EXHIBIT 10.7
CONVERSION AGREEMENT
This Conversion Agreement ("Agreement") is made and entered into as of August, 20, 2013, by and among Geospatial Holdings, Inc., a Nevada corporation (the "Company"), Geospatial Mapping Systems, Inc., a Delaware corporation and a wholly owned subsidiary of the Company ("GMS") and Mark A. Smith, Chairman and Chief Executive Officer of the Company ("Smith").
RECITALS
WHEREAS,SmithholdsthefollowingnotesevidencingtheCompany'sobligationtorepaycertainloansmadebySmithtothe Company: (i) an unsecured convertible note dated October 30, 2009 in the original principal amount of One Million Dollars ($1,000,000 (the "Convertible Note") and (ii) an unsecured demand note dated October 30, 2009 in the original principal amount of $128,262.70 (the"DemandNote"); and
WHEREAS,thetotalprincipalandaccruedinterestowedbytheCompanyasof August1,2013(the"EffectiveDate")(i) undertheConvertibleNoteis $40,638.l 0 (the "ConvertibleNote Amount") and (ii) under the DemandNote is $173,011.45 (the"DemandNote Amount"); and
·
WHEREAS,subsequenttothe issuance oftheConvertibleNoteandtheDemandNote,SmithmadeadditionalloanstotheCompanyinthe amount of $140,000, which Joans together with accruedandunpaid interest thereon,aggregate $184,203.78 as of August 1, 2013 (the "Additional Loan Amount"); and
WHEREAS,GMSandSmithenteredintoaLeaseAgreementdatedMay1,2006 (the"LeaseAgreement")pursuanttowhichSmithleased an office tothe Company;and
WHEREAS,fromDecember1,2009toJune30, 2012,Smithincurredexpensesandmadedisbursementsinthe course of performing hisdutiesfor theCompany,which have not been reimbursed to Smith by the Company and Smith was not paid rent by GMS as requiredby theterms of the Lease Agreement,all of which unreimbursed and unpaid amounts aggregate $282,156.20 (the"UnpaidExpense Amount"); and
WHEREAS,fromJuly1,2012throughtheEffectiveDate,Smithhasincurred expensesandmadedisbursementsinthecourseofperforminghis dutiesfor the Company,which has not been reimbursed toSmith by the Company and Smith was not paid rentbyGMS as required by the terms of the Lease Agreement, all of which unreimbursedand unpaid amounts aggregate $21,366.40 (the "Recent UnpaidExpense Amount");and
WHEREAS,GMShasnotpaidtoSmithhisBaseSalaryasprovidedforintheEmploymentAgreement dated as ofDecember1,2007 between GMS and Smith (the"EmploymentAgreement"),and such unpaid Base Salaryaggregated (a) $573,634.70 for theperiodpriortoandincludingJune30,2012(the"UnpaidSalaryAmount")and(b) $97,500.00fortheperiodfromJuly 1,2012through theEffectiveDate(the"RecentUnpaid SalaryAmount");and
1 |
WHEREAS,theCompanyandGMSdesirethatSmithexchange(i)theprincipalandinterestowedtohimpursuanttotheConvertibleNoteandtheDemandNote,(ii)theAdditionalLoanAmount,(iii)theUnpaidExpenseAmountand(iv)theUnpaid SalaryAmountforsharesofcommonstock,parvalue$.001 pershare,oftheCompany ("CommonStock") and awarrant to purchaseshares ofCommonStock oftheCompany;and
WHEREAS,theCompanyandSmithdesiretomemorializetheRecentUnpaidExpenseAmountandtheRecentUnpaidSalaryAmount,andagreeuponthe termsoftheirpayment;and
WHEREAS,theCompanydesirestograntcertainregistrationrightstoSmith.
NOWTHEREFORE,forgoodandvaluableconsideration,thereceiptandsufficiencyofwhichisherebyacknowledged,theCompany,GMSandSmithherebyagrees asfollows:
AGREEMENT
1. | CONVERSION ANDRELEASE. |
1.1 ConversionintoCommonStockandWarrant.UponthetermsandsubjecttotheconditionsofthisAgreement,Smithhereby deliversand surrendersto theCompanytheConvertibleNote andtheDemand Note,andsurrendersand releasesto theCompanyhis rightto receive paymentoftheAdditional Loan Amount,the Unpaid ExpenseAmount andtheUnpaid SalaryAmount,andinexchange therefor,the Companyhereby issuesanddelivers toSmith (a)17,909,203 sharesof Common Stock (the"Conversion Stock")and(b) awarranttopurchase 1,790,920 shares ofCommonStock in theformofExhibitA hereto(the"Warrant").
1.2 Release.SmithherebyacceptstheConversionStockandtheWarrantin fullpaymentandsatisfactionoftheConvertibleNoteAmount,theDemand Note Amount, the AdditionalLoanAmount,the Unpaid Expense Amount and theUnpaidSalary Amount, andreleasesanddischarges theCompany,GMSand alloftheir respective employees,agents,successors,assigns,affiliates,directorsand officersfromandagainstanyand allother obligationsorliabilities relating to theConvertibleNote,the DemandNote,theAdditionalLoan Amount,theUnpaidExpenseAmount and the Unpaid SalaryAmount. Notwithstandinganythingin this Agreement to thecontrary,nothingcontainedhereinis intendedto,andthisAgreement shallnotoperateto,releaseanyclaimsSmith may have toenforceanyrightsconferredunder thisAgreement.
2 |
1.3 PaymentofTaxes.Tothe extentthattheissuanceoftheConversion StockandtheWarranttoSmith wouldbesubjecttotaxesimposedagainst SmithundertheInternal RevenueCodeof 1986,asamended,theFederalInsurance Contributions Act,asamended,andany state orlocal taxcodeor regulation,ifapplicable (collectively, the"Taxes"),thenSmithshallbeentitled to receivea paymentfromtheCompany (the "Gross-UpPayment")inan amount such thatafterpayment by Smith ofall federal,stateand local taxes(includingincome taxesandexcisetaxes)imposedontheGross-UpPayment, Smith retainsan amount oftheGross-UpPayment equal to theTaxes.
1.4 RepaymentofRecentUnpaidExpenseAmountandRecentUnpaidSalaryAmount. TheCompanyherebyacknowledgesitsobligationandliability topaythe RecentUnpaid Expense Amount andtheRecent UnpaidSalaryAmount to Smithand agreesto use its reasonablecommercial effortsto pay suchamounts to Smithassoon as possible.
1.5 RegistrationRights. ConcurrentlywiththeexecutionanddeliveryofthisAgreement,theCompanyandSmith areenteringintoa Registration RightsAgreement inthe form ofExhibitBhereto(the"Registration RightsAgreement").
2. | REPRESENTATIONS AND WARRANTIES OF THE COMPANY. TheCompanyherebyrepresentsandwarrantstoSmiththat asoftheEffectiveDate: |
2.1 Organization. TheCompanyisdulyorganized, validlyexistingandin goodstandingunderthelawsoftheState ofNevada. TheCompanyhasfullpowerandauthority toown orleaseitspropertiesandto carryonits businessaspresentlyconducted.
2.2 DueAuthorizationandValidIssuance. TheCompanyhasallrequisitecorporatepowerandauthoritytoexecute,deliverandperformitsobligationsunderthis Agreement,theWarrantandthe Registration Rights Agreement.This Agreement,the Warrantandthe Registration RightsAgreementhavebeendulyauthorizedandvalidly executedand deliveredby theCompanyandeach constitutes the 1ega1,valid andbindingagreement oftheCompanyenforceableagainstthe Company inaccordance withits terms,exceptas (a)rights to indemnityandcontribution may be limited bystateorfederalsecuritiesJaws of the public policyunderlyingsuch laws,(b) enforceabilitymay be limitedby applicable bankruptcy,insolvency,reorganization,moratoriumor similarlawsaffectingcreditors'rightsand contractingparties' rightsgenerallyand(c) enforceabilitymay besubject togeneralprinciplesofequity(regardlessof whethersuchenforceabilityis considered inaproceedinginequityor at law).
2.3 Capitalization.ImmediatelypriortogivingeffecttothetransactionscontemplatedbythisAgreement,theauthorizedcapitalstockoftheCompanyconsists of (i)100,000,000sharesofcommon stock, parvalue$.001 pershare, of which 45,871,374 sharesare issued and outstanding,and (ii)5,000,000sharesofpreferredstock,parvalue$.001 pershare,5,000,000of which aredesignatedas "SeriesBConvertiblePreferred Stock",ofwhich4,460,429areissuedandoutstanding.Asofthedatehereof,15,000,000sharesofcommonstockare reserved forissuanceupon exerciseof stock options granted ortobe granted under the Company's Stock Incentive Plans.As ofthe date hereof there areoutstandingwarrantsto purchase 5,942,242 sharesofcommon stock and outstanding warrantsto purchase 446,023shares of Series B ConvertiblePreferred Stock.
