THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH
SECURITIES HAVE BEEN REGISTERED FOR SALE
PURSUANT TO THE SECURITIES ACT OF 1933,
AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD
PURSUANT TO RULE 144(K), OR (III)
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT
THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933 OR QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS.
3% SENIOR CONVERTIBLE NOTE
--------------------------
US$______________ July
8, 2005
FOR VALUE
RECEIVED, LocatePLUS Holdings Corporation, a Delaware
corporation
(the "Company"), hereby unconditionally promises to pay to the order of
-------
________________________ (the "Holder"), having an address at 153 E. 53rd
--
------
Street, 55th Floor, 10022, at such address or at such other
place as may be
designated in writing by the Holder, or its
assigns, the aggregate principal sum
of _____________________ United States Dollars ($_____________________),
together with interest from July 8, 2005 on
the unpaid principal balance of this
Note outstanding at a rate equal to
three percent (3.0%) (computed on the basis
of the actual number of days elapsed in a
360-day year) per annum and continuing
on the outstanding principal until
this 3% Senior Convertible Note (the "Note")
----
is converted into Common Stock as provided herein or indefeasibly and
irrevocably paid in full by the Company. Subject to the other provisions
of
this Note, the principal of this Note and
all accrued and unpaid interest hereon
shall mature and become due and payable on the earlier of
(i) [120 days from
Closing] and (ii) the date on which the Company's stockholders
vote not to
approve the Recapitalization (the earlier of such dates, the
"Stated Maturity
---------------
Date"). Except as provided herein, all payments of principal
and interest by
--
the Company under this Note shall be made in United States dollars in
immediately available funds to an account specified by the Holder.
From and after the Stated Maturity Date, all
amounts due and owing under this
Note shall automatically, and without
action by any party hereto, bear interest
at an annual rate of fifteen percent (15%).
In no event shall any
interest
charged, collected or reserved under this Note exceed the maximum rate
then
permitted by applicable law, and if any such payment is paid by
the Company,
then such excess sum shall be credited
by the Holder as a payment of principal.
1. Definitions.
Unless the context
otherwise requires, when used herein the
------------
following
terms shall have the meaning indicated:
"Additional
Rights" shall have the meaning ascribed to such term in Section
-----------------
6 hereof.
<PAGE>
"Affiliate" shall mean, with respect to any Person, any other Person
which
---------
directly or indirectly through one or more intermediaries Controls, is
----
controlled by, or is under common control with, such Person.
----
"Automatic Conversion Date" shall have the meaning ascribed to such term
in
---------------------------
Section 5 hereof.
---
"Board" shall mean the Board of Directors of the Company.
-----
"Business Day" other than a Saturday or
Sunday, on which banks in New York City
-------------
are open for the general transaction of business.
"Change of
Control" means, at any time (i) any Person or any Persons
acting
-----------------
together that would constitute a "group" for purposes
of Section 13(d)
under
the Exchange Act, or any successor provision
thereto, shall acquire beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act, or
any
successor provision thereto) in a single transaction or a series of
related
transactions, of more than 50% of the aggregate
voting power of the Company; or
(ii) the Company merges into or consolidates with any other
Person, or any
Person merges into or consolidates with
the Company and, after giving effect to
such transaction, the stockholders of the Company immediately prior to
such
transaction own less than 50% of the aggregate voting
power of the Company or
the successor entity of such transaction; or (iii) the Company sells or
transfers its assets, as an entirety or
substantially as an entirety, to another
Person; or (iv) any "change of control" or similar event under any loan
agreement, mortgage, indenture or other agreement
relating to any indebtedness
for borrowed money of the Company shall occur;
or (v) during any period of two
consecutive years, individuals who at the beginning
of such period constituted
the Board of Directors (together with any new
directors whose election by the
shareholders of the Company was proposed by a
vote of the majority of directors
of the Company then still in office who
were either directors at the beginning
of such period or whose election or nomination
for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office.
"Common Stock" shall mean (i) prior to the
consummation of the Recapitalization,
------------
the Class A Voting Common Stock, par value $0.01 per share,
of the Company;
provided, however, that if, upon conversion of this
Note and the other Company
Notes as provided in Section 6 hereof, the authorized
but unissued shares of
Class A Voting Common Stock are not
sufficient to permit the full conversion of
this Note and the other Company Notes, then
the term "Common Stock" shall mean
such shares of Class A Voting Common Stock as are
then available for issuance
plus such number of shares of Class B
Nonvoting Common Stock as shall permit the
full conversion of this Note and the other
Company Notes and (ii) from and after
the effective time of the Recapitalization, the Recapitalization Stock.
