SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
to
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 22, 2000
La Jolla Fresh Squeezed Coffee Co., Inc.
(Exact name of registrant as specified in its
charter)
9060 Activity Road, Suite A, San Diego, California 92126
(Address of principal executive offices) (Zip Code)
858.273.5282
(Registrant's telephone number, including area code)
Sorisole Acquisition Corp.
2600 Michelson Drive, Suite 490
Irvine, California 92612
(Former name or former address, if changed since last report)
<TABLE>
<S> <C> <C>
Delaware 000-26897 33-0838663
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
(949) 660-9700
Facsimile: (949) 660-9010
Page 1 of 9
Index to Exhibits specified on Page 8
1
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to an Agreement and Plan of Reorganization (the "Acquisition
Agreement") effective February 22, 2000, La Jolla Fresh Squeezed Coffee Co.,
Inc., a Washington corporation ("Company"), acquired all the outstanding shares
of common stock of Sorisole Acquisition Corp., a Delaware corporation
("Sorisole"), from the shareholders thereof in an exchange for an aggregate of
3,500,000 shares of common stock of the Company (the "Acquisition").
The Acquisition was approved by the unanimous consent of the Company's Board of
Directors on February 22, 2000. The Acquisition is intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
Prior to the Acquisition, the Company had 20,797,890 shares of common stock
issued and outstanding and 24,297,890 shares issued and outstanding following
the Acquisition.
Upon effectiveness of the Acquisition, pursuant to Rule 12g-3(a) of the General
Rules and Regulations of the Securities and Exchange Commission, the Company
elected to become the successor issuer to Sorisole for reporting purposes
pursuant to the Securities Exchange Act of 1934 ("Exchange Act") and elects to
report pursuant to the Exchange Act effective February 22, 2000.
A copy of the Acquisition Agreement is filed as an exhibit to this Form 8-K and
is incorporated in its entirety herein. The foregoing description is modified by
such reference.
(b) The following table specifies information regarding the shareholdings of the
Company's current directors and executive officers and those persons or entities
who beneficially own more than 5% of the Company's common stock (giving effect
to the exercise of the warrants held by each such person or entity):
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Owner Percent of Class(1)
- ---------------- ---------------------------- ----------------------------- -------------------
<S> <C> <C> <C>
$.001 Par Value Cody Ashwell, 1135 2,700,000 shares 11.11%
Common Stock Terminal Way, Suite 209,
Reno, NV 89502
$.001 Par Value Big Rock Marketing Inc., 2,700,000 shares 11.11%
Common Stock 1135 Terminal Way, Suite
209, Reno, NV 89502
$.001 Par Value Cape Mckinnon Inc., 154B 1,890,000 shares 7.78%
Common Stock 18th Avenue, San
Francisco, California 94121
$.001 Par Value Cede & Company(2), P.O. 2,729,676 shares 11.23%
Common Stock Box 222, New York,
New York 10274
$.001 Par Value Stephen F. Corey, 9060 4,139,800 shares, Secretary, 17.04%
Common Stock Activity Road, Suite A, Director
San Diego, California
92126
$.001 Par Value All directors and named 17.04%
Common Stock executive officers as a group
</TABLE>
2
<PAGE>
(1) Based upon 24,297,890 outstanding shares of common stock.
(2) The Company is informed that approximately 2,729,676 shares of the Company's
common stock are presently held by Cede & Company, which is the nominee name for
the Depository Trust Company ("DTC"), a division of the Bank of New York formed
to facilitate securities transactions for major brokers. Generally, only
unrestricted securities may be deposited by brokers into the DTC, and Cede &
Company is not a beneficial owner of any securities which it holds.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The consideration exchanged pursuant to the Acquisition Agreement was
negotiated by Sorisole and the Company. In evaluating the Acquisition, Sorisole
evaluated criteria such as the value of the Company's assets, the Company's
ability to compete in the market for coffee products, the unique nature of the
Company's products, the Company's current and anticipated business operations
and the Company's business name and reputation in the coffee industry.
(b) The Company intends to achieve its expansion objectives by growth at its
existing facilities, use of multiple marketing efforts and establishing its name
recognition and consumer familiarity with the Company's products.
Background of the Company. The Company was incorporated in the state of
Washington on February 9, 1987 as North West Converters, Inc. On December 31,
1996, the sole director and shareholder discontinued the operations of the
Company. On October 31, 1997, our Articles of Incorporation were amended to
change the par value of common stock to $.001, and the Company then began
operations in the wholesale and retail gourmet and specialty foods and the
operation of the retail store, both of which were unsuccessful. On June 2, 1997,
we amended our Articles of Incorporation to change our name to North West Farms,
Inc. In November 1998, we began the development stage of entering the retail and
wholesale specialty coffee market. On June 2, 1999, we amended our Articles of
Incorporation to change our name to La Jolla Coffee Co., Inc. and on June 16,
1999 we amended our Articles of Incorporation to change our name to La Jolla
Fresh Squeezed Coffee Co., Inc. On June 15, 1999, the Company's Board of
Directors ratified the acquisition of the assets of Stephen's Coffee, Inc. and
the merger with Stephen's Coffee Holding, Inc. (See "Legal Proceedings")
Our Business. We are a manufacturer and distributor of gourmet cold-brewed
coffee liquid extract and gourmet non-alcoholic cold coffee drinks. We believe
that our proprietary cold extraction process and delivery system provides the
food industry with a convenient gourmet coffee alternative that reduces labor,
waste disposal costs and production costs. We believe that our cold-brewed
coffee have gourmet tastes that are uncommon in the liquid coffee industry where
flavor is often compromised for convenience. Our liquid coffee delivery system
eliminates the substantial amount of coffee wasted every year by traditional
coffee delivery systems that pre-brew coffee, often making the coffee burnt, or
bitter.
OUR PRODUCTS AND SERVICES
Javalixir. Javalixir, which was developed for the food service and hospitality
industry, is our pure coffee concentrate. We target major food service
providers, such as Denny's and Coco's restaurants, hospitality chains such as
Sheraton and Marriott hotels with a complete program that offers economical
complete solutions for high volume customers.
JavaNectar. JavaNectar is our premium cold coffee beverage served over ice or
through granita "slushy" machines widely used in convenience store applications.
We believe that JavaNectar will be competitive with our competitor's cold coffee
beverages, which are derived from powder bases. The initial target market is
convenience stores in the southwest.
3
<PAGE>
Retail Javalixir Coffee Concentrate. The Retail Javalixir Coffee Concentrate is
packaged as 5 ounce and 12 ounce bottled concentrate. We anticipate that the
product will be offered to individuals by upscale gourmet grocery chains and by
our Internet retail site LaJollaCoffee.com.
Flavorants. Our Flavorant products are coffee extracts that can be utilized as
an ingredient in the manufacture of beverages and other food products such as
ice cream. We believe that our products' purity level will provide a competitive
advantage in the coffee extract market. We plan to position the flavorant
product as a premium level ingredients.
Future Products. The Bottled Javanectar is a 10 ounce cold coffee drink, similar
to Starbuck's Frappuccino beverage which has successfully been sold in every
region of the country. We believe that the Bottled Javanectar offers a higher
quality, better tasting beverage at a comparable price. Starbucks manufacturing
process involves a "full retort" to insure adequate pasteurization, the beverage
is heated to approximately 280 degrees Fahrenheit for a minimum of two hours. We
believe that this process destroys much of the coffee flavors, thereby leaving
the consumer's pallet with a relatively bland flavor note. We process our
bottled beverage using a less invasive process approved by the Food and Drug
Administration, which we believe leaves the majority of the coffee flavor
intact. We anticipate that we will begin shipping our bottled Javanectar in
April to May 2000. The shelf life of this product is estimated at 6 months,
allowing us to market the product through national distribution channels. Our
target markets include supermarkets, upscale gourmet markets and convenience
stores.
Our Marketing Strategy. Our marketing strategy is to be positioned as the new
and improved entry in the liquid coffee market offering higher quality at
competitive pricing. In the coffee concentrates market, we target private label
customers with high volume consumption and ease in packing for these customers.
