Exhibit 1
AGREEMENT AND PLAN OF REORGANIZATION
Dated as of
May 20, 2005
between
SIERRA NORTE, LLC,
ALL MEMBERS OF SIERRA NORTE, LLC.
and
POCKETSPEC TECHNOLOGIES INC.
TABLE OF CONTENTS
SECTION 1: GENERAL DEFINITIONS................................... -1-
1.1 BEST KNOWLEDGE........................................ -1-
1.2 BUSINESS DAY.......................................... -1-
1.3 CODE.................................................. -1-
1.4 ERISA................................................. -1-
1.5 EXCHANGE ACT.......................................... -1-
1.6 FISCAL YEAR........................................... -2-
1.7 GOVERNMENTAL AUTHORITY................................ -2-
1.8 GOVERNMENTAL REQUIREMENT.............................. -2-
1.9 IRS................................................... -2-
1.10 LEGAL REQUIREMENTS.................................... -2-
1.11 OWNERSHIP INTEREST.................................... -2-
1.12 PERSON................................................ -2-
1.13 SECTION............................................... -2-
1.14 SECURITIES ACT........................................ -2-
1.15 TAXES................................................. -2-
SECTION 2: ACQUISITION .......................................... -2-
2.1 EXCHANGE OF SECURITIES................................ -2-
2.2 INCOME TAX CONSIDERATIONS............................. -3-
2.3 COMPLIANCE WITH SECURITIES LAWS....................... -3-
SECTION 3: APPROVALS ............................................ -3-
3.1 PocketSpec Board of Directors Approval................ -3-
3.2 Sierra Norte Members Approval......................... -3-
SECTION 4: ADDITIONAL AGREEMENTS ................................ -3-
4.1 Sierra Norte Audits................................... -4-
4.2 Spin Off.............................................. -4-
4.3 NOTIFICATION OF CERTAIN MATTERS....................... -4-
4.4 FURTHER ACTION........................................ -4-
4.5 PUBLIC ANNOUNCEMENTS.................................. -4-
4.6 COOPERATION IN SECURITIES FILINGS..................... -4-
4.7 ADDITIONAL DOCUMENTS.................................. -4-
SECTION 5: CLOSING .............................................. -5-
5.1 GENERAL PROCEDURE..................................... -5-
5.2 TIME AND PLACE........................................ -5-
5.3 EFFECTIVE DATE OF CLOSING............................. -5-
5.4 COVENANTS REGARDING CLOSING........................... -5-
5.5 CONDITIONS TO OBLIGATION OF POCKETSPEC................ -5-
5.6 CONDITIONS TO OBLIGATION OF SIERRA NORTE AND MEMBERS.. -7-
5.7 SPECIFIC ITEMS TO BE DELIVERED AT THE CLOSING......... -9-
5.8 ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS OF
POCKETSPEC ........................................... -11-
SECTION 6: REPRESENTATIONS AND WARRANTIES BY
SIERRA NORTE ANDD SHAREHOLDERS ....................... -11-
6.1 ORGANIZATION AND STANDING............................. -11-
6.2 SUBSIDIARIES, ETC..................................... -11-
6.3 QUALIFICATION......................................... -11-
6.4 CORPORATE AUTHORITY................................... -11-
6.5 FINANCIAL STATEMENTS.................................. -12-
6.6 FINANCIAL INFORMATION................................. -12-
6.7 CAPITALIZATION OF SIERRA NORTE........................ -12-
6.8 TAXES................................................. -13-
6.9 NO ACTIONS, PROCEEDINGS, ETC.......................... -13-
6.10 POST BALANCE SHEET CHANGES............................ -13-
6.11 NO BREACHES........................................... -14-
6.12 CONDITION OF SIERRA NORTE'S ASSETS.................... -14-
6.13 INVENTORY............................................. -14-
6.14 ACCOUNTS RECEIVABLE................................... -14-
6.15 CORPORATE ACTS AND PROCEEDINGS........................ -14-
6.16 REGISTERED RIGHTS AND PROPRIETARY INFORMATION......... -14-
6.17 CHANGES IN SUPPLIERS AND CUSTOMERS.................... -14-
6.18 NO LIENS OR ENCUMBRANCES.............................. -16-
6.19 EMPLOYEE MATTERS...................................... -16-
6.20 LEGAL PROCEEDINGS AND COMPLIANCE WITH LAW............. -16-
6.21 CONTRACT SCHEDULES.................................... -16-
6.22 LABOR MATTERS......................................... -17-
6.23 INSURANCE............................................. -17-
6.24 ENVIRONMENTAL......................................... -18-
6.25 DISCLOSURE OF INFORMATION............................. -19-
6.26 REPRESENTATION AND WARRANTIES......................... -19-
SECTION 7: COVENANTS OF SIERRA NORTE AND ▇▇▇▇▇▇................. -19-
7.1 PRESERVATION OF BUSINESS.............................. -19-
7.2 ORDINARY COURSE....................................... -20-
7.3 NEGATIVE COVENANTS.................................... -20-
7.4 ADDITIONAL COVENANTS.................................. -20-
7.5 ACCESS TO BOOKS AND RECORDS, PREMISES, ETC............ -21-
7.6 COMPENSATION.......................................... -21-
7.7 NO SOLICITATION....................................... -21-
SECTION 8: REPRESENTATIONS AND WARRANTIES OF POCKETSPEC.......... -22-
8.1 ORGANIZATION AND STANDING............................. -22-
8.2 SUBSIDIARIES, ETC..................................... -22-
8.3 QUALIFICATION......................................... -22-
8.4 CORPORATE AUTHORITY................................... -23-
8.5 SEC Documents......................................... -23-
8.6 CAPITALIZATION OF POCKETSPEC.......................... -23-
8.7 NO ACTIONS, PROCEEDINGS, ETC.......................... -24-
8.8 POST BALANCE SHEET CHANGES............................ -24-
8.9 NO BREACHES........................................... -24-
8.10 CORPORATE ACTS AND PROCEEDINGS........................ -25-
8.11 REPRESENTATIONS AND WARRANTIES........................ -25-
SECTION 9: COVENANTS OF PocketSpec............................... -25-
9.1 PRESERVATION OF BUSINESS.............................. -25-
9.2 ORDINARY COURSE....................................... -25-
9.3 NEGATIVE COVENANTS.................................... -25-
9.4 ADDITIONAL COVENANTS.................................. -26-
9.5 ACCESS TO BOOKS AND RECORDS, PREMISES, ETC............ -27-
9.6 DELIVERY OF ADDITIONAL FILINGS........................ -27-
SECTION 10: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS........ -27-
10.1 OWNERSHIP............................................. -27-
10.2 RIGHTS OWNERSHIP...................................... -27-
10.3 RESTRICTION ON FUTURE TRANSFER........................ -27-
10.4 UNREGISTERED STOCK.................................... -28-
10.5 STOCK ACQUIRED FOR INVESTMENT; LIMITATIONS
ON DISPOSITION........................................ -28-
SECTION 11: TERMINATION................................................. -28-
11.1 TERMINATION........................................... -28-
11.2 EFFECT OF TERMINATION................................. -29-
SECTION 12: INDEMNIFICATION AND REMEDIES FOR BREACH..................... -29-
12.1 INDEMNIFICATION BY POCKETSPEC......................... -29-
12.2 INDEMNIFICATION BY MEMBERS............................ -30-
12.3 INDEMNIFICATION BY SIERRA NORTE....................... -30-
12.4 ADDITIONAL NOTICE..................................... -30-
12.5 DETERMINATION OF DAMAGES AND RELATED MATTERS.......... -31-
12.6 REMEDIES FOR BREACH................................... -32-
SECTION 13: NONDISCLOSURE OF CONFIDENTIAL INFORMATION................... -32-
13.1 NONDISCLOSURE OF CONFIDENTIAL INFORMATION............. -32-
13.2 NO PUBLICITY.......................................... -33-
SECTION 14: EXPENSES.................................................... -33-
SECTION 15: MISCELLANEOUS............................................... -33-
15.1 ATTORNEY'S FEES....................................... -33-
15.2 NO BROKERS............................................ -33-
15.3 SURVIVAL AND INCORPORATION OF REPRESENTATIONS......... -33-
15.4 INCORPORATION BY REFERENCE............................ -34-
15.5 PARTIES IN INTEREST................................... -34-
15.6 AMENDMENTS AND WAIVERS................................ -34-
15.7 WAIVER................................................ -34-
15.8 GOVERNING LAW - CONSTRUCTION.......................... -34-
15.9 REPRESENTATIONS AND WARRANTIES........................ -34-
15.10 NOTICES............................................... -34-
15.11 FAX/COUNTERPARTS...................................... -35-
15.12 CAPTIONS.............................................. -36-
15.13 SEVERABILITY.......................................... -36-
15.14 GOOD FAITH COOPERATION AND ADDITIONAL DOCUMENTS....... -35-
15.15 SPECIFIC PERFORMANCE.................................. -36-
15.16 ASSIGNMENT............................................ -36-
15.17 TIME.................................................. -36-
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT ("Agreement") is made and entered into effective this 20th
of May, 2005, by and between and among POCKETSPEC TECHNOLOGIES INC., a Colorado
corporation, ("PocketSpec") and SIERRA NORTE, LLC., a New Mexico limited
liability company, ("Sierra Norte") and each of the undersigned, as the Members
of Sierra Norte (hereafter collectively be referred to as "Members").
WITNESSETH
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WHEREAS, Members are the record and beneficial owners of all of the issued
and outstanding membership interests of Sierra Norte (the "Memberships"), which
Memberships represent one hundred percent (100%) of the issued and outstanding
memberships of Sierra Norte; and
WHEREAS, PocketSpec desires to acquire Sierra Norte (the "Acquisition")
through the acquisition of the Memberships in consideration of the issuance of
shares of common stock, $.001 par value, of PocketSpec; and
WHEREAS, the parties intend this Agreement to be a Plan of Reorganization
within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended, (the "Code") and the regulations thereunder; and
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and other good and
valuable consideration, the receipt and adequacy whereof is hereby acknowledged,
the parties agree as follows:
SECTION 1: GENERAL DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 BEST KNOWLEDGE. "Best Knowledge" shall mean both what a Person knew as
well as what the Person should have known had the Person exercised
reasonable diligence. When used with respect to a Person other than a
natural person, the term "Best Knowledge" shall include matters that
are known or should have known as the result of the exercise of
reasonable diligence to the current directors and executive officers
of the Person.
1.2 BUSINESS DAY. "Business Day" means any day which is not a Saturday,
Sunday or a permitted or required bank holiday in Denver, Colorado.
1.3 CODE. "Code" means the Internal Revenue Code of 1986, as amended.
1.4 ERISA. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.5 EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
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1.6 FISCAL YEAR. "Fiscal Year" shall mean a twelve-month period beginning
January 1.
1.7 GOVERNMENTAL AUTHORITY. "Governmental Authority" shall mean any and
all foreign, federal, state or local governments, governmental
institutions, public authorities and governmental entities of any
nature whatsoever, and any subdivisions or instrumentalities thereof,
including, but not limited to, departments, boards, bureaus,
commissions, agencies, courts, administrations and panels, and any
division or instrumentalities thereof, whether permanent or ad hoc and
whether now or hereafter constituted or existing.
1.8 GOVERNMENTAL REQUIREMENT. "Governmental Requirement" shall mean any
and all laws (including, but not limited to, applicable common law
principles), statutes, ordinances, codes, rules regulations,
interpretations, guidelines, directions, orders, judgments, writs,
injunctions, decrees, decisions or similar items or pronouncements,
promulgated, issued, passed or set forth by any Governmental
Authority.
1.9 IRS. "IRS" means the Internal Revenue Service.
1.10 LEGAL REQUIREMENTS. "Legal Requirements" means applicable common law
and any statute, ordinance, code or other laws, rule, regulation,
order, technical or other standard, requirement, judgment, or
procedure enacted, adopted, promulgated, applied or followed by any
governmental authority, including, without limitation, any order,
decree, award, verdict, findings of fact, conclusions of law, decision
or judgment, whether or not final or appealable, of any court,
arbitrator, arbitration board or administrative agency.
1.11 OWNERSHIP INTEREST. "Ownership Interest" shall mean any form of direct
or indirect interest in the ownership, equity or profits of Sierra
Norte or PocketSpec, whether certificated or non-certificated, issued
or unissued, contingent or otherwise, including, without limitation,
the following: securities, or the right thereto, executory rights to
receive securities, options, warrants, instruments or obligations
convertible into Memberships or profit interests.
1.12 PERSON. "Person" shall mean any natural person, any Governmental
Authority and any entity the separate existence of which is recognized
by any Governmental Authority or Governmental Requirement, including,
but not limited to, corporations, partnerships, joint ventures, joint
stock companies, trusts, estates, companies and associations, whether
organized for profit or otherwise.
1.13 SECTION. Unless otherwise stated herein, the term "Section" when used
in this Agreement shall refer to the Sections of this Agreement.
1.14 SECURITIES ACT. "Securities Act" shall mean the Securities Act of
1933, as amended.
1.15 TAXES. "Tax" and "Taxes" shall mean any and all income, excise,
franchise or other taxes and all other charges or fees imposed or
collected by any Governmental Authority or pursuant to any
Governmental Requirement, and shall also include any and all
penalties, interest, deficiencies, assessments and other charges with
respect thereto.
SECTION 2: ACQUISITION
2.1 EXCHANGE OF SECURITIES. Subject to the terms and conditions
hereinafter set forth, on the Closing Date (as hereinafter defined),
the Members of Sierra Norte, shall deliver to PocketSpec, and
PocketSpec shall accept from Members, certificates representing 100%
of the Memberships of Sierra Norte, which Memberships shall represent
one hundred percent (100%) of the issued and outstanding equity
securities of Sierra Norte (the "Sierra Norte Memberships").