3 |
2.4 IssuanceofShares. ThesharesofConversionStock,whenissued,soldanddeliveredinaccordance withtheterms of this Agreement, andthe sharesof Common Stock issuable pursuant to the Warrant, whenissued,soldanddelivered in accordance with the terms of the Warrant, will be duly authorized,validly issued, fully-paidand nonassesable.
2.5 PrivateOffering.Assumingthe correctnessoftherepresentationsand warrantiesofSmithsetforthinSection3hereof, the issuance ofthe Conversion Stock and the Warrant isexempt from registrationunder the Securities Act of1933,as amended,andthe rules andregulations promulgated thereunder(the"Securities Act").Neither the Company nor any personacting on behalfofthe Companyhas offered or sold the Conversion Stockorthe Warrant by anyformof general solicitation or general advertising.
3. | REPRESENTATIONS AND WARRANTIES OF SMITH. TheCompanyherebyrepresentsandwarrantstoSmiththat asoftheEffectiveDate: |
3.1 Authorization.Smithhastherequisitelegalpowerandauthoritytoenter intothisAgreementandthisAgreementconstitutesavalidandlegally binding obligation ofSmith,except asthe same may belimitedby bankruptcy,insolvency, moratoriumor other laws of generalapplication affectingthe enforcement of creditors' rights.
3.2 Conversion Stockand Warrant Not Registered;Reliance UponSmith'sRepresentations.Smithunderstandsandacknowledges(i)thattheConversionStockandtheWarrantarenot registered or qualified underany federal, foreign or state securities laws,(ii) that the Conversion Stock and the Warrantare beingissuedto Smith on the ground that the issuance ofsecurities hereunder isexempt fromregistration under all applicable securities laws pursuantto exemptions thereunder,and (iii) that the Company's reliance on such exemptions ispredicated on Smith's representations set forth herein.
3.3 Accredited Investor. Smithisan"accreditedinvestor"withinthe meaningofRule501ofRegulationDundertheSecurities Act, as presently in effect.
3.4 Restricted Securities.SmithunderstandsthattheConversionStockand theWarrantconstituterestrictedsecuritiesunderapplicablesecuritieslaws and may not be resold or transferred unlessthey arefirstregistered onqualified under applicable securitieslaws or unlessan exemption from such registrationor qualificationis available. Accordingly,Smithhereby acknowledges that he isprepared to hold the Conversion Stock andtheWarrantforanindefiniteperiodoftime,untilresaleispermittedunderapplicable securitieslaws.
4 |
3.5 Experience;Risk.Smithhassuchknowledgeandexperienceinfinancial andbusinessmattersthatSmithiscapableofevaluatingthemeritsandrisks ofhisacquisitionof the ConversionStock andthe Warrant and of protectingSmith'sinterests in connectiontherewith.Smith isableto fendfor himself in the transactionscontemplated by this Agreementandhas the ability to bear the economic risk of the investment, including completelossofthe investment.
3.6 Investment.SmithisacquiringtheConversionStockandtheWarrantfor investmentforhisownaccount,notasanomineeoragentandnotwithaviewto,orfor resale inconnectionwith any distributionthereof, andSmith has no presentintentionof selling,grantingany participation in,or otherwisedistributing thesame.
4. | RESTRICTEDSECURITIES. |
4.1 RestrictiveLegends.
(a) UnlessanduntilotherwisepermittedbythisSection,each certificateforConversionStockissuedtoSmithoranysubsequenttransfereeofanysuch certificateshall be stampedorotherwiseimprinted with a legendof substantially the following form:
"THESHARESREPRESENTEDBYTHISCERTIFICATE HAVENOTBEENREGISTEREDUNDERTHESECURITIESACTOF1933OR ANY OTHER APPLICABLE FEDERALOR STATE SECURITIESLAWS,ANDTHUS MAY NOT BE TRANSFERRED UNLESS REGISTEREDUNDER THE SECURITIES ACTOR1933 AND SUCH OTHER LAWS OR UNLESSANEXEMPTION FROM REGISTRATION ISAVAILABLE."
(b) InadditiontothelegendrequiredbythisSection4.1,eachcertificateforCompanysharesissuedunderorpursuant tothis Agreement toSmithor any subsequent transfereeshall bestampedor otherwise imprinted with any legend required pursuant to applicablestatecorporationand securities laws.
4.2 Transfer.TheCompanymaydeclinetoacknowledgeorregisteratransferofanyCompanysharesbearinganylegendpursuanttoSection 4.1,and may instruct any transferagentforitsCompanyshares to decline the same,unless the Company isreasonably satisfied that theCompanysharesbeingtransferredhave beenregisteredorareexempt from registrationunderapplicable securitieslaws.
4.3 RemovalofLegends.Wheneverthe legenddescribedinSection4.1shallnolongerberequiredbylaw,the holder ofanyparticularCompany sharesbearing such legends shallbeentitledtoreceivefromtheCompany,withoutexpensetosuchholder,one ormorenew certificates for suchparticular Company sharesnot bearing restrictivelegendspursuanttoSection 4.1hereof.
5 |
5. | MISCELLANEOUS. |
5.1 FurtherInstrumentsandActions.Thepartiesagreetoexecutesuchfurtherinstrumentsandtotake such further action as may reasonablybe necessary to carry out the intent of this Agreement.
5.2 Expenses.Eachpartyheretoagreestopayitsexpensesincurredin connectionwiththisAgreementandthedocumentsandtransactionscontemplatedherein.
5.3 Notices.Allnoticesandothercommunicationsrequiredorpermitted hereundershallbegiveninwritingandshall bedeliveredby personaldelivery, facsimile,electronic mail,overnight delivery service,or U.S.mail service,addressed as follows:
TheCompany:GeospatialHoldings,Inc.229HowesRunRoad Sarver,PA16055
Attn:ThomasOxenreiter,ChiefFinancialOfficerT:724-353-3400
F:724-353-3049
Email:toxenreiter@geospatialcorporation.com
Smith:
MarkA.Smith 1001CarlisleStreet
NatronaHeights,PA15065T:724-994-8055
H:724-226-2067
Email:mark@gooselakeventures.com
AnynoticeorothercommunicationdeliveredinaccordancewiththisSection5shallbedeemedtohave beengiven upon actual receiptorrefusalof such delivery.
5.4 GoverningLaw.ThisAgreementshallbegovernedinallrespectsbythelawsoftheCommonwealthofPennsylvaniawithoutgivingeffect totheconflicts of laws principles hereof.
5.5 Successors and Assigns; Assignment. NopartymayassignthisAgreementoranyrightsorobligationshereunderwithout the prior writtenconsentof the otherparty,which consent maynot be unreasonably withheld,includingbymerger or consolidation.Subject tothe preceding,this Agreement shallbebinding upon,inure to
6 |
INWITNESSWHEREOF,thepartiesheretohaveexecutedthisAgreementasof thedayandyearwrittenabove.
COMPANY: | SMITH: | |||
GEOSPATIAL HOLDINGS, INC. | ||||
By: | /s/ Thomas R. Oxenreiter | By: | /s/ Mark A. Smith | |
Thomas R. Oxenreiter: CFO | Mark A. Smith | |||
GMS: | ||||
GEOSPATIAL MAPPING SYSTEMS, INC. | ||||
By: | /s/ Thomas R. Oxenretier | |||
Thomas R. Oxenreiter: CFO | ||||
7 |
EXHIBITA
FORMOFWARRANT
SeeAttached
8 |
NEITHERTHISWARRANTNORTHESECURITIESISSUABLEUPONEXERCISE HEREOFHAVEBEENREGISTEREDUNDERTHESECURITIESACTOF1933,AS AMENDED,ORANYSTATESECURITIESLAWS.NEITHERTHIS WARRANT NOR THESECURITIES ISSUABLEUPONEXERCISEHEREOF MAYBE TRANSFERRED EXCEPT(A)PURSUANT TO AN EFFECTIVEREGISTRATIONSTATEMENT,UNDERTHE SECURITIESACTOF 1933,ASAMENDED, ANDAPPLICABLE STATESECURITIESLAWS, OR (B) IN ATRANSACTIONWHICHISEXEMPTFROM REGISTRATION UNDERTHESECURITIESACTOF 1933,ASAMENDED, ANDAPPLICABLE STATE SECURITIES LAWS.
