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Adamis Pharmaceuticals Corporation 8-K [adamis_8-k.htm]
 
Exhibit 10.1
 

AGREEMENT AND PLAN OF REORGANIZATION
 
among
 
LA JOLLA PHARMACEUTICAL COMPANY
a Delaware corporation,

JEWEL MERGER SUB, INC.,
a Delaware corporation

and

ADAMIS PHARMACEUTICALS CORPORATION,
a Delaware corporation

__________________________
 

Dated as of December 4, 2009
 

 

 
 

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TABLE OF CONTENTS
 

 
PAGE
ARTICLE I THE MERGER
2
     
1.1
Merger of Merger Sub into Adamis
2
         
1.2
Effect of the Merger
2
         
1.3
Closing; Effective Time
2
         
1.4
Certificate of Incorporation and Bylaws; Directors and Officers
2
         
1.5
Reverse Split of La Jolla Common Stock
3
         
1.6
Shares to be Issued; Effect on Capital Stock
4
         
1.7
Calculation of the Exchange Ratio
6
         
1.8
Dissenting Shares
6
         
1.9
No Further Transfer of Adamis Capital Stock.
6
         
1.10
Exchange of Certificates; Exchange Agent
6
         
1.11
Further Action
8
       
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ADAMIS
8
     
2.1
Organization and Good Standing
9
         
2.2
Subsidiaries.
9
         
2.3
Authority
9
         
2.4
No Conflict
10
         
2.5
Consents
10
         
2.6
Governmental Authorizations
10
         
2.7
Capitalization.
10
         
2.8
SEC Reports; Financial Statements.
11
         
2.9
Absence of Certain Changes
12
         
2.10
Interested Party Transactions
13
         
2.11
Intellectual Property.
13
         
2.12
Taxes.
14
         
2.13
Employee Benefit Plans.
16
         
2.14
Employee Matters
17
         
2.15
Insurance
17
         
2.16
Compliance with Legal Requirements
17

 
 
 
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2.17
Environmental Matters
18
         
2.18
Legal Proceedings
18
         
2.19
Contracts; No Defaults.
18
         
2.20
Labor Matters
19
         
2.21
Unlawful Payments
19
         
2.22
Financial Advisor
19
         
2.23
Title to Assets; No Real Property.
19
         
2.24
Representations Complete
19
       
ARTICLE III REPRESENTATIONS AND WARRANTIES OF LA JOLLA AND MERGER SUB
20
     
3.1
Organization and Good Standing
20
         
3.2
Subsidiaries.
20
         
3.3
Authority
21
         
3.4
No Conflict
21
         
3.5
Consents
21
         
3.6
Governmental Authorizations
22
         
3.7
Capitalization.
22
         
3.8
SEC Reports; Financial Statements.
23
         
3.9
Absence of Certain Changes
24
         
3.10
Interested Party Transactions
24
         
3.11
Intellectual Property.
24
         
3.12
Taxes.
25
         
3.13
Employee Benefit Plans.
27
         
3.14
Employee Matters
28
         
3.15
Insurance
28
         
3.16
Compliance with Legal Requirements
28
         
3.17
Environmental Matters
29
         
3.18
Legal Proceedings
29
         
3.19
Contracts; No Defaults.
29
         
3.20
Labor Matters
30
         
3.21
Unlawful Payments
30
         
3.22
Financial Advisor
30

 
 
 
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3.23
Title to Assets; No Real Property.
30
         
3.24
Representations Complete
30
       
ARTICLE IV CONDUCT BEFORE THE EFFECTIVE TIME
31
     
4.1
Access and Investigation
31
         
4.2
Operation of La Jolla’s Business.
31
         
4.3
Operation of Adamis’s Business.
32
         
4.4
Disclosure Schedule Updates
33
         
4.5
No Solicitation.
33
       
ARTICLE V ADDITIONAL AGREEMENTS
37
     
5.1
Proxy Statement; Registration Statement.
37
         
5.2
Adamis Stockholder Meeting; Change in the Adamis Board Recommendation.
38
         
5.3
La Jolla Stockholder Meeting; Change in the La Jolla Board Recommendation;
Adoption of Agreement by La Jolla as Sole Stockholder of Merger Sub.
40
         
5.4
Regulatory Approvals
41
         
5.5
Indemnification of Officers and Directors.
41
         
5.6
Additional Agreements.
42
         
5.7
Disclosure
43
         
5.8
Directors; Officers
43
         
5.9
Tax Matters.
43
         
5.10
La Jolla Amendment
44
         
5.11
Adamis’s Auditors
44
         
5.12
La Jolla’s Auditors
44
         
5.13
Legends
44
         
5.14
Confidentiality
44
         
5.15
FIRPTA Compliance
44
         
5.16
Rule 16b-3
45
         
5.17
Use of La Jolla Net Cash
45
       
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY
45
     
6.1
Stockholder Approval
45
         
6.2
No Restraints
45
         
6.3
Governmental Authorization
45

 
 
 
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6.4
No Governmental Proceedings Relating to Contemplated Transactions or Right to
Operate Business
45
         
6.5
Registration Statement
46
       
ARTICLE VII ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF LA JOLLA AND
MERGER SUB
46
     
7.1
Accuracy of Representations
46
         
7.2
Performance of Covenants
46
         
7.3
No Material Adverse Effect
46
         
7.4
Consents
46
         
7.5
Agreements and Other Documents
47
         
7.6
Sarbanes-Oxley Certifications
47
         
7.7
SEC Reports
47
         
7.8
Legal Opinion
47
       
ARTICLE VIII ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATION OF ADAMIS
47
     
8.1
Accuracy of Representations
47
         
8.2
Performance of Covenants
47
         
8.3
No Material Adverse Effect
48
         
8.4
Consents
48
         
8.5
Documents
48
         
8.6
Sarbanes-Oxley Certifications
48
         
8.7
Board of Directors
48
         
8.8
Officers
48
         
8.9
Certificate of Amendment
48
         
8.10
SEC Reports
48
         
8.11
Legal Opinion
48
       
ARTICLE IX TERMINATION
49
     
9.1
Termination
49
         
9.2
Effect of Termination
51
         
9.3
Expenses; Termination Fees.
51
       
ARTICLE X MISCELLANEOUS PROVISIONS
52
     
10.1
Non-Survival of Representations and Warranties
52
         
10.2
Amendment
52

 
 
 
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10.3
Waiver.
52
         
10.4
Entire Agreement; Counterparts; Exchanges by Facsimile
52
         
10.5
Applicable Law; Jurisdiction
53
         
10.6
Waiver of Jury Trial
53
         
10.7
Notices
53
         
10.8
Cooperation
54
         
10.9
Severability
54
         
10.10
Other Remedies; Specific Performance
54
         
10.11
Construction.
55

 
 
 
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AGREEMENT AND PLAN OF REORGANIZATION
 
THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made and entered
into as of December 4, 2009, by and among La Jolla Pharmaceutical Company, a
Delaware corporation (“La Jolla”), Jewel Merger Sub, Inc., a Delaware
corporation and wholly-owned subsidiary of La Jolla (“Merger Sub”), and Adamis
Pharmaceuticals Corporation, a Delaware corporation (“Adamis”).  Certain
capitalized terms used in this Agreement are defined in Exhibit A attached
hereto.
 
RECITALS
 
A.           The Board of Directors of La Jolla and Adamis have each determined
that it is in the best interests of their respective stockholders for Adamis and
La Jolla to enter into a business combination transaction pursuant to which
Merger Sub will merge with and into Adamis (the “Merger”), with Adamis
continuing after the Merger as the surviving corporation and wholly owned
subsidiary of La Jolla.
 
B.           Pursuant to the Merger, each outstanding share of common stock,
$0.0001 par value per share, of Adamis (“Adamis Common Stock”) will, in
accordance with the provisions of this Agreement, be converted into the number
of shares of La Jolla’s common stock, $0.01 par value per share (“La Jolla
Common Stock”) equal to the Exchange Ratio.
 
C.           In connection with, and immediately before the consummation of, the
Merger, a reverse stock split of La Jolla Common Stock shall be consummated,
pursuant to which each outstanding share of La Jolla Common Stock shall be
converted into the number of shares of La Jolla Common Stock determined as
provided in Section 1.5 below.
 
D.           The Board of Directors of La Jolla (i) has approved and declared
advisable this Agreement, the Merger and the other transactions contemplated by
this Agreement, (ii) has determined that the Merger is in the best interests of
La Jolla and its stockholders and has determined to recommend the approval of
this Agreement and the Merger to the stockholders of La Jolla, and (iii) has
determined to recommend that La Jolla, in its capacity as the sole stockholder
of Merger Sub, vote to adopt this Agreement and approve the Merger and such
other actions as are contemplated by this Agreement.
 
E.           The Board of Directors of Adamis (i) has approved and declared
advisable this Agreement, the Merger and the other transactions contemplated by
this Agreement and (ii) has determined that the Merger is in the best interests
of Adamis and its stockholders and has determined to recommend the approval of
this Agreement and the Merger to the stockholders of Adamis.
 
F.           The parties hereto intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended.
 
G.           As an inducement to La Jolla to enter into this Agreement,
concurrently herewith certain stockholders of Adamis have entered into an
agreement with La Jolla, in the form attached hereto (a “Voting Agreement”),
pursuant to which each such person has agreed, among other things, to vote the
shares of capital stock of Adamis owned by such person to approve this Agreement
and the transactions contemplated hereby.
 

 
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AGREEMENT
 
The parties to this Agreement, intending to be legally bound, agree as follows:
 
ARTICLE I
THE MERGER
 
1.1           Merger of Merger Sub into Adamis.  Upon the terms and subject to
the conditions set forth in this Agreement and in accordance with the Delaware
General Corporation Law (“DGCL”), at the Effective Time Merger Sub shall be
merged with and into Adamis, and the separate existence of Merger Sub shall
cease.  Adamis will continue as the surviving corporation following the Merger
(the “Surviving Corporation”).
 
1.2           Effect of the Merger.  The Merger shall have the effects set forth
in this Agreement and the applicable provisions of the DGCL.  As a result of the
Merger, Adamis will become a wholly-owned subsidiary of La Jolla.  Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of Adamis and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of Adamis and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
 
1.3           Closing; Effective Time.  The consummation of the transactions
contemplated by this Agreement (the “Closing”) shall take place in San Diego,
California, at 10:00 a.m., on a date and at a location to be agreed by La Jolla
and Adamis (the “Closing Date”), which shall be no later than the third Business
Day after the satisfaction or waiver of the last to be satisfied or waived of
the conditions set forth in Articles VI, VII and VIII (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or waiver of such conditions), or at such other time, date
and place as La Jolla and Adamis may mutually agree in writing.  At the Closing,
subject to the terms and conditions of this Agreement, the parties hereto shall
cause the Merger to be consummated by executing and filing with the Secretary of
State of the State of Delaware a Certificate of Merger with respect to the
Merger, satisfying the applicable requirements of the DGCL and in a form
reasonably acceptable to La Jolla and Adamis.  The Merger shall become effective
at the time of the filing of such Certificate of Merger with the Secretary of
State of the State of Delaware or at such later time as may be specified in such
Certificate of Merger (the time as of which the Merger becomes effective being
referred to as the “Effective Time”).
 
1.4           Certificate of Incorporation and Bylaws; Directors and
Officers.  At the Effective Time:
 
(a)           Adamis Certificate of Incorporation.  The Adamis Charter, as in
effect immediately before the Effective Time, shall be amended in the Merger to
read in its entirety as set forth on Exhibit B-1 hereto and, as so amended,
shall be the certificate of incorporation of the Surviving Corporation until
thereafter amended as provided by the DGCL and such certificate of
incorporation;
 

 
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(b)           Adamis Bylaws.  The Adamis Bylaws, as in effect immediately before
the Effective Time, shall be amended to read in its entirety as set forth on
Exhibit B-2 hereto and, as so amended, shall be the bylaws of the Surviving
Corporation, until thereafter amended as provided by the DGCL and such Bylaws;
 
(c)           Adamis Directors.  The directors of Adamis immediately before the
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the certificate of incorporation and bylaws of
the Surviving Corporation; and
 
(d)           Adamis Officers.  The officers of Adamis immediately before the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified, or until their earlier death, resignation or removal.
 
1.5           Reverse Split of La Jolla Common Stock.
 
(a)           La Jolla Restated Certificate.  Immediately before the Effective
Time, and subject to receipt of the requisite stockholder approval at the La
Jolla Stockholder Meeting, La Jolla shall cause to be filed an amendment to its
certificate of incorporation and/or an Amended and Restated Certificate of
Incorporation (the “La Jolla Restated Certificate”), whereby without any further
action on the part of La Jolla, Adamis or any stockholder of La Jolla:
 
(i)           The shares of La Jolla Common Stock issued and outstanding
immediately before the filing of the La Jolla Restated Certificate shall be
combined in a reverse stock split, with each share thereafter representing a
fractional share equal to the Reverse Stock Split Ratio (the “Reverse Stock
Split”);
 
(ii)           the total number of authorized shares of La Jolla Common Stock
and La Jolla Preferred Stock shall be 225,000,000 and 8,000,000 shares,
respectively.
 
(iii)           With respect to the determination of the La Jolla Net Cash as of
the Closing Date and the number of Post-Effective La Jolla Stockholder Shares,
within five (5) days before the Closing Date, La Jolla shall deliver to Adamis
(the date of such delivery, the “Net Cash Delivery Date”) an unaudited
certification (the “Net Cash Certification”) of the calculation of the projected
La Jolla Net Cash as of the Closing Date, with a detailed schedule showing each
item taken into account in determining the amount of La Jolla Net Cash
(including without limitation each Liability and each amount, if any, reserved
or taken into account with respect to Liabilities after the Closing
Date).  Within two (2) days after the Net Cash Delivery Date, Adamis will notify
La Jolla whether Adamis accepts the Net Cash Certification or whether Adamis
disputes the Net Cash Certification, setting forth in reasonable detail the
basis for such dispute.  If Adamis accepts the original Net Cash Certification,
then the original Net Cash Certification shall be the basis for determining La
Jolla Net Cash at the Closing Date.  If Adamis disputes the initial Net Cash
Certification, the parties shall attempt to resolve the dispute promptly.  If a
final resolution of the dispute is reached within a ten-day period following
Adamis’s objection, then the initial Net Cash Certification, such changes as
have been agreed upon, shall be the final Net Cash Certification for all
purposes under this Agreement.  If no final resolution of the dispute is reached
within such ten-day period, then the dispute shall be submitted to an
independent auditing firm mutually selected by Adamis and La Jolla, who shall
make a final determination with respect to such dispute within ten (10) Business
Days after submission of the dispute or as soon
 

 
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as practicable thereafter.  The expenses of the auditing firm shall be allocated
between the parties ratably on the inverse basis of the percentage of disputed
amount that is awarded to Adamis (e.g., if 75% of the disputed amount is awarded
to Adamis, then 75% of the expense shall be allocated to La Jolla).  The La
Jolla portion of such expenses will be treated as a Liability that reduces the
amount of La Jolla Net Cash.  The independent accounting firm shall consider
only the items in dispute.  The final determination by such auditing firm shall
be binding upon the parties and the initial Net Cash Certification, with such
changes as have been finally determined by such auditing firm, shall be the
final Net Cash Certification for all purposes under this Agreement.
 
(b)           No Fractional Shares.  No fractional shares of La Jolla Common
Stock shall be issued in connection with the Reverse Stock Split, and no
certificates or scrip representing such fractional shares shall be issued.  La
Jolla will round down to the nearest whole share any fraction of a share that
any La Jolla stockholder would otherwise receive (after aggregating all
fractional shares issuable to such holder), and any holder of La Jolla Common
Stock who would otherwise be entitled to receive a fraction of a share of La
Jolla Common Stock (after aggregating all fractional shares of La Jolla Common
Stock issuable to such holder) shall, in lieu of such fraction of a share and
upon surrender of such holder’s certificate representing such fractional shares
of La Jolla Common Stock, instead receive from La Jolla an amount of cash
(rounded to the nearest whole cent), without interest, equal to the product of
(i) such fraction, multiplied by (ii) the applicable price per share which shall
be equal to the average closing price of La Jolla Common Stock (as reported on
the Nasdaq Capital Market, or the OTC Bulletin Board or, if the La Jolla Common
Stock is not traded on the Nasdaq Capital Market or OTC Bulletin Board, then the
Pink Sheets, and, if not traded on the Pink Sheets, then as determined in good
faith by La Jolla’s Board of Directors) on the five trading days immediately
prior to the effective date of the Reverse Stock Split (giving effect to the
Reverse Stock Split).  In lieu of the foregoing, La Jolla may, in its
discretion, elect to round up each fractional share (after aggregating all
fractional shares issuable to such holder) to a whole share.  The aggregate
value of the fractional share payments and out-of-pocket expenses associated
with the Reverse Stock Split and the post-Closing exchange of certificates (the
“Reverse Split Expenses”) shall be disregarded in calculating the La Jolla Net
Cash.
 
(c)           Reverse Stock Split and the Exchange Ratio.  The Exchange Ratio
set forth herein assumes the effectiveness of the Reverse Stock Split set forth
above.
 
1.6           Shares to be Issued; Effect on Capital Stock.  Subject to the
terms and conditions of this Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of La Jolla, Merger Sub, Adamis or any
stockholder of Adamis, the following shall occur:
 
(a)           Conversion of Adamis Common Stock.  Subject to the terms of
Section 1.10(h), each share of Adamis Common Stock issued and outstanding
immediately before the Effective Time (other than any shares of Adamis Common
Stock to be canceled pursuant to Section 1.6(b), if any, and excluding any
Dissenting Shares (to the extent provided in Section 1.8)) will be converted
automatically into the right to receive: (i) that number of shares of La Jolla
Common Stock equal to the Exchange Ratio, and (ii) any cash, without interest,
to be paid in lieu of any fractional share of Adamis Common Stock in accordance
with Section 1.6(f).
 

 
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(b)           Cancellation of Treasury and La Jolla-Owned Shares.  Any shares of
Adamis Capital Stock held as treasury stock or held or owned by Adamis or La
Jolla immediately before the Effective Time shall be canceled and shall cease to
exist, and no consideration shall be delivered in exchange therefore.
 
(c)           Adamis Restricted Stock.  If any shares of Adamis Common Stock
issued and outstanding immediately before the Effective Time are unvested or are
subject to a repurchase option or the risk of forfeiture or under any applicable
restricted stock purchase agreement, stock restriction agreement, cancellation
agreement or other agreement with Adamis (such shares, the “Adamis Restricted
Stock”), then the shares of La Jolla Common Stock issued in exchange for such
shares of Adamis Restricted Stock pursuant to Section 1.6(a) will to the same
extent be unvested and subject to the same repurchase option or risk of
forfeiture, and the certificates representing such shares of La Jolla Common
Stock shall accordingly be marked with appropriate legends to reflect such
repurchase option or risk of forfeiture.  Adamis and La Jolla shall take all
action that may be necessary to ensure that, from and after the Effective Time,
La Jolla is entitled to exercise any such repurchase option or right of
cancellation or other right set forth in any such restricted stock purchase
agreement or other agreement.
 
(d)           Capital Stock of Merger Sub.  Each share of common stock of Merger
Sub issued and outstanding immediately before the Effective Time shall
automatically be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation.  Each
stock certificate of Merger Sub evidencing ownership of any such shares shall,
as of the Effective Time, evidence ownership of such shares of common stock of
the Surviving Corporation.
 
(e)           Adjustments to Exchange Ratio.  If, between the date of this
Agreement and the Effective Time, any outstanding shares of Adamis Common Stock
or La Jolla Common Stock shall have been changed into, or exchanged for, a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, reverse split,
combination or exchange of shares (other than the Reverse Stock Split) (such
transaction or event being referred to as a “Recapitalization”), then the
Exchange Ratio, the Reverse Stock Split Ratio and, if applicable, the per-share
prices set forth in the definition of the Post-Effective La Jolla Stockholder
Shares shall, as applicable, be correspondingly adjusted to provide the holders
of Adamis Capital Stock and Adamis Options and La Jolla Stock and La Jolla
Options the same economic effect as contemplated by this Agreement before such
event and any such adjustment to the Exchange Ratio shall be approved by Adamis
and La Jolla.   No Recapitalization may be effected by one party with the prior
written consent of the other party, which consent will not be unreasonably
withheld or delayed.
 
(f)           No Fractional Shares.  No fractional shares of La Jolla Common
Stock shall be issued in connection with the Merger, and no certificates or
scrip representing such fractional shares shall be issued.  The holder of shares
of Adamis Common Stock who would otherwise be entitled to receive a fraction of
a share of La Jolla Common Stock (after aggregating all fractional shares of La
Jolla Common Stock to be received by such holder) shall, in lieu of such
fraction of a share and upon surrender of such holder’s certificate representing
shares of Adamis Capital Stock (the “Adamis Stock Certificate”), instead receive
from La Jolla an amount of cash (rounded to the nearest whole cent), without
interest, equal to the product of (i) such fraction, multiplied by

 
5

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(ii) the applicable price per share which shall be equal to the average closing
price of La Jolla Common Stock (as reported on the Nasdaq Capital Market, or the
OTC Bulletin Board or, if the La Jolla Common Stock is not traded on the Nasdaq
Capital Market or the OTC Bulletin Board, then the Pink Sheets, and, if not
traded on the Pink Sheets, then as determined in good faith by La Jolla’s Board
of Directors) on the five trading days immediately prior to the Effective Date
(after giving effect to the Reverse Stock Split).

1.7           Calculation of the Exchange Ratio.  For purposes of this
Agreement, the “Exchange Ratio” shall be one (1) share of La Jolla Common Stock
(assuming the effectiveness of the Reverse Stock Split) in exchange for one (1)
share of Adamis Common Stock outstanding immediately before the Effective Time.
 
1.8           Dissenting Shares.  Notwithstanding any other provision of this
Agreement to the contrary, if Section 262 of the DGCL (or Chapter 13 of the
California Corporations Code, to the extent applicable to Adamis by virtue of
Section 2115 thereof) provides for appraisal rights with respect to the Merger,
then any shares of Adamis Capital Stock that have not been voted in favor of
adoption of this Agreement, and with respect to which a demand for payment and
appraisal have been properly made in accordance with (a) Section 262 of the DGCL
or (b) Chapter 13 of the California Corporations Code (to the extent applicable
to Adamis by virtue of Section 2115 thereof) (such shares referred to as
“Dissenting Shares”), shall not be converted into or represent a right to
receive La Jolla Common Stock pursuant to Section 1.6(a), but shall be converted
into the right to receive such consideration as may be determined to be due with
respect to such Dissenting Shares pursuant to the DGCL or the California
Corporations Code, as applicable; provided, however, that if a holder of
Dissenting Shares (a “Dissenting Stockholder”) withdraws such holder’s demand
for such payment and appraisal or becomes ineligible for such payment and
appraisal then, as of the later of the Effective Time or the date of which such
Dissenting Stockholder withdraws such demand or otherwise becomes ineligible for
such payment and appraisal, such holder’s Dissenting Shares will cease to be
Dissenting Shares and will be converted into the right to receive La Jolla
Common Stock as determined in accordance with Section 1.6(a).
 