"Company" shall have the meaning ascribed to such term
in the first paragraph
-------
herein.
-
"Company Notes" shall have the meaning
ascribed to such term in Section 2 hereof
-------------
"Control" (including the terms "controlling",
"controlled by" or "under common
-------
control with") means the possession,
direct or indirect, of the power to direct
or cause the direction of the management and policies of a
Person, whether
through the ownership of voting securities, by contract or otherwise
<PAGE>
"Conversion Price" shall mean initially $0.10 per
share, subject to adjustment
-----------------
as provided in Section 6.
"Convertible Securities" shall have the
meaning ascribed to such term in Section
----------------------
6 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
-------------
"Event of Default" shall have the meaning ascribed to such
term in Section 7
------------------
herein.
--
"Excluded Issuances" shall have the meaning ascribed to
such term in Section 6
-------------------
herein.
"Holder" shall have the meaning ascribed to such term in
the first paragraph
------
herein.
--
"Investors" shall have the meaning ascribed to such term in the Purchase
---------
Agreement.
------
"Market Price", as of a particular date (the
"Valuation Date"), shall mean the
-------------
--------------
following with respect to any class of
securities: (A) if such security is then
listed on a national stock exchange, the
Market Price shall be the closing bid
price of one share of such security on such exchange
on the last Trading Day
prior to the Valuation Date, provided that if
such security has not traded in
the prior ten (10) trading sessions, the Market Price shall be the
average
closing bid price of such security in the
most recent ten (10) trading sessions
during which such security has traded;
(B) if such security is then included in
The Nasdaq Stock Market, Inc.
("Nasdaq"), the Market Price shall be the closing
------
bid price of one share of such
security on Nasdaq on the last Trading Day prior
to the Valuation Date or, if no such closing sale price is
available, the
average of the high bid and the low ask
price quoted on Nasdaq as of the end of
the last Trading Day prior to the Valuation
Date, provided that if such security
has not traded in the prior ten (10)
trading sessions, the Market Price shall be
the average closing price of one share of such
security in the most recent ten
(10) trading sessions during which such security has traded; (C) if such
security is then included in the Over-the-Counter Bulletin
Board, the Market
Price shall be the closing sale price of one share of such
security on the
Over-the-Counter Bulletin Board on the last Trading Day
prior to the Valuation
Date or, if no such closing sale price is
available, the average of the high bid
and the low ask price quoted on the
Over-the-Counter Bulletin Board as of the
end of the last Trading Day prior to the
Valuation Date, provided that if such
stock has not traded in the prior ten (10)
trading sessions, the Market Price
shall be the average closing price of one share of such
security in the most
recent ten (10) trading sessions during which
such security has traded; or (D)
if such security is then included in the
"pink sheets," the Market Price shall
be the closing sale price of one
share of such security on the "pink sheets" on
the last Trading Day prior to the Valuation Date or, if
no such closing sale
price is available, the average of the
high bid and the low ask price quoted on
the "pink sheets" as of the end of the last
Trading Day prior to the Valuation
Date, provided that if such stock has not traded
in the prior ten (10) trading
sessions, the Market Price shall be the average closing
price of one share of
such security in the most recent ten (10) trading
sessions during which such
security has traded.
"Note" shall have the meaning ascribed to such term in the first
paragraph
----
herein.
----
<PAGE>
"Options" shall have the meaning ascribed to such term in Section 6
hereof.
-------
"Person" means an individual, corporation, partnership, limited liability
------
company, trust, business trust,
association, joint stock company, joint venture,
-----
sole proprietorship, unincorporated
organization, governmental authority or any
other form of entity not specifically listed herein.
"Purchase Agreement" shall mean the Securities Purchase
Agreement, dated as of
-------------------
July 8, 2005, and as that agreement may be amended
from time to time, by and
among the Company and the Investors.
"Recapitalization" shall mean (i) the
recapitalization of each outstanding share
----------------
of the Company's Class A Voting Common
Stock, par value $0.01 per share, and the
Company's Class B Nonvoting Common Stock, par value
$0.01 per share, into one
share of a single class of voting common
stock and (ii) a one-for-fifty reverse
split of the Common Stock.
"Recapitalization Stock" shall mean the
common stock, par value $0.01 per share,
----------------------
of the Company after giving effect to the Recapitalization.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement,
-------------------------------
dated as of July 8, 2005, and as that agreement may be
amended from time to
-
time, by and among the Company and the Investors.
