March 20, 2007
LocatePLUS Corporation
000 Xxxxxxxx Xxxxxx, Xxxxx 000 X
Xxxxxxx, XX 00000
Office 000-000-0000
Re: Payoff and Settlement Letter
Dear Messrs. Xxxxxxxxx & Fields:
Reference is made to that certain Debenture Agreement, Security Agreement,
Debenture Registration Rights Agreement, and Subscription Agreement, each
effective as of December 30, 2005 and that certain Debenture Agreement, Security
Agreement, Debenture Registration Rights Agreement and Subscription Agreement
dated July 18, 2006 (collectively, the "Loan Documents"), between LocatePlus
Holdings Corporation (the "Company" or "you") and Dutchess Private Equities
Fund, L.P. and Dutchess Private Equities Fund, II, LP (collectively, the
"Dutchess" or "we"). The Company and Dutchess are hereinafter sometimes
collectively referred to as the "Parties" and each a "Party" to this Agreement.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Loan Documents, and are incorporated by
reference.
The parties are entering into this agreement to settle a dispute regarding
amounts claimed to be owing by Company to Dutchess under the Loan Documents.
The Company hereby represents that a closing on a subsequent financing
("Subsequent Financing") shall occur on or before March 20, 2007 (the "Closing
Date").
NOWTHEREFORE, for the mutual consideration set out herein and other good and
valuable consideration, the legal sufficiency of which is hereby acknowledged,
the parties agree to the following;
1) The Company and the Dutchess hereby agree that upon the date of this
Letter, Dutchess is hereby owed (i) a new convertible debenture, attached hereto
as Exhibit A and incorporated by reference, in the amount of one million five
hundred thousand dollars ($1,500,000) ("March 2007 Convertible Debenture") (ii)
an adjustment of the exercise price for the Warrants dated December 30, 2005 and
July 18, 2006 between the Dutchess and Company and (iii) the following cash
payments ("Payment Amount") on the terms and conditions outlined herein:
a. Payment in immediately available funds of $1,500,000 by wire transfer to
the Dutchess' bank account at the earlier of 1) the closing of a Subsequent
Financing or 2) the Closing Date ("First Payment").
b. Payment in immediately available funds of $300,000 by wire transfer to
the Dutchess' bank account on the date which is the earlier of 1) 45 days from
the Closing Date or 2) the date the Company files a registration statement
covering the resale of securities for the Subsequent Financing.
c. Payment in immediately available funds of $300,000 by wire transfer to
the Dutchess' bank account on the date which is the earlier of 1) 145 days from
the Closing Date or 2) the date the Company's registration statement for the
Subsequent Financing is declared effective by the SEC.
2) Upon both (i) the First Payment to Dutchess, and (ii) the execution and
delivery of the March 2007 Convertible Debenture, Dutchess hereby agrees to
relinquish any rights to:
a. all of our liens on, and security interests in, all of the assets and
properties of the Company and any other assets or properties pledged to us for
the benefit of the Company, shall terminate automatically; and we hereby
authorize you or any person authorized by you to file termination statements for
any Uniform Commercial Code Financing Statements, or comparable forms, in any
jurisdiction listing Dutchess as a secured party and the Company, or any
subsidiary of the Company as a debtor without any further action by us; and we
also hereby agree to promptly, but in any event within three (3) business days
after the date hereof, deliver to you or as you shall direct any of your or such
other person's assets that we are holding as Pledged Property;
3) The Warrants issued by the Company to Dutchess dated December 30, 2005
and July 18, 2006 to purchase a total of 1,125,000 shares of the Company's
common stock shall be deemed automatically amended such that the Exercise Price
shall be equal to the ten cents ($.10) per share.
