WARRANT AGREEMENT
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION"
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH
TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND
EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
LocatePlus Holdings Corporation
WARRANT NO. July 101
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Dated: July 21, 2006
LocatePlus Holdings Corporation, a corporation organized under the laws of the
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State of placeStateDelaware (the "Company"), hereby certifies that, for value
received from Dutchess Private Equities Fund, L.P. (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company up to a total
of three hundred and seventy-five thousand dollars ($375,000) worth of the
Common Stock, $.01 par value per share (the "Common Stock"), of the Company
(each such share, a "Warrant Share" and all such shares, the "Warrant Shares")
at an exercise price equal to the the lower of 1) one dollar ($1.00) or 2) the
lowest closing bid price of the Common Stock between July 10, 2006 and the
Filing Deadline (as defined in the Debenture Registration Rights Agreement
between the Company and the Investor of this date). The Warrant may be exercised
on a cashless basis anytime after issuance through and including the fifth (5th)
anniversary of its original issuance (the "Expiration Date"), subject to the
following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant,
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upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers and Exchanges.
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(a) The Company or the transfer agent shall enter or record the
transfer of any portion of this Warrant in the Warrant Register, upon surrender
of this Warrant to the Company at the office specified herein or pursuant to
Section 11. Upon any such registration or transfer, a new warrant to purchase
Common Stock, in substantially the form of this Warrant (any such new warrant, a
"New Warrant"), evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining portion of
this Warrant not so transferred, if any, shall be issued to the Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company specified herein or pursuant to Section 3(b)
for one or more New Warrants, evidencing in the aggregate the right to purchase
the number of Warrant Shares which may then be purchased hereunder. Any such
New Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
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(a) This Warrant shall be exercisable by the registered Holder on any
business day before 5:00 P.M., placeCityBoston time, at any time and from time
to time on or after the date hereof to and including the Expiration Date. At
5:00 P.M., placeCityBoston time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
Prior to the Expiration Date, the Company may not call or otherwise redeem this
Warrant without the prior written consent of the Holder.
(b) Subject to Sections 2(b), 6 and 10, upon surrender of this Warrant,
with the Form of Election to Purchase attached hereto duly completed and signed,
to the Company at its address for notice set forth in Section 11 and upon
payment of the Exercise Price multiplied by the number of Warrant Shares that
the Holder intends to purchase hereunder, in the manner provided hereunder, all
as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 5 business days after the Date of
Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends except either (i) in the event that a
registration statement covering the resale of the Warrant Shares and naming the
Holder as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), or (ii) if this Warrant shall have been issued pursuant to a written
agreement between the original Holder and the Company, as required by such
agreement. In the case of (i) above, the Warrant Shares will bear a Securities
Act restrictive legend. Any person so designated by the Holder to receive
Warrant Shares shall be deemed to have become holder of record of such Warrant
Shares as of the Date of Exercise (as defined in this subsection) of this
Warrant. A "Date of Exercise" means the date on which the Company shall have
received (i) this Warrant (or any New Warrant, as applicable), with the Form of
Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from
time to time, for a portion of the number of Warrant Shares. If less than all
of the Warrant Shares which may be purchased under this Warrant are exercised at
any time, the Company shall issue or cause to be issued, at its expense, a New
Warrant evidencing the right to purchase the remaining number of Warrant Shares
for which no exercise has been evidenced by this Warrant. In the event the
Common Stock representing the Warrant Shares is not delivered per the written
instructions of the Holder, within five (5) business days after the Notice of
Election and Warrant is received by the Company (the "Delivery Date"), then in
such event the Company shall pay to Holder two percent (2.0%) in cash, of the
dollar value of the Warrant Shares to be issued per each day after the Delivery
Date that the Warrant Shares are not delivered. The Company acknowledges that
its failure to deliver the Warrant Shares by the Delivery Date will cause the
Holder to suffer damages in an amount that will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include in this Warrant
a provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to quantify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Warrant. The Company shall make any payments incurred under this Section 3 in
immediately available funds within five (5) business days from the date of
issuance of the applicable Warrant Shares. Nothing herein shall limit Holder's
right to pursue actual damages or cancel the Notice of Election for the
Company's failure to issue and deliver Common Stock to the Holder within seven
(7) business days following the Delivery Date.