1.9           No Further Transfer of Adamis Capital Stock.   At the Effective
Time all shares of Adamis Capital Stock outstanding immediately before the
Effective Time shall automatically be exchanged, and all holders of Adamis
Capital Stock that were outstanding immediately before the Effective Time shall
cease to have any rights as stockholders of Adamis, except the right to receive
the consideration described in Section 1.6(a) or Section 1.8, as applicable.  No
further transfer of any such shares of Adamis Capital Stock shall be made on
such stock transfer books after the Effective Time.  Subject to Section 1.10(f)
if, after the Effective Time, any shares of Adamis Capital Stock are presented
to the Exchange Agent or to Adamis or La Jolla, such Adamis shares shall be
canceled and shall be exchanged as provided in Section 1.10.
 
1.10           Exchange of Certificates; Exchange Agent.  Prior to the Effective
Time, La Jolla and Adamis will jointly select and designate a national bank,
trust company or transfer agent to act as agent of La Jolla for purposes of,
among other things, mailing and receiving transmittal letters and distributing
the La Jolla Common Stock to the holders of Adamis Common Stock (the “Exchange
Agent”).
 

 
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(b)           La Jolla to Provide Common Stock.  Promptly after the Effective
Time, La Jolla shall supply or cause to be supplied or made available to the
Exchange Agent for exchange in accordance with this Section 1.10, through such
reasonable procedures as La Jolla may adopt, instructions regarding issuance of
certificates evidencing the shares of La Jolla Common Stock issuable pursuant to
Section 1.6(a) in exchange for shares of Adamis Capital Stock outstanding
immediately before the Effective Time (the “Exchange Shares”).
 
(c)           Exchange Procedures.  As promptly as practicable after the
Effective Time, the Exchange Agent will mail to each holder of record of Adamis
Capital Stock whose shares would be converted into the right to receive shares
of La Jolla Common Stock pursuant to Section 1.6(a), (i) a letter of transmittal
in customary form; (ii) such other customary documents as may be required
pursuant to such instructions; and (iii) instructions for use in effecting the
surrender of Adamis Capital Stock in exchange for certificates (or, if La Jolla
elects to have shares be represented in uncertificated form, then notifications
of share ownership) representing shares of La Jolla Common Stock.  Upon
surrender of Adamis Capital Stock for cancellation to the Exchange Agent,
together with such letter of transmittal and other documents, duly completed and
validly executed in accordance with the instructions thereto, the holder of such
Adamis Capital Stock shall be entitled to receive in exchange therefor (x) a
certificate (or, for uncertificated shares, a notification of share ownership)
representing the number of whole Exchange Shares into which the Adamis Common
Stock represented thereby shall have been converted into the right to receive as
of the Effective Time, (y) any dividends or other distributions to which such
holder is entitled pursuant to Section 1.10(d), and (z) cash in respect of any
fractional shares as provided in Section 1.6(f), and the Adamis Capital Stock so
surrendered shall forthwith be canceled.  Until so surrendered, each such
outstanding share of Adamis Capital Stock will be deemed from and after the
Effective Time, for all corporate purposes other than the payment of dividends,
to evidence the ownership of the number of full shares of La Jolla Common Stock
into which such shares of Adamis Capital Stock shall have been so converted and
the right to receive cash in lieu of the issuance of any fractional shares.  If
any Adamis Stock Certificate shall have been lost, stolen or destroyed, La Jolla
may, in its discretion and as a condition precedent to the issuance of any
certificate (or notification of share ownership) representing La Jolla Common
Stock, require the owner of such lost, stolen or destroyed Adamis Stock
Certificate to provide a reasonable affidavit and/or bond as indemnity against
any claim that may be made against the Exchange Agent, La Jolla or the Surviving
Corporation with respect to such Adamis Stock Certificate.
 
(d)           Distributions With Respect to Unexchanged Shares.  No dividends or
other distributions with respect to La Jolla Common Stock with a record date
after the Effective Time will be paid to the holder of any unsurrendered Adamis
Capital Stock with respect to the shares of La Jolla Common Stock represented
thereby until the holder of record of such Adamis Capital Stock shall surrender
such shares of Adamis Capital Stock.  Subject to applicable law, following
surrender of any such Adamis Capital Stock, there shall be delivered to the
record holder of Adamis Capital Stock a certificate representing whole shares of
La Jolla Common Stock issued in exchange therefor (including any cash in respect
of any fractional shares), without interest at the time of such surrender, and
the amount of any such dividends or other distributions with a record date after
the Effective Time theretofore payable (but for the provisions of this Section)
with respect to such shares of La Jolla Common Stock.
 

 
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(e)           Transfers of Ownership.  If any certificate (or notification of
share ownership) for shares of La Jolla Common Stock is to be issued in a name
other than that in which Adamis Stock Certificate surrendered in exchange
therefor is registered, it will be a condition of the issuance thereof that the
Adamis Capital Stock so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will have
paid to La Jolla or any agent designated by it any transfer or other taxes
required by reason of the issuance of a certificate (or notification of share
ownership) for shares of La Jolla Common Stock in any name other than that of
the registered holder of the Adamis Capital Stock surrendered, or established to
the satisfaction of La Jolla or any agent designated by it that such tax has
been paid or is not payable, and shall provide such written assurances regarding
federal and state securities law compliance as La Jolla may reasonably request.
 
(f)           Termination of Exchange Shares.  Any Exchange Shares which remain
undistributed to the stockholders of Adamis twelve (12) months after the
Effective Time shall be delivered to La Jolla, upon demand, and any stockholders
of Adamis who have not previously complied with this Section shall thereafter
look only to La Jolla for payment of their claim for their portion of the
Exchange Shares and any dividends or distributions with respect to the Exchange
Shares.
 
(g)           No Liability.  Notwithstanding anything to the contrary in this
Section, none of the Exchange Agent, La Jolla, Adamis or any party hereto shall
be liable to any person for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
 
(h)           Dissenting Shares.  The provisions of this Section shall also
apply to Dissenting Shares that lose their status as such, except that the
obligations of La Jolla under this Section shall commence on the date of loss of
such status and the holder of such shares shall be entitled to receive in
exchange such shares to which such holder is entitled pursuant to Section 1.6.
 
1.11           Further Action.  If, at any time after the Effective Time, any
further action that is commercially reasonable and lawful is determined by La
Jolla to be necessary or appropriate to carry out the purposes of this Agreement
or to vest La Jolla with full right, title and possession of all shares of
Adamis Capital Stock, the officers and directors of Adamis and La Jolla shall be
fully authorized (in the name of Adamis and/or La Jolla or otherwise) to take
such action.
 
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ADAMIS
 
Adamis represents and warrants to La Jolla that the statements contained in this
Article II are true and correct as set forth herein and as qualified by the
disclosure letter separately delivered to La Jolla concurrently herewith (the
“Adamis Disclosure Letter”).  The disclosures set forth in the Adamis Disclosure
Letter shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article II.  The disclosures in any
section or subsection of the Adamis Disclosure Letter shall qualify other
sections and subsections in this Article II to the extent it is reasonably clear
from a reading of the disclosure that such disclosure is applicable to such
other sections and subsections.
 

 
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2.1           Organization and Good Standing.  Adamis is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with requisite corporate power and authority to
conduct its business as now being conducted and to own or use its properties and
assets.  Adamis is duly qualified to do business as a foreign corporation and is
in good standing under 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, except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect on Adamis.
 
2.2           Subsidiaries.
 
(a)           The Adamis Disclosure Letter sets forth all direct and indirect
Subsidiaries of Adamis.  Adamis owns all of the equity of each
Subsidiary.  Except as set forth on the Adamis Disclosure Letter, Adamis does
not have any Subsidiaries or affiliated companies and does not otherwise own any
shares in the capital of or any interest in, or control, directly or indirectly,
any corporation, partnership, limited liability company, association, joint
venture or other business entity (each an “Entity”).  Except as set forth in
Section 2.2(a) of the Disclosure Letter, Adamis has not agreed and is not
obligated to make any future investment in or capital contribution to any
Entity, and Adamis has not guaranteed and is not responsible or liable for any
obligation of any of the Entities in which it owns or has owned any equity
interest.
 
(b)           Each Subsidiary of Adamis: (i) is a corporation duly organized and
validly existing under the laws of its jurisdiction of incorporation, (ii) has
all requisite corporate power and authority to own, operate or lease the
properties and assets owned, operated or leased by such Subsidiary and to carry
on its business as it has been and is currently conducted by such Subsidiary and
(iii) is duly qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such license and qualification necessary, except, in each of
clauses (i), (ii) and (iii), such failures which, when taken together with all
other such failures, would not have a Material Adverse Effect on Adamis and its
Subsidiaries, when considered together.
 
2.3           Authority.  Adamis has all requisite corporate power and authority
to enter into this Agreement and the other agreements to which it is a party
expressly required to be executed and delivered in connection with the
transactions contemplated hereby (collectively, the “Ancillary Agreements”), to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby.  The execution and delivery of
this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Adamis, subject only to the approval
of this Agreement by the stockholders of Adamis.  The Board of Directors of
Adamis has unanimously approved this Agreement and the Merger.  This Agreement
has been (and the Ancillary Agreements will be at the Closing) duly executed and
delivered by Adamis, and this Agreement constitutes (and the Ancillary
Agreements will constitute at the Closing) the valid and binding obligation of
Adamis enforceable against Adamis in accordance with their terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to creditors' rights generally, and subject
to general principles of equity.
 

 
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2.4           No Conflict.  The execution and delivery by Adamis of this
Agreement and the Ancillary Agreements to which Adamis is a party, does not, and
the consummation of the transactions contemplated hereby and thereby will not
(i) conflict with, or result in any violation of, any provision of the Adamis
Charter (in its current form and as it may be amended immediately before the
Effective Time) or the Adamis Bylaws, (ii) except as would not reasonably be
expected to have a Material Adverse Effect on Adamis, result in any violation of
or default under (with or without notice or lapse of time, or both), or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any benefit under any mortgage, indenture, lease, contract, grant,
funding arrangement, or other agreement or instrument, permit, concession,
franchise or license of Adamis, (iii) subject to obtaining the approval of
Adamis’s stockholders and except as would not reasonably be expected to have a
Material Adverse Effect on Adamis, conflict with, or result in any violation of
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Adamis or any of its properties or assets, or (iv) conflict with,
or result in a violation of any resolution adopted by Adamis’s stockholders,
Adamis’s board of directors or any committee of Adamis’s board of directors.
 
2.5           Consent.  No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with or notice to, any Governmental
Entity or any party to any Material Contract of Adamis is required by or with
respect to Adamis or any of its Subsidiaries in connection with the execution
and delivery of this Agreement by Adamis and any Ancillary Agreement to which
Adamis is a party or the consummation of the transactions contemplated hereby
and thereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities laws, (ii) the filing of the Certificate of Merger with
the Delaware Secretary of State, and (iii) such consents, waivers, approvals,
orders, authorizations, registrations, declarations or filings which, if not
obtained or made, would not have a Material Adverse Effect on Adamis.
 
2.6           Governmental Authorizations.  Adamis has obtained each material
federal, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a Governmental Entity (a) pursuant to which
Adamis currently operates or holds any interest in any of its properties, or (b)
that is required for the operation of Adamis’s business or the holding of any
such interest, and all of such authorizations are in full force and effect,
except for such consents, licenses, permits, grants or other authorizations,
which if not obtained would not have a Material Adverse Effect on Adamis.
 
2.7           Capitalization.
 
(a)           The authorized capital stock of Adamis consists of 175,000,000
shares of Adamis Common Stock, $0.0001 par value, and 10,000,000 shares of
Adamis Preferred Stock, $0.0001 par value, of which there were issued and
outstanding, as of the date of this Agreement, 45,972,303 shares of Adamis
Common Stock and no shares of Adamis Preferred Stock.  All of the outstanding
shares of Adamis Capital Stock (i) have been duly authorized and validly issued,
and are fully paid and non-assessable, (ii) except for rights of first refusal,
exchange, repurchase, forfeiture and/or cancellation rights in favor of Adamis,
are not subject to preemptive rights or rights of first refusal created by
statue, the Adamis Charter, the Adamis Bylaws or any agreement to which Adamis
is a party or by which it is bound and (iii) have been issued in compliance in
all material respects with federal and state securities laws.  There are no
declared or unpaid dividends with respect to any shares of Adamis Capital
Stock.  None of Adamis’s debt could be classified as equity for tax purposes.
 

 
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(b)           Section 2.7 of the Adamis Disclosure Letter sets forth: (i) the
number of outstanding options and warrants to purchase shares of Adamis Common
Stock; (ii) the number of shares reserved for further issuance under the Adamis
2009 Equity Incentive Plan; (iii) with respect to each option and warrant
outstanding as of the date of this Agreement, (A) the name of the holder of such
option or warrant, (B) the total number of shares of Adamis Common Stock that
are subject to such option or warrant and the number of shares of Adamis Common
Stock with respect to which such option or warrant is immediately exercisable,
(C) the date of which such option or warrant was granted and the term of such
option or warrant, (D) the vesting schedule, if any, of such option or warrant,
(E) the exercise price per share of Adamis Common Stock purchasable under such
option or warrant and (F) whether such option or warrant has been designated an
“incentive stock option” as defined in Section 422 of the Code; and (iv) an
accurate and complete description of the terms of each repurchase option which
is held by Adamis and to which any of such shares is subject.
 
(c)           Except as set forth in Section 2.7 of the Adamis Disclosure
Letter, there is no: (i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of Adamis; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of Adamis; (iii)
contract under which Adamis is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities; or (iv) to
Adamis’s Knowledge, condition or circumstance that may give rise to or provide a
basis for the assertion of a claim by any Person to the effect that such Person
is entitled to acquire or receive any shares of capital stock or other
securities of Adamis.
 
2.8           SEC Reports; Financial Statements.
 
(a)           As of their respective filing dates, all annual, quarterly or
current reports, filed by Adamis with the SEC since January 1, 2009 (including
those that Adamis may file subsequent to the date hereof) (such reports, as
amended “Adamis SEC Reports”) (i) were prepared in accordance in all material
respects with the requirements of the Securities Act and the Exchange Act, as
the case may be, and the rules and regulations thereunder, except as may be
reflected in any amendments to such reports that Adamis has filed with the SEC,
(ii) as the same may have been amended, did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading and (iii) were all the
forms, reports and other documents required to be filed under the Exchange
Act.  Since January 1, 2009, Adamis has filed with the SEC all reports that are
required to have been filed.
 
(b)           No Subsidiary of Adamis is or has been required to file any form,
report, registration statement or other document with the SEC.  The consolidated
financial statements (including any related notes thereto) contained in the
Adamis SEC Reports (in the form, as applicable, in any amendments to such Adamis
SEC Reports) (the “Adamis Financial Statements”): (i) complied as to form in all
material respects with the published rules and regulations of the SEC applicable
thereto; (ii) were prepared in

 
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accordance with GAAP applied on a consistent basis throughout the periods
covered, except as may be indicated in the notes to such financial statements
and (in the case of unaudited statements) as permitted by Form 10-Q of the SEC,
and except that unaudited financial statements may not contain footnotes and are
subject to year-end audit adjustments; and (iii) fairly present in all material
respects the consolidated financial position of Adamis and its Subsidiaries as
of the respective dates thereof and the consolidated results of operations and
cash flows of Adamis and its Subsidiaries for the periods covered thereby.  The
unaudited balance sheet of Adamis as of September 30, 2009, that is included in
the Adamis Financial Statements is referred to herein as the “Adamis Current
Balance Sheet.”
 
(c)           Adamis maintains a system of internal accounting controls and
disclosure controls and procedures sufficient, in the judgment of Adamis’s board
of directors, to provide reasonable assurance that (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
 
(d)           Adamis has not, in the twelve (12) months preceding the date
hereof, received notice from the trading market or stock quotation system on
which the Adamis Common Stock is listed or quoted or any other trading market or
stock quotation system on which the Adamis Common Stock was previously listed or
quoted to the effect that Adamis is not in compliance with the listing or
maintenance requirements of such trading market or stock quotation
system.  Adamis is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
 
2.9           Absence of Certain Changes
.  Since the date of the Adamis Current Balance Sheet, except as set forth in
the Adamis Disclosure Letter or as disclosed in the Adamis SEC Reports, there
has not occurred (a) any change, event or condition (whether or not covered by
insurance) that has resulted in, or would reasonably be expected to result in, a
Material Adverse Effect on Adamis; (b) any acquisition, sale or transfer of any
material assets or material properties of Adamis or any creation of any security
interest in such assets or properties; (c) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by Adamis or any revaluation by Adamis of any of its assets; (d) any
declaration, setting aside, or payment of a dividend or other distribution with
respect to the shares of Adamis or any direct or indirect redemption, purchase
or other acquisition by La Jolla of any of its shares of capital stock; (e) any
Material Contract entered into by Adamis, or any material amendment or
termination of, or default under, any Material Contract to which Adamis is a
party or by which it is bound, in each case that would reasonably be expected to
result in a Material Adverse Effect on Adamis; (f) any amendment or change to
Adamis Charter or Adamis Bylaws; (g) any increase in or modification of the
compensation or benefits payable or to become payable by Adamis to any of its
directors or employees; (h) any sale, issuance or authorization by Adamis of (1)
any capital stock or other security, (2) any option or right to acquire any
capital stock or any other security, or (3) any Convertible Securities; any
formation by Adamis of any Subsidiary or any acquisition of any equity interest
or other interest in any other Equity (other than Merger Sub); (i) any other
material event that is not in the Ordinary Course of Business; or (j) any
agreement by Adamis to do any of the things described in the preceding clauses
(a) through (i).
 

 
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2.10           Interested Party Transactions.  Except as set forth in the Adamis
SEC Reports or as set forth in Section 2.10 of the Adamis Disclosure Letter,
Adamis is not indebted to any director, officer or employee of Adamis (except
for amounts due as normal salaries and bonuses and in reimbursement of ordinary
expenses), and no such person is indebted to Adamis.  Except as set forth in the
Adamis SEC Reports or as set forth in Section 2.10 of the Adamis Disclosure
Letter, Adamis is not a party to any transaction of the type that would be
required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by
the SEC.  
 
2.11           Intellectual Property.
 
(a)           Adamis and each of its Subsidiaries owns or possesses the right to
use the Intellectual Property that is owned by or licensed to Adamis and each of
its Subsidiaries (the “Adamis Patent and Proprietary Rights”), except where the
failure to own or possess such rights would not have a Material Adverse Effect
on Adamis or any of its Subsidiaries, considered together.
 
(b)           Neither Adamis nor any of its Subsidiaries has received any notice
of any asserted rights with respect to any of the Adamis Patent and Proprietary
Rights which, if determined unfavorably with respect to the interests of Adamis
or any of its Subsidiaries would have a Material Adverse Effect on Adamis or any
of its Subsidiaries, considered together.
 
(c)           To Adamis’s Knowledge, neither Adamis nor any of its Subsidiaries
has ever infringed (directly, contributorily, by inducement, or otherwise),
misappropriated, or otherwise violated or made unlawful use of any right to
Intellectual Property of any other Person or engaged in unfair competition.  No
infringement, misappropriation, or similar claim or Legal Proceeding is pending
or, to Adamis’s Knowledge, threatened against Adamis, any of its Subsidiaries or
any other Person who is or may be entitled to be indemnified, defended, held
harmless, or reimbursed by Adamis or any of its Subsidiaries with respect to
such claim or Legal Proceeding.  Neither Adamis nor any of its Subsidiaries has
received notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any of Adamis Patent and Proprietary
Rights, which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding), individually or in the aggregate, would result in
a Material Adverse Effect on Adamis or any of its Subsidiaries, considered
together.
 
(d)           To Adamis’s Knowledge, neither Adamis nor any of its Subsidiaries
has engaged in patent or copyright misuse or any fraud or inequitable conduct in
connection with any Adamis Patent and Proprietary Rights, and no trademark or
trade name owned, used, or applied for by Adamis or any of its Subsidiaries
conflicts or interferes with any trademark or trade name owned, used, or applied
for by any other Person.
 
2.12           Taxes.
 
(a)           As used in this Agreement, the terms “Tax” and, collectively,
“Taxes” mean any and all U.S. federal, state, local or foreign taxes,
assessments and other similar governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, stamp transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor Entity.
 

 
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(b)           Adamis and each of its Subsidiaries has prepared and timely filed
all Tax Returns relating to any and all Taxes concerning or attributable to
Adamis and such Tax Returns are true and correct in all material respects and
have been completed in accordance with applicable law.  Adamis has delivered or
made available to La Jolla correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against or
agreed to by Adamis or any of its Subsidiaries filed or received since January
1, 2008 or, if later, since inception.  None of Adamis or any of its
Subsidiaries is delinquent in the payment of any Taxes due and owing by Adamis
and each of its Subsidiaries
 
(c)           Adamis and each of its Subsidiaries has withheld and timely paid
all Taxes required to have been withheld and paid with respect to any amounts
paid or owing to any employee, independent contractor, creditor, stockholder, or
other third party.
 
(d)           There is no Tax deficiency outstanding or assessed or, to Adamis’s
Knowledge, proposed against Adamis that is not reflected as a liability on the
Adamis Current Balance Sheet, nor has Adamis executed any agreements or waivers
extending any statute of limitations on or extending the period for the
assessment or collection of any Tax (other than extensions which have
expired).  No claim has ever been made by an authority in a jurisdiction where
Adamis does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction.  There are no liens for Taxes (other than Taxes not yet due
and payable) upon any of the assets of Adamis.  Neither Adamis nor any of its
Subsidiaries has been a party to any “listed transaction” as defined in Section
6707(C)(2) of the Code and Section 1.6011-4(b)(2) of the Treasury Regulations.
 
(e)           To Adamis’s Knowledge, Adamis has no liabilities for unpaid Taxes
that have not been accrued for or reserved on the Adamis Financial Statements,
whether asserted or unasserted, contingent or otherwise.  Neither Adamis nor any
of its Subsidiaries will incur any liability for Taxes through the Effective
Date other than in the ordinary course of business or pursuant to this
Agreement.
 
(f)           Neither Adamis nor any of its Subsidiaries has received from any
Governmental Entity any (i) written notice indicating an intent to open an audit
or other review, (ii) written request for information related to Tax matters, or
(iii) written notice of deficiency or proposed adjustment of or any amount of
Tax proposed, asserted, or assessed by any Governmental Entity against Adamis.
 