We position our concentrates as a significantly higher quality product at a
nominally higher price. In the cold flavored concentrate market, we pursue
nationally branded product strategy with cold flavored coffee in markets wherein
its supplies products to full service distributors. We will supply these
products in 2.5-gallon bag-in-box (BIB) aseptically filled containers.
Our goal is to gain significant market share in San Diego and then expand into
Southern California. We believe that this approach is desirable because it
significantly lowers shipping costs and increases margins by eliminating
distributors and brokers. San Diego is a highly populated city with large food
service and industrial service due to military, tourism, and several
universities. We are targeting our competitors' liquid coffee customers, because
these customers are educated to the benefits of liquid coffee. We believe that
our products provide these customers with a superior gourmet tasting liquid
extract alternative.
Competition. The specialty coffee market is highly competitive. Many of our
competitors have greater marketing and financial resources and brand name
recognition combined with larger customer base and distribution channels. We
compete with a number of liquid Coffee manufacturers including: Dowe Egbert,
Amelia Bay, Victory House, Beverage House Inc., Lykes Pascow, Cool Brew, Nestle,
Toddy, Sivetz, Filtron, and Flavor Brands. Dowe Egbert is the leader in the
coffee concentrates market offering products that are economical and easy to
use. We believe that our products have a gourmet coffee taste by using the cold
brewing process and formulating lower levels of coffee concentrates and that our
products are priced competitively. Our main competition for the cold coffee
beverage is Starbuck's Frappaccino, which is the market leader in brand name
recognition, distribution channels and strong financial resources.
Our Facilities. At this time, the Company occupies office space located at 9060
Activity Road, Suite A, San Diego, California 92126.
Employees. We currently have seven (7) full time employees.
Market for the Company's Securities. The Company participates in the OTC
Bulletin Board, an electronic quotation medium for securities traded outside of
the Nasdaq Stock Market, under the trading symbol "LJCC". The Nasdaq Stock
Market has implemented a change in its rules requiring all companies trading
securities on the OTC Bulletin Board to become reporting companies under the
Securities Exchange Act of 1934. The Company was required to
4
<PAGE>
become a reporting company by the close of business on February 24, 2000. The
Company acquired all the outstanding shares of Sorisole Acquisition Corp. to
become successor issuer to it pursuant to Rule 12g-3 in order to comply with the
reporting company requirements implemented by the Nasdaq Stock Market.
MANAGEMENT
Executive Officers and Directors. We are dependent on the efforts and abilities
of certain of our senior management. The interruption of the services of key
management could have a material adverse effect on our operations, profits and
future development, if suitable replacements are not promptly obtained. We
anticipate that we will enter into employment agreements with each of our key
executives; however, no assurance can be given that each executive will remain
with us during or after the term of his or her employment agreement. In
addition, our success depends, in part, upon our ability to attract and retain
other talented personnel. Although we believe that our relations with our
personnel are good and that we will continue to be successful in attracting and
retaining qualified personnel, there can be no assurance that we will be able to
continue to do so. All officers and directors of the Company will hold office
until their resignation or removal.
Our directors and principal executive officers are as specified on the following
table:
================================================================================
Name Age Position
- --------------------------------------------------------------------------------
Kurt B. Toneys 44 President, Chief Executive Officer, Director
- --------------------------------------------------------------------------------
Stephen F. Corey 44 Secretary, Vice President, Director
================================================================================
Kurt B. Toneys is the President, Chief Executive Officer and a director of the
Company since 1998. From 1996 through 1998, Mr. Toneys was the President of
Polar Pacific, Inc., a California-based global distributor of refrigerants and
reclamation technologies. From 1993 to 1996, Mr. Toneys was a partner in Charles
duPont & Co., a private investment-banking firm. He received his Bachelor of
Science in business administration with emphasis in Finance and Entrepreneurship
from the University of Southern California.
Stephen F. Corey is the Secretary, Vice President of Product Development and a
director of the Company. Mr. Corey has performed over five continuous years of
intense scientific research on coffee and coffee processing systems in the
following areas: coffee history, molecular structure of coffee, extraction
processes, new technology of concentration & extraction, blend creation, product
receptivity, and statistical analysis. Mr. Corey is directly responsible for
developing the various coffee lines used by the Company as well as overseeing
its manufacturing process and research and development for all future products.
Mr. Corey studied science, chemistry, physics and empirical background in
engineering while attending three years of college in Davos, Switzerland and one
year at the College of Idaho. Mr. Corey holds technical degrees in Aviation and
Airway Sciences.
All directors hold office until the next annual meeting of the shareholders and
the election and qualification of their successors. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board of
Directors.
There are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security, or temporarily or permanently
restraining any of the officers or directors of the Company from engaging in or
continuing any conduct, practice or employment in connection with the purchase
or sale of securities, or convicting such person of any felony or misdemeanor
involving a security, or any aspect of the securities business or of theft or of
any felony, nor are the officers or directors of any affiliate of the officers
and directors so enjoined or entity so enjoined.
Employment Contracts. The Company has entered into employment contract with
Stephen F. Corey and anticipates that it will enter into an employment contract
with Kurt B. Toneys.
5
<PAGE>
Legal Proceedings. The Company is not aware of any pending litigation nor does
it have any reason to believe that any such litigation exists, except as
follows:
In or about November 1999, Michael Gilbert, a former director of the Stephen's
Coffee, Inc. and Stephen's Coffee Holding, Inc. and current shareholder of the
Company, filed an action in the United States District Court, Central District
of California, alleging that the transfer of the assets of Stephen's Coffee,
Inc. to the Company was fraudulent and seeking declaratory relief to unwind the
transaction. In November 1998, the Company believed it had settled this matter
by the payment of $15,000.00 (U.S. Dollars), the issuance of 150,000 shares and
the resignation of Mr. Gilbert as a director of Stephen's Coffee, Inc. and
Stephen's Coffee Holding, Inc. The Company believes that the claim is without
merit and intends to vigorously defend it.
In or about November 1999, Thomas Reed, a current shareholder of the Company,
filed an action in the Los Angeles Superior Court, alleging similar claims as
those of Michael Gilbert, specifically that the transfer of the assets of
Stephen's Coffee, Inc. to the Company was fraudulent and seeking declaratory
relief to unwind the transaction. The Company believes that the claim is without
merit and intends to vigorously defend it.
RISK FACTORS
We Have Not Been Audited By Independent Certified Public Accountants. Although
the Company is required to file audited financial statements no later than 60
days from the date that this report is required to be filed, no such audited
financial statements have been prepared or are available for inspection as of
the date hereof. Consequently, there can be no assurance that any
representations as to the financial condition or assets of the Company are as
stated herein.
We Have a Very Limited Operating History. We have a very limited operating
history upon which an evaluation of our prospects can be made. Our prospects
must be considered speculative considering the risks, expenses and difficulties
frequently encountered in the establishment of a new business, specifically the
risk inherent in the development of specialty coffee products. There can be no
assurance that unanticipated problems will not occur which would result in
material delays in future product commercialization or that our efforts will
result in successful product and service commercialization. There can be no
assurance that we will be able to achieve profitable operations.
We Depend on Name Recognition. Our strategy for growth is substantially
dependent upon our ability to market and promote our coffee products
successfully. Other companies, including those with substantially greater
financial, marketing and sales resources, compete with us, and have the
advantage of marketing products with existing production and distribution
facilities. There can be no assurance that we will be able to market and promote
our products on acceptable terms, or at all. Failure to market our products
successfully could have a material adverse effect on our business, financial
condition or results of operations.
We Are in a Very Competitive Industry. Competition to provide specialty coffee
products is intense and we expect the competition to increase. We will compete
directly with other companies and businesses that have developed and are in the
process of developing products which will be competitive with the products
developed and offered by us. There can be no assurance that other products which
are functionally equivalent or similar to our products have not been developed
or are not in development. We expect that there are companies or businesses
which may have developed or are developing such products as well as other
companies and businesses which have the expertise which would encourage them to
develop and market products directly competitive with those developed and
marketed by us. To the extent that customers exhibit loyalty to the supplier
that first supplies them with a particular product, our competitors may have an
advantage over us with respect to products first developed by such competitors.
