Exhibit 10.1

SECURED CONVERTIBLE PROMISSORY NOTE

 

Up to $1,000,000 Young County, Texas    December  10, 2012

 
FOR VALUE RECEIVED, the undersigned, Location Based Technologies, Inc., a Nevada
corporation  (referred to herein as the “Borrower” or “Company”), hereby
unconditionally promises to pay to the order of ECPC II Capital, LLC, its
endorsees, successors and assigns (the “Holder” or “Lender”), in lawful money of
the United States, at 455 Elm St., Suite 100, Graham, Young County, Texas 76450
or such other address as the Lender may from time to time designate, the
principal sum of up to $1,000,000.
 
1.      Terms of Repayment and Conversion.
 
a.           Upon the execution and delivery of this Note, the Holder shall
disburse to the Borrower the sum of up to $1,000,000; the amount actually
received by the Borrower shall be the principal amount. All amounts outstanding
under this Note shall mature and become due and payable on Monday, June 30th,
2013 (the "Maturity Date"), subject to any prior payment required by this
Note.  At the Maturity Date, or during the Term, the Lender shall have the
right, but not the obligation, to convert this Note into shares of the Company’s
common stock at a price of $0.25 per share (the “Conversion Price”).
 
b.           The Holder may from time to time effect conversions of all or a
portion of the outstanding principal amount and accrued interest of this Note by
delivering written notice to the Company specifying therein the principal amount
of this Note to be converted. Such conversions shall be effected within ten (10)
days of receipt by the Company of the notice of exercise conversion.  The number
of shares issuable upon a conversion hereunder shall be equal to the quotient
obtained by dividing (x) the outstanding principal amount of this Note to be
converted plus any accrued but unpaid interest thereon, by (y) the Conversion
Price. The Conversion Price shall be appropriately and equitably adjusted
following any stock splits, stock dividends, spin-offs, distributions and
similar events.  The shares issued upon conversion shall be duly and validly
issued, fully paid and non-assessable and, following the applicable Rule 144
holding period and compliance by the Holder with any reasonable requirements of
the Company’s transfer agent to eliminate restrictions on transfer under the
Securities Act of 1933, as amended, freely tradable.  The Holder shall receive
the stock certificate(s) within five (5) business days following the date of
conversion.

2.      Interest Rate.  This Note shall accrue interest on the principal from
the date of this Note at a rate of Eight Percent (8%) per annum (the “Interest
Rate”).  All payments and conversions hereunder are to be applied first to the
payment or satisfaction of accrued interest, and the remaining balance to the
payment or satisfaction of principal. In the event of default, interest shall
stop accruing when Lender takes possession of the Collateral.

3.      Events of Default.  If any of the events of default specified in this
Section shall occur, Holder may, so long as such condition continues, declare
the entire principal and unpaid accrued interest hereon immediately due and
payable, by notice in writing to the Company, and any other obligations of the
Borrower to the Lender, shall become due immediately, without demand or notice:

a.           Default in the payment of the principal or unpaid accrued interest
of this Note when due and payable;
 
 
1

--------------------------------------------------------------------------------

 

b.           Failure to issue shares of common stock of the Company within 10
days after the Company’s receipt of  a valid notice of conversion; or
 
c.           The Company shall: (1) make a general assignment for the benefit of
its creditors; (2) apply for or consent to the appointment of a receiver,
trustee, assignee, custodian, sequestrator, liquidator or similar official for
itself or any of its assets and properties; (3) commence a voluntary case for
relief as a debtor under the United States Bankruptcy Code; (4) file with or
otherwise submit to any governmental authority any petition, answer or other
document seeking:  (A) reorganization, (B) an arrangement with creditors or
(C) to take advantage of any other present or future applicable law respecting
bankruptcy, reorganization, insolvency, readjustment of debts, relief of
debtors, dissolution or liquidation; (5) file or otherwise submit any answer or
other document admitting or failing to contest the material allegations of a
petition or other document filed or otherwise submitted against it in any
proceeding under any such applicable law, or (6) be adjudicated a bankrupt or
insolvent by a court of competent jurisdiction;
 
d.           Any case, proceeding or other action shall be commenced against the
Company for the purpose of effecting, or an order, judgment or decree shall be
entered by any court of competent jurisdiction approving (in whole or in
part) anything specified in Section 3.(c) hereof, or any receiver, trustee,
assignee, custodian, sequestrator, liquidator or other official shall be
appointed with respect to the Company, or shall be appointed to take or shall
otherwise acquire possession or control of all or a substantial part of the
assets and properties of the Company, and any of the foregoing shall continue
unstayed and in effect for any period of sixty (60) days.
 
4.      Successors and Assigns: Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties
hereto.  Nothing in this Note, express or implied, is intended to confer upon
any party, other than the parties hereto and their successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this Note,
except as expressly provided herein.  The Company may not assign this Note or
any of the rights or obligations referenced herein without the prior written
consent of Holder.

5.      Governing Law.  This agreement is entered into in Young County, Texas,
and shall be construed in accordance with and governed by the laws of the State
of Texas applicable to contracts made and to be performed in Texas.  Further,
the parties agree that venue shall rest solely and exclusively in Young County,
Texas, and any challenge or objection thereto is hereby waived.
 