(g)           Adamis is not a party to any tax-sharing agreement or similar
arrangement with any other party, and Adamis has not assumed any obligation to
pay any Tax obligations of, or with respect to any transaction relating to, any
other person or agreed to indemnify any other person with respect to any Tax.
 

 
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(h)           Adamis has not been a member of an affiliated group of
corporations filing a consolidated federal income tax return other than a group
of which Adamis was the parent.
 
(i)           Adamis has not been at any time a United States Real Property
Holding Corporation within the meaning of Section 897(c)(2) of the Code.
 
(j)           Neither Adamis nor any of its Subsidiaries has filed a consent
under section 341(f) of the Code concerning collapsible corporations.  Neither
Adamis nor any of its Subsidiaries is a party to any contract, agreement, plan
or arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Adamis or any of its Subsidiaries
that, individually or collectively, could give rise to the payment of (i) any
“excess parachute payment” within the meaning of Section 280G of the Code (or
any corresponding provisions of state, local or foreign Tax law) and (ii) any
amount that will not be fully deductible as a result of Section 162(m) of the
Code (or any corresponding provisions of state, local or foreign Tax law).  None
of the Adamis common stock is subject to a “substantial risk of forfeiture”
within the meaning of Section 83 of the Code.
 
(k)           Adamis will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion there) ending after the Closing Date as a result of any: (A) change in
method of accounting for taxable period ending on or prior to the Closing Date;
(B) “closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (C) intercompany transactions or any
excess loss account described in Treasury Regulations under section 1502 of the
Code (or any corresponding or similar provisions of state, local or foreign
income Tax law); (D) installment sale or open transaction disposition made on or
prior to the Closing Date; (E) prepaid amount received on or prior to the
Closing Date, or (F) election with respect to the discharge of indebtedness
under Section 108(i) of the Code.
 
(l)           Adamis has not distributed stock of another Person, or has had its
stock distributed by another Person, in a transaction that was purported or
intended to be governed in whole or in part by section 355 or section 361 of the
Code.
 
2.13           Employee Benefit Plans.
 
(a)           The Adamis Disclosure Letter contains a complete and accurate list
(to the extent not already filed as an exhibit with the Adamis SEC Reports) of
each Adamis Employee Agreement and each plan, program, policy, practice,
contract, agreement or other arrangement providing for performance awards,
bonus, incentive, stock option, stock purchase, stock bonus, phantom stock,
stock appreciation right, supplemental retirement, fringe benefits, cafeteria
benefits or other benefits, whether written or unwritten, including without
limitation each "employee benefit plan" within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), which
is sponsored, maintained, contributed to, or required to be contributed to by
Adamis (or any subsidiary) and, with respect to any such plans which are subject
to Code Section 401(a), any trade or business (whether or not incorporated) that
is or at any relevant time was treated as a single employer with Adamis within
the

 
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meaning of Section 414(b), (c), (m) or (o) of the Code, (an “ERISA Affiliate”)
for the benefit of any person who performs services for Adamis (or any
subsidiary) or with respect to which Adamis or any ERISA Affiliate has or may
have any liability (including without limitation contingent liability) or
obligation (collectively, the “Adamis Employee Plans”).  Adamis has furnished or
made available to La Jolla true and complete copies of documents embodying each
of the Adamis Employee Plans and, with respect to each Adamis Employee Plan that
is subject to ERISA reporting requirements, Adamis has provided or made
available copies of the Form 5500 reports filed for the last two plan years.
 
(b)           Compliance.  Each Adamis Employee Plan has been administered in
material compliance with its terms and with the requirements of applicable law;
and Adamis and each ERISA Affiliate have performed all material obligations
required to be performed by them under, and are not in any material respect in
default under or violation of, any of Adamis Employee Plans.  No Adamis Employee
Plan is intended to be qualified under Section 401(a) of the Code.  No
“prohibited transaction,” within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Adamis Employee Plan.  There are no
claims or Legal Proceedings pending, or, to Adamis’s Knowledge, threatened or
reasonably anticipated (other than routine claims for benefits), against any
Adamis Employee Plan or against the assets of any Adamis Employee Plan.  There
are no audits, inquiries or Legal Proceedings pending or, to Adamis’s Knowledge,
threatened by any Governmental Authority with respect to any Adamis Employee
Plan.  For at least the three years preceding the date of this Agreement,
neither Adamis nor any of its Subsidiaries has incurred any penalty or tax with
respect to any Adamis Employee Plan under Section 502(i) of ERISA or Sections
4975 through 4980 of the Code.  Adamis and each of its Subsidiaries have made
all contributions and other payments required by and due under the terms of each
Adamis Employee Plan.
 
(c)           No Title IV or Multiemployer Plan.  No Adamis Employee Plan is a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or a “pension plan”
(as defined in Section 3(2) of ERISA) subject to Title IV of ERISA.
 
(d)           Future Commitments.  No Adamis Employee Plan provides (except at
no cost to Adamis or any of its Subsidiaries), or reflects or represents any
liability of Adamis or any of its Subsidiaries to provide, retiree life
insurance, retiree health benefits or other retiree employee welfare benefits to
any Person for any reason, except as may be required by COBRA or other
applicable Legal Requirements.  Other than commitments made that involve no
future costs to Adamis or any of its Subsidiaries, neither Adamis nor any of its
Subsidiaries has represented, promised or contracted (whether in oral or written
form) to any employee of Adamis or any other Person that such employee or other
Person would be provided with retiree life insurance, retiree health benefit or
other retiree employee welfare benefits, except to the extent required by
applicable Legal Requirements.
 
(e)           Effect of Transaction.  The consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or other service provider of Adamis or any ERISA Affiliate to severance
benefits or any other payment (including without limitation unemployment
compensation, golden parachute, bonus or benefits under any Adamis Employee
Plan), except as expressly provided in this Agreement; or (ii) accelerate the
time of payment or vesting of any such benefits or increase the amount of
compensation due any such employee or service provider.
 

 
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2.14           Employee Matters.  Adamis is in material compliance with all
currently applicable laws and regulations respecting terms and conditions of
employment.  There are no proceedings pending or, to Adamis’s Knowledge,
threatened, between Adamis, on the one hand, and any or all of its current or
former employees, on the other hand, which would reasonably be expected to have
a Material Adverse Effect on Adamis.  Except as may be reflected in the Adamis
SEC Reports, Adamis has provided all employees with all wages, benefits,
relocation benefits, stock options, bonuses and incentives, and all other
compensation that became due and payable through the date of this Agreement.
 
2.15           Insurance.  The Adamis Disclosure Letter sets forth all policies
of insurance maintained by, at the expense of or for the benefit of
Adamis.  There is no material claim pending under any of such policies as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies.  All premiums due and payable under all such policies have been
paid and, to Adamis’s Knowledge, Adamis is otherwise in compliance with the
terms of such policies.  To Adamis’s Knowledge, there is no threatened
termination of, or material premium increase with respect to, any of such
policies.
 
2.16           Compliance with Legal Requirements.  For all periods of time
during which the respective applicable statute of limitations periods have not
expired, except as disclosed in the Adamis SEC Reports or in Section 2.16 of the
Adamis Disclosure Letter, (i) Adamis and each of its Subsidiaries has complied
in all material respects with, is not in material violation of, and has not
received any written or, to Adamis’s Knowledge, other notices of violation with
respect to, any applicable Legal Requirement or regulation with respect to the
conduct of its business, or the ownership or operation of its business; and (ii)
neither Adamis nor any of its Subsidiaries has received any written or, to
Adamis’s Knowledge, other notices or other communication from any Governmental
Entity regarding (A) any actual, alleged, possible, or potential violation of,
or failure to comply with, any applicable Legal Requirement, or (B) any actual,
alleged, possible, or potential obligation on the part of Adamis or any of its
Subsidiaries to undertake, or to bear all or any portion of the cost of, any
remedial action related to compliance or non-compliance with any applicable
Legal Requirement, in each of the above cases which if determined adversely to
Adamis or any of its Subsidiaries would reasonably be expected to have a
Material Adverse Effect on Adamis or its Subsidiaries, considered together.
 
2.17           Environmental Matters.  To Adamis’s Knowledge, Adamis is, and at
all times has been, in compliance in all material respects with all
Environmental Laws and is not subject to any material liability under any
Environmental Law.  Adamis has not received, nor to Adamis’s Knowledge has any
other Person for whose conduct it is or may be held responsible, received, any
order, written notice, or other written communication from (i) any Governmental
Entity or private citizen acting in the public interest, or (ii) the current or
prior owner or operator of any Facilities, asserting or alleging any actual or
potential violation of or failure to comply with any Environmental Law, or any
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities.
 
2.18           Legal Proceedings.  Except as may be disclosed in the Adamis SEC
Reports, there is no pending Legal Proceeding that has been commenced by or
against Adamis.  To Adamis’s Knowledge, no Person has threatened to commence any
Legal Proceeding against Adamis.  Except as may be disclosed in the Adamis SEC
Reports, there is no judgment, decree or order against Adamis, or, to Adamis’s
Knowledge, any of its directors or officers (in their capacities as such), that
could prevent, enjoin, or
 

 
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materially alter or delay any of the transactions contemplated by this
Agreement, or any Ancillary Agreement, or that would reasonably be expected to
have a Material Adverse Effect on Adamis.  To Adamis’s Knowledge, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will, or that would reasonably be expected to, give rise to or serve as a basis
for the commencement of any such Legal Proceeding.
 
2.19           Contracts; No Defaults.
 
(a)           Each Material Contract of Adamis is set forth in Section 2.19(a)
of the Adamis Disclosure Letter or filed as an exhibit to the Adamis SEC
Reports, and is enforceable in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies; and
 
(b)           Adamis has not violated or breached, or committed any default
under, any Material Contract, in each of the above cases where such violation,
breach or default would have a Material Adverse Effect on Adamis. Except as set
forth in the Adamis Disclosure Letter or the Adamis SEC Reports, no event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time) would reasonably be expected to, (i) result in a violation or
breach of any of the provisions of any Material Contract of Adamis, (ii) give
any Person the right to declare a default or exercise any remedy under any
Material Contract of Adamis, (iii) give any Person the right to accelerate the
maturity or performance of any Material Contract of Adamis, or (iv) give any
Person the right to cancel, terminate or modify any Material Contract, in each
of the above cases where such violation, breach or default would have a Material
Adverse Effect on Adamis.  Neither Adamis nor any of its Subsidiaries has
received any notice or other written or, to Adamis’s Knowledge, oral
communication regarding any actual or possible violation or breach of, or
default under, any Material Contract of Adamis.
 
(c)           The Adamis Disclosure Letter sets forth a list of all material
consents or waivers of, or notifications to, any Governmental Entity or any
third party that are required or provided for under any Material Contract of
Adamis or any of its Subsidiaries in connection with the execution and delivery
of this Agreement and the Ancillary Agreements by Adamis and the consummation of
the transactions contemplated hereby and thereby.
 
2.20           Labor Matters.  Adamis is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization.  Adamis is not the subject of any
Legal Proceeding asserting that Adamis has committed an unfair labor practice or
seeking to compel it to bargain with any labor organization as to wages or
conditions of employment.  There is no strike, work stoppage or other labor
dispute involving Adamis pending or, to Adamis’s Knowledge, threatened against
Adamis.
 
2.21           Unlawful Payments.  To Adamis’s Knowledge, none of Adamis, or any
officer, director, employee, agent or representative of Adamis has made,
directly or indirectly, any bribe or kickback, illegal political contribution,
payment from corporate funds which was incorrectly recorded on the books and
records of Adamis, unlawful payment from corporate funds to governmental or
municipal officials in their individual capacities for the purpose of affecting
their action or the actions of the jurisdiction which they represent to obtain
favorable treatment in securing business or licenses or to obtain special
concessions of any kind whatsoever, or illegal payment from corporate funds to
obtain or retain any business.
 

 
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2.22           Financial Advisor.  Except as disclosed in writing to La Jolla
before the date of this Agreement, no broker, finder or investment banker is
entitled to any commission or brokerage or finder’s fee in connection with the
Merger or any of the other transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Adamis.
 
2.23           Title to Assets; No Real Property.
 
(a)           Adamis owns, and has good, valid and marketable title to, all
assets purported to be owned by it, including:  (i)  all assets reflected on its
balance sheet as of the date of the Adamis Current Balance Sheet; (ii)  all
equity interests of its Subsidiaries, all Adamis Patent and Proprietary Rights
and all of Adamis’s rights under the Material Contracts required to be
identified in Section 2.19 of the Adamis Disclosure Letter; and (iii) all other
assets reflected in Adamis’s books and records as being owned by Adamis.  All of
said assets are owned by Adamis free and clear of any liens or other
Encumbrances, except for (x) any lien for current taxes not yet due and payable,
and (y) minor liens that have arisen in the ordinary course of business and that
do not (in any case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of Adamis or any
of its Subsidiaries.
 
(b)           Except as set forth in Section 2.23 of the Adamis Disclosure
Letter, Adamis does not own any real property and Adamis is not party to any
lease for real property either as a lessee or lessor.
 
2.24           Representations Complete.  This Agreement (as limited and
qualified by the Adamis Disclosure Letter) does not contain any representation,
warranty or information that (i) contains an untrue statement of a material
fact, or (ii) omits to state any material fact necessary in order to make the
statements herein (in the light of the circumstances under which such statements
have been made) not misleading.
 
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LA JOLLA AND MERGER SUB
 
La Jolla, and Merger Sub (with respect to the representations, warranties and
covenants of Merger Sub), represent and warrant to Adamis that the statements
contained in this Article III are true and correct as set forth herein and as
qualified by the disclosure letter separately delivered to Adamis concurrently
herewith (the “La Jolla Disclosure Letter”).  The disclosures set forth in the
La Jolla Disclosure Letter shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III.  The disclosures
in any section or subsection of the La Jolla Disclosure Letter shall qualify
other sections and subsections in this Article III to the extent it is
reasonably clear from a reading of the disclosure that such disclosure is
applicable to such other sections and subsections.
 
3.1           Organization and Good Standing.  La Jolla is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with requisite corporate power and authority
to conduct its business as now being conducted and to own or use its properties
and assets.  La Jolla is duly qualified to do business as a foreign corporation
and is in good standing under 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 except
where the failure to be so qualified or in good standing would not have a
Material Adverse Effect on La Jolla.
 

 
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3.2           Subsidiaries.
 
(a)           The La Jolla Disclosure Letter sets forth all direct and indirect
Subsidiaries of La Jolla.  La Jolla owns all of the equity of each
Subsidiary.  Except as set forth on the La Jolla Disclosure Letter, La Jolla
does not have any Subsidiaries or affiliated companies and does not otherwise
own any shares in the capital of or any interest in, or control, directly or
indirectly, any Entity.  Except as set forth in Section 3.2(a) of the Disclosure
Letter, La Jolla has not agreed and is not obligated to make any future
investment in or capital contribution to any Entity, and La Jolla has not
guaranteed and is not responsible or liable for any obligation of any of the
Entities in which it owns or has owned any equity interest.
 
(b)           Each Subsidiary of La Jolla: (i) is a corporation duly organized
and validly existing under the laws of its jurisdiction of incorporation, (ii)
has all requisite corporate power and authority to own, operate or lease the
properties and assets owned, operated or leased by such Subsidiary and to carry
on its business as it has been and is currently conducted by such Subsidiary and
(iii) is duly qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such license and qualification necessary, except, in each of
clauses (i), (ii) and (iii), such failures which, when taken together with all
other such failures, would not have a Material Adverse Effect on La Jolla and
its Subsidiaries, when considered together.
 
3.3           Authority.  Each of La Jolla and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of La Jolla and
Merger Sub, subject only to the approval of this Agreement by the stockholders
of La Jolla and Merger Sub.  The Board of Directors of La Jolla and Merger Sub
have unanimously approved this Agreement and the Merger.  This Agreement has
been (and the Ancillary Agreements will be at the Closing) duly executed and
delivered by La Jolla and Merger Sub, and this Agreement constitutes and the
Ancillary Agreements will constitute at the Closing) the valid and binding
obligations of La Jolla and Merger Sub enforceable against each of La Jolla and
Merger Sub in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to creditors' rights generally, and subject to general
principles of equity.  Merger Sub has been formed solely for the purpose of
executing and delivering this Agreement and consummating the transactions
contemplated hereby.  Since the date of its incorporation, Merger Sub has
neither engaged in nor transacted any business or activity of any nature
whatsoever other than activities related to its corporate organization and the
execution and delivery of this Agreement and the related documents and
instruments.  Merger Sub has no assets or properties or debts, liabilities or
obligations of any kind whatsoever, and with the exception of this Agreement and
the related documents and instruments, is not a party to any contract, agreement
or undertaking of any nature.
 

 
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3.4           No Conflict.  The execution and delivery by La Jolla of this
Agreement and the Ancillary Agreements to which La Jolla is a party, does not,
and the consummation of the transactions contemplated hereby and thereby will
not (i) conflict with, or result in any violation of, any provision of the La
Jolla Charter (in its current form and as it may be amended immediately before
the Effective Time) or the La Jolla Bylaws, (ii) except as would not reasonably
be expected to have a Material Adverse Effect on La Jolla, result in any
violation of or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under any mortgage, indenture, lease,
contract, grant, funding arrangement, or other agreement or instrument, permit,
concession, franchise or license of La Jolla, (iii) subject to obtaining the
approval of La Jolla’s stockholders and except as would not reasonably be
expected to have a Material Adverse Effect on La Jolla, conflict with, or result
in any violation of any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to La Jolla or any of its properties or assets or (iv)
conflict with, or result in a violation of any resolution adopted by La Jolla’s
stockholders, La Jolla’s board of directors or any committee of La Jolla’s board
of directors.
 
3.5           Consents.  No consent, waiver, approval, order or authorization of
or registration, declaration or filing with or notice to, any Governmental
Entity or any party to any Material Contract is required by or with respect to
La Jolla or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by La Jolla and any Ancillary Agreement to which La
Jolla is a party or the consummation by La Jolla of the transactions
contemplated hereby and thereby, except for (i) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable securities laws, (ii) the filing of the
Certificate of Merger with the Delaware Secretary of State and (iii) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations or filings which, if not obtained or made, would not have a
Material Adverse Effect on La Jolla.
 
3.6           Governmental Authorizations.  La Jolla has obtained each material
federal, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a Governmental Entity (a) pursuant to which La
Jolla currently operates or holds any interest in any of its properties, or (b)
that is required for the operation of La Jolla’s business or the holding of any
such interest, and all of such authorizations are in full force and effect,
except for such consents, licenses, permits, grants or other authorizations,
which if not obtained would not have a Material Adverse Effect on La Jolla.
 
3.7           Capitalization.
 
(a)           The authorized capital stock of La Jolla consists of 225,000,000
shares of Common Stock, $.01 par value, and 8,000,000 shares of Preferred Stock,
$.01 par value, of which there were issued and outstanding as of the date of
this Agreement, 65,722,648 shares of Common Stock and no shares of Preferred
Stock.  The shares of La Jolla Common Stock to be issued pursuant to the Merger
will be duly authorized, validly issued, fully paid, and non-assessable, free of
any liens or encumbrances other than any liens or encumbrances created by or
imposed by the holders thereof, and shall be issued in material compliance with
all applicable federal and state securities laws.  All of the outstanding shares
of La Jolla Common Stock (i) have been duly

 
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authorized and validly issued, and are fully paid and non-assessable, (ii)
except for rights of first refusal, exchange, repurchase, forfeiture and/or
cancellation rights in favor of La Jolla, are not subject to preemptive rights
or rights of first refusal created by statue, La Jolla Charter, La Jolla Bylaws
or any agreement to which La Jolla is a party or by which it is bound and (iii)
have been issued in compliance in all material respects with federal and state
securities laws.  There are no declared or unpaid dividends with respect to any
shares of La Jolla Common Stock.  None of La Jolla’s debt could be classified as
equity for tax purposes.
 
(b)           Section 3.7 of the La Jolla Disclosure Letter sets forth: (i) the
number of outstanding options and warrants to purchase shares of La Jolla Common
Stock; (ii) the number of shares reserved for further issuance under the La
Jolla Equity Incentive Plans and the La Jolla Employee Stock Purchase Plan;
(iii) with respect to each option and warrant outstanding as of the date of this
Agreement, (A) the name of the holder of such option or warrant, (B) the total
number of shares of La Jolla Common Stock that are subject to such option or
warrant and the number of shares of La Jolla Common Stock with respect to which
such option or warrant is immediately exercisable, (C) the date of which such
option or warrant was granted and the term of such option or warrant (D) the
vesting schedule, if any, of such option or warrant, (E) the exercise price per
share of La Jolla Common Stock purchasable under such option or warrant and (F)
whether such option or warrant has been designated an “incentive stock option”
as defined in Section 422 of the Code; and (iv) an accurate and complete
description of the terms of each repurchase option which is held by La Jolla and
to which any of such shares is subject.
 
(c)           Except as set forth in Section 3.7 of the La Jolla Disclosure
Letter, there is no: (i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of La Jolla; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of La Jolla;  (iii)
contract under which La Jolla is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities; or (iv) to La
Jolla’s Knowledge, condition or circumstance that may give rise to or provide a
basis for the assertion of a claim by any Person to the effect that such Person
is entitled to acquire or receive any shares of capital stock or other
securities of La Jolla.
 
3.8           SEC Reports; Financial Statements.
 
(a)           As of their respective filing dates, all annual, quarterly or
current reports, filed by La Jolla with the SEC since January 1, 2009 (including
those that La Jolla may file subsequent to the date hereof) (such reports, as
amended the “La Jolla SEC Reports”) (i) were prepared in accordance in all
material respects with the requirements of the Securities Act and the Exchange
Act, as the case may be, and the rules and regulations thereunder, except as may
be reflected in any amendments to such reports that La Jolla has filed with the
SEC, (ii) as the same may have been amended, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading and (iii)
were all the forms, reports and other documents required to be filed under the
Exchange Act.  Since January 1, 2009, La Jolla has filed with the SEC all
reports that are required to have been filed.
 