As a result of their size and breadth of their service offerings, certain of
these competitors have been and will be able to establish managed accounts by
which they seek to gain a disproportionate share of users for their products.
Such managed accounts present significant competitive barriers to us. It is
anticipated that we will benefit from its participation in niche markets which,
as they expand, may attract the attention of our competitors.
6
<PAGE>
We May Rely on Third-Parties. We may become dependent upon various third parties
for one or more significant products or services required for our business,
which products or services will be provided to us pursuant to agreements with
such providers. Inasmuch as the capacity for certain products or services by
certain third parties may be limited, our inability, for economic or other
reasons, to continue to receive products or services from existing providers, or
to obtain similar products or services from additional providers, could have a
material adverse effect on us.
We Depend on Management. We are dependent on the efforts and abilities of our
senior management. The loss of various members of that management could have a
material adverse effect on our business and prospects. The members of our Board
of Directors believe that all commercially reasonable efforts have been made to
minimize the risks attendant with the departure by key personnel from the
service of us. There is no assurance, however, that upon the departure of key
personnel from our service, replacement personnel will cause us to operate
profitably.
Penny Stock Regulation. The Commission has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks". Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, deliver a standardized
risk disclosure document prepared by the Commission, which (i) contained a
description of the nature and level of risk in the market for penny stocks in
both public offerings and secondary trading; (ii) contained a description of the
broker's or dealer's duties to the customer and of the rights and remedies
available to the customer with respect to violation to such duties or other
requirements of Securities' laws; (iii) contained a brief, clear, narrative
description of a dealer market, including "bid" and "ask" prices for penny
stocks and significance of the spread between the "bid" and "ask" price; (iv)
contains a toll-free telephone number for inquiries on disciplinary actions; (v)
defines significant terms in the disclosure document or in the conduct of
trading in penny stocks; and (vi) contains such other information and is in such
form (including language, type, size and format), as the Commission shall
require by rule or regulation. The broker-dealer also must provide, prior to
effecting any transaction in penny stock, the customer (i) with bid and offer
quotations for the penny stock; (ii) the compensation of the broker-dealer and
its salesperson in the transaction; (iii) the number of shares to which such bid
and ask prices apply, or other comparable information relating to the depth and
liquidity of the market for such stock; and (iv) month account statements
showing the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
If any of the Company's securities become subject to the penny stock rules,
holders of those securities may have difficulty selling those securities.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Successor Issuer Election. Pursuant to Rule 12g-3(a) of the General Rules and
Regulations of the Securities and Exchange Commission, the Company elected to
become the successor issuer to Sorisole Acquisition Corp. for reporting purposes
under the Securities Exchange Act of 1934 and elects to report under the Act
effective February 22, 2000.
7
<PAGE>
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Danilo Cacciamatta resigned as an officer and director of Sorisole effective
upon completion of the Acquisition.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report ................................................ F-2
Consolidated Financial Statements:
Consolidated Balance Sheet as of December 31, 1999 ..................... F-3
Consolidated Statements of Operations for each of the years
in the two-year period ended December 31, 1999 and the period
from August 13, 1993 (Inception) to December 31, 1999 .................. F-4
Consolidated Statements of Stockholders' Deficit for the period
from August 13, 1993 (Inception) to December 31, 1999 ................. F-5
Consolidated Statements of Cash Flows for each of the years
in the two-year period ended December 31, 1999 and the period
from August 13, 1993 (Inception) to December 31, 1999 .................. F-8
Notes to Consolidated Financial Statements ............................. F-9
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
Board of Directors
La Jolla Fresh Squeezed Coffee Co., Inc.
We have audited the accompanying consolidated balance sheet of La Jolla Fresh
Squeezed Coffee Co., Inc., (the "Company"), a development-stage company, as of
December 31, 1999, and the related consolidated statements of operations,
stockholders' deficit, and cash flows for each of the years in the two-year
period ended December 31, 1999 and the period from August 13, 1993 (Inception)
to December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of La Jolla Fresh
Squeezed Coffee Co., Inc. as of December 31, 1999, and the results of their
operations and their cash flows for each of the years in the two-year period
ended December 31, 1999 and the period from August 13, 1993 (Inception) to
December 31, 1999, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred operating losses,
has a working capital deficit and requires additional financing to sustain
operations. These conditions raise substantial doubt about its ability to
continue as a going concern. Management's plans regarding those matters are also
described in Note 2. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Irvine, California
April 21, 2000
F-2
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash $ 16,526
Accounts receivable 3,771
-----------
Total current assets 20,297
Property and equipment, net 102,225
-----------
$ 122,522
===========
LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 11,637
Accrued expenses 63,371
Accrued payroll and related benefits 13,021
Other liabilities 8,000
-----------
Total current liabilities 96,029
Due to related party 78,547
-----------
Total liabilities 174,576
Commitments and contingencies --
Stockholders' deficit:
Common stock, $0.001 par value; 50,000,000
shares authorized; 20,398,486 issued and outstanding 20,398
Additional paid-in capital 4,036,683
Deficit accumulated during the development stage (3,599,135)
Note receivable from officer (510,000)
-----------
Total stockholders' deficit (52,054)
-----------
$ 122,522
===========
The accompanying notes are an integral part of these
consolidated financial statements
F-3
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the year ended For the period from
December 31, August 13, 1993
----------------------------------- (Inception) to
1999 1998 December 31, 1999
------------ ------------ -------------------
<S> <C> <C> <C>
Net sales $ -- $ -- $ --
Cost of sales -- -- --
------------ ------------ ------------
Gross profit -- -- --
Operating expenses-
Selling, general and administrative 1,501,836 371,487 2,389,135
Stock issued for services 1,210,000 -- 1,210,000
------------ ------------ ------------
Net loss $ (2,711,836) $ (371,487) $ (3,599,135)
============ ============ ============
Basic and diluted loss per share $ (.14) $ (.12)
============ ============
Basic and diluted weighted average common shares
outstanding 18,730,031 3,032,264
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-4
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM AUGUST 13, 1993 (INCEPTION)
TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
------------------------ Additional During the Note
Paid-In Development Receivable
Shares Amount Capital Stage From Officer Total
---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued to founder and
shareholders in recapitalization 1,142,500 $ 1,143 $ 148,113 $ -- $ -- $ 149,256
Capital contributed by founder -- -- 362,556 -- -- 362,556
Net loss for the period from August 13, 1993
(Inception) through December 31, 1997 -- -- -- (515,812) -- (515,812)
---------- ---------- ---------- ---------- ----- ----------
Balances, December 31, 1997 1,142,500 1,143 510,669 (515,812) -- (4,000)
Capital contributed by founder 105,094 -- -- 105,094
Shares retained by shareholders in
recapitalization on November 1, 1998 11,086,797 11,087 (11,087) -- -- --
Stock issued in November and December
1998 in a private placement at $0.35 503,571 503 175,747 -- -- 176,250
per share
Net loss -- -- -- (371,487) -- (371,487)
---------- ---------- ---------- ---------- ----- ----------
Balances, December 31, 1998 12,732,868 12,733 780,423 (887,299) -- (94,143)
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-5
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Continued)
FOR THE PERIOD FROM AUGUST 13, 1993 (INCEPTION)
TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
------------------------ Additional During the Note
Paid-In Development Receivable
Shares Amount Capital Stage From Officer Total
---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Stock issued from January to March 1999
in a private placement at $0.35 per share 496,429 496 173,254 -- -- 173,750
Stock issued from May to October 1999
in a private placement at $0.65 per share 475,846 476 308,824 -- -- 309,300
Value of stock options granted to officers
in February 1999 at $0.15 per share -- -- 1,000,000 -- -- 1,000,000
Exercise of stock options in February 1999
at $0.15 per share for note 3,400,000 3,400 506,600 -- (510,000) --
Exercise of stock options in February 1999
at $0.15 per share for employment services 1,600,000 1,600 238,400 -- -- 240,000
Stock issued in June 1999 valued at $0.65
per share for services 1,000,000 1,000 649,000 -- -- 650,000
Stock issued for cash in June, August,
September and October 1999 at $0.65 per share 446,152 446 289,554 -- -- 290,000
Stock issued for cash in November 1999
at prices ranging from $0.31 to $0.36 172,191 172 60,703 -- -- 60,875
per share
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-6
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Continued)