6.       Security Interest.   This Note is secured by a security interest
granted to the Lender pursuant to a Security Agreement, as delivered by Borrower
to Lender.  The Borrower acknowledges and agrees that should a proceeding under
any bankruptcy or insolvency law be commenced by or against the Borrower, or if
any of the Collateral (as defined in the Security Agreement) should become the
subject of any bankruptcy or insolvency proceeding, then the Lender should be
entitled to, among other relief to which the Lender may be entitled hereunder or
under any of the other documents executed in connection herewith or and any
other agreement to which the Borrower and Lender are parties (collectively,
“Loan Documents”) and/or applicable law, an order from the court granting
immediate relief from the automatic stay pursuant to 11 U.S.C. Section 362 to
permit the Lender to exercise all of its rights and remedies pursuant to the
Loan Documents and/or applicable law.  Immediately, upon satisfaction of this
Note (either by repayment or conversion), the security interest granted to the
Lender pursuant to the Security Agreement shall be released unconditionally,
fully and completely.
 
7.      License. If Lender takes possession of the Collateral, the Company (as
well as its subsidiaries and Affiliates), shall immediately receive a fully
paid-up, perpetual, worldwide, irrevocable, non-exclusive, transferable right
and royalty-free license to use the Collateral for any purpose, including, but
not limited to, in connection with any product, service, or systems provided or
developed by or for the Company, either now existing or later developed. Such
license shall be deemed to extend to and include an immunity from suit against
all past, present and future customers, suppliers, sublicensees, resellers
(whether or not the reseller uses a Company product brand name, packaging, logo,
form factor, color scheme, etc.), destributors, consultants and users of any
product, service, or system provided by or for the Company. The Lender shall not
enter into any agreement or take any action which would interfere with the
release, covenants not to sue and license grants set forth in this Note.
 
 
2

--------------------------------------------------------------------------------

 

The Lender hereby releases, forever discharges, and covenants not to sue the
Company from any and all claims, actions, causes of action, suits, damages,
injuries, duties, rights, obligations, liabilities, adjustments,
responsibilities, judgments, trespasses, and demands, whatsoever, in law or in
equity, whether known or unknown, suspected or unsuspected to exist, now
existing or later acquired, which were made or could have been made or may be
made in the future by the Lender relating to the licensing of the
Collateral.  This release is not intended and shall not be construed to affect
Lender’s claims (including claims for patent infringement) against any other
current or future alleged infringer of the Collateral, nor shall this limit
Lender’s right to foreclose on the Collateral in the event of default.

The releases and license set forth above are assignable and transferable by the
Company in the case of a merger or sale of all or substantially all of its
assets or stock, in the case of an acquisition of the Company or to a subsidiary
or a present or future Affiliate of the Company. For purposes of this Note, the
term “Affiliate” means any person, firm or entity controlling, controlled by or
under common control with the Company.

This license shall be binding upon the Lender, its successors, principals and
assigns as well as any future successor owner of the Collateral.

8.      Notices.  For the purpose of this Note, notices and all other
communications provided for in this Note shall be in writing and shall be deemed
to have been duly given as of the date if delivered in person or by telecopy, on
the next business day, if sent by a nationally recognized overnight courier
service, and on the second business day if mailed by registered mail, return
receipt requested, postage prepaid, and if addressed to the Company then at its
principal place of business, or if addressed to the Holder, then the last known
address on file with the Company.

 

If to the Company:   Location Based Technologies, Inc.     49 Discovery, Ste 260
    Irivne, CA 92618     Facsimile Number:  (714) 200-0287    
E-mail:  Gregory.harrison@pocketfinder.com       If to Lender:    ECPC II
Capital, LLC     P. O. Box 930     Graham, TX 76450     Attn: Alfred G. Allen,
III     Facsimile Number: (940) 549-5691     E-Mail: aga@turnerandallen.com    
 

 
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties
 
 
3

--------------------------------------------------------------------------------

 

9.       Heading; References.  The headings have been inserted for convenience
only and are not to be considered when construing the provisions of this Note.

10.     Representations and Warranties. Each Party has the requisite corporate,
partnership, limited liability company or other power and authority to enter
into this Note and otherwise to carry out its obligations hereunder.

11.     Counterparts.   This Agreement may be executed in counterparts by the
Company and the Lender, both of which taken together shall be deemed one
original, binding on both parties, notwithstanding that all parties are not
signatories to the original or the same counterpart.

12.     Entire Agreement.  This Note and the Loan Documents constitute the
entire understanding between the parties hereto in respect of the terms of this
Note by the Holder and by the Company, superseding all negotiations, prior
discussions, prior written, implied and oral agreements, preliminary agreements
and understandings with the Company or any of its officers, employees or agents.

 

{Signature Page to Follow}
 
 
4

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Borrower has executed this Promissory Note as of the
date first set forth above.
 

Borrower:

LOCATION BASED TECHNOLOGIES, INC.

By:                                                                  
David M. Morse
CEO

Date: December____, 2012

Lender:

 ECPC II Capital, LLC

By: ______________________________________
Alfred G. Allen, III, Manager

Date:       December____, 2012
 
 
5

--------------------------------------------------------------------------------

 

Exhibit A

Notice of Conversion

The undersigned herby elects to convert $___________ of the principal and all of
the accrued interest on the principal of the Promissory Note issued by Location
Based Technologies, Inc., on ___________, 201_ being converted into shares of
Common Stock of Location Based Technologies, Inc. according to the conditions
set forth in such Note, as the date written below.

Date of Conversion: ____________________

Conversion Price: $__0.25_____

Shares To Be Delivered: ________________

 ECPC II Capital, LLC

Signature: ___________________________

Printed Name: Alfred G. Allen, III, Manager (the “Holder”)

Name on the Certificate (if different from above): ECPC II Capital, LLC

Mailing Address:                  P. O. Box 930

Graham, TX 76450

______________________

6