 
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(b)           No Subsidiary of La Jolla is or has been required to file any
form, report, registration statement or other document with the SEC.  The
consolidated financial statements (including any related notes thereto)
contained in the La Jolla SEC Reports (in the form, as applicable, in any
amendments to such La Jolla SEC Reports) (the “La Jolla Financial Statements”):
(i) complied as to form in all material respects with the published rules and
regulations of the SEC applicable thereto; (ii) were prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered, except as may
be indicated in the notes to such financial statements and (in the case of
unaudited statements) as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes and are subject to
year-end audit adjustments; and (iii) fairly present in all material respects
the consolidated financial position of La Jolla and its Subsidiaries as of the
respective dates thereof and the consolidated results of operations and cash
flows of La Jolla and its Subsidiaries for the periods covered thereby.  The
unaudited balance sheet of La Jolla as of September 30, 2009, that is included
in the La Jolla Financial Statements is referred to herein as the “La Jolla
Current Balance Sheet.”
(c)           La Jolla maintains a system of internal accounting controls and
disclosure controls and procedures sufficient, in the judgment of La Jolla’s
board of directors, to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
 
3.9           Absence of Certain Changes.  Since the date of the La Jolla
Current Balance Sheet, except as set forth in the La Jolla SEC Reports or as set
forth in Section 3.9 of the La Jolla Disclosure Letter, there has not occurred
(a) any change, event or condition (whether or not covered by insurance) that
has resulted in, or would reasonably be expected to result in, a Material
Adverse Effect on La Jolla; (b) any acquisition, sale or transfer of any
material assets or material properties of La Jolla or any creation of any
security interest in such assets or properties; (c) any change in accounting
methods or practices (including any change in depreciation or amortization
policies or rates) by La Jolla or any revaluation by La Jolla of any of its
assets; (d) any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of La Jolla or any direct or indirect
redemption, purchase or other acquisition by La Jolla of any of its shares of
capital stock; (e) any Material Contract entered into by La Jolla, or any
material amendment or termination of, or default under, any Material Contract to
which La Jolla is a party or by which it is bound, in each case that would
reasonably be expected to result in a Material Adverse Effect on La Jolla; (f)
any amendment or change to La Jolla Charter or La Jolla Bylaws; (g) any increase
in or modification of the compensation or benefits payable or to become payable
by La Jolla to any of its directors or employees; (h) any sale, issuance or
authorization by La Jolla of (1) any capital stock or other security, (2) any
option or right to acquire any capital stock or any other security, or (3) any
Convertible Securities; any formation by La Jolla of any Subsidiary or any
acquisition of any equity interest or other interest in any other Equity (other
than Merger Sub); (i) any other material event not in the Ordinary Course of
Business; or (j) any agreement by La Jolla to do any of the things described in
the preceding clauses (a) through (i).
 

 
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3.10           Interested Party Transactions.  Except as set forth in the La
Jolla SEC Reports or as set forth in Section 3.10 of the La Jolla Disclosure
Schedule, La Jolla is not indebted to any director, officer or employee of La
Jolla (except for amounts due as normal salaries and bonuses and in
reimbursement of ordinary expenses), and no such person is indebted to La
Jolla.  Except as set forth in the La Jolla SEC Reports or in Section 3.22 of
the La Jolla Disclosure Letter, La Jolla is not a party to any transaction of a
type that would be required to be disclosed pursuant to Item 404 of Regulation
S-K promulgated by the SEC.
 
3.11           Intellectual Property.
 
(a)           La Jolla and each of its Subsidiaries owns or possesses the right
to use the Intellectual Property that is owned by or licensed to La Jolla (the
“La Jolla Patent and Proprietary Rights”), except where the failure to own or
possess such rights would not have a Material Adverse Effect on La Jolla or any
of its Subsidiaries, considered together.
 
(b)           Neither La Jolla nor any of its Subsidiaries has received any
notice of any asserted rights with respect to any of the La Jolla Patent and
Proprietary Rights which, if determined unfavorably with respect to the
interests of La Jolla or any of its Subsidiaries would have a Material Adverse
Effect on La Jolla or any of its Subsidiaries, considered together.
 
(c)           To La Jolla’s Knowledge, neither La Jolla nor any of its
Subsidiaries has ever infringed (directly, contributorily, by inducement, or
otherwise), misappropriated, or otherwise violated or made unlawful use of any
right to Intellectual Property of any other Person or engaged in unfair
competition.  No infringement, misappropriation, or similar claim or Legal
Proceeding is pending or, to La Jolla’s Knowledge, threatened against La Jolla,
any of its Subsidiaries or any other Person who is or may be entitled to be
indemnified, defended, held harmless, or reimbursed by the Company or any of its
Subsidiaries with respect to such claim or Legal Proceeding.  Neither La Jolla
nor any of its Subsidiaries has received notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to any
of the La Jolla Patent and Proprietary Rights, which infringement or conflict
(if the subject of any unfavorable decision, ruling or finding), individually or
in the aggregate, would result in a Material Adverse Effect on La Jolla or any
of its Subsidiaries, considered together.
 
(d)           To La Jolla’s Knowledge, neither La Jolla nor any of its
Subsidiaries has engaged in patent or copyright misuse or any fraud or
inequitable conduct in connection with any La Jolla Patent and Proprietary
Rights, and no trademark or trade name owned, used, or applied for by La Jolla
or any of its Subsidiaries conflicts or interferes with any trademark or trade
name owned, used, or applied for by any other Person.
 
3.12           Taxes.
 
(a)           La Jolla has prepared and timely filed all Tax Returns relating to
any and all Taxes concerning or attributable to La Jolla and such Tax Returns
are true and correct in all material respects and have been completed in
accordance with applicable law.  La Jolla has delivered or made available to
Adamis correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by La Jolla or any of its Subsidiaries filed or received since January 1,
2008.  None of La Jolla or any of its Subsidiaries is delinquent in the payment
of any Taxes due and owing by La Jolla and its Subsidiaries.
 

 
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(b)           La Jolla and each of its Subsidiaries has withheld and timely paid
all Taxes required to have been withheld and paid with respect to any amounts
paid or owing to any employee, independent contractor, creditor, stockholder, or
other third party.
 
(c)           There is no Tax deficiency outstanding or assessed or, to La
Jolla’s Knowledge, proposed against La Jolla that is not reflected as a
liability on the La Jolla Current Balance Sheet nor has La Jolla executed any
agreements or waivers extending any statute of limitations on or extending the
period for the assessment or collection of any Tax (other than extensions which
have expired).  No claim has ever been made by an authority in a jurisdiction
where La Jolla does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.  There are no liens for Taxes (other than Taxes
not yet due and payable) upon any of the assets of La Jolla.  Neither La Jolla
nor any of its Subsidiaries has been a party to any “listed transaction” as
defined in Section 6707(C)(2) of the Code and Section 1.6011-4(b)(2) of the
Treasury Regulations.
 
(d)           To La Jolla’s Knowledge, La Jolla has no liabilities for unpaid
Taxes that have not been accrued for or reserved on the La Jolla Financial
Statements, whether asserted or unasserted, contingent or otherwise.  Neither La
Jolla nor any of its Subsidiaries will incur any liability for Taxes through the
Effective Time, other than in the ordinary course of business or pursuant to
this Agreement.
 
(e)           Neither La Jolla nor any of its Subsidiaries has received from any
Governmental Entity any (i) written notice indicating an intent to open an audit
or other review, (ii) written request for information related to Tax matters, or
(iii) written notice of deficiency or proposed adjustment of or any amount of
Tax proposed, asserted, or assessed by any Governmental Entity against La Jolla.
 
(f)           La Jolla is not a party to any tax-sharing agreement or similar
arrangement with any other party, and La Jolla has not assumed any obligation to
pay any Tax obligations of, or with respect to any transaction relating to, any
other person or agreed to indemnify any other person with respect to any Tax.
 
(g)           La Jolla has not been a member of an affiliated group of
corporations filing a consolidated federal income tax return other than a group
of which La Jolla was the parent.
 
(h)           La Jolla has not been at any time a United States Real Property
Holding Corporation within the meaning of Section 897(c)(2) of the Code.
 
(i)           Neither La Jolla nor any of its Subsidiaries has filed a consent
under Section 341(f) of the Code concerning collapsible corporations.  Neither
La Jolla nor any of its Subsidiaries is a party to any contract, agreement, plan
or arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of La Jolla or any of its Subsidiaries
that, individually or collectively, could give rise to the payment of (i) any
“excess parachute payment” within the meaning of Section 280G of the Code (or
any corresponding provisions of state, local or foreign Tax law) and (ii) any
amount that will not be fully deductible as a result of Section 162(m) of the
Code (or any corresponding provisions of state, local or foreign Tax law).  None
of the La Jolla common stock is subject to a “substantial risk of forfeiture”
within the meaning of Section 83 of the Code.
 

 
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(j)           La Jolla will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion there) ending after the Closing Date as a result of any: (A) change in
method of accounting for taxable period ending on or prior to the Closing Date;
(B) “closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (C) intercompany transactions or any
excess loss account described in Treasury Regulations under Section 1502 of the
Code (or any corresponding or similar provisions of state, local or foreign
income Tax law); (D) installment sale or open transaction disposition made on or
prior to the Closing Date; (E) prepaid amount received on or prior to the
Closing Date; or (F) election with respect to the discharge of indebtedness
under Section 108(i) of the Code.
 
(k)           La Jolla has not distributed stock of another Person, or has had
its stock distributed by another Person, in a transaction that was purported or
intended to be governed in whole or in part by Section 355 or Section 361 of the
Code.
 
3.13           Employee Benefit Plans.
 
(a)           The La Jolla Disclosure Letter contains a complete and accurate
list (to the extent not already filed as an exhibit with the La Jolla SEC
Reports) of each La Jolla Employee Agreement and each plan, program, policy,
practice, contract, agreement or other arrangement providing for performance
awards, bonus, incentive, stock option, stock purchase, stock bonus, phantom
stock, stock appreciation right, supplemental retirement, fringe benefits,
cafeteria benefits or other benefits, whether written or unwritten, including
without limitation each "employee benefit plan" within the meaning of Section
3(3) of ERISA, which is sponsored, maintained, contributed to, or required to be
contributed to by La Jolla (or any subsidiary) and, with respect to any such
plans which are subject to Code Section 401(a), any trade or business (whether
or not incorporated) that is or at any relevant time was treated as a single
employer with La Jolla within the meaning of Section 414(b), (c), (m) or (o) of
the Code (an “ERISA Affiliate”) for the benefit of any person who performs
services for La Jolla (or any subsidiary) or with respect to which La Jolla or
any ERISA Affiliate has or may have any liability (including without limitation
contingent liability) or obligation (collectively, the “La Jolla Employee
Plans”).  La Jolla has furnished or made available to Adamis true and complete
copies of documents embodying each of the La Jolla Employee Plans and, with
respect to each La Jolla Employee Plan that is subject to ERISA reporting
requirements, La Jolla has provided or made available copies of the Form 5500
reports filed for the last two plan years.
 
(b)           Compliance.  Each La Jolla Employee Plan has been administered in
material compliance with its terms and with the requirements of applicable law;
and La Jolla and each ERISA Affiliate have performed all material obligations
required to be performed by them under, and are not in any material respect in
default under or violation of, any of the La Jolla Employee Plans.  Any La Jolla
Employee Plan that is intended to be qualified under Section 401(a) of the Code
has obtained from the Internal

 
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Revenue Service a favorable determination letter as to its qualified status
under the Code, including all currently effective amendments to the Code.  No
“prohibited transaction,” within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any La Jolla Employee Plan.  There are no
claims or Legal Proceedings pending, or, to La Jolla’s Knowledge, threatened or
reasonably anticipated (other than routine claims for benefits), against any La
Jolla Employee Plan or against the assets of any La Jolla Employee Plan.  There
are no audits, inquiries or Legal Proceedings pending or, to La Jolla’s
Knowledge, threatened by any Governmental Authority with respect to any La Jolla
Employee Plan.  For at least the three years preceding the date of this
Agreement, neither La Jolla nor any of its Subsidiaries has incurred any penalty
or tax with respect to any La Jolla Employee Plan under Section 502(i) of ERISA
or Sections 4975 through 4980 of the Code.  La Jolla and each of its
Subsidiaries have made all contributions and other payments required by and due
under the terms of each La Jolla Employee Plan.
 
(c)           No Title IV or Multiemployer Plan.  No La Jolla Employee Plan is a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or a “pension plan”
(as defined in Section 3(2) of ERISA) subject to Title IV of ERISA.
 
(d)           Future Commitments.  No La Jolla Employee Plan provides (except at
no cost to La Jolla or any of its Subsidiaries), or reflects or represents any
liability of La Jolla or any of its Subsidiaries to provide, retiree life
insurance, retiree health benefits or other retiree employee welfare benefits to
any Person for any reason, except as may be required by COBRA or other
applicable Legal Requirements.  Other than commitments made that involve no
future costs to La Jolla, La Jolla has not represented, promised or contracted
(whether in oral or written form) to any employee of La Jolla or any other
Person that such employee or other Person would be provided with retiree life
insurance, retiree health benefit or other retiree employee welfare benefits,
except to the extent required by applicable Legal Requirements.
 
(e)           Effect of Transaction.  The consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or other service provider of La Jolla or any ERISA Affiliate to
severance benefits or any other payment (including without limitation
unemployment compensation, golden parachute, bonus or benefits under any La
Jolla Employee Plan), except as expressly provided in this Agreement; or (ii)
accelerate the time of payment or vesting of any such benefits or increase the
amount of compensation due any such employee or service provider.
 
3.14           Employee Matters.  La Jolla is in material compliance with all
currently applicable laws and regulations respecting terms and conditions of
employment.  There are no proceedings pending or, to La Jolla’s Knowledge,
threatened, between La Jolla, on the one hand, and any or all of its current or
former employees, on the other hand, which would reasonably be expected to have
a Material Adverse Effect on La Jolla.  Except as may be reflected in the La
Jolla SEC Reports, La Jolla has provided all employees with all wages, benefits,
relocation benefits, stock options, bonuses and incentives, and all other
compensation that became due and payable through the date of this Agreement.
 
3.15           Insurance.  The La Jolla Disclosure Letter sets forth all
policies of insurance maintained by, at the expense of or for the benefit of La
Jolla.  There is no material claim pending under any of such policies as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies.  All premiums due and payable under all such policies have been
paid and, to La Jolla’s Knowledge, La Jolla is otherwise in compliance with the
terms of such policies.  To La Jolla’s Knowledge, there is no threatened
termination of, or material premium increase with respect to, any of such
policies.
 

 
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3.16           Compliance with Legal Requirements.  For all periods of time
during which the respective applicable statute of limitations periods have not
expired, and except as disclosed in the La Jolla SEC Reports or in Section 3.16
of the La Jolla Disclosure Letter, (i) La Jolla and each of its Subsidiaries has
complied in all material respects with, is not in material violation of, and has
not received any written or, to La Jolla’s Knowledge, other notices of violation
with respect to, any applicable Legal Requirement or regulation with respect to
the conduct of its business, or the ownership or operation of its business; and
(ii) neither La Jolla nor any of its Subsidiaries has received any written or,
to La Jolla’s Knowledge, other notices or other communication from any
Governmental Entity regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any applicable Legal Requirement, or
(B) any actual, alleged, possible, or potential obligation on the part of La
Jolla or any of its Subsidiaries to undertake, or to bear all or any portion of
the cost of, any remedial action related to compliance or non-compliance with
any applicable Legal Requirement, in each of the above cases which if determined
adversely to La Jolla or any of its Subsidiaries would reasonably be expected to
have a Material Adverse Effect on La Jolla or its Subsidiaries, considered
together.
 
3.17           Environmental Matters.  To La Jolla’s Knowledge, La Jolla is, and
at all times has been, in compliance in all material respects with all
Environmental Laws and is not subject to any material liability under any
Environmental Law.  La Jolla has not received, nor to La Jolla’s Knowledge has
any other Person for whose conduct it is or may be held responsible, received,
any order, written notice, or other written communication from (i) any
Governmental Entity or private citizen acting in the public interest, or (ii)
the current or prior owner or operator of any Facilities, asserting or alleging
any actual or potential violation of or failure to comply with any Environmental
Law, or any obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities.
 
3.18           Legal Proceedings.  Except as may be disclosed in the La Jolla
SEC Reports, there is no pending Legal Proceeding that has been commenced by or
against La Jolla.  To La Jolla’s Knowledge, no Person has threatened to commence
any Legal Proceeding against La Jolla.  Except as may be disclosed in the
La  Jolla SEC Reports, there is no judgment, decree or order against La Jolla
or, to La Jolla’s Knowledge, any of its directors or officers (in their
capacities as such), that could prevent, enjoin, or materially alter or delay
any of the transactions contemplated by this Agreement, or any Ancillary
Agreement, or that would reasonably be expected to have a Material Adverse
Effect on La Jolla.  To La Jolla’s Knowledge, no event has occurred, and no
claim, dispute or other condition or circumstance exists, that will, or that
would reasonably be expected to, give rise to or serve as a basis for the
commencement of any such Legal Proceeding.
 
3.19           Contracts; No Defaults.
 
(a)           Each Material Contract of La Jolla is set forth in Section 3.19(a)
of the Disclosure Letter or filed as an exhibit to the La Jolla SEC Reports and
is enforceable in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies; and
 

 
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(b)           La Jolla has not violated or breached, or committed any default
under, any Material Contract, in each of the above cases where such violation,
breach or default would have a Material Adverse Effect on La Jolla.  Except as
set forth in the La Jolla Disclosure Letter or the La Jolla SEC Reports, no
event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) would reasonably be expected to, (i) result in
a violation or breach of any of the provisions of any Material Contract of La
Jolla, (ii) give any Person the right to declare a default or exercise any
remedy under any Material Contract of La Jolla, (iii) give any Person the right
to accelerate the maturity or performance of any Material Contract of La Jolla,
or (iv) give any Person the right to cancel, terminate or modify any Material
Contract, in each of the above cases where such violation, breach or default
would have a Material Adverse Effect on La Jolla.  Neither La Jolla nor any of
its Subsidiaries has received any notice or other written or, to La Jolla’s
Knowledge, oral communication regarding any actual or possible violation or
breach of, or default under, any Material Contract of La Jolla.
 
(c)           The La Jolla Disclosure Letter sets forth a list of all material
consents or waivers of, or notifications to, any Governmental Entity or any
third party that are required or provided for under any Material Contract of La
Jolla or any of its Subsidiaries in connection with the execution and delivery
of this Agreement and the Ancillary Agreements by La Jolla and the consummation
of the transactions contemplated hereby and thereby.
 
3.20           Labor Matters.  La Jolla is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization.  La Jolla is not the subject of any
Legal Proceeding asserting that La Jolla has committed an unfair labor practice
or seeking to compel it to bargain with any labor organization as to wages or
conditions of employment.  There is no strike, work stoppage or other labor
dispute involving La Jolla pending or, to La Jolla’s Knowledge, threatened
against La Jolla.
 
3.21           Unlawful Payments.  To La Jolla’s Knowledge, none of La Jolla, or
any officer, director, employee, agent or representative of La Jolla has made,
directly or indirectly, any bribe or kickback, illegal political contribution,
payment from corporate funds which was incorrectly recorded on the books and
records of La Jolla, unlawful payment from corporate funds to governmental or
municipal officials in their individual capacities for the purpose of affecting
their action or the actions of the jurisdiction which they represent to obtain
favorable treatment in securing business or licenses or to obtain special
concessions of any kind whatsoever, or illegal payment from corporate funds to
obtain or retain any business.
 
3.22           Financial Advisor.  Except as disclosed in writing to Adamis
before the date of this Agreement, no broker, finder or investment banker is
entitled to any commission or brokerage or finder’s fee in connection with the
Merger or any of the other transactions contemplated by this Agreement based
upon arrangements made by or on behalf of La Jolla.
 
3.23           Title to Assets; No Real Property.
 
(a)           La Jolla owns, and has good, valid and marketable title to, all
assets purported to be owned by it, including:  (i)  all assets reflected on its
balance sheet as of the date of the La Jolla Current Balance Sheet;  (ii)  all
equity interests of its
 

 
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Subsidiaries, all La Jolla Patent and Proprietary Rights and all of La Jolla’s
rights under the Material Contracts required to be identified in Section 3.19 of
the La Jolla Disclosure Letter; and (iii) all other assets reflected in La
Jolla’s books and records as being owned by La Jolla.  All of said assets are
owned by La Jolla free and clear of any liens or other Encumbrances, except for
(x) any lien for current taxes not yet due and payable, and (y) minor liens that
have arisen in the ordinary course of business and that do not (in any case or
in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of La Jolla or any of its
Subsidiaries.
 
(b)           La Jolla does not own any real property and La Jolla is not party
to any lease for real property either as a lessee or lessor.
 
3.24           Representations Complete.  This Agreement (as limited and
qualified by the La Jolla Disclosure Letter) does not contain any
representation, warranty or information that (i) contains an untrue statement of
a material fact, or (ii) omits to state any material fact necessary in order to
make the statements herein (in the light of the circumstances under which such
statements have been made) not misleading.
 
ARTICLE IV
CONDUCT BEFORE THE EFFECTIVE TIME
 
4.1           Access and Investigation.  Subject to the terms of the
Confidentiality Agreement which the Parties agree will continue in full force
following the date of this Agreement, during the period commencing on the date
of this Agreement and ending at the Effective Time, unless this Agreement is
earlier terminated pursuant to the terms hereof (the “Pre-Closing Period”), upon
reasonable notice each Party shall, and shall use commercially reasonable
efforts to cause such Party’s Representatives to: (a) provide the other Party
and such other Party’s Representatives with reasonable access during normal
business hours to such Party’s Representatives, personnel and assets and to all
existing books, records, Tax Returns, work papers and other documents and
information relating to such Party and its Subsidiaries; (b) provide the other
Party and such other Party’s Representatives with such copies of the existing
books, records, Tax Returns, work papers, product data, and other documents and
information relating to such Party and its Subsidiaries, and with such
additional financial, operating and other data and information regarding such
Party and its Subsidiaries as the other Party may reasonably request; and (c)
permit the other Party’s officers and other employees to meet, upon reasonable
notice and during normal business hours, with the chief financial officer and
other officers and managers of such Party responsible for such Party’s financial
statements and the internal controls of such Party to discuss such matters as
the other Party may deem necessary or appropriate. Notwithstanding the
foregoing, any Party may restrict the foregoing access to the extent that any
Legal Requirement applicable to such party requires such Party or its
Subsidiaries to restrict or prohibit access to any such properties or
information or if such restriction is needed to protect attorney-client
privilege.  No information or knowledge obtained in any investigation pursuant
to Section 4.1 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Merger.
 
