STOCK ACQUISITION AND REORGANIZATION AGREEMENT
THIS STOCK ACQUISITION AND REORGANIZATION AGREEMENT ("Agreement") is made
and entered into in duplicate effective the 22nd day of February 2000
("Effective Date"), by and among La Jolla Fresh Squeezed Coffee Co., Inc., a
Washington corporation ("La Jolla"); Sorisole Acquisition Corp., a Delaware
corporation ("Sorisole"); and those persons specified more particularly on that
schedule attached to this Agreement marked Exhibit A and the provisions of
which, by this reference, are made a part of this Agreement as though specified
completely and specifically at length in this Agreement. For convenience, the
persons specified in Exhibit A of this Agreement shall be referred to in this
Agreement, collectively, as the "Shareholders" and any of them may be referred
to in this Agreement, individually, as a "Shareholder".
RECITALS
A. Shareholders own all of the issued and outstanding of $.001 par value
common stock of Sorisole ("Shares").
B. Shareholders desire to exchange all of the Shares for 3,500,000 shares
of $.001 par value common stock of La Jolla, on the terms and subject to the
conditions specified by the provisions of this Agreement.
C. The Boards of Directors of Sorisole and La Jolla have determined that it
is advisable and appropriate and in the best interests of the those corporations
and their respective shareholders that the exchange contemplated by the
provisions of Recital B specified above occur, on the terms and subject to the
conditions specified by the provisions of this Agreement.
D. The parties to this Agreement desire that the transaction contemplated
by the provisions of this Agreement satisfy the requirements of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated pursuant thereto.
NOW, THEREFORE, IN CONSIDERATION OF THE RECITALS SPECIFIED ABOVE THAT SHALL BE
DEEMED TO BE A SUBSTANTIVE PART OF THIS AGREEMENT, AND THE MUTUAL COVENANTS,
PROMISES, UNDERTAKINGS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES SPECIFIED IN
THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED
LEGALLY AND EQUITABLY, THE PARTIES DO HEREBY COVENANT, PROMISE, AGREE, REPRESENT
AND WARRANT AS FOLLOWS:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I:
"Applicable Contract" -- any Contract (a) pursuant to which Sorisole has or
may acquire any rights, (b) pursuant to which Sorisole has or may become subject
to any obligation or liability, or (c) by which Sorisole or any of the assets
owned or used by Sorisole is or may become obligated.
"Best Efforts" -- the efforts that a prudent Person desiring to achieve a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible.
"Breach" -- a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by this
Agreement, including; but not limited to:
(a) the transfer of the Shares by Shareholders to La Jolla in exchange for
3,500,000 shares of $.001 par value common stock of La Jolla;
(b) the execution, delivery, and performance of the Shareholders' Release;
(c) the performance by La Jolla and Shareholders of their respective
covenants and obligations pursuant to this Agreement; and
(d) La Jolla's acquisition and ownership of the Shares and assumption of
control of Sorisole.
"Contract" -- any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
obligating.
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"Effective Date" -- the date upon which this Agreement is signed and
delivered by the parties hereto, as defined in the preamble of this Agreement.
"Employee Benefit Plan" -- any "Employee Pension Benefit Plan" (as defined
in Section 3(2) of ERISA), "Employee Welfare Benefit Plan" (as defined in
Section 3(1) of ERISA), "Multi-employer Plan" (as defined in Section 3(37) of
ERISA), plan of deferred compensation, medical plan, life insurance plan,
long-term disability plan, dental plan or other plan providing for the welfare
of any of employees or former employees of Sorisole or beneficiaries thereof (as
applicable), personnel policy (including, but not limited to, vacation time,
holiday pay, bonus programs, moving expense reimbursement programs and sick
leave), excess benefit plan, bonus or incentive plan (including, but not limited
to, stock options, restricted stock, stock bonus and deferred bonus plans),
salary reduction agreement, change-of-control agreement, employment agreement,
consulting agreement or any other benefit, program, agreement or contract.
"Encumbrance" -- any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any nature whatsoever, including any restriction on
use, voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"Environment" -- soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental, Health, and Safety Liabilities" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or pursuant
to Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising pursuant to
Environmental Law or Occupational Safety and Health Law, including consultant
and attorney fees;
(c) financial responsibility pursuant to Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been
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required or requested by any Governmental Body or any other Person) and for any
natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required pursuant to Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types
of activities specified by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Sections 9601 et seq., as
amended ("CERCLA").
"Environmental Law" -- any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of intended
or actual releases of Hazardous Materials, violations of discharge limits, or
other prohibitions and of the commencements of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable amounts the release of Hazardous
Materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so
that these products do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable amounts the risks inherent in the transportation
of Hazardous Materials;
(g) cleaning up Hazardous Materials that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
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"Facilities" -- any real property, leaseholds, or other interests currently
or formerly owned or operated by Sorisole and any buildings, plants, structures,
or equipment (including motor vehicles, aircraft, and rolling stock) currently
or formerly owned or operated by Sorisole.
"GAAP" -- generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Sorisole Balance Sheet and the
other financial statements referred to in Section 3.4 were prepared.
"Governmental Authorization" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or pursuant to the authority of any Governmental Body or pursuant
to any Legal Requirement.
"Governmental Body" -- any:
(a) nation, state, commonwealth, county, city, town, village, district,
xxxx, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature whatsoever
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature whatsoever.
"Hazardous Activity" -- the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, disposal or use (including any withdrawal
or other use of groundwater) of Hazardous Materials in, on, under, about, or
from the Facilities or any part thereof into the Environment, and any other act,
omission, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or Sorisole.
"Hazardous Materials" -- any waste or other substance that is regulated,
listed, defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor, polychlorinated biphenyls ("PCBs") and asbestos or asbestos-containing
materials.
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"IRC" -- the Internal Revenue Code of 1986, or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" -- the United States Internal Revenue Service, or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"La Jolla"-- La Jolla Fresh Squeezed Coffee Co., Inc., a Washington
corporation, as defined in the preamble of this Agreement.
"La Jolla Common Stock" -- common stock, $.001 par value per share, of La
Jolla.
"Knowledge" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual should have been aware of
such fact or other matter, after reasonable investigation thereof.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, manager, executor, or trustee
of such Person (or in any similar capacity) has, or at any time had, Knowledge
of such fact or other matter.
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Occupational Safety and Health Law" -- any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the Board of Directors
of such Person (or by any Person or group of Persons having similar authority);
and
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(c) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the Board of Directors of such Person (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
business as such Person.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the articles of organization and the operating agreement of a
limited liability company; (e) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and (f)
any amendment to any of the foregoing.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
fraternal organization, group, joint venture, estate, trust, association,
organization, labor union, or other entity or Governmental Body.
"Plan Affiliate" -- with respect to any Person, any other person or entity
with whom the Person constitutes all or part of a controlled group, or which
would be treated with the Person as under common control or whose employees
would be treated as employed by the Person, pursuant to Section 414 of the IRC
and any regulations, administrative rulings and case law interpreting the
foregoing.
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Related Person"
(a) with respect to a particular individual:
(i) each other member of such individual's Family;
(ii) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(iii) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(iv) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
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(b) With respect to a specified Person other than an individual:
(i) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(ii) any Person that holds a Material Interest in such specified
Person;
(iii) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(iv) any Person in which such specified Person holds a Material
Interest;
(v) any Person with respect to which such specified Person serves as a
general partner, manager or a trustee (or in a similar capacity); and
(vi) any Related Person of any individual described in clause (ii) or
(iii) of this Subsection (b).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 pursuant to the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"Release" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Reorganization" -- The exchange of La Jolla Common Stock for all of the
Shares, pursuant to Section 368(a)(1)(B) of the Code.
"Representative" -- with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Securities Act" -- the Securities Act of 1933, or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
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"Shareholders" -- the persons specified in Exhibit A of this Agreement.
"Shares" -- as defined in the Recital A of this Agreement.
"Sorisole"-- Sorisole Acquisition Corp., a Delaware corporation, as defined
in the preamble of this Agreement.