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Sierra Norte shall also pay the sum of Seventy Thousand Dollars
($70,000), of which Fifty Thousand Dollars ($50,000) shall be paid to
ColorSpec and Twenty Thousand Dollars ($20,000) shall be paid to ▇▇▇▇▇
▇▇▇▇▇▇ & Associates, ▇.▇.▇▇ exchange for the Sierra Norte Memberships,
PocketSpec shall issue and deliver to Members, pro rata, an aggregate
of One Hundred Million shares (100,000,000) of PocketSpec Common
Stock, $.001 par value, (the "PocketSpec Common Stock" or the
"Exchange Stock"). Hereafter the exchange of the Sierra Norte
Memberships for the Exchange Stock shall be referred to as the
"Exchange" or the "Acquisition").
2.2 INCOME TAX CONSIDERATIONS. It is the intention of the parties hereto
that the exchange of stock contemplated by this Agreement will qualify
for treatment as a tax-free reorganization under ss.368(a)(1)(B) of
the Internal Revenue Code of 1986, as amended, and the parties hereby
agree to undertake all reasonable actions necessary both before and
after the consummation of the Exchange to effect such treatment.
2.3 COMPLIANCE WITH SECURITIES LAWS. The Exchange provided for in Section
2.1 above shall be undertaken in reliance upon an exemption from the
registration requirements contained in Section 5 of the Securities Act
contained in Section 4(2). PocketSpec shall take such actions as may
be necessary or advisable in order consummate the Exchange in
conformity with applicable Legal Requirements, including, without
limitation, federal and state securities laws; and Sierra Norte,
together with its managers, agrees to take such actions as may be
necessary or advisable upon the reasonable request of PocketSpec to
consummate the Exchange in conformity with such Legal Requirements.
SECTION 3: APPROVALS
3.1 PocketSpec BOARD OF DIRECTORS APPROVAL. Subject to the provisions
hereof, the Board of Directors of PocketSpec shall, by written
unanimous consent, approve the Exchange and the transactions provided
for or contemplated by this Agreement; provided, however, that such
approval shall be subject to their satisfaction that the issuance of
the Exchange Stock to the Members shall be and is exempt from the
registration requirements of the Securities Act, is undertaken without
violation of the anti-fraud provisions of the Securities Act and has
been consummated in conformity with all other applicable Legal
Requirements.
3.2 SIERRA NORTE MEMBERS' APPROVAL. Subject to the provisions hereof, the
Members of Sierra Norte shall, by written unanimous consent, approve
the Exchange and the transactions provided for or contemplated by this
Agreement; provided, however, that such approval shall be subject to
their satisfaction that the issuance of the Exchange Stock to the
Members shall be and is exempt from the registration requirements of
the Securities Act, is undertaken without violation of the anti-fraud
provisions of the Securities Act and has been consummated in
conformity with all other applicable Legal Requirements.
SECTION 4: ADDITIONAL AGREEMENTS
4.1 SIERRA NORTE AUDITS. As promptly as practicable following the
execution of this Agreement, Sierra Norte shall engage the services of
an independent auditing firm (the "Auditor"), to prepare audited
financial statements of Sierra Norte as well as audited financial
statements of any subsidiaries of Sierra Norte (hereafter collectively
the "Audited Financial Statements"). The Audited Financial Statements
shall conform in all respects to the requirements of Regulation SB,
Item 310 under the Securities Act and shall include, at a minimum,
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audited balance sheets for a minimum of one year, or from inception if
less than one year, audited statements of operation and statements of
cash flow for a minimum of two fiscal years, or from inception if less
than two years, and audited statements of members' equity. All costs
and expenses incurred in connection with the preparation of the
Audited Financial Statements, including fees and disbursements of the
Auditor, shall be borne exclusively by Sierra Norte.
4.2 SPIN-OFF. Immediately after the Exchange, PocketSpec shall complete
the sale pursuant to the Agreement attached in Exhibit 4.2 herein of
all of the outstanding common stock it owns in ColorSpec Technologies,
Inc., a Colorado corporation and a wholly-owned subsidiary of
PocketSpec, through which PocketSpec's business is operated, which
agreement shall contain the assumption by purchasers and by ColorSpec,
jointly and severally, of all liabilities of PocketSpec and ColorSpec,
and an indemnity, in a form satisfactory to PocketSpec and its
counsel, indemnifying PocketSpec following the Closing for any and all
claims, causes of action, liabilities and taxes, known or unknown,
owed by or asserted against either or both PocketSpec and ColorSpec,
for any operations prior to the Closing. All legal, audit and
registration costs incurred in connection with the spin-off of
ColorSpec shall be borne by ColorSpec.
4.3 NOTIFICATION OF CERTAIN MATTERS. Sierra Norte shall give prompt notice
to PocketSpec and PocketSpec shall give prompt notice to Sierra Norte
of (i) the occurrence or non-occurrence of any event which would cause
any representation or warranty made by the respective parties in this
Agreement to be materially untrue or inaccurate and (ii) any failure
of PocketSpec or Sierra Norte, as the case may be, to materially
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that
the delivery of any notice pursuant to this section shall not limit or
otherwise affect the remedies available hereunder to the party
receiving such notice and, provided further, that the failure to give
such notice shall not be treated as a breach of covenant for the
purposes of this Agreement unless the failure to give such notice
results in material prejudice to the other party.
4.4 FURTHER ACTION. Upon the terms and subject to the conditions hereof,
each of the parties hereto shall use reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by
this Agreement, to obtain in a timely manner all necessary waivers,
consents and approvals and to effect all necessary registrations and
filings, and to otherwise satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement.
4.5 PUBLIC ANNOUNCEMENTS. Sierra Norte and PocketSpec shall consult with
each other before issuing any press release or other public statement
with respect to the acquisition or this Agreement and shall not issue
any such press release or make any such public statement without the
prior consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that a party may, without
the prior consent of the other party, issue such press release or make
such public statement as may, upon the advice of counsel, be required
by law if it has used reasonable efforts to first consult with the
other party.
4.6 COOPERATION IN SECURITIES FILINGS. Sierra Norte shall provide such
information regarding Sierra Norte, its business, its officers,
directors and affiliates, as is reasonably required by PocketSpec for
purposes of preparing any notices, reports and other filings with the
Commission.
4.7 ADDITIONAL DOCUMENTS. The parties shall deliver or cause to be
delivered such documents or certificates as may be necessary, in the
reasonable opinion of counsel for either of the parties, to effectuate
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the transactions provided for in this Agreement. If at any time the
parties or any of their respective successors or assigns shall
determine that any further conveyance, assignment or other document or
any further action is necessary desirable to further effectuate the
transactions set forth herein or contemplated hereby, the parties and
their officers, directors and agents shall execute and deliver, or
cause to be executed and delivered, all such documents as may be
reasonably required to effectuate such transactions.
SECTION 5: CLOSING
5.1 GENERAL PROCEDURE. Subject to the terms and conditions hereinafter set
forth, at the Closing each party shall deliver such documents,
instruments and materials as may be reasonably required in order to
effectuate the intent and provisions of this Agreement, and all such
documents, instruments and materials shall be satisfactory in form and
substance to counsel for each party.
5.2 TIME AND PLACE. Upon the terms and subject to the conditions set forth
in this Agreement, the Exchange transactions contemplated by Section
2.1 shall be consummated and closed (the "Closing") at a time and
place to be determined by mutual agreement on the earlier of (i) May
20,, 2005 and (ii) five business days after the date on which the
conditions set forth in Sections 5.4 and 5.5 shall have been satisfied
or waived or such other time, date and place as the parties shall
agree upon (the date of the Closing being herein referred to as the
"Closing Date").
5.3 EFFECTIVE DATE OF CLOSING. Notwithstanding the actual time and place
of Closing, the parties stipulate and agree that the effective date of
Closing and the effective date of Exchange shall be May 20, 2005.
5.4 COVENANTS REGARDING CLOSING. Sierra Norte and PocketSpec each hereby
covenant and agree that they shall (i) use reasonable efforts to cause
each of their respective Exhibits to be prepared and exchanged with
the other party, and its legal counsel, within ten (10) business days
following the execution of this Agreement, except to the extent the
express terms of this Agreement provide for a different time period
for such delivery to be accomplished, (ii) use reasonable efforts to
cause all of their respective representations and warranties set forth
in this Agreement, and Exhibits hereto, to be true on and as of the
Closing Date, (iii) use reasonable efforts to cause all of their
respective obligations that are to be fulfilled on or prior to the
Closing Date to be so fulfilled, (iv) use reasonable efforts to cause
all conditions to the Closing set forth in this Agreement to be
satisfied on or prior to the Closing Date, and (v) use reasonable
efforts to deliver to each other at the Closing the certificates,
updated lists, notices, consents, authorizations, approvals,
agreements, transfer documents, receipts and amendments required
hereby (with such additions or exceptions to such items as are
necessary to make the statements set forth in such items true and
correct, provided that if any such additions or exceptions cause any
of the conditions to its respective obligations hereunder as set forth
herein below not to be performed, satisfied or fulfilled, such
additions and exceptions shall in no way limit the rights of the
parties hereto to terminate this Agreement or refuse to consummate the
transactions contemplated hereby).
5.5 CONDITIONS TO OBLIGATION OF POCKETSPEC. The obligation of PocketSpec
to complete the Exchange on the Closing Date on the terms set forth in
this Agreement is, at the option of PocketSpec, subject to the
satisfaction or written waiver by PocketSpec of each of the following
conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties made by Sierra Norte in this Agreement shall be
true and correct in all material respects on and as of the
Closing Date with the same force and effect as though such
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representations and warranties had been made on the Closing Date,
except to the extent that such representations and warranties
expressly relate to an earlier date in which case they shall have
been true and correct as of such earlier date.
(b) COMPLIANCE WITH COVENANTS. All covenants which Sierra Norte is
required to perform, satisfy or comply with on or before the
Closing Date shall have been fully complied with or performed in
all material respects.
(c) CORPORATE APPROVALS. Any action required to be taken by the
Members of Sierra Norte to authorize the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly
taken.
(d) CONSENTS AND APPROVALS. To the extent that any material lease,
mortgage, deed of trust, contract or agreement to which Sierra
Norte is a party shall require the consent of any person to the
Exchange or any other transaction provided for herein, such
consent shall have been obtained and PocketSpec shall have
received reasonably satisfactory evidence thereof; provided,
however, that Sierra Norte shall not make, as a condition for the
obtaining of any such consent, any agreements or undertakings not
approved in writing by PocketSpec to the extent that such
condition otherwise has an effect on PocketSpec. PocketSpec shall
have been furnished with evidence satisfactory to it of the
timely consent or approval of, filing with or notice to, each
Governmental Authority or Person which in the good faith judgment
of PocketSpec is necessary or required with respect to the
execution and delivery by Sierra Norte and the consummation by
Sierra Norte of the transactions contemplated hereby.
(e) REVIEW AND DUE DILIGENCE. PocketSpec, its investment bankers,
legal counsel and/or auditors shall have had the opportunity to
complete, and shall have completed, a satisfactory due diligence
investigation of Sierra Norte, together with a satisfactory
review of Sierra Norte's corporate status and Sierra Norte's
property, all of which shall be satisfactory in form and
substance to PocketSpec in its sole discretion.
(f) NO LITIGATION, ETC. No action, investigation, litigation or
arbitration or proceeding by or before any Governmental
Authority, or before any arbitral, mediation panel or tribunal of
any kind shall have been instituted or threatened (i) to restrain
or prohibit the transactions contemplated by this Agreement, or
(ii) to claim that the consummation of any such transaction is
illegal or (iii) which, if determined adversely, would effect
adversely PocketSpec or Sierra Norte following consummation of
the transactions contemplated hereby and Sierra Norte shall have
delivered to PocketSpec a certificate dated as of the Closing
Date and executed by Sierra Norte, stating that to its Best
Knowledge, no such items exist. No governmental authority or
arbitral, mediation panel or tribunal of any kind shall have
taken any other action as a result of which the management of
PocketSpec, in its sole discretion, reasonably deems it
inadvisable to proceed with the transactions contemplated by this
Agreement.
(g) NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, property or assets of Sierra Norte shall have occurred,
and no loss or damage to any of the assets, whether or not
covered by insurance, with respect to Sierra Norte hereto has
occurred, and Sierra Norte shall have delivered to PocketSpec a
certificate dated as of the Closing Date to such effect.
(h) UPDATE OF CONTRACTS. Sierra Norte shall have delivered to
PocketSpec an accurate list, as of the Closing Date, showing (i)
all agreements, contracts and commitments entered into since the
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date of this Agreement; and (ii) all other agreements, contracts
and commitments related to the businesses or the assets of Sierra
Norte entered into since the date of this Agreement, together
with true, complete and accurate copies of all such documents
(the "Sierra Norte New Contracts"). PocketSpec shall have had the
opportunity to review and approve the Sierra Norte New Contracts
of the other, and any of the Companies shall have the right to
delay the Closing for up to ten (10) days if it in its sole
discretion deems such delay necessary to enable it to adequately
review the Sierra Norte New Contracts.
(i) NO ADVERSE INFORMATION. The investigations with respect to Sierra
Norte, the assets and the respective businesses performed by
PocketSpec's respective professional advisors and other
representatives shall not have revealed any information
concerning Sierra Norte, its assets, liabilities or its business
that has not been made known to PocketSpec, in writing prior to
the date of this Agreement and that, in the opinion of such party
and its advisors, materially and adversely affects the business
or assets of the other party or the viability of the transaction
contemplated by this Agreement.
(j) ORDINARY COURSE OF BUSINESS. During the period from the date of
this Agreement until the Closing Date, Sierra Norte shall have
carried on its business in the ordinary and usual course, and
shall have delivered to PocketSpec a certificate to that effect.
(k) OTHER DOCUMENTS. Sierra Norte shall have delivered or caused to
be delivered all other documents, agreements, resolutions,
certificates or declarations as PocketSpec or its attorneys may
have reasonably requested.
(l) COMPLIANCE WITH SECURITIES LAWS. PocketSpec shall have undertaken
all actions necessary or advisable to consummate the Exchange in
conformity with all Governmental Requirements including, without
limitation, applicable federal and state securities laws.