4.2           Operation of La Jolla’s Business.
 

 
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(a)           Except as contemplated by this Agreement or with the prior written
consent of Adamis, during the Pre-Closing Period, each of La Jolla and its
Subsidiaries shall: (i) use commercially reasonable efforts to conduct its
business and operations in the Ordinary Course of Business and in compliance
with all applicable Legal Requirements and the requirements of all Contracts
that constitute Material Contracts of La Jolla; (ii) use its commercially
reasonable efforts to preserve intact its current business organization, use
commercially reasonable efforts to keep available the services of its current
key employees, officers and other employees and maintain its relations and
goodwill with all suppliers, customers, landlords, creditors, licensors,
licensees, employees and other Persons having business relationships with La
Jolla or its Subsidiaries; (iii) not amend or permit the adoption of any
amendment to its certificate of incorporation or bylaws, or effect or permit
itself to become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction; (iv) use its commercially reasonable efforts to keep in full force
all insurance policies identified in the La Jolla Disclosure Letter; (v) not
form any Subsidiary or acquire any equity interest or other interest in any
other Entity; (vi) not (A) lend money to any Person, or (B) incur or guarantee
any indebtedness for borrowed money; (vii) not (A) make or change any election,
change an annual accounting period, adopt or change any accounting method, file
any amended Tax Return, (B) enter into any closing agreement, settle any Tax
claim or assessment relating to La Jolla or any of its Subsidiaries, (C)
surrender any right to claim a refund of Taxes, (D) consent to any extension or
waiver of the limitation period applicable to any Tax claim or assessment
relating to La Jolla or any of its Subsidiaries, or (E) take any other similar
action relating to the filing of any Tax Return or the payment of any Tax, if
such election, adoption, change, amendment, agreement, settlement, surrender,
consent or other action would have the effect of materially increasing the Tax
liability of La Jolla or any of its Subsidiaries or materially decreasing any
Tax attribute of La Jolla or any of its Subsidiaries as of the Effective Date;
or (viii) not agree or commit to take any of the actions described in clauses
(iii) through (vii) above.
 
(b)           La Jolla shall promptly notify Adamis of: (A) any notice or other
communication from any Person alleging that the Consent of such Person is or may
be required in connection with any of the Contemplated Transactions; and (B) any
event that would reasonably be expected to have a Material Adverse Effect on La
Jolla.
 
4.3           Operation of Adamis’s Business.
 
(a)           Except as contemplated by this Agreement or with the prior written
consent of La Jolla, during the Pre-Closing Period, each of Adamis and its
Subsidiaries shall: (i) use commercially reasonable efforts to conduct its
business and operations in the Ordinary Course of Business and in compliance
with all applicable Legal Requirements and the requirements of all Contracts
that constitute Material Contracts of Adamis; (ii) use its commercially
reasonable efforts to preserve intact its current business organization, use
commercially reasonable efforts to keep available the services of its current
key employees, officers and other employees and maintain its relations and
goodwill with all suppliers, customers, landlords, creditors, licensors,
licensees, employees and other Persons having business relationships with Adamis
or its Subsidiaries; (iii) not amend or permit the adoption of any amendment to
its certificate of incorporation or bylaws, or effect or permit itself to become
a party to any Acquisition Transaction, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction; (iv) use its
commercially reasonable efforts to keep in full force all insurance policies
identified in the Adamis Disclosure Letter; (v) not form any Subsidiary
 

 
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or acquire any equity interest or other interest in any other Entity; (vi) not
(A) lend money to any Person, or (B) incur or guarantee any indebtedness for
borrowed money; (vii) not (A) make or change any election, change an annual
accounting period, adopt or change any accounting method, (B) file any amended
Tax Return, enter into any closing agreement, settle any Tax claim or assessment
relating to Adamis or any of its Subsidiaries, (C) surrender any right to claim
a refund of Taxes, (D) consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment relating to Adamis or any of
its Subsidiaries, or (E) take any other similar action relating to the filing of
any Tax Return or the payment of any Tax, if such election, adoption, change,
amendment, agreement, settlement, surrender, consent or other action would have
the effect of materially increasing the Tax liability of Adamis or any of its
Subsidiaries or materially decreasing any Tax attribute of Adamis or any of its
Subsidiaries as of the Effective Date; or (viii) not agree or commit to take any
of the actions described in clauses (iii) through (vii) above.  Notwithstanding
the foregoing, Adamis shall be permitted during the Pre-Closing Period to
negotiate, enter into and consummate the following types of transactions: (X)
any debt financing transaction for up to $2,000,000 of aggregate principal, (Y)
any equity financing transaction involving the issuance of up to 20% of the
Adamis Common Stock outstanding as of the date of this Agreement, and (Z) the
acquisition of one or more businesses, interests in businesses, technologies,
intellectual property or products or issuing equity or debt instruments in
connection therewith, provided that the aggregate consideration paid or
potentially payable in connection with all such transactions shall not either
exceed $1,000,000 or result in the issuance or potential issuance of more than
20% of the Adamis Common Stock outstanding as of the date of this Agreement.
 
(b)           Adamis shall promptly notify La Jolla of: (A) any notice or other
communication from any Person alleging that the Consent of such Person is or may
be required in connection with any of the Contemplated Transactions; and (B) any
event that would reasonably be expected to have a Material Adverse Effect on La
Jolla.
 
4.4           Disclosure Schedule Updates.  During the Pre-Closing Period,
Adamis on the one hand, and La Jolla on the other, shall promptly notify the
other Party in writing, by delivery of an updated Adamis Disclosure Letter or La
Jolla Disclosure Letter, as the case may be, of: (i) the discovery by such Party
of any event, condition, fact or circumstance that occurred or existed on or
before the date of this Agreement and that caused or constitutes a material
inaccuracy in any representation or warranty made by such Party in this
Agreement; (ii) any event, condition, fact or circumstance that occurs, arises
or exists after the date of this Agreement and that would cause or constitute a
material inaccuracy in any representation or warranty made by such Party in this
Agreement if: (A) such representation or warranty had been made as of the time
of the occurrence, existence or discovery of such event, condition, fact or
circumstance; or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or before the date of this Agreement; (iii) any material
breach of any covenant or obligation of such Party; and (iv) any event,
condition, fact or circumstance that could reasonably be expected to make the
timely satisfaction of any of the conditions set forth in Articles VI, VII or
VIII. No notification given pursuant to this Section shall change, limit or
otherwise affect any of the representations, warranties, covenants or
obligations of the notifying Party contained in this Agreement or its Disclosure
Schedule for purposes of Section 7.1 or 7.2, in the case of Adamis, or Section
8.1 or 8.2 in the case of La Jolla.
 
4.5           No Solicitation.
 

 
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(a)           Except as set forth below, each Party agrees that neither it nor
any of its Subsidiaries shall, nor shall it nor any of its Subsidiaries
authorize or permit any of their Representatives to directly or indirectly:
(i)           solicit, initiate, knowingly encourage, induce or facilitate the
communication, making, submission or announcement of any Acquisition Proposal or
Acquisition Inquiry or take any action that could reasonably be expected to lead
to an Acquisition Proposal or Acquisition Inquiry;
 
(ii)           furnish any information regarding such Party to any Person in
connection with or in response to an Acquisition Proposal or Acquisition
Inquiry;
 
(iii)           engage in discussions or negotiations with any Person with
respect to any Acquisition Proposal or Acquisition Inquiry;
 
(iv)           approve, endorse or recommend any Acquisition Proposal or, with
respect to La Jolla, effect any Change in the La Jolla Board Recommendation or,
with respect to Adamis, effect any Change in the Adamis Board Recommendation; or
 
(v)           execute or enter into any letter of intent or similar document or
any Contract contemplating or otherwise relating to any Acquisition Proposal or
enter into any agreement in principle requiring such Party to abandon, terminate
or fail to consummate the Merger or breach its obligations hereunder or propose
or agree to do any of the foregoing.
 
(b)           Exceptions to Adamis No Solicitation.
 
(i)           Notwithstanding anything contained in this Section, before
obtaining the Required Adamis Stockholder Vote, Adamis may furnish nonpublic
information regarding Adamis to, and enter into discussions or negotiations
with, any Person in response to an unsolicited, bona fide written Acquisition
Proposal made or received after the date of this Agreement, which Adamis’s Board
of Directors determines in good faith constitutes, or is reasonably likely to
result in, a Superior Proposal (and is not withdrawn) if: (A) neither Adamis nor
any Representative of Adamis shall have failed to comply with this Section; (B)
the Board of Directors of Adamis concludes in good faith, after consultation
with outside counsel, that the failure to take such action would result in a
breach of the fiduciary duties of the Board of Directors of Adamis under
applicable law; (C) within 24 hours following the furnishing of any such
nonpublic information to, or entering into discussions with, such Person, Adamis
gives La Jolla written notice of the identity of such Person and of Adamis’s
intention to furnish nonpublic information to, or enter into discussions with,
such Person or has furnished, or entered into discussions with, such Person; (D)
Adamis receives from such Person an executed confidentiality agreement
containing provisions (including nondisclosure provisions, use restrictions,
non-solicitation provisions, no hire provisions and “standstill” provisions) at
least as favorable to Adamis as those contained in the Confidentiality
Agreement; and (E) within 24 hours following the furnishing of any such
nonpublic information to such Person, Adamis furnishes such nonpublic
information to La Jolla (to the extent such nonpublic information has not been
previously furnished by Adamis to La Jolla). Without limiting the generality of
the foregoing, Adamis acknowledges and agrees that in the event any
Representative of Adamis takes any action that, if taken by Adamis, would
constitute a failure to comply with this Section by Adamis, the taking of such
action by such Representative shall be deemed to constitute a failure to comply
with this Section by Adamis for purposes of this Agreement.
 

 
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(ii)           Notwithstanding anything to the contrary set forth in this
Agreement, if at any time before obtaining the Required Adamis Stockholder Vote,
Adamis receives an unsolicited bona fide written Acquisition Proposal that did
not relate to a breach of this Section and which the Board of Directors of
Adamis determines in good faith constitutes a Superior Proposal, and each of
Adamis, its Subsidiaries and their Representatives have otherwise complied with
its obligations under this Section 4.5, the Board of Directors of Adamis may, on
three (3) Business Days’ prior written notice (a “Notice of Superior Proposal”)
to La Jolla (which notice shall include the forms of agreements pursuant to
which the Superior Proposal would be implemented or, if no such agreements have
been proposed, a written summary of the material terms and conditions of such
Superior Proposal) (it being understood that Adamis must deliver a new Notice of
Superior Proposal and thereafter negotiate as provided herein in the event of
any modification to an Acquisition Proposal if such modification results in the
determination that such Acquisition Proposal is a Superior Proposal), take any
action otherwise prohibited by Section 4.5(a)(i), (a)(ii), (a)(iii), (a)(iv) or
(a)(v) and cause Adamis to terminate this Agreement pursuant to Section 9.1(g)
if (i) the Board of Directors of Adamis, after consultation with outside
counsel, shall have first determined in good faith that there is a reasonable
risk that the failure to take such action would result in a breach of its
fiduciary duties under the DGCL, and (ii) Adamis shall have notified La Jolla of
such determination and offered to discuss in good faith with La Jolla (and, if
La Jolla accepts, thereafter negotiates in good faith), for a period of no less
than three (3) Business Days, any adjustments in the terms and conditions of
this Agreement proposed by La Jolla, and the Board of Directors of Adamis shall
have resolved, after taking into account the results of such discussions and
proposals by La Jolla, if any, that the Acquisition Proposal remains a Superior
Proposal.
 
(c)           Exceptions to La Jolla No Solicitation.
 
(i)           Notwithstanding anything contained in this Section, before
obtaining the Required La Jolla Stockholder Vote, La Jolla may furnish nonpublic
information regarding La Jolla to, and enter into discussions or negotiations
with, any Person in response to an unsolicited, bona fide written Acquisition
Proposal made or received after the date of this Agreement, which La Jolla’s
Board of Directors determines in good faith constitutes, or is reasonably likely
to result in, a Superior Proposal (and is not withdrawn) if: (A) neither La
Jolla nor any Representative of La Jolla shall have failed to comply with this
Section; (B) the Board of Directors of La Jolla concludes in good faith, after
consultation with outside counsel, that the failure to take such action would
result in a breach of the fiduciary duties of the Board of Directors of La Jolla
under applicable law; (C) within 24 hours following the furnishing of any such
nonpublic information to, or entering into discussions with, such Person, La
Jolla gives Adamis written notice of the identity of such Person and of La
Jolla’s intention to furnish nonpublic information to, or enter into discussions
with, such Person or has furnished, or entered into discussions with, such
Person; (D) La Jolla receives from such Person an executed confidentiality
agreement containing provisions (including nondisclosure provisions, use
restrictions, non-solicitation provisions, no hire provisions and “standstill”
provisions) at least as favorable to La Jolla as those contained in the
Confidentiality Agreement; and (E) within 24 hours following the furnishing of
any such nonpublic information to such Person, La Jolla furnishes such nonpublic
information to Adamis (to the extent such nonpublic information has
 

 
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not been previously furnished by La Jolla to Adamis). Without limiting the
generality of the foregoing, La Jolla acknowledges and agrees that in the event
any Representative of La Jolla takes any action that, if taken by La Jolla,
would constitute a failure to comply with this Section by La Jolla, the taking
of such action by such Representative shall be deemed to constitute a failure to
comply with this Section by La Jolla for purposes of this Agreement.
 
(ii)           Notwithstanding anything to the contrary set forth in this
Agreement, if at any time before obtaining the Required La Jolla Stockholder
Vote, La Jolla receives an unsolicited bona fide written Acquisition Proposal
that did not relate to a breach of this Section and which the Board of Directors
of La Jolla determines in good faith constitutes a Superior Proposal, and each
of La Jolla, its Subsidiaries and their respective Representatives have
otherwise complied with its obligations under this Section 4.5, the Board of
Directors of La Jolla may on three (3) Business Days’ prior written Notice of
Superior Proposal to Adamis (which notice shall include the forms of agreements
pursuant to which the Superior Proposal would be implemented or, if no such
agreements have been proposed, a written summary of the material terms and
conditions of such Superior Proposal) (it being understood that La Jolla must
deliver a new Notice of Superior Proposal and thereafter negotiate as provided
herein in the event of any modification to an Acquisition Proposal if such
modification results in the determination that such Acquisition Proposal is a
Superior Proposal), take any action otherwise prohibited by Section 4.5(a)(i),
(a)(ii), (a)(iii), (a)(iv) or (a)(v) and cause La Jolla to terminate this
Agreement pursuant to Section 9.1(h) if (i) the Board of Directors of La Jolla
shall have first determined in good faith, after consultation with outside
counsel, that there is a reasonable risk that the failure to take such action
would result in a breach of its fiduciary duties under the DGCL, and (ii) La
Jolla shall have notified Adamis of such determination and offered to discuss in
good faith with Adamis (and, if Adamis accepts, thereafter negotiates in good
faith), for a period of no less than three (3) Business Days, any adjustments in
the terms and conditions of this Agreement proposed by Adamis, and the Board of
Directors of La Jolla shall have resolved, after taking into account the results
of such discussions and proposals by Adamis, if any, that the Acquisition
Proposal remains a Superior Proposal.
 
(d)           If any Party or any Representative of such Party receives an
Acquisition Proposal or Acquisition Inquiry at any time during the Pre-Closing
Period, then such Party shall promptly (and in no event later than 24 hours
after such Party becomes aware of such Acquisition Proposal or Acquisition
Inquiry) advise the other Party orally and in writing of such Acquisition
Proposal or Acquisition Inquiry (including the identity of the Person making or
submitting such Acquisition Proposal or Acquisition Inquiry, and the terms
thereof).  Such Party shall keep the other Party fully informed with respect to
the status and terms of any such Acquisition Proposal or Acquisition Inquiry and
any modification or proposed modification thereto and related agreements, draft
agreements and modifications thereof.
 
(e)           Each Party shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition Proposal or
Acquisition Inquiry as of the date of this Agreement, and shall instruct its
Representatives accordingly.  Each Party shall not terminate, release or permit
the release of any Person from, or waive or permit the waiver of any provision
of or right under, any confidentiality, non-solicitation, no hire, “standstill”
or similar agreement (whether entered into before or after the date of this
Agreement) to which such Party is a party or under which such Party has any
rights, and shall enforce or cause to be enforced each such agreement to the
fullest extent possible.
 

 
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(f)           Nothing contained in this Section, Section 5.2 (with respect to
Adamis) or Section 5.3 (with respect to La Jolla) shall prohibit either of
Adamis or La Jolla from taking and disclosing to its stockholders a position
with respect to a tender offer contemplated by Rule 14d-9 or Rule 14e-2
promulgated under the Exchange Act or from making any disclosure to its
respective stockholders if, in the good faith judgment of the Board of Directors
of Adamis or La Jolla (as the case may be), after consultation with outside
counsel, that the failure to so disclose would result in a breach of its
fiduciary duties under the DGCL; provided that disclosure to stockholders
pursuant to Rule 14e-2 relating to an Acquisition Proposal or Acquisition
Inquiry shall be deemed to be a Change in Adamis Board Recommendation or Change
in the La Jolla Board Recommendation (as the case may be) unless the Board of
Directors of Adamis or La Jolla (as the case may be) expressly, and without
qualification, concurrently with such disclosure reaffirms the Adamis Board
Recommendation or La Jolla Board Recommendation (as the case may be).
ARTICLE V
ADDITIONAL AGREEMENTS
 
5.1           Proxy Statement; Registration Statement.
 
(a)           As promptly as practicable after the execution of this Agreement,
La Jolla and Adamis shall jointly prepare, and La Jolla shall file, a joint
registration statement and proxy statement on Form S-4 consisting of a proxy
statement of Adamis in connection with the Merger, a proxy statement of La Jolla
in connection with the Proposals (the “Proxy Statement”) and the Registration
Statement to register under the Securities Act the issuance of shares of La
Jolla Common Stock in connection with the Merger.  The Proxy Statement shall,
among other things, include the La Jolla Board Recommendation and (i) solicit
the approval of and include the recommendation of the Board of Directors of La
Jolla to La Jolla’s stockholders that they vote in favor of the Merger, (ii)
solicit the approval of and include the recommendation of the Board of Directors
of La Jolla to La Jolla’s stockholders that they vote in favor of the La Jolla
Charter Amendment; and (iii) solicit the approval of and include the
recommendation of the Board of Directors of La Jolla to La Jolla’s stockholders
that they vote in favor of the La Jolla Name Change Amendment; and (iv) solicit
the approval of and include the recommendation of the Board of Directors of La
Jolla to La Jolla’s stockholders that they vote in favor of the Plan
Amendment.  Adamis shall promptly furnish to La Jolla all information concerning
Adamis and its Subsidiaries, and shall use its commercially reasonable efforts
to cause to be finished all information with respect to its stockholders, that
is required to be disclosed in the Registration Statement and the Proxy
Statement.  All information in the Registration Statement and Proxy Statement
concerning Adamis shall be subject to the prior review and approval of Adamis.
 
(b)           La Jolla and Adamis shall use reasonable efforts to cause the
Proxy Statement and La Jolla shall use reasonable efforts to cause the
Registration Statement to comply with the applicable rules and regulations
promulgated by the SEC, and shall respond promptly to any comments of the SEC or
its staff and shall use reasonable best efforts to resolve any comments of SEC
on the Proxy Statement or the Registration Statement as promptly as reasonably
practicable.  La Jolla and Adamis shall each use commercially reasonable efforts
to cause the definitive Proxy Statement and Registration Statement to be mailed
to their stockholders as promptly as practicable after review by the SEC has
been completed.  La Jolla shall notify Adamis promptly upon the receipt of

 
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any comments from the SEC or its staff or any other government officials and of
any request by the SEC or its staff or any other government officials for
amendments or supplements to the Proxy Statement or Registration Statement and
shall supply Adamis with copies of all correspondence between La Jolla or any of
its representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Proxy Statement and
the Registration Statement.  Both Parties and their respective counsel shall be
given a reasonable opportunity to review and comment upon the Proxy Statement
and Registration Statement and related materials, any proposed amendment or
supplement to the Proxy Statement or Registration Statement and any response to
any comments from the SEC or other correspondence before its filing with the SEC
or dissemination to La Jolla’s stockholders or Adamis’s stockholders, and such
materials shall be mutually satisfactory before filing or
dissemination.  Whenever any event occurs which is required to be set forth in
an amendment or supplement to the Proxy Statement or Registration Statement,
Adamis or La Jolla, as the case may be, shall promptly inform the other of such
occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of La Jolla or Adamis, such
amendment or supplement as promptly as possible.  Without limiting the
foregoing, each of the parties shall promptly provide the other party with
corrections to any information provided by it for use in the Proxy Statement and
Registration Statement, if and to the extent any such information shall be or
have become false or misleading in any material respect, and La Jolla shall take
all reasonable steps necessary to correct the same and to cause the Proxy
Statement and Registration Statement as so corrected to be disseminated to La
Jolla’s stockholders and Adamis’s stockholders, in each case to the extent
required by applicable law or otherwise deemed appropriate by the parties.
 
(c)           Before the Effective Time, La Jolla shall use reasonable best
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after filing, and commercially
reasonable efforts to obtain all regulatory approvals needed to ensure that the
La Jolla Common Stock to be issued in the Merger will (to the extent required)
be registered or qualified or exempt from registration or qualification under
the securities law of every state of the United States (or such fewer states as
the Parties may mutually agree).
 
5.2           Adamis Stockholder Meeting; Change in the Adamis Board
Recommendation.
 
(a)           Adamis shall take all action necessary under all applicable Legal
Requirements to call, give notice of and hold a meeting of the holders of Adamis
Capital Stock to vote on the approval of the Merger, adoption of this Agreement,
and related matters (the “Adamis Stockholder Meeting”).  The Adamis Stockholder
Meeting shall be held as promptly as reasonably practicable after the
effectiveness of the Registration Statement.  Adamis shall ensure that all
proxies and consents solicited in connection with the Adamis Stockholder Meeting
are solicited in compliance with all applicable Legal Requirements.
 
(b)           Adamis agrees that, subject to Sections 4.5 and 5.2(d): (i) the
Board of Directors of Adamis shall recommend that the holders of Adamis Capital
Stock vote to approve the Merger and adopt this Agreement and the other matters
contemplated by this Agreement, and shall use commercially reasonable efforts to
solicit such approval (the recommendation of the board of directors of Adamis
that the stockholders of Adamis vote to adopt this Agreement and such other
matters contemplated

 
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by this Agreement being referred to as the “Adamis Board Recommendation”); (ii)
the Proxy Statement shall include a statement to the effect that the Board of
Directors of Adamis recommends that the stockholders of Adamis vote to approve
such proposals; and (iii) the Board of Directors of Adamis shall not make or
effect any change, withdrawal, qualification or modification of the Adamis Board
Recommendation.
 
(c)           Subject to Section 4.5, Adamis shall take all action that is both
reasonable and lawful to solicit the approval of its stockholders of the
proposals submitted to the Adamis stockholders for approval and shall take all
other action reasonably necessary or advisable to secure the vote or consent of
the stockholders of Adamis required by the DGCL to obtain such approvals.  If,
on the date of the Adamis Stockholder Meeting or any subsequent adjournment
thereof pursuant to this Section, Adamis has not received proxies representing a
sufficient number of shares of Adamis Common Stock to approve the proposals
submitted to the Adamis stockholders for approval, Adamis shall, if requested by
La Jolla, adjourn the Adamis Stockholder Meeting until such date or dates as
Adamis determines in good faith (subject to La Jolla’s prior approval not to be
unreasonably withheld, delayed or conditioned) the Required Adamis Stockholder
Vote is reasonably likely to be obtained, and shall continue to use its
commercially reasonable efforts, together with its proxy solicitor, to assist in
the solicitation of proxies from stockholders relating to Adamis stockholder
approval.
 
