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Stock Purchase Agreement Dated 11/6/98

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STOCK PURCHASE AGREEMENT


dated as of


November 6, 1998


by and among


SIERRA MEDICAL TECHNOLOGIES, INC.,


COLLAGEN AESTHETICS, INC.,


and


LIPOMATRIX, INC., a wholly-owned
subsidiary of Collagen Aesthetics, Inc.


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2


Applications for an order granting confidential treatment
pursuant to Rule 24b-2 of the Securities and Exchange
Act of 1934 has been or will be timely made. Confidential
portions of this document have been redacted and marked
with an (*) and have been filed with the Securities and
Exchange Commission separately with such application.


STOCK PURCHASE AGREEMENT


THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the 6th day of November, 1998 by and among Sierra Medical Technologies, Inc., a Delaware corporation (the "Purchaser"), Collagen Aesthetics, Inc., a Delaware corporation (the "Stockholder"), and LipoMatrix, Inc., a British Virgin Islands corporation and wholly-owned subsidiary of the Stockholder (the "Company").


RECITALS


The Company is in the business of developing and supplying breast implant products with unique safety and other attributes. The Stockholder is the sole owner of all of the Company's outstanding capital stock. Purchaser wishes to purchase from the Stockholder, and the Stockholder wishes to sell to Purchaser, all of the outstanding capital stock of the Company on the terms and conditions set forth herein (the "Purchase").


AGREEMENT


In consideration of the mutual promises, agreements, warranties and provisions contained in this Agreement, the parties agree as follows:


SECTION 1


PURCHASE AND SALE OF STOCK


1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase at the Closing (as defined below) and the Stockholder agrees to sell to the Purchaser at the Closing, all of the shares of capital stock of the Company outstanding as of the Closing (the "Shares") for an aggregate purchase price (the "Purchase Price") of:


(a) (*) in immediately available funds;


(b) a payment of (*) for each unit of triglyceride-filled breast implant product (collectively, the "Products") sold by the Company following the Closing with respect to the first (*) units of Products so sold; and


(c) running royalties equal to (*) of the Net Revenue (as defined below) from worldwide sales of the Products from the date of Closing by the Company or its successors and assigns. Purchaser's obligations to pay royalties pursuant to this Section 1(c) shall terminate on (*), with respect to Products sold outside of the United States, and on (*), with respect to Products sold within the United States. "Net Revenue" shall mean the amounts received by the Company, or its successors and assigns, from the sale, licensing or other disposition of the Product after deduction of arms-length (a) refunds, replacements and credits for return actually made, (b) trade, quantity or cash discounts actually


*Confidential treatment has been or will be timely requested for a portion of this document.


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given, (c) costs of shipping containers and packaging and freight and
transportation charges actually paid, including shipping insurance
premiums actually incurred and (d) sales, use and value-added taxes
actually paid.


SECTION 2


CLOSING


2. CLOSING.


2.1 CLOSING DATE. The closing of the Purchase (the "Closing") shall be held at the offices of Collagen Aesthetics, Inc., 1850 Embarcadero Road, Palo Alto, California U.S.A. 94303 at 2:30 p.m. local time on November 6, 1998, or at such other time and place upon which the parties shall agree orally or in writing, such time and date being referred to herein as the "Closing Date."


2.2 ACTIONS AT THE CLOSING. At the Closing, the Company, the Stockholder and Purchaser shall take such actions and execute and deliver such agreements and other instruments and documents as necessary or appropriate to effect the transactions contemplated by this Agreement in accordance with its terms, including, without limitation, the following:


(a) The Stockholder will deliver to Purchaser a certificate or certificates representing all of Stockholder's Shares, together with stock powers duly endorsed in blank for transfer of such Shares to Purchaser, and the Stockholder shall deliver all other documents required of the Stockholder pursuant to the Agreement; and


(b) Purchaser will deliver all cash portions of the Purchase Price to the Stockholder by certified check payable to the Stockholder and deliver all other documents required of Purchaser pursuant to this Agreement.


(c) The Stockholder and the Company will execute the notification letters in the form attached hereto as Exhibit 2.2(c) and shall deliver such executed letters to the proper authorities in Europe as necessary to permit the Company to continue sales of the Products after the Closing Date.


SECTION 3


REPRESENTATIONS AND WARRANTIES OF THE COMPANY


In this Agreement, any reference to any event, change, condition or effect being "material" with respect to any entity means any material event, change, condition or effect related to the condition, properties, assets, liabilities, business, operations or results of operations of such entity. In this Agreement, any reference to a "Material Adverse Effect" with respect to any entity means any event, change or effect that, when taken individually or together with all other adverse changes and effects, is or is reasonably likely to be materially adverse to the condition, properties, assets, liabilities, business, operations, or results of such entity and its


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subsidiaries, taken as a whole, or to prevent or materially delay consummation of the transactions contemplated under this Agreement or otherwise to prevent such entity and its subsidiaries from performing their obligations under this Agreement.