-
"Stated Maturity Date" shall have the
meaning ascribed to such term in the first
--------------------
paragraph herein.
"Stockholder Approvals" means the approval of the Recapitalization by the
----------------------
stockholders of the Company in accordance with applicable law.
"Subsidiary" of any Person means another Person, an amount of the voting
----------
securities, other voting ownership or voting
partnership interests of which is
------
sufficient to elect at least a majority of its Board of Directors
or other
governing body (or, if there are no such voting
interests, 50% or more of the
equity interests of which) is owned
directly or indirectly by such first Person.
"Trading Day" means (i) if the relevant
stock or security is listed or admitted
------------
for trading on The New York Stock Exchange, Inc. or any other national
securities exchange, a day on which such
exchange is open for business; (ii) if
the relevant stock or security is quoted on
the Nasdaq Stock Market or any other
system of automated dissemination of
quotations of securities prices, a day on
which trades may be effected through such
system; or (iii) if the relevant stock
or security is not listed or admitted for trading on
any national securities
exchange or quoted on the Nasdaq Stock Market
or any other system of automated
dissemination of quotation of securities prices, a day on which
the relevant
stock or security is traded in a regular
way in the over-the-counter market and
for which a closing bid and a closing asked
price for such stock or security are
available, shall mean a day, other than a Saturday
or Sunday, on which The New
York Stock Exchange, Inc. is open for trading.
"Trigger Issuance" shall have the meaning ascribed to such term
in Section 6
-----------------
hereof.
--
2. Purchase
Agreement. This Note
is one of the several 3% Convertible Notes
------------------
of the Company issued pursuant to the Purchase Agreement (the
"Company
-------
Notes"). This Note is subject to the terms and
conditions of, and entitled to
-
the benefit of, the provisions of the
3.
<PAGE>
Purchase Agreement. This Note is transferable and
assignable to any person to
whom such transfer is permissible under the Purchase
Agreement and applicable
law. The Company agrees to issue from time to time a
replacement Note in the
form hereof to facilitate such transfers and
assignments. In
addition, after
delivery of an indemnity in form and substance
reasonably satisfactory to the
Company, the Company also agrees to promptly issue a
replacement Note if this
Note is lost, stolen, mutilated or destroyed.
4. No Right of Prepayment or Redemption.
This Note shall not be
prepayable
-------------------------------------
or redeemable by the Company prior to the Stated Maturity Date.
5. Restrictive
Covenants.
So long as any Company
Notes remain outstanding,
-----------------------
without the prior written consent of the
holders of at least two-thirds of the
outstanding Company Notes given in person
or by proxy, either in writing or at a
special meeting called for that purpose, the Company will not:
(a) enter
into or consummate any Change of Control;
(b) incur,
assume or suffer to exist any indebtedness
for borrowed money;
(c) except
for the Recapitalization, amend, alter or repeal, whether by
merger, consolidation or otherwise, the
Certificate of Incorporation or By-laws
of the Company or effect or approve
any stock split, reverse stock split, stock
dividend or other reclassification or
combination of any class or series of its
capital stock;
(d) issue
or authorize the issuance of any shares of
capital stock or any
Options or Convertible Securities (other than with respect to Convertible
Securities which are outstanding prior to the date hereof (provided such
Convertible Securities are not amended after the date hereof));
(e) directly
or indirectly, declare or pay any dividend (other than
dividends payable in shares of Common Stock but only to the
extent that such
stock dividend results in an adjustment of the Conversion Price
pursuant to
Section 6 or directly or indirectly purchase,
redeem, repurchase or otherwise
acquire or permit any Subsidiary to redeem,
purchase, repurchase or otherwise
acquire (or make any payment to a sinking fund for
such redemption, purchase,
repurchase or other acquisition) any share
of Common Stock or any other class or
series of the Company's capital stock
whether in cash, securities or property or
in obligations of the Company or any Subsidiary; or
(f) agree
to do any of the foregoing.
6. Automatic
Conversion.