4) In furtherance of the foregoing, upon receipt of the entire Payout Amount
and the other deliveries referred to above, Dutchess and Company, and their
respective officers, directors, stockholders, attorneys, members, agents,
representatives, employees, subsidiaries, affiliates, partners, predecessors and
successors in interest, and assigns and all other persons, firms or corporations
with whom any of the former have been, or are now, affiliated (hereinafter
"Releasors") hereby completely release and forever discharge each other and
their respective officers, directors, stockholders, attorneys, members, agents,
representatives, employees, subsidiaries, affiliates, partners, predecessors and
successors in interest, and assigns and all other persons, firms, associations
or corporations with whom any of the former have been, or are now, affiliated
(hereinafter "Releasees") of and from any and all past and present claims,
demands, actions, causes of action, debts and dues both in law and in equity of
any nature or description whatsoever,
whether now known or unknown, anticipated or unanticipated, asserted or
unasserted, whether based on statute, contract, tort, or otherwise, on account
of or in any way growing out of, related to, resulting or to result from the
Loan Documents. Dutchess agrees to execute and deliver from time to time after
receipt of the Payment Amount and other deliveries referred to above any
documents, at your expense, as shall be reasonably requested by you to evidence
such release and termination. This letter agreement shall be a fully binding and
complete settlement and release between Dutchess, Company and Releasees with
respect to the matters addressed herein upon receipt by Dutchess of the Payment
Amount and other deliveries referred to above.
5) The parties warrant and represent that:
(i) the parties have been fully informed and have full knowledge of the terms,
conditions, and effects of this agreement, and have read this agreement and are
executing it under advice of counsel;
(ii) the parties have investigated, to each party's satisfaction, all of the
facts surrounding the various claims, controversies, and disputes and are
satisfied with the terms and effects of this agreement;
(iii) the parties have executed and agreed to this agreement as a complete
compromise of matters involving disputed issues of law and fact and fully assume
the risk that the facts or law may be other than they believe; and
(iv) no relative, or other person or entity, has or has had any interest in the
claims, demands, obligations, or causes of action referred to in this agreement;
that they have the sole right and exclusive authority to execute this agreement
and pay or receive the sums specified in it; and that they have not sold,
assigned, transferred, conveyed or otherwise disposed of any of the claims,
demands, obligations or causes of actions referred to in this agreement.
6) The parties agree and acknowledge that this agreement is a full and
complete compromise of all matters involving disputed issues and that neither
this agreement nor the negotiations for this settlement (including all
statements, admissions or communications) by Dutchess or Company or their
attorneys or representatives shall be considered admissions by any of said
parties, and that no past or present wrongdoing or liability on the part of any
party shall be implied by such settlement or negotiations.
7) The Company hereby agrees that all sales of the Company's common stock by
Dutchess underlying the March 2007 Convertible Debenture or the Warrants shall
be deemed sellable under Rule 144 at such time as Rule 144 applies. The Company
hereby agrees that the original date of consideration will apply for the
Warrants. The Company shall provide an opinion letter from counsel within ten
(10) business days of written request by the Dutchess. In the event the Company
does not deliver the opinion letter within ten business days, the Company shall
be charged one thousand dollars ($1,000) for each business day an opinion letter
fails to be delivered. In the event that counsel to the Company fails or
refuses to render an opinion as required to issue the Shares in accordance with
this section, then the Company irrevocably and expressly authorizes counsel to
Dutchess to render such opinion and shall authorize the Transfer Agent to accept
and to rely on such opinion for the purposes of issuing the Shares. Any costs
incurred by Holder for such opinion letter shall be the responsibility of the
Company.
8) After the Closing Date, the Company must make a Prepayment to the Holder
if the aggregate amount of financing ("Financing") received by the Company is in
excess of five million seven hundred thousand dollars ($5,700,000) ("Threshold
Amount") prior to the payment deadlines outlined in 1), above. The Company
agrees to pay twenty five percent (25%) of any proceeds raised by the Company
over the Threshold Amount toward the Prepayment of the Payment Amount. The
Prepayments shall be made to the Holder within one (1) business day of the
Company's receipt of the Financing.
9) Please indicate your agreement to the foregoing by signing in the space
provided below. This agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed to be but one and
the same agreement. Delivery by any party hereto of a signature page to this
agreement by facsimile shall be effective as delivery of a counterpart manually
executed by such party of this agreement. This agreement shall be governed by
the laws of the Commonwealth of Massachusetts without giving effect to its
choice of law principles.
[Balance of page left blank intentionally]
Very truly yours,
DUTCHESS PRIVATE EQUITIES FUND, LTD.
AS SUCCESSOR IN INTEREST TO:
DUTCHESS PRIVATE EQUITIES FUND, LP &
DUTHCESS PRIVATE EQUITIES FUND, II, LP
By:/s/ Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Title: Director
AGREED:
LOCATEPLUS HOLDINGS CORPORATION
By: /s/ Xxx Xxxxxxxxx
Name: Xxx Xxxxxxxxx
Title: CEO
By:/s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: CFO