(m) SHAREHOLDER SUBSCRIPTION AGREEMENTS AND ASSIGNMENTS. At Closing,
not less than one hundred percent (100%) of the combined voting
power of the issued and outstanding Memberships of Sierra Norte
Memberships shall have been delivered for exchange pursuant to
Section 2 of this Agreement. Surrendering Sierra Norte Members
shall have executed and delivered to PocketSpec Assignments and
Subscription Agreements substantially in the form of Exhibit
5.5(m) hereto assigning to PocketSpec their Sierra Norte
Memberships.
(n) FINANCIAL ADVISORY FEES. At or prior to Closing, all obligations
or commitments of PocketSpec and Sierra Norte to their respective
financial advisors and investment bankers shall have been paid or
otherwise satisfied upon terms satisfactory to the parties, and
PocketSpec and Sierra Norte shall each have been delivered and
received such written consents, approvals, estoppel certificates
or other instruments or undertakings from its advisors or other
third parties as each may deem reasonable, necessary or
advisable.
(o) SIERRA NORTE AUDITED FINANCIAL STATEMENTS. The Sierra Norte
Audited Financial Statements shall have been completed and shall
be in a form and substance satisfactory to PocketSpec and in
conformity with the requirements of Regulation SB under the
Securities Act.
5.6 CONDITIONS TO OBLIGATION OF SIERRA NORTE AND MEMBERS. The obligations
of Sierra Norte and Members on the Closing Date under the terms set
forth in this Agreement are, at the option of Sierra Norte and
Members, subject to the satisfaction or written waiver by Sierra Norte
and Members of each of the following conditions:
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(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties made by PocketSpec in this Agreement shall be true
and correct in all material respects on and as of the Closing
Date with the same force and effect as though such
representations and warranties had been made on the Closing Date,
except to the extent that such representations and warranties
expressly relate to an earlier date in which case they shall have
been true and correct as of such earlier date.
(b) COMPLIANCE WITH COVENANTS. All covenants which PocketSpec are
required to perform, satisfy or comply with on or before the
Closing Date shall have been fully complied with or performed in
all material respects.
(c) CORPORATE APPROVALS. Any action required to be taken by the Board
of Directors of PocketSpec and its shareholders to authorize the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have
been duly and validly taken.
(d) CONSENTS AND APPROVALS. To the extent that any material lease,
mortgage, deed of trust, contract or agreement to which
PocketSpec is a party shall require the consent of any person to
the exchange of PocketSpec's Memberships of Common Stock or any
other transaction provided for herein, such consent shall have
been obtained and Sierra Norte shall have received reasonably
satisfactory evidence thereof; provided, however, that PocketSpec
shall not make, as a condition for the obtaining of any such
consent, any agreements or undertakings not approved in writing
by Sierra Norte to the extent that such condition otherwise has
an effect on Sierra Norte or PocketSpec. Sierra Norte shall have
been furnished with evidence satisfactory to it of the timely
consent or approval of, filing with or notice to, each
Governmental Authority or Person which in the good faith judgment
of Sierra Norte is necessary or required with respect to the
execution and delivery by PocketSpec and the consummation by
PocketSpec of the transactions contemplated hereby.
(e) REVIEW AND DUE DILIGENCE. Sierra Norte, its investment bankers,
legal counsel and/or auditors shall have had the opportunity to
complete, and shall have completed, a satisfactory due diligence
investigation of PocketSpec, its assets and liabilities, together
with a satisfactory review of PocketSpec's corporate status and
the marketability of title to PocketSpec's property, all of which
shall be satisfactory in form and substance to Sierra Norte in
its sole discretion.
(f) NO LITIGATION, ETC. No action, investigation, litigation or
arbitration or proceeding by or before any Governmental
Authority, or before any arbitral, mediation panel or tribunal of
any kind shall have been instituted or threatened (i) to restrain
or prohibit the transactions contemplated by this Agreement or
(ii) to claim that the consummation of any such transaction is
illegal or (iii) which, if determined adversely, would effect
adversely PocketSpec or Sierra Norte following consummation of
the transactions contemplated hereby and the Companies shall have
delivered to each other certificates dated as of the Closing Date
and executed by such parties, stating that to their Best
Knowledge, no such items exist. No Governmental Authority or
arbitral or mediation panel or tribunal of any kind shall have
taken any other action as a result of which the management of
Sierra Norte, in its sole discretion, reasonably deems it
inadvisable to proceed with the transactions contemplated by this
Agreement.
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(g) NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, property, assets or liabilities of any Company shall
have occurred, and no loss or damage to any of the assets,
whether or not covered by insurance, with respect to PocketSpec
hereto has occurred, and PocketSpec shall have delivered to
Sierra Norte a certificate dated as of the Closing Date to such
effect.
(h) NO ADVERSE INFORMATION. The investigations with respect to
PocketSpec, the assets, liabilities and their respective
businesses performed by Sierra Norte's respective professional
advisors and other representatives shall not have revealed any
information concerning PocketSpec, its assets, liabilities or
business that has not been made known to Sierra Norte, in writing
prior to the date of this Agreement and that, in the opinion of
Sierra Norte and its advisors, materially and adversely affects
the business, liabilities or assets of PocketSpec or the
viability of the transactions contemplated by this Agreement.
(i) ORDINARY COURSE OF BUSINESS. During the period from the date of
this Agreement until the Closing Date, PocketSpec shall have
undertaken no material business operations and shall have
delivered to Sierra Norte a certificate to that effect.
(j) OTHER DOCUMENTS. PocketSpec shall have delivered or caused to be
delivered all other documents, agreements, resolutions,
certificates or declarations as Sierra Norte or its attorneys may
have reasonably requested.
(k) COMPLIANCE WITH SECURITIES LAWS. PocketSpec shall otherwise have
undertaken all actions necessary or advisable to consummate the
Exchange in conformity with all Governmental Requirements,
including, without limitation, applicable federal and state
securities laws.
(l) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Exchange shall be
in effect.
5.7 SPECIFIC ITEMS TO BE DELIVERED AT THE CLOSING. The parties shall
deliver the following items to the appropriate party at the Closing of
the transactions contemplated by this Agreement.
(a) TO BE DELIVERED BY SIERRA NORTE:
(i) A certificate dated the Closing Date of Sierra Norte, signed
by the Manager of Sierra Norte stating that the
representations and warranties of Sierra Norte set forth in
this Agreement are true and correct in all material
respects. Said certificate shall further verify and affirm
that all consents or waivers, if any, which may be necessary
to execute and deliver this Agreement have been obtained and
are in full force and effect.
(ii) A certificate dated the Closing Date of Sierra Norte, signed
by the Manager of Sierra Norte, in form and substance
satisfactory to PocketSpec and its legal counsel, certifying
that all conditions precedent set forth in this Agreement to
the obligations of Sierra Norte to close, have been
fulfilled or waived in writing, and that no event of default
hereunder and no event which, with the giving of notice or
passage of time, or both, would be an event of default, has
occurred as of such date.
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(b) TO BE DELIVERED BY MEMBERS:
(i) Certificate or certificates representing one hundred percent
(100%) of the issued and outstanding common Memberships of
Sierra Norte, which certificates shall be endorsed in favor
of PocketSpec.
(ii) Assignments, if any, with unconditional warranties of title,
duly executed by Members, assigning to PocketSpec any and
all equity rights, including, but not limited to, options,
warrants, puts and so forth, which Members may own in Sierra
Norte at the time of Closing.
(iii) Certificate of Members in which they state that they own
the Memberships and other rights of Sierra Norte free and
clear of all liens, encumbrances, security interests and
limitations on transfer whatsoever.
(iv) Certificate of Members confirming the accuracy, as of the
Closing Date, of the representations and warranties of
Members set forth in this Agreement.
(v) Subscription Agreements.
(c) TO BE DELIVERED BY PocketSpec:
(i) Certificate or certificates representing the Exchange Stock;
and
(ii) A certificate dated the Closing Date of PocketSpec, signed
by the President of PocketSpec stating that the
representations and warranties of PocketSpec set forth in
this Agreement are true and correct in all material
respects. Said certificate shall further verify and affirm
that all consents or waivers, if any, which may be necessary
to execute and deliver this Agreement have been obtained and
are in full force and effect.
(iii) A certificate dated the Closing Date of PocketSpec, signed
by the Chief Executive Officer and the Chief Financial
Officer of PocketSpec, in form and substance satisfactory to
Sierra Norte and its legal counsel, certifying that all
conditions precedent set forth in this Agreement to the
obligations of PocketSpec to close, have been fulfilled or
waived in writing, and that no event of default hereunder
and no event which, with the giving of notice or passage of
time, or both, would be an event of default, has occurred as
of such date.
(iv) Certificates dated the Closing Date of PocketSpec, signed by
the Secretary of PocketSpec, (i) certifying attached copies
of resolutions duly adopted by the Board of Directors of
PocketSpec, authorizing the execution of this Agreement and
the other transactions to be consummated pursuant thereto;
(ii) certifying the names and incumbency of the officers of
PocketSpec who executed the Agreement and any certificates
delivered pursuant to this Section for and on behalf of
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PocketSpec; (iii) certifying the authenticity of copies of
the Articles of Incorporation and Bylaws of PocketSpec and
its Subsidiaries; and (iv) certifying the authenticity of a
reasonably current Certificate of Good Standing, from all
jurisdictions in which PocketSpec and its Subsidiaries are
qualified to conduct business.
5.8 ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS OF PocketSpec .
(a) At Closing, the Board of Directors of PocketSpec shall resign and
be reconstituted to consist of directors designated by Sierra
Norte, subject only to the filing of appropriate SEC notices.
(b) At Closing, or as soon thereafter as practicable, the executive
officers of PocketSpec shall resign and the newly-constituted
Board of Directors of PocketSpec shall elect persons determined
by the newly constituted Board to serve as executive officers of
PocketSpec until the next regular annual meeting of the Company's
directors.
SECTION 6: REPRESENTATIONS AND WARRANTIES BY SIERRA NORTE AND MEMBERS
As a material inducement to PocketSpec to enter into this Agreement and with the
understanding and expectations that PocketSpec will be relying thereon in
consummating the Exchange contemplated hereunder, Sierra Norte and Members
(hereinafter collectively referred to as the "Corporation" or "Sierra Norte" for
the purposes of this Section 5 only) jointly and severally represent and warrant
as follows:
6.1 ORGANIZATION AND STANDING. Sierra Norte is a limited liability company
duly organized, validly existing and in good standing under the laws
of the State of New Mexico and has all requisite corporate power and
authority to own its assets and properties and to carry on its
business as it is now being conducted.
6.2 SUBSIDIARIES, ETC. Except as set forth on Exhibit 6.2, Sierra Norte
does not have any direct or indirect Ownership Interest in any
corporation, partnership, joint venture, association or other business
enterprise.
6.3 QUALIFICATION. Except as set forth on Exhibit 6.3 and for any
jurisdiction where the failure to be qualified to engage in business
as a foreign corporation would not have a material adverse affect on
Sierra Norte, Sierra Norte is not qualified to engage in business as a
foreign corporation in any state and there is no other jurisdiction
wherein the character of the properties presently owned by Sierra
Norte or the nature of the activities presently conducted by Sierra
Norte makes necessary the qualification, licensing or domestication of
Sierra Norte as a foreign corporation.
6.4 CORPORATE AUTHORITY. Except as set forth on Exhibit 6.4 hereto,
neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by
Sierra Norte with any on the provisions hereof will:
(a) Conflict with or result in a breach of any provision of its
Articles of Organization or Operating Agreement;
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(b) Result in a default (or give rise to any right of termination,
cancellation, or acceleration) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which Sierra Norte
is a party, or by which any of its properties or assets may be
bound except for such default (or right of termination,
cancellation, or acceleration) as to which requisite waivers or
consents shall either have been obtained by Sierra Norte prior to
the Closing Date or the obtaining of which shall have been waived
by PocketSpec; or
(c) Violate any order, writ, injunction, decree or, to Sierra Norte's
Best Knowledge, any statute, rule or regulation applicable to
Sierra Norte or any of its properties or assets. No consent or
approval by any Governmental Authority is required in connection
with the execution and delivery by Sierra Norte of this Agreement
or the consummation by Sierra Norte of the transactions
contemplated hereby.
6.5 FINANCIAL STATEMENTS. Except as otherwise provided, the following
statements will be attached to this Agreement as Exhibit 6.5:
(a) Audited financial statements of Sierra Norte containing balance
sheets, together with statements of operation, statements of cash
flows, and statements of stockholders' equity as of and for the
periods ended December 31, 2004 and unaudited financial
statements as of March 31, 2005.
Such financial statements, together with and subject to the
disclosures and notes thereto: (i) are in accordance with the
books and records of Sierra Norte; (i) present fairly and
accurately the financial condition of Sierra Norte as of the
dates of the balance sheets; (iii) present fairly and accurately
the results of operations for the periods covered by such
statements; (iv) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis; and
(v) include all adjustments (consisting of only normal recurring
accruals) which are necessary for a fair presentation of the
financial condition of Sierra Norte, and of the results of
operations of Sierra Norte for the periods covered by such
statements.
As of the date hereof and as of the Closing Date, Sierra Norte
does not have any liabilities or payables (absolute or
contingent, known or unknown), except for liabilities or payables
set forth in the Financial Statements or otherwise disclosed in
writing to PocketSpec.
6.6 FINANCIAL INFORMATION. In connection with the investigations performed
by and audit to be undertaken by PocketSpec of Sierra Norte, Sierra
Norte furnished certain financial information and data including,
without limitation, tax and accounting records, financial records,
statements, worksheets and other information requested by PocketSpec
and its auditors necessary to undertake the complete the audited
financial examinations. Sierra Norte and Members jointly and severally
represent and warrant that any and all such information furnished in
connection with the conduct of such investigations and audits shall be
true, accurate and complete in all material respects and shall not
contain any material misstatements nor any material omissions of fact
or information respecting the financial condition or results of
operation of the business for the respective periods covered by the
audits.