WarrantIssueDate:August,2013
COMMONSTOCKPURCHASEWARRANT
Forvaluereceived,GeospatialHoldings,Inc.(the"Company"),aNevada corporation,herebycertifiesthat(the"Holder")oritspermittedassign(s)isentitled topurchase fromtheCompany,atany time or fromtimetotime duringtheExercisePeriod (as definedbelow),inwhole orinpart, sharesofthe Company's Common Stock,parvalue $.001 per share ("Common Stock"),at aprice per share equal to $0.25(the"ExercisePrice"). This Warrantissubject thefollowingtermsandconditions. ThisWarrant is issued pursuanttothatcertain Conversion Agreement datedas ofAugust,2013,by andamongtheCompany,GeospatialMapping Systems,Inc. andthe Holder(the "ConversionAgreement").ThisWarrantissubject tothe termsof theConversionAgreement and the followingadditionaltermsand conditions.
I. Certain Definitions.
(a) "ChangeinControl"meansanysaleofcapitalstockoftheCompanyorconsolidationormergeroftheCompanywith or intoanyothercorporationor otherentityorperson,or anyothercorporatereorganization,in which the stockholdersoftheCompanyimmediatelyprior tosuch sale,consolidation, mergerorreorganization,do nothold at leasta majorityoftheresulting or surviving corporation'svotingpowerimmediatelyaftersuchconsolidation,mergerorreorganization, or thesale,lease,orotherdisposition ofallor substantially all of theassets of the Company.
(b) "ExercisePeriod"meanstheperiodcommencingontheWarrant IssueDateandendingonthedatethatistheearliestto occurof (i)5:00p.m. (prevailing localtimeatthe principalexecutiveoffice of theCompany) onthefifth anniversaryofthe Warrant Issue Date, (ii)a Changein Control,or(iii)the closingofa Qualified Public Offering(asdefined intheCertificateof Designationof Series B PreferredStockofthe Company).
9 |
2. | ExerciseofWarrant. |
(a) ThepurchaserightsrepresentedbythisWarrantareexercisableby theHolder,inwholeorinpart,duringtheExercise Period bythesurrender of this Warrant,withtheform of Subscription Agreement attached hereto as Annex Aduly completed andexecutedbytheHolder, to the Company atits principal executiveoffice, accompaniedby payment in cash, in lawful moneyofthe United States of America, including bycertified or officialbank check madepayableto the orderof the Company or by wire transfer ofimmediatelyavailable funds to an account designatedby the Company,of an amount equal to the ExercisePrice multiplied by the number of shares of Common Stock being purchasedpursuantto such exercise of the Warrant.
(b) ThisWarrantmaybeexercisedforlessthanthefullnumberof sharesofCommonStockfirst shown above,provided thatthisWarrant maynotbe exercisedin partfor less thana whole number of shares of CommonStock. Upon any such partial exercise, the Company at its expense will forthwith issue to the Holder a new Warrant or Warrants of like tenor exercisable for the number of shares of Common Stock as to whichrights have notbeenexercised(subject to adjustmentas herein provided), such Warrant or Warrants to be issued in the name of the Holder or its nominee.
(c) AssoonaspracticableaftertheexerciseofthisWarrantand paymentoftheExercisePrice,andin any event within 20 business days thereafter, the Company,at its expense, will cause to be issued in the name of and delivered to the Holder a certificate or certificates for the number of duly authorized, validly issued, fully paidand non-assessable shares of Common Stock to which the Holder shall be entitled upon such exercise, plus, in lieu of any fractionalshare to which the Holder would otherwise be entitled, cashinan amount determined in accordance with Section 3(d) hereof. The Company agrees that the shares so purchased shall be deemed to be issued to the Holder as the record ownerof suchsharesas of the close of business onthe date on whichthisWarrant shall have been surrenderedand payment made for such sharesas aforesaid.
(d) PriortotheexerciseofthisWarrant,theHoldershall notbe entitledtoanyrightsofastockholderoftheCompanywith respect toshares for which this Warrantshall be exercisable, including, withoutlimitation, the right to vote, to receivedividends or otherdistributionsor to exercise any preemptive rights, and shall not be entitledto receiveany notice of any proceedings of the Company.·
(e) IntheeventthattheCompanyproposestoengageinaChangein ControlorQualifiedPublicOffering,itshallgive theHolderwrittenof its intentionnot less than ten (10)days prior tothedateof the proposed closingofsuchtransaction. Thenotice shall describe the material terms and conditions upon which the Company proposes to consummate such transaction.
10 |
3. | Adjustments. |
(a) Adjustments Generally. Inordertopreventdilutionoftherights grantedhereunderinthespecificcircumstancescontemplatedbythisSection3, the ExercisePrice shall be subjecttoadjustment from time totime inaccordance with this Section 3.Upon each adjustment of the Exercise Pricepursuantto this Section 3,the Holdershallthereafter be entitled toacquire upon exercise,at the ExercisePrice resulting fromsuch adjustment, thenumber ofshares of Common Stock determined by(i) multiplying (A)theExercise Pricein effectimmediately prior tosuch adjustment by (B) the numberof shares ofCommon Stock issuable upon exercise hereofimmediately prior to suchadjustment, and (ii)dividingthe product thereof by theExercise Price resulting from suchadjustment;provided that no such adjustments shallbe made intheExercise Price and/orthe number of shares of Common Stocksubject to this Warrant if the conversionratio of theCommonStock already reflectssuchevent.
(b) Subdivisions,StockDividendsandRecapitalizations.IncasetheCompanyshallatanytimesubdivideitsoutstandingshares of Common Stock intoa greater number of shares (including, without limitation,through any stock split effected by means of a dividend on theCommon Stock which is payable in Common Stock), the Exercise Price ineffect immediatelyprior to such subdivisionshallbe proportionately reduced,and,conversely, in casethe outstanding shares ofCommon Stock of the Company shall be combined intoa smaller number of shares, the ExercisePrice in effect immediately prior to such combination shallbe proportionately increased, unless the conversion ratio of such Common Stock already reflects such event.
(c) Reorganization,Reclassification,Consolidation, MergerorSaleof Assets.Ifanycapitalreorganizationorreclassificationofthecapital stock of the Company, or consolidation or merger of theCompanywithanothercorporation,or the saleof a significantamount of assets toanothercorporationshallbeeffected in sucha way that(i) doesnot constitute aChange in Control, and (ii) holders ofCommon Stock shallbeentitledtoreceivestock, securities, cash or other propertywith respect toor in exchange for CommonStock,then, as acondition of such reorganization,reclassification, consolidation,merger or sale,lawful andadequate provision shall be made whereby the Holder shallhave the right to acquireand receive uponexerciseof this Warrantsuch shares of stock, securities, cash or other property of thesuccessorcorporation that a holder of the shares deliverable upon exerciseof this Warrant wouldhave been entitledto receivein such reorganization, reclassification, consolidation,merger orsale if this Warrant had been exercised immediately before such reorganization, reclassification, consolidation, merger or sale. The foregoing provisions shall similarly applyto successive reorganizations, reclassifications, consolidations, mergers or salesand to the stock or securities of anyother corporation that are at the time receivable upon the exercise of this Warrant.In all events, appropriate adjustments(asdetermined by the Board of Directors of the Company) shall be made in the applicationof the provisions of thisWarrantwith respectto the rights and interests ofthe Holder after the transaction, to the endthat the provisions ofthis Warrantshall be applicableafter thatevent, as near asreasonably maybe,in relation to anysharesorotherproperty deliverable after thateventuponexerciseof this Warrant.
11 |
(d) FractionalShares.TheCompanyshallnotissuefractionsofsharesofCommonStockuponexerciseofthisWarrantorscripin lieuthereof.Ifany fractionofashareofCommonStockwould,exceptforthe provisionsof thisSection3(d), be issuable uponexercise of thisWarrant,then theCompany shall in lieu thereof payto the personentitled theretoanamount in cashequaltothe current valueof suchfraction, calculated to the nearest one-hundredth (11100)of a share, tobecomputed on the basis of the fair market value pershareasdetermined in good faith bytheBoardofDirectorsoftheCompany.
(e) CertificateastoAdjustments. Whenever theExercisePriceshallbeadjustedasprovidedinSection3hereof,theCompanyshallpromptly computesuch adjustmentand furnishtotheHolder a certificate settingforthsuch adjustmentandshowinginreasonable detail thefactsrequiringsuchadjustment, the ExercisePricethat willbeeffective aftersuch adjustmentandthe number ofsharesandthe amount,if any,ofother property that atthetimewouldbereceivedupon the exerciseof thisWarrant.
4. ReservationofStockIssuableonExerciseofWarrants.TheCompanyshallatalltimesreserveandkeepavailableoutofits authorized butunissuedstock,solelyfortheissuance and delivery upon the exerciseofthis Warrant, such number ofits dulyauthorizedshares of CommonStockas from time to time shall beissuable upon theexercise ofthis Warrant. All ofthesharesof Common Stock issuableuponexercise ofthisWarrant,whenissued and deliveredinaccordancewith the terms hereof andthereof, will be dulyauthorized,validlyissued,fully paidandnon-assessable, subjecttono lienorother encumbranceother than restrictionsontransfer arising underapplicable securitieslaws and restrictions imposed by Section6(a)hereof and the Agreements towhichreferenceis made inSection6(b)hereof.