In this Agreement, any reference to a party's "knowledge" means such party's actual knowledge after due inquiry of its officers reasonably believed to have knowledge of such matters.


Except as disclosed in a document of the same date as this Agreement and delivered by the Company to Purchaser prior to the execution and delivery of this Agreement and referring to the representations and warranties in this Section 3 (the "Company Disclosure Schedule"), the Company represents and warrants to Purchaser as follows:


3.1 ORGANIZATION STANDING AND POWER. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. The Company has the requisite corporate power and authority and all necessary government approvals to own, lease and operate its properties and to carry on its business as now being conducted and as proposed to be conducted, except where the failure to have such power, authority and governmental approvals would not, individually or in the aggregate, have a Material Adverse Effect on the Company. The Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, limited liability company, joint venture or other business association or entity.


3.2 CHARTER DOCUMENTS AND BYLAWS. The Company has made available a true and correct copy of the charter documents and Bylaws, stock records and Board and stockholder actions and consents, as applicable, of the Company, each as amended to date, to Purchaser. The Company is not in violation of any of the provisions of its charter documents or Bylaws or equivalent organizational documents.


3.3 CAPITAL STRUCTURE. The authorized capital stock of the Company consists of 16,000,000 shares of Common Stock and 12,040,818 shares of Preferred Stock, of which 4,040,818 shares have been designated Series A Preferred Stock (the "Series A Preferred") and 8,000,000 shares have been designated Series B Preferred Stock (the "Series B Preferred"). There were issued and outstanding as of the close of business on October 30, 1998, 800,000 shares of Common Stock, 4,040,818 shares of Series A Preferred and 1,980,000 shares of Series B Preferred. Stockholder is, and will be as of the Closing Date, the sole shareholder of the Company. There is no (i) outstanding option, warrant or other right to acquire any shares of the capital stock or other securities of the Company, (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of capital stock or other securities of the Company, or (iii) agreement or understanding under which the Company is or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities. All outstanding shares of the Company Capital Stock are duly authorized, validly issued, fully paid and non-assessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof, and are not subject to


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preemptive rights or rights of first refusal created by statute, the Certificate of Incorporation or Bylaws of the Company or any agreement to which the Company is a party or by which it is bound.


3.4 AUTHORITY. The Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and assuming due authorization, execution and delivery by Purchaser, constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms.


3.5 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.


(a) The execution and delivery of this Agreement by the Company does not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default under, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit under (i) any provision of the Certificate of Incorporation or Bylaws of the Company, as amended, or (ii) any material mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its properties or assets.


(b) No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality ("Governmental Entity") is required by or with respect to the Company in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (i) any filings as may be required under applicable U.S. state securities laws and the securities laws of any other country; and (ii) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not have a Material Adverse Effect on the Company and would not prevent, or materially alter or delay, any of the transactions contemplated by this Agreement.


3.6 FINANCIAL STATEMENTS. Section 3.6 of the Company Disclosure Schedule includes a true, correct and complete copy of the Company's unaudited financial statements for the fiscal year ended June 30, 1998, and its financial statements (balance sheet, statement of operations and statement of cash flows) on a consolidated basis as at, and for the three-month period ended September 30, 1998 (collectively, the "Financial Statements"). The Financial Statements are unaudited but have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") (except that they do not have notes thereto) applied on a consistent basis throughout the periods indicated. The Financial Statements accurately set out and describe the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject to normal year-end audit adjustments, which adjustments are not expected to be material The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with GAAP.


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3.7 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no material obligations or liabilities of any nature (matured or unmatured, fixed or contingent) other than (i) those set forth or adequately provided for in the Balance Sheet for the period ended September 30, 1998 (the "Company Balance Sheet"), (ii) those incurred in the ordinary course of business, consistent with past practice, and not required to be set forth in the Company Balance Sheet under GAAP, (iii) those incurred in the ordinary course of business since the Company Balance Sheet Date and consistent with past practice, which liabilities individually and in the aggregate are of a character and magnitude consistent with the ordinary course of business consistent with past practice, and (iv) those incurred in connection with the execution of this Agreement.