6.7 CAPITALIZATION OF SIERRA NORTE. The authorized capitalization of
Sierra Norte consists of two hundred fifty (250) Memberships issued
and outstanding. The names of the record owners of the issued and
outstanding Memberships are set forth on Exhibit 6.7 hereto. All
issued and outstanding Memberships of Sierra Norte Memberships have
been duly authorized and validly issued and are fully paid and
non-assessable. There are no other outstanding rights, options,
warrants, subscriptions, calls, convertible securities or agreement of
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any character or nature under which Sierra Norte is or may become
obligated to issue any Memberships of its capital stock of any kind,
other than those Memberships indicated in this Section as presently
outstanding and Memberships issuable in accordance with the terms of
this Agreement.
6.8 TAXES. Except as set forth in Exhibit 6.8:
(a) Sierra Norte has filed (or has obtained extensions for filing)
all income, excise, sales, corporate franchise, property, payroll
and other tax returns or reports required to be filed by it, as
of the date hereof by the United States of America, any state or
other political subdivision thereof or any foreign country and
has paid all Taxes or assessments relating to the time periods
covered by such returns or reports; and
(b) Sierra Norte has paid all tax liabilities imposed or assessed by
any governmental authority for all periods prior to the Closing
Date for which such taxes have become due and payable and has
received no notice from any such governmental authority of any
deficiency or delinquency with respect to such obligation. Sierra
Norte is not currently undergoing any audit conducted by any
taxing authority and has received no notice of audit covering any
prior period for which taxes have been paid or are or will be due
and payable prior to the Closing Date. There are no present
disputes as to taxes of any nature payable by Sierra Norte.
6.9 NO ACTIONS, PROCEEDINGS, ETC. Except as listed on the attached Exhibit
6.9, there is no action or proceeding (whether or not purportedly on
behalf of Sierra Norte) pending or to its knowledge threatened by or
against Sierra Norte which might result in any material adverse change
in the condition, financial or otherwise, of Sierra Norte's business
or assets. No order, writ or injunction or decree has been issued by,
or requested of any court or Governmental Agency which does nor may
result in any material adverse change in Sierra Norte's assets or
properties or in the financial condition or the business of Sierra
Norte. Except for liabilities referred to in attached Exhibit 6.9,
Sierra Norte is not liable for damages to any employee or former
employee as a result of any violation of any state, federal or foreign
laws directly or indirectly relating to such employee or former
employee.
6.10 POST BALANCE SHEET CHANGES. Except as set forth on the attached
Exhibit 6.10 and as contemplated by this Agreement, since March 31,
2005, Sierra Norte has not (a) issued, bought, redeemed or entered
into any agreements, commitments or obligations to sell, buy or redeem
any Memberships of its capital stock; (b) incurred any obligation or
liability (absolute or contingent), other than current liabilities
incurred, and obligations under contracts entered into, in the
ordinary course of business; (c) discharged or satisfied any lien or
encumbrance or paid any obligation or liability (absolute or
contingent), other than current liabilities incurred in the ordinary
course of business; (d) mortgaged, pledged or subjected to lien
charges, or other encumbrance any of its assets, other than the lien
of current or real property taxes not yet due and payable; (e) waived
any rights of substantial value, whether or not in the ordinary course
of business; (f) suffered any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting its
assets or its business; (g) made or suffered any amendment or
termination of any material contract or any agreement which adversely
affects its business; (h) received notice or had knowledge of any
labor trouble other than routine grievance matters, none of which is
material; (i) increased the salaries or other compensation of any of
its directors, officers or employees or made any increase in other
benefits to which employees may be entitled, other than employee
salary increases made in the ordinary course of business and reflected
on an exhibit hereto; (j) sold, transferred or otherwise disposed of
any of its assets, other than in the ordinary course of business; (k)
declared or made any distribution or payments to any of its Members,
officers or employees, other than wages and salaries made to employees
in the ordinary course of business; (l) revalued any of its assets; or
(m) entered into any transactions not in the ordinary course of
business.
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6.11 NO BREACHES. Sierra Norte is not in violation of, and the consummation
of the transactions contemplated hereby do not and will not result in
any material breach of, any of the terms or conditions of any
mortgage, bond, indenture, agreement, contract, license or other
instrument or obligation to which Sierra Norte is a party or by which
its assets are bound; nor will the consummation of the transactions
contemplated hereby cause Sierra Norte to violate any statute,
regulation, judgment, writ, injunction or decree of any court,
threatened or entered in a proceeding or action in which Sierra Norte
is, was or may be bound or to which any of Sierra Norte's assets are
subject.
6.12 CONDITION OF SIERRA NORTE'S ASSETS. Except as set forth on Exhibit
6.12, Sierra Norte's assets are currently in good and usable condition
and there are no defects or other conditions which, in the aggregate,
materially and adversely affect the operation or values of such assets
taken as a whole. Except as disclosed on Exhibit 6.12, no person other
than Sierra Norte (including any officer or employee of Sierra Norte)
has any proprietary interest in any know-how or other intangible
assets used by Sierra Norte in the conduct of its business. The
Company does not currently market any products for sale. 6.13
INVENTORY. Except as otherwise set forth on Exhibit 6.13, all
inventories reflected in the Financial Statements in excess of the
reserves for excess or obsolete inventories are stated at the lowest
of cost, replacement cost or market and, as so stated, are in good
condition and usable or salable in the category in which they are
inventoried, in the ordinary course of business of Sierra Norte,
without discounts other than normal trade discounts regularly offered
by Sierra Norte, for prompt payment or quantity purchase.
6.14 ACCOUNTS RECEIVABLE. The accounts receivable of Sierra Norte represent
valid and enforceable obligations due to Sierra Norte and, except to
the extent of the reserve reflected in the latest financial
statements, shall be collectible by Sierra Norte in the ordinary
course of business. Except as set forth on the attached Exhibit 6.14,
Sierra Norte has not received any notice of any material counterclaim
or set-off with respect to such accounts receivable.
6.15 CORPORATE ACTS AND PROCEEDINGS. This Agreement has been duly
authorized by all necessary corporate action on behalf of Sierra
Norte, has been duly executed and delivered by an authorized officer
of Sierra Norte, and is a valid and binding Agreement on the part of
Sierra Norte that is enforceable against Sierra Norte in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, fraudulent transfers,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and to judicial limitations on the
enforcement of the remedy of specific performance and other equitable
remedies.
6.16 REGISTERED RIGHTS AND PROPRIETARY INFORMATION.
(a) Exhibit 6.16 hereto contains a true and complete list of all
patents, letters patent and patent applications, service marks,
trademark and service ▇▇▇▇ registrations and applications,
copyright, copyright registrations and applications, grants of
licenses and rights to Sierra Norte with respect to the
foregoing, both domestic and foreign, claimed by Sierra Norte or
used or proposed to be used by Sierra Norte in the conduct of its
business (collectively herein, "Sierra Norte Registered Rights").
Exhibit 6.16 hereto also contains a true and complete list of all
and every trade secret, know-how, process, formula, discovery,
development, research, design, technique, customer and supplier
list, contracts, product development plans, product development
concepts, author contracts, marketing and purchasing strategy,
invention, and any other matter required for, incident to, or
related to the conduct of its business (hereafter collectively
-14-
the "Sierra Norte Proprietary Information"). Except as described
in Exhibit 6.16 hereto, Sierra Norte is not obligated or under
any liability whatever to make any payments by way of royalties,
fees or otherwise to any owner or licensor of, or other claimant
to, any Sierra Norte Registered Right or Sierra Norte Proprietary
Information with respect to the use thereof in the conduct of its
business or otherwise.
(b) Except as described in Exhibit 6.16 hereto, to Sierra Norte's
Best Knowledge, Sierra Norte owns and has the unrestricted right
to use the Sierra Norte Registered Rights and Sierra Norte
Proprietary Information required for or incident to the design,
development, manufacture, operation, sale and use of all products
and services sold or rendered or proposed to be sold or rendered
by Sierra Norte or relating to the conduct or proposed conduct of
its business free and clear of any right, title, interest, equity
or claim of others. As soon as practicable following the
execution of this Agreement, and except as described in Exhibit
6.16 hereto, Sierra Norte agrees to take all necessary steps
(including without limitation entering into appropriate
confidentiality, assignment of rights and non-competition
agreements with all officers, directors, employees and
consultants of Sierra Norte and others with access to or
knowledge of the Sierra Norte Proprietary Information) to
safeguard and maintain the secrecy and confidentiality of, and
its proprietary rights in, the Sierra Norte Proprietary
Information and all related documentation and intellectual
property rights therein necessary for the conduct or proposed
conduct of its business.
(c) Except as described in Exhibit 6.16 hereto, Sierra Norte has not
sold, transferred, assigned, licensed or subjected to any right,
lien, encumbrance or claim of others, any Sierra Norte
Proprietary Information, including without limitation any Sierra
Norte Registered Right, or any interest therein, related to or
required for the design, development, manufacture, operation,
sale or use of any product or service currently under development
or manufactured, or proposed to be developed, sold or
manufactured, by it. Exhibit 6.16 contains a true and complete
list and description of all licenses of Sierra Norte Proprietary
Information granted to Sierra Norte by others or to others by
Sierra Norte. Except as described in Exhibit 6.16 hereto, there
are no claims or demands of any person pertaining to, or any
proceedings that are pending or threatened, which challenge the
rights of Sierra Norte in respect of any Sierra Norte Proprietary
Information used in the conduct of its business.
(d) Except as described in Exhibit 6.16 hereto, Sierra Norte owns and
on the Closing Date shall own, has and shall have, holds and
shall hold, exclusively all right, title and interest in the
Sierra Norte Registered Rights, free and clear of all liens,
encumbrances, restrictions, claims and equities of any kind
whatsoever, has and shall have the exclusive right to use, sell,
license or dispose of, and has and shall have the exclusive right
to bring action for the infringement of the Sierra Norte
Registered Rights and the Sierra Norte Proprietary Information.
To the Best Knowledge of Corporation, the marketing, promotion,
distribution or sale by Sierra Norte of any products or interests
subject to the Sierra Norte Registered Rights or making use of
Sierra Norte Proprietary Information shall not constitute an
infringement of any patent, copyright, trademark, service ▇▇▇▇ or
misappropriation or violation of any other party's proprietary
rights or a violation of any license or agreement by Sierra
Norte. Except as described in Exhibit 6.16 hereto, to the
knowledge of Sierra Norte after due inquiry no facts or
circumstances exist that could result in the invalidation of any
of the Sierra Norte Registered Rights.
6.17 CHANGES IN SUPPLIERS AND CUSTOMERS. Except as disclosed on Exhibit
6.17, Sierra Norte is not aware of any fact which indicates that any
of the suppliers supplying products, components or materials to Sierra
Norte intends to cease selling such products to Sierra Norte nor is
Sierra Norte aware of any fact which indicates that any major customer
of Sierra Norte intends to terminate its business relations with
Sierra Norte.
-15-
6.18 NO LIENS OR ENCUMBRANCES. Sierra Norte has good and marketable title
to all of the property and assets, tangible and intangible, employed
in the operations of its business, free of any material mortgages,
security interests, pledges, easements or encumbrances of any kind
whatsoever except as set forth on the attached Exhibit 6.18 and except
for such property and assets as may be leased by Sierra Norte.
6.19 EMPLOYEE MATTERS. Exhibit 6.19 attached hereto contains a true,
complete and accurate list of all employees of Sierra Norte and the
remuneration of each (including wages, salaries and fringe benefits).
Sierra Norte has no information or facts indicating that any employee
listed on Exhibit 6.19 intends to terminate his/her employment
relationship with Sierra Norte prior or subsequent to the Closing
Date, except as may be required by this Agreement. Except as
specifically described on Exhibit 6.19, Sierra Norte has no employee
benefit plans (including, but not limited to, pension plans and health
or welfare plans), arrangements or understandings, whether formal or
informal. Sierra Norte does not now and has never contributed to a
"multi-employer plan" as defined in Section 400(a)(3) of the ERISA.
Sierra Norte has complied with all applicable provisions of ERISA and
all rules and regulations promulgated thereunder, and neither Sierra
Norte nor any trustee, administrator, fiduciary, agent or employee
thereof has at any time been involved in a transaction that would
constitute a "prohibited transaction" within the meaning of Section
406 of ERISA as to any covered plan of Sierra Norte. Sierra Norte is
not a party to any collective bargaining or other union agreement.
Sierra Norte has not, within the past five (5) years had, or been
threatened with, any union activities, work stoppages or other labor
trouble with respect to its employees which had a material adverse
effect on Sierra Norte, its business or assets. Except as set forth in
Exhibit 6.19, Sierra Norte has not made any commitment or agreements
to increase the wages or modify the conditions or terms of employment
of any of the employees of Sierra Norte used in connection with its
business, and between the date of this Agreement and the Closing Date,
Sierra Norte will not make any agreement to increase the wages or
modify the conditions or terms of employment of any of the employees
of Sierra Norte used in the conduct of its business, without the prior
written consent of all parties hereto.
6.20 LEGAL PROCEEDINGS AND COMPLIANCE WITH LAW. Except as set forth in
Exhibit 6.20, Sierra Norte has not received notice of any legal,
administrative, arbitration or other proceeding or governmental
investigation pending or threatened (including those relating to the
health, safety, employment of labor, or protection of the environment)
pertaining to Sierra Norte which might result in the aggregate in
money damages payable by Sierra Norte in excess of insurance coverage
or which might result in a permanent injunction against Sierra Norte.
Except as set forth in such Exhibit 6.20, Sierra Norte has
substantially complied with, and is not in default in any respect
under any laws, ordinances, requirements, regulations, or orders
applicable to the business of Sierra Norte, the violation of which
might materially and adversely affect it. Except as set forth in such
Exhibit 6.20, Sierra Norte is not a party to any agreement or
instrument, nor is it subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree, rule,
regulation, code or ordinance which materially and adversely affects,
or might reasonably be expected materially and adversely to affect the
business, operations, prospects, property, assets or condition,
financial or otherwise, of Sierra Norte.