"Sorisole Disclosure Letter" -- the disclosure letter delivered by
Shareholders to La Jolla concurrently with the execution and delivery of this
Agreement.
"Subsidiary" -- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's Board of Directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax" -- Any tax, charge, fee, levy, interest, penalty, addition to tax or
other assessment, including, but not limited to, income, provincial, excise,
property "real, tangible personal or intangible personal", sales, use, gross
receipts, business and occupation, value added and franchise tax, license,
recording, documentation and registration fee and customs duty, imposed by any
Governmental Body and any payment with respect there to required pursuant to any
tax sharing agreement.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release" -- a substantial probability of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
cause a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter probably will be asserted, commenced, taken, or
otherwise pursued in the future.
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ARTICLE II
REORGANIZATION AND REGISTRATION
2.1 Qualifying "B" Reorganization. Pursuant to the requirements of Section
368(a)(1)(B) of the IRC and the regulations promulgated pursuant thereto, La
Jolla will issue and deliver to Shareholders 3,500,000 shares of La Jolla Common
Stock in exchange for the Shares. Immediately after that exchange, La Jolla
shall have control (as defined in Section 368(c) of the IRC) of Sorisole.
2.2 Implementation of Reorganization. Shareholders shall cause Sorisole to
(i) take all corporate actions and obtain all approvals and consents necessary
to complete the Reorganization; (ii) secure the consent of any Person (if such
consent is necessary) to the consummation of such Reorganization; (iii) file all
necessary documents, returns, notices and applications with all Governmental
Bodies necessary or appropriate to complete the Reorganization; (iv) deliver the
Sorisole Disclosure Letter; and (v) deliver and transfer the certificates
representing and evidencing the Shares, together with stock powers duly endorsed
in blank with signatures guaranteed by Sorisole's transfer agent.
2.3 Obligations upon Execution. Upon the execution of this Agreement:
(a) Shareholders will deliver to La Jolla:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), for transfer to La Jolla;
(ii) releases in the form of Exhibit 2.3(a)(ii), executed by
Shareholders' Representative ("Shareholders' Release"); and
(iii) the Sorisole Disclosure Letter;
(b) La Jolla will deliver to Shareholders:
(i) one or more certificates evidencing and representing 3,500,000
shares of La Jolla Common Stock; and
2.4 Registration Rights. Within sixty (60) days of the Effective Date, La
Jolla will use its best efforts to file a Registration Statement with the
Securities and Exchange Commission pursuant to the Securities Act and cause
500,000 shares of La Jolla Common Stock held by Xxxxxx Cattiamatta to be
registered pursuant to the Securities Act. All expenses and fees incurred by La
Jolla in complying with this section, including, without limitation,
registration and filing fees, listing fees, printing expenses, fees and
disbursements of all independent accountants or auditors and counsel for La
Jolla and the expense of any special audits incident to or required by any such
registration and the expenses of complying with the securities or Blue Sky laws
of any jurisdiction shall be paid by La Jolla.
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Notwithstanding the foregoing, Xxxxxx Cattiamattta shall pay all underwriting
discounts or commissions with respect to shares of La Jolla Common Stock sold by
Xxxxxx Cattiamattta.
2.5 Shareholders Representative. The Shareholders hereby irrevocably,
unconditionally and forever designate and appoint Xxxxxx Xxxxxxxxxxx, 0000
Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, as their agent and
attorney in fact (the "Shareholders' Representative") with full and complete
power and authority to execute, deliver, and receive on their behalf all
notices, requests, and other communications pursuant to this Agreement; to
waive, amend, or modify any provisions of this Agreement, and to take such other
action on their behalf in connection with this Agreement and the Contemplated
Transactions as such agent deems appropriate; provided, however, that no such
waiver, amendment, or modification may be made if it would decrease the number
of shares of La Jolla Common Stock to be issued to the Shareholders pursuant to
this Agreement or increase the extent of their obligation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SHAREHOLDERS AND SORISOLE
Sorisole and Shareholders jointly and severally represent and warrant to La
Jolla as follows:
3.1 Organization and Good Standing.
(a) Part 3.1 of the Sorisole Disclosure Letter contains a complete and
accurate list for Sorisole, of its name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each stockholder and the number of
shares held by each). Sorisole is a corporation duly organized, validly
existing, and in good standing pursuant to the laws of its jurisdiction of
incorporation, with full and complete corporate power and authority to conduct
its business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its obligations
pursuant to Applicable Contracts. Sorisole is duly qualified to do business as a
foreign corporation and is in good standing pursuant to the laws of each state
or other jurisdiction in which either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by it, requires
such qualification.
(b) Sorisole has delivered to La Jolla true and correct copies of the
Organizational Documents of Sorisole, as currently in effect.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding obligation of
Shareholders, enforceable against Shareholders in accordance with its terms.
Upon the execution and delivery by Shareholders and Sorisole of the
Shareholders' Release ("Shareholders' Closing Documents"), the
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Shareholders' Closing Documents will constitute the legal, valid and binding
obligations of Shareholder and Sorisole, enforceable against Shareholders and
Sorisole in accordance with their respective terms. Shareholders have the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and to perform their obligations pursuant to this
Agreement, and Shareholders and Sorisole have the absolute and unrestricted
right, power, authority, and capacity to execute and deliver this Agreement and
to perform their obligations pursuant to the Shareholder' Closing Documents.
(b) Except as set forth in Part 3.2 of the Sorisole Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of Sorisole, or (B) any
resolution adopted by the Board of Directors or the stockholders of
Sorisole;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which Sorisole or any
Shareholder, or any of the assets owned or used by Sorisole, may be
subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Sorisole or that otherwise relates to the
business of, or any of the assets owned or used by, any Sorisole;
(iv) cause La Jolla or Sorisole to become subject to, or to become
liable for the payment of, any Tax;
(v) cause any of the assets owned by Sorisole to be reassessed or
revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by Sorisole.
Except as set forth in Part 3.2 of the Sorisole Disclosure Letter, neither
Sorisole nor any Shareholder is or will be required to give any notice to or
obtain any Consent from any Person in
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connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
(c) Shareholders are acquiring the La Jolla Common Stock for their own
accounts and not with an intention of distribution within the meaning of Section
2(11) of the Securities Act.
3.3 Capitalization. The authorized equity securities of Sorisole consist of
20,000,000 shares of $.001 par value Common Stock, of which 500,000 shares are
issued and outstanding, all of which issued and outstanding shares constitute
the "Shares." Shareholders are the record and beneficial owners and holders of
the Shares, free and clear of all Encumbrances. Part 3.3 of the Sorisole
Disclosure Letter sets forth the ownership of the Shares. No legend or other
reference to any purported Encumbrance appears upon any certificate representing
the Shares. All of the Shares have been duly authorized and validly issued and
are fully paid and nonassessable. Except for this Agreement, there are no
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of Sorisole. None of the Shares were issued in violation of
the Securities Act or any other Legal Requirement. Sorisole does not own, or has
any Contract to acquire, any equity securities or other securities of any Person
or any direct or indirect equity or ownership interest in any other business.
3.4 Financial Statements. Sorisole has delivered to La Jolla (a) audited
balance sheets of Sorisole as at December 31 in each of the years 1997 through
1998, inclusive, and the related audited statement of income for each of the
fiscal years then ended, (b) an unaudited balance sheet of Sorisole as at
September 30, 1999 (the "Sorisole Balance Sheet"), and the related unaudited
statement of income for the nine (9) months then ended, and (c) an unaudited
balance sheet of Sorisole as at the date of this Agreement (the "Sorisole
Interim Balance Sheet") and the related unaudited statements of income, changes
in stockholders' equity, and cash flow for the nine (9) months then ended,
including in each case the notes thereto. Such financial statements and notes
fairly present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of Sorisole as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of notes; the financial
statements referred to in this Section 3.4 present the consistent application of
such accounting principles throughout the periods involved. No financial
statements of any Person other than Sorisole are required by GAAP to be included
in the financial statements of Sorisole.