(d)           Notwithstanding anything to the contrary contained in Section
5.2(b), at any time before the adoption of this Agreement by the Required Adamis
Stockholder Vote, the Board of Directors of Adamis may effect a Change in the
Adamis Board Recommendation in accordance with the provisions of Section 4.5(b),
provided that La Jolla must receive not less than three (3) Business Days prior
written notice from Adamis confirming that Adamis’s Board of Directors has
determined to make a Change in the Adamis Board Recommendation.  For purposes of
this Agreement, “Change in Adamis Board Recommendation” means any: (i)
withholding, withdrawal, qualification or modification of (or any proposal or
resolution to withhold, withdraw, qualify or modify) the Adamis Board
Recommendation in any manner adverse to La Jolla; (ii) action or statement by
Adamis, any of its Subsidiaries or any of their respective Representatives in
connection with the Adamis Stockholder Meeting contrary to the Adamis Board
Recommendation; (iii) taking any position other than opposition (including
making no recommendation), by Adamis’s Board of Directors with respect to an
Acquisition Proposal that has been publicly disclosed or otherwise become known
to any Person other than Adamis, La Jolla and their respective Representatives
after a reasonable amount of time has elapsed for Adamis’s Board of Directors to
review and make a recommendation with respect thereto (and in no event more than
ten Business Days after being publicly disclosed or otherwise become known to
any Person other than Adamis, La Jolla and their respective Representatives);
(iv) failure of Adamis’s Board of Directors to (A) if a tender offer, take-over
bid or exchange offer that constitutes or would constitute an Acquisition
Proposal (other than by La Jolla) is commenced, recommend that the Adamis
stockholders not accept such tender offer, take-over bid or exchange offer after
a reasonable amount of time has elapsed for Adamis’s Board of Directors to
review and make a recommendation with respect thereto (and in no event more than
ten Business Days following commencement of such tender offer, take-over bid or
exchange offer), or (B) reaffirm in writing the Adamis Board Recommendation in
connection with a disclosure pursuant to Section 4.5(f) or otherwise within two
Business Days of a request by La Jolla to do so; or (v) approval, adoption or
recommendation, or publicly disclosed proposal to approve, adopt or recommend,
an Acquisition Proposal.
 

 
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(e)           Adamis’s obligation to call, give notice of and hold Adamis
Stockholder Meeting in accordance with Section 5.2(a) shall not be limited or
otherwise affected by any Change in the Adamis Board Recommendation or the
commencement, disclosure, announcement or submission of a Superior Proposal or
Acquisition Proposal.
 
5.3           La Jolla Stockholder Meeting; Change in the La Jolla Board
Recommendation; Adoption of Agreement by La Jolla as Sole Stockholder of Merger
Sub.
 
(a)           La Jolla shall take all action necessary under applicable Legal
Requirements to call, give notice of and hold a meeting of the holders of La
Jolla Common Stock to vote on the Merger and the Reverse Split, the La Jolla
Charter Amendment and the La Jolla Name Change Amendment and the Plan Amendment
(such meeting, the “La Jolla Stockholder Meeting”).  La Jolla shall use its
commercially reasonable efforts to ensure that all proxies solicited in
connection with the La Jolla Stockholder Meeting are solicited in compliance
with all applicable Legal Requirements.
 
(b)           La Jolla agrees that, subject to Sections 4.5 and 5.3(d): (i) the
Board of Directors of La Jolla shall recommend that the holders of La Jolla
Common Stock vote to approve the Merger, and (A) the issuance of shares of La
Jolla Common Stock in the Merger and the Reverse Split, (B) adopt the La Jolla
Charter Amendment, (C) adopt the La Jolla Name Change Amendment, (D) adopt the
Plan Amendment, and (E) such other matters as may be reasonably necessary to
effect the Merger and the other Contemplated Transactions, and shall use
commercially reasonable efforts to solicit such approval or adoption, as the
case may be (proposals “(A)” through “(E)” being the “Proposals”), (ii) the
Proxy Statement shall include a statement to the effect that the Board of
Directors of La Jolla recommends that the stockholders of La Jolla vote to
approve the Proposals (such recommendation being referred to herein as the “La
Jolla Board Recommendation”); and (iii) the Board of Directors of La Jolla shall
not make or effect any Change in the La Jolla Board Recommendation.
 
(c)           Subject to Section 4.5, La Jolla shall take all action that is
both reasonable and lawful to solicit the approval of its stockholders of the
Proposals and shall take all other action reasonably necessary or advisable to
secure the vote or consent of the stockholders of La Jolla required by the DGCL
to obtain such approvals.  If, on the date of La Jolla Stockholder Meeting or
any subsequent adjournment thereof pursuant to this Section, La Jolla has not
received proxies representing a sufficient number of shares of La Jolla Common
Stock to approve the Proposals, La Jolla shall, if requested by Adamis, adjourn
the La Jolla Stockholder Meeting until such date or dates as La Jolla determines
in good faith (subject to Adamis’s prior approval not to be unreasonably
withheld, delayed or conditioned) the Required La Jolla Stockholder Vote is
reasonably likely to be obtained, and shall continue to use its commercially
reasonable efforts, together with its proxy solicitor, to assist in the
solicitation of proxies from stockholders relating to La Jolla stockholder
approval.
 
(d)           Notwithstanding anything to the contrary contained in Section
5.3(b), at any time before the adoption of this Agreement by the Required La
Jolla Stockholder Vote, the Board of Directors of La Jolla may effect a Change
in the La Jolla Board Recommendation in accordance with the provisions of
Section 4.5(c), provided that Adamis must receive not less than three (3)
Business Days’ prior written notice from La Jolla confirming that La Jolla’s
Board of Directors has determined to make a Change

 
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in the La Jolla Board Recommendation.  For purposes of this Agreement, “Change
in the La Jolla Board Recommendation” means any: (i) withholding, withdrawal,
qualification or modification of (or any proposal or resolution to withhold,
withdraw, qualify or modify) the La Jolla Board Recommendation in any manner
adverse to Adamis; (ii) action or statement by La Jolla, any of its Subsidiaries
or any of their respective Representatives in connection with the La Jolla
Stockholder Meeting contrary to the La Jolla Board Recommendation; (iii) taking
any position other than opposition (including making no recommendation), by La
Jolla’s Board of Directors with respect to an Acquisition Proposal that has been
publicly disclosed or otherwise become known to any Person other than La Jolla,
Adamis and their respective Representatives after a reasonable amount of time
has elapsed for La Jolla’s Board of Directors to review and make a
recommendation with respect thereto (and in no event more than ten Business Days
after being publicly disclosed or otherwise become known to any Person other
than La Jolla, Adamis and their respective Representatives); (iv) failure of La
Jolla’s Board of Directors to (A) if a tender offer, take-over bid or exchange
offer that constitutes or would constitute an Acquisition Proposal (other than
by Adamis) is commenced, recommend that the La Jolla stockholders not accept
such tender offer, take-over bid or exchange offer after a reasonable amount of
time has elapsed for La Jolla’s Board of Directors to review and make a
recommendation with respect thereto (and in no event more than ten Business Days
following commencement of such tender offer, take-over bid or exchange offer),
or (B) reaffirm in writing the La Jolla Board Recommendation in connection with
a disclosure pursuant to Section 4.5(f) or otherwise within two Business Days of
a request by Adamis to do so; or (v) approval, adoption or recommendation, or
publicly disclosed proposal to approve, adopt or recommend, an Acquisition
Proposal.
 
(e)           La Jolla’s obligation to call, give notice of and hold the La
Jolla Stockholder Meeting in accordance with Section 5.3(a) shall not be limited
or otherwise affected by any Change in the La Jolla Board Recommendation or the
commencement, disclosure, announcement or submission of a Superior Proposal or
Acquisition Proposal.
 
(f)           La Jolla, as sole stockholder of Merger Sub, shall adopt this
Agreement as soon as practicable following the Execution Date by action by
written consent, as permitted by the DGCL 228 in lieu of an actual meeting of
the stockholders of Merger Sub.
 
5.4           Regulatory Approvals.  Each Party shall use commercially
reasonable efforts to file or otherwise submit, as soon as practicable after the
date of this Agreement, all applications, notices, reports and other documents
reasonably required to be filed by such Party with or otherwise submitted by
such Party to any Governmental Entity with respect to the Merger and the other
Contemplated Transactions, and to submit promptly any additional information
requested by any such Governmental Entity.
 
5.5           Indemnification of Officers and Directors.
 
(a)           From and after the Effective Time through the third anniversary of
the date the Effective Time occurs, La Jolla shall and shall cause the Surviving
Corporation to, fulfill and honor in all respects the obligations of La Jolla
and Adamis pursuant to any indemnification provisions under their respective
certificates of incorporation and bylaws as in effect on the date of this
Agreement (the persons entitled to be indemnified pursuant to such provisions
being referred to collectively as the “D&O Indemnified Parties”).
 

 
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(b)           The certificate of incorporation and bylaws of La Jolla and the
Surviving Corporation, as the case may be, shall contain provisions no less
favorable with respect to indemnification, advancement of expenses and
exculpation of present and former directors and officers of La Jolla than are
presently set forth in the certificate of incorporation and bylaws of La Jolla,
which provisions shall not be amended, modified or repealed for a period of
three (3) years time from the Effective Time in a manner that would adversely
affect the rights thereunder of the D&O Indemnified Parties.
 
(c)           La Jolla shall take no actions to terminate or curtail the
directors’ and officers’ tail liability insurance coverage that is in place at
the Effective Time insuring those directors and officers of La Jolla serving
prior to the Effective Time.
 
(d)           La Jolla shall pay all expenses, including reasonable attorneys’
fees, that may be incurred by the D&O Indemnified Parties in connection with
their enforcement of their rights provided in this Section 5.5 pursuant to any
indemnification provisions under their respective certificates of incorporation
and bylaws as in effect on the date of this Agreement.
 
(e)           The provisions of this Section are intended to be in addition to
the rights otherwise available to the D&O Indemnified Parties by law, charter,
statute, by-law or agreement, and shall operate for the benefit of, and shall be
enforceable by, each of the D&O Indemnified Parties, their heirs and their
representatives.
 
(f)           La Jolla shall cause the Surviving Corporation to perform all of
the obligations of the Surviving Corporation under this Section.
 
5.6           Additional Agreements.
 
(a)           Subject to Sections 4.5, 5.2(d), 5.3(d) and 5.6(b), the Parties
shall use commercially reasonable efforts to cause to be taken all actions
necessary to consummate the Merger and make effective the other Contemplated
Transactions.  Without limiting the generality of the foregoing, but subject to
Section 5.6(b), each Party to this Agreement: (i) shall make all filings and
other submissions (if any) and give all notices (if any) reasonably required to
be made and given by such Party in connection with the Merger and the other
Contemplated Transactions; (ii) shall use commercially reasonable efforts to
obtain each Consent (if any) reasonably required to be obtained (pursuant to any
applicable Legal Requirement or Material Contract) by such Party in connection
with the Merger or any of the other Contemplated Transactions or for such
Contract to remain in full force and effect; (iii) shall use commercially
reasonable efforts to lift any injunction prohibiting, or any other legal bar
to, the Merger or any of the other Contemplated Transactions; and (iv) shall use
commercially reasonable efforts to satisfy the conditions precedent to the
consummation of this Agreement.  Each Party shall provide to the other Party a
copy of each proposed filing with or other submission to any Governmental Entity
relating to any of the Contemplated Transactions, and shall give the other Party
a reasonable time before making such filing or other submission in which to
review and comment on such proposed filing or other submission.  Each Party
shall promptly deliver to the other Party a copy of each such filing or other
submission made, each notice given and each Consent obtained by such Party
during the Pre-Closing Period.
 

 
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(b)           Notwithstanding anything to the contrary contained in this
Agreement, no Party shall have any obligation under this Agreement: (i) to
dispose of or transfer or cause any of its Subsidiaries to dispose of or
transfer any assets; (ii) to discontinue or cause any of its Subsidiaries to
discontinue offering any product or service; (iii) to license or otherwise make
available, or cause any of its Subsidiaries to license or otherwise make
available to any Person any Intellectual Property; (iv) to hold separate or
cause any of its Subsidiaries to hold separate any assets or operations (either
before or after the Closing Date); (v) to make or cause any of its Subsidiaries
to make any commitment (to any Governmental Entity or otherwise) regarding its
future operations; or (vi) to contest any Legal Proceeding or any order, writ,
injunction or decree relating to the Merger or any of the other Contemplated
Transactions if such Party determines in good faith that contesting such Legal
Proceeding or order, writ, injunction or decree might not be advisable.
 
5.7           Disclosure.  Without limiting any of either Party’s obligations
under the Confidentiality Agreement, each Party shall not, and shall not permit
any of its Subsidiaries or any Representative of such Party to, issue any press
release or make any public disclosure regarding the Merger or any of the other
Contemplated Transactions unless: (a) the other Party shall have approved such
press release or disclosure (which approval shall not be unreasonably withheld);
or (b) such Party shall have determined in good faith, upon the advice of
outside legal counsel, that such disclosure is required by applicable Legal
Requirements and, to the extent practicable, before such press release or
disclosure is issued or made, such Party advises the other Party of, and
consults with the other Party regarding, the text of such press release or
disclosure; provided, however, that each of Adamis and La Jolla may make any
public statement in response to specific questions by the press, analysts,
investors or those attending industry conferences or financial analyst
conference calls, so long as any such statements are consistent with previous
press releases, public disclosures or public statements made by Adamis or La
Jolla in compliance with this Section 5.7.
 
5.8           Directors; Officers.  Prior to the Effective Time, and subject to
the receipt of any required stockholder vote, La Jolla shall take all action
necessary (i) to cause the number of members of the Board of Directors of La
Jolla to be fixed at a number to be determined by Adamis, effective at the
Effective Time; (ii) to obtain the resignations, effective at the Effective
Time, of the directors of La Jolla determined by Adamis, (iii) cause each of the
individuals nominated by Adamis, which individuals may be persons who are at the
time directors of Adamis and such additional persons as are reasonably
acceptable to La Jolla, to be appointed as a director of La Jolla, effective at
the Effective Time, (iv) to have the Board of Directors of La Jolla appoint as
officers of La Jolla, effective at the Effective Time, such persons as nominated
by Adamis, which individuals may be persons who are at the time officers of
Adamis and such additional persons who are reasonably acceptable to La Jolla;
and (v) all officers of La Jolla shall be terminated immediately prior to
Closing (such termination being deemed to be without cause) and any severance
payments due in connection with such termination shall be paid at Closing.
 
5.9           Tax Matters.
 
(a)           La Jolla, Merger Sub and Adamis shall use their respective
commercially reasonable efforts to cause the Merger to qualify, and except as
specifically contemplated by this Agreement, shall use their respective
commercially reasonable efforts not to, and not to permit or cause any affiliate
or any subsidiary to, knowingly take any actions or cause any action to be taken
which would prevent the Merger from qualifying, as a “reorganization” under
Section 368(a) of the Code.
 

 
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(b)           This Agreement is intended to constitute, and the parties hereto
hereby adopt this Agreement as, a “plan of reorganization” within the meaning
Treasury Regulation Sections 1.368-2(g) and 1.368-3(a). La Jolla, Merger Sub and
Adamis shall report the Merger as reorganization within the meaning of Section
368(a) of the Code, unless otherwise required pursuant to a “determination”
within the meaning of Section 1313(a) of the Code.
 
5.10           La Jolla Amendment.  Subject to Section 5.3(d), La Jolla agrees
to recommend to its stockholders that the Certificate of Incorporation of La
Jolla be amended, by means of one of more amendments to be mutually agreed upon
by La Jolla and Adamis: (i) to change the corporate name of La Jolla to a name
designated by Adamis before the definitive La Jolla Proxy Statement is mailed to
its stockholders (the “La Jolla Name Change Amendment”); (ii) to amend the La
Jolla Pharmaceutical Company 2004 Equity Incentive Plan (the “La Jolla Stock
Plan”) to increase the number of shares reserved for issuance under the La Jolla
Stock Plan (the “Plan Amendment”); and (iii) to approve the Reverse Stock Split,
and to make such other changes thereto as may be determined by Adamis.
 
5.11           Adamis’s Auditors.  Adamis will use its commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (i) the preparation of financial statements (including pro forma
financial statements if required) for inclusion in the Registration Statement
and Proxy Statement to comply with Legal Requirements, and (ii) the review of
Adamis’s audit work papers for up to the past three years or such lesser period
of which Adamis has been in existence, including the examination of selected
interim financial statements and data.
 
5.12           La Jolla’s Auditors.  La Jolla will use its commercially
reasonable efforts to cause its management and its independent auditors to
facilitate on a timely basis (i) the preparation of financial statements
(including pro forma financial statements if required) for inclusion in the
Registration Statement and Proxy Statement to comply with Legal Requirements,
and (ii) the review by Adamis and its Representatives of La Jolla’s audit work
papers for up to the past three years, including the examination of selected
interim financial statements and data.
 
5.13           Legends.  La Jolla shall be entitled to place such appropriate
legends on the certificates evidencing any shares of La Jolla Common Stock to be
received in the Merger by equity holders of Adamis as La Jolla reasonably
determines is required or appropriate under applicable laws.
 
5.14           Confidentiality.  Each of La Jolla and Adamis hereby agrees that
the information obtained in any investigation pursuant to this Agreement, or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transaction contemplated hereby shall be governed by the terms of the
Confidential Disclosure Agreement dated as of October 8, 2009, previously
executed by and between Adamis and La Jolla (the “Confidentiality Agreement”).
 

 
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5.15           FIRPTA Compliance.  On the Closing Date, Adamis shall deliver to
La Jolla a properly executed statement in a form reasonably acceptable to La
Jolla for purposes of satisfying La Jolla’s obligations under Treasury
Regulation Section 1.1445-2(c)(3).
 
5.16           Rule 16b-3.  The Board of Directors of La Jolla, or a committee
of non-employee directors thereof (as such term is defined for purposes of Rule
16b-3(d) under the Exchange Act) shall, reasonably promptly after the date
hereof, and in any event before the Effective Time, adopt a resolution providing
that the receipt, by those officers and directors of Adamis who may be subject
to the reporting requirements of Section 16(a) of the Exchange Act with respect
to La Jolla Common Stock following the Effective Time, of La Jolla Common Stock
in the Merger is intended to be an exempt transaction under such Rule 16b-3.
 
5.17           Use of La Jolla Net Cash.  Adamis shall not, and La Jolla
commencing at the Effective Time shall not, use any of the La Jolla Net Cash, as
reflected on the Net Cash Certification, to pay either (a) any Adamis
indebtedness for borrowed money in existence at the Effective Time, or (b) any
Adamis deferred compensation and/or accrued bonuses in existence at the
Effective Time.
 

ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY
 
The obligations of each Party to effect the Merger and otherwise consummate the
transactions to be consummated at the Closing are subject to the satisfaction
or, to the extent permitted by applicable law, the written waiver by each of the
Parties, at or before the Closing, of each of the following conditions:
 
6.1           Stockholder Approval.  This Agreement and the Merger shall have
been duly adopted by the Required Adamis Stockholder Vote, and the Proposals and
such other matters as may be reasonably necessary to effect the Merger and the
other Contemplated Transactions shall have been duly approved or adopted, as the
case may be, by the Required La Jolla Stockholder Vote.
 
6.2           No Restraints.  No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction or other
Governmental Entity and remain in effect, and there shall not be any Legal
Requirement which has the effect of making the consummation of the Merger
illegal.
 
6.3           Governmental Authorization.  Any Governmental Authorization or
other Consent required to be obtained by any of the Parties under any applicable
antitrust or competition law or regulation or other Legal Requirement shall have
been obtained and shall remain in full force and effect.
 
6.4           No Governmental Proceedings Relating to Contemplated Transactions
or Right to Operate Business.  There shall not be any Legal Proceeding pending,
or overtly threatened in writing by an official of a Governmental Entity in
which such Governmental Entity indicates that it intends to conduct any Legal
Proceeding or taking any other action: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other Contemplated
Transactions; (b) relating to the Merger 
 

 
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and seeking to obtain from La Jolla, Merger Sub or Adamis any damages or other
relief that would have a Material Adverse Effect on the Combined Company; (c)
seeking to prohibit or limit in any material and adverse respect a Party’s
ability to vote, transfer, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of La Jolla; (d) that could
have a Material Adverse Effect on the right or ability of the Combined Company
to own the assets or operate the business of the Combined Company; or (e)
seeking to compel Adamis, La Jolla or any Subsidiary of La Jolla to dispose of
or hold separate any assets that are material to the Combined Company as a
result of or following the Merger or any of the Contemplated Transactions.
 
6.5           Registration Statement.  The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act, no
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated by the SEC and not concluded or withdrawn and all state securities or
“blue sky” authorizations necessary to carry out the transactions contemplated
hereby shall have been obtained and be in effect.
 

ARTICLE VII
ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF LA JOLLA AND MERGER SUB
 
The obligations of La Jolla and Merger Sub to effect the Merger and otherwise
consummate the transactions to be consummated at the Closing are subject to the
satisfaction or the written waiver by La Jolla, at or before the Closing, of
each of the following conditions:
 
7.1           Accuracy of Representations.  The representations and warranties
of Adamis contained in this Agreement shall have been true and correct as of the
date of this Agreement and shall be true and correct on and as of the Closing
Date with the same force and effect as if made on the Closing Date except (A) in
each case, or in the aggregate, where the failure to be true and correct would
not reasonably be expected to have a Material Adverse Effect on the Combined
Company, or (B) for those representations and warranties which address matters
only as of a particular date (which representations shall have been true and
correct, subject to the qualifications as set forth in the preceding clause (A),
as of such particular date).
 
7.2           Performance of Covenants.  Each of the covenants and obligations
in this Agreement that Adamis is required to comply with or to perform at or
before the Closing shall have been complied with and performed by Adamis in all
material respects, except where the failure to perform such covenants or
obligations would not have a Material Adverse Effect on the Combined Company.
 
7.3           No Material Adverse Effect.  From the Execution Date through the
Effective Time, there shall not have occurred any Material Adverse Effect on
Adamis that shall be continuing as of the Effective Time and that would have a
Material Adverse Effect on the Combined Company.
 

 
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7.4           Consents.  All of the Consents set forth on Schedule 7.4 shall
have been obtained and shall be in full force and effect.
 