6.21 CONTRACT SCHEDULES. Attached as Exhibit 6.21 hereto is an accurate
list of the following:
(a) All contracts, leases, agreements, covenants, licenses,
instruments or commitments of Sierra Norte pertaining to the
business of Sierra Norte calling for the payment of Five Thousand
Dollars ($5,000) or more or which is otherwise material to the
business of Sierra Norte, including, without limitation, the
following:
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(i) Licenses and contracts held in the ordinary course of
business;
(ii) Executory contracts for the purchase, sale or lease of any
assets;
(iii) Management or consulting contracts;
(iv) Patent, trademark and copyright applications, registrations
or licenses, and know-how, intellectual property and trade
secret agreements or other licenses;
(v) Note agreements, loan agreements, indentures and the like,
other than those entered into and executed in the ordinary
course of business;
(vi) All sales, agency, distributorship or franchise agreements;
and
(vii) Any other contracts not in the ordinary course of business.
(b) All labor contracts, employment agreements and collective
bargaining agreements to which Sierra Norte is a party.
(c) All instruments evidencing any liens or security interest
securing any indebtedness of Sierra Norte covering any asset of
Sierra Norte.
(d) All profit sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health
insurance or other employee benefit plans, agreements,
arrangements or commitments of any nature whatsoever, whether or
not legally binding, and all agreements with any present or
former officer, director or shareholder of Sierra Norte.
(e) Any and all documents, instruments and other writings not listed
in any other schedule hereto which are material to the business
operations of Sierra Norte.
Except as set forth in Exhibit 6.21, all of such contracts,
agreements, leases, licenses, plans, arrangements and commitments
and all other such items set forth above are valid, binding and
in full force and effect in accordance with their terms and
conditions, except as the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, fraudulent transfer,
reorganization or other similar laws affecting the enforcement of
contracts generally, and there is no existing material default
thereunder or breach thereof by Sierra Norte, or to Sierra
Norte's knowledge by any party to such contracts, or any
conditions which, with the passage of time or the giving of
notice or both, might constitute such a default by Sierra Norte
or by any other party to the contracts.
6.22 LABOR MATTERS. There are no strikes, slowdowns, stoppages,
organizational efforts, discrimination charges or other labor disputes
pending or, to the knowledge of Sierra Norte or any of its agent or
employees, threatened against Sierra Norte.
6.23 INSURANCE. Sierra Norte maintains in full force and effect insurance
coverage on its assets and business in such amounts and against such
risks and losses as set forth in Exhibit 6.23.
6.24 ENVIRONMENTAL. Except as disclosed on Exhibit 6.24, Sierra Norte has
never owned or operated any real property except for leased office
space:
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(a) To the Best Knowledge of Sierra Norte, no real property (or the
subsurface soil and the ground water thereunder) now or
previously leased by Sierra Norte (the "Leased Premises") either
contains any Hazardous Substance (as hereinafter defined) or has
underneath it any underground fuel or liquid storage tanks;
(b) To the Best Knowledge of Sierra Norte, there has been no
generation, transportation, storage, treatment or disposal of any
Hazardous Substance on or beneath the Leased Premises, now or in
the past;
(c) Sierra Norte is not aware of any pending or threatened litigation
or proceedings before any court or administrative agency in which
any person alleges, or threatens to allege, the presence,
release, threat of release, placement on or in the Leased
Premises, or the generation, transportation, storage, treatment
or disposal at the Leased Premises, of any Hazardous Substance;
(d) Sierra Norte has not received any written notice and has no
knowledge that any Governmental Authority or any employee or
agent thereof has determined or alleged, or is investigating the
possibility, that there is or has been any presence, release,
threat of release, placement on or in the Leased Premises, or any
generation, transportation, storage, treatment or disposal at the
Leased Premises, of any Hazardous Substance;
(e) To the Best Knowledge of Sierra Norte, there have been no
communications or agreements with any Governmental Authority or
agency (federal, state, or local) or any private person or entity
(including, without limitation, any prior owner of the Leased
Premises and any present or former occupant or tenant of the
Leased Premises) relating in any way to the presence, release,
threat of release, placement on or in the Leased Premises, or any
generation, transportation, storage, treatment or disposal at the
Leased Premises, of any Hazardous Substance. Sierra Norte further
agrees and covenants that Sierra Norte will not store or deposit
on, otherwise release or bring onto or beneath, the Leased
Premises any Hazardous Substance prior to the Closing Date; and
(f) There is no litigation, proceeding, citizen's suit or
governmental or other investigation pending, or, to Sierra
Norte's Best Knowledge, threatened, against Sierra Norte, and
Sierra Norte knows of no facts or circumstances which might give
rise to any future litigation, proceeding, citizen's suit or
governmental or other investigation, which relate to Sierra
Norte's compliance with environmental laws, regulations, rules,
guidelines and ordinances.
For purposes of this Section 6.24, "Hazardous Substance" shall
mean and include (i) a hazardous substance as defined in 42
U.S.C. Section 9601(14), the Regulations at 40 C.F.R. Part 302,
(2) any substance regulated under the Emergency Planning and
Community Right to Know Act (including without limitation any
extremely hazardous substances listed at 40 C.F.R. Part 355 and
any toxic chemical listed at 40 C.F.R. Part 372), (iii) hazardous
wastes and hazardous substances as specified under any California
state or local Governmental Requirement governing water
pollution, groundwater protection, air pollution, solid wastes,
hazardous wastes, spills and other releases of toxic or hazardous
substances, transportation of hazardous substances, materials and
wastes and occupational or employee health and safety, and (iv)
any other material, gas or substance known or suspected to be
toxic or hazardous (including, without limitation, any
radioactive substance, methane gas, volatile hydrocarbon,
industrial solvent, and asbestos) or which could cause a material
detriment to, or materially impair the beneficial use of, the
Leased Premises, or constitute a material health, safety or
environmental risk to any person exposed thereto or in contact
therewith. For purposes of this Section 5.24, "Hazardous
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Substance" shall not mean and shall not include the following, to
the extent used normally and required for everyday uses or normal
housekeeping or maintenance: (a) fuel oil and natural gas for
heating, (b) lubricating, cleaning, coolant and other compounds
customarily used in building maintenance, (c) materials routinely
used in the day-to-day operations of an office, such as copier
toner, (d) consumer products, (e) material reasonably necessary
and customarily used in construction and repair of an office
project, and (f) fertilizers, pesticides and herbicides commonly
used for routine office landscaping.
6.25 DISCLOSURE OF INFORMATION. Sierra Norte represents and warrants that
all statements, data and other written information provided by it to
any party hereto as well as their respective consultants and
representatives have been accurate copies or true originals. Sierra
Norte represents and warrants that, to its Best Knowledge, (i) there
exists no material information concerning Sierra Norte which has been
requested but not been disclosed to or made available to the other
parties and their representatives or consultants and which would be
material to a decision to consummate the transactions provided for in
this Agreement and (i) in the aggregate, such information does not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made in them,
in light of the circumstances under which they are made, not
misleading.
6.26 REPRESENTATION AND WARRANTIES. The representations and warranties
contained in this Agreement shall be true on and as of the Closing
Date with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date. Such
representations and warranties shall survive the Closing Date and
shall remain operative in full force and effect for the period of time
set forth in Section 11.5(a) hereof regardless of any investigation at
any time made by or on behalf of PocketSpec and shall not be deemed
merged in any document or instruction so executed and/or delivered by
Sierra Norte or Members.
SECTION 7: COVENANTS OF SIERRA NORTE
7.1 PRESERVATION OF BUSINESS. Until Closing, Sierra Norte shall use his
best efforts to cause Sierra Norte to:
(a) Preserve intact the present business organization of Sierra
Norte;
(b) Maintain its property and assets in its present state of repair,
order and condition, reasonable wear and tear excepted;
(c) Preserve and protect the goodwill and advantageous relationships
of Sierra Norte with its customers and all other persons having
business dealings with Sierra Norte;
(d) Preserve and maintain in force all licenses, permits,
registrations, franchises, patents, trademarks, tradenames, trade
secrets, service marks, copyrights, bonds and other similar
rights of Sierra Norte; and
(e) Comply with all laws applicable to the conduct of its business
7.2 ORDINARY COURSE. Until Closing, Sierra Norte shall conduct its
business only in the usual, regular and ordinary course, in
substantially the same manner as previously, and shall not make any
substantial change to its methods of management or operation in
respect of such business or property. Without limiting the foregoing,
Sierra Norte shall not, with respect to Sierra Norte:
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(a) Sell, mortgage, pledge or encumber or agree to sell, mortgage,
pledge or encumber, any of its property or assets, other than in
the ordinary course of business;
(b) Incur any obligation (contingent or otherwise) or purchase,
acquire, transfer, or convey, any material assets or property or
enter into any contract or commitment, except in the ordinary
course of business.
7.3 NEGATIVE COVENANTS. Until Closing, except as contemplated by this
Agreement or disclosed in exhibits to this Agreement, from the date
hereof until the Closing Date, unless and until PocketSpec otherwise
consents in writing, Sierra Norte will not (a) change or alter the
physical contents or character of the tangible and intangible assets
so as to materially affect the nature of Sierra Norte's business; (b)
incur any obligations or liabilities (absolute or contingent) other
than current liabilities incurred and obligations under contracts
entered into in the ordinary course of business; (c) mortgage, pledge
or voluntarily subject to lien, charge or other encumbrance any
assets, tangible or intangible, other than the lien of current
property taxes not due and payable; (d) sell, assign or transfer any
of its assets or cancel any debts or claims, other than in the
ordinary course of business; (e) waive any right of any substantial
value; (f) declare or make any payment or distribution to Members or
issue, purchase or redeem any Memberships of its capital stock or
other equity securities or issue or sell any rights to acquire the
same; (g) grant any increase in the salary or other compensation of
any of its directors, officers, or employees or make any increase in
any benefits to which such employees might be entitled; (h) institute
any bonus, benefit, profit sharing, stock option, pension, retirement
plan or similar arrangement, or make any changes in any such plans or
arrangements presently existing; or (i) enter into any material
transactions or series of transactions other than in the ordinary
course of business.
7.4 ADDITIONAL COVENANTS.
(a) Sierra Norte will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes,
assessments, and governmental charges or levies imposed upon the
income, profits, property or business of Sierra Norte or any
subsidiary; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings
and if Sierra Norte shall have set aside on its books adequate
reserves therefor; and provided, further, that Sierra Norte will
pay all such taxes, assessments, charges or levies forthwith upon
the commencement of proceedings to foreclose any lien that may
have attached as security therefor. Sierra Norte will promptly
pay or cause to be paid when due, or in conformance with
customary trade terms, all other indebtedness incident to the
operations of Sierra Norte;
(b) Sierra Norte will keep its properties and those of its
subsidiaries in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and
improvements thereto; and Sierra Norte will at all times comply
with the provisions of all material leases to which any of them
is a party or under which any of them occupies property so as to
prevent any loss or forfeiture thereof or thereunder;
(c) Sierra Norte will keep its assets that are of an insurable
character insured by financially sound and reputable insurers
against loss or damage by fire, extended coverage and explosion
insurance in amounts customary for companies in similar
businesses similarly situated; and Sierra Norte will maintain,
with financially sound and reputable insurers, insurance against
other hazards, risks and liabilities to persons and property to
the extent and in the manner customary for companies in similar
businesses similarly situated;
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(d) Sierra Norte will keep true records and books of account in which
full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in
accordance with its past practices consistently applied;
(e) Sierra Norte will comply with the requirements of all applicable
laws, rules, regulations and orders of any governmental
authority, a breach of which could have a material adverse effect
on its business or credit;
(f) Sierra Norte shall maintain in full force and effect its
corporate existence, rights and franchises and all licenses and
other rights to use patents, processes, licenses, trademarks,
trade names or copyrights owned or possessed by it or any
subsidiary and deemed by Sierra Norte to be necessary to the
conduct of its business;
(g) Sierra Norte will, consistent with its practices in the ordinary
course of business, endeavor to retain its business relationships
with its customers and suppliers that it believes to be
advantageous; and
(h) Sierra Norte shall deliver to PocketSpec copies of its statements
of operation and financial condition and similar statements as
and when prepared (if at all) in the ordinary course of its
business.
7.5 ACCESS TO BOOKS AND RECORDS, PREMISES, ETC. From the date of this
Agreement through the Closing Date, Sierra Norte will grant PocketSpec
and its authorized representatives reasonable access to its books and
records, premises, products, employees and customers and other parties
with whom it has contractual relations during reasonable business
hours and in a manner not to disrupt or interfere with Sierra Norte's
business relationships for purposes of enabling PocketSpec to fully
investigate the business of Sierra Norte. Sierra Norte will also
deliver copies of its monthly statements of operations and financial
condition for the period subsequent to its financial statements
referred to in Section 6.5 to PocketSpec within a reasonable time of
such statements becoming available.
7.6 COMPENSATION. Except as contemplated by this Agreement, Sierra Norte
shall not enter into or agree to enter into any employment contract or
agreement for consulting, professional, or other services which will
adversely and materially affect the operation of Sierra Norte prior to
the Closing Date, except for any extensions of said contracts or
agreements on substantially the same terms and conditions as were
previously in effect.
7.7 NO SOLICITATION.
(a) Except in connection with the transactions contemplated by this
Agreement, Sierra Norte shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any officer,
director or employee of or any investment banker, attorney or
other advisor or representative of, Sierra Norte or any of its
subsidiaries to, (i) solicit, initiate or encourage the
submission of, any takeover proposal, (i) enter into any
agreement with respect to any takeover proposal or (iii)
participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead
to, any takeover proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in
the preceding sentence by any executive officer of Sierra Norte
or any of its subsidiaries or any investment banker, attorney or
other advisor or representatives of Sierra Norte or any of its
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subsidiaries or otherwise, shall be deemed to be a breach of this
Section by Sierra Norte. For purposes of this Agreement,
"takeover proposal" means any proposal for a merger,
consolidation or reorganization or other business combination
involving Sierra Norte or any of its subsidiaries or any proposal
or offer to acquire in any manner, directly or indirectly, an
equity interest in, any voting securities of, or options, rights,
warrants or other interests convertible or exercisable for or
into such voting securities, or a substantial or material portion
of the assets or business of Sierra Norte or any of its
subsidiaries, other than the transactions contemplated by this
Agreement.
(b) Except upon a material breach of this Agreement by PocketSpec or
following termination hereof, except for action permitted or
contemplated by this Agreement, including a party's right to
terminate this Agreement under certain circumstances, neither the
Board of Directors of Sierra Norte nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify,
in a manner adverse to PocketSpec, the approval or recommendation
by such Board of Directors of any such committee of this
Agreement or the Exchange or (i) approve or recommend, or propose
to approve or recommend, any takeover proposal.
(c) Sierra Norte promptly shall advise PocketSpec orally and in
writing of any takeover proposal or any inquiry with respect to
or which could lead to any takeover proposal and the identity of
the person making any such takeover proposal or inquiry. Sierra
Norte will keep PocketSpec fully informed of the status and
details of any such takeover proposal or inquiry.
(d) The provisions of this Section 7.7 shall not be construed to
prevent any investment banker, attorney or other advisor or
representative of Sierra Norte to engage in discussions with
third parties in the ordinary course of business with respect to
transactions not involving the parties to this Agreement.
SECTION 8: REPRESENTATIONS AND WARRANTIES OF PocketSpec
As a material inducement to Sierra Norte to enter into this Agreement and with
the understanding and expectations that Sierra Norte will be relying thereon in
consummating the Exchange contemplated hereunder, PocketSpec hereby represents
and warrants as follows:
8.1 ORGANIZATION AND STANDING. PocketSpec is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Colorado, and has all requisite corporate power and authority to own
its assets and properties and to carry on its business as it is now
being conducted.
8.2 SUBSIDIARIES, ETC. Except as set forth on Exhibit 8.2 hereto,
PocketSpec does not have any direct or indirect Ownership Interest in
any corporation, partnership, joint venture, association or other
business enterprise.
8.3 QUALIFICATION. Except as set forth on Exhibit 8.3 and for any
jurisdiction where the failure to be qualified to engage in business
as a foreign corporation would not have a material adverse effect on .
PocketSpec. PocketSpec is not qualified to engage in business as a
foreign corporation in any state other than Colorado, and there is no
other jurisdiction wherein the character of the properties presently
owned by . PocketSpec or the nature of the activities presently
conducted by . PocketSpec makes necessary the qualification, licensing
or domestication of PocketSpec as a foreign corporation.
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8.4 CORPORATE AUTHORITY. Except as set forth on Exhibit 8.4 hereto,
neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by
PocketSpec with any on the provisions hereof will:
(a) Conflict with or result in a breach of any provision of its
Articles of Incorporation or By-Laws or similar documents of any
Subsidiary;
(b) Result in a default (or give rise to any right of termination,
cancellation, or acceleration) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which . PocketSpec
is a party, or by which any of its properties or assets may be
bound except for such default (or right of termination,
cancellation, or acceleration) as to which requisite waivers or
consents shall either have been obtained by Sierra Norte prior to
the Closing Date or the obtaining of which shall have been waived
by Sierra Norte; or
(c) Violate any order, writ, injunction, decree or, to PocketSpec's
Best Knowledge, any statute, rule or regulation applicable to
PocketSpec or any of its properties or assets. No consent or
approval by any Governmental Authority is required in connection
with the execution and delivery by . PocketSpec of this Agreement
or the consummation by . PocketSpec of the transactions
contemplated hereby, except for possible notice under plant
closing laws.
8.5 SECURITIES MATTERS.
(a) The Common Stock of PocketSpec is registered pursuant to Section
12(g) of the Exchange Act. PocketSpec has had the opportunity to
obtain on Sierra Norte's behalf true and complete copies of the
SEC Documents (except for exhibits and incorporated documents).
PocketSpec has not provided to Sierra Norte any information
which, according to applicable law, rule or regulation, should
have been disclosed publicly by PocketSpec but which has not been
so disclosed, other than with respect to the transactions
contemplated by this Agreement.
(b) As of their respective dates, all of PocketSpec's reports,
statements and other filings with the Commission (the "SEC
Documents") complied in all material respects with the
requirements of the Act or the Exchange Act as the case may be
and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
financial statements of PocketSpec included in the SEC Documents
comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations
of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may
be condensed or summary statements) and fairly present in all
material respects the financial position of Company as of the
dates thereof and the results of operations and cash flows for
the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(c) The Exchange Stock to be issued to the Members shall be and is
exempt from the registration requirements of the Securities Act,
and the transfer of the Exchange Stock to the Members will not
violate the anti-fraud provisions of the Securities Act and the
exchange of securities provided for in Section 2.1 of this
Agreement has been consummated in conformity with all other
applicable Legal Requirements.
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8.6 CAPITALIZATION OF PocketSpec . The authorized capital stock of
PocketSpec consists entirely of 900,000,000 Shares of Common Stock
having a par value of $.001 per share. As of March 31, 2005, there
were a total of 37,265,372 Shares of Common Stock issued and
outstanding issued and outstanding. All outstanding Shares of
PocketSpec's capital stock have been validly issued, are fully paid
and non-assessable, and are not subject to pre-emptive rights. The
Shares of Common Stock to be issued to the Members on the Closing Date
in accordance with Sections 2.1 hereof have been duly approved by the
Directors of PocketSpec and will, upon their issuance, have been
validly issued and will be fully paid and non-assessable. Except as
described in PocketSpec's SEC Documents, there are no equity
securities of PocketSpec authorized, issued or outstanding, and there
are no authorized, issued or outstanding subscriptions, options,
warrants, contracts, calls, commitments or other purchase rights of
any nature or character relating to any of PocketSpec's capital stock,
equity securities, debt or other securities convertible into stock or
equity securities of PocketSpec. As of the date of this Agreement,
there are no outstanding contractual obligations of PocketSpec to
repurchase, redeem or otherwise acquire any Shares of capital stock of
PocketSpec.
8.7 NO ACTIONS, PROCEEDINGS, ETC. Except as listed on the attached Exhibit
8.7, there is no action or proceeding (whether or not purportedly on
behalf of PocketSpec) pending or to its knowledge threatened by or
against PocketSpec, which might result in any material adverse change
in the condition, financial or otherwise, of PocketSpec 's business or
assets. No order, writ or injunction or decree has been issued by, or
requested of any court or Governmental Agency which does nor may
result in any material adverse change in PocketSpec 's assets or
properties or in the financial condition or the business of
PocketSpec. PocketSpec is not liable for damages to any employee or
former employee as a result of any violation of any state, federal or
foreign laws directly or indirectly relating to such employee or
former employee.
8.8 POST BALANCE SHEET CHANGES. Except as set forth on Exhibit 8.8 and as
contemplated by this Agreement, since the date of the latest financial
statements, PocketSpec has not (a) issued, bought, redeemed or entered
into any agreements, commitments or obligations to sell, buy or redeem
any Memberships of its capital stock; (b) incurred any obligation or
liability (absolute or contingent), other than current liabilities
incurred, and obligations under contracts entered into, in the
ordinary course of business; (c) discharged or satisfied any lien or
encumbrance or paid any obligation or liability (absolute or
contingent), other than current liabilities incurred in the ordinary
course of business; (d) mortgaged, pledged or subjected to lien
charges, or other encumbrance any of its assets, other than the lien
of current or real property taxes not yet due and payable; (e) waived
any rights of substantial value, whether or not in the ordinary course
of business; (f) suffered any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting its
assets or its business; (g) made or suffered any amendment or
termination of any material contract or any agreement which adversely
affects its business; (h) received notice or had knowledge of any
labor trouble other than routine grievance matters, none of which is
material; (i) increased the salaries or other compensation of any of
its directors, officers or employees or made any increase in other
benefits to which employees may be entitled, other than employee
salary increases made in the ordinary course of business and reflected
on an exhibit hereto; (j) sold, transferred or otherwise disposed of
any of its assets, other than in the ordinary course of business; (k)
declared or made any distribution or payments to any of its
shareholders, officers or employees, other than wages and salaries
made to employees in the ordinary course of business; (l) revalued any
of its assets; or (m) entered into any transactions not in the
ordinary course of business.
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8.9 NO BREACHES. Except as set forth on Exhibit 8.9 , PocketSpec is not in
violation of, and the consummation of the transactions contemplated
hereby do not and will not result in any material breach of, any of
the terms or conditions of any mortgage, bond, indenture, agreement,
contract, license or other instrument or obligation to which
PocketSpec is a party or by which its assets are bound; nor will the
consummation of the transactions contemplated hereby cause PocketSpec
or any Subsidiary to violate any statute, regulation, judgment, writ,
injunction or decree of any court, threatened or entered in a
proceeding or action in which PocketSpec is, was or may be bound or to
which any of PocketSpec 's assets are subject.
8.10 CORPORATE ACTS AND PROCEEDINGS. This Agreement has been duly
authorized by all necessary corporate action on behalf of PocketSpec,
has been duly executed and delivered by authorized officers of
PocketSpec, and is a valid and binding Agreement on the part of
PocketSpec that is enforceable against PocketSpec in accordance with
its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, fraudulent transfers,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and to judicial limitations on the
enforcement of the remedy of specific performance and other equitable
remedies. All corporate action necessary to issue and deliver to the
Sierra Norte Members the Exchange Stock (each as described in Sections
2.1 and 2.3) has been taken by PocketSpec.
8.11 REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in this Agreement shall be true on and as of the Closing
Date with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date.
SECTION 9: COVENANTS OF PocketSpec
9.1 PRESERVATION OF BUSINESS. Until Closing, PocketSpec shall use its best
efforts to :
(a) Preserve intact the present business organization of PocketSpec;
(b) Maintain its property and assets in its present state of repair,
order and condition, reasonable wear and tear excepted;
(c) Preserve and protect the goodwill and advantageous relationships
of PocketSpec with its customers and all other persons having
business dealings with PocketSpec;
(d) Preserve and maintain in force all licenses, permits,
registrations, franchises, patents, trademarks, tradenames, trade
secrets, service marks, copyrights, bonds and other similar
rights of PocketSpec; and
(e) Comply with all laws applicable to the conduct of its business.
9.2 ORDINARY COURSE. Until Closing, PocketSpec shall not, without the
prior written consent of Sierra Norte:
(a) Sell, mortgage, pledge or encumber or agree to sell, mortgage,
pledge or encumber, any of the property or assets of PocketSpec
or the Subsidiaries; and
(b) Incur any obligation (contingent or otherwise) or purchase,
acquire, transfer, or convey, any material assets or property or
enter into any contract or commitment.
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9.3 NEGATIVE COVENANTS. Until Closing, except as contemplated by this
Agreement or as disclosed in Exhibits to this Agreement, from the date
hereof until the Closing Date, unless and until Sierra Norte otherwise
consents in writing, PocketSpec and the Subsidiaries will not (a)
change or alter the physical contents or character of the inventories
of its business, so as to materially affect the nature of PocketSpec
's business or materially and adversely change the total dollar
valuation of such inventories from that reflected on the financial
statements referred to in Section 8.5 other than in the ordinary
course of business; (b) incur any obligations or liabilities (absolute
or contingent) other than current liabilities incurred and obligations
under contracts entered into in the ordinary course of business; (c)
mortgage, pledge or voluntarily subject to lien, charge or other
encumbrance any assets, tangible or intangible, other than the lien of
current property taxes not due and payable; (d) sell, assign or
transfer any of its assets or cancel any debts or claims, other than
in the ordinary course of business; (e) waive any right of any
substantial value; (f) declare or make any payment or distribution to
shareholders or issue, purchase or redeem any shares of its capital
stock or other equity securities or issue or sell any rights to
acquire the same; (g) grant any increase in the salary or other
compensation of any of its directors, officers, or employees or make
any increase in any benefits to which such employees might be
entitled; (h) institute any bonus, benefit, profit sharing, stock
option, pension, retirement plan or similar arrangement, or make any
changes in any such plans or arrangements presently existing; or (i)
enter into any transactions or series of transactions other than in
the ordinary course of business.
9.4 ADDITIONAL COVENANTS.
(a) PocketSpec will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes,
assessments, and governmental charges or levies imposed upon the
income, profits, property or business of PocketSpec or any
subsidiary; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings
and if PocketSpec shall have set aside on its books adequate
reserves therefor; and provided, further, that PocketSpec will
pay all such taxes, assessments, charges or levies forthwith upon
the commencement of proceedings to foreclose any lien that may
have attached as security therefor. PocketSpec will promptly pay
or cause to be paid when due, or in conformance with customary
trade terms, all other indebtedness incident to the operations of
PocketSpec;
(b) PocketSpec will keep its properties and those of its subsidiaries
in good repair, working order and condition, reasonable wear and
tear excepted, and from time to time make all needful and proper
repairs, renewals, replacements, additions and improvements
thereto; and PocketSpec will at all times comply with the
provisions of all material leases to which any of them is a party
or under which any of them occupies property so as to prevent any
loss or forfeiture thereof or thereunder;
(c) PocketSpec will keep its assets that are of an insurable
character insured by financially sound and reputable insurers
against loss or damage by fire, extended coverage and explosion
insurance in amounts customary for companies in similar
businesses similarly situated; and PocketSpec will maintain, with
financially sound and reputable insurers, insurance against other
hazards, risks and liabilities to persons and property to the
extent and in the manner customary for companies in similar
businesses similarly situated;
(d) PocketSpec will keep true records and books of account in which
full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in
accordance with its past practices consistently applied;
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(e) PocketSpec will comply with the requirements of all applicable
laws, rules, regulations and orders of any governmental
authority, a breach of which could have a material adverse effect
on its business or credit;
(f) PocketSpec shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other
rights to use patents, processes, licenses, trademarks, trade
names or copyrights owned or possessed by it or any subsidiary
and deemed by PocketSpec to be necessary to the conduct of its
business;
(g) PocketSpec will, consistent with its practices in the ordinary
course of business, endeavor to retain its business relationships
with its customers and suppliers that it believes to be
advantageous; and
(h) PocketSpec shall deliver to Sierra Norte copies of its statements
of operation and financial condition and similar statements as
and when prepared (if at all) in the ordinary course of its
business.