4. Registration Rights. During the term of this Warrant, the Company
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agrees to use its best efforts to file, within ten (10) calendar days of the
Closing, a registration statement with the Securities and Exchange Commission
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder (unless the Warrant Shares are otherwise freely
transferable without volume restrictions pursuant to Rule 144(k) or Rule 144A
promulgated under the Securities Act of 1933). The registration rights granted
to the Holder pursuant to this Section shall continue until all of the Holder's
Warrant Shares have been sold in accordance with an effective registration
statement or upon the Expiration Date, or as otherwise provided in the Debenture
Registration Rights Agreement entered into between the Company and the original
Holder as of the original issuance date hereof. The Company will pay all
registration expenses in connection therewith.
5. Payment of Taxes. The Company will pay all documentary stamp taxes
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attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that
may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
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or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and indemnity, if
requested, satisfactory to it. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will
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at all times reserve and keep available out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number of
Warrant Shares which are then issuable and deliverable upon the exercise of this
entire Warrant, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder (taking into account the
adjustments and restrictions of Section 8. The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
If the Company does not have a sufficient amount of Common Stock authorized to
reserve for the Warrant Shares, it shall use its best efforts to place before
shareholder vote a proposal to increase the number of its authorized shares as
soon as reasonably practicable.
8. Certain Adjustments. The Exercise Price and number of Warrant
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Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8. Upon each such adjustment of the
Exercise Price pursuant to this Section 8, the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) An adjustment shall be made, if the Company, at any time while this
Warrant is outstanding (i) pays a stock dividend (except scheduled dividends
paid on outstanding preferred stock as of the date hereof which contain a stated
dividend rate) or otherwise make a distribution or distributions on shares of
its Common Stock or on any other class of capital stock and not the Common Stock
payable in shares of Common Stock, (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, or (iii) combines outstanding shares of
Common Stock into a smaller number of shares. If either (i), (ii) or (iii),
above occurs, the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision or combination, and shall apply to successive subdivisions and
combinations.
(b) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event to
receive such amount of securities or property equal to the amount of Warrant
Shares such Holder would have been entitled to had such Holder exercised this
Warrant immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange. The terms of any such consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give to
the Holder the right to receive the securities or property set forth in this
Section 8(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of this
Warrant) evidence of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
8(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (the "Appraiser").
(d) If, at any time while this Warrant is outstanding, the Company
shall issue or cause to be issued rights or warrants to acquire or otherwise
sell or distribute shares of Common Stock for a consideration per share less
than the lower of the Exercise Price then in effect and the then fair market
value of the Common Stock, then, forthwith upon such issue or sale, the Exercise
Price shall be reduced to the price (calculated to the nearest one hundredth of
a cent) determined by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of (i) the number
of shares of Common Stock outstanding immediately prior to such issuance, and
(ii) the number of shares of Common Stock which the aggregate consideration
received (or to be received, assuming exercise or conversion in full of such
rights, warrants and convertible securities) for the issuance of such additional
shares of Common Stock would purchase at the Exercise Price, and the denominator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares. Such adjustment shall
be made successively whenever such an issuance is made.
(e) For the purposes of this Section 8, the following clauses shall
also be applicable:
(i) Record Date. In case the Company shall take a record of the holders
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of its Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock or in securities convertible or
exchangeable into shares of Common Stock, or (B) to subscribe for or purchase
Common Stock or securities convertible or exchangeable into shares of Common
Stock, then such record date shall be deemed to be the date of the issue or sale
of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding at
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any given time shall not include shares owned or held by or for the account of
the Company, and the disposition of any such shares shall be considered an issue
or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(g) Whenever the Exercise Price is adjusted pursuant to Section 8(c)
above, the Holder, after receipt of the determination by the Appraiser, shall
have the right to select an additional appraiser (which shall be a nationally
recognized accounting firm), in which case the adjustment shall be equal to the
average of the adjustments recommended by each of the Appraiser and such
additional appraiser appointed under this subsection (g). The Holder shall
promptly mail or cause to be mailed to the Company, a notice setting forth the
Exercise Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. Such adjustment shall become effective
immediately after the record date mentioned above, if:
(i) the Company shall declare a dividend (or any other distribution) on
its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash dividend on
or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock of the Company, any
consolidation or merger to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company, or any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or
property; or
(v) the Company shall authorize the voluntary dissolution, liquidation
or winding up of the affairs of the Company, then the Company shall cause to be
mailed to the Holder at their last addresses as they shall appear upon the
Warrant Register, at least 30 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up; provided, however, that
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the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.