---------------------
(a) Following
receipt of the Stockholder Approvals, this Note shall
automatically and with no action on the part of the
Holder convert into fully
paid and nonassessable shares of Common Stock upon satisfaction of the
requirements of this Section 6. Promptly upon receipt of the Stockholder
Approvals, but in no event more than two (2) Business
(b)
<PAGE>
Days thereafter, the Company shall file an appropriate amendment to the
Company's Certificate of Incorporation to effect the Recapitalization (the
"Amendment"), which, by its terms, shall become
effective upon filing with the
-----
Secretary of State of Delaware. The date on which such Amendment
shall become
effective is hereinafter referred to as the
"Automatic Conversion Date". On the
-------------------------
Automatic Conversion Date, this Note and all interest accrued thereon
shall
automatically and with no action on the part of the Holder
convert into such
number of fully paid and nonassessable
shares of Common Stock as is obtained by:
(i) adding (A) the principal amount of this Note and (B) the amount of
any
accrued but unpaid interest on this Note and
(ii) dividing the result obtained
pursuant to clause (i) above by the Conversion Price then in effect.
The
Company shall provide prompt written
notice of the Automatic Conversion Date to
the Holder.
(c) Promptly
after the Automatic Conversion Date, the
Holder of this Note
shall deliver this Note to the Company (or,
in lieu thereof, an appropriate lost
security affidavit in the event this Note
shall have been lost or destroyed) to
the Company at its principal office (or such other office or agency of
the
Company as the Company may designate by notice in writing to the
Holder),
together with a statement of the name or names (with address) in
which the
certificate or certificates for shares of Common Stock shall be issued.
Promptly following the surrender of this
Note (or, in lieu thereof, delivery of
an appropriate lost security affidavit in the event
this Note shall have been
lost or destroyed) as aforesaid, but in no event more
than three (3) Business
Days thereafter, the Company shall
issue and deliver, or cause to be issued and
delivered, to the Holder, registered in such name or names
as the Holder may
direct in writing, a certificate or
certificates for the number of whole shares
of Common Stock issuable upon the conversion of this Note. To the extent
permitted by law, such conversion shall be
deemed to have been effected, and the
Conversion Price shall be determined, as of the close of business on the
Automatic Conversion Date, and at such time, the rights of the
Holder shall
cease with respect to the Note being converted, and the
Person or Persons in
whose name or names any certificate or
certificates for shares of Common Stock
shall be issuable upon such conversion
shall be deemed to have become the holder
or holders of record of the shares represented thereby.
(d) No fractional shares shall be issued upon any
conversion of this Note
into Common Stock. If any fractional share of Common
Stock would, except for
the provisions of the first sentence of this Section
5(c), be delivered upon
such conversion, the Company, in lieu of
delivering such fractional share, shall
pay to the Holder an amount in cash equal
to the Market Price of such fractional
share of Common Stock.
7. Conversion
Rights; Adjustment to Conversion Price.
------------------------------------------------------
(a) Subject
to and upon compliance with the
provisions of this Note, prior
to the Stated Maturity Date, the Holder
shall have the right, at its option at
any time, to convert some or all of
the Note into such number of fully paid and
nonassessable shares of Common Stock as is obtained by: (i) adding (A)
the
principal amount of this Note to be
converted and (B) the amount of any accrued
but unpaid interest with respect to such
portion of this Note to be converted;
and (ii) dividing the result obtained pursuant to clause (i) above by the
Conversion Price then in effect The rights of conversion set forth in
this
Section 6 shall be exercised by the Holder by giving written
notice to the
Company that the Holder elects to convert a stated amount
(b)
<PAGE>
of this Note into Common Stock and by surrender of this Note (or, in
lieu
thereof, by delivery of an appropriate lost
security affidavit in the event this
Note shall have been lost or destroyed) to
the Company at its principal office
(or such other office or agency of the
Company as the Company may designate by
notice in writing to the Holder) at any time on the date set forth
in such
notice (which date shall not be earlier than the Company's receipt
of such
notice), together with a statement of the
name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be
issued.
(c) Promptly after
receipt of the written notice referred to in Section 6(a)
above and surrender of this Note (or, in lieu thereof, by delivery of
an
appropriate lost security affidavit in the
event this Note shall have been lost
or destroyed), but in no event more than
three (3) Business Days thereafter, the
Company shall issue and deliver, or cause to be issued and
delivered, to the
Holder, registered in such name or names
as the Holder may direct in writing, a
certificate or certificates for the number of whole shares of Common
Stock
issuable upon the conversion of such portion of this Note. To the extent
permitted by law, such conversion shall be
deemed to have been effected, and the
Conversion Price shall be determined, as of
the close of business on the date on
which such written notice shall have
been received by the Company and this Note
shall have been surrendered as aforesaid (or, in
lieu thereof, an appropriate
lost security affidavit has been delivered to the
Company), and at such time,
the rights of the Holder shall cease with
respect to the principal amount of the
Notes being converted, and the