5. ReplacementofWarrant.Uponreceiptofevidencereasonablysatisfactory totheCompanyoftheloss,theft,destructionormutilationofthis Warrant and(inthe case ofloss,theftor destruction) upon deliveryof anindemnityagreement reasonablysatisfactorytotheCompany(with suretyif reasonablyrequired),or (inthecase ofmutilation) upon surrender andcancellationthereof, theCompany willissue, in lieu thereof, a new Warrant oflike tenor andamount.
6. | Negotiability.ThisWarrantisissueduponthefollowingterms: |
(a) Transfer.Byacceptancehereof,theHolderacknowledgesand agreesthatthe HolderisacquiringtheWarrantandthesharesof CommonStockissuable uponexercisehereofforinvestment foritsownaccount,notas anominee oragent,and notwithaviewto,orforresaleinconnectionwith,anydistributionthereof, and Holder has no presentintentionofselling,grantinganyparticipation in,orotherwisedistributing thesame.
12 |
(b) Agreements.AsaconditiontotheCompany'sobligationtoissue shares of CommonStockupon exercisehereof,theHoldershallexecutetheSubscription Agreement attachedhereto as AnnexA.
(c) TransferTaxes.TheCompanyshallnotberequiredtopayanyfederalorstatetransfer tax or chargethat maybepayable inrespect ofany transfer involved in the transferordelivery ofthis Warrant or the issuanceor conversionor delivery of certificatesfor Common Stock in a name otherthan that of the Holderor to issue or deliver any certificates for CommonStock upontheexercise of thisWarrant until anyandall such taxesand charges shall have been paid by theHolder or until it has been establishedto the Company's reasonable satisfaction that no such tax or charge is due.
(d) Compliance with Securities Laws. TheHolder,byacceptancehereof,acknowledgesthatthisWarrantandthesharesofCommonStocktobe issuedupon exercise hereof are being acquired solelyfor the Holder's own account andnot as a nomineefor any other party,and for investment, and thatthe Holder will not offer, sellor otherwise dispose ofthisWarrant oranysharesofCommonStockto be issuedupon exercise hereof except under circumstances thatwillnot result in a violation of applicable federal and state securities laws.
7. SubdivisionofRights.SubjecttoSection6,thisWarrant(aswellasany newWarrantsissuedpursuanttotheprovisionsofthisSection7)isexchangeable,upon thesurrenderhereofbytheHolder,at the principal executiveoffice oftheCompanyfor any numberof newWarrantsof like tenor and date representingin the aggregate the right to subscribe for andpurchase the numberof shares ofCommon Stockofthe Company which may be subscribedfor andpurchased hereunder.
8. | Miscellaneous. |
(a) Notices.Anynoticeorothercommunicationrequiredorpermitted tobegivenhereundershallbeinwritingandgivenas provided in theConversion Agreement.
(b) BooksoftheCompany.The Companymaytreattheholderhereof asappearingontheCompany'sbooksatanytimeastheholderforallpurposes.
(c) Headings.TheheadingsinthisWarrantareforpurposesof referenceonly,andshallnotlimitor otherwise affectthemeaning hereof.
(d) Amendment;Waiver.ThisWarrantandanytermhereofmaybe amended,waived,dischargedorterminatedonlybyaninstrument inwriting signed by theparty against whom enforcement of such amendment, waiver, discharge or termination is sought.No waivers of any term, condition or provision of thisWarrant,in any oneor more instances,shall bedeemedto be, or construed as, a furtheror continuing waiver of any suchterm,condition orprovision.
13 |
(e) BenefitsofthisWarrant.NothinginthisWarrantshallbeconstruedtogiveanypersonorcorporationother thantheCompany and theHolderany legal or equitable right, remedyor claimunder this Warrantand this Warrantshallbe for the sole and exclusive benefit oftheCompany andtheHolder and any other permitted holder or holders of theWarrant.
[REMAINDEROFPAGEINTENTIONALLYLEFTBLANK]
14 |
INWITNESSWHEREOF,theCompanyhascausedthisWarranttobeduly executedanddeliveredbyitsauthorizedofficer,asof thedate first abovewritten.
Geospatial Holdings,Inc | ||
By: | /s/ Mark A. Smith | |
Name: | Mark A. Smith | |
Title: | Chief ExecutiveOfficer |
15 |
ANNEXA
SUBSCRIPTION AGREEMENT
Date: _____________________
To: _____________________
The undersigned (the"Purchaser"),pursuanttotheprovisionssetforthinthe attachedWarrant,herebyirrevocablyelects(a)topurchaseshares ofCommon Stock (the"Warrant Shares") covered bysuchWarrant and herewith makes payment of$,representing thefull purchase price forsuchshares at the price per share provided forin such Warrant or (b) to exercise the Warrant with respect to________ shares of Common Stock, pursuant to Section 2(b) of the Warrant [STRIKE (a) OR (b) AS APPLICABLE].
PurchaserrepresentsandwarrantstotheCompanyasfollows:
1. InvestmentRepresentations.PurchaserunderstandsthattheWarrant Shareshavenot beenregisteredundertheSecuritiesAct.Purchaseralsounderstandsthat theWarrantShares arebeingoffered and sold pursuant toanexemption fromregistration contained in theSecurities Actbased in partupon Purchaser's representationscontained in this Agreement.
2. Experience;Risk.Purchaserhassuchknowledgeandexperiencein financialandbusinessmattersthatPurchaseriscapableofevaluatingthe meritsand risks of the purchase of the Warrant Shares and of protectingPurchaser'sinterests in connection therewith.Purchaseris abletofend for itself in the transactionscontemplated by this Agreement and has the abilityto bearthe economic risk of the investment,includingcomplete loss of the investment.
3. Investment.PurchaserisacquiringtheWarrantSharesforinvestmentfor itsownaccount,notasanomineeor agent, andnotwith a view to,or for resale in connection with, any distribution thereof, and Purchaser has no presentintention of selling,granting any participation in, or otherwise distributingthe same.Purchaser understands that the Warrant Shares have not been registered under the Securities Act and applicable state securities laws(collectively,the"Acts") byreason of aspecific exemption from the registration provisions of the Acts which depends upon, among other things,the bona fide natureof the investment intent andtheaccuracy ofPurchaser's representations as expressed herein.
16 |
4. Information.Purchaserhasbeenfurnishedwithallinformationwhichit deemsnecessarytoevaluatethemeritsandrisksofpurchasingtheWarrantShares andhas hadthe opportunitytoask questions concerningthe WarrantShares andtheCompanyandallquestions posedhave beenansweredto its satisfaction.Purchaserhas beengiventheopportunity toobtainanyadditionalinformation it deems necessaryto verifytheaccuracyof anyinformationobtained concerningthe Warrant Shares and theCompany.Purchaser hassuchknowledgeandexperienceinfinancialand businessmatters thatitis abletoevaluatethe meritsand risks ofpurchasing theWarrantSharesandtomakeaninformeddecisionrelating thereto.
5. RestrictedSecurities;RestrictionsonTransfer.PurchaserunderstandsthattheWarrantShareswillbe"restrictedsecurities"underapplicable securities lawsinasmuchastheyarebeingacquired from theCompanyina transactionnotinvolving apublicofferingandthatundersuch lawsandapplicableregulationsthe Warrant Sharesmay beresoldwithout registrationunder theActs onlyincertainlimitedcircumstances.Purchaseracknowledges thatWarrantSharesmust beheld indefinitely unless subsequentlyregisteredunderthe Acts or anexemptionfromsuchregistrationisavailable.To the extentthatPurchaserisnotalreadya party to such agreements,Purchaseragreestoexecute anddeliver acounterpartsignaturepage,and become aparty,tosuchstockholderandregistrationrightsagreementsasare then in effect by andamongtheCompanyanditsstockholders.
6. NoPublic Market.PurchaserunderstandsthatnopublicmarketnowexistsforanyofthesecuritiesissuedbytheCompany andthat thereis no assurancethatapublicmarketwillever existforsuch securities.
7. AccreditedInvestor. Purchaserisan"accreditedinvestor"withinthemeaningofRule501promulgatedunder theSecuritiesAct.ThePurchaser hasconsideredthe Federaland stateincometax implications of the exerciseofthe Warrant andthepurchase andsubsequent saleof the Warrant Shares.
8. Residence.IfPurchaserisanindividual,thenPurchaserresidesinthestateorprovinceidentifiedintheaddressofPurchaser setforth below;ifPurchaser isapartnership,corporation,limitedliabilitycompanyor otherentity,thentheoffice orofficesofPurchaserin whichitsinvestment decisionwasmadeislocatedattheaddressoraddresses ofPurchaserset forthbelow.