9. Payment of Exercise Price. The Holder, at its sole election, may
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pay the Exercise Price in one of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately available
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funds; or
(b) Cashless Exercise. If at any time after one year from the date of
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issuance of this Warrant there is no effective Registration Statement
registering the resale of the Warrant Shares by the Holder at such time, this
Warrant may also be exercised at such time by means of a "cashless exercise."
The Holder shall surrender this Warrant to the Company together with a notice of
cashless exercise, in which event the Company shall issue to the Holder the
number of Warrant Shares determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued
to the Holder.
Y = the number of Warrant Shares with respect to which this Warrant is being
exercised.
A = the average closing bid price of the Common Stock for the five (5) trading
days immediately prior to the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 of the Securities Act, it is intended, understood and
acknowledged that the Warrant Shares issued in a cashless exercise transaction
shall be deemed to have been acquired by the Holder, and the holding period for
the Warrant Shares shall be deemed to have been commenced, on the issue date.
(c) The Holder is limited in the amount of this Warrant it
may exercise. In no event shall the Holder be entitled to exercise any amount
of this Warrant in excess of that amount upon exercise of which the sum of (1)
the number of shares of Common Stock beneficially owned (as such term is defined
under Section 13(d) and Rule 13d-3 of the Securities Exchange Act of 1934 (the
1934 Act")) by the Holder, and (2) the number of Warrant Shares issuable upon
the exercise of any Warrants then owned by Holder, would result in beneficial
ownership by the Holder of more than 9.9% of the outstanding shares of Common
Stock of the Company, as determined in accordance with Rule13d-1(j).
Furthermore, the Company shall not process any exercise that would result in
beneficial ownership by the Holder of more than 9.9% of the outstanding shares
of Common Stock of the Company.
10. Fractional Shares. The Company shall not be required to issue or
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cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 10, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.
11. Notices. Any and all notices or other communications or deliveries
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hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 5:00 p.m. (Boston time) on a business day, (ii) the business
day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this Section later
than 5:00 p.m. (Boston time) on any date and earlier than 11:59 p.m. (Boston
time) on such date, (iii) the business day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The addresses
for such communications shall be: (i) if to the Company, to:
James C. Fields
LocatePLUS Holdings Corporation
100 placePlaceNameCummings PlaceTypeCenter #235M
placeCityBeverly, StateMA PostalCode01915
Telephone: 978-921-2727
Facsimile: 978-524-8887
or (ii) if to the Holder, to the Holder at the address or facsimile number
appearing on the Warrant Register or such other address or facsimile number as
the Holder may provide to the Company in accordance with this Section 11.
12. Warrant Agent. The Company shall serve as warrant agent under this
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Warrant Agreement. Upon thirty (30) days notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further act. Any
such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder
at the Holder's last address as shown on the Warrant Register.
13. Miscellaneous.
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(a) This Warrant Agreement shall be binding on and inure to the benefit
of the parties hereto. This Warrant may be amended only in writing signed by
the Company and the Holder.
(b) Nothing in this Warrant shall be construed to give to any person or
corporation other than the Company and the Holder any legal or equitable right,
remedy or cause under this Warrant. This Warrant shall inure to the sole and
exclusive benefit of the Company and the Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the laws of the placePlaceTypeCommonwealth of
PlaceNameMassachusetts without regard to the principles of conflicts of law
thereof.
(d) The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
14. Disputes Under This Agreement.
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All disputes arising under this agreement shall be governed by and
interpreted in accordance with the laws of the placePlaceTypeCommonwealth of
PlaceNameMassachusetts, without regard to principles of conflict of laws. The
parties to this agreement will submit all disputes arising under this agreement
to arbitration in placeCityBoston, StateMassachusetts before a single arbitrator
of the American Arbitration Association ("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 placePlaceTypeCommonwealth of PlaceNameMassachusetts. No party to
this agreement 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 Agreement from a court of law.
15. PRIOR AGREEMENTS
The execution and delivery of this Agreement shall NOT alter any prior
agreements signed between the Company and the Holder.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its authorized officer as of the date first indicated above.
LocatePlus Holdings Corporation.
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By /s/ Jon R. Latorella
Name: Jon Latorella
Title: Chief Executive Officer
By /s/ James C. Fields
Name: James C. Fields.
Title: Chief Financial Officer