3.5 Books and Records. The books of account, minute books, stock record
books, and other records of Sorisole, all of which have been delivered to La
Jolla, are complete and correct and have been maintained in accordance with
competent business practices, including the maintenance of an adequate system of
internal controls. The minute book of Sorisole contain accurate and complete
records of all meetings held of, and corporate actions taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of Sorisole, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been
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prepared and are not contained in such minute books. Upon the execution of this
Agreement, all of those books and records will be in the possession of Sorisole.
3.6 Title to Properties; Encumbrances. Sorisole owns no real property or
any interest therein. Part 3.6 of the Sorisole Disclosure Letter contains a
complete and accurate list of all leaseholds of Sorisole. Sorisole owns all the
properties and assets (whether real, personal, or mixed and whether tangible or
intangible) that Sorisole purports to own, including all of the properties and
assets specified in the Sorisole Balance Sheet and the Sorisole Interim Balance
Sheet (except for assets held pursuant to capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Sorisole Disclosure Letter and
personal property sold since the date of the Sorisole Balance Sheet and the
Sorisole Interim Balance Sheet, as the case may be, in the Ordinary Course of
Business), and all of the properties and assets purchased or otherwise acquired
by Sorisole since the date of the Sorisole Balance Sheet (except for personal
property acquired and sold since the date of the Sorisole Balance Sheet in the
Ordinary Course of Business and consistent with past practice). All material
properties and assets specified in the Sorisole Balance Sheet and the Sorisole
Interim Balance Sheet are free and clear of all Encumbrances. Neither the whole
nor any portion of any property held by Sorisole is subject to any governmental
decree or Order to be sold or is being condemned, expropriated or otherwise
taken by any Governmental Body or any Person with or without payment
compensation therefor, nor, if any such condemnation, expropriation or taking
being proposed.
3.7 Condition and Sufficiency of Assets. The buildings, plants, structures,
and equipment of Sorisole are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they are being put,
and none of such buildings, plants, structures, or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The buildings, plants, structures, and
equipment of Sorisole are sufficient for the continued conduct of Sorisole
business after the Effective Date in substantially the same manner as conducted
prior to the Effective Date.
3.8 Accounts Receivable. All accounts receivable of Sorisole that are
specified on the Sorisole Balance Sheet or the Sorisole Interim Balance Sheet or
on the accounting records of Sorisole as of the Effective Date (collectively,
the "Sorisole Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. The Sorisole Accounts Receivable are current
and collectible net of the respective reserves shown on the Sorisole Balance
Sheet or the Sorisole Interim Balance Sheet or on the accounting records of
Sorisole as of the Effective Date (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the
Effective Date, will not represent a greater percentage of the Sorisole Accounts
Receivable as of the Effective Date than the reserve specified in the Sorisole
Balance Sheet represented of the Sorisole Accounts Receivable specified therein
and will not represent a material adverse change in the composition of such
Sorisole Accounts Receivable in terms of aging). Subject to such reserves, each
of the Sorisole Accounts Receivable either has been or will be collected in
full, without any set-off, within 90 days after the day on which it first
becomes due and payable. There is no contest, claim, or right of set-off, other
than returns in the Ordinary Course of Business, pursuant to any Contract with
any obligor of an Sorisole Accounts Receivable relating to the amount or
validity of such Sorisole Accounts Receivable. Part 3.8 of the
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Sorisole Disclosure Letter specifies a complete and accurate list of all
Sorisole Accounts Receivable as of the date of the Sorisole Interim Balance
Sheet sets and the aging of each Sorisole Accounts Receivable.
3.9 Inventory. All inventory of Sorisole, whether or not specified in the
Sorisole Balance Sheet or the Sorisole Interim Balance Sheet, consists of a
quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Sorisole Balance
Sheet or the Sorisole Interim Balance Sheet or on the accounting records of
Sorisole as of the Effective Date, as the case may be. All inventories not
written off have been priced at the lower of cost or market on a first in, first
out basis. The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of Sorisole.
3.10 No Undisclosed Liabilities. Except as set forth in Part 3.10 of the
Sorisole Disclosure Letter, Sorisole has no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations specified or reserved against
in the Sorisole Balance Sheet or the Sorisole Interim Balance Sheet and current
liabilities incurred in the Ordinary Course of Business since the respective
dates thereof.
3.11 Taxes.
(a) Sorisole has filed or caused to be filed on a timely basis all Tax
Returns that are or were required to be filed by or with respect to any of them,
either separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. Sorisole has delivered to La Jolla copies of all
such Tax Returns filed since January 1, 1997. Sorisole has paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by Shareholders or Sorisole, except such Taxes, if any, as are listed
in Part 3.11 of the Sorisole Disclosure Letter and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Sorisole Balance Sheet and the Sorisole Interim
Balance Sheet.
(b) Part 3.11 of the Sorisole Disclosure Letter contains a complete and
accurate list of all audits of all such Tax Returns, including a reasonably
detailed description of the nature and outcome of each audit. All deficiencies
proposed as a result of such audits have been paid, reserved against, settled,
or, as described in Part 3.11 of the Sorisole Disclosure Letter, are being
contested in good faith by appropriate proceedings. Part 3.11 of the Sorisole
Disclosure Letter describes all adjustments to the United States federal income
Tax Returns filed by Sorisole for all taxable years since 1997, and the
resulting deficiencies proposed by the IRS. Except as described in Part 3.11 of
the Sorisole Disclosure Letter, neither Sorisole or any Shareholder has given or
been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute of limitations
relating to the payment of Taxes of Sorisole or for which Sorisole may be
liable.
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(c) The charges, accruals and reserves with respect to Taxes on the books
of Sorisole are adequate (determined in accordance with GAAP) and are at least
equal to Sorisole's liability for Taxes. There exists no proposed tax assessment
against Sorisole, except as disclosed in the Sorisole Balance Sheet or in Part
3.11 of the Sorisole Disclosure Letter. No consent to the application of Section
341(f)(2) of the IRC has been filed with respect to any property or assets held,
acquired, or to be acquired by Sorisole. All Taxes that Sorisole is or was
required by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated basis)
Sorisole are true, correct, and complete. There is no tax sharing agreement that
will require any payment by Sorisole after the date of this Agreement. Sorisole
is not, nor during the 5 year period preceding the Effective Date has been, an
"S" corporation. During the consistency period (as defined in Section 338(h)(4)
of the IRC with respect to the sale of the Shares to La Jolla), neither Sorisole
nor target affiliate (as defined in Section 338(h)(6) of the IRC with respect to
the sale of the Shares to La Jolla) has sold or will sell any property or assets
to La Jolla or to any member of the affiliated group (as defined in Section
338(h)(5) of the IRC) that includes La Jolla. Part 3.11 of the Sorisole
Disclosure Letter lists all such target affiliates.
3.12 No Material Adverse Change. Since the date of the Sorisole Balance
Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or condition of Sorisole, and no
event has occurred or circumstance exists that may result in such a material
adverse change.
3.13 Employee Benefits. Except as set forth in Part 3.13 of the Sorisole
Disclosure Letter, neither Sorisole nor any Plan Affiliate of Sorisole has
maintained, sponsored, adopted, made contributions to or obligated itself to
make contributions to or to pay any benefits or grant rights pursuant to or with
respect to any Employee Benefit Plan, whether or not written, which could give
rise to or result in Sorisole or such Plan Affiliate having any material debt,
liability, claim or obligation of any kind or nature whatsoever, whether
accrued, absolute, contingent, direct, indirect, known or unknown, perfected or
inchoate or otherwise and whether or not due or to become due. Correct and
complete copies of all Employee Benefit Plans previously have been furnished to
La Jolla. The Employee Benefit Plans are in compliance in all material respects
with governing documents and agreements and with applicable laws. There has not
been any act or omission by Sorisole pursuant to ERISA or the terms of the
Employee Benefit Plans, or any other applicable law or agreement which could
give rise to any liability of Sorisole, whether pursuant to ERISA, the IRC or
other laws or agreements.
