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, 2000
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)
DELAWARE 76-0172936
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
ONE MILLENNIUM WAY 08876
BRANCHBURG, NEW JERSEY (zip code)
(Address of principal executive office)
(908) 947-1100
(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 May 10, 2000, there were outstanding 13,793,087 shares of common stock,
par value $.001, and 104,510 of Series B preferred stock, par value $.001 (which
are convertible into approximately an additional 3,370,448 shares of common
stock), of the registrant.
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFECELL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $4,121,677 $4,736,877
Short-term investments 315,244 315,244
Accounts and other receivables, net 3,395,008 2,557,337
Inventories 3,741,301 3,202,271
Prepayments and other 311,838 159,664
------------- ------------
Total current assets 11,885,068 10,971,393
Fixed assets, net 7,996,028 6,547,863
Other assets, net 557,634 564,175
------------- ------------
Total assets $20,438,730 $18,083,431
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $1,783,132 $741,375
Accrued liabilities 3,421,560 4,896,090
Notes payable 2,809,754 2,792,459
Current maturities of long-term debt 598,311 -
------------- ------------
Total current liabilities 8,612,757 8,429,924
------------- ------------
Deferred revenue 376,473 405,126
------------- ------------
Long term debt, net of current maturities 1,901,689 -
------------- ------------
Commitments and Contingencies (Note 6)
Stockholders' Equity:
Series B preferred stock, $.001 par value, 182,205 shares authorized,
104,530 and 118,016 issued and outstanding, respectively 105 118
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
13,772,442 and 12,899,643 shares issued and outstanding respectively 13,772 12,900
Warrants outstanding to purchase 3,086,367 and 3,466,399 shares of
common stock, respectively 862,351 887,812
Additional paid-in capital 64,367,782 62,725,551
Accumulated deficit (55,696,199) (54,378,000)
------------- ------------
Total stockholders' equity 9,547,811 9,248,381
------------- ------------
Total liabilities and stockholders' equity $20,438,730 $18,083,431
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
LIFECELL CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
2000 1999
-------------- -------------
<S> <C> <C>
Revenues:
Product sales $ 4,438,483 $ 2,319,074
Research funded by others 377,933 286,764
-------------- -------------
Total revenues 4,816,416 2,605,838
-------------- -------------
Cost of goods sold 1,188,802 806,994
-------------- -------------
Gross Profit 3,627,614 1,798,844
-------------- -------------
Operating Expenses:
Research and development 1,219,027 1,062,068
General and administrative 1,215,985 1,307,144
Selling and marketing 2,277,586 1,643,640
-------------- -------------
Total operating expenses 4,712,598 4,012,852
-------------- -------------
Loss From Operations (1,084,984) (2,214,008)
-------------- -------------
Interest income (expense) and other, net (71,080) 129,564
-------------- -------------
Net Loss $ (1,156,064) $(2,084,444)
============== =============
Preferred Stock Dividends (162,135) (175,850)
============== =============
Net Loss Applicable to Common Stockholders $ (1,318,199) $(2,260,294)
============== =============
Loss Per Common Share - Basic and Diluted $ (0.10) $ (0.19)
============== =============
Shares Used in Computing Loss Per
Common Share - Basic and Diluted 13,257,800 11,653,402
============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
LIFECELL CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,156,064) $(2,084,444)
Adjustments to reconcile net loss to net cash used in
operating activities -
Depreciation and amortization 255,643 75,318
Provision for bad debt (13,109) -
Accretion of debt discount 17,295 -
Change in assets and liabilities -
Increase in accounts and other receivables (824,562) (426,553)
Increase in inventories (539,030) (252,489)
Decrease (increase) in prepayments and other (147,173) 42,117
Increase (decrease) in accounts payable and accrued (418,355) 131,442
liabilities
Increase (decrease) in deferred revenues (28,653) -
------------ ------------
Net cash used in operating activities (2,854,008) (2,514,609)
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures (1,702,265) (117,228)
Additions to patents - (28,617)
Sales of short-term investments - 4,000,745
------------ ------------
Net cash provided by (used in) investing activities (1,702,265) 3,854,900
------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of stock and warrants 1,617,626 926,625
Borrowings and repayments of notes payable 2,500,000 -
Cash dividends paid (176,553) (175,850)
------------ ------------
Net cash provided by financing activities 3,941,073 750,775
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents (615,200) 2,091,066
Cash and Cash Equivalents at Beginning of Period 4,736,877 8,025,415
------------ ------------
Cash and Cash Equivalents at End of Period $ 4,121,677 $10,116,481
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest 140,278 -
------------ ------------
</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
product, AlloDerm , an acellular dermal graft, during 1994. The future
operating results of the Company will be principally dependent on the market
acceptance of its current product, development of and market acceptance of
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, 1999.