FOR THE PERIOD FROM AUGUST 13, 1993 (INCEPTION)
TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
------------------------ Additional During the Note
Paid-In Development Receivable
Shares Amount Capital Stage From Officer Total
---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Stock issued for cash in December
1999 at $0.40 per share 75,000 75 29,925 -- -- 30,000
Net loss -- -- -- (2,711,836) -- (2,711,836)
----------- ----------- ----------- ----------- ----------- -----------
Balances, December 31, 1999 20,398,486 $ 20,398 $ 4,036,683 $(3,599,135) $ (510,000) $ (52,054)
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the year ended For the period from
December 31, August 13, 1993
--------------------------------- (Inception) to
1999 1998 December 31, 1999
----------- ----------- -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(2,711,836) $ (371,487) $(3,599,135)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 16,232 -- 16,232
Value of stock options issued below fair value 1,000,000 -- 1,000,000
Issuance of common stock for services
rendered 890,000 -- 890,000
Changes in operating assets and liabilities:
Accounts receivable (3,771) -- (3,771)
Accounts payable 6,109 5,528 11,637
Accrued expenses 53,871 9,500 63,371
Accrued payroll and related benefits 9,357 3,664 13,021
Other liabilities 8,000 -- 8,000
----------- ----------- -----------
Net cash used in operating activities (732,038) (352,795) (1,600,645)
----------- ----------- -----------
Cash flows from investing activities-
Purchases of property and equipment (118,457) -- (118,457)
----------- ----------- -----------
Cash flows from financing activities:
(Decrease) increase in due to related parties (10,000) 88,547 78,547
Issuance of common stock for cash 863,925 176,250 1,189,431
Contributions of capital -- 101,094 467,650
----------- ----------- -----------
Net cash provided by financing activities 853,925 365,891 1,735,628
----------- ----------- -----------
Net increase in cash 3,430 13,096 16,526
Cash at beginning of period 13,096 -- --
----------- ----------- -----------
Cash at end of period $ 16,526 $ 13,096 $ 16,526
=========== =========== ===========
Non Cash Financing Activities-
Stock issued to officer for promissory note $ -- $ 510,000 $ 510,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
F-8
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1 - Organization
La Jolla Fresh Squeezed Coffee Company, Inc., formerly North West Farms, Inc.
("LJFSC"), incorporated in the state of Washington, and its subsidiaries
(collectively the "Company") intends to manufacture, market and distribute
quality cold-brewed coffee liquid extract and gourmet non-alcoholic cold coffee
drinks. The Company since Inception has had no significant operations and,
accordingly, is a company in the development stage.
Stephen's Coffee Co., Inc. ("SCC") was incorporated in the state of California
on August 13, 1993 ("Inception"). SCC is the operating company responsible for
the development of manufacturing methods and products for distribution.
Effective November 1, 1998, SCC was acquired for 1,142,500 shares of common
stock representing approximately 9% of the outstanding voting stock of LJFSC in
exchange for the common stock of SCC. LJFSC has had no significant operations.
For accounting purposes, the combination is treated as a recapitalization of
SCC.
The accompanying consolidated financial statements reflect the historical assets
and liabilities, and the related historical operations of SCC for all periods
presented.
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements at December 31, 1999, include
the accounts of the Company and its subsidiaries. All inter-company accounts
have been eliminated in consolidation.
Basis of Presentation
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has incurred
losses from operations since its inception and requires substantial funds for
its operational activities and sales efforts. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management is
seeking financing through a private placement of its common stock. There are no
assurances that funds will be available to or, if available, that the Company
will achieve revenues sufficient to meets its cost structure. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during
the reported periods. Actual results could materially differ from those
estimates. Significant estimates made by management include, but are not limited
to, the allowance for losses on uncollectible accounts receivable, and the
impairment of long-lived assets.
F-9
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2 - Summary of Significant Accounting Policies, continued
Concentration of credit risk
The Company purchased certain products from two suppliers, which accounted for
approximately 24% and 23% of total purchases during the year ended December 31,
1999. No suppliers represented more than 10% during the year ended December 31,
1998. Management does not believe that the loss of such suppliers could have a
severe impact on the results of operations.
Impairment of Long-Lived Assets
The Company accounts for impairment of long-lived assets under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of."
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
Property and Equipment
Property and equipment are depreciated over their estimated useful lives using
the straight-line method over three to seven years. Additions and betterments
are capitalized. The cost of maintenance and repairs is charged to expense as
incurred. When depreciable property is retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the accounts and any
gain or loss is reflected in operations.
The Company periodically reviews the value of its property and equipment for
impairment whenever events or changes in circumstances indicate that the book
value of an asset may not be recoverable. An impairment loss would be recognized
whenever the review demonstrates that the future undiscounted net cash flows
expected to be generated by an asset from its use and eventual deposition are
less than the carrying amount of the asset. Management believes no permanent
impairment has occurred.
Revenue Recognition
Revenue from coffee products is recognized upon shipment of product. Estimated
returns and allowances are accrued to expenses at the time of sale.
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes," whereby deferred tax assets and liabilities are
recognized for the future tax consequences attributable to temporary differences
between bases used for financial reporting and income tax reporting
F-10
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2 - Summary of Significant Accounting Policies, continued
purposes. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A valuation allowance is
provided for certain deferred tax assets if it is more likely than not that the
Company will not realize tax assets through future operations.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair value
based method of accounting for stock-based compensation. However, SFAS No. 123
allows an entity to continue to measure compensation cost related to stock and
stock options issued to employees using the intrinsic method of accounting
prescribed by Accounting Principles Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees." Entities electing to remain with the accounting
method of APB No. 25 must make pro forma disclosures of net income (loss) and
earnings (loss) per share, as if the fair value method of accounting defined in
SFAS No. 123 had been applied. Through December 31, 1999, the Company had no
employee stock options outstanding.
Loss Per Share
Basic EPS is computed as net income (loss) divided by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur from common stock issuable through stock
options, warrants and other convertible securities. The Company did not have any
potentially dilutive common stock equivalents outstanding as of December 31,
1999 or 1998.
Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting the components of
comprehensive income and requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
included in a financial statement that is displayed with the same prominence as
other consolidated financial statements. Comprehensive income includes net
income (loss), as well as certain non-shareholder items that are reported
directly within a separate component of stockholders' equity and bypass net
income (loss). The Company had adopted the provisions of this statement during
the current fiscal year, with no impact on the accompanying consolidated
financial statements.
Disclosures about Segments of an Enterprise and Related Information
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." The provisions of this statement require
disclosures of financial and descriptive information about an enterprise's
operating segments in annual and interim financial reports issued to
stockholders. The statement defines an operating segment as a component of an
enterprise that engages in business activities that generate revenue and incur
expense, whose operating results are reviewed by the chief operating
decision-maker in the determination of resource allocation and assessing
performance, and for which discrete financial information is available. The
Company has adopted the provisions of this statement in 1999 with no impact on
the accompanying consolidated financial statements.
F-11
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2 - Summary of Significant Accounting Policies, continued
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Accordingly, the Company will adopt SFAS
No. 133 beginning on January 1, 2000. SFAS No. 133 establishes standards for the
accounting and reporting of derivative instruments and hedging activities,
including certain derivative instruments embedded in other contracts. Under SFAS
No. 133, entities are required to carry all derivative instruments at fair value
on their balance sheets. The accounting for changes in the fair value (i.e.,
gains or losses) of a derivative instrument depends on whether it has been
designated and qualifies as part of a hedging activity and the underlying
purpose for it. The Company does not believe that the adoption of SFAS No. 133
will have a significant impact on the Company's consolidated financial
statements or related disclosures.