3.14 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.14 of the Sorisole Disclosure Letter:
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(i) Sorisole is and has been in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation
of its business or the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
violation by Sorisole of, or a failure on the part of Sorisole to comply
with, any Legal Requirement, or (B) may give result in any obligation on
the part of Sorisole to undertake, or to pay all or any portion of the cost
of, any remedial action of any nature, including pursuant to any
Environmental, Health, and Safety Liability; and
(iii) Sorisole has not received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of Sorisole to undertake, or
to pay all or any portion of the cost of, any remedial action of any
nature, including pursuant to any Environmental, Health, and Safety
Liability.
(b) Part 3.14 of the Sorisole Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by Sorisole or
that otherwise relates to the business of, or to any of the assets owned or used
by, Sorisole. Each Governmental Authorization listed or required to be listed in
Part 3.14 of the Sorisole Disclosure Letter is valid and in full force and
effect. Except as set forth in Part 3.14 of the Sorisole Disclosure Letter:
(i) Sorisole is and has been in full compliance with all of the terms
and requirements of each Governmental Authorization identified or required
to be identified in Part 3.14 of the Sorisole Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be
listed in Part 3.14 of the Sorisole Disclosure Letter, or (B) result
directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any Governmental
Authorization listed or required to be listed in Part 3.14 of the Sorisole
Disclosure Letter;
(iii) Sorisole has not received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
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(iv) all applications required to have been filed for the renewal of
the Governmental Authorizations listed or required to be listed in Part
3.14 of the Sorisole Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings
required to have been made with respect to such Governmental Authorizations
have been duly made on a timely basis with the appropriate Governmental
Bodies.
The Governmental Authorizations listed in Part 3.14 of the Sorisole Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit Sorisole to conduct and operate its business lawfully in the manner
Sorisole currently conducts and operates such business and to permit Sorisole to
own and use its assets in the manner in which Sorisole currently owns and uses
such assets.
3.15 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.15 of the Sorisole Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against Sorisole or that otherwise
relates to or may affect the business of, or any of the assets owned or
used by, Sorisole; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Shareholders and Sorisole, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that may give
result in or serve as a basis for the commencement of any such Proceeding.
Sorisole has delivered to La Jolla copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Part 3.15 of the Sorisole
Disclosure Letter. The Proceedings listed in Part 3.15 of the Sorisole
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of Sorisole.
(b) Except as set forth in Part 3.15 of the Sorisole Disclosure Letter:
(i) there is no Order to which Sorisole, or any of the assets owned or
used by Sorisole, is subject;
(ii) no Sorisole Shareholder is subject to any Order that relates to
the business of, or any of the assets owned or used by, Sorisole; and
(iii) no officer, director, agent, or employee of Sorisole is subject
to any Order that prohibits such officer, director, agent, or employee from
engaging in or continuing any conduct, activity, or practice relating to
the business of Sorisole.
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(c) Except as set forth in Part 3.15 of the Sorisole Disclosure Letter:
(i) Sorisole is and has been in full compliance with all of the terms
and requirements of each Order to which it, or any of the assets owned or
used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may constitute
or result in (with or without notice or lapse of time) a violation of or
failure to comply with any term or requirement of any Order to which
Sorisole, or any of the assets owned or used by Sorisole, is subject; and
(iii) Sorisole has not received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which
Sorisole, or any of the assets owned or used by Sorisole, is or has been
subject.
3.16 Absence of Certain Changes and Events. Except as set forth in Part
3.16 of the Sorisole Disclosure Letter, since the date of the Sorisole Balance
Sheet, Sorisole has conducted Sorisole's business only in the Ordinary Course of
Business and there has not been any:
(a) change in Sorisole's authorized or issued capital stock; grant of any
stock option or right to purchase shares of capital stock of Sorisole; issuance
of any security convertible into such capital stock; grant of any registration
rights; purchase, redemption, retirement, or other acquisition by Sorisole of
any shares of any such capital stock; or declaration or payment of any dividend
or other distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of Sorisole;
(c) payment or increase by Sorisole of any bonuses, salaries, or other
compensation to any stockholder, director, officer, or (except in the Ordinary
Course of Business) employee or entry into any employment, severance, or similar
Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits pursuant to,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of
Sorisole;
(e) damage to or destruction or loss of any asset or property of Sorisole,
whether or not covered by insurance, materially and adversely affecting the
properties, assets, business, financial condition, or prospects of Sorisole,
taken as a whole;
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(f) entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to Sorisole of at least $10,000.00;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of Sorisole or
mortgage, pledge, or imposition of any lien or other encumbrance on any material
asset or property of Sorisole, including the sale, lease, or other disposition
of any of the Sorisole Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to Sorisole
in excess of $10,000.00;
(i) material change in the accounting methods used by Sorisole; or
(j) agreement, whether oral or written, by Sorisole to do any of the
foregoing.
3.17 Contracts; No Defaults.
(a) Part 3.17(a) of the Sorisole Disclosure Letter contains a complete and
accurate list, and Sorisole has delivered to La Jolla true and complete copies,
of all the Contracts with a value of at least $10,000.00 of Sorisole. Part
3.17(a) of the Sorisole Disclosure Letter sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount of
the remaining commitment of Sorisole pursuant to the Contracts, and Sorisole's
office where details relating to the Contracts are located.
(b) Except as set forth in Part 3.17(b) of the Sorisole Disclosure Letter:
(i) no Shareholder (and no Related Person of any Shareholder) has or
may acquire any rights pursuant to, and no Shareholder has or may become
subject to any obligation or liability pursuant to, any Contract that
relates to the business of, or any of the assets owned or used by,
Sorisole; and
(ii) no officer, director, agent, employee, consultant, or contractor
of Sorisole is obligated by any Contract that purports to limit the ability
of such officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating to
the business of Sorisole, or (B) assign to Sorisole or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Sorisole Disclosure Letter,
each Contract identified or required to be identified in Part 3.17(a) of the
Sorisole Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
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(d) Except as set forth in Part 3.17(d) of the Sorisole Disclosure Letter:
(i) Sorisole is and has been in full compliance with all applicable
terms and requirements of each Contract pursuant to which Sorisole has or
had any obligation or liability or by which Sorisole or any of the assets
owned or used by Sorisole is or was obligated;
(ii) each other Person that has or had any obligation or liability
pursuant to any Contract pursuant to which Sorisole has or had any rights
is and has been in full compliance with all applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result
in a violation or breach of, or give Sorisole or other Person the right to
declare a default or exercise any remedy pursuant to, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
(iv) Sorisole has not given to or received from any other Person any
notice or other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach of, or default
pursuant to, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to Sorisole pursuant
to current or completed Contracts with any Person and no such Person has made
written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or provision
of products or services by Sorisole have been entered into in the Ordinary
Course of Business and have been entered into without the commission of any act
alone or in concert with any other Person, or any consideration having been paid
or promised, that is or would be in violation of any Legal Requirement.
3.18 Insurance.
(a) Sorisole has delivered to La Jolla:
(i) true and complete copies of all policies of insurance to which
Sorisole is a party, or any director of Sorisole, is or has been covered at
any time within the three (3) years preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for policies
of insurance; and
21
(iii) any statement by the auditor of Sorisole's financial statements
with regard to the adequacy of such entity's coverage or of the reserves
for claims.
(b) Part 3.18(b) of the Sorisole Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting Sorisole, including
any reserves established pursuant thereto;
(ii) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by Sorisole; and
(iii) all obligations of Sorisole to third parties with respect to
insurance (including such obligations under leases and service agreements)
and identifies the policy pursuant to which such coverage is provided.
(c) Part 3.18(c) of the Sorisole Disclosure Letter sets forth, by year, for
the current policy year and each of the three (3) preceding policy years:
(i) a summary of the loss experience pursuant to each policy;
(ii) a statement describing each claim pursuant to an insurance policy
for an amount in excess of $10,000.00, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of insurance,
and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims that
were self-insured, including the number and aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the Sorisole Disclosure Letter:
(i) All policies to which Sorisole is a party or that provide coverage
to Shareholder, Sorisole, or any director or officer of Sorisole:
(A) are valid, outstanding, and enforceable;
22
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for the
assets and the operations of Sorisole for all risks normally insured
against by a Person carrying on the same business or businesses as
Sorisole;
(D) are sufficient for compliance with all Legal Requirements,
Governmental Authorizations and Contracts to which Sorisole is a party
or by which Sorisole is obligated;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of Sorisole.