3.8 ABSENCE OF CERTAIN CHANGES. Since September 30, 1998 (the "Company Balance Sheet Date"), there has not been, occurred or arisen any:


(a) transaction by the Company except in the ordinary course of business as conducted on that date and consistent with past practices;


(b) amendments or changes to the Certificate of Incorporation or Bylaws of the Company;


(c) capital expenditure or commitment by the Company, in any individual amount exceeding (*), or in the aggregate, exceeding (*);


(d) destruction of, damage to, or loss of any assets (including, without limitation, intangible assets), business or customer of the Company (whether or not covered by insurance) which would constitute a Material Adverse Effect;


(e) labor trouble or claim of wrongful discharge or other unlawful labor practice or action;


(f) change in accounting methods or practices (including any change in depreciation or amortization policies or rates, or any change in policies in making or reversing accruals) by the Company;


(g) revaluation by the Company of any of its assets;


(h) declaration, setting aside, or payment of a dividend or other distribution in respect to the capital stock of the Company, or any direct or indirect redemption, purchase or other acquisition by the Company of any of its capital stock;


(i) increase in the salary or other compensation payable or to become payable by the Company to any officers, directors, employees or consultants of the Company, except in the ordinary course of business consistent with past practice, or the declaration, payment, or commitment or obligation of any kind for the payment by the Company of a bonus or other additional salary or compensation to any such person except as otherwise contemplated by this Agreement, the establishment of any bonus, insurance, deferred compensation, pension, retirement, profit sharing, stock option (including without limitation, the granting of stock


*Confidential treatment has been or will be timely requested for a portion of this document.


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options, stock appreciation rights, performance awards), stock purchase or other employee benefit plan;


(j) sale, lease, license or other disposition of any of the assets or properties of the Company, except in the ordinary course of business and not in excess of (*) either individually or in the aggregate;


(k) termination or material amendment of any material contract, agreement or license (including any distribution agreement) to which the Company is a party or by which it is bound;


(l) loan by the Company to any person or entity, or guaranty by the Company of any loan, except for (i) travel or similar advances made to employees in connection with their employment duties in the ordinary course of business, consistent with past practices and (ii) trade payables not in excess of (*) either individually or in the aggregate and in the ordinary course of business, consistent with past practices;


(m) waiver or release of any right or claim of the Company, including any write-off or other compromise of any account receivable of the Company, in excess of (*) either individually or in the aggregate;


(n) commencement or notice or threat of commencement of any lawsuit or proceeding against or, to the Company's or the Company's officers' or directors' knowledge, investigation of the Company or its affairs;


(o) notice of any claim of ownership by a third party of the Company's Intellectual Property (as defined in Section 3.12 below) or of infringement by the Company of any third party's Intellectual Property rights;


(p) issuance or sale by the Company of any of its shares of capital stock, or securities exchangeable, convertible or exercisable therefor, or of any other of its securities;


(q) change in pricing or royalties set or charged by the Company to its customers or licensees or in pricing or royalties set or charged by persons who have licensed Intellectual Property to the Company;


(r) any event or condition of any character that has or could reasonably be expected to have a Material Adverse Effect on the Company;


(s) agreement by the Company, or any officer or employee of the Company on behalf of the Company to do any of the things described in the preceding clauses (a) through (r) (other than negotiations with Purchaser and its representatives regarding the transactions contemplated by this Agreement); or


(t) any event, or combination of events, described under subsections (c), (j), (l) and (m) above, which, either individually or in the aggregate, exceeds (*).


*Confidential treatment has been or will be timely requested for a portion of this document.


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3.9 LITIGATION. There is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal, foreign or domestic, or, to the Company's knowledge, threatened against the Company or any of its properties or any of its officers or directors (in their capacities as such) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on the Company. There is no judgment, decree or order against the Company or, to the Company's knowledge, any of its directors or officers (in their capacities as such), that could prevent, enjoin, or materially alter or delay any of the transactions contemplated by this Agreement, or that could reasonably be expected to have a Material Adverse Effect on the Company. All litigation to which the Company is a party (or, to the knowledge of the Company, threatened to become a party) is disclosed in the Company Disclosure Schedule.


3.10 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement, judgment, injunction, order or decree binding upon the Company which has or could reasonably be expected to have the effect of prohibiting or materially impairing any current or future business practice of the Company, any acquisition of property by the Company or the overall conduct of business by the Company as currently conducted or as proposed to be conducted by the Company. The Company has not entered into any agreement under which the Company is restricted from selling, licensing or otherwise distributing any of its products to any class of customers, in any geographic area, during any period of time or in any segment of the market.