Note 3 - Acquisition
As discussed in Note 1, LJFSC entered into an asset purchase agreement with SCC
to acquire all the assets of SCC for 1,142,500 shares of its common stock. Since
the acquisition was treated as a recapitalization of SCC, these shares are
reflected as outstanding since Inception. The shares totaling 11,086,797
retained by the shareholders of LJFSC are considered as issued in connection
with the recapitalization in the accompanying consolidated statements of
stockholders' deficit. LJFSC had no assets nor operations at the date of the
acquisition.
Note 4 - Property and Equipment
Property and equipment consists of the following at December 31, 1999:
Equipment $ 59,956
Furniture and fixtures 1,249
Leasehold improvements 57,252
---------
118,457
Less accumulated depreciation (16,232)
---------
$ 102,225
Note 5 - Commitments and Contingencies
Lessee
The Company is the lessee of office equipment under operating leases typically
for periods of three years. The Company leases its office space under an
operating lease in which the terms are for a period of six months. Total rent
expense for all leases for the years ended December 31, 1999 and 1998 amounted
to approximately $72,254 and $48,775, respectively.
F-12
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 5 - Commitments and Contingencies, continued
The Company's future annual minimum lease payments for all non-cancelable
operating leases as of December 31, 1999, are as follows:
Years Ending
2000 $ 64,614
2001 47,172
2002 29,730
2003 7,957
-------
$ 149,473
=======
Litigation
In November 1999, a former director of SCC made a claim against the Company
alleging that certain corporate formalities were not complied with during the
transfer of the assets of SCC entitling the plaintiff to unwind the transfer,
$150,000 in damages and additional shares in the Company. In November 1998, the
Company believed it had settled the matter by the payment of $15,000, the
issuance of 150,000 shares and the director's resignation. The outcome of the
case is uncertain. As such, no provision for loss has been made in the
accompanying consolidated statements of operations.
In November 1999, a shareholder of the Company filed a claim against the Company
alleging similar claims as above, specifically that the transfer of the assets
of SCC was fraudulent and is seeking declaratory relief to unwind the transfer,
and other damages. The outcome of the case is uncertain. As such, no provision
for loss has been made in the accompanying consolidated statements of
operations.
Note 6 - Stockholders' Deficit
During the period from Inception to December 1998, the president and founder of
SCC had personally funded much of the operations. Approximately $468,000 was
contributed to further the research and development of its cold extraction
process and delivery system.
Common Stock Issuances
As discussed in Notes 1 and 3, effective November 1, 1998, NWF issued 1,142,500
shares of its common stock for all the assets subject to liabilities assumed of
SCC. Since the acquisition was treated as a recapitalization of SCC, these
shares are reflected as outstanding since Inception. The shares totaling
11,086,797 retained by the stockholders of NWF are considered as issued in
connection with the recapitalization in the accompanying consolidated statements
of stockholders' deficit.
In 1998, the Company issued 503,571 shares of common stock for $0.35 per share
in a private placement offering for a total of $176,250. In 1999, the Company
sold an additional 496,429 shares of common stock for $0.35 per share pursuant
to such offering for a total of $173,750.
From May to October 1999, the Company received $309,300 from a private placement
offering issuing 475,846 shares of its common stock for $0.65 per share.
F-13
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 6 - Stockholders' Deficit, continued
In June 1999, the Company issued 1,000,000 shares of common stock to a third
party in exchange for the development and maintenance of the Company's website.
The services were valued at $650,000 or $0.65 per share. The Company disputes
the transaction due to lack of performance by the vendor and the Company is
currently pursuing cancellation of a portion of the shares. No adjustment has
been made to the accompanying consolidated financial statements as a result of
managements' intent to cancel certain shares under this arrangement.
At various times during 1999, the Company issued 446,152 shares of common stock
at $0.65 per share for total proceeds of $290,000.
In November 1999, the Company issued 172,191 shares of common stock at prices
ranging from $0.31 to $0.36 per share for total proceeds of $60,875.
In December 1999, the Company issued 75,000 shares of common stock at $0.40 per
share for total proceeds of $30,000.
Stock Options
In 1999, the Company adopted the 1999 Incentive Stock Option Plan (the "Plan"),
which authorizes the granting of options to key employees, directors, and/or
consultants to purchase unissued common stock subject to certain conditions,
such as continued employment. Options are generally granted at the fair market
value of the Company's common stock at the date of grant and become exercisable
over a period of three years from the date of grant. During 1999, options to
purchase 5,000,000 shares of the Company's common stock were granted and
exercised at $0.15 per share.
In February 1999, pursuant to the Plan, the Company granted to two officers
options to purchase 3,400,000 and 1,600,000 shares of its common stock at $0.15
per share. The officers exercised these options in February 1999 in exchange for
a promissory note bearing interest at six percent per annum due in 2009 for the
3,400,000 shares and services rendered for the 1,600,000 shares. No payments
have been made on the note during 1999. The Company recorded additional
compensation expense during 1999 of $1,000,000 for the value of these options
granted below fair value based on the difference between the estimated fair
value of $0.35 and the exercise price of $0.15.
Note 7 - Provision for Income Taxes
The Company's net deferred tax assets at December 31, 1999, consist of net
operating loss carryforwards for federal and state income tax reporting
amounting to approximately $3.6 million and $1.7 million, respectively. At
December 31, 1999, the Company provided a 100% valuation allowance for these net
operating loss carryforwards totaling approximately $1.4 million. The Company's
net operating loss carryforwards will begin to expire in 2019 and 2004 for
federal and state income tax purposes, respectively. The Company recorded no
benefit for income taxes during the periods presented. During the years ended
December 31, 1999 and 1998, the Company's total valuation allowance increased
approximately $1.1 million and $149,000, respectively.
F-14
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 7 - Provision for Income Taxes, continued
The difference between the tax benefit assuming a Federal income tax rate of 34%
and amounts recorded in the financial statements of zero percent is the result
of the Company recording a 100% valuation allowance for its deferred tax assets.
As a result of changes in ownership, the Company's use of net operating loss
carryforwards may be limited by section 382 of the Internal Revenue Code until
such net operating loss carryforwards expire. Deferred tax assets have been
computed using the maximum expiration terms of 20 and 5 years for federal and
state tax purposes, respectively.
Note 8 - Subsequent Events
On February 22, 2000, the Company acquired all the outstanding shares of common
stock of Sorisole Acquisition Corp. ("Sorisole"), a Delaware corporation, from
the shareholders thereof in exchange for 3,500,000 shares of common stock.
Sorisole is a reporting shell corporation and has no assets or liabilities and
no significant operations. This acquisition will be accounted for as a
recapitalization of the Company.
From January to April 2000, the Company issued 340,000, 78,950, 249,500 and
61,111 shares of its common stock for cash to unrelated parties at $0.12, $0.19,
$0.40 and $0.45 per share, respectively, in a private placement under the
provisions of the Securities Act of 1933. The Company received approximately
$182,000 pursuant to such offering.
F-15
<PAGE>
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
Index to Exhibits
10.1 Stock Acquisition and Reorganization Agreement by and among La Jolla
Fresh Squeezed Coffee Co., Inc. and Sorisole Acquisition Corp., dated
February 22, 2000.
3.1 Articles of Incorporation of La Jolla Fresh Squeezed Coffee Co., Inc.
3.2 Amendment to Articles of Incorporation
3.3 Amendment to Articles of Incorporation
3.4 Amendment to Articles of Incorporation
3.5 Amendment to Articles of Incorporation
3.6 By-Laws of La Jolla Fresh Squeezed Coffee Co., Inc.
17.1 Resignation Letter of Danilo Cacciamatta
27.1. Financial Data Schedule.
- ----------
*To be filed by amendment
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf of the
undersigned, thereunto duly authorized.
La Jolla Fresh Squeezed Coffee Co., Inc.
DATED: April 24, 2000 By: /s/ Kurt B. Toneys
-----------------------------------
Kurt B. Toneys, President
9
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:
<PAGE>
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.
2
<PAGE>
"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
3
<PAGE>
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.
4
<PAGE>
"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,
ward, 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.
5
<PAGE>
"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
6
<PAGE>
(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).
7
<PAGE>
(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.
8
<PAGE>
"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.
9
<PAGE>
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 Danilo 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.