9.5 ACCESS TO BOOKS AND RECORDS, PREMISES, ETC. From the date of this
Agreement through the Closing Date, PocketSpec will ▇▇▇▇▇ ▇▇▇▇▇▇ Norte
and its authorized representatives reasonable access to its and the
Subsidiaries' books and records, premises, products, employees and
customers and other parties with whom it has contractual relations
during reasonable business hours for purposes of enabling Sierra Norte
to fully investigate the business of PocketSpec and the Subsidiaries.
PocketSpec will also deliver copies of the monthly statements of
operations and financial condition for the period subsequent to the
latest financial statements to Sierra Norte within a reasonable time
of such statements becoming available.
9.6 DELIVERY OF ADDITIONAL FILINGS. Following the execution of this
Agreement and until the Closing Date, PocketSpec shall provide Sierra
Norte with copies of any and all reports, filings, notices or other
information which PocketSpec may prepare and file with or receive from
the Commission, Nasdaq or any other regulatory authority, (and shall
give Sierra Norte an opportunity to review and comment on any such
filings) as well as copies of any pleadings, notices or other filings
made in connection with any pending litigation, arbitration,
investigation or proceeding in which PocketSpec or any Subsidiary is
party or otherwise involved.
SECTION 10: REPRESENTATIONS AND WARRANTIES OF MEMBERS
Members severally represent and warrant to PocketSpec that, as of the date of
this Agreement, and as of the date of Closing, the following are true and
accurate:
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10.1 OWNERSHIP. Each Member owns the number of Memberships of Sierra Norte,
a New Mexico limited liability company, set forth in Section 6.7
hereof, which Memberships are fully paid, non-assessable and will be
transferred and assigned to PocketSpec free and clear of any claims,
liens, and encumbrances or other restrictions which would in any way
impair their right to effectively sell or transfer such Memberships.
10.2 RIGHTS OWNERSHIP. Each Member is the beneficial owner of the equity
rights, including, but not limited to, options, warrants, puts and the
like, in Sierra Norte, as are set forth on Exhibit 10.2 hereto. The
rights set forth on Exhibit 10.2 are owned by Members and will be
assigned to PocketSpec free and clear of any claims, liens, and
encumbrances or other restrictions which would in any way impair the
entitlements represented thereby.
10.3 RESTRICTION ON FUTURE TRANSFER. There are no unwaived restrictions on
the transferability of the Memberships of Sierra Norte Memberships
being transferred to PocketSpec imposed by or pursuant to Sierra
Norte's corporate documents or by any other agreements to which
Members or Sierra Norte are a party, except for restrictions imposed
by or on account of federal and state securities laws.
10.4 UNREGISTERED STOCK. Members represent that they understand that the
PocketSpec Common Stock has not been registered for sale under federal
or state securities laws and that said securities are being issued to
Members pursuant to a claimed exemption from the registration
requirements of such laws. Members understand that in order to
maintain such exemption it must be acquiring the stock with no view to
making a public distribution of said securities, and the
representations and warranties contained in this Section 10.4 are
given with the intention that PocketSpec may rely thereon for purposes
of claiming such exemption; and that they understand that they must
bear the economic risk of their investment in the PocketSpec Common
Stock for a substantial period of time, because the PocketSpec Common
Stock has not been registered under the federal or state securities
laws, and, cannot be sold unless subsequently registered under such
laws or unless an exemption from such registration is available.
10.5 STOCK ACQUIRED FOR INVESTMENT; LIMITATIONS ON DISPOSITIONS. Each
Member represents that he is acquiring the PocketSpec Common Stock for
its own account and for investment and not with a view to, or for sale
in connection with, any distribution thereof in violation of the
Securities Act of 1933, as amended. Members agree that the stock will
not be offered for sale, sold or otherwise transferred for value and
that no transfer thereof will be made by it unless (i) a registration
statement with respect thereto has become effective under the
Securities Act of 1933, as amended, or (i) there is presented to
PocketSpec an opinion of counsel for Members reasonably satisfactory
to PocketSpec that such registration is not required, or (iii) there
is presented to PocketSpec a letter from the Securities and Exchange
Commission (said Commission having been informed of all relevant
circumstances) to the effect that in the event the stock is
transferred by Members without such registration, the Commission or
the staff will not recommend any action. Members further agrees that
the stock will not be offered for sale, sold or otherwise transferred
unless, in the opinion of legal counsel for PocketSpec, such sale or
disposition does not, and will not, violate any provisions of any
other federal or state securities law or regulation. Members consents
that any transfer agent of PocketSpec may be instructed not to
transfer any of the stock unless it receives satisfactory evidence of
compliance with the foregoing provisions and that there may be
endorsed upon any certificates (or instruments issued in substitution
therefor), PocketSpec's regular legend regarding the sale of
restricted securities.
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SECTION 11: TERMINATION
11.1 TERMINATION. This Agreement may be terminated and abandoned solely as
follows:
(a) At any time until the Closing Date by the mutual agreement of
PocketSpec and Sierra Norte.
(b) By any party hereto, if for any reason the parties have failed to
close this Agreement on or before May 31, 2005, provided that the
party requesting termination is not then in default thereunder.
(c) By any party hereof, if the other party shall have breached any
representation, warranty or covenant contained in this Agreement
and shall have failed to cure such breach within ten (10) days
following written notice thereof by the party seeking
termination.
In the event of any termination pursuant to this Section 11.1(b)
or (c), written notice setting forth the reasons therefor shall
forthwith be given by the terminating party to all of the other
parties hereto.
11.2 EFFECT OF TERMINATION. If the Exchange is terminated and abandoned as
provided for in this Section 11, this Agreement shall forthwith become
wholly void and of no effect without liability to any party to this
Agreement; provided, however, that no such termination shall terminate
or limit the rights of any such terminating party to enforce any
remedy otherwise available for any breach hereof.
SECTION 12: INDEMNIFICATION AND REMEDIES FOR BREACH
12.1 INDEMNIFICATION BY PocketSpec.
(a) PocketSpec shall defend, indemnify and hold Members and Sierra
Norte harmless against and in respect of any damage, loss,
liability, cost or expense, including expert witness fees and
reasonable attorneys' fees, whether or not recoverable under
applicable state law, resulting or arising from or incurred in
connection with:
(viii) Any misrepresentation, breach of warranty, or
nonfulfillment or nonperformance of any agreement on the
part of PocketSpec under this Agreement, or any
misrepresentation or omission from any exhibit, schedule,
list, certificate or other instrument furnished or to be
furnished by it under this Agreement, or any noncompliance
on the part of PocketSpec with applicable law.
(ix) Any and all liabilities of PocketSpec of any nature
whatsoever, whether accrued, absolute, contingent or
otherwise and whether known or unknown, except to the extent
that any such liability arises from Members' failure to
perform or discharge, when due, Members' and Sierra Norte's
future obligations; and
(x) Any actions, suits, proceedings, damages, assessments,
judgments, costs or expenses incident to any of the
foregoing.
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(b) Promptly after the receipt by Members and/or Sierra Norte of
notice of any claim asserted by a third party that may give rise
to PocketSpec's liability to Members and/or Sierra Norte under
this Section, Members and/or Sierra Norte shall give to
PocketSpec written notice of such claim, and PocketSpec shall be
entitled to participate at its own expense in the defense of any
such claim. Members and/or Sierra Norte shall not pay,
acknowledge, compromise or settle any such claim without the
written consent of PocketSpec, unless such payment,
acknowledgment, compromise or settlement results in a full and
complete release and discharge of PocketSpec from any liability.
12.2 INDEMNIFICATION BY MEMBERS.
(a) Members shall defend, indemnify and hold PocketSpec harmless
against and in respect of any damage, loss, liability, cost or
expense, including expert witness fees and reasonable attorneys'
fees, whether or not recoverable under applicable state law,
resulting or arising from or incurred in connection with:
(xi) Any misrepresentation, breach of warranty, or nonfulfillment
or nonperformance of any agreement on the part of Members
under this Agreement, or any misrepresentation or omission
from any exhibit, schedule, list, certificate or other
instrument furnished or to be furnished by it under this
Agreement.
(xii) Any and all liabilities of Members of any nature
whatsoever, whether accrued, absolute, contingent or
otherwise and whether known or unknown, except to the extent
that any such liability arises from PocketSpec's failure to
perform or discharge, when due, PocketSpec's future
obligations;
(xiii) Any actions, suits, proceedings, damages, assessments,
judgments, costs or expenses incident to any of the
foregoing.
(b) Promptly after the receipt by PocketSpec of notice of any claim
asserted by a third party that may give rise to Members'
liability to PocketSpec under this Section, PocketSpec shall give
to Members written notice of such claim and Members shall be
entitled to participate at its own expense in the defense of any
such claim. PocketSpec shall not pay, acknowledge, compromise or
settle any such claim without the written consent of Members,
unless such payment, acknowledgment, compromise or settlement
results in a full and complete release and discharge of Members
from any liability.
12.3 INDEMNIFICATION BY SIERRA NORTE.
(a) Sierra Norte shall defend, indemnify and hold PocketSpec harmless
against and in respect of any damage, loss, liability, cost or
expense, including expert witness fees and reasonable attorneys'
fees, whether or not recoverable under applicable state law,
resulting or arising from or incurred in connection with:
(i) Any misrepresentation, breach of warranty, or nonfulfillment
or nonperformance of any agreement on the part of Sierra
Norte under this Agreement, or any misrepresentation or
omission from any exhibit, schedule, list, certificate or
other instrument furnished or to be furnished by it under
this Agreement.
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(ii) Any and all liabilities of Sierra Norte of any nature
whatsoever, whether accrued, absolute, contingent or
otherwise and whether known or unknown, except to the extent
that any such liability arises from PocketSpec's failure to
perform or discharge, when due, PocketSpec's future
obligations;
(iii) Any actions, suits, proceedings, damages, assessments,
judgments, costs or expenses incident to any of the
foregoing.
(b) Promptly after the receipt by PocketSpec of notice of any claim
asserted by a third party that may give rise to Sierra Norte's
liability to PocketSpec under this Section, PocketSpec shall give
to Sierra Norte written notice of such claim and Sierra Norte
shall be entitled to participate at its own expense in the
defense of any such claim. PocketSpec shall not pay, acknowledge,
compromise or settle any such claim without the written consent
of Sierra Norte, unless such payment, acknowledgment, compromise
or settlement results in a full and complete release and
discharge of Sierra Norte from any liability.
12.4 ADDITIONAL NOTICE. Notwithstanding the provisions of Sections 12.1,
12.2 or 12.3 above, promptly after the receipt by any party hereto of
notice of any claim asserted by a third party that may give rise to
the liability of any party for which the right to indemnification may
be claimed under this Section, such party shall give to each other
party written notice of such claim as soon as practicable. The
provisions of this Section 12.4 in addition to and not in lieu of the
covenants of the parties contained in Sections 12.1, 12.2 or 12.3
above.
12.5 DETERMINATION OF DAMAGES AND RELATED MATTERS.
(a) Upon the occurrence of any event which would give rise to a claim
by PocketSpec against, or to a right of defense and indemnity
against Members pursuant to this Section 12.5, or in the event
that any suit, action, investigation, claim or proceeding is
begun, made or instituted as a result of which Members may become
obligated to PocketSpec hereunder, PocketSpec shall give notice
to Members of the occurrence of such event and shall identify
PocketSpec's choice of counsel to represent such investigation,
claim or proceedings, provided that the failure of PocketSpec to
give notice shall not affect the indemnification obligations of
Members hereunder. PocketSpec shall have the exclusive right to
so defend, contest or protect against such matter utilizing the
counsel of PocketSpec's choice (who shall be reasonably
acceptable to a representative of Members). Members shall have
the right, but not the obligation, to participate, at its own
expense, in the defense thereof by counsel of their choice.
(b) As PocketSpec incurs expenses for which indemnification hereunder
is provided and after any final judgment or award shall have been
rendered by a court, arbitration board or administrative agency
of competent jurisdiction, and the expiration of the time in
which to appeal therefrom, or a settlement shall have been
consummated, PocketSpec shall forward to Members notice of any
sums due and owing by them pursuant to this Agreement with
respect to such matter and they shall be required to pay all of
the sums so due and owing to PocketSpec within ten (10) days of
such notice.
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(c) Upon the occurrence of any event which would give rise to a claim
by Sierra Norte and/or Members against, or to a right of defense
and indemnity against PocketSpec pursuant to this Section 12.5,
or in the event that any suit, action, investigation, claim or
proceeding is begun, made or instituted as a result of which
PocketSpec may become obligated to Sierra Norte and/or Members
hereunder, Sierra Norte and/or Members shall give notice to
PocketSpec of the occurrence of such event and shall identify
their choice of counsel to represent such investigation, claim or
proceedings, provided that the failure of either or both of them
to give notice shall not affect the indemnification obligations
of PocketSpec hereunder. Sierra Norte and/or Members shall have
the exclusive right to so defend, contest or protect against such
matter utilizing the counsel of their choice (who shall be
reasonably acceptable to a representative of PocketSpec).
PocketSpec shall have the right, but not the obligation, to
participate, at its own expense, in the defense thereof by
counsel of its choice.
(d) As Sierra Norte and/or Members incur expenses for which
indemnification hereunder is provided and after any final
judgment or award shall have been rendered by a court,
arbitration board or administrative agency of competent
jurisdiction, and the expiration of the time in which to appeal
therefrom, or a settlement shall have been consummated, Sierra
Norte and/or Members shall forward to PocketSpec notice of any
sums due and owing by it pursuant to this Agreement with respect
to such matter and shall be required to pay all of the sums so
due and owing to Sierra Norte and/or Members by certified or bank
cashier's check within ten (10) days of such notice.
12.6 REMEDIES FOR BREACH. In the event of any breach of any of the
provisions of this Agreement, including but not limited to any breach
of any covenant, warranty or representation made by any party hereto,
the breaching or defaulting party shall be liable pursuant to the
provisions of 12.1, 12.2 or 12.3 above. In the event of any material
breach by any party of any provision under this Agreement, either
party may file suit. Nothing contained in this Agreement shall be
deemed to preclude a party to ▇▇▇ for or seek specific performance of
the provisions of this Agreement in the appropriate circumstance.
SECTION 13: NONDISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Each of the parties hereto
recognizes and acknowledges that it has and will have access to
certain nonpublic information of the others which shall be deemed the
confidential information of the other Companies (including, but not
limited to, business plans, costs, trade secrets, licenses, research
projects, profits, markets, sales, customer lists, strategies, plans
for future development, financial information and any other
information of a similar nature) that after the consummation of the
transactions contemplated hereby will be valuable, special and unique
property of the Companies. Information received by the other party or
its representatives shall not be deemed Confidential Information and
afforded the protections of this Section 13.1 if, on the Closing Date,
such information has been (i) developed by the receiving party
independently of the disclosing party, (i) rightfully obtained without
restriction by the receiving party from a third party, provided that
the third party had full legal authority to possess and disclose such
information, (iii) publicly available other than through the fault or
negligence of the receiving party, (iv) released without restriction
by the disclosing party to anyone, including the United States
government, or (v) properly and lawfully known to the receiving party
at the time of its disclosure, as evidenced by written documentation
conclusively established to have been in the possession of the
receiving party on the date of such disclosure. Each of the parties
hereto agrees that it shall not disclose, and that it shall use its
best efforts to prevent disclosure by any other Person of, any such
confidential information to any Person for any purpose or reason
whatsoever, except to authorized representatives of the Companies who
agree to be bound by this confidentiality agreement. Notwithstanding,
a party may use and disclose any such confidential information to the
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extent that a party may become compelled by Legal Requirements to
disclose any such information; provided, however, that such party
shall use all reasonable efforts and shall have afforded the other
Companies the opportunity to obtain an appropriate protective order or
other satisfactory assurance of confidential treatment for any such
information compelled to be disclosed. In the event of termination of
this Agreement, each party shall use all reasonable efforts to cause
to be delivered to the other parties, and to retain no copies of, any
documents, work papers and other materials obtained by such party or
on such party's behalf during the conduct of the matters provided for
in this Agreement, whether so obtained before or after the execution
hereof. Each of the Companies recognizes and agrees that violation of
any of the agreements contained in this Section 13.1 will cause
irreparable damage or injury to the Companies, the exact amount of
which may be impossible to ascertain, and that, for such reason, among
others, the Companies shall be entitled to an injunction, without the
necessity of posting bond therefor, restraining any further violation
of such agreements. Such rights to any injunction shall be in addition
to, and not in limitation of, any other rights and remedies the
Companies may have against each other. The provisions of this Section
13.1 shall survive any termination of this Agreement.
13.2 NO PUBLICITY. Until the Closing or the termination of this Agreement
in accordance with its terms, neither PocketSpec nor Sierra Norte
shall, directly or indirectly, issue any press release, or make any
public statement, concerning the transactions contemplated by this
Agreement without the prior written consent of PocketSpec (in the case
of such a release or statement by Sierra Norte) or of Sierra Norte (in
the case of such a release or statement by PocketSpec). This Section
13.2 shall not, however, preclude any party from making any disclosure
required by applicable law, and in the event any party, or any
officer, director, employee, agent or representative of a party,
believes that any press release, public statement or other disclosure
is so required, such party will notify and consult with the other
parties with respect thereto as promptly as is practicable under the
circumstances.
SECTION 14: EXPENSES
Each of the parties will pay all costs and expenses of its performance and
compliance with this Agreement. Notwithstanding the foregoing, if the Agreement
is not consummated by reason of a default of one of the Companies, then the
expenses of each of the Companies in connection with the transaction
contemplated herein shall be paid by such defaulting Company. In no event will
any party to this Agreement be liable to any other party for incidental damages,
lost profits, income tax consequences, lost savings or any other consequential
damages, even if such party has been advised of the possibility of such damages,
or for punitive damages, resulting from the breach of any obligation under this
Agreement. The provisions of this Section 14 shall survive any termination
hereof.
SECTION 15: MISCELLANEOUS
15.1 ATTORNEY'S FEES. In any action at law or in equity or in any
arbitration proceeding, for declaratory relief or to enforce any of
the provisions or rights or obligations under this Agreement, the
unsuccessful party to such proceeding, shall pay the successful party
or parties all statutorily recoverable costs, expenses and reasonable
attorneys' fees incurred by the successful party or parties including
without limitation costs, expenses, and fees on any appeals and the
enforcement of any award, judgment or settlement obtained, such costs,
expenses and attorneys' fees shall be included as part of the
judgment. The successful party shall be that party who obtained
substantially the relief or remedy sought, whether by judgment,
compromise, settlement or otherwise.
15.2 NO BROKERS. PocketSpec represents and warrants to Sierra Norte and
Sierra Norte represents and warrants to PocketSpec, that neither it
nor any party acting on its behalf has incurred any liability, either
express or implied, to any "broker," "finder," financial advisor,
employee or similar person in respect of any of the transactions
contemplated hereby. PocketSpec agrees to indemnify Sierra Norte
against, and hold it harmless from, and Sierra Norte agrees to
indemnify PocketSpec against, and hold it harmless from, any
liability, cost or expense (including, but not limited to, fees and
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disbursements of counsel) resulting from any agreement, arrangement or
understanding made by such party with any third party, including
employees of Sierra Norte, for brokerage, finders' or financial
advisory fees or other commissions in connection with this Agreement
or the transactions contemplated hereby. The provisions of this
Section 15.2 shall survive any termination of this Agreement.
15.3 SURVIVAL AND INCORPORATION OF REPRESENTATIONS. The representations,
warranties, covenants and agreements made herein or in any
certificates or documents executed in connection herewith shall
survive the execution and delivery thereof, and all statements
contained in any certificate or other document delivered by any party
hereunder or in connection herewith shall be deemed to constitute
representations and warranties made by that party to this Agreement.
15.4 INCORPORATION BY REFERENCE. All Exhibits to this Agreement and all
documents delivered pursuant to or referred to in this Agreement are
herein incorporated by reference and made a part hereof.
15.5 PARTIES IN INTEREST. Nothing in this Agreement, whether express or
implied, is intended to, or shall, confer any rights or remedies
under, or by reason of, this Agreement, on any person other than the
parties hereto and their respective and proper successors and assigns
and indemnitees. Nothing in this Agreement shall act to relieve or
discharge the obligation or liability of any third persons to any
party to this Agreement.
15.6 AMENDMENTS AND WAIVERS. This Agreement may not be amended, nor may
compliance with any term, covenant, agreement, condition or provision
set forth herein be waived (either generally or in a particular
instance and either retroactively or prospectively) unless such
amendment or waiver is agreed to in writing by all parties hereto.
15.7 WAIVER. No waiver of any breach of any one of the agreements, terms,
conditions, or covenants of this Agreement by the parties shall be
deemed to imply or constitute a waiver of any other agreement, term,
condition, or covenant of this Agreement. The failure of any party to
insist on strict performance of any agreement, term, condition, or
covenant, herein set forth, shall not constitute or be construed as a
waiver of the rights of either or the other thereafter to enforce any
other default of such agreement, term, condition, or covenant; neither
shall such failure to insist upon strict performance be deemed
sufficient grounds to enable either party hereto to forego or subvert
or otherwise disregard any other agreement, term, condition, or
covenants of this Agreement.
15.8 GOVERNING LAW - CONSTRUCTION. This Agreement, and the rights and
obligations of the respective parties, shall be governed by and
construed in accordance with the laws of the State of Colorado.
Notwithstanding the preceding sentence, it is acknowledged that each
party hereto is being represented by, or has waived the right to be
represented by, independent counsel. Accordingly, the parties
expressly agree that no provision of this Agreement shall be construed
against any party on the ground that the party or its counsel drafted
the provision. Nor may any provision of this Agreement be construed
against any party on the grounds that party caused the provision to be
present.
15.9 REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in Sections 6, 7 and 8 of this Agreement shall survive the
Closing Date and shall remain operative in full force and effect for
the period of time set forth in this Agreement regardless of any
investigation at any time made by or on behalf of either PocketSpec or
Sierra Norte and shall not be deemed merged in any document or
instrument so executed or delivered by either PocketSpec or Sierra
Norte.
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15.10 NOTICES. Any notice, communication, offer, acceptance, request,
consent, reply, or advice (herein severally and collectively, for
convenience, called "Notice"), in this Agreement provided or permitted
to be given, served, made, or accepted by any party or person to any
other party or parties, person or persons, hereunder must be in
writing, addressed to the party to be notified at the address set
forth below, or such other address as to which one party notifies the
other in writing pursuant to the terms of this Section 15.10, and must
be served by (i) telefax or other similar electronic method, or (i)
depositing the same in the United States mail, certified, return
receipt requested and postage paid to the party or parties, person or
persons to be notified or entitled to receive same, or (iii)
delivering the same in person to such party.
Notice shall be deemed to have been given immediately when sent by
telefax and confirmed received or other electronic method and
seventy-two hours after being deposited in the United States mail, or
when personally delivered in the manner herein above described. Notice
provided in any manner not specified above shall be effective only if
and when received by the party or parties, person or persons to be, or
provided to be notified.
All notices, requests, demands and other communications required or
permitted under this Agreement shall be addressed as set forth below:
If PocketSpec, to: POCKETSPEC TECHNOLOGIES INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇▇▇ & Associates, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., #▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
If Sierra Norte, to: SIERRA NORTE, LLC.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
With copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ & Associates, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax (▇▇▇)▇▇▇-▇▇▇▇
If Members, to: ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
NEW WORLD DEVELOPMENT, INC.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ #▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
REAL ESTATE SERVICES, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
Any party receiving a facsimile transmission shall be entitled to rely
upon a facsimile transmission to the same extent as if it were an
original. Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in
conformity with the provisions of this Section 15.10 for the giving of
notice.
15.11 FAX/COUNTERPARTS. This Agreement may be executed by telex, telecopy
or other facsimile transmission, and such facsimile transmission shall
be valid and binding to the same extent as if it were an original.
Further, this Agreement may be signed in one or more counterparts, all
of which when taken together shall constitute the same documents. For
all evidentiary purposes, any one complete counter set of this
Agreement shall be considered an original. 15.12 CAPTIONS. The caption
and heading of various sections and paragraphs of this Agreement are
for convenience only and are not to be construed as defining or
limiting, in any way, the scope or intent of the provisions hereof.
15.13 SEVERABILITY. Wherever there is any conflict between any provision of
this Agreement and any Governmental Requirement or judicial precedent,
the latter shall prevail, but in such event the provisions of this
Agreement thus affected shall be curtailed and limited only to the
extent necessary to bring it within the requirement of the law. In the
event that any part, section, paragraph or clause of this Agreement
shall be held by a court of proper jurisdiction to be invalid or
unenforceable, the entire Agreement shall not fail on account thereof,
but the balance of the Agreement shall continue in full force and
effect unless such construction would clearly be contrary to the
intention of the parties or would result in unconscionable injustice.
15.14 GOOD FAITH COOPERATION AND ADDITIONAL DOCUMENTS. The parties shall
use their best good faith efforts to fulfill all of the conditions set
forth in this Agreement over which it has control or influence. Each
party covenants and agrees to cooperate in good faith and to enter
into and deliver such other documents and papers as the other party
reasonably shall require in order to consummate the transactions
contemplated hereby, provided in each instance, any such document is
in form and substance approved by the parties and their respective
legal counsel.
15.15 SPECIFIC PERFORMANCE. The obligations of the parties under Sections 2
and 3 are unique. If either party should default in its obligations
under said Section, the parties each acknowledge that it would be
extremely difficult and impracticable to measure the resulting
damages; accordingly, the non-defaulting party, in addition to any
other available rights and remedies, may ▇▇▇ in equity for injunction
(mandatory or prohibitive) or specific performance (all without the
need to post a bond or undertaking of any nature), and the parties
each expressly waive the defense that a remedy at law in damages is
adequate.
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15.16 ASSIGNMENT. Neither party may directly or indirectly assign or
delegate, by operation of law or otherwise, all or any portion of
its/their/his rights, obligations or liabilities under this Agreement
without the prior written consent of all other parties, which consent
may be withheld in their respective sole and absolute discretion. Any
purported assignment or delegation without such consent shall be null
and void.
For purposes of this Section, the term "Agreement" shall include this
Agreement and the Exhibits and other documents attached hereto or
described in this Section 15.16. This Agreement, and other documents
delivered pursuant to this Agreement, contain all of the terms and
conditions agreed upon by the parties relating to the subject matter
of this Agreement and supersede all prior and contemporaneous
agreements, letters of intent, representations, warranties,
disclosures, negotiations, correspondence, undertakings and
communications of the parties, oral or written, respecting that
subject matter.
15.17 TIME. Time is of the essence of this Agreement and each of its
provisions.
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IN WITNESS WHEREOF, the parties have signed the Agreement the date and year
first above written.
PocketSpec:
POCKETSPEC TECHNOLOGIES INC.,
a Colorado corporation
By: /s/
----------------------------
President
SIERRA NORTE: SIERRA NORTE, LLC.,
a New Mexico limited liability company
By: /s/
------------------------------------
Manager
MEMBERS: By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
NEW WORLD DEVELOPMENT, INC.
a New Mexico corporation
By: /s/
------------------------------------
President
REAL ESTATE SERVICES, INC.
a New Mexico corporation
By: /s/
------------------------------------
President
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