(ii) Neither Sorisole nor any Shareholder has received (A) any refusal
of coverage or any notice that a defense will be afforded with reservation
of rights, or (B) any notice of cancellation or any other indication that
any insurance policy is not now in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform
its obligations pursuant thereto.
(iii) Sorisole has paid all premiums due, and have otherwise performed
all of its obligations, pursuant to each policy to which Sorisole is a
party or that provides coverage to Sorisole or director or officer thereof.
(iv) Sorisole has given notice to the insurer of all claims that may
be insured thereby.
3.19 Environmental Matters. Except as set forth in part 3.19 of the
Sorisole Disclosure Letter:
(a) Sorisole is, and at all times has been, in full compliance with, and
has not been and is not in violation of or liable for Environmental, Health, and
Safety Liabilities pursuant to, any Environmental Law. Neither Sorisole nor any
Shareholder has any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held to be responsible received, any actual or
Threatened Order, notice, or other communication from (i) any Governmental Body
or private citizen, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential Release of Hazardous Materials from any
Facilities, or any violation or failure to comply with any Environmental Law, or
of any actual or Threatened obligation to undertake or pay the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which any Shareholder or Sorisole has had
23
an interest, or with respect to any property or Facility (A) at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
transported, disposed, imported, used, or processed by or from any Shareholder,
Sorisole, or any other Person for whose conduct they are or may be held
responsible, or (B) to or from which Hazardous Materials from any Shareholder,
Sorisole, or any other Person for whose conduct they are or may be held
responsible have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Shareholders and Sorisole,
Threatened claims, Encumbrances, or other restrictions of any nature, resulting
from any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which any Shareholder or Sorisole has or had an interest.
(c) Neither Sorisole nor any Shareholder has any basis to expect, nor has
any of them or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning, or other communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential obligation
to undertake or pay the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which any Shareholder or Sorisole
had an interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, treated,
used, or processed by any Shareholder, Sorisole, or any other Person for whose
conduct they are or may be held responsible, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(d) Neither Sorisole nor any Shareholder, nor any other Person for whose
conduct they are or may be held responsible, has any Environmental, Health, and
Safety Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which any
Shareholder or Sorisole (or any predecessor), has or had an interest, or at any
property geologically or hydrologically adjoining the Facilities or any such
other property or assets.
(e) There are no Hazardous Materials present on or in the Environment at
the Facilities or at any geologically or hydrologically adjoining property,
including any Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, buildings, equipment (whether
moveable or fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, sumps, or any other part of the Facilities
or such adjoining property, or incorporated into any structure therein or
thereon. Neither Sorisole nor any Shareholder, nor any other Person for whose
conduct they are or may be held responsible, or any other Person, has permitted
or conducted, or is aware of, any Hazardous Activity conducted with respect to
the Facilities or any other properties or assets (whether real, personal, or
mixed) in which any Shareholder or Sorisole has or had an interest.
24
(f) There has been no Release or, to the Knowledge of any Shareholder and
Sorisole, Threat of Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which any Shareholder or Sorisole
has or had an interest, or any geologically or hydrologically adjoining
property, whether by any Shareholder, Sorisole, or any other Person, or with
respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, treated, used, or processed by any
Shareholder, Sorisole, or any other Person for whose conduct they are or may be
held responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(g) Sorisole has delivered to La Jolla true and complete copies and results
of any reports, studies, analyses, tests, or monitoring possessed or initiated
by any Shareholder or Sorisole pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by any
Shareholder, Sorisole, or any other Person for whose conduct they are or may be
held responsible, with Environmental Laws.
3.20 Employees.
(a) Part 3.20 of the Sorisole Disclosure Letter contains a complete and
accurate list of the following information for each employee or director of
Sorisole, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since January 1, 1997; vacation accrued; and service credited
for purposes of vesting and eligibility to participate pursuant to Sorisole's
pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay, insurance,
medical, welfare, or vacation plan, other Employee Pension Benefit Plan or
Employee Welfare Benefit Plan, or any other employee benefit plan or any
director plan.
(b) No employee or director of Sorisole is a party to, or is otherwise
obligated by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Sorisole Proprietary Rights Agreement") that in
any way adversely affects or will affect (i) the performance of his or her
duties as an employee or director of Sorisole, or (ii) the ability of Sorisole
to conduct its business, including any Sorisole Proprietary Rights Agreement
with any Shareholder or Sorisole by any such employee or director. To
Shareholders' Knowledge, no director, officer, or other key employee of Sorisole
intends to terminate his or her employment with Sorisole.
(c) Part 3.20 of the Sorisole Disclosure Letter also contains a complete
and accurate list of the following information for each retired employee or
director of Sorisole, or their dependents, receiving benefits or scheduled to
receive benefits in the future: name, pension benefit, pension option election,
retiree medical insurance coverage, retiree life insurance coverage, and other
benefits.
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3.21 Labor Relations; Compliance. Sorisole has not been or is a party to
any collective bargaining or other labor Contract. There has not been, there is
not presently pending or existing, and there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
Proceeding against or affecting Sorisole relating to the alleged violation of
any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting Sorisole or its premises, or (c) any
application for certification of a collective bargaining agent. No event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by
Sorisole, and no such action is contemplated by Sorisole. Sorisole has complied
in all respects with all Legal Requirements relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes,
occupational safety and health, and plant closing. Sorisole is not liable for
the payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements.
3.22 Intellectual Property.
(a) Sorisole (i) owns all the licenses, trademarks, tradenames, copyrights,
marks, patents and applications for patents listed and attributed to it on Part
3.22(a) of the Sorisole Disclosure Letter (the "Sorisole Intellectual Property
Assets"), (ii) neither owns nor uses any such items which are not listed in the
Sorisole Disclosure Letter, (iii) pays no royalties to any Person with respect
to any such items, and (iv) has full, complete, unfettered and lawful right to
bring actions for the infringement thereof. Sorisole owns, or possesses adequate
and enforceable rights to use without payment of royalties, all licenses,
trademarks, tradenames, copyrights, patents, trade secrets and processes
necessary for the conduct of, or use in, its business as the same is presently
being conducted.
(b) Except as set forth on Part 3.22(b) of the Sorisole Disclosure Letter,
Sorisole has no Knowledge nor has received any notice to the effect that any
service or product it provides or sells, or any process, method, part or
material it employees in its business for the use by it or another of any such
service, may infringe, or is in conflict with, any asserted right of another
Person. There is no pending or Threatened claim or litigation action against
Sorisole contesting its right to use or the validity of any of the trademarks or
tradenames listed on Part 3.22(a) of the Sorisole Disclosure Letter or asserting
its misuse of any of the foregoing, which would deprive it of the right to
assert its rights pursuant thereto or which would prevent the sale of any
service provided or sold by it.
3.23 Certain Payments. Neither Sorisole nor any director, officer, agent,
or employee of Sorisole, or to Shareholders' Knowledge any other Person
associated with or acting for or on behalf of Sorisole, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions
26
already obtained, for or in respect of Sorisole or any Affiliate of Sorisole, or
(iv) in violation of any Legal Requirement, or (b) established or maintained any
fund or asset that has not been recorded in the books and records of Sorisole.
3.24 Disclosure.
(a) No representation or warranty of Shareholders in this Agreement and no
information specified in the Sorisole Disclosure Letter omits to specify a
material fact necessary to make the information specified herein or therein,
considering the circumstances in which that information was furnished, not
misleading.
(b) There is no fact known to any Shareholder that has specific application
to any Shareholder or Sorisole (other than general economic or industry
conditions) and that materially adversely affects or, as far as any Shareholder
can reasonably foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of Sorisole that has not been set
forth in this Agreement or the Sorisole Disclosure Letter.