10
<PAGE>
Notwithstanding the foregoing, Danilo Cattiamattta shall pay all underwriting
discounts or commissions with respect to shares of La Jolla Common Stock sold by
Danilo Cattiamattta.
2.5 Shareholders Representative. The Shareholders hereby irrevocably,
unconditionally and forever designate and appoint Danilo Cacciamatta, 2600
Michelson Drive, Suite 490, Irvine, California 92612, 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
11
<PAGE>
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
12
<PAGE>
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
13
<PAGE>
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
14
<PAGE>
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.
15
<PAGE>
(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:
16
<PAGE>
(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
17
<PAGE>
(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.
18
<PAGE>
(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;
19
<PAGE>
(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.
20
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
(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.
25
<PAGE>
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
<PAGE>
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
<PAGE>
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.
28
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
(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.
32
<PAGE>
(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).
33
<PAGE>
(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:
Danilo Cacciamatta
2600 Michelson Drive, Suite 490
Irvine, California 92612
34
<PAGE>
Sorisole:
Sorisole Acquisition Corp.
2600 Michelson Drive, Suite 490
Irvine, California 92612
La Jolla:
La Jolla Fresh Squeezed Coffee Co., Inc.
9060 Activity Road, Suite A
San Diego, California 92126-4455
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
<PAGE>
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
<PAGE>
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
<PAGE>
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/ Kurt B. Toneys
----------------------------------------
Kurt B. Toneys
Its: President
By: /s/ Stephen F. Corey
----------------------------------------
Stephen F. Corey
Its: Secretary
Sorisole Acquisition Corp.,
a Delaware corporation
By: /s/ Danilo Cacciamatta
----------------------------------------
Danilo Cacciamatta
Its: President
By: /s/ Danilo Cacciamatta
----------------------------------------
Danilo Cacciamatta
Its: Secretary
Shareholders of Sorisole Acquisition Corp.
By: /s/ Danilo Cacciamatta
----------------------------------------
Danilo Cacciamatta
38
<PAGE>
Form of Sorisole Disclosure Letter
February 22, 2000
La Jolla Fresh Squeezed Coffee Co., Inc.
9060 Activity Road, Suite A
San Diego, CA 92126-4455
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/ Danilo Cacciamatta
----------------------------------------
Danilo Cacciamatta
Its: President
By: /s/ Danilo Cacciamatta
----------------------------------------
Danilo Cacciamatta
Its: Secretary
39
<PAGE>
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/ Kurt B. Toneys
----------------------------------------
Kurt B. Toneys
Its: President
By: /s/ Stephen F. Corey
----------------------------------------
Stephen F. Corey
Its: Secretary
40
<PAGE>
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
<PAGE>
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
<PAGE>
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/ Danilo Cacciamatta
- ----------------------------------------
Danilo Cacciamatta
3
ARTICLES OF INCORPORATION
OF
NORTH WEST CONVERTERS INC
KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned,
________________________________________________________________________________
_________________________________, for the purpose of forming a corporation
under the laws of the State of Washington, and in pursuance thereof do ____
hereby sign and acknowledge the following Articles of Incorporation, in
duplicate originals, and state ______ as follows:
ARTICLE I.
The name of this corporation is and shall be
NORTH WEST CONVERTER'S INC
ARTICLE II.
The corporation is to have perpetual existence.
ARTICLE III.
The general nature of the business of the corporation and the objects and
purposes proposed to be transacted, promoted and carried on by it, are as
follows:
1. COLLECTION OF USED
COLLECTION OF USED CATALYTIC CONVERTERS
2. In furtherance of and not in limitation of the general powers conferred
by the laws of the State of Washington. It is expressly provided that this
corporation shall also have the following powers:
(a) To purchase or otherwise acquire, so far as permitted by law, the whole
or any part of the undertaking and business of any person, firm or
corporation and the property and liabilities, including the good will,
assets and stock in trade thereof, and to pay for the same either in cash
or in shares, or partly in cash and partly in shares.
(b) To purchase or otherwise acquire, and to hold, maintain, work, develop,
sell, lease, exchange, hire, convey, mortgage, or otherwise dispose of and
deal in lands and leaseholds, and any interest, estate and rights in real
property and any personal or mixed property, and any franchises, rights,
business or privileges necessary, convenient and appropriate for any of the
purposes herein expressed.
(c) To acquire by purchase, subscription, or otherwise, and to hold for
investment or otherwise, and to use, sell, assign, transfer, mortgage,
pledge, or otherwise deal with or dispose of stocks, bonds, or any
obligations or securities of this or any corporation or corporations; and
to merge or consolidate with any corporation in such manner as may be
provided by law.
(d) To borrow money, and to make and issue notes, bonds, debentures,
obligations and evidences of indebtedness of all kinds, whether secured by
mortgage, pledge or otherwise, without limit as to amount, except as may be
prohibited by statute, and to secure the same by mortgage, pledge or
otherwise, and generally to make and perform agreements and contracts of
every kind and description.
(e) To conduct and carry on its business, or any part thereof, and to have
one or more offices, and to exercise all or any of its corporate powers and
rights in the State of Washington, and in the various states, territories,
colonies and dependencies of the United States, in the District of
Columbia, and in all or any foreign countries or country.
<PAGE>
(f) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes, or the attainment of any of the
objects, or the furtherance of any of the powers hereinabove set forth,
either alone or in association with other corporations, firms or
individuals, and to do every act or acts, thing or things, incidental or
appurtenant to or growing out of or connected with the aforesaid business
or powers, or any part or parts thereof; Provided, the same be not
inconsistent with the laws under which this corporation is organized.
(g) To have such powers as are conferred upon corporations under the laws
of this state.
ARTICLE IV.
The aggregate number of shares which the corporation shall have authority
to issue, including the classes thereof and special provisions, are as follows:
10,000,000 Shares of Common Stock Authorized (To be Issued 50,000 at .10
cents $5,000)
ARTICLE V
The authority to make By-Laws for the corporation is hereby expressly
vested in the Board of Directors of this corporation, subject to the power of
the shareholders to change or repeal such By-Laws. The Board of Directors shall
not make or alter any By-Laws fixing their qualifications, classifications,
terms of offices or compensation without first securing the approval of the
shareholders.
ARTICLE VI
The shareholders reserve the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed by statute, and all rights conferred on the corporation
herein are granted subject to this reservation.
ARTICLE VII
The address of the initial registered offices is
2188 ANKAR PARK DRIVE #107 BELLINGHAM WASH, 98226
and the name of the initial registered agent at such address is
ROBERT A. STRAHL
ARTICLE VII
The management of this corporation shall be vested in a Board of Directors;
the number of initial directors shall be TWO; and the subsequent number,
qualifications, terms of office, manner of election, time and place of meeting,
and powers and duties of the directors shall be such as are prescribed by the
By-Laws of the corporation. The names and addresses of the persons who are to
serve as directors until the first annual meeting of shareholders or until their
successors be elected and qualify, are as follows:
Name Address
ROBERT A. STRAHL 2188 ANKAR PARK DRIVE
#107 BELLINGHAM WASHINGTON
ZIP 98266
RICHARD K. BRUNETTE 8411 [ILLEGIBLE] DRIVE
RICHMOND B.C. CANADA
U7C-1L3
<PAGE>
ARTICLE IX
The name and address of each incorporator is as follows:
Name Address
ROBERT A STRAHL 2188 ANKAR PARK DRIVE
#107 BELLINGHAM
WASHINGTON 98266
RICHARD A BRUNETTE 8411 [ILLEGIBLE] DRIVE
RICHMOND B.C. CANADA
U7C-1L3
IN WITNESS WHEREOF the incorporator _____ ha ______ hereunto set their
(his) hand ______ in duplicate originals this 2 day of January, 1987, under
penalty of perjury.
Robert A. Strahl
Richard K. Brunette
$ 145 - Attached
Filing fee $100
+ License fee $75.