7.5           Agreements and Other Documents.  La Jolla shall have received the
following agreements and other documents, each of which shall be in full force
and effect:
 
(a)           a certificate of Adamis executed on its behalf by the Chief
Executive Officer and Chief Financial Officer of Adamis confirming that the
conditions set forth in Sections 7.1, 7.2, 7.3 and 7.4 have been duly satisfied;
and
 
(b)           certificates of good standing (or equivalent documentation) of
Adamis in its jurisdiction of incorporation and the various foreign
jurisdictions in which it is qualified (except where the failure to have
obtained such certificates would not result in a Material Adverse Effect on the
Combined Company), certified charter documents, a certificate as to the
incumbency of officers and the adoption of resolutions of the Board of Directors
of Adamis authorizing the execution of this Agreement and the consummation of
the Contemplated Transactions to be performed by Adamis hereunder.
 
7.6            Sarbanes-Oxley Certifications.  Neither the principal executive
officer nor the principal financial officer of Adamis shall have failed to
provide, with respect to any Adamis SEC Document filed (or required to be filed)
with the SEC on or after the date of this Agreement, any necessary certification
in the form required under Rule 13a-14 under the Exchange Act and 18 U.S.C.
§1350.
 
7.7           SEC Reports.  Adamis shall have timely filed with the SEC all
reports and other documents required to be filed under the Securities Act or
Exchange Act.
 
7.8           Legal Opinion.  La Jolla shall have received a legal opinion of
Weintraub Genshlea Chediak LLP, counsel to Adamis, in substantially the form set
forth as Exhibit 7.8.
 
ARTICLE VIII
ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATION OF ADAMIS
 
The obligations of Adamis to effect the Merger and otherwise consummate the
transactions to be consummated at the Closing are subject to the satisfaction or
the written waiver by Adamis, at or before the Closing, of each of the following
conditions:
 
8.1           Accuracy of Representations.  The representations and warranties
of La Jolla and Merger Sub contained in this Agreement shall have been true and
correct as of the date of this Agreement and shall be true and correct on and as
of the Closing Date with the same force and effect as if made on the Closing
Date except (A) in each case, or in the aggregate, where the failure to be true
and correct would not reasonably be expected to have a Material Adverse Effect
on the Combined Company, or (B) for those representations and warranties which
address matters only as of a particular date (which representations shall have
been true and correct, subject to the qualifications as set forth in the
preceding clause (A), as of such particular date).
 
8.2           Performance of Covenants.  All of the covenants and obligations in
this Agreement that La Jolla or Merger Sub is required to comply with or to
perform at or before the
 

 
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Closing shall have been complied with and performed in all material respects,
except where the failure to perform such covenants or obligations would not have
a Material Adverse Effect on the Combined Company.
 
8.3           No Material Adverse Effect.  From the Execution Date through the
Effective Time, there shall not have occurred any Material Adverse Effect on La
Jolla that continues as of the Effective Time and that would have a Material
Adverse Effect on the Combined Company.
 
8.4           Consents.  All the Consents set forth on Schedule 8.4 shall have
been obtained and shall be in full force and effect.
 
8.5           Documents.  Adamis shall have received the following documents:
 
(a)           a certificate of La Jolla executed on its behalf by the Chief
Executive Officer and Vice President of Finance of La Jolla confirming that the
conditions set forth in Sections 8.1, 8.2 and 8.4 have been duly satisfied;
 
(b)           certificates of good standing (or equivalent documentation) of
each of La Jolla and Merger Sub in its jurisdiction of incorporation and the
various foreign jurisdictions in which it is qualified (except where the failure
to have obtained such certificates would not result in a Material Adverse Effect
on the Combined Company), certified charter documents, a certificate as to the
incumbency of officers and the adoption of resolutions of the Boards of
Directors of La Jolla and Merger Sub authorizing the execution of this Agreement
and the consummation of the Contemplated Transactions to be performed by La
Jolla and Merger Sub hereunder; and
 
(c)           Written resignations in forms reasonably satisfactory to Adamis,
dated as of the Closing Date and effective as of the Closing, executed by the
directors and officers of La Jolla .
 
8.6           Sarbanes-Oxley Certifications.  Neither the principal executive
officer nor the principal financial officer of La Jolla shall have failed to
provide, with respect to any La Jolla SEC Document filed (or required to be
filed) with the SEC on or after the date of this Agreement, any necessary
certification in the form required under Rule 13a-14 under the Exchange Act and
18 U.S.C. §1350.
 
8.7           Board of Directors.  La Jolla shall have caused the Board of
Directors of La Jolla to be constituted as set forth in Section 5.8 of this
Agreement.
 
8.8           Officers.  Each of the individuals identified by Adamis prior to
the Effective Time shall have been appointed officers of La Jolla as of the
Effective Time.
 
8.9           Certificate of Amendment.  Amendments to the La Jolla Restated
Certificate of Incorporation, consisting of the increase in the number of
authorized shares and the Reverse Stock Split (the “La Jolla Charter
Amendment”), as contemplated by this Agreement, shall have become effective
under the DGCL.
 
8.10           SEC Reports.  La Jolla shall have timely filed with the SEC all
reports and other documents required to be filed under the Securities Act or
Exchange Act.
 

 
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8.11           Legal Opinion.  Adamis shall have received a legal opinion of
Goodwin Procter LLP, counsel to La Jolla, in substantially the form set forth as
Exhibit 8.11.
 
ARTICLE IX
TERMINATION
 
9.1           Termination.  This Agreement may be terminated before the
Effective Time (whether before or after receipt of the Required Adamis
Stockholder Vote or Required La Jolla Stockholder Vote, unless otherwise
specified below):
 
(a)           by mutual written consent duly authorized by the Boards of
Directors of La Jolla and Adamis;
 
(b)           by either La Jolla or Adamis if the Merger shall not have been
consummated by March 31, 2010 (the “Outside Date”); provided, however, that the
right to terminate this Agreement under this Section 9.1(b) shall not be
available to any Party whose failure to fulfill or diligently pursue fulfillment
of any material obligation under this Agreement has been a principal cause of or
resulted in the failure of the Merger to occur on or before the Outside Date;
 
(c)           by either La Jolla or Adamis if a court of competent jurisdiction
or other Governmental Entity shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action, in each case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger; provided, however, that neither Party may terminate this Agreement
pursuant to this Section 9.1(c) unless that party first shall have used its
reasonable best efforts to procure the removal, reversal, dissolution, setting
aside or invalidation of any such order, decree, ruling or action;
 
(d)           by either La Jolla or Adamis if (i) the La Jolla Stockholder
Meeting (including any adjournments and postponements thereof) shall have been
held and completed and La Jolla’s stockholders shall have taken a final vote on
the Merger, the La Jolla Charter Amendment and (ii) any of the Merger or the La
Jolla Charter Amendment shall not have been approved or adopted at the La Jolla
Stockholder Meeting (and shall not have been approved or adopted at any
adjournment or postponement thereof) by the Required La Jolla Stockholder Vote;
provided, however, that the right to terminate this Agreement under this Section
9.1(d) shall not be available to La Jolla where the failure to obtain the
Required La Jolla Stockholder Vote shall have been caused by the action or
failure to act of La Jolla and such action or failure to act constitutes a
breach by La Jolla of this Agreement;
 
(e)           by Adamis (at any time before the receipt of the Required La Jolla
Stockholder Vote) if a La Jolla Triggering Event shall have occurred;
 
(f)           by La Jolla (at any time before the receipt of the Required La
Jolla Stockholder Vote) if an Adamis Triggering Event shall have occurred;
 
(g)           by Adamis in accordance with the terms and subject to the
conditions of Section 4.5(b)(ii);
 

 
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(h)           by La Jolla in accordance with the terms and subject to the
conditions of Section 4.5(c)(ii);
 
(i)           by Adamis, upon a material breach of any representation, warranty,
covenant or agreement on the part of La Jolla or Merger Sub set forth in this
Agreement, or if any representation or warranty of La Jolla or Merger Sub shall
have become inaccurate, in either case such that the conditions set forth in
Section 8.1 or Section 8.2 would not be satisfied as of the time of such breach
or as of the time such representation or warranty shall have become inaccurate,
provided that if such inaccuracy in La Jolla’s or Merger Sub’s representations
and warranties or breach by La Jolla or Merger Sub is curable by La Jolla or
Merger Sub, then this Agreement shall not terminate pursuant to this Section
9.1(g) as a result of such particular breach or inaccuracy until the earliest of
(i) the Outside Date; (ii) the expiration of a thirty (30) day period commencing
upon delivery of written notice from Adamis to La Jolla or Merger Sub of such
breach or inaccuracy; and (iii) La Jolla or Merger Sub (as applicable) ceasing
to exercise commercially reasonable efforts to cure such breach (it being
understood that this Agreement shall not terminate pursuant to this Section
9.1(g) as a result of such particular breach or inaccuracy if such breach by La
Jolla or Merger Sub is cured before such termination becoming effective);
 
(j)           by La Jolla, upon a material breach of any representation,
warranty, covenant or agreement on the part of Adamis set forth in this
Agreement, or if any representation or warranty of Adamis shall have become
inaccurate, in either case such that the conditions set forth in Section 7.1 or
Section 7.2 would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become inaccurate, provided that
if such inaccuracy in Adamis’s representations and warranties or breach by
Adamis is curable by Adamis then this Agreement shall not terminate pursuant to
this Section 9.1(h) as a result of such particular breach or inaccuracy until
the earlier of (i) the Outside Date; (ii) the expiration of a thirty (30) day
period commencing upon delivery of written notice from La Jolla to Adamis of
such breach or inaccuracy; and (iii) Adamis ceasing to exercise commercially
reasonable efforts to cure such breach (it being understood that this Agreement
shall not terminate pursuant to this Section 9.1(h) as a result of such
particular breach or inaccuracy if such breach by Adamis is cured before such
termination becoming effective);
 
(k)           by either La Jolla or Adamis if (i) the Adamis Stockholder Meeting
(including any adjournments and postponements thereof) shall have been held and
completed and Adamis’s stockholders shall have taken a final vote on the Merger
and (ii) the Merger shall not have been approved or adopted at the Adamis
Stockholder Meeting (and shall not have been approved or adopted at any
adjournment or postponement thereof) by the Required Adamis Stockholder Vote;
provided, however, that the right to terminate this Agreement under this Section
9.1(k) shall not be available to Adamis where the failure to obtain the Required
Adamis Stockholder Vote shall have been caused by the action or failure to act
of Adamis and such action or failure to act constitutes a breach by Adamis of
this Agreement;
 
(l)           by La Jolla if the Adamis Discounted Share Price (as defined in
the definition of “Post-Effective La Jolla Stockholder Shares”) is less than
$0.20 per share and an event of the type set forth on Schedule 9.1(l) has
occurred; or
 

 
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(m)           by Adamis, if, as of the Closing Date, the La Jolla Net Cash, as
reflected on the Net Cash Certification, is less than $2.3 million.

9.2           Effect of Termination.  In the event of the termination of this
Agreement as provided in Section 9.1, this Agreement shall be of no further
force or effect; provided, however, that (i) Section 5.9, this Section 9.2,
Section 9.3, and Section 10 and the Confidentiality Agreement shall survive the
termination of this Agreement and shall remain in full force and effect, and
(ii) the termination of this Agreement shall not relieve any Party from any
liability for any breach of any representation, warranty, covenant, obligation
or other provision contained in this Agreement.
 
9.3           Expenses; Termination Fees.
 
(a)           Except as set forth in this Section 9.3, all fees and expenses
incurred in connection with this Agreement and the Contemplated Transactions
shall be paid by the Party incurring such expenses, whether or not the Merger is
consummated.
 
(b)           La Jolla shall pay Adamis a nonrefundable fee as liquidated
damages in the following amounts and circumstances: (i) $150,000 if this
Agreement is terminated by Adamis pursuant to Section 9.1(e) or by La Jolla
pursuant to Sections 9.1(h) or 9.1(l); or (ii) if this Agreement is terminated
by La Jolla or Adamis pursuant to Section 9.1(d), all reasonable accounting and
legal fees and costs incurred by Adamis in connection with the transactions
contemplated by this agreement (up to a maximum of $100,000) (the fee payable in
either of the above instances referred to as the “La Jolla Termination
Fee”).  Any La Jolla Termination Fee due under this Section shall be paid to
Adamis by wire transfer of same-day funds within five Business Days of
termination.
 
(c)           Adamis shall pay La Jolla a nonrefundable fee as liquidated
damages in the following amounts and circumstances: (i) $150,000 if this
Agreement is terminated by La Jolla pursuant to Section 9.1(f) or by Adamis
pursuant to Sections 9.1(g) or 9.1(m); or (ii) if this Agreement is terminated
by La Jolla or Adamis pursuant to Section 9.1(k), all reasonable accounting and
legal fees and costs incurred by La Jolla in connection with the transactions
contemplated by this agreement (up to a maximum of $100,000) (the fee payable in
either of the above instances referred to as the “Adamis Termination Fee”).  Any
Adamis Termination Fee due under this Section shall be paid to La Jolla by wire
transfer of same-day funds within five Business Days of termination.
 
(d)           If either Party fails to pay when due any amount payable by such
Party under Section 9.3(b) or 9.3(c), as applicable then (i) such Party shall
reimburse the other Party for reasonable costs and expenses (including
reasonable fees and disbursements of counsel) incurred in connection with the
collection of such overdue amount and the enforcement by the other Party of its
rights under this Section, and (ii) such Party shall pay to the other Party
interest on such overdue amount (for the period commencing as of the date such
overdue amount was originally required to be paid and ending on the date such
overdue amount is actually paid to the other Party in full) at a rate per annum
equal to the “prime rate” (as announced by Bank of America or any successor
thereto) in effect on the date such overdue amount was originally required to be
paid.
 

 
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(e)           The fees payable pursuant to this Section 9.3 shall be paid as
liquidated damages and shall be the sole remedy hereunder following a
termination of the type set forth in this Section 9.3.  The parties acknowledge
that the actual damages incurred in connection with a termination as
contemplated under this Section 9.3 would be impossible to ascertain and that
the fees set forth in this Section 9.3 are an estimate of such damages and not a
penalty for termination.
 
ARTICLE X
MISCELLANEOUS PROVISIONS
 
10.1           Non-Survival of Representations and Warranties.  The
representations and warranties of Adamis, Merger Sub and La Jolla contained in
this Agreement or any certificate or instrument delivered pursuant to this
Agreement shall terminate at the Effective Time, and only the covenants that by
their terms survive the Effective Time and this Article 10 shall survive the
Effective Time.
 
10.2           Amendment.  This Agreement may be amended with the approval of
the respective Boards of Directors of Adamis and La Jolla at any time (whether
before or after the receipt of the Required Adamis Stockholder Vote or Required
La Jolla Stockholder Vote); provided, however, that after any such adoption and
approval of this Agreement by a Party’s stockholders, no amendment shall be made
which by law requires further approval of the stockholders of such Party without
the further approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of Adamis and La
Jolla.
 
10.3           Waiver.
 
(a)           No failure on the part of any Party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any Party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
 
(b)           No Party shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
 
10.4           Entire Agreement; Counterparts; Exchanges by Facsimile.  This
Agreement and the other agreements referred to in this Agreement constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among or between any of the Parties with respect to the
subject matter hereof and thereof; provided, however, that the Confidentiality
Agreement shall not be superseded and shall remain in full force and effect in
accordance with its terms. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument. The exchange of a fully executed
Agreement (in counterparts or otherwise) by all Parties by facsimile shall be
sufficient to bind the Parties to the terms and conditions of this Agreement.
 

 
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10.5           Applicable Law; Jurisdiction.  This Agreement shall be governed
by, and construed in accordance with, the laws of the State of California
(except to the extent that the DGCL governs the procedures relating to the
Merger), regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws.  In any action or suit between any of the
parties arising out of or relating to this Agreement or any of the Contemplated
Transactions: (a) each of the parties irrevocably and unconditionally consents
and submits to the exclusive jurisdiction and venue of the state and federal
courts located in the State of California; (b) if any such action or suit is
commenced in a state court, then, subject to applicable Legal Requirements, no
Party shall object to the removal of such action or suit to any federal court
located in the county of San Diego, and (c) the parties agree that service of
progress may be made in the manner provided for in this Agreement for delivery
of notices.
 
10.6           Waiver of Jury Trial.  EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) IT MAKES THIS WAIVER
VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.6.
 
10.7           Notices.  Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be given by means of hand delivery, registered mail, courier or express delivery
service, or facsimile.  Notices shall be deemed delivered and received (i) upon
delivery by hand, (ii) three (3) Business Days after deposit in the U.S. mails,
certified or registered mail, (iii) one (1) Business Day after delivery to a
reputable overnight courier service for next business-day delivery (with
confirmation of delivery), or (iv) one (1) Business Day after transmission by
facsimile to the number set forth beneath the name of such party below (or to
such other address or facsimile telephone number as such party shall have
specified in written notice given to the other parties here), with confirmation
of successful transmission:
 
if to La Jolla :

4365 Executive Drive, Suite 300
San Diego, California 92121
Attention: Chief Executive Officer
Telephone No.:  (858) 452-6600
Facsimile No.:  (858) 626-2851

 
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with a copy to:

Goodwin Procter LLP
4365 Executive Drive, Suite 300
San Diego, California 92121
Attention: Ryan Murr and Mitch Bloom
Telephone No.: (858) 202-2700
Facsimile No.: (858) 457-1255

if to Adamis:

Adamis Pharmaceuticals Corporation
2658 Del Mar Heights Road, #555
Del Mar, California 92014
Attention: President
Telephone No.: (858) 401-3984

with a copy to:

C. Kevin Kelso, Esq.
Weintraub Genshlea Chediak
400 Capitol Mall, 11th Floor
Sacramento, California 95814
Telephone: (916) 558-6000
Fax: (916) 446-1611
Email:  kkelso@weintraub.com

10.8           Cooperation.  Each Party agrees to cooperate fully with the other
Party and to execute and deliver such further documents, certificates,
agreements and instruments and to take such other actions as may be reasonably
requested by the other Party to evidence or reflect the Contemplated
Transactions and to carry out the intent and purposes of this Agreement.
 
10.9           Severability.  Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions of this
Agreement or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.  If a final judgment of a
court of competent jurisdiction declares that any term or provision of this
Agreement is invalid or unenforceable, the Parties hereto agree that the court
making such determination
 
10.10           Other Remedies; Specific Performance.  Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a Party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such Party, and the exercise by a Party of any
one remedy will not preclude the exercise of any other remedy. It is accordingly
agreed that the Parties shall be entitled to seek an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being the addition to any other remedy to which they are
entitled at law or in equity.  Notwithstanding the foregoing, in the event that
this Agreement is terminated by Adamis pursuant to Section 9.1(d), 9.1(e),
9.1(g) or 9.1(i) or by La Jolla pursuant to Section 9.1(d) or 9.1(f) or 9.1(k)
above, Adamis’s or La Jolla’s sole and exclusive remedy hereunder shall be that
provided in Section 9.3(b) or (c), respectively.
 

 
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10.11           Construction.
 
(a)           For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include masculine
and feminine genders.
 
(b)           The Parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting Party shall not
be applied in the construction or interpretation of this Agreement.
 
(c)           As used in this Agreement, the words “include” and “including,”
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words “without limitation.”
 
(d)           Except as otherwise indicated, all references in this Agreement to
“Sections,” “Exhibits” and “Schedules” are intended to refer to Sections of this
Agreement and Exhibits and Schedules to this Agreement.
 
(e)           The bold-faced headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 
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IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Reorganization to be executed as of the date first above written.

   
LA JOLLA PHARMACEUTICAL COMPANY
         
By:
/s/ Deirdre Y. Gillespie
   
Name:
Deirdre Y. Gillespie
   
Title:
President and Chief Executive Officer

   
MERGER SUB
         
By:
/s/ Deirdre Y. Gillespie
   
Name:
Deirdre Y. Gillespie
   
Title:
President and Chief Executive Officer

   
MERGER SUB CORPORATION
         
By:
/s/ Dennis J. Carlo
   
Name:
Dennis J. Carlo
   
Title:
President and Chief Executive Officer

 
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EXHIBIT A
 
CERTAIN DEFINITIONS
 
For purposes of this Agreement:
 
“Acquisition Inquiry” shall mean, with respect to a Party, an inquiry,
indication of interest or request for information (other than an inquiry,
indication of interest or request for information made or submitted by Adamis,
on the one hand or La Jolla, on the other hand, to the other Party) that would
reasonably be expected to lead to an Acquisition Proposal from such Party.

“Acquisition Proposal” shall mean any offer or proposal (other than an offer or
proposal made or submitted by Adamis, on the one hand or La Jolla, on the other
hand to the other Party) contemplating or otherwise relating to any Acquisition
Transaction with such Party.

“Acquisition Transaction” shall mean any transaction or series of transactions
(except for the Contemplated Transactions) involving:

(a) any merger, consolidation, amalgamation, share exchange, business
combination, issuance of securities, acquisition of securities, reorganization,
recapitalization, tender offer, exchange offer or other similar transaction in
which (i) a Person or “group” (as defined in the Exchange Act and the rules
promulgated thereunder) of Persons directly or indirectly acquires beneficial or
record ownership of securities representing more than 50% of the outstanding
securities of any class of voting securities of a Party or any of its
Subsidiaries; or (ii) a Party or any of its Subsidiaries issues securities
representing more than 50% of the outstanding securities of any class of voting
securities of such Party or any of its Subsidiaries (other than, solely with
respect to Adamis, through any capital raising transaction);

(b) any sale, lease, exchange, transfer, license, acquisition or disposition of
any business or businesses or assets that constitute or account for: (i) 50% or
more of the consolidated book value of the assets of a Party and its
Subsidiaries, taken as a whole; or (ii) 50% or more of the fair market value of
the assets of a Party and its Subsidiaries, taken as a whole; or

(c) any liquidation or dissolution of a Party.

“Adamis” shall have the meaning set forth in the Preamble.

“Adamis Bylaws” shall mean the bylaws of Adamis as currently in effect.
 
“Adamis Capital Stock” shall mean shares of Adamis Common Stock and, if any,
Adamis Preferred Stock.
 
“Adamis Charter” shall mean the certificate of incorporation of Adamis, as in
effect on the date of this Agreement.
 
“Adamis Common Stock” shall have the meaning set forth in the Recitals.

 
A-1

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“Adamis Current Balance Sheet”  shall have the meaning set forth in Section
2.8(b).

“Adamis Disclosure Letter” shall have the meaning set forth in the first
paragraph of Article II.

“Adamis Employee Agreement” shall mean each management, employment, severance,
consulting, relocation, repatriation or expatriation agreement or other contract
between Adamis or any of its Subsidiaries and any current employee thereof,
other than any such management, employment, severance, consulting, relocation,
repatriation or expatriation agreement or other contract with such employee
which is terminable “at will” without any obligation on the part of Adamis or
any of its Subsidiaries to make any payments or provide any benefits in
connection with such termination.