Signature | |||
Print name: | |||
Address: |
17 |
NOTICE OFTRANSFER
[To besignedonlyupontransferofWarrant]
FOR VALUERECEIVED,theundersignedherebysells,assignsandtransfersuntotheAssignee namedbelowtherightsand obligations represented by the within Warrant with respect to the numberof sharesof CommonStock ofset forthbelow:
Nameof Assignee | Address | No.of Shares |
and appoints ____________________attorney to transfer said right on the warrant register of ____________________ withfullpowerofsubstitutioninthepremises.
Dated: ________________
(Signaturemustconforminallrespectsto nameofHolderasspecifiedonthefaceof theWarrant)
Address:
_____________________________
_____________________________
_____________________________
18 |
EXHIBITB
FORMOFREGISTRATION RIGHTSAGREEMENT
SeeAttached
19 |
REGISTRATIONRIGHTSAGREEMENT
THISREGISTRATIONRIGHTSAGREEMENT(this"Agreement")isentered intoasofthis__day ofAugust,2013 (the"EffectiveDate") by and between Geospatial Holdings,Inc., a Nevada corporation(the"Company"), and Mark A.Smith,an individual resident of Natrona Heights, Pennsylvania ("Smith").
AGREEMENT
WHEREAS,theCompany,GeospatialMappingSystems,Inc.andSmitharepartiestoaConversionAgreementdated the date hereof (the "Conversion Agreement"); and
WHEREAS,theConversionAgreementrequiresthat,uponexecutionoftheConversion Agreement,GeospatialandSmithwillenterintothis Agreement.
NOW,THEREFORE,inconsiderationofthemutualcovenantsandagreements setforthhereinandforgoodandvaluableconsideration,the receiptand adequacyof which ishereby acknowledged, the parties herebyagreeas follows:
ARTICLEI DEFINITIONS
1.1Definitions.AsusedinthisAgreement,andunlessthecontextrequiresadifferentmeaning,thefollowingterms have the meaningsindicated:
"Agreement"hasthemeaningsetforthinthepreamble."Board"meanstheboardofdirectorsofthe Company.
Company.
"Common Stock"meansthecommonstock,parvalue$.00l pershare,ofthe"Company"hasthe meaning set forth in the preamble.
"ContractualObligation"meansastoanyPerson,anymaterialprovisionofany securityissuedbysuchPersonoranymaterialprovisionof any agreement, leaseof real or personal property, undertaking, contract,indenture,mortgage, deedof trustor other instrument including,without limitation, the organizational or governing documents of such Person,to which such Person is a party or by whichitor any of its propertyis bound.
"EffectiveDate"has themeaningsetforthinthepreamble.
"ExchangeAct"meanstheSecuritiesExchangeActof1934,asamended."Governmental Authority"means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of any government of any nation, state, city,localityorotherpolitical subdivision.
20 |
"Holder"means(i)anypersonowningofrecordRegistrableSharesthathavenot beensoldtothepublicor (ii) anyassignee ofrecordofsuch Registrable Shares inaccordancewithSection4.9 hereof.
"InitialOffering"meanstheCompany'sfirstfirmcommitment underwritten publicofferingofitsCommonStockregisteredundertheSecuritiesAct.
"Person"meansanyindividual,firm,corporation,partnership,trust,incorporated orunincorporatedassociation,jointventure,jointstock company, Governmental Authority or otherentityof anykind, and shallincludeanysuccessor (bymergeror otherwise) of such entity.
"Register,""registered"and"registration" refertoaregistrationeffectedby preparingandfilingaregistrationstatementincompliancewiththeSecuritiesAct,andthe declarationorordering ofeffectivenessofsuchregistrationstatementordocument.
"RegistrableShares"means(a)CommonStockoftheCompanyissuedtoSmith pursuanttotheConversionAgreement;(b)anyothersharesofCommon Stockhereafterowned orheld bySmith;and(c)any"RegistrableShares" asdefined inany other agreementpursuant to whichtheCompany hasgrantedregistrationrights. Notwithstanding theforegoing, RegistrableSharesshallnotincludeany securitiessold bya Persontothepubliceitherpursuanttoa registrationstatement or Securities ActRule144or soldina private transaction inwhichthe transferor's rights pursuanttoSection IVofthis Agreementarenotassigned.
"RegistrationExpenses"meansallexpensesincurredbytheCompanyincomplyingwithSections4.1,4.2and 4.3hereof,including,withoutlimitation,allregistration andfilingfees,printingexpenses, feesanddisbursementsofcounselfortheCompany,reasonablefees anddisbursementsof a single special counsel fortheHolders,blueskyfees andexpensesandthe expense ofanyspecialauditsincidenttoor requiredbyany such registration.
"RequirementsofLaw"means,astoanyPerson,theprovisionsofthecharterandbylawsor otherorganizational or governingdocumentsof suchPerson, andanylaw,treaty,rule, regulation,right,privilege,qualification,licenseor franchise,order,judgment,or determination ofanarbitrator or acourt or other GovernmentalAuthorityapplicableto orbinding uponsuchPersonor any ofits property(or to which suchPersonor any of itspropertyis subject) or applicabletoanyor all of thetransactionscontemplatedby,or referredto in, thisAgreement.
"RestrictedPeriod"hasthemeaningsetforthinSection4.9.
"SEC"or"Commission"meanstheSecuritiesandExchangeCommission.
"SECReports"shallmeanallreportsrequiredtobefiledwiththeSECundertheSecuritiesActandtheExchangeAct.
"SecuritiesAct"meanstheSecuritiesActof1933,asamended.
"SellingExpenses"meansallunderwritingdiscountsandsellingcommissionsapplicabletothesale.
"Violation"basthemeaningsetforthinSection4.7(a).
21 |
ARTICLEII
REPRESENTATIONSANDWARRANTIESOFTHECOMPANY
TheCompanyherebyrepresentsandwarrantstoSmithfollows:
2.1 Authorization;BindingEffect.TheCompanyhasfullpowerandauthority toenterintoandperformitsobligationsunder thisAgreement.This Agreement constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms except (i) as may be limitedby applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, and(ii)as may be limited by laws relating to the availability of specific performance, injunctive relief,or other equitable remedies.
2.2 Non-contravention. Theexecution,deliveryandperformanceofthisAgreementbytheCompanyandtheconsummationofthetransactionscontemplated hereby,donot and will not (i)violateany Requirements of Lawapplicable to theCompany,or(ii)resultina material breach or defaultunderany of theContractualObligations ofthe Company, or under anyorder,writ,judgment, injunction,decree, determination or award of anyGovernmentalAuthority,ineachcaseapplicable to the Company or its properties.
ARTICLEIII
REPRESENTATIONS ANDWARRANTIES OFSMITH
Smithherebyrepresentsandwarrantsasofthedatehereofasfollows:
3.1 Authorization;BindingEffect.Smithhastherequisitelegalpowerandauthoritytoenterintoandperformhisobligations under this Agreement.This Agreementconstitutesthevalidand legally bindingobligation of Smith,enforceableagainstSmithinaccordancewithits terms, except (i)as may be limited by applicable bankruptcy,insolvency,reorganization, moratorium, andotherlaws ofgeneral applicationaffecting enforcementofcreditors' rights generally,and(ii)asmay belimited by laws relating to the availabilityofspecificperformance, injunctive relief, or other equitable remedies.
3.2 Non-contravention. Theexecution,deliveryandperformanceofthis AgreementbySmith,andtheconsummationofthetransactionscontemplatedhereby,do not and will not (a) violate any Requirements of Lawapplicable to Smith, or (b) resultin a material breach or default under any of the Contractual Obligations of Smith,or under any order, writ,judgment, injunction, decree, determinationor award of any Governmental Authority, in each caseapplicable to Smithor Smith's properties.
ARTICLEIV
REGISTRATION;COVENANTSOFTHECOMPANY
4.1 Registration.TheCompany shall,withinsix(6) monthsfollowingthe Effective Date,filearegistrationstatementundertheSecuritiesAct covering the Registrable Sharesand thereafter shall use itsreasonable commercial efforts to causesuch registrationstatement to be declared effective as soon thereafteras reasonably practicable. Such registration shall provide for sale or distributionof such Registrable Shares on a delayed or continuous basis pursuant to Rule 415 under the Securities Act to the extent it is available.
