This Exchange Agreement (this “
Agreement ”) is made and entered into as of this
9 th day of July, 2009, by and between Larry Vance
(the “ Holder ”), and Earth Search Sciences,
Inc., a Nevada corporation (the “ Company
”).
RECITALS
WHEREAS, the Holder currently holds $1,250,000
principal amount of the Company’s Promissory Notes issued
August 15, 2008 (the “ Outstanding Notes ”)
issued pursuant to the Purchase and Sale of Business Agreement
between the Company, the Holder and certain other holders (the
“Other Holders”) of Outstanding Notes dated as of
August 15, 2008;
WHEREAS, the Holder desires to exchange the
Outstanding Notes for Series C Convertible Preferred Stock, $0.001
par value (the “ Series C Stock ”) on the terms
and conditions set forth in this Agreement (the “ Note
Exchange ”);
WHEREAS, the Company desires to issue to the
Holder 15,625,000 shares of Series C Stock in exchange for the
Outstanding Notes in the Note Exchange;
WHEREAS, the Series C Stock shall have the terms
set forth in the attached Exhibit A hereto;
NOW, THEREFORE, in consideration of the premises
and the agreements set forth below, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
Exchange
Section 1.1 Exchange of the
Outstanding Notes .
Upon the terms and subject to the conditions of
this Agreement, at the Closing (as defined herein), the Company
shall issue to and exchange with the Holder, and the Holder agrees
to accept from the Company, for 15,625,000 shares of Series C Stock
$1,250,000 aggregate principal amount of Outstanding Notes plus all
accrued and unpaid interest on the Outstanding Notes to the Closing
Date,.
Section 1.2 Closing .
Subject to the terms and conditions hereof, the closing of the
transactions contemplated by this Agreement (the “
Closing ”) shall take place on the date hereof at the
offices of Brown Rudnick LLP, One Financial Center, Boston,
Massachusetts 02111, or on such other date and at such other place
as the parties may agree in writing (the “ Closing
Date ”). At the Closing, (i) the Holder shall
deliver or cause to be delivered to the Company all of such
Holder’s right, title and interest in and to all of the
Outstanding Notes, and all documentation related thereto, and
whatever documents of conveyance or transfer may be necessary or
desirable to transfer to and confirm in the Company all right,
title and interest in and to the Outstanding Notes, and
(ii) the Company shall issue to the Holder certificates for
the Series C Stock.
Section 1.3 Conditions to
Closing . (i) The obligation of the Holder hereunder to
consummate the transactions contemplated hereby at the Closing is
subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for
the Holder’s sole benefit and may be waived by the Holder at
any time in its sole discretion by providing the Company with prior
written notice thereof:
(a) The Company shall
have executed and delivered this Agreement to Holder;
(b) The Company shall
have executed and delivered to Holder a certificate for that number
of shares of Series C Stock set forth in
Section 1.1;
(c) The Company shall
have delivered to the Holder a certificate of the Company, dated
the Closing Date, executed by the secretary of the Company
certifying in such capacity and on behalf of the Company
(i) as to the incumbency and signature of the officer of the
Company who executed this Agreement; and (ii) as to the
adoption of resolutions of the Board of Directors of the Company
which are in full force and effect on the Closing Date, authorizing
(x) the execution and delivery of this Agreement and the
Series C Stock, and (y) the performance of the obligations of
the Company hereunder and thereunder;
(d) The Company shall
have delivered to the Holder a certificate of the Chief Executive
Officer or Chief Financial Officer of the Company, dated the
Closing Date, to the effect that the representations and warranties
of the Company in this Agreement are true and correct on and as of
the Closing Date with the same effect as if made on the Closing
Date and that the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date.
(ii) The
obligation of the Company hereunder to consummate the transactions
contemplated hereby at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions,
provided that these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole
discretion by providing the Holder with prior written notice
thereof:
(a) The Holder shall
have executed and delivered to the Company this Agreement;
and
(b) The Holder shall
have delivered, or caused to be delivered, to the Company the
Outstanding Notes being exchanged pursuant to this Agreement in
accordance with the written instructions of the Company.
ARTICLE II
Representations and Warranties of
the Holder
The Holder
hereby makes the following representations and warranties, each of
which is true and correct on the date hereof and shall survive the
Closing Date and the transactions contemplated hereby to the extent
set forth herein.
Section 2.1 Existence and
Power .
(a) The Holder is duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and has the power, authority
and capacity to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions
contemplated hereby.