3.25 Relationships with Related Persons. Except as set forth on Part 3.25
of the Sorisole Disclosure Letter, no Shareholder or any Related Person of
Shareholders or of Sorisole has or has had any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), used in or
pertaining to Sorisole's business. Except as set forth in Part 3.25 of the
Sorisole Disclosure Letter, no Shareholder or any Related Person of Shareholders
or of Sorisole is or has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with
Sorisole, or (ii) engaged in competition with Sorisole with respect to any line
of the products or services of Sorisole (a "Sorisole Competing Business") in any
market presently served by Sorisole. Except as set forth in Part 3.25 of the
Sorisole Disclosure Letter, no Shareholder or any Related Person of Shareholders
or of Sorisole is a party to any Contract with, or has any claim or right
against, Sorisole.
3.26 Brokers or Finders. Shareholders and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.27 Corporate Resolutions. Sorisole has delivered to La Jolla a certified
copy of the resolutions adopted by the Board of Directors of Sorisole
authorizing execution, delivery and performance of this Agreement and the
consummation of the Reorganization and a certificate of the Secretary of
Sorisole, dated the Effective Date, to the effect that those resolutions were
duly adopted and are in full force and effect and with respect to the authority
and incumbency of the officers of Sorisole executing this Agreement.
3.28 Take or Pay Contracts. Part 3.28 of the Sorisole Disclosure Letter
specifies all Contracts pursuant to which Sorisole is required to purchase a
minimum quantity of utilities, products or services or to make payment therefor.
Sorisole has utilized the minimum quantity of utilities,
27
products or services that Sorisole is required to utilize pursuant to such
Contracts and Sorisole has made no prepayments for utilities, products or
services that Sorisole has not utilized.
3.29 Banking Relationships. Part 3.29 of the Sorisole Disclosure Letter
specifies the names and locations of all banks, trust companies, savings and
loans associations and other financial institutions at which Sorisole maintains
its safe deposit boxes or accounts of any nature and the names of all persons
authorized to have access there to, draw thereon or make withdrawals therefrom.
Upon request, Sorisole and Shareholders will deliver to La Jolla copies of all
records, including all signatures or authorization cards and the keys pertaining
to safe deposit boxes.
3.30 Further Assurances. Each Shareholder shall cooperate with La Jolla and
provide such Shareholder's best efforts to assist La Jolla in connection with
the continuity and smooth transition of the Sorisole businesses. At any time or
from time to time, each Shareholder shall, at the request of La Jolla, take any
and all action necessary or appropriate to put La Jolla in actual possession and
control of Sorisole and shall execute and deliver such further instruments of
sale, conveyance, transfer, assignment and consent and take such other action as
La Jolla may request in order to sale, convey, transfer, deliver, assign, and
set over to La Jolla all of the Shares and to confirm the title and possession
thereto or to assist La Jolla in exercising its rights with respect thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents and warrants to Sorisole and Shareholders, and each of
them, as follows:
4.1 Organization and Good Standing.
(a) La Jolla is a corporation duly organized, validly existing, and in good
standing pursuant to the laws of its jurisdiction of incorporation, with full
and complete corporate power and authority to conduct its business as it is now
being conducted, to own or use the properties and assets that it purports to own
or use, and to perform all its obligations pursuant to Applicable Contracts. La
Jolla is duly qualified to do business as a foreign corporation and is in good
standing pursuant to the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification.
(b) La Jolla has delivered to Sorisole true and correct copies of the
Organizational Documents of La Jolla, as currently in effect.
4.2 Authority; No Conflict.
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(a) This Agreement constitutes the legal, valid, and binding obligation of
La Jolla, enforceable against La Jolla in accordance with its terms. La Jolla
has the absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and to perform its obligations pursuant to
this Agreement, and La Jolla has the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of La Jolla, or (B) any
resolution adopted by the Board of Directors or the stockholders of La
Jolla;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief
pursuant to, any Legal Requirement or any Order to which La Jolla, or any
of the assets owned or used by La Jolla, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by La Jolla or that otherwise relates to the
business of, or any of the assets owned or used by, La Jolla;
(iv) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy pursuant to, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable
Contract; or
La Jolla is not or will not be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) La Jolla is acquiring the Shares for La Jolla's own account and not
with an intention of distribution within the meaning of Section 2(11) of the
Securities Act. La Jolla is an "accredited investor" as such term is defined in
Rule 501(a) of Regulation D promulgated pursuant to the Securities Act.
4.3 Capitalization. The authorized equity securities of La Jolla consist of
50,000,000 shares of common stock, $.001 par value, of which 20,797,890 shares
are issued and outstanding. No legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of La
Jolla. All of the outstanding equity securities of La Jolla have been duly
authorized
29
and validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of La Jolla. None of the outstanding equity securities or other
securities of La Jolla was issued in violation of the Securities Act or any
other Legal Requirement. La Jolla does not own, and except for this Agreement,
La Jolla has no Contract to acquire, any equity securities or other securities
of any Person or any direct or indirect equity or ownership interest in any
other business.
4.4 Books and Records. The books of account, minute books, stock record
books, and other records of La Jolla, all of which have been delivered to
Sorisole, are complete and correct and have been maintained in accordance with
sound business practices, including the maintenance of an adequate system of
internal controls. The minute book of La Jolla contains accurate and complete
records of all meetings held of, and corporate actions taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of La Jolla, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute book. Upon the execution of this Agreement, all of
those books and records will be in the possession of La Jolla.
4.5 Corporate Resolutions. La Jolla has delivered to Sorisole a certified
copy of the resolutions adopted by the Board of Directors of La Jolla
authorizing execution, delivery and performance of this Agreement and the
consummation of the Reorganization and a certificate of the Secretary of La
Jolla, dated the Effective Date, to the effect that those resolutions were duly
adopted and are in full force and effect and with respect to the authority and
incumbency of the officers of La Jolla executing this Agreement.
ARTICLE V
INDEMNIFICATION; REMEDIES
5.1 Survival; Right to Indemnification Not Affected by Knowledge. All
representations, warranties, covenants, and obligations in this Agreement, the
Disclosure Letter, the certificates delivered pursuant to Sections 2.3(a)(i) and
2.3(b)(i), and any other certificate or document delivered pursuant to this
Agreement will survive this Agreement. The right to indemnification, payment of
Damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted with respect
to, or any Knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
5.2 Indemnification and Payment of Damages by Majority Shareholders.
Majority Shareholders, jointly and severally, will indemnify and hold harmless
La Jolla, and La Jolla's
30
respective Representatives, stockholders, controlling persons, and affiliates
(collectively, the "La Jolla Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including reasonable costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Shareholders or
Sorisole in this Agreement, the Sorisole Disclosure Letter, or any other
certificate or document delivered by Shareholders or Sorisole pursuant to this
Agreement;
(b) any Breach by any Shareholder or Sorisole of any covenant or obligation
of such Shareholder or Sorisole in this Agreement; or
(c) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such Person with any Shareholder or Sorisole (or any Person
acting on their behalf) in connection with any of the Contemplated Transactions.
The remedies provided in this Section 5.2 will not be exclusive of or limit
any other remedies that may be available to La Jolla or the La Jolla Indemnified
Persons.
5.3 Indemnification and Payment of Damages by Majority Shareholders and
Sorisole -- Environmental Matters. In addition to the provisions of Section 5.2,
Majority Shareholders and Sorisole, jointly and severally, will indemnify and
hold harmless La Jolla, and the La Jolla Indemnified Persons for, and will pay
to La Jolla, and the La Jolla Indemnified Persons the amount of, any Damages
(including response costs, costs of indemnification, cleanup, containment, or
other remediation) arising, directly or indirectly, from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of or
relating to: (i) (A) the ownership, operation, or condition at any time on or
prior to the Effective Date of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
Majority Shareholders or Sorisole has or had an interest, or (B) any Hazardous
Materials or other contaminants that were present on the Facilities or such
other properties and assets at any time on or prior to the Effective Date; or
(ii) (A) any Hazardous Materials or other contaminants, wherever located, that
were, or were allegedly, generated, transported, stored, treated, Released,
dispersed or otherwise handled by Shareholders or Sorisole or by any other
Person for whose conduct they are or may be held responsible at any time on or
prior to the Effective Date, or (B) any Hazardous Activities that were, or were
allegedly, conducted by Shareholders or Sorisole or by any other Person for
whose conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or manifested
itself), personal injury, property damage
31
(including trespass, nuisance, wrongful eviction, and deprivation of the use of
real property), or other damage of or to any Person, including any employee or
former employee of Shareholders or Sorisole or any other Person for whose
conduct they are or may be held responsible, in any way arising from or
allegedly arising from any Hazardous Activity conducted or allegedly conducted
with respect to the Facilities or the operation of Sorisole prior to the
Effective Date, or from Hazardous Material that was (i) present or suspected to
be present on or before the Effective Date on or at the Facilities (or present
or suspected to be present on any other property, if such Hazardous Material
emanated or allegedly emanated from any of the Facilities and was present or
suspected to be present on any of the Facilities on or prior to the Effective
Date) or (ii) Released or allegedly Released by Shareholders or Sorisole or any
other Person for whose conduct they are or may be held responsible, at any time
on or prior to the Effective Date, whether or not from the Facilities.
La Jolla will be entitled to direct or control any Cleanup, any related
Proceeding, and, except as provided in the following sentence, any other
Proceeding with respect to which indemnity may be sought pursuant to this
Section 5.3. The procedure described in Section 5.5 will apply to any claim
solely for monetary damages relating to a matter contemplated by this Section
5.3.
5.4 Indemnification and Payment of Damages by La Jolla. La Jolla will
indemnify and hold harmless Shareholders and Sorisole, and Shareholders and
Sorisole's respective Representatives, stockholders, controlling persons, and
affiliates (collectively, the "Shareholders and Sorisole Indemnified Persons")
for, and will pay to the Shareholders and Sorisole Indemnified Persons the
amount of, any loss, liability, claim, damage (including incidental and
consequential damages), expense (including reasonable costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by La Jolla in this
Agreement, the Disclosure Letter, or any other certificate or document delivered
by La Jolla pursuant to this Agreement;
(b) any Breach by La Jolla or Sorisole of any covenant or obligation of La
Jolla in this Agreement; or
(c) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such Person with La Jolla (or any Person acting on their
behalf) in connection with any of the Contemplated Transactions.
The remedies provided in this Section 5.4 will not be exclusive of or limit
any other remedies that may be available to Shareholders and Sorisole or the
Shareholders and Sorisole Indemnified Persons.
5.5 Procedure for Indemnification -- Third Party Claims.
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(a) Promptly after receipt by a Person indemnified pursuant to this Article
V of notice of the commencement of any Proceeding against it, such indemnified
Person will, if a claim is to be made against an indemnifying Person pursuant to
this Article V, give notice to the indemnifying Person of the commencement of
such claim, but the failure to notify the indemnifying Person will not relieve
the indemnifying Person of any liability that it may have to any indemnified
Person, except to the extent that the indemnifying Person demonstrates that the
defense of such claim is prejudiced by the indemnifying Person's failure to give
such notice.
(b) If any Proceeding referred to in Section 5.5(a) is brought against an
indemnified Person and it gives notice to the indemnifying Person of the
commencement of such Proceeding, the indemnifying Person will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it desires (unless (i) the indemnifying Person is also a party to such
Proceeding and the indemnified Person determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying Person fails to
provide reasonable assurance to the indemnified Person of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified Person and, after notice from the indemnifying Person to the
indemnified Person of its election to assume the defense of such Proceeding, the
indemnifying Person will not, as long as it diligently conducts such defense, be
liable to the indemnified Person pursuant to this Article V for any fees of
other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified Person in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If an indemnifying Person assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying Person without the indemnified Person's consent, unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified Person, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying Person; and (iii) the
indemnified Person will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying Person of the commencement of any Proceeding and the indemnifying
Person does not, within 10 days after the indemnified Person's notice is given,
give notice to the indemnified Person of its election to assume the defense of
such Proceeding, the indemnifying Person will be obligated by any determination
made in such Proceeding or any compromise or settlement effected by the
indemnified Person.
(c) Notwithstanding the foregoing, if an indemnified Person determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified Person may, by notice to the indemnifying Person, assume the
exclusive right to defend, compromise, or settle such Proceeding, but the
indemnifying Person will not be obligated by any determination of a Proceeding
so defended or any compromise or settlement effected without its consent (which
shall not be unreasonably withheld).
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(d) Shareholders hereby consent to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any La Jolla Indemnified Person
for purposes of any claim that a La Jolla Indemnified Person may have pursuant
to this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on Shareholders with respect to
such a claim anywhere in the world.
5.6 Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
ARTICLE VI
GENERAL PROVISIONS
6.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party shall pay all expenses, costs and fees (including attorneys' fees)
incurred by that party in connection with the Contemplated Transactions,
including the preparation, execution and delivery of this Agreement and the
ancillary agreements, schedules and documents related to the Contemplated
Transactions.
6.2 Public Announcements. Any public announcement or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as La Jolla and Shareholders shall mutually
determine. Shareholders and La Jolla will consult with each other concerning the
communication by which Sorisole's employees, customers, and suppliers and other
Persons having dealings with Sorisole will be informed of the Contemplated
Transactions, and La Jolla will have the right to be present for any such
communication.
6.3 Notices. All notices, consents, waivers, and other communications
pursuant to this Agreement must be in writing and will be deemed to have been
duly given when (a) delivered by hand (with written confirmation of receipt),
(b) sent by facsimile machine (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
facsimile machine numbers set forth below (or to such other addresses and
facsimile machine numbers as a party may designate by notice to the other
parties):
Shareholders:
Xxxxxx Xxxxxxxxxxx
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
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Sorisole:
Sorisole Acquisition Corp.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
La Jolla:
La Jolla Fresh Squeezed Coffee Co., Inc.
0000 Xxxxxxxx Xxxx, Xxxxx X
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
6.4 Jurisdiction; Service of Process. Any action or proceeding seeking to
enforce any provision of, or based on any right resulting from, this Agreement
may be brought against any of the parties in the courts of the State of
California, County of San Diego, or, if it has or can acquire jurisdiction, in
the United States District Court for the Central District of California, and
each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
6.5 Further Assurances. The parties agree (a) to furnish upon request to
each other such additional information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
parties may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to in this Agreement.
6.6 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege pursuant to this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right resulting from
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
6.7 Entire Agreement and Modification. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
35
and exclusive statement of the terms of the Agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written Agreement executed by the party to be charged with any such amendment.
6.8 Sorisole Disclosure Letter.
(a) The disclosures in the Sorisole Disclosure Letter must relate only to
the representations and warranties in the section of the Agreement to which it
expressly relates and not to any other representation or warranty in this
Agreement.
(b) In the event of any inconsistency between the statements in this
Agreement and those in the Sorisole Disclosure Letter (other than an exception
expressly set forth as such in such Disclosure Letter with respect to a
specifically identified representation or warranty), the provisions of this
Agreement will prevail and control.
6.9 Assignments, Successors, and No Third-party Rights. No party may assign
any of its rights pursuant to this Agreement without the prior written consent
of the other parties, and any such assignment shall be null and void ab initio;
provided, however, that La Jolla may assign any of its rights pursuant to this
Agreement to any Subsidiary of La Jolla. Subject to the preceding sentence, this
Agreement will apply to, obligate in all respects, and inure to the benefit of,
the successors and permitted assigns of the parties. Nothing expressed or
referred to in this Agreement will be construed to give any Person, other than
the parties to this Agreement, any legal or equitable right, remedy, or claim
pursuant to or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
6.10 Severability. If any provision of this Agreement is determined to be
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement determined to be invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not determined to be
invalid or unenforceable.