22 |
4.2 PiggybackRegistration.TheCompanyshallnotifyallHoldersof RegistrableSharesinwritingatleastthirty(30)dayspriorto thefilingofanyregistration statement under the SecuritiesAct for purposes ofa public offering ofsecuritiesof the Company (including,but not limitedto,registration statementsrelatingtosecondaryofferings ofsecurities of the Company, but excluding registrationstatementsrelating to employee benefit plans orwith respecttocorporate reorganizations orothertransactions under Rule 145of the Securities Act), which notice will specify the proposedoffering price, thekind and number of securities proposed to be registered, the distribution arrangements andsuch other information that at the timewould be appropriate toincludein suchnotice,and willafford each such Holderan opportunitytoinclude in suchregistrationstatement all or part ofsuchRegistrable Sharesheld bysuchHolder on terms andconditionsat least as favorableasthose applicableto the securities to besold by the Company and byany other person thereunder.Each Holderdesiring to includein anysuch registration statement all oranypart of the RegistrableSharesheld by it shall, within fifteen(15) days afterthe above-described notice fromtheCompany,so notify the Company in writing.Ifa Holder decides not toinclude some or allofits Registrable Shares in any registration statement thereafter filed by the Company or decides to withdraw its RegistrableShares from any underwriting orregistration pursuanttoSection4.1,such Holdershallneverthelesscontinueto have therightto include any Registrable Shares inany subsequentregistrationstatementor registration statementsasmay be filedby the Company with respect toofferings ofitssecurities,allupon the terms andconditionsset forthherein
a. Underwriting.If theregistrationstatementunderwhichtheCompanygivesnotice underthisSection4.2 is for anunderwritten offering, theCompany shall so advise the Holders ofRegistrable Shares.In such event, the rightofany such Holder to be includedina registration pursuant tothisSection 4.2 shall beconditionedupon such Holder's participation in such underwritingand the inclusion ofsuch Holder's Registrable Sharesin the underwriting to the extent provided herein.All Holders proposing todistribute their Registrable Sharesthrough such underwritingshallenterinto an underwriting agreementincustomary form with the underwriter or underwritersselectedfor such underwriting bythe Company. Notwithstandingany other provision of this Agreement, if the underwriter determinesin good faith thatmarketing factors requirealimitation ofthe numberof securities to be underwritten andadvisestheHolders of Registrable Shares inwriting,the number of shares that may be included in theunderwritingshall be allocated,first, to the Company; second,to the Holders on a pro rata basis basedon the total number ofRegistrableShares held by the Holders; and third, to anyholder of securities ofthe Company(otherthan a Holder)on a pro rata basis.In making any such reduction,all shares held by employeesofthe Companywhichare not Registrable Shares shallfirstbeexcluded.No such reductionshall(i)reduce the securitiesbeingofferedby the Company for its ownaccount to beincludedin the registration andunderwriting or(ii)reduce the amount of Registrable Sharesofthe selling Holders included in the registration below thirty three and one-third percent(331/3%)ofthe total amount ofsecuritiesincludedinsuch registration,unless such offering is the Initial Offering, inwhicheventany or all ofthe Registrable Shares ofthe Holders may be excluded.Ifany Holder disapproves of the termsof any suchunderwriting,suchHolder mayelectto withdraw therefrom bywritten noticeto the
23 |
--'
Companyandtheunderwriter,deliveredatleastten(10)businessdayspriortotheeffectivedateoftheregistrationstatement. AnyRegistrableShares excluded orwithdrawnfromsuchunderwritingshallbeexcludedandwithdrawn from the registration.ForanyHolderwhichisapartnership,limited liabilitycompany orcorporation, thepartnersandmembers,retiredpartnersandmembersandshareholders of suchHolder, orthe estates andfamilymembersof any suchpartnersandmembers andretired partners andmembers andanytrustsforthe benefitofanyof theforegoingperson shall be deemed to be asingle"Holder," and any pro rata reduction with respect tosuch "Holder" shallbe based upon the aggregate amountofsharescarryingregistration rights ownedbyall entitiesandindividuals includedin such"Holder,” asdefined in thissentence.
b.Right toTerminateRegistration.TheCompanyshallhavetherighttoterminateor withdrawanyregistrationinitiatedbyitunderthisSection4.2prior to theeffectivenessofsuch registrationwhetherornot anyHolder haselectedto include securities insuchregistration.The RegistrationExpensesof suchwithdrawn registration shall be borneby theCompanyinaccordance withSection4.4 hereof.
4.3 FormS-3Registration.IftheCompanyshallreceivefromHoldersofatleastseventyfivepercent(75%)oftheRegistrableSharesthenoutstanding a writtenrequest orrequests that theCompanyeffect aregistrationonForm S-3oranysimilar short-formregistrationstatementand anyrelatedqualification orcompliancewithrespecttoallorapart of theRegistrable Shares ownedbysuchHolderorHolders,the Companywill:
a. promptlygivewrittennoticeoftheproposedregistration,andanyrelatedqualificationorcompliance,toallother Holders of Registrable Securities;and
b. assoonaspracticable,effectsuchregistrationandallsuchqualifications andcompliancesasmaybesorequested andaswouldpermitorfacilitatethesaleand distributionofallor such portionofsuchHolder's orHolders'Registrable Sharesas are specifiedinsuchrequest, togetherwith all orsuchportionofthe RegistrableSharesof anyother HolderorHoldersjoining insuchrequestas are specifiedin awritten requestgiven withinfifteen(15)daysafterreceiptofsuchwrittennoticefromtheCompany;provided,however,that the Companyshallnot beobligatedtoeffectanysuch registration,qualificationorcompliance pursuanttothisSection 4.3:
Holders,or
(i) if FormS-3isnotavailableforsuchofferingbythe
(ii) iftheHolders,togetherwiththeholdersofanyothersecuritiesoftheCompanyentitledtoinclusioninsuchregistration,proposetosellRegistrable Sharesandsuchother securities(ifany) at anaggregateprice to the publicoflessthan fivehundredthousanddollars ($500,000),or
(iii) iftheCompanyshallfurnishtotheHoldersacertificatesignedbythechairmanoftheBoardoftheCompanyoritschief executiveofficer statingthat in thegoodfaith judgmentof theBoard of theCompany,itwouldbeseriouslydetrimentalto theCompany and its shareholders forsuchForm S-3 registration to beeffected at suchtime, in
24 |
whicheventtheCompanyshallhavetherighttodeferthefilingoftheFormS-3registration statementfora period ofnotmore than ninety(90) days after receiptof therequestof the Holder or Holders underthisSection 4.3;provided,thatsuch rightto delay a request shall be exercised by the Company not morethan once in any twelve (12) month period, or
(iv) iftheCompanyhas,withinthetwelve(12)monthperiod precedingthedateofsuchrequest,alreadyeffectedone(1)registrationonFormS-3for the Holders pursuant to thisSection 4.3.
c. Subject totheforegoing,theCompanyshallfileaFormS-3 registrationstatementcoveringtheRegistrableSharesand other securities so requested to be registered as soon as practicable afterreceipt of the request or requests of the Holders. Registrations effectedpursuant to thisSection 4.3 shallnot be countedas demands for registration or registrations effected pursuant toSection 4. 1 orSection 4.2,respectively.
4.4 Expenses of Registration. Exceptasspecificallyprovidedherein,all RegistrationExpensesincurredinconnectionwithanyregistration,qualificationorcompliance pursuanttoSections4.1,4.2or 4.3herein shall be borneby theCompany.AllSelling Expenses applicabletoRegistrable Sharessold byHolders incurred in connection with any registrations hereunder shallbeborne bythe Holdersof the securities so registered pro rataonthe basis of the number of shares so registered.
4.5 ObligationsoftheCompany.Wheneverrequiredtoeffecttheregistration ofanyRegistrableSecurities,theCompanyshall,asexpeditiouslyasreasonablypossible:
a. PrepareandfilewiththeSECaregistrationstatementwithrespect tosuchRegistrableSharesanduseitsbesteffortstocausesuchregistrationstatementtobecome effective as soon aspossible, and in any event withinthirty(30) days of the date on which the obligation to effect suchregistration arises,and,upontherequestofthe Holdersofamajority of theRegistrableShares registeredthereunder,keepsuchregistrationstatementeffectivefor upto onehundred eighty(180)daysor,ifashelf registration pursuanttoSecuritiesActRule415,until the Holder or Holders have completed the distribution related thereto.
b. PrepareandfilewiththeSECsuchamendmentsandsupplements tosuchregistrationstatementandtheprospectususedinconnection with suchregistration statement as may be necessary to comply with the provisionsof the Securities Actwith respect to thedisposition of all securitiescovered by such registrationstatementfor the period setforth in paragraph (a) above.
c. FurnishtotheHolderssuchnumberofcopiesofaprospectus, includingapreliminaryprospectus,inconformitywiththerequirements of theSecurities Act, and such otherdocuments as they may reasonably request in order to facilitate the disposition of Registrable Shares owned by them.
d. Useitsbesteffortstoregisterand qualifythesecuritiescoveredby suchregistrationstatementundersuchothersecuritiesorBlueSkylaws of such jurisdictions as shall be reasonablyrequested by the Holders.
25 |
e. Intheeventofanyunderwrittenpublicoffering,enterintoandperformitsobligationsunderanunderwriting agreement,in usualandcustomary form,with the managing underwriter(s) of suchoffering. EachHolder participatinginsuchunderwritingshallalso enter intoand performitsobligationsunder such an agreement,providedthat such underwriting agreement shall not provide for indemnification or contributionobligations on the partof the Holders greaterthantheobligations set forth inSections 4.7(b) and (d).
f. NotifyeachHolderofRegistrableSharescoveredbysuch registrationstatementatanytimewhenaprospectusrelatingthereto isrequired to be delivered underthe Securities Act of the happening of any event asa result of which the prospectus included insuch registration statement,asthen in effect, includes anuntrue statement of a materialfact or omits to state a material fact required to be stated thereinornecessary to make the statements therein not misleading inthe light of the circumstances then existingand correct suchmisrepresentation or omission as expeditiouslyasreasonablypossible.
g. Useitsbesteffortstofurnish,onthedatethatsuchRegistrableSharesaredeliveredtotheunderwritersforsale,if such securities are being sold through underwriters,(i) an opinion,dated as ofsuchdate,of the counselrepresenting the Company for the purposes ofsuch registration,inform and substance as is customarily given to underwriters inan underwritten publicoffering,addressed to the underwriters,ifany,and (ii)to theHolders requesting registration of RegistrableSecurities,a letterdated as of such date,from the independentcertified publicaccountants of the Company, in form andsubstance as is customarily given by independent certified publicaccountants to underwriters in an underwritten public offering addressed to the underwriters.
h. CooperateandassistinanyfilingstobemadewiththeFinancial IndustryRegulatoryAuthority,Inc.
i. CauseallsuchRegistrableSharestobelistedoneachsecurities exchangeonwhichsimilarsecuritiesissued by the Company are then listed,or cause suchRegistrable Shares to be authorized for trading onthe Nasdaq Stock Market if any similar securitiesissued by the Company arethen so authorized,if requested by the Holders ofa majority of such Registrable Securities.
j. ProvideatransferagentandregistrarforallRegistrableShares registeredpursuanthereunderandaCUSIPnumberforallsuchRegistrable Securities, in each case not later than the effective date of such registration.
k. In connectionwithanunderwrittenoffering,to the extentrequestedbythemanagingunderwritersorHolders,participateinand supportcustomary efforts tosellthe Registrable Sharesinthe offering;including withoutlimitation,participating in"roadshows."·
4.6 DelayofRegistration;Furnishing Information.Itshallbeaconditionprecedenttotheobligations of the Company totake any actionpursuant toSection 4.1,4.2 or4.3 that the selling Holders shall furnish to the Company such information regarding themselves,the
26 |
RegistrableSharesheldbythemandtheintendedmethodofdispositionofsuchsecuritiesas shallberequiredtoeffectthe registration oftheir Registrable Securities.
4.7 Indemnification.IntheeventanyRegistrableSharesareincludedina registrationstatementunderSection4.1,4.2or 4.3:
a. Totheextentpermittedbylaw,theCompanywillindemnifyandholdharmlesseachHolder,thepartners,stockholders,members,officersanddirectorsof each Holder, any underwriter (as defined inthe Securities Act)forsuchHolder andeachperson, if any,whocontrolssuchHolderorunderwriter withinthemeaningofthe SecuritiesAct or the ExchangeAct, against any losses,claims, damages, or liabilities Goint or several) to which theymay become subject under the SecuritiesAct,theExchange Act or other federal orstatelaw,insofar as suchlosses,claims, damages or liabilities(or actions inrespect thereof) arise out of orarebased upon any of thefollowing statements,omissionsorviolations (collectively a"Violation")by the Company:(i)any untrue statement or alleged untrue statementof a material fact contained insuchregistration statement, including any preliminaryprospectus or final prospectus contained therein or any amendmentsorsupplements thereto, (ii) theomission or alleged omission to statetherein a material fact required to bestated therein, ornecessary to make the statements therein not misleading, or (iii)any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulationpromulgated under the Securities Act, the Exchange Actor any state securities law inconnectionwith the offering covered by such registrationstatement; and the Companywillpay as incurredtoeach such Holder,partner,stockholder,member,officer,director,underwriter or controllingpersonanylegalor other expensesreasonably incurredby themin connectionwith investigatingor defending anysuch loss, claim,damage,liabilityor action;provided,however,that the indemnityagreement contained in this Section 4.7(a) shall not apply to amounts paid insettlement of any such loss,claim,damage, liability or action if such settlement iseffectedwithout the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company beliablein any such casefor anysuchloss, claim, damage,liabilityor actionto the extent thatit arises outof or is basedupon a Violation whichoccurs in relianceuponandinconformitywith writteninformationfurnished expresslyfor use in connection with such registrationbysuch Holder,partner, officer,director,underwriteror controllingpersonof such Holder.
b. Totheextentpermittedbylaw,eachHolderwill,ifRegistrable SharesheldbysuchHolderareincludedinthesecurities asto which such registration, qualifications or complianceisbeing effected,indemnify and hold harmless theCompany, each of its stockholders, directors, officers and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any otherHolder selling securities under such registrationstatement or any ofsuch other Holder's partners, stockholders,members,officersanddirectors,anyunderwriter (as defined in theSecurities Act) for such Holderand eachperson, if any,whocontrols suchHolder or underwriterwithin the meaning ofthe SecuritiesAct or theExchangeAct, againstany losses, claims, damages or liabilities joint orseveral)to which the Company orany such stockholder, director,officer,controlling person, underwriter or other such Holder, or the partners,stockholders,members,officers and directors of such other Holder, any underwriter (as definedin the Securities Act) for such Holder and each person,if any,who controls such Holder or underwriter within the meaning of the Securities Act
27 |
or theExchangeAct,maybecomesubjectundertheSecuritiesAct,theExchangeActorother federalorstatelaw, insofar assuchlosses,claims, damagesorliabilities (oractionsin respect thereto)ariseoutof or arebased uponanyViolation, ineachcase to theextent(and only to the extent) thatsuch Violation occursinreliance uponandinconformitywith writteninformation furnishedby such Holder under aninstrument duly executed bysuchHolderand statedtobe specifically for use inconnectionwith such registration;and each such Holder will pay as incurredanylegal or other expenses reasonablyincurred by theCompany or anysuch director, officer, controlling person, underwriteror other Holder,or the partners, stockholders, members, officers and directorsof such other Holder,any underwriter (as definedin the Securities Act) for such Holder and each person, if any,who controls such Holder or underwriterwithin the meaningof the Securities Actor the ExchangeAct, in connection withinvestigating or defendingany such loss,claim, damage,liability or actionif it is judicially determined that there wassuch a Violation;provided,however,thattheindemnityagreementcontained in thisSection4.7 (b) shallnotapplytoamountspaidin settlementof any such loss, claim, damage,liabilityor action if such settlement is effected withoutthe consent of the Holder, which consentshall not be unreasonably withheld;provided further,that in noeventshall any indemnityunderthisSection4.7 exceed the proceeds from theoffering received bysuchHolder;providedfurther,that any payments will be repaid to each such Holder if the Company acted recklessly.
c. PromptlyafterreceiptbyanindemnifiedpartyunderthisSection4.7ofnoticeofthecommencement ofanyaction(includinganygovernmentalaction),such indemnifiedpartywill,ifaclaimin respect thereof is tobe made against any indemnifying party under thisSection 4.7,deliverto the indemnifyingparty a writtennotice of thecommencement thereof andthe indemnifyingpartyshallhave the right to participate in, and,to the extent the indemnifying partysodesires, jointly with any other indemnifying party similarly noticed,to assume the defense thereofwith counsel mutually satisfactory to the parties;provided, however,that an indemnified partyshall have the rightto retain its own counsel, with the fees and expenses to be paid by theindemnifying party, if in the reasonable opinion of counsel representation ofsuch indemnified party by the counsel retained by the indemnifying party would beinappropriate dueto actual or potential differing interests between such indemnified party and any otherparty represented by such counsel in such proceeding. Thefailure to deliver written notice to theindemnifying party within a reasonable time of the commencement of any such action, if (andonly to the extent) materiallyprejudicial to its ability to defend such action, shall relieve such indemnifying partyof anyliability to the indemnified party under thisSection 4.7,but the omission soto deliver written notice to the indemnifying party will not relieve it of anyliabilitythat it may have to any indemnifiedparty otherwise than under thisSection 4.7.
d. IftheindemnificationprovidedforinthisSection4.7isheldbya courtofcompetent jurisdiction to be unavailable to an indemnifiedparty with respect to any losses, claims, damages or liabilities referred to herein,the indemnifying party, inlieuof indemnifying such indemnified party thereunder,shall to the extent permittedby applicablelaw contribute to theamount paid orpayable by suchindemnifiedparty as aresult of such loss, claim, damage or liability in suchproportion as is appropriate to reflect therelative fault of the indemnifying party on the one hand andoftheindemnified party on theother in connection with the Violation(s) that resulted in such loss, claim,damage or liability, as well as any other relevant equitableconsiderations. The relativefaultof the indemnifyingpartyand ofthe indemnified party shall be determined by a courtof law by reference to,among other things,
28 |
whethertheuntrueorallegeduntruestatementofa materialfactortheomissiontostate a materialfactrelatestoinformation suppliedby the indemnifying partyorby the indemnified party and the parties'relative intent,knowledge,access toinformationandopportunityto corrector preventsuchstatementor omission;provided,that in no eventshallany contributionbya Holder hereunder exceed the proceedsfromthe offeringreceivedby suchHolder
.
e. TheobligationsoftheCompanyandHoldersunderthisSection4.7 shallsurvivecompletionofanyofferingofRegistrableSharesinaregistrationstatementandtheterminationofthisAgreement. No indemnifying party, inthedefense of anysuchclaimor litigation,shall, except withthe consentofeach indemnifiedparty,consent toentryof any judgmentorenter into anysettlementwhichdoes not includeasan unconditionalterm thereof thegivingby the claimant or plaintiff tosuchindemnified party ofareleasefrom allliability in respecttosuchclaim orlitigation.
4.8 AssignmentofRegistrationRights. TherightstocausetheCompanyto registerRegistrableSharespursuanttothisArticle IVmay betransferred orassignedby aHolder to a transfereeorassigneeofRegistrableShareswhich (a) isasubsidiary,parent,stockholder,generalpartner, limited partner, retired partner,member, retired memberor Affiliate of aHolder,(b) isaHolder's Immediate Family memberoranestateor trustof or forthe benefit ofan individual Holder, or(c)acquiresatleasttwentypercent (20%) of the Registrable Shares held bysuch Holder;provided, however,(i)thetransferorshall, within ten (10) daysaftersuch transfer, furnish to the Company written noticeofthe nameandaddress ofsuchtransferee orassigneeand thesecuritieswith respect to whichsuch registrationrights arebeingassignedand(ii)suchtransfereeshallbecome a party to thfa Agreement.
4.9 "MarketStand-Off'Agreement;AgreementtoFurnishInformation.EachHolderhereby agreesthatsuchHoldershall,ifrequested by the underwriter of any underwritten public offering of theCompany'sCommon Stock,agree withsuch underwriternot to sell, transfer,make anyshort saleof,grantany optionforthepurchase of,or enterintoany hedging or similar transaction with thesameeconomic effectas a sale of,anyCommonStock(orothersecurities) ofthe Company heldbysuch Holder(otherthanthoseincludedinthe registration) foraperiodspecifiedby the representative of the underwriters ofCommon Stock (orothersecurities) of the Company(the "RestrictedPeriod") notto exceed ninety(90)days followingtheeffectivedate of any registrationstatement ofthe Company filed under the Securities Act in connectionwiththe InitialOffering;providedthat such agreements shall notapplyto RegistrableSharesincludedin such registrationstatement or sales or similar transactionseffectedpursuanttoavalidexemptionfrom theregistration requirements of the SecuritiesAct.EachHolder agrees to execute and deliversuch otheragreementsas may be reasonablyrequestedbytheCompanyor the underwriterwhichare consistent with the foregoing orwhicharenecessary togivefurthereffectthereto. In addition, if requested by theCompanyor the representative ofthe underwritersofCommon Stock (or othersecurities)of the Company, eachHolder shallprovide,withinten(10)days of such request, such information concerning such Holderasmay be reasonably requested bytheCompany orsuch representative in connectionwiththe completion of any public offeringoftheCompany's securitiespursuant toaregistrationstatementfiled under the Securities Act. Theobligationsdescribed in thisSection 4.9shall not apply toaregistration relating solely to employee benefitplans onForm S-1 or Form S-8or similar formsthat may be promulgatedinthe future,or a registration relatingsolelyto a Rule 145 transactionon FormS-4
29 |
orsimilarformsthatmaybepromulgatedinthefuture.TheCompanymayimposestop-transfer instructionswithrespect tothe shares of CommonStock (or other securities)subject to the foregoing restriction until theend of theRestricted Period.
4.10 InformationRegardingtheCompany.WithaviewtomakingavailabletoSmiththebenefitsofcertainrulesand regulations of the SECwhich maypermit the sale of the Shares to the public withoutregistration,theCompany agreesto:
a. FollowingthedateuponwhichtheCompanyregistersthe CommonStockwiththeCommissionunderSection12of theExchangeAct,the Companywill file with the SEC, ina timelymanner, all reports andother documents required of the Company under the Exchange Act; and
b. SolongasSmithownsanyShares,furnishtoSmithforthwithupon request:(i)awrittenstatementbytheCompanyastoitscompliance with the reporting requirements ofthe Exchange Act (at any timeafter it has becomesubject to such reporting requirements);(ii) a copy of the mostrecentannual or quarterly report of the Company; and (iii) such other reports anddocuments as Smith mayreasonably request inavailing itself of any rule or regulation of the SEC allowing it to sell the Notes without registration.
ARTICLEV
GENERALPROVISIONS
5.1 Indemnification.Smithagreestoindemnifyandholdharmlessthe Company,itsofficers,managers,affiliates,counsel,agentsandeachotherPerson,ifany, who controls or is controlled by it, within the meaningof Section15 of the Securities Act, against any and all loss, liability, claim, damage and expense whatsoever(including,but not limited to, any and all expenses reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or.anyclaim whatsoever)arising outof or baseduponany false representation orwarranty or breach or failure by Smithtocomplywith any covenant or agreement made bySmith herein or in any other document furnished by Smith to any of the foregoinginconnection withthistransaction.
5.2 Amendment. This Agreement may be amended, modified or supplementedatanytimebythepartiesheretoonlybyaninstrumentinwritingsignedonbehalf of each of the parties hereto. No agreementmade through the use of electronic records or electronic signatures, asthoseterms areused in theElectronic Signatures inGlobal and National Commerce Act, 15U.S.C. Sec. 7001 et. seq., shall be enforceable or binding on either party hereto. Notwithstanding the previous sentence, facsimile signatures, telecopied signatures,or copiesof signatures inPDF format sentbye-mail,will constitute asufficientform ofwriting for purposes of thisSection 5.2andSection 5.3.
5.3 Counterparts. ThisAgreementmaybeexecutedinoneormore counterparts, eachofwhichshallbedeemedanoriginal,but all of which together shall constitute oneandthe same instrument.
5.4 Headings.TheheadingsinthisAgreementareforconvenienceof referenceonlyandshallnotlimitorotherwiseaffectthemeaninghereof.
30 |
5.5 GOVERNING LAW.THIS AGREEMENT SHALLBE GOVERNED BYANDCONSTRUEDINACCORDANCEWITHTHELAWSOFTHESTATEOFNEWYORK.
5.6 Severabilitv.Ifanyoneormoreoftheprovisionscontainedherein,orthe applicationthereofinanycircumstance,isheld invalid,illegalorunenforceableinany respectfor anyreason,thevalidity,legality andenforceabilityof anysuchprovisionin everyotherrespect andoftheremaining provisions hereofshallnot bein anywayimpaired.
5.7 EntireAgreement;Waivers. ThisAgreement,togetherwiththe SettlementAgreement,isintendedbythepartiesasafinalexpressionoftheiragreementandisintendedtobe acomplete and exclusivestatement oftheagreement andunderstandingofthe parties hereto in respectofthesubject matter contained herein.Thereare no restrictions, promises,warranties or undertakings,otherthan those set forthherein and in the Conversion Agreement. This Agreementand theConversionAgreementsupersede allprioragreementsandunderstandingsbetween thepartieswithrespecttosuchsubjectmatter.Nowaiverofanyof theprovisionsofthis Agreementshallbe deemed orshallconstitutea waiverofany otherprovision hereof (whether or not similar), norshallsuch waiver constituteacontinuing waiver unless otherwiseexpresslyprovided.
5.8 FurtherAssurances.Eachofthepartiesshallexecutesuchdocumentsandperformsuchfurtheracts (including, withoutlimitation, obtaining anyconsents,exemptions,authorizations,or otheractions by,orgivingany notices to, or making any filings with,any GovernmentalAuthority or any other Person)as maybereasonably requiredordesirableto carry out orto performtheprovisionsof thisAgreement.
5.9 Notices.Allnoticesorothercommunicationsgivenormadehereundershallbeinwritingandshallbedeliveredormailedby registeredorfirst class mail,postage prepaid, or expressovernightcourier service,to theaddressset forth in the ConversionAgreement.
(SignaturePageFollows)
31 |
INWITNESSWHEREOF,theCompanyandSmithhaveexecutedthisAgreementas of,2013.
GEOSPATIAL HOLDINGS,INC. | ||
By: | ||
Thomas R. Oxenreiter, CFO | ||
MarkA.Smith |