3.11 PERMITS; COMPANY PRODUCTS; REGULATION.


(a) The Company is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders necessary for the Company, to own, lease and operate its properties or to carry on its business as it is now being conducted (the "Company Authorizations") and no suspension or cancellation of any Company Authorization is pending or, to the Company's knowledge, threatened, except where the failure to have, or the suspension or cancellation of, any Company Authorization would not have a Material Adverse Effect on the Company. The Company is not in conflict with, or in default or violation of, (i) any laws applicable to the Company or by which any property or asset of the Company is bound or affected, (ii) any Company Authorization or (iii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company is a party or by which the Company or any property or asset of the Company is bound or affected, except for any such conflict, default or violation that would not, individually or in the aggregate have a Material Adverse Effect on the Company.


(b) Since September 30, 1998, there have been no written notices, citations or decisions by any governmental or regulatory body that any product produced, manufactured, marketed or distributed at any time by the Company is defective or fails to meet any applicable standards promulgated by any such governmental or regulatory body. To the knowledge of the Company, the Company has complied in all material respects with the laws, regulations, policies, procedures and specifications with respect to the design, manufacture, labeling, testing and inspection of the Company's products. There have been no recalls, field notifications or seizures


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ordered or, to the Company's knowledge, threatened by any such governmental or regulatory body with respect to any of the Products.


(c) The Company has obtained, in all countries where either the Company is marketing or has marketed its Products, all applicable licenses, registrations, approvals, clearances and authorizations required by local, state or federal agencies in such countries regulating the safety, effectiveness and market clearance of the Products currently or previously marketed by the Company in such countries, except for any such failures as would not, individually or in the aggregate, have a Material Adverse Effect on the Company. The Company has identified and made available for examination by Purchaser all information relating to regulation of its Products, including licenses, registrations, approvals, permits, device listing, inspections, the Company's recalls and product actions, audits and the Company's ongoing clinical studies and trials. The Company has identified in writing to Purchaser all international locations where regulatory information and documents are kept.


(d) To the Company's knowledge, the Company has at all times conducted, and is presently conducting, its operations so as to comply with all laws, statutes, ordinances, rules and regulations applicable to the conduct or operation of its business or the ownership or use of its assets, except where failure to do so would not have a Material Adverse Effect.


3.12 INTELLECTUAL PROPERTY.


Section 3.12 of the Company Disclosure Schedule lists (i) all patents and patent applications and all registered and unregistered trademarks, trade names and service marks, registered and unregistered copyrights, and mask work rights, including the jurisdictions in which each such intellectual property right has been issued or registered or in which any application for such issuance and registration has been filed (collectively, the "Intellectual Property"), (ii) all licenses, sublicenses and other agreements to which the Company is a party and pursuant to which any person is authorized to use any Intellectual Property, and (iii) all licenses, sublicenses and other agreements as to which the Company is a party and pursuant to which the Company is authorized to use any third party patents, trademarks or copyrights, including software ("Third Party Intellectual Property Rights") which are incorporated in, are, or form a part of any products of the Company that are, individually or in the aggregate, material to the business of the Company. The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby, will neither cause the Company to be in violation or default under any such license, sublicense or agreement, nor entitle any other party to any such license, sublicense or agreement to terminate or modify such license, sublicense or agreement.


3.13 TAXES.


(a) All tax returns required to be filed by or on behalf of the Company have been duly filed on a timely basis and such returns are true, complete and correct. All taxes shown to be payable on such returns or on subsequent assessments with respect thereto, and all payments of estimated taxes required to be made by or on behalf of the Company have been paid in full on a timely basis, and no other taxes are payable by the Company with respect to items or


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periods covered by such returns (whether or not shown on or reportable on such returns).


(b) To the Company's knowledge, no audit of the returns of or including the Company by a government or taxing authority is in process or threatened. No deficiencies exist or have been asserted or are expected to be asserted with respect to taxes of the Company, and the Company has not received notice that it has not filed a tax return or paid taxes required to be filed or paid.


3.14 EMPLOYEE MATTERS. The Company is in compliance in all material respects with all currently applicable laws and regulations respecting employment, wages, hours and occupational safety and health and employment practices, and is not engaged in any unfair labor practice. There are no pending claims against the Company under any workers compensation plan or policy or for long term disability. There are no controversies pending or, to the Company's knowledge, threatened, between the Company and any of its employees, which controversies have or could reasonably be expected to have a Material Adverse Effect on the Company. The Company is not a party to any collective bargaining agreement or other labor unions contract nor is the Company aware of any activities or proceedings of any labor union or organize any such employees.


3.15 MATERIAL CONTRACTS.


Section 3.15 of the Company Disclosure Schedule contains a list of all contracts and agreements to which the Company is a party and that are material to the business, results of operations, or condition (financial or otherwise), of the Company taken as a whole (the "Material Contracts"). Stockholder h
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