6.11 Section Headings, Construction. The headings of sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "section" or "sections" refer to the
corresponding section or sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
6.12 Time of Essence. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
36
6.13 Governing Law. This Agreement will be governed by the laws of the
State of California, without regard to conflicts of laws principles.
6.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same Agreement.
THE REMAINDER OF THIS PAGE IS BLANK INTENTIONALLY
37
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the Effective Date.
La Jolla Fresh Squeezed Coffee Co., Inc.,
a Washington corporation
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx
Its: President
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------
Xxxxxxx X. Xxxxx
Its: Secretary
Sorisole Acquisition Corp.,
a Delaware corporation
By: /s/ Xxxxxx Xxxxxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxxxxx
Its: President
By: /s/ Xxxxxx Xxxxxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxxxxx
Its: Secretary
Shareholders of Sorisole Acquisition Corp.
By: /s/ Xxxxxx Xxxxxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxxxxx
38
Form of Sorisole Disclosure Letter
February 22, 2000
La Jolla Fresh Squeezed Coffee Co., Inc.
0000 Xxxxxxxx Xxxx, Xxxxx X
Xxx Xxxxx, XX 00000-0000
Gentlemen:
We refer to the Stock Acquisition and Reorganization Agreement (the
"Agreement") to be entered into effective today between the persons specified in
Exhibit A of the Agreement ("Shareholders"); Sorisole Acquisition Corp., a
Delaware corporation ("Company"); and La Jolla Fresh Squeezed Coffee Co., Inc.,
a Washington corporation ("La Jolla"), pursuant to which Shareholders exchanged
with La Jolla and La Jolla acquired from Shareholders 500,000 shares of $.001
par common stock of the Company, which is 100% of the issued and outstanding
$.001 par common stock of the Company, on the terms and subject to the
conditions specified in the Agreement.
This letter constitutes the Sorisole Disclosure Letter referred to in the
Agreement. The representations and warranties of Sorisole and Shareholders in
the Agreement are made and given subject to the disclosures in this Sorisole
Disclosure Letter. The disclosures in this Sorisole Disclosure Letter are to be
taken as relating to the representations and warranties in the section of the
Agreement to which they expressly relate and to no other representation or
warranty in the Agreement.
Terms defined in the Agreement are used with the same meanings in this
Sorisole Disclosure Letter. References to Appendices are to the Appendices to
this Sorisole Disclosure Letter.
By reference to Section 3 of the Agreement (using the numbering in such
section), the following matters are disclosed:
Very truly yours,
Sorisole Acquisition Corp.,
a Delaware corporation
By: /s/ Xxxxxx Xxxxxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxxxxx
Its: President
By: /s/ Xxxxxx Xxxxxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxxxxx
Its: Secretary
39
La Jolla acknowledges receipt of the Sorisole Disclosure Letter of which this is
a duplicate (including the Appendices referred to therein).
Dated: February 22, 2000
La Jolla Fresh Squeezed Coffee Co., Inc.,
a Washington corporation
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx
Its: President
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------
Xxxxxxx X. Xxxxx
Its: Secretary
40
SHAREHOLDERS' RELEASE
THIS SHAREHOLDERS' RELEASE ("Release") is executed and delivered in
accordance with Section 2.3(a)(ii) of that certain Stock Acquisition and
Reorganization Agreement which is effective the 22nd day of February 22, 2000
("Effective Date") ("Agreement"), by and among La Jolla Coffee Fresh Squeezed
Coffee Co., Inc., a Washington corporation ("La Jolla"); Sorisole Acquisition
Corp., a Delaware corporation ("Sorisole"); and the persons specified in Exhibit
A of the Agreement. The persons specified in Exhibit A of the Agreement shall be
referred to in this Release, collectively, as the "Shareholders," and any of
them may be referred to in this Release, individually, as a "Shareholder".
Capitalized terms used in this Release without definitions have the respective
meanings given to them in the Agreement.
Each Shareholder acknowledges that execution and delivery of this Release
is a condition to La Jolla's obligation to acquire the Shareholders' shares of
$.001 par common stock of Sorisole pursuant to the Agreement and that La Jolla
is relying on this Release in consummating the Reorganization.
Each Shareholder, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and with the intent to be
obligated legally and equitably, in order to induce La Jolla to consummate the
Reorganization pursuant to the Agreement, hereby agrees as follows:
Each Shareholder, on behalf of himself and each of his Related Persons,
hereby unconditionally, irrevocably and forever releases, acquits and discharges
La Jolla and Sorisole, and each of them, and each of their respective
individual, joint or mutual, past, present and future Representatives,
affiliates, stockholders, controlling persons, Subsidiaries, successors and
assigns (individually, a "Releasee" and, collectively, "Releasees") from any and
all claims, demands, Proceedings, causes of action, Orders, obligations,
contracts, agreements, debts and liabilities whatsoever, whether known or
unknown, suspected or unsuspected, both at law and in equity, which such
Shareholder or any of such Shareholder's respective Related Persons now has,
have ever had or may hereafter have against the Releasees resulting
contemporaneously from or prior to the Effective Date or on account of or
resulting from any matter, cause or event occurring contemporaneously with or
prior to the Effective Date, including, but not limited to, any rights to
indemnification or reimbursement from Sorisole, whether pursuant to its
Organizational Documents, contract or otherwise and whether or not relating to
claims pending on, or asserted after, the Effective Date; provided, however,
that nothing specified in this Release shall operate to release any obligations
of (i) La Jolla or Sorisole resulting from the Agreement.
1
Each Shareholder hereby irrevocably shall refrain from, directly or
indirectly, asserting any claim or demand, or commencing, instituting or causing
to be commenced, any Proceeding against any Releasee, based upon any matter
released or purported to be released hereby.
Without in any way limiting any of the rights and remedies otherwise
available to any Releasee, each Shareholder, jointly and severally, shall
indemnify and hold harmless each Releasee from and against all loss, liability,
claim, damage (including incidental and consequential damages) or expense
(including costs of investigation and defense and reasonable attorney's fees)
whether or not involving third party claims, resulting directly or indirectly
from or in connection with (i) the assertion by or on behalf of such Shareholder
or any of such Shareholder's Related Persons of any claim or other matter
purported to be released pursuant to this Release and (ii) the assertion by any
third party of any claim or demand against any Releasee resulting directly or
indirectly from, or in connection with, any assertion by or on behalf of such
Shareholder or any of such Shareholder's Related Persons against such third
party of any claims or other matters purported to be released pursuant to this
Release.
Each Shareholder, on behalf of himself and each of his Related Persons,
agrees that there is a risk that, subsequent to the execution and delivery of
this Release, losses, damages or injuries might be incurred by such Shareholder
which are unknown or unanticipated, for whatever reason, at the time of the
execution and delivery of this Release. It is none the less specifically agreed
that the releases specified in this Release are fully and completely effective
regardless of any present lack of knowledge on the part of any party as to any
claims, charges, complaints, liabilities, obligations, debts, suits, demands,
grievances, losses, damages, injuries costs, expenses, rights, actions or causes
of action, or as to any possible fact or circumstance relating in any manner to
the matters for which the releases specified in this Release are made. Each
Shareholder voluntarily, intentionally and expressly waives the benefits and
provisions of Section 1542 of the Civil Code of the State of California, and any
similar law of any state or territory of the United States of America or other
jurisdiction. Specifically, that Section 1542 specifies as follow:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH
IF KNOW BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
If any provision of this Release is determined to invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Release
will remain in full
2
force and effect. Any provision of this Release determined to be invalid or
unenforceable only in part will remain in full force and effect to the extent
not determined to be invalid or unenforceable.
This Release may not be amended except in a writing signed by the person
against whose interest such amendment shall operate. This Release shall be
governed by and construed pursuant to the laws of the State of California,
without regard to principles of conflicts of law.
All words used in this Release will be construed to be of such gender or
number as the circumstances require.
IN WITNESS WHEREOF, each of the undersigned have executed and delivered this
Release which shall be effective as of this 22nd day of February 2000.
Shareholders of Sorisole Acquisition Corp.
/s/ Xxxxxx Xxxxxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxxxxx
3