“Adamis Employee Plan” shall have the meaning set forth in Section 2.13(a).

“Adamis Financial Statements” shall have the meaning set forth in Section
2.8(b).
 
“Adamis’s Knowledge” shall mean (a) the actual knowledge, after reasonable
diligence, of the officers and directors of Adamis and (b) such facts and
circumstances each of the officers and directors of Adamis should have known
given their involvement in Adamis and the information available to them.
 
“Adamis Options” shall mean all options, warrants or other rights, if any, that
may be outstanding to purchase, acquire or otherwise receive shares of Adamis
Capital Stock (whether or not vested) held by current or former employees or
directors of or consultants to Adamis.
 
“Adamis Patent and Proprietary Rights” shall have the meaning set forth in
Section 2.11.
 
“Adamis Preferred Stock” shall mean shares of preferred stock of Adamis.
 
“Adamis Restricted Stock” shall have the meaning set forth in Section 1.6(c).

“Adamis SEC Reports” shall have the meaning set forth in Section 2.8(a).

“Adamis Stock Certificate” shall have the meaning set forth in Section 1.6(f).
 
“Adamis Stockholder” shall mean each holder of any Adamis Capital Stock
immediately before the Effective Time.
 
“Adamis Termination Fee” shall have the meaning set forth in Section 9.3(c).

“Adamis Triggering Event” shall be deemed to have occurred if: (i) there shall
have occurred a Change in the Adamis Board Recommendation; (ii) Adamis shall
have failed to convene or hold the Adamis Stockholder Meeting within sixty (60)
days after the definitive Proxy Statement is filed with the SEC (other than to
the extent that Adamis determines, in good faith, that the Required Adamis
Stockholder Vote will not be obtained at a meeting held within such time, in
such case the sixty (60) day period shall be

 
A-2

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 tolled until such time as Adamis determines, in good faith, that the Required
Adamis Stockholder Vote can be obtained at a meeting, in each case in accordance
with Section 5.2(d)), (iii) Adamis or any of its Subsidiaries or Representatives
shall have failed to comply with the provisions set forth in Section 4.5 of the
Agreement in any material respect, (iv) Adamis or any of its Representatives
shall change the Adamis Board Recommendation, or (v) Adamis shall have delivered
a Notice of Superior Proposal under Section 4.5(b).

“Agreement” shall mean the Agreement and Plan of Reorganization to which this
Exhibit A is attached, as it may be amended from time to time.
 
“Ancillary Agreements” shall have the meaning as set forth in Section 2.3.
 
“Business” shall mean the business and operations of a party.

“Business Day” shall mean any day other than a day on which banks in the State
of California are authorized or obligated to be closed.

“Certificate of Merger” shall have the meaning as set forth in Section 1.3.
 
“Change in the Adamis Board Recommendation” shall have the meaning set forth in
Section 5.2.

“Change in the La Jolla Board Recommendation” shall have the meaning set forth
in Section 5.3.

“Closing” shall have the meaning set forth in Section 1.3.
 
“Closing Date” shall have the meaning set forth in Section 1.3.
 
“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Combined Company” shall mean La Jolla and Adamis and their respective
Subsidiaries (and, after the Closing, the Surviving Corporation), taken together
as a whole.

“Confidentiality Agreement” shall have the meaning as set forth in Section 5.14
of this Agreement.
 
“Consent” shall mean any approval, consent, ratification, permission, waiver or
authorization (including any necessary Governmental Authorization).
 
“Contemplated Transactions” shall mean the Merger and the other transactions and
actions expressly contemplated by the Agreement.

“Contract” shall, with respect to any Person, mean any written, oral or other
agreement, contract, subcontract, lease (whether real or personal property),
mortgage, understanding, arrangement, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature to which such Person is a party
or by which such Person or any of its assets are bound or affected under
applicable law.

 
A-3

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“Convertible Securities” shall mean and include options, warrants and other
rights for the purchase of common stock or any stock or security convertible
into or exchangeable for common stock.

“Current Balance Sheet” shall have the meaning as set forth in Section 2.8.
 
“D&O Indemnified Parties” shall have the meaning set forth in Section 5.2.

“Dissenting Shares” shall have the meaning as set forth in Section 1.8.
 
“Dissenting Stockholder” shall have the meaning set forth in Section 1.8.
 
“Effective Time” shall have the meaning as set forth in Section 1.3.
 
“Encumbrances” shall mean any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, claim, infringement, interference, option, right
of first refusal, preemptive right, community property interest or restriction
of any nature (including any restriction on the voting of any security, any
restriction on the transfer of any security or other asset, any restriction on
the receipt of any income derived from any asset, any restriction on the use of
any asset and any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset).
 
“Entity” shall have the meaning set forth in Section 2.2.
 
“Environment” shall mean soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), ground waters, 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” shall mean any cost, damages,
expense, liability, obligation, or other responsibility arising out of any
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
 
(i)           any fines, penalties, judgments, awards, settlements, legal or
administrative Legal Proceedings, damages, losses, claims, demands and response,
investigative, remedial, compliance, corrective or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products); or
 
(iii)           financial responsibility under 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 required or
requested by any Governmental Entity or any other Person) and for any natural
resource damages.
 

 
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The terms “removal,” “remedial,” and “response action,” include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
(“CERCLA”).
 
“Environmental Law” shall mean all federal, state and local laws, statutes,
regulations, ordinances, codes, rules and other governmental restrictions and
requirements relating to the discharge of air pollutants, water pollutants or
processed waste water or otherwise relating in any manner to the environment,
pollutants or hazardous substances or materials, including but not limited to
the Federal Solid Waste Disposal Act; the Federal Clean Air Act including,
without limitation, the Clean Air Act Amendments of 1990; the Federal Water
Pollution Control Act; the Hazardous Materials Transportation Act; the Federal
Toxic Substances Control Act; the Federal Resource Conservation and Recovery Act
of 1976; CERCLA, all amendments to any of the foregoing statutes, and all
regulations promulgated by any federal or state agencies, including the
Environmental Protection Agency, regulations of the Nuclear Regulatory Agency,
and regulations of any state department of natural resources or state
environmental protection agency previously, now or at any time hereafter in
effect.
 
“ERISA” shall have the meaning as set forth in Section 2.13(a).
 
“ERISA Affiliate” shall have the meaning as set forth in Section 2.13(a).

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Exchange Agent” shall have the meaning set forth in Section 1.10.
 
“Exchange Ratio” shall have the meaning set forth in Section 1.7.
 
“Exchange Shares” shall have the meaning set forth in Section 1.10(b).
 
“Facilities” shall mean any real property, leaseholds, or other interests
currently or formerly owned or operated by a Party and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by any Party.
 
“GAAP” shall mean United States generally accepted accounting principles.
 
“Governmental Authorization” shall mean any: (a) permit, license, certificate,
franchise, grant, funding arrangement, permission, variance, clearance,
registration, qualification, approval or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Entity or
pursuant to any applicable Legal Requirement; or (b) right under any Contract
with any Governmental Entity.
 
“Governmental Entity” shall mean any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or (c)
governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, ministry, fund, foundation, center, organization, unit, body or Entity
and any court or other tribunal, and for the avoidance of doubt, any Taxing
authority).

 
A-5

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“Hazardous Materials” shall mean any pollutant, chemical, substance and any
toxic, infectious, carcinogenic, reactive, corrosive, ignitable or flammable
chemical, or chemical compound, or hazardous substance, material or waste,
whether solid, liquid or gas, that is subject to regulation, control or
remediation under any Environmental Law Requirement, including without
limitation, crude oil or any fraction thereof, and petroleum products or
by-products.

“Intellectual Property” shall mean all domestic and foreign intellectual
property and proprietary rights, including but not limited to all (i) inventions
(whether or not patentable and whether or not reduced to practice), all
improvements thereto, and all patents and patent applications, (ii) trademarks,
service marks, trade names, domain names, trade dress, logos, corporate names
and brand names, together will all goodwill associated therewith, and all
applications and registrations in connection therewith, (iii) all works of
authorship (whether or not published), copyrights and designs, and all
applications and registrations in connection therewith, (iv) source code and
object code versions of computer software (including data and related
documentation) and website content, and (v) trade secrets and confidential
business information (including ideas, know-how, formulas, compositions,
processes and techniques, research and development information, technical data,
designs, drawings, specifications, research records, records of inventions, test
information, financial, marketing and business data, pricing and cost
information, business and marketing plans and proposals and customer and
supplier lists and information, including all membership lists and databases and
related information and profiles).

“IRS” shall mean the United States Internal Revenue Service.

“La Jolla” shall have the meaning set forth in the Preamble.

“La Jolla Board Recommendation” shall have the meaning set forth in Section 5.3.

“La Jolla Bylaws” shall mean the bylaws of La Jolla as currently in effect.
 
“La Jolla Charter” shall mean the certificate of incorporation of La Jolla, as
in effect on the date of this Agreement.
 
“La Jolla Charter Amendment” shall have the meaning set forth in Section 8.9.

“La Jolla Common Stock” shall have the meaning set forth in the Recitals.

“La Jolla Disclosure Letter” shall have the meaning set forth in the first
paragraph of Article III.

“La Jolla Employee Agreement” shall mean each management, employment, severance,
consulting, relocation, repatriation or expatriation agreement or other contract
between La Jolla or any of its Subsidiaries and any current employee thereof,
other than any such management, employment, severance, consulting, relocation,
repatriation or expatriation agreement or other contract with such employee
which is terminable “at will” without any obligation on the part of La Jolla or
any of its Subsidiaries to make any payments or provide any benefits in
connection with such termination.
 

 
A-6

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“La Jolla Employee Plan” shall have the meaning set forth in Section 3.13.

“La Jolla Employee Stock Purchase Plan” means the La Jolla Pharmaceutical
Company 1995 Employee Stock Purchase Plan.

“La Jolla Equity Incentive Plans” means (a) the La Jolla Pharmaceutical Company
1994 Stock Incentive Plan and (b) the La Jolla Pharmaceutical Company 2004
Equity Incentive Plan.

“La Jolla Financial Statements” shall have the meaning set forth in Section
3.8(b).
 
“La Jolla’s Knowledge” shall mean (a) the actual knowledge, after reasonable
diligence, of La Jolla’s officers and directors and (b) such facts and
circumstances each of the officers and directors of La Jolla should have known
given their involvement in La Jolla and the information available to them.
 
“La Jolla Name Change Amendment” shall have the meaning set forth in Section
5.10.

“La Jolla Net Cash” shall mean the amount of (A) La Jolla’s cash and cash
equivalents and current amounts receivable of La Jolla, as reflected in La
Jolla’s financial records as of the Closing Date, minus (B) all cash Liabilities
of La Jolla as reflected in La Jolla’s financial records as of the Closing Date,
but excluding the Reverse Split Expenses.

“La Jolla Options” shall mean options or other rights to purchase or acquire
shares of La Jolla Common Stock issued by La Jolla.

“La Jolla Patent and Proprietary Rights” shall have the meaning as set forth in
Section 3.11 of this Agreement.
 
“La Jolla Preferred Stock” shall mean shares of preferred stock, par value $0.01
per share, of La Jolla.

“La Jolla Restated Certificate” shall have the meaning set forth in Section
1.5(a).
 
“La Jolla SEC Reports” shall have the meaning set forth in Section 3.8.
 
“La Jolla Stock Plan” shall have the meaning set forth in Section 5.10.

“La Jolla Stockholder Meeting” shall have the meaning set forth in Section 5.3.

“La Jolla Termination Fee” shall have the meaning set forth in Section 9.3.

“La Jolla Triggering Event” shall be deemed to have occurred if: (i) there shall
have occurred a Change in the La Jolla Board Recommendation; (ii) La Jolla shall
have failed to convene or hold the La Jolla Stockholder Meeting within sixty
(60) days after
 
 
A-7

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the definitive Proxy Statement is filed with the SEC (other than to the extent
that La Jolla determines, in good faith, that the Required La Jolla Stockholder
Vote will not be obtained at a meeting held within such time, in such case the
sixty (60) day period shall be tolled until such time as La Jolla determines, in
good faith, that the Required La Jolla Stockholder Vote can be obtained at a
meeting, in each case in accordance with Section 5.3(d)), (iii) La Jolla or any
of its Subsidiaries or Representatives shall have failed to comply with the
provisions set forth in Section 4.5 of the Agreement in any material respect,
(iv) La Jolla or any of its Representatives shall change the La Jolla Board
Recommendation, or (v) La Jolla shall have delivered a Notice of Superior
Proposal under Section 4.5(c).

“Legal Proceeding” shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
court or other Governmental Entity or any arbitrator or arbitration panel.

“Legal Requirement” shall mean any federal, state, foreign, material local or
municipal or other law, statute, constitution, ordinance, code, rule, or
regulation issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity.

“Liabilities” (or when used with reference to a single item described below,
“Liability”) means debts, liabilities and obligations (whether pecuniary or not,
including without limitation obligations to perform or forbear from performing
acts or services), fines, or penalties, whether accrued or fixed, absolute or
contingent, matured or unmatured, determined or undeterminable, known or
unknown, and whether or not required to be included in financial statements
under GAAP, including without limitation those arising under any law, action or
governmental order, liabilities for Taxes and those arising under any contract,
agreement, arrangement, commitment, employee benefit plan (including without
limitation the cost of any severance, salary continuation or similar payment and
the costs of any obligation to maintain health insurance or other benefits) or
undertaking of any kind whatsoever (whether written, express or implied).

“Material Adverse Effect” shall mean any fact, change, event, factor, condition,
circumstance, development or effect that, individually or in the aggregate, has,
or would reasonably be expected to have, a material adverse effect on the
business, assets, liabilities, condition (financial or otherwise), prospects or
results of operations of a Party and its Subsidiaries (including, following the
Merger, the Surviving Corporation and its Subsidiaries), taken as a whole, other
than to the extent such effects are due to: (a) the announcement of the
transactions contemplated by this Agreement; (b) economic factors affecting the
national, regional or world economy; (c) any act or threat of terrorism or war
anywhere in the world, any armed hostilities or terrorist activities anywhere in
the world, any threat or escalation or armed hostilities or terrorist activities
anywhere in the world or any governmental or other response or reaction to any
of the foregoing; (d) changes in GAAP or the interpretation thereof, in each
case to the extent required by GAAP; (e) the Reverse Stock Split; or (f) any
change in the stock price or trading volume of La Jolla Common Stock or Adamis
Common Stock (it being understood that the facts and circumstances giving rise
to such change may be deemed to constitute, and may be taken into account in
determining whether there has been, a Material Adverse Effect if such facts and
circumstances are not otherwise excluded by clauses (a) – (e) of this
definition).

 
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For the avoidance of doubt, “Material Adverse Effect” shall include, without
limitation, any regulatory actions taken by the FDA that would be expected to
cause an interruption in the ability of Adamis to commercialize the Epinephrine
PFS product.

“Merger” shall have the meaning set forth in the Recitals.

“Merger Sub” shall have the meaning set forth in the Preamble.

“Material Contract” shall mean any agreement, instrument or document now in
effect (including any amendment to any of the foregoing):
 
(i)           with any director, officer or affiliate of Adamis or La Jolla, as
the case may be;
 
(ii)          evidencing, governing or relating to indebtedness for borrowed
money or which provides for the imposition of any lien on any of its assets;
 
(iii)         that involves expenditures or receipts in excess of $50,000;
 
(iv)         that in any material way purports to restrict the business activity
of a party or any of its affiliates or to limit the freedom of a party or any of
its affiliates to engage in any line of business or to compete with any Person
or in any geographic area or to hire or retain any Person;
 
(v)          relating to the employment of, or the performance of services by,
any employee or consultant; or pursuant to which a party is or may become
obligated to make any severance, termination or similar payment to any employee
or director; or pursuant to which a party is or may become obligated to make any
bonus or similar payment (other than payments constituting base salary) to any
employee or director;
 
(vii)        (A) relating to the acquisition, issuance, voting, registration,
sale or transfer of any securities of a party, (B) providing any Person with any
preemptive right, right of participation, right of maintenance or any similar
right with respect to any securities of a Party, or (C) providing a Person with
any right of first refusal with respect to, or right to repurchase or redeem,
any securities, except for Contracts pursuant to La Jolla Stock Option Plan, the
Adamis Stock Option Plan and Contracts between Adamis and any Person that
provide a right of first refusal, right of repurchase or cancellation or similar
right in favor of Adamis;
 
(viii)       incorporating or relating to any guaranty or any indemnity or
similar obligation;
 
(ix)          relating to any currency hedging;
 
(x)           (A) imposing any confidentiality obligation on a party (other than
under agreements entered into in the Ordinary Course of Business that are not
material to the Party), or (B) containing "standstill" provisions;
 

 
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(xi)          (A) to which any Governmental Entity is a party or under which any
Governmental Entity has any rights or obligations, or (B) directly or indirectly
benefiting any Governmental Entity (including any subcontract or other Contract
between Adamis and any contractor or subcontractor to any Governmental Entity),
or (C) relating to any funding, grant or similar agreement, proposal or
commitment relating to product of the party; and
 
(xii)         that if terminated or breached would reasonably be expected to
have a Material Adverse Effect on the Party or on any of the transactions
contemplated by this Agreement or any of the Ancillary Agreements.
 
“Notice of Superior Proposal” shall have the meaning set forth in Section 4.5.

“Ordinary Course of Business” shall mean, in the case of each of Adamis and La
Jolla, such actions taken in the ordinary course of its normal operations and
consistent with its past practices.

“Outside Date” shall have the meaning set forth in Section 9.1(b).

“Party” or “Parties” shall mean Adamis, Merger Sub and La Jolla.

“Person” shall mean any individual, Entity or Governmental Entity.
 
“Post-Effective La Jolla Stockholder Shares” shall be a number equal to (i) the
La Jolla Net Cash as of the Closing Date plus $750,000, divided by (ii) the
Adamis Discounted Share Price.  The “Adamis Discounted Share Price” shall mean
the volume weighted average closing price of the Adamis Common Stock (as
reported on the OTC Bulletin Board or other market or quotation system on which
the Adamis Common Stock is quoted or traded) commencing on the first Business
Day after the date of this Agreement and ending two trading days before the
Closing Date, discounted by an amount set forth in the following table:

Adamis Average Share Price*
% Discount
Less than $0.25
10% (not to go below $0.20 per share)
$0.25 to $2.00
25% (not to go below $0.20 per share)
Greater than $2.00
$1.50 (fixed price)

*  Subject to adjustment, as appropriate, in the event of Recapitalization of
Adamis.

By way of example only: (A) if the La Jolla Net Cash as of the Closing Date is
$2,000,000 and the Adamis Average Share Price is $0.24, then the Adamis
Discounted Share Price would equal $0.216 and the Post-Effective La Jolla
Stockholder Shares would equal 12,731,481; (B) if the La Jolla Net Cash as of
the Closing Date is $2,000,000 and the Adamis Average Share Price is $0.50, then
the Adamis Discounted Share Price would equal $0.375 and the Post-Effective La
Jolla Stockholder Shares would equal 7,333,333; and (C) if the La Jolla Net Cash
as of the Closing Date is $2,000,000 and the Adamis Average Share Price is
$2.01, then the Adamis Discounted Share Price would equal $1.50 and the
Post-Effective La Jolla Stockholder Shares would equal 1,833,333.

 
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“Pre-Closing Period” shall have the meaning as set forth in Section 4.1.
 
“Pre-Effective La Jolla Shares” shall be the sum of all shares of La Jolla
Common Stock prior to the Effective Date that are: (a) issued and outstanding
and (b) issuable upon conversion of any preferred stock of La Jolla.

“Proposals” shall have the meaning set forth in Section 5.3(b).

“Proxy Statement” shall mean the joint Proxy Statement to be filed with the SEC
by La Jolla and Adamis in connection with the Merger, as said statements may be
amended, and mailed to the La Jolla stockholders in connection with the La Jolla
Stockholder Meeting and to the Adamis stockholders in connection with the Adamis
Stockholder Meeting.

“Registration Statement” shall mean the registration statement on Form S-4 (the
“S-4”) to be filed with the SEC by La Jolla, together with all amendment and
supplements thereto and including the exhibits thereto.
 
“Representatives” shall mean officers, directors, employees, agents, attorneys,
accountants, investment bankers, advisors and representatives.
 
“Required La Jolla Stockholder Vote” shall mean the vote of the La Jolla
stockholders that is required under the DGCL or other applicable law to approve
the Proposals.
 
“Required Adamis Stockholder Vote” shall mean the vote of the Adamis
Stockholders that is required under applicable law to approve the Merger and the
transactions contemplated by this Agreement.

“Reverse Stock Split” shall have the meaning set forth in Section 1.5(a)(i).

“Reverse Stock Split Ratio” shall be expressed as a fraction, the numerator of
which shall equal one (1) and the denominator of which shall equal the
Pre-Effective La Jolla Shares divided by the Post-Effective La Jolla Stockholder
Shares.

“Sarbanes-Oxley” shall mean the Sarbanes-Oxley Act of 2002, as it may be amended
from time to time.

“SEC” shall mean the United States Securities and Exchange Commission.
 
“Securities Act” shall mean the Securities Act of 1933, as amended.
 
“Subsidiary” An Entity shall be deemed to be a “Subsidiary” of another Person if
such Person directly or indirectly owns, beneficially or of record, (a) an
amount of voting securities of other interests in such Entity that is sufficient
to enable such Person to elect at least a majority of the members of such
Entity’s board of directors or other governing body, or (b) at least 50% of the
outstanding equity, voting, beneficial or financial interests in such Entity.

“Superior Proposal” means an Acquisition Proposal that the board of directors of
a Party determines, in its reasonable judgment, to be more favorable to such
Party’s stockholders than the terms of the transactions contemplated by this
Agreement.

 
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“Surviving Corporation” shall have the meaning set forth in Section 1.1.

“Tax” shall have the meaning set forth in Section 2.12.
 
“Tax Return” shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Entity 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.
 
“Treasury Regulations” shall mean the official interpretations of the Code
promulgated by the United States Department of the Treasury.

“Voting Agreement” shall have the meaning set forth in the Recitals.

 
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Schedule 9.1(l)

List of events:

 
·
Material manufacturing or supply problems with “Epinephrine PFS” product
(including API and syringe), or any regulatory actions taken by the FDA, that
result in or would be expected to result in a commercial interruption in sales
of such product.

 
·
Any litigation filed against Adamis, its directors or officers asserting claims
that could reasonably be expected to result in the occurrence of a Material
Adverse Effect.

 
·
The loss of the services of Dennis J. Carlo as an officer, director or full-time
employee of the Company for any reason whatsoever.