(b) The execution of
this Agreement by the Holder and the consummation by the Holder of
the transactions contemplated hereby do not and will not constitute
or result in a breach, violation, conflict or default under any
note, bond, mortgage, deed, indenture, lien, instrument, contract,
agreement, lease or license to which the Holder is a party, whether
written or oral, express or implied, or any statute, law,
ordinance, decree, order, injunction, rule, directive, judgment or
regulation of any court, administrative or regulatory body,
governmental authority, arbitrator, mediator or similar body on the
part of the Holder or on the part of any other party thereto or
cause the acceleration or termination of any obligation or right of
the Holder, except for such breaches, conflicts, defaults, rights
or violations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the
ability of the Holder to perform its obligations
hereunder.
Section 2.2 Valid
and Enforceable Agreement; Authorization . This Agreement has
been duly executed and delivered by the Holder and constitutes a
legal, valid and binding obligation of the Holder, enforceable
against the Holder in accordance with its terms, except that such
enforcement may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors’ rights generally, and
(b) general principles of equity.
Section 2.3 Title to
Outstanding Notes . The Holder is a beneficial owner of and has
the investment power, including the power to dispose of, and has
good and valid title to, the Outstanding Notes being exchanged by
such Holder hereby, free and clear of any mortgage, lien, pledge,
charge, security interest, encumbrance, title retention agreement,
option, equity or other adverse claim thereto. The Holder has not,
in whole or in part, (i) assigned, transferred, hypothecated,
pledged or otherwise disposed of the Outstanding Notes or its
rights in such Outstanding Notes being exchanged or redeemed by
such Holder hereby, or (ii) given any person or entity any
transfer order, power of attorney or other authority of any nature
whatsoever with respect to such Outstanding Notes.
Section 2.4 Investment
Decision . The Holder is an “accredited investor”
within the meaning of Rule 501 of Regulation D under the
Securities Act, and in either case was not organized for the
purpose of acquiring the Series C Stock or the shares of Common
Stock, $.001 par value, into which the Series C Stock may be
converted (the “ Underlying Common Stock ”). The
Holder (or its authorized representative) is has had the
opportunity to review the Company’s filings currently filed
with the Securities and Exchange Commission (the “ SEC
”), including, without limitation, the Company’s Annual
Report on Form 10-K filed on July 1, 2008, the Company’s
Quarterly Report on Form 10-Q filed on August 14, 2008 and November
19, 2008, and the Company’s Current Reports on Form 8-K
filed on September 10, 2008 (2 filings), September 12, 2008 and
October 20, 2008 (all of such filings currently filed with the SEC
referred to, collectively, as the “ SEC Documents
”). The Holder has had an opportunity to ask
questions of the Company and to obtain from representatives of the
Company such information as the Holder has deemed necessary to
permit it to evaluate the merits and risks of its investment in the
Company and has independently, without reliance upon any
representatives of the Company and based on such information as the
Holder deemed appropriate, made its own analysis and decision to
enter into this Agreement. The Holder has had the opportunity to
consult with its accounting, tax, financial and legal advisors to
be able to evaluate the risks involved in the exchange of the
Outstanding Notes pursuant hereto and to make an informed
investment decision with respect to such exchange. No
opportunity of the Holder to review the SEC Documents or any other
documents, to ask questions or to consult with advisors, nor any
other due diligence investigations or inquiries by the Holder or
its advisors or representatives shall modify, amend or affect the
Holder’s right to rely upon the Company’s
representations and warranties contained herein.
Section
2.5 Restricted Securities
. The Holder understands that neither the Series C Stock
nor the Underlying Common Stock have been registered under the
Securities Act, and are being issued hereunder by reason of a
specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the accuracy
of certain of the Holder’s representations as expressed
herein. The Holder understands that the Series C Stock (and the
Underlying Common Stock) are “restricted securities”
under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Holder must hold the Series C Stock
(and the Underlying Common Stock) indefinitely unless they are
registered with the SEC and qualified by state authorities, or an
exemption from such registration and qualification requirements is
available
Section
2.6 No Public Market
. The Holder understands that no public market now
exists for the Series C Stock, and that the Company has made no
assurance that a public market will ever exist for the Series C
Stock.
ARTICLE III
Representations, Warranties and
Covenants of the Company
The Company hereby makes the following
representations, warranties, and covenants each of which is true
and correct on the date hereof and shall survive the date of the
Closing and the transactions contemplated hereby to the extent set
forth herein.
Section 3.1 Existence and
Power .
(a) The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada and has the power, authority
and capacity to own its properties, to carry on its business as
currently conducted and proposed to be conducted, to execute and
deliver this Agreement and the other Transaction Documents, to
perform the Company’s obligations hereunder and thereunder,
and to consummate the transactions contemplated hereby and
thereby.
(b) The execution,
delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactio
