SERIESA CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

 

THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of November 4, 2009 by and among LocatePLUS Holdings Corporation , a Delaware corporation, (collectively, the “Company”), and the investors listed on Schedule 1 attached hereto (who shall execute this Agreement and who are collectively referred to as the “Investors”).

 

 

    WHEREAS, the Company and the Investors are executing and delivering this Agreement in reliance upon an exemption from securities registration pursuant to Section 4(2) and/or Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”);

 

    WHEREAS, the Company desires to authorize, issue and sell seventy two thousand (72,000) shares of its Series A Convertible Preferred Stock, $1.00 par value per share (the “Series A Stock”) to the Investors, and the Investors desire to purchase the Series A Stock, all on the terms and subject to the conditions herein set forth; and

 

    WHEREAS, on November 4, 2009 the Company and Dutchess Private Equities Fund, Ltd.   executed and delivered a Debt Conversion Agreement (the “Debt Conversion Agreement”) to take effect upon such time as the fulfillment of the Company obligations herein for duly authorized issuance of the Series A Stock.

 

    NOW, THEREFORE, for and in consideration of the foregoing premises, the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

        2. Sale and Purchase of Series A Stock.  Subject to the terms and conditions herein, the Company agrees to sell to the Investors, and each of the Investors severally agrees to purchase from the Company on the date hereof in accordance with this Agreement, the number of shares of Series A Stock set forth opposite such Investor’s name on Schedule 1 at a purchase price of Twenty-Five dollars ($25.00) per share in accordance with the terms and conditions of the Debt Conversion Agreement (the “Purchase Commitment”).  The Company’s agreement with each Investor is a separate agreement, and the sale of the Series A Stock to each Investor is a separate sale.

        3. The Closing.  The closing of the sale of the Series A Stock shall take place at 10:00 a.m. Boston time (the “Closing”) on the date hereof.  The date and time on which the Closing occurs shall be referred to as the “Closing Date”.  On the Closing Date, the Company shall deliver to each of the Investors purchasing shares of the Series A Stock on such date a stock certificate for the number of shares of Series A Stock being acquired by such Investor, which shares shall be registered in the Investor’s name or as otherwise designated by the Investor.

 

        4. Representations and Warranties by the Company.  As a material inducement to each of the Investors to enter into this Agreement and to purchase the number of shares of the Series A Stock set forth after such Investor’s name on Schedule 1, with the understanding that each Investor will be relying thereon in consummating the transactions contemplated hereunder, the Company hereby represents and warrants to each Investor as of the date of this Agreement that, except as set forth (i) in the Disclosure Schedule attached hereto and prepared and delivered by the Company to the Investors on the date hereof (the “Disclosure Schedule”), (ii) the Transaction Documents or (iii) SEC Form 10-K of the Company for the year ended December 31, 2008 and the SEC Form 10-Q of the Company for the six months ended June 30, 2009 (the “SEC Documents”, the statements contained in this Section 4 are true and correct.  The Disclosure Schedule is arranged in sections corresponding to the sections and subsections of this Section 4:

          4.1. Organization, Qualification and Power.  The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all requisite corporate power and authority, and all governmental licenses, governmental authorizations, governmental consents and governmental approvals, required to carry on its business as now conducted and to own, lease and operate the assets and properties of the Company as now owned, leased and operated.  The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing in every jurisdiction in which the character or location of its properties and assets owned, leased or operated by the Company or the nature of the business conducted by the Company requires such qualification or licensing, except where the failure to be so qualified, licensed or in good standing in such other jurisdiction could not, individually or in the aggregate, have a Material Adverse Effect (as defined herein) on the Company.  The Company has heretofore delivered to the Investors complete and accurate copies of its Articles of Incorporation and Bylaws, as currently in effect. The Company has previously delivered to the Investors a complete and accurate list of all jurisdictions in which the Company is qualified or licensed to do business as of the date hereof.

          4.2. Authorization; Enforcement.  The Company has full power and authority to enter into this Agreement, the related Debt Conversion Agreement, any and all agreements referenced herein or therein, and all agreements and documents related to the foregoing (collectively, the “Transaction Documents”) and, to carry out the transactions contemplated in the Transaction Documents. Subject to the terms and conditions of the Debt Conversion Agreement, The Board of Directors of the Company and the Company’s stockholders have taken all action required by law, the Company’s charter documents and otherwise to duly and validly authorize and approve the execution, delivery and performance by the Company of the Transaction Documents and the consummation by the Company of the transactions contemplated in the Transaction Documents and no other corporate proceedings on the part of the Company are necessary to authorize the Transaction Documents or to consummate the transactions contemplated thereby.  The Transaction Documents have been duly and validly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company, enforceable against it in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and rules of law governing specific performance, injunctive relief or other equitable remedies.

       4.3. Capitalization of the Company.  The Company has authorized (a) 50,000,000 shares of Common Stock, 49,993,987 of which shares are issued and outstanding, and (b) 1,000,000 shares of Preferred Stock of which 72,000 shares of Series A Preferred Stock have been authorized but none of which is  issued and outstanding (together with the Common Stock, the “Capital Stock”).  All of the issued and outstanding shares of the Capital Stock are duly authorized, validly issued, fully paid, non-assessable and free of preemptive rights.  Except as set forth in the Disclosure Schedule, the Transaction Documents or the SEC Documents (a) there are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any of its securities,  (b) there are no stockholder agreements, voting trusts or other agreements or understandings to which the Company is a party or by which it is bound relating to the voting or registration of any shares of Capital Stock,  (c) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, (d) there are no contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, (e) there are no outstanding debt securities, (f) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the Securities Act, (g) there are no outstanding registration statements or comment letters from the SEC or any other regulatory agency and (h)there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Preferred Stock as described in this Agreement.

       4.4. Non-Contravention.  Neither the execution, delivery and performance by the Company of the Transaction Documents nor the consummation of the transactions contemplated therein will (i) contravene or conflict with the Certificate of Incorporation or By-Laws  of the Company, (ii) contravene or conflict with or constitute a violation of any provision of any Applicable Law (as defined herein) binding upon or applicable to the Company or any of the Company’s assets, (iii) result in the creation or imposition of any Lien (as defined herein) on any of the Company’s assets, other than Permitted Liens (as defined herein), (iv) be in conflict with, constitute (with or without due notice or lapse of time or both) a default under, result in the loss of any material benefit under, or give rise to any right of termination, cancellation, increased payments or acceleration under any terms, conditions or provisions of any material note, bond, lease, mortgage, indenture, license, contract, franchise, permit, instrument or other agreement or obligation to which the Company is a party, or by which any of its properties or assets may be bound, or (v) to the knowledge of the Company, materially disrupt or impair any business relationship with any material supplier, customer, distributor, sales representative or employee of the Company.  Except as set forth in the Disclosure Schedule, the Transaction Documents or the SEC Documents , neither the Company nor its subsidiaries is in violation of any term of or in default under its Certificate of Incorporation or By-laws  or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its subsidiaries.  The business of the Company and its subsidiaries is not being conducted, and shall not be conducted in violation of any material law, ordinance, or regulation of any governmental entity.  Except as specifically contemplated by the Transaction Documents  and as required under the Securities Act and any Applicable Law, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents in accordance with the terms thereof.  All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.  The Company and its subsidiaries are unaware of any facts or circumstance, which might give rise to any of the foregoing.

 

       4.5. Consents and Approvals.  No consent, approval, order or authorization of or from, or registration, notification, declaration or filing with (hereinafter sometimes separately referred to as a “Consent” and sometimes collectively as “Consents”), of any Person, including, without limitation, any Governmental Authority (as defined herein), is required in connection with the execution, delivery or performance of the Transaction Documents by the Company or the consummation by the Company of the transactions contemplated therein.  To the knowledge of the Company, there are no facts relating to the identity or circumstances of the Company that would prevent or materially delay obtaining any of the Consents.

       4.6. Financial Statements; Undisclosed Liabilities.

 

          (a) The Company has previously delivered to the Investors complete and accurate copies of the audited financial statements  of the Company as of December 31, 2008 Latest Financial Statements and the unaudited financial statements of the Company for the six months   ended June 30, 2009 all, as included in the

SEC Documents  ( the “Latest Financial Statements”).  The Latest Financial Statements are based upon the information contained in the books and records of the Company and fairly and accurately present the financial condition of the Company as of the dates thereof and results of operations for the periods referred to therein.  The Latest Financial Statements have been prepared in accordance with GAAP (as defined herein). The financial statements for the period ended June 30, 2009 have been prepared in accordance with GAAP applicable to unaudited interim financial statements and thus may not contain all notes and may not contain prior period comparative data which are required by GAAP for audited financial statements)They reflect all adjustments necessary to a fair and accurate statement of the financial condition and results of operations of the Company for the interim periods presented.

 

          (b) All accounts, books and ledgers related to the business of the Company and its subsidiaries are properly and accurately kept, are complete in all material respects, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein subject to the year end adjustments made by the outside

accountant which shall be in accordance with prior practice.

 

          (c) Except as and to the extent reflected in the Latest Financial Statements  subject to year end adjustments made in accordance with prior practice, the Company does not have any Liabilities (as defined herein) of any nature (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due,  and

regardless of when asserted), other than Liabilities incurred in the Ordinary Course of Business (as defined herein) since the date of the Latest Financial Statements and Liabilities arising in connection with this Agreement and the transactions contemplated herein. 

       4.7. Assets and Properties.

 

          (a) Except as previously disclosed in the SEC Documents, the Company has good and valid right, title and interest in and to or, in the case of leased properties or properties held under license, good and valid leasehold or license interests in, all of their assets and properties, including, but not limited to, all of the machinery,

equipment, terminals, computers, vehicles, and all other assets and properties (real, personal or mixed, tangible or intangible) reflected in the Latest Financial Statements and all of the assets purchased or otherwise acquired since the date of the Latest Financial Statements, except those assets and properties disposed of in the Company’s ordinary course of business after the date of the Latest Financial Statements.  The Company holds title to each such property and asset free and clear of all Liens, except Permitted Liens.

 

          (b) Except as previously disclosed in the SEC Documents, the material equipment owed by the Company has been properly maintained and is in good operating condition and repair and is adequate for the uses for which they are currently being put by the Company, normal wear and tear excepted.  To the knowledge of the

Company, no such asset is in need of maintenance or repair, except for routine maintenance and repairs that are in the ordinary course.

 

          (c) Except as previously disclosed in the SEC Documents, the Company owns or has the right to use all material property, real or personal, tangible or intangible, which is necessary for the operation of its business in substantially the same manner as it has been conducted during the period covered by the Latest Financial

Statements.

       4.8. Compliance with Applicable Laws.  Except as set forth in the Transaction Documents, the SEC Documents or the Disclosure Schedule, the Company has not violated or infringed, nor is it in violation or infringement of, any Applicable Law or any order, writ, injunction or decree of any Governmental Authority in connection with its activities.  The Company, and its officers, directors, agents and employees, have complied with all Applicable Laws.  No claims have been filed against the Company alleging a violation of any Applicable Law.

       4.9. Permits.  The Company has conducted its business in compliance with all material terms and conditions of all licenses, permits, quotas, authorizations, registrations and other approvals that are necessary to the operation of, or relate solely to, the Company’s business (collectively, the “Permits”).  Each Permit is valid and in full force and effect and none of the Permits will be terminated, revoked, modified or become terminable or impaired in any respect for any reason, except as would not have a Material Adverse Effect.

       4.10. Receivables.  The accounts receivable and other receivables reflected on the Latest Financial Statements, and those arising after the date thereof, are valid receivables that have arisen from bona fide transactions in the Company’s ordinary course of business, and the Company is not aware  that such accounts are subject to valid counterclaims or setoffs, and are collectible in accordance with their terms, except as and to the extent of the bad debt allowance reflected on the Latest Financial Statements.

       4.11. Litigation.  Except as set forth in the Transaction Documents, the SEC Documents or the Disclosure Schedule, there are no (a) actions, suits, claims, hearings, arbitrations, proceedings (public or private) or governmental investigations that have been brought by or against any Governmental Authority or any other Person, nor any investigations or reviews by any Governmental Authority against or affecting the Company, pending or, to the Company’s knowledge, threatened, against or by the Company or any of its assets or which seek to enjoin or rescind the transactions contemplated by this Agreement; or (b) existing orders, judgments or decrees of any Governmental Authority naming the Company as an affected party or otherwise affecting any of the assets or the business of the Company.

       4.12. Labor and Employment Matters.  Except as set forth in the Transaction Documents, the SEC Documents or the Disclosure Schedule, the Company has previously provided  to the Investors a complete and accurate list of all current employees, officers and directors of the Company, which list includes their base salaries and bonus.  All employees of the Company are employed on an at-will basis.  Neither the Company nor any of its subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any of its subsidiaries, is any such dispute threatened.  None of the Company’s or its subsidiaries’ employees is a member of a union and the Company and its subsidiaries believe that their relations with their employees are good

       4.13. Tax Matters.  Except as set forth in the Transaction Documents, the SEC Documents or the Disclosure Schedule as and with the exception of its corporate federal and state income tax return for the year ended December 31, 2008,  the Company has, or will have prior to Closing (a) properly completed and filed on a timely basis all tax returns (federal, provincial, state, county, local and other) relating to all excise, payroll, real estate, capital stock, intangible, value-added, income, sales, use, service, employment, property and, without limitation of the foregoing, all other taxes of every kind and nature which the Company is required to file in connection with its business prior to the Closing Date (i.e., the due date for such tax return being on or before the Closing Date) and for which the non-payment of, or failure to file, could result in a Lien on any of the Company’s assets, or result in the Investors becoming liable or responsible therefore, and (b) paid in full all Taxes (as defined herein), interest, penalties, assessments or deficiencies shown to be due to any taxing authority on such returns.  The Company is not currently the beneficiary of any extension of time within which to file any such return. The Company is not a party to any pending or, to the knowledge of the Company, any threatened action or proceeding against the Company for the assessment or collection of Taxes by any Governmental Authority, and there is no basis for any such action or proceeding.  There are no audits pending with respect to any liabilities for Taxes of the Company.

       4.14. Indemnification, Guarantee or Assumption of Liability Obligations.  Except as permitted by Applicable Law or set forth in the Company‘s Certificate of Incorporation or By-laws or set forth in the Transaction Documents, the SEC Documents or the Disclosure Schedule the Company is not a party to any Contract that contains any provisions requiring the Company to indemnify, guarantee or assume liabilities of any Person except as made in the ordinary course of business with routine agreements.

       4.15. Employee Benefit Plans.  Except as set forth in the Transaction Documents, the SEC Documents or the Disclosure Schedule the Company does not have any liability arising directly or indirectly under Section 412 of the Code, or Section 302 of Title IV of ERISA. The Company does not have any liability arising directly or indirectly to or with respect to any “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA.  The Company does not have any liability arising under the Consolidated Omnibus Reconciliation Act of 1985, as amended, Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA.  Nothing has occurred or failed to occur with respect to any the Company Pension Plan that could result in any liability to the Investors.

       4.16. Disclosure.  To the best of the knowledge and belief of the management of the Company, no representation or warranty by the Company in this Agreement and no statement contained or to be contained in any document, certificate or other writing furnished by the Company to the Investors in connection with the transactions contemplated by this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  There is no fact that has not been disclosed to the Investors of which any officer or director of the Company is aware which has or could reasonably be expected to have a Material Adverse Effect.

       4.17. Insurance.  The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged.

       4.18. Regulatory Permits.  The Company and its subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

       4.19. Internal Accounting Controls.  The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, and (iii) the recorded amounts for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

       4.20. SEC Documents: Financial Statements. Except as set forth in the Disclosure Schedule, since the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) The Company has made available through the Commission’s website at www.sec.gov., complete and accurate copies of the SEC Documents.  As of their respective dates, the financial statements of the Company disclosed in the SEC Documents (the “Financial Statements”) complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto.  Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, 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 exclude footnotes or may be condensed or summary statements) and, fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

 

       4.21. Acknowledgment Regarding Investor’s Purchase of the Preferred Stock. The Company acknowledges and agrees that the Investors are acting solely in the capacity of an arm’s-length purchaser with respect to the Transaction Documents and the transactions contemplated thereby.  The Company further acknowledges that the Investors are not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by the Investors or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to such Investor’s purchase of the Preferred Stock or the Conversion Shares.  The Company further represents to the Investor that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.

 

       4.22. No General Solicitation.  None of the Company, its subsidiaries or Affiliates (as defined herein), nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Preferred Stock.

 

       4.23. No Integrated Offering.  None of the Company, its subsidiaries or Affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the Preferred Stock under the Securities Act or cause this offering of the Preferred Stock to be integrated with prior offerings by the Company for purposes of the Securities Act.

 

       4.24. Certain Transactions.  Except as permitted by Applicable Law or set forth in the Company‘s Certificate of Incorporation or By-laws or set forth in the Transaction Documents, the SEC Documents or the Disclosure Schedule  and except for arm’s-length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from third parties and other than the grant of stock options disclosed in the SEC Documents, none of the officers, directors, or employees of the Company, its subsidiaries or Affiliates is presently a party to any transaction with the Company, its subsidiaries or Affiliates (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

 

       4.25. Rights of First Refusal.  The Company is not obligated to offer the securities offered hereunder on a right of first refusal basis or otherwise to any third parties, including but not limited to, current or former shareholders of the Company, its subsidiaries, Affiliates, underwriters, brokers, agents or other third parties.

 

       4.27. Cancelleation of Debentures and Warrants.  The Investors and the Company agree that at  and subject to the conditions of Closing hereunder, Dutchess Private Equities Fund, Ltd will cancel all Convertible Debentures issued by the Company to Dutchess Private Equities Fund, Ltd. and all Warrants held by Dutchess Private Equities Fund, Ltd. and all indebtedness and other obligations of the Company associated with such  Debentures and Warrants.

    5. Representations of the Investors.  Each of the Investors severally represents to the Company that:

 

       5.1. Investment Intent.  The shares of the Series A Stock and the Conversion Shares into which such shares may be converted that are being acquired by the Investor are being purchased for investment for the Investor’s own account and not with a view to, or for resale in connection with, any distribution or public offering thereof.  The Investor has no present plan or intention to engage in a sale, exchange, transfer, distribution, redemption, reduction in any way of the Investor’s risk of ownership by short sale or otherwise, or other disposition, directly or indirectly of the Series A Stock being acquired by the Investor pursuant to the Transaction Documents or the Conversion Shares into which such shares may be converted.  The Investor is able to bear the economic risk of its investment and has the knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks (including tax considerations) of its investment, including the high degree of risk of loss of the Investor’s entire investment herein.

       5.2. Restrictions on Resale, Rule 144.  The Investor understands that the shares of the Series A Stock and the Conversion Shares have not been registered under the Securities Act or any state securities laws by reason of their contemplated issuance in transactions exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 504, 505 or 506 promulgated under the Securities Act and applicable state securities laws, and that the reliance of the Company and others upon these exemptions is predicated in part upon this representation by the Investor.  The Investor further understands that the Series A Stock and the Conversion Shares may not be transferred or resold without (i) registration under the Securities Act and any applicable state securities laws, or (ii) an exemption from the requirements of the Securities Act and applicable state securities laws.  The Investor also understands that the Conversion Shares will be issued without prior registration thereof under the Securities Act or applicable state securities laws in reliance upon Section 4(2) of the Securities Act and transactional exemptions from registration under applicable state securities laws based upon appropriate representations of the Investor.  As such, the Conversion Shares will be subject to transfer restrictions similar to restrictions applicable to the Series A Stock.  The Investor understands that (i) an exemption from such registration is presently available pursuant to Rule 144 promulgated under the Securities Act by the Commission, (ii) the Company has made a commitment to remain eligible for Rule 144,.  The Investor understands that any sales pursuant to Rule 144 can be made only in full compliance with the provisions of Rule 144.

 

       If so requested by the Investors, the Company shall instruct counsel to write a Rule 144 opinion letter provided the necessary paperwork has been submitted and such counsel can write an opinion that the proposed transaction fits within the Exemption (as defined herein) .  

 

       5.3 Location of Principal Office, Qualification as an Accredited Investor, etc.  The state in which the Investor’s principal office (or domicile, if the Investor is an individual) is located is the state set forth in the Investor’s address on Schedule 1.  The Investor by execution of this Agreement hereby represents that he, she or it qualifies as an “accredited investor” for purposes of Regulation D promulgated under the Securities Act.  The Investor (i) is an investor in securities of companies similar to the Company and acknowledges that it is able to fend for itself, and bear the loss of its entire investment in the Series A Stock, and (ii) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment to be made by it pursuant to this Agreement.  If other than an individual, the Investor also represents it has not been organized solely for the purpose of acquiring the Series A Stock or the Conversion Shares.

 

       5.4. Acts and Proceedings.  The Investor has full power and authority to enter into and perform under the Transaction Documents in accordance with their respective terms.  The Transaction Documents have been duly authorized by all necessary action on the part of the Investor, has been duly executed and delivered by the Investor, and each is a valid and binding agreement of the Investor and enforceable against the Investor in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and to judicial limitations on the remedy of specific enforcement and other equitable remedies.

 

       5.5. Exculpation Among Investors.  The Investor acknowledges that in making the decision to invest in the Company, the Investor is not relying on any other Investor or upon any person, firm or company, other than the Company and its officers, employees and/or directors.  The Investor agrees that none of any of the other Investor, nor their partners, employees, officers or controlling persons, shall be liable for any actions taken by the Investor, or omitted to be taken by the Investor, in connection with such investment.

 

       5.6. Disclosure of Information.  The Investor represents that the Company has made available to the Investor at a reasonable time prior to the execution of the Transaction Documents the  opportunity to ask questions and receive answers from the Company’s management concerning the Company’s business, management and financial affairs, the terms and conditions of the offering of the Series A Stock and to obtain any additional information (that the Company possesses or can acquire without unreasonable effort or expense) as may be necessary to verify the accuracy of information furnished to such Investor.  Investor further represents that it, except as otherwise provided by law, is entering into the Transaction Documents and is acquiring the Series A Stock without any representation or warranty, express or implied, by the Company or any of its officers, directors, employees or affiliated, except as expressly set forth in this Agreement.  The foregoing, however, does not limit or modify the representations and warranties of the Company in the Transaction Documents or the right of the Investors to rely thereon.

 

       5.7. Legend; Stop Transfer.  The Series A Stock, and any Conversion Shares issued upon conversion thereof, shall bear a legend substantially similar to the following:

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE BLUE SKY LAWS, AND ARE SUBJECT TO CERTAIN INVESTMENT REPRESENTATIONS.  THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT AND SUCH APPLICABLE BLUE SKY LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

The Company shall make a notation regarding the restrictions on transfer of the Series A Stock and any such Conversion Shares in its books and the Series A Stock and any such Conversion Shares shall be transferred on the books of the Company only if transferred or sold pursuant to an effective registration statement under the Securities Act covering the securities to be transferred or an opinion of counsel satisfactory to the Company that such registration is not required.

 

Any legend endorsed on a certificate pursuant to Section 5.7 hereof shall be removed, and the Company shall issue a certificate without such legend to the holder of such security, if such security is being disposed of pursuant to a registration under the Securities Act or pursuant to Rule 144 or any similar rule then in effect.

 

       It shall be the Company’s responsibility to take all necessary actions and to bear all such costs to issue the Conversion Shares as provided herein, including the responsibility and cost for delivery of an opinion letter to the transfer agent, if so required.  The person or entity in whose name the certificate of Conversion Shares is to be registered shall be treated as a shareholder of record on and after the Conversion Date.  The Company hereby acknowledges that the date of consideration for this Debenture is the Issuance Date of the original Obligations, as outlined in the Debt Conversion Agreement, and shall use all commercially reasonable best efforts to facilitate sales under Rule 144 of the Securities Act

 

       5.8 No Brokers or Finders.  No person, firm or corporation has or will have, as a result of any contractual undertaking by the Investor, any right, interest or valid claim against the Investor or the Company for any commission, fee or other compensation as a finder or broker, or in any similar capacity, in connection with the transactions contemplated by the Transaction Documents.  Each responsible Investor will indemnify and hold the Company harmless against any and all liability with respect to any such commission, fee or other compensation which may be payable or determined to be payable.

 

       5.9. No Governmental Review.  Each Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Preferred Stock or the Conversion Shares, or the fairness or suitability of the investment in the Preferred Stock or the Conversion Shares, nor have such authorities passed upon or endorsed the merits of the offering of the Preferred Stock or the Conversion Shares.

 

       5.10. Receipt of Documents.  Each Investor and his or its counsel has received and read in their entirety: (i) the Transaction Documents and each representation, warranty and covenant set forth therein; (ii) all due diligence and other information requested by the Investor to verify the accuracy and completeness of such representations, warranties and covenants; (iii) the Company’s Form 10-KSB for the fiscal year ended December 31, 2008; (iv) the Company’s Form 10-QSB for the six months  ended June  30, 2009 and (v) answers to all questions each Investor submitted to the Company regarding an investment in the Company; and each Investor has relied on the information contained therein.

 

       5.11. Due Formation of Corporate and Other Investors.  If the Investors is a corporation, trust, partnership or other entity that is not an individual person, it has been formed and validly exists and has not been organized for the specific purpose of purchasing the Series A Stock and is not prohibited from doing so.

 

       5.12. No Legal Advice From the Company.  Each Investor acknowledges, that it had the opportunity to review the Transaction Documents and the transactions contemplated thereby with his or its own legal counsel and investment and tax advisors.  Each Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company, its subsidiaries, Affiliates or any of their respective representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by the Transaction Documents or the securities laws of any jurisdiction.

    6. Covenants.

       6.1. Best Efforts.  Each party shall use its best efforts to timely satisfy each of the conditions to be satisfied by it as provided in Sections 7 and 8 hereof.

       6.2. Reporting Status.  Until the earlier of (i) the date as of which the Investors may sell all of the Conversion Shares without restriction pursuant to Rule 144(k) promulgated under the Securities Act (or successor thereto), or (ii) the date on which (A) the Investors shall have sold all the Conversion Shares and (B) none of the Series A Stock are outstanding (the “Registration Period”), the Company shall file in a timely manner all reports required to be filed with the Commission pursuant to the Exchange Act and the regulations of the Commission thereunder, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination.

       6.3. Reservation of Shares.  The Company shall take all action reasonably necessary to at all times have authorized, and reserved for the purpose of issuance, such number of shares of Common Stock as shall be necessary to effect the issuance of the Conversion Shares.  If at any time the Company does not have available such shares of Common Stock as shall from time-to-time be sufficient to effect the conversion of all of the Conversion Shares, then the Company and its management shall, upon the written request of the Investors, do the following: (i) call and hold a special meeting of the shareholders or initiate a request for consents of shareholders within thirty (30) days of such occurrence for the sole purpose of increasing the number of shares authorized, (ii) recommend to the shareholders that they vote in favor of increasing the number of shares of Common Stock authorized, and (iii) vote all of their shares in favor of increasing the number of authorized shares of Common Stock.

       6.4. Listings or Quotation.  If not already done prior to the Closing, the Company shall promptly secure the listing or quotation of the Conversion Shares upon each national securities exchange, automated quotation system or The National Association of Securities Dealers Inc.’s Over-The-Counter Bulletin Board (“OTCBB”) or other market, if any, upon which shares of Common Stock are then listed or quoted.  The Company shall use its best efforts to maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time-to-time issuable under the terms of this Agreement.  The Company shall maintain the Common Stock’s authorization for quotation on the OTCBB.

       6.5. Fees and Expenses.  Each of the Company and the Investors shall pay all costs and expenses incurred by such party in connection with the negotiation, investigation, preparation, execution and delivery of the Transaction Documents.

       6.6. Transfer Agent.  The Company covenants and agrees that, in the event that the Company’s agency relationship with the transfer agent should be terminated for any reason after the Closing Date, the Company shall immediately appoint a new transfer agent and shall require that the new transfer agent agree to be bound by the terms of any transfer agent instructions issued by the Company and in place as of the date hereof.

    7. Conditions To The Company’s Obligation To Sell.  The obligation of the Company hereunder to issue and sell the Preferred Stock to the Investors 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:

       7.1. The Investor and Company shall have executed the Debt Conversion Agreement, Certificate of Designation and this Agreement (collectively, the “Transaction Documents”) .

       7.2. All necessary consents and approvals from regulatory and other authorities and all filings with such authorities and all other consents and approvals required by the Transaction Documents shall have been obtained and made to the Company’s satisfaction.

       7.3. The representations and warranties of the Investors shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Investors shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Investors at or prior to the Closing Date.

 

    8. Conditions To The Investor’s Obligation To Purchase.  The obligation of the Investors hereunder to purchase the Series A Stock at the Closing(s) is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Investor’s sole benefit and may be waived by that Investor at any time in the Investor’s sole discretion:

       8.1. The Company shall have executed the Transaction Documents and delivered the same to the Investors.

       8.2. The Common Stock shall be authorized for quotation on the OTCBB and trading in the Common Stock shall not have been suspended for any reason.

       8.3. The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties is  qualified herein  as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by the Transaction Document to be performed, satisfied or complied with by the Company at or prior to the Closing Date.  If requested by the Investor, the Investor shall have received a certificate, executed by the President of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Investor.

       8.4. The Company shall have delivered to the Investors the Series A Stock in the respective amounts set forth opposite each Investors name on Schedule 1 attached hereto.

       8.5. The Company shall have delivered to the Investors a certificate of good standing from the Delaware Secretary of State.

       8.6. The Company shall have reserved out shares of Common Stock to effect the conversion of all of the Conversion Shares then outstanding.

       8.7. No Events of Default past any applicable cure period, shall have occurred under the Transaction Documents.

       8.8. The Company shall deliver to the Investor a board resolution stating that all management, director and officers have authorized the Debt Conversion Agreement and this Agreement.

 

    9. Indemnification.

       9.1. In consideration of the Investor’s execution and delivery of this Agreement and acquiring the Preferred Stock and the Conversion Shares hereunder, and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless the Investors and each other holder of the Preferred Stock and the Conversion Shares, and all of their officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by the Transaction Documents) (collectively, the “Investor Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Investor Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by the Investor Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated thereby, or (c) any cause of action, suit or claim brought or made against such Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents or any other instrument, document or agreement executed pursuant thereto, provided that no indemnification shall be provided for any such actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses resulting directly or indirectly from willful or negligent conduct of any Investor or in breach of any of the Transaction Documents.   To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.

       9.2. In consideration of the Company’s execution and delivery of the Transaction Documents, and in addition to all of the Investor’s other obligations under the Transaction Documents, the Investor shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by the Transaction Documents) (collectively, the “Company Indemnitees”) from and against any and all Indemnified Liabilities incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Investors in the Transaction Documents, instrument or document contemplated thereby or executed by the Investor, (b) any breach of any covenant, agreement or obligation of the Investors contained in the Transaction Documents or any other certificate, instrument or document contemplated thereby or executed by the Investor, or (c) any cause of action, suit or claim brought or made against such Company Indemnitee based on material misrepresentations or due to a material breach and arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents or any other instrument, document or agreement executed pursuant thereto by any of the parties thereto, including, specifically, documents executed in settlement of any litigation.  To the extent that the foregoing undertaking by each Investor may be unenforceable for any reason, each Investor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.

    10. Definitions.  The following terms, as used herein, have the following meanings:

       10.1. “Affiliate” means, with respect to any person or entity, another person or entity that, directly or indirectly, (i) has a ten percent (10%) or more equity interest in that person or entity,

(ii) has ten percent (10%) or more common ownership with that person or entity, (iii) controls that person or entity, or (iv) shares common control  with that person or entity.  

“Control” or “controls” for purposes hereof means that a person or entity has the power, direct or indirect, to conduct or govern the policies of another person or entity.

       10.2. “Agreement” has the meaning set forth in the Introduction.

       10.3. “Applicable Law” means, with respect to any Person, any domestic or foreign, federal, state or local common law or duty, case law or ruling, statute, law, ordinance,

policy, guidance, rule, administrative interpretation, regulation, code, order, writ, injunction, directive, judgment, decree or other requirement of any Governmental 

Authority applicable to such Person or any of its Affiliates or Plan Affiliates or any of their respective properties, assets, officers, directors, employees, consultants

or agents (in connection with such officer’s, director’s, employee’s, consultant’s or agent’s activities on behalf of such Person or any of its Affiliates or Plan Affiliates).

       10.4. “Capital Stock” has the meaning set forth in Section 4.3 hereof.

       10.5. “Certificate of Incorporation” means the Company’s Certificate of Incorporation as filed with the Delaware Secretary of State, as may be amended from time to time.

       10.6. “Closing” has the meaning set forth in Section 3 hereof.

       10.7. “Closing Date” has the meaning set forth in Section 3 hereof.

       10.8. “Code” means the Internal Revenue Code of 1986, as amended, and the regulations or other binding pronouncements promulgated thereunder.

       10.9. “Common Stock” has the meaning set forth in Section 1 hereof.

       10.10. “Company” has the meaning set forth in the Introduction.

       10.12. “Consent” or “Consents” have the meanings set forth in Section 4.5 hereof.

       10.13. “Contracts” means all contracts, agreements, options, leases, licenses, sales and accepted purchase orders, commitments and other instruments of any kind, whether written or oral,

to which the Company is a party on the Closing Date, including the Scheduled Contracts.

       10.14. “Conversion Shares” has the meaning set forth in Section 1 hereof.

 

       10.15. “Disclosure Schedule” has the meaning set forth in Section 4 hereof.

       10.16. “Effective Date” has the meaning set forth in Section 6.3 hereof.

       10.17. “Employee Benefit Plan” means all Pension Plans, Welfare Plans and Compensation Plans.

       10.18. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

       10.19. “ERISA Affiliate” means any “person,” within the meaning of Section 7701(a)(1) of the Code, that together with the Company is considered a single employer pursuant to

Section 414(b), (c), (m) or (o) of the Code or Section 3(5) or 4001(b)(1) of ERISA.

       10.20. “Exchange Act” means the Securities Exchange Act of 1934, as amended.

       10.21. “Filing Date” has the meaning set forth in Section 6.3 hereof.

       10.22. “GAAP” means generally accepted accounting principles in the United States, consistently applied.

       10.23. “Governmental Authority” means any foreign, domestic, federal, territorial, state or local governmental authority, quasi-governmental authority, instrumentality, court, government

or self-regulatory organization, commission, tribunal or organization or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of

any of the foregoing.

       10.24. “Intellectual Property” means all rights in patents, patent applications, trademarks (whether registered or not), trademark applications, service mark registrations and service

mark applications, trade names, trade dress, logos, slogans, tag lines, uniform resource locators, Internet domain names, Internet domain name applications, corporate names,

copyright applications, registered copyrighted works and commercially significant unregistered copyrightable works (including proprietary software, books, written materials,

prerecorded video or audio tapes, and other copyrightable works), technology, software, trade secrets, know-how, technical documentation, specifications, data, designs and

other intellectual property and proprietary rights used in or necessary to the conduct of the business of the Company, but excluding third-party off-the-shelf computer programs.

       10.25. “Investors” has the meaning set forth in the Introduction.

       10.26. “Latest Financial Statements” has the meaning set forth in Section 4.6(a) hereof.

       10.27.  “Liability” or “Liabilities” means any liabilities, obligations or claims of any kind whatsoever whether absolute, accrued or un-accrued, fixed or contingent, matured or un-matured,

asserted or unasserted, known or unknown, direct or indirect, contingent or otherwise and whether due or to become due, including without limitation any foreign or domestic tax

liabilities or deferred tax liabilities incurred in respect of or measured by the Company’s income, or any other debts, liabilities or obligations relating to or arising out of any act,

omission, transaction, circumstance, sale of goods or services, state of facts or other condition which occurred or existed on or before the date hereof, whether or not known, due or payable.

       10.28. “Lien” means, with respect to any asset, any mortgage, title defect or objection, lien, pledge, charge, security interest, hypothecation, restriction, encumbrance, adverse claim

or charge of any kind in respect of such asset.

       10.29. “Material Adverse Effect” means, with respect to the Company, any change in or effect on its business, customers, customer relations, operations, properties, working

capital condition (financial or otherwise), assets, properties, liabilities or prospects (financial or otherwise) that is materially adverse to its business, properties, working

capital condition (financial or otherwise),assets, liabilities or prospects (financial or otherwise).

       10.30. “Material Customers” has the meaning set forth in Section 4.17 hereof.

       10.31. “Ordinary Course of Business” means any action taken by the Company that is (i) consistent with its past practices and is taken in the ordinary course of its normal

day-to-day operations, and (ii) not required to be specifically authorized by its Board of Directors.

       10.32. “Penalty Date” has the meaning set forth in Section 6.3 hereof.

       10.33. “Pension Plan” means an “employee pension benefit plan” as such term is defined in Sections 3(2) or 3(3) of ERISA and all other material employee benefit arrangements or

programs relating to the Company’s business, including, without limitation, any such arrangements or programs providing severance pay, sick leave, vacation pay, salary

continuation for disability, retirement benefits, deferred compensation, bonus pay, incentive pay, stock options, hospitalization insurance, medical insurance and life

insurance, sponsored or maintained by the Company or any Affiliate of the Company or to which the Company or any Affiliate of the Company is obligated to contribute

thereunder on behalf of any current or former employee who performed services with respect to the Company’s business.

       10.34. “Permits” has the meaning set forth in Section 4.9 hereof.

       10.36. “Person” means an individual, corporation, partnership, limited liability company, association, trust, estate or other entity or organization, including a Governmental Authority.

       10.37. “Plan Affiliate” means, with respect to any Person, any Employee Benefit Plan sponsored by, maintained by or contributed to by such Person, and with respect to any Employee

Benefit Plan, any Person sponsoring, maintaining or contributing to such plan or arrangement.

       10.38. “Preferred Stock” has the meaning set forth in Section 1 hereof.

       10.39. “Purchase Commitment” has the meaning set forth in Section 2 hereof.

       10.40. “Scheduled Contracts” has the meaning set forth in Section 4.12 hereof.

       10.41. “SEC Documents” has the meaning set forth in Section 4.26 hereof.

       10.42. “Securities Act” means the Securities Act of 1933, as amended.

       10.43.  “Series A Stock” has the meaning set forth in the Recitals.

       10.44. “Tax” or “Taxes” means all taxes imposed of any nature including federal, state, local or foreign net income tax, alternative or add-on minimum tax, profits or excess profits tax,

franchise tax, grossincome, adjusted gross income or gross receipts tax, employment related tax (including employee withholding or employer payroll tax, FICA or FUTA),

real or personal property tax or ad valorem tax, sales or use tax, excise tax, stamp tax or duty, any withholding or back up withholding tax, value added tax, severance tax, prohibited

transaction tax, premiums tax, environmental tax, intangibles tax or occupation tax, together with any interest or any penalty, addition to tax or additional amount imposed by any

Governmental Authority (domestic or foreign) responsible for the imposition of any such tax.  The term Tax shall also include any Liability of the Company for the Taxes of any

other Person under U.S. Treasury Regulations Section 1.1502-6 (or similar provisions of state, local or foreign law), as a transferee or successor by contract or otherwise.

       10.45. “Tax Return” means all returns, declarations, reports, estimates, forms, information returns and statements or other information required to be filed with respect to any Tax.

       10.46. “Transaction Documents” has the meaning set forth in Section 4.2 hereof.

       10.47. “Welfare Plan” means an “employee welfare benefit plan” as such term is defined in Section 3(1) of ERISA (including without limitation a plan excluded from coverage by

Section 4 of ERISA).

    11. Miscellaneous.

       11.1. Waivers, Amendments and Approvals.  In each case in which approval of any of the Investors is required by the terms of this Agreement, such requirement shall be satisfied by a vote or the written action of such Investor.  With the written consent of any Investor, the obligations of the Company to that Investor under this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) and with the written approval of such  Investor, the Company may enter into a supplementary agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement applicable to such Investor; provided, however, that no such waiver or supplemental agreement shall be effective to amend the terms of the shares of the Series A Stock under circumstances where  such amendment to the terms of the shares of Series A Stock shall require the vote of the holders of shares of Series A Stock called for by the Certificate of Incorporation or Certificate of Designation and  such vote shall not have been obtained.

       11.2. Written Changes, Waivers, Etc.  Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, except by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, except to the extent provided in Section 11.1 hereof.

       11.3. Notices.  Any and all notices required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of the following: (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business day after deposit with an express overnight courier for United States deliveries, or two (2) business days after such deposit for deliveries outside of the United States, with proof of delivery from the courier requested; or (iii) three (3) business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries.  All notices for delivery outside the United States will be sent by express courier.  All notices not delivered personally will be sent with postage and/or other charges prepaid and properly addressed to the party or parties to be notified at such address or addresses as such party or parties may designate by one of the indicated means of notice herein to the other party or parties hereto.  If the notice shall be given to the Company, a copy of which shall simultaneously be given to Michael Lorenz, residing at 5109 Waterford Wood Way, Fayetteville, NY 13066

       11.4. Survival of Representations, Warranties, Etc.  All representations, warranties, covenants and agreements contained herein, including the indemnification obligations set forth in Section 9 hereof, shall survive after the execution and delivery of this Agreement or such certificate or document, as the case may be, for a period of two (2) years.

       11.5. Delays or Omissions.  Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party under this Agreement shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence thereto, or of a similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any party hereto of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.

       11.6. Other Remedies.  Any and all remedies herein expressly conferred upon a party shall be deemed cumulative with, and not exclusive of, any other remedy conferred hereby or by law on such party, and the exercise of anyone remedy shall not preclude the exercise of any other.

       11.7. Attorney Fees.  Should suit be brought to enforce or interpret any part of this Agreement, the prevailing party shall be entitled to recover, as an element of the costs of suit and not as damages, reasonable attorney fees to be fixed by the court (including, without limitation, costs, expenses and fees on any appeal).  The prevailing party shall be the party entitled to recover its costs of suit, regardless of whether such suit proceeds to final judgment.  A party not entitled to recover its costs shall not be entitled to recover attorney fees.  No sum for attorney fees shall be counted in calculating the amount of a judgment for purposes of determining if a party is entitled to recover costs or attorney fees.

       11.8. Entire Agreement.  This Agreement including the exhibits hereto and the other Transaction Documents constitute the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect hereto and thereto.  The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof.

       11.9. Severability.  Should any one or more of the provisions of this Agreement or of any agreement entered into pursuant to this Agreement be determined to be illegal or unenforceable, all other provisions of this Agreement and of each other agreement entered into pursuant to this Agreement, shall be given effect separately from the provision or provisions determined to be illegal or unenforceable and shall not be affected thereby.  The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision which will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision.

       11.10. Successors and Assigns.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon and be enforceable by the successors and assigns of the parties hereto, including the holder(s) from time-to-time of any of the Series A Stock.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

       11.11. Governing Law.  The validity, terms, performance and enforcement of this Agreement shall be governed and construed by the provisions hereof and in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements that are negotiated, executed, delivered and performed solely in the Commonwealth of Massachusetts.

       11.12. Counterparts.  This Agreement may be executed concurrently in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

       11.13. Publicity.  The Company and the Investors shall have the right to approve, before issuance any press release or any other public statement with respect to the transactions contemplated hereby made by any party; provided, however, that the Company shall be entitled, without the prior approval of the Investors, to issue any press release or other public disclosure with respect to such transactions required under applicable securities or other laws or regulations (the Company shall use its best efforts to consult the Investors in connection with any such press release or other public disclosure prior to its release and Investors shall be provided with a copy thereof upon release thereof).

       11.14. Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

       11.15. Tacking.  For purposes of calculating under SEC Rule 144 the holding period for the Series A Stock purchased pursuant to this Agreement and the Conversion Shares, the Investors shall claim a holding period tacking back to the Closing Date of the original Debentures, as defined in the Debt Conversion Agreement.  The Company shall not adopt a position inconsistent with the foregoing or contest such tacking for any reason, and the Company shall use its best efforts to cooperate with the Investors in any efforts the Investors may undertake to assert such tacking in connection with the future sale of the Series A Stock or the Conversion Shares.

       11.16. No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

       11.17. Headings.  The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

       11.18. Disputes Under Debenture. All disputes arising under this Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without regard to principles of conflict of laws.  The parties to this Agreement shall submit all disputes arising under this Agreement to arbitration in Boston, Massachusetts before a single arbitrator of the American Arbitration Association (the “AAA”).  The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the Commonwealth of Massachusetts.  No party hereto will challenge the jurisdiction or venue provisions as provided in this section.  Nothing in this section shall limit the Holder's right to obtain an injunction for a breach of this Debenture from a court of law.  Any injunction obtained shall remain in full force and effect until the arbitrator, as set forth in herein, fully adjudicates the dispute.

 

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Series A Convertible Preferred Stock Purchase Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written.

 

		THE COMPANY: LOCATEPLUS HOLDINGS CORPORATION
		By:___________________ Name: Geoffrey Lee   Its: Interim Chief Executive Officer

Name	Signature	Address/Facsimile Number of Investor	Purchase Commitment ($)	Purchase Commitment (# Shares)
Dutchess Private Equities Fund Ltd.	___________________ Douglas H. Leighton, Director	Douglas H. Leighton c/o Dutchess Capital Management 50 Commonwealth Ave., Suite 2 Boston, MA 02116 Tel:   ###-###-#### Fax:   ###-###-####	$1,817,828	72,000