Adams 1,652
Paul B. Ankin & Lois F. Ankin 264
John S. Bai 230
Joseph Battipaglia 158
Michael E. Cahr 531
Chinook Equities Inc. 531
CIBC Wood Gundy Ventures Inc. 47,805
John Cirrito 264
P. William Curreri 425
James C. Gale Tr. of the James C. Gale Trust 668
James C. Gale & Judith S. Haselton 1,644
Michael Gironta 1,065
Gruntal & Co. Inc. Cust FBA Evan Kleinberg IRA 3
Gruntal & Co. Inc. Cust FBA Bernard B. Salzman IRA 56
Jeffrey Keeler 42
Edward A Kerbs 328
Douglas Kleinberg 262
Michael J. Koblitz Tr. of the Marcus L. Koblitz Trust 25
Michael J. Koblitz Tr. of the Lauren J. Koblitz Trust 25
Michael J. Koblitz 51
Smith Barney Inc. Cust Christopher C Kraft Jr. 264
John Latshaw 22
Stephen Livesey 264
William J. McCluskey 196
B. Michael Pisani 30
Michael H. Richmond 425
Barry Richter 264
Joseph A. Russo 163
Robert Sablowsky 495
David Saks 531
Don A. Sanders 660
SBSF Biotechnology Fund LP 9,602
SBSF Biotechnology Partners LP 1,065
Richard L. Serrano 51
Technology Funding Medical Partners ILP 2,666
Vector Later-Stage Equity Fund LP 42,681
Stephen G. Weiss 350
The Woodlands Venture Capital Company 2,666
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 10116481
<SECURITIES> 0
<RECEIVABLES> 1810473
<ALLOWANCES> 0
<INVENTORY> 2001512
<CURRENT-ASSETS> 14093920
<PP&E> 3145725
<DEPRECIATION> (1715478)
<TOTAL-ASSETS> 15828471
<CURRENT-LIABILITIES> 2901503
<BONDS> 0
<COMMON> 11753
0
118
<OTHER-SE> 298344
<TOTAL-LIABILITY-AND-EQUITY> 15828471
<SALES> 2319074
<TOTAL-REVENUES> 2735402
<CGS> 806994
<TOTAL-COSTS> 4819846
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2084444)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2084444)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2084444)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