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, 1999.
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,
2000 1999
---------- -------------
<S> <C> <C>
Raw materials used in production $1,450,645 $ 1,081,449
Work-in-process. . . . . . . . . 1,045,399 1,214,619
Finished goods . . . . . . . . . 1,245,257 906,203
---------- -------------
Total inventories. . . . . . . . $3,741,301 $ 3,202,271
========== =============
</TABLE>
4. DIVIDENDS PAYABLE ON SERIES B PREFERRED STOCK
The Series B Preferred Stock bears cumulative dividends, payable quarterly
for five years through November 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 2000, the Company paid dividends on the Series
B Preferred Stock of $176,553, and accrued dividends of $162,135. Such
dividends are payable on May 15, 2000.
5
<PAGE>
5. LONG-TERM DEBT
On December 6, 1999 the Company entered into a $6 million credit facility
with a financial institution and the New Jersey Economic Development Authority
("NJEDA"). The loan provides for a revolving portion (the "Revolving Loan") not
to exceed $3 million and two term portions (the "Term Loans") one for $2.5
million and the other for $.5 million. The Revolving Loan bears an interest of
prime plus 3% (12% at March 31, 2000) with a minimum rate of 9% and matures on
January 31, 2001 with provisions for automatic renewal for additional terms of
one year each. As of March 31, 2000, $3 million was outstanding on the
Revolving Loan. On February 25, 2000 the Company borrowed $2,500,000 under one
of the "Term Loans". The Term Loan exercised by the Company bears an interest
rate of 14.21% and is payable in 30 equal monthly installments of principal and
interest beginning October 1, 2000 and continuing through and including March 1,
2003.
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.
7. NEW ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB101"). The bulletin draws on existing accounting rules and provides
specific guidance on how those accounting rules should be applied, and
specifically addresses revenue recognition for non-refundable technology access
fees in the biotechnology industry. SAB 101 is effective for fiscal years
beginning after December 15, 1999. The Company is evaluating SAB 101 and the
effect it may have on its financial statements. At this time, the Company
believes that SAB 101 will not have a material impact on its financial position
or results of operations.
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 Corporation is a bioengineering company engaged in the development
and commercialization of tissue regeneration and cell preservation products.
Our core preservation technology produces an acellular tissue matrix, which
retains the essential biochemical and structural components necessary for normal
tissue regeneration. We currently market three products based on this
technology: AlloDerm for the reconstructive plastic, burn and dental markets;
Cymetra a micronized version of AlloDerm for the reconstructive plastic and
dermatology markets; and Repliform acellular tissue for the urology and
gynecology market. We believe that our products are the only commercially
available tissue transplant products that provide a complete template for the
regeneration of normal human soft tissue. We estimate that AlloDerm has been
transplanted in more than 50,000 patients. We also are developing several
additional products, including small diameter vascular grafts as an alternative
to autografted blood vessels, orthopedic applications of our acellular tissue
matrix, and ThromboSolTM a formulation for extended storage of platelets.
6
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Total revenues for the three months ended March 31, 2000, increased 85% to
approximately $4.8 million compared to approximately $2.6 million for the same
period of 1999. The increase was primarily attributable to a 91% increase in
product sales to approximately $4.4 million in the current period as compared to
$2.3 million in the prior year. The increase in product sales is the result of
expanded direct sales and marketing activities, increased pricing of certain
AlloDerm products during the second half of 1999 and increased sales volume
related to the full launch of Repliform through our partner Boston Scientific
Corporation. The Company signed a sales and marketing agreement with Boston
Scientific in March 1999. Total revenue was further impacted by a 32% increase
in funded research grant revenues of $0.4 million from $0.3 million during the
same period in 1999. This increase is primarily due to the increased level of
funding available for research activities as compared to the same period of
1999.
Cost of goods sold for the three months ended March 31, 2000 was
approximately $1.2 million resulting in a gross margin of approximately 73%,
compared to cost of goods sold of approximately $0.8 million and gross margin of
65% for the same period of 1999. The increase in gross margin was principally
attributable to pricing benefits resulting from the Company's change during 1999
to direct distribution of its reconstructive plastic products to hospitals and
doctors' offices rather than through third party distributors. In addition,
increases in sales mix of certain higher margin AlloDerm products together with
certain price increases contributed to the improved gross margin.
Total research and development expenses increased 15% to approximately $1.2
million for the three months ended March 31, 2000 compared to approximately $1.1
million for the same period of 1999. The increased expenses are due primarily to
higher expenditures in the cell preservation government funded projects for the
three month period ended March 31, 2000, as compared to the same period of 1999.
General and Administrative expenses decreased 7% to approximately $1.2
million for the three months ended March 31, 2000 compared to $1.3 million for
the same period of 1999. The decrease was due to a combination of professional
fees incurred relating to a sales and marketing agreement entered into during
the first quarter of 1999, offset in part by higher salary costs during the
first quarter of 2000 relating to the hiring of management personnel during the
second half of 1999.
Selling and marketing expenses increased 39% to approximately $2.3 million
for the three months ended March 31, 2000 compared to approximately $1.6 million
for the same period last year. The increase was primarily attributable to the
hiring of domestic sales and marketing personnel during the second half of 1999,
the expansion of domestic marketing activities and the agency fees associated
with the sales and marketing agreement with Boston Scientific.
Interest income (expense) and other, net decreased approximately $0.2
million for the three months ended March 31, 2000 compared to same period of
1999. The decrease was due to a combination of a decline in cash available for
investment and interest costs associated with the revolving and long-term notes
debt financing.
The net loss for the three months ended March 31, 2000, decreased 45% to
approximately $1.2 million compared to approximately $2.1 million for the same
period of 1999. This decrease in loss was primarily attributable to increased
AlloDerm sales volume and the full launch of Repliform, partially offset by
increased infrastructure costs.
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.
As of March 31, 2000, the Company had cash and cash equivalents of
approximately $4.1 million. At March 31, 2000 the Company had an aggregate of
approximately $5.5 million outstanding under its borrowing arrangements, which
is repayable over the next 36 months. The amount of principal to be repaid by
the Company over the next 12 months is approximately $0.6 million. The Company
7
<PAGE>
has an additional borrowing availability of $.5 million on its $6 million credit
facility. The Company has available an additional $0.6 million through an
incentive financing package provided by the New Jersey Economic Development
Authority.
The Company's operating activities used cash of approximately $2.9 million
for the three-month period ended March 31, 2000 to fund its operating loss,
decreases in accrued liabilities and increased inventories and accounts
receivable for the period. For the period ended March 31, 1999, the Company's
operating activities used cash of approximately $2.5 million to fund its
operating loss and increased inventories and accounts receivable.
For the three months ended March 31, 2000, the Company's investing
activities used cash of approximately $1.7 million for the purchase of capital
equipment and leasehold improvements relating to the completion of the New
Jersey facility. The Company's investing activities for the three months ended
March 31, 1999 provided cash of approximately $3.9 million principally through
the sales of short-term investments.
The Company's financing activities provided approximately $3.9 million for
the three month period ended March 31, 2000 primarily from the takedown of $2.5
million of long-term debt and approximately $1.6 million in proceeds from the
exercise of stock options and warrants, partially offset by dividends paid. For
the period ended March 31, 1999, the Company's financing activities provided
approximately $0.75 million as a result of the sale of common stock, partially
offset by dividends paid.
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 the proceeds from the available financing and 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 2000 and 2001, 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.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Statements contained in this report other than historical facts are
forward-looking statements provided in accordance with the provisions of the
Private Securities Litigation Reform Act of 1995. 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,
development of expanded uses for the Company's products, development of
additional products and programs, the Company's ability to satisfy regulatory
requirements, 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 of Form 10-K for the year ended December 31, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended March 31, 2000, the Company issued 351,460
shares of common stock in exchange for warrants to purchase 380,032 shares of
common stock for consideration of approximately $1.3 million. During the same
period the Company issued 86,311 shares of common stock for the exercise of
employee stock options for consideration of approximately $0.4 million. During
the same period, the Company issued 435,028 shares of common stock in exchange
for 13,486 shares of convertible Series B preferred stock (convertible at a rate
of 32.2578 common shares for each share of preferred stock). These issues 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 the registration under Section 4(2) of the Securities Act of
1933, as amended.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. EXHIBITS
10.1 Second Amended and Restated Voting Agreement dated as of April
13, 2000 among the Company and the Series B Preferred
Shareholders
27.1 Financial Data Schedule
b. REPORTS ON FORM 8-K
None
9
<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: May 12, 2000 By: /s/ Paul G. Thomas
---------------------
Paul G. Thomas
President and Chief
Executive Officer
Date: May 12, 2000 By: /s/ Fenel M. Eloi
--------------------
Fenel M. Eloi
Sr. Vice President, Chief
Financial Officer and Secretary
(Principal Financial Officer)
Date: May 12, 2000 By: /s/ David B. Platt
----------------
David B. Platt
Controller
(Principal Accounting Officer)