STATE of WASHINGTON [STATE SEAL] SECRETARY of STATE
Corporations Division o 505 E. Union Avenue o P.O. Box 40234
Olympia, WA 98504-0234 o 360/753-7115 o Fax 360/864-8781
ARTICLES OF AMENDMENT
WASHINGTON PROFIT CORPORATION
RCW 23B.10.060
UBI #: 601007729 Submit original
Phone #: 408-375-6209 and one copy
Please type or print in black ink Fee: $30.00
1. Name of the corporation currently recorded with the Office of the Secretary
of State:
NORTH WEST FARMS, INC.
2. Amendments to the Articles of Incorporation were adopted on: Oct 31, 1997
Date
3. Amendments to the Articles of Incorporation are as follows (If amendment
provides for an exchange, reclassification, or cancellation of issued
shares, provisions for implementing the amendment are included below):
PAR VALUE OF STOCK IS $.001 PER SHARE
Please attach additional amendments.
4. Amendments were adopted by (Check and complete one of the following
applicable statements):
[_] Incorporators. Shareholders action was not required.
[X] Board of directors. Shareholders action was not required.
[_] Duly approved shareholder action in accordance with RCW 23B.10.030 and
RCW 23B.10.040.
5. Application will be effective upon filing unless another date and/or time
is specified:
Extended effective date may delay up to 30 days beyond the date the
document is stamped "Filed" by the Corporation Division.
---------------------------------------------------------------------------
Date Time
6. This document is hereby executed under penalties of perjury, and is, to the
best of my knowledge true and correct.
/s/ DIANE S. BUTTON DIANE S. BUTTON OCT. 31, 1997
---------------------------------------------------------------------------
Signature of Officer Printed Name Date
President
MAKE CHECKS PAYABLE TO THE SECRETARY OF STATE'S OFFICE.
SUBMIT THE COMPLETED FORM AND THE FEE TO THE ABOVE ADDRESS.
FEE: $30.00
COPY
STATE OF WASHINGTON [SEAL] SECRETARY OF STATE
Corporations Division o 505 W. Union Ave. o P.O. Box 40234 o Olympia, WA
98504-0234 o 360/753-7115 o 360/684-8781
ARTICLES OF AMENDMENT
WASHINGTON PROFIT CORPORATION
RCW 238.10.060
Submit original
UBI #: 601 007 729 And one copy
Phone #: 408-375-6209 Please type or print in black ink. Fee: $30.00
1. Name of the corporation currently recorded with the Office of the Secretary
of State:
North West Converters, Inc.
---------------------------------------------------------------------------
2. Amendments to the Articles of Incorporation were adopted on:_______________
Date
3. Amendments to the Articles of Incorporatoin are as follows (If amendment
provides for an exchange, reclassification, or cancellation of issued
shares, provisions for implementing the amendment are included below):
1. The name of the corporatoin shall be NorthWest Farms, Inc.
---------------------------------------------------------------------------
2. Dennis Davis shall replace James H. Watson as Secretary and Director
---------------------------------------------------------------------------
of this Corporation.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Please attach additional amendments.
4. Amendments were adopted by (Check and complete one of the following
applicable statements):
|_| Incorporators. Shareholders action was not required.
|X| Board of directors. Shareholders action was not required
|_| Duly approved shareholder action in accordance with RCW
238.10.030 and RCW 238.10.040.
5. Application will be effective upon filing unless another date and/or time
is specified:
Extended effective date may delayed up to 30 days beyond the date the
document is stamped "Filed" by the corporations.
---------------------------------------------------------------------------
Date Time
6. This document is hereby executed under penalties of perjury, and is, to the
best of my knowledge true and correct.
/s/ Robert A. Strahl Robert A. Strahl 5/28/97
- --------------------------------------------------------------------------------
Signature of Officer Printed Name Date
MAKE CHECKS PAYABLE TO THE SECRETARY OF STATE'S OFFICE.
SUBMIT THE COMPLETED FORM AND THE FEE TO THE ABOVE ADDRESS. FEE $30.00
================================================================================
STATE of WASHINGTON
[STATE SEAL]
SECRETARY of STATE
I, RALPH MUNRO, Secretary of State of the State of Washington and custodian of
its seal, hereby issue this
CERTIFICATE OF AMENDMENT
to
NORTH WEST FARMS, INC.
a Washington Profit corporation. Articles of Amendment were filed for record in
this office on the date indicated below.
Changing name to LA JOLLA COFFEE COMPANY, INC.
UBI Number: 601 007 729 Date: June 02, 1999
[STATE SEAL]
Given under my hand and the Seal of the State
of Washington at Olympia, the State Capital
/s/ Ralph Munro
-------------------------------
Ralph Munro, Secretary of State
================================================================================
[STAMP]
FILED
STATE OF WASHINGTON
JUN 18 1999
[ILLEGIBLE]
SECRETARY OF STATE
[SEAL] STAFF OF WASHINGTON ARTICLES OF AMENDMENT
[ILLEGIBLE] WASHINGTON
Ralph Muna, Secretary of State PROFIT CORPORATION
[ILLEGIBLE]
FEE: $30
[illegible]
o Please PRINT or TYPE in black ink
o Sign, date, and return original AND ONE COPY to:
CORPORATIONS DIVISION
805 E. UNION o PO BOX 40234
OLYMPIA, WA 96604-0234
o BE SURE TO INCLUDE FILING FEE. [illegible]
Checks should be made payable to -----------------------
"Secretary of State" FILED / /
-----------------------
- --------------------------------------------------------------------------------
IMPORTANT! Person to [illegible] Daytime Phone Number (with area code)
Ariane Joannou (619) 459-8133
- --------------------------------------------------------------------------------
AMENDMENT TO ARTICLES OF INCORPORATION
- --------------------------------------------------------------------------------
NAME OF CORPORATION (As currently recorded with the Office of the Secretary of
State.)
La Jolla Coffee Company, Inc.
- --------------------------------------------------------------------------------
UB NUMBER CORPORATION NUMBER AMENDMENTS TO ARTICLES OF INCORPORATION
(If different) WERE ACCEPTED ON
601007729 23842032 Date: June 15, 1999
- --------------------------------------------------------------------------------
EFFECTIVE DATE (Specify last effect date [illegible] up to 90 days AFTER
OF ARTICLES OF receipt of the [illegible] of the Secretary of State.)
AMENDMENT
|_| Specific Date: ______________________
|X| Upon filing by the Secretary of State
- --------------------------------------------------------------------------------
ARTICLES OF AMENDMENT WERE ACCEPTED BY (Please check ONE of the following):
|_| Incorporators. Shareholders action was not required
|X| Board of Directors. Shareholders action was not required
|_| Duly approved sharholder action in accordance with Chapter 235.10.RCW
- --------------------------------------------------------------------------------
AMENDMENTS TO THE ARTICLES OF INCORPORATION ARE AS FOLLOWS
[illegible]
ARTICLE ONE IS AMENDED TO READ AS FOLLOWS:
ONE: THE NAME OF THE CORPORATION IS
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE OF OFFICER
This document is hereby executed under penalties of perjury; and is to the best
of my knowledge true and correct.
/s/ Kurt B Toneys Kurt B Toneys 6-15-99
- --------------------------------------------------------------------------------
Signature of Officer Printed Name President Date
- --------------------------------------------------------------------------------
INFORMATION AND ASSISTANCE - 360/783-7118 (TTD - 360/753-1085)
NORTH WEST FARMS, INC.
By-Laws
ARTICLE I MEETINGS OF STOCKHOLDERS
1. Stockholders meetings shall be held in the office of the Corporation, at
Monterey, CA, or at such other place or places as the directors shall from time
to time determine.
2. The annual meeting of the Stockholders of this Corporation shall be held
at 9 A.M., on the 13th day of February of each year beginning in 1987, at which
time there shall be elected by the Stockholders of the Corporation a Board of
Directors for the ensuing year, and the Stockholders shall transact such other
business as shall properly come before them.
3. A notice setting out the time and place of such annual meeting shall be
mailed postage prepaid to each of the Stockholders of record, at his address and
as the same appears on the stock book of the company, or if no such address
appears, at his last known place of business, at least ten (10) days prior to
the annual meeting.