10
<PAGE>
EXHIBIT INDEX
10.1 Voting Agreement
27.1 Financial Data Schedule.
11
<PAGE>
Second Amended and Restated Voting Agreement
--------------------------------------------
This Second Amended and Restated Voting Agreement (this "Agreement") is
---------
made as of April 27, 2000, among LifeCell Corporation, a Delaware corporation
(the "Company"), and the Stockholders (as defined below).
-------
Vector Later-Stage Equity Fund, L.P. ("Vector"), CIBC WMV, Inc. ("CIBC"),
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, entered
into in connection with the Purchase Agreement, as amended and restated in
December 1998 (the "Voting 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 at eight directors and shall be reduced in accordance with
clauses (vii) and (viii) of this Section 2(a);
(ii) the following individuals shall be elected to the Board:
(A) such number of representatives as is equal to the number
of directors the holders of the Series B Preferred then are
entitled to elect pursuant to paragraph 3(b) of the Certificate
of Designation of the Series B Preferred (the "Investor
--------
Directors") as designated by holders of a majority of the
---------
Underlying Common Stock (the "Majority Investors"), which
--------------------
Investor Directors, so long as such number of directors to be
elected by the Series B Preferred is two, shall include one
representative designated by Vector (the "Vector
------
Representative"), and one representative designated by CIBC (the
--------------
"CIBC Representative");
--------------------
(B) the Chief Executive Officer of the Company and Stephen
A. Livesey (each, a "Company Director"); and
-----------------
(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"), and three 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"); ------------------
---------
(iii) the removal from the Board (with or without cause) of any
Vector Representative or any CIBC Representative shall be at the written request
of Vector or CIBC, respectively, but only upon such written request and under no
other circumstances;
<PAGE>
(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) 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;
(vi) 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;
(vii) 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
(viii) in the event that the number of Investor Directors is
reduced to one, the resulting vacancy shall not be filled and the number of
authorized directors shall be reduced by one.
(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, determined pursuant to paragraph 3(b) of the Certificate of
Designation of the Series B Preferred, when the holders of Series B Preferred no
longer have the right to elect a member of the Board 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.
<PAGE>
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.
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.
<PAGE>
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.
<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
--------------------------------------------------
Paul G. Thomas
President and Chief Executive Officer
VECTOR LATER-STAGE EQUITY FUND, LP
By: Vector Fund Management, L.P., its General Partner
By
---------------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
CIBC WMV, INC.
By
---------------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
-------
Stockholders
------------
TAX ID NAME TOTAL
OUTSTANDING
<S> <C>
Paul B. Ankin & Lois F. Ankin 264
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
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
Michael J. Koblitz Tr. Of the Marcus L. Koblitz Trust 9
Michael J. Koblitz Tr. Of the Lauren JL. Koblitz Trust 9
Michael J. Koblitz 20
Smith Barney Inc. Cust Christopher C. Kraft Jr. 264
Stephen Livesey 264
William J. McCluskey 196
Michael H. Richmond 425
Barry Richter 264
Robert Sablowsky 183
David Saks 531
Don A. Sanders 660
SBSF Biotechnology Fund LP 2,325
SBSF Biotechnology Partners LP 1,065
richard L. Serrano 51
Technology Funding Medical Partners ILP 2,666
Vector Later-Stage Equity Fund LP 41,440
Stephen G. Weiss 20
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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4121677
<SECURITIES> 315244
<RECEIVABLES> 3569586
<ALLOWANCES> (174578)
<INVENTORY> 3741301
<CURRENT-ASSETS> 12025199
<PP&E> 9841737
<DEPRECIATION> (1845709)
<TOTAL-ASSETS> 20438730
<CURRENT-LIABILITIES> 8612757
<BONDS> 0
0
105
<COMMON> 13772
<OTHER-SE> 862351
<TOTAL-LIABILITY-AND-EQUITY> 20438730
<SALES> 4438483
<TOTAL-REVENUES> 4816416
<CGS> 1188802
<TOTAL-COSTS> 5901400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149993
<INCOME-PRETAX> (1156064)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1156064)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1156064)
<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