4. If a quorum is not present at the annual meeting, the Stockholders
present, in person or by proxy, may adjourn to such future time as shall be
agreed upon by them, and notice of such adjournment shall be mailed, postage
prepaid, to each Stockholder of record at least ten (10) days before such date
to which the meeting was adjourned; but if a quorum is present, they may adjourn
from day to day as they see fit, and no notice of such adjournment need be
given.
5. Special meetings of the Stockholders may be called at any time by the
President; by all of the Directors provided there are no more than three, or if
more than three, by any three Directors; or by the holder of a majority share of
the capital stock of the Corporation. The Secretary shall send a notice of such
called meeting to each Stockholder of record at least ten (10) days before such
meeting, and such notice shall state the time and place of the meeting, and the
object thereof. No business shall be transacted at a
<PAGE>
special meeting except as stated in the notice to the Stockholders, unless by
unamimous consent of all the Stockholders present, either in person or by proxy,
all such stock being represented at the meeting.
6. A majority of the stock issued and outstanding, either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of the Stockholders.
7. Each Stockholder shall be entitled to one vote for each share of stock
in his own name on the books of the company, whether represented in person or by
proxy.
8. All proxies shall be in writing and signed.
9. The following order of business shall be observed at all meetings of the
Stockholders so far as is practicable:
a. Call the roll;
b. Reading, correcting, and approving of the minutes of the previous
meeting;
c. Reports of Officers;
d. Reports of Committees;
e. Election of Directors;
f. Unfinished business; and
g. New business.
ARTICLE II STOCK
1. Certificates of stock shall be in a form adopted by the Board of
Directors and shall be signed by the President and Secretary of the Corporation.
2. All certificates shall be consecutively numbered; the name of the person
owning the shares represented thereby, with the number of shares and the date of
issue shall be entered on the company's books.
3. All certificates of stock fransferred by endorsement thereon shall be
surrendered by cancellation and new certificates issued to the purchaser or
assignee.
2
<PAGE>
ARTICLE III DIRECTORS
1. A Board of Directors, consisting of at least one (1) person shall be
chosen annually by the Stockholders at their meeting to manage the affairs of
the company. The Directors' term of office shall be one year, and Directors may
be re-elected for successive annual terms.
2. Vacancies on the Board of Directors by reason of death, resignation or
other causes shall be filled by the remaining Director or Directors choosing a
Director or Directors to till the unexpired term.
3. Regular meetings of the Board of Directors shall be held at 9 A.M., on
the 13th day of January of each year beginning in 1987 at the office of the
company at Monterey, CA., or at such other time or place as the Board of
Directors shall by resolution appoint; special meetings may be called by the
President or any Director giving ten (10) days notice to each Director. Special
meetings may also be called by execution of the appropriate waiver of notice and
call when executed by a majority of the Directors of the company. A majority of
the Directors shall constitute a quorum.
4. The Directors have the general management and control of the business
and affairs of the company and shall exercise all the powers that may be
exercised or performed by the Corporation, under the statutes, the Articles of
Incorporation, and the By-Laws. Such management will be by equal vote of each
member of the Board of Directors with each board member having an equal vote.
5. A resolution, in writing, signed by all or a majority of the members of
the Board of Directors, shall constitute action by the Board of Directors to
effect therein expressed, with the same force and effect as though such
resolution has been passed at a duly convened meeting; and it shall be the duty
of the Secretary to record every such resolution in the Minute Book of the
Corporation under its proper date.
3
<PAGE>
ARTICLE IV OFFICERS
1. The officers of this company shall consist of: a President, one or more
Vice President(s), Secretary, Treasurer, Resident Agent, and such other officers
as shall, from time to time, be elected or appointed by the Board of Directors.
2. The PRESIDENT shall preside at all meetings of the Directors and the
Stockholders and shall have general charge and control over the affairs of the
Corporation subject to the Board of Directors end shall perform all such other
duties as are incident to his office or are required by him by the Board of
Directors.
3. The VICE PRESIDENT shall exercise the functions of the President during
the absence or disability of the President and shall have such powers and such
duties as may be assigned to him from time to time by the Board of Directors.
4. The SECRETARY shall issue notices for all meetings as required by the
By-Laws, shall keep a record of the minutes of the proceedings of the meetings
of the Stockholders and Directors, shall have charge of the corporate books, and
shall make such reports and perform such other duties ads are incident to his
office, or properly required of him by the Board of Directors. He shall be
responsible that the corporation complies with Washington State Corporation laws
and maintains any and all amendments or changes to the By-Laws of the
Corporation. He will maintain a current statement setting out the name of the
custodian of the stock ledger or duplicate stock ledger, and the present and
complete Post Office address, including street and number, if any, where such
stock ledger or duplicate stock ledger specified in the section kept.
4
<PAGE>
5. The TREASURER shall have the custody of all monies and securities of the
Corporation and shall keep regular books of account. He shall disburse the funds
of the Corporation in payment of the just demands against the Corporation, or as
may be ordered by the Board of Directors, making proper vouchers for such
disbursements and shall render to the Board of Directors, from time to time, as
may be required of him, an account of all his transactions as Treasurer and of
the financial condition of the Corporation. He shall perform all duties incident
to his office or which are properly required of him by the Board of Directors~
6. The RESIDENT AGENT shall be in charge of the Corporation's registered
office in the State of CA. upon whom process against the Corporation may be
served and shall perform all duties required of him by statute.
7. The salaries of all offices shall be fixed by the Board of Directors and
may be changed from time to time by a majority vote of the board.
8. Each such officer shall serve for a term of one (1) year or until their
successors are chosen and qualified. Officers may be re-elected or appointed for
successive annual terms.
9. The Board of Directors may appoint such other officers and agents, as it
shall deem necessary or expedient, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to dine by the Board of Directors.
ARTICLE V INDEMNIFICATION 0F OFFICERS AND DIRECTORS
1. The Corporation shall indemnify any and all of its Directors and
Officers, and its former Directors and Officers, or any person who may have
served at the Corporations request as a. Director or Officer of another
Corporation in which it owns shares of capital stock or of which it is a
creditor, against expenses actually and necessarily incurred by them in
connection with the defense of any action, suit or proceeding in which they, or
any of them, are made parties, or a party, by reason of being or having been
Director(s) or Officer(s) of the Corporation, or of such other Corporation,
except, in relation to matters as to which any such director or
5
<PAGE>
officer or former Director or Officer or person shall be adjudged in such
action, suit or proceeding to be liable for negligence or misconduct in the
performance of duty. Such indemnification shall not be deemed exclusive of any
other rights to which those indemnified may be entitled, under By-Law,
agreement, vote of Stockholders or otherwise.
ARTICLE VI AMENDMENTS
1. Any of these By-Laws may be amended by a majority vote of the
Stockholders at any meeting or at any special meeting called for that purpose.
2. The Board of Directors may amend the By-Laws or adopt additional
By-Laws, but shall not alter or repeal any By-Law adopted by the Stockholders of
the company.
CERTIFIED TO BE THE BY-LAWS OF;
NORTH WEST FARMS, INC.
BY: /s/ [ILLEGIBLE]
---------------------------------
Sorisole Acquisition Corp.
2600 Michelson Drive, Suite 490,
Irvine, California 92612
February 22, 2000
The Board of Directors
Sorisole Acquisition Corp.
Gentlemen:
I hereby tender my resignation as director, chairman of the board, chief
executive officer, chief financial officer and president of the Corporation
effective immediately.
Cordially,
/s/ Danilo Cacciamatta
Danilo Cacciamatta
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 16,526 0
<SECURITIES> 0 0
<RECEIVABLES> 3,771 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 20,297 0
<PP&E> 118,457 0
<DEPRECIATION> 16,232 0
<TOTAL-ASSETS> 122,522 0
<CURRENT-LIABILITIES> 96,029 0
<BONDS> 0 0
0 0
0 0
<COMMON> 20,398 0
<OTHER-SE> (72,452) 0
<TOTAL-LIABILITY-AND-EQUITY> 122,522 0
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 2,711,836 371,487
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,711,836) (371,487)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,711,836) (371,487)
<EPS-BASIC> (.14) (.12)
<EPS-DILUTED> (.14) (.12)
</TABLE>
