EXHIBIT 4.1
-----------
THIS NOTE, AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF, HAVE
BEEN ISSUED PURSUANT TO REGULATION S, PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED ("SECURITIES ACT"), AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO (A) THE PROVISIONS OF REGULATION S, (B) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (C) SUCH OTHER
EXEMPTIONS FROM SUCH REGISTRATION. HEDGING TRANSACTIONS WITH RESPECT TO SUCH
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. AS
A CONDITION TO PERMITTING ANY TRANSFER OF THESE SECURITIES, THE COMPANY MAY
REQUIRE THAT IT BE FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT NO REGISTRATION OR QUALIFICATIONS IS LEGALLY REQUIRED
FOR SUCH TRANSFER.
SEMOTUS SOLUTIONS, INC.
CONVERTIBLE PROMISSORY NOTE
$200,000 April 23, 2008
FOR VALUE RECEIVED, Semotus Solutions, Inc., a Nevada corporation (the
"Company"), promises to pay to the order of FLINT TELECOM LIMITED, a company
limited by shares organized under the Irish Companies Xxx 0000 to 2003 (the
"Payee"), at the office of the Payee as listed in Section 10 below, or at such
other place as Payee may designate in writing, the principal sum of Two Hundred
Thousand US Dollars (US$200,000) (the "Principal Amount") on the terms set forth
below. Interest on the unpaid principal balance shall accrue at a rate of eight
percent (8%) per annum, from the date hereof with respect to the Principal
Amount. All payments of interest and principal hereunder shall be made in U.S.
currency.
This Note is made in connection with that certain Investment Agreement
dated April 23, 2008 between Company and Payee (the "Investment Agreement").
1. DEFINITIONS.
Capitalized terms not defined herein shall have the same meaning as set
forth in the Investment Agreement. The following terms shall have the meanings
herein specified:
"Common Stock" means authorized Common Stock, $.01 par value, of the
Company.
"Conversion Notice" shall have the meaning set forth in Section 2(b).
"Conversion Price" shall mean the per share price(s) at which some or
all of the Principal Amount plus all accrued interest thereon is converted or
convertible pursuant to Section 2, and in all cases as adjusted pursuant to
Section 2(e).
"Conversion Shares" means the shares of Common Stock, issuable upon
conversion of this Note.
"Event of Default" means an event specified in Section 4 hereof.
"Holder" means the Payee, and each endorsee, pledgee, assignee, owner
and holder of this Note, as such; and any consent, waiver or agreement in
writing by the then Holder with respect to any matter or thing in connection
with this Note, whether altering any provision hereof or otherwise, shall bind
all subsequent Holders. Notwithstanding the foregoing, the Company may treat the
registered holder of this Note as the Holder for all purposes.
"Principal Amount" shall have the meaning set forth in the initial
paragraph.
"Person" means an individual, trust, partnership, firm, association,
corporation or other organization or a government or governmental authority.
Words of one gender include the other gender; the singular includes the
plural; and the plural includes the singular, unless the context otherwise
requires.
2. CONVERSION OF THE NOTE.
(a) ELECTION TO CONVERT. Holder may, at its option, exercised by
written notice (the "Conversion Notice") to the Company at any time prior to
payment in full hereof, elect to convert all or any part of the entire
outstanding Principal Amount of this Note plus a pro rata share of the accrued
interest on the then outstanding balance into the Conversion Shares at a
conversion price equal to $0.275 per share, for an aggregate of Seven Hundred
Twenty Seven Thousand, Two Hundred Seventy Two (727,272) shares (subject to
adjustment for any accrued interest, and subject to adjustment for anti-dilution
as set forth below).
(b) DELIVERY OF CONVERSION SHARES. Upon such conversion, the
Conversion Shares shall be delivered as follows:
(i) As promptly as practicable after conversion (but in any
event no later than five days following the delivery of such Conversion
Notice), the Company shall deliver to Holder, or to such person or
persons as are designated by Holder in the Conversion Notice, a
certificate or certificates representing the number of Conversion
Shares into which this Note or portion thereof is to be converted in
such name or names as are specified in the Conversion Notice, rounded
to the nearest whole share. Such conversion shall be deemed to have
been effected at the close of business on the date when this Note shall
have been surrendered to the Company for conversion, so that the person
entitled to receive such Conversion Shares shall be treated for all
purposes as having become the record holder of such Conversion Shares
at such time.
(ii) In the event that less than the entire outstanding
Principal Amount of this Note is converted hereunder pursuant to
subsection (a) above, this Note shall not be surrendered for
cancellation but shall have the fact and amount of conversion recorded
on the face of this Note by writing acknowledged by Holder and the
Company. If less than the entire Principal Amount of this Note is
converted, the amount of principal converted shall be reduced to the
nearest amount that results in no fractional shares.
(c) RESERVATION OF SHARES. The Company agrees that, during the period
within which this Note may be converted, the Company will at all times have
authorized and in reserve, and will keep available solely for delivery upon the
conversion of this Note, Common Stock and other securities and properties as
from time to time shall be receivable upon the conversion of this Note, free and
clear of all restrictions on issuance, sale or transfer other than those imposed
by law and free and clear of all pre-emptive rights. The Company agrees that the
Conversion Shares shall, at the time of such delivery, be validly issued and
outstanding, fully paid and non-assessable, and the Company will take all such
action as may be necessary to assure that the stated value or par value per
share of the Conversion Shares is at all times equal to or less than the
Conversion Price. If at any time the total number of shares of Common Stock
issuable pursuant hereto, together with the maximum number of shares of Common
Stock issuable upon conversion, exchange or exercise of (i) all then-outstanding
securities (whether debt or equity) of the Company convertible or exchangeable
for Common Stock and (ii) all then-outstanding warrants and options to purchase
Common Stock, would exceed the total number of shares of Common Stock then
authorized by the Company's articles of incorporation but unissued, the Company
shall promptly amend its articles of incorporation to increase the number of
authorized shares of Common Stock such that there shall be a sufficient number
of authorized and unissued shares of Common Stock available at all times to
effect the conversion hereof.
(d) PROTECTION AGAINST DILUTION.
(i) STOCK DIVIDEND, SPLIT OR COMBINATION. If at any time the
Company shall (A) pay a dividend in shares of Common Stock, (B)
subdivide any outstanding shares of Common Stock into a greater number
of shares of Common Stock, (C) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock, or (D) issue, by
reclassification of its shares of Common Stock, any shares of its
capital stock, the amount and type of shares purchasable upon the
exercise of this Note immediately prior thereto shall be adjusted
thereafter, until further adjusted pursuant to this Section (d), so
that the Holder shall be entitled to receive upon conversion of this
Note that number and class or series of shares of Common Stock or other
capital stock which such Holder would have owned or have been entitled
to receive after the happening of such event had such Holder converted
this Note immediately prior to the record date, in the case of any such
dividend, or the effective date in the case of any such subdivision,
combination, reclassification, or issuance. An adjustment made pursuant
to this Section 2(d)(i) shall be made whenever any of such events shall
occur, but shall become effective, retroactively after such record date
or such effective date, as the case may be, as to any Principal Amount
or under under this Note converted between such record date or
effective date and the date of happening of any such event.
(ii) BELOW MARKET VALUE ISSUANCES. In case the Company shall
(A) issue any options, warrants or other rights
entitling the holder thereof to subscribe for or purchase
shares of Common Stock or other securities of the Company
convertible or exchangeable for Common Stock at a price per
share which, when added to the amount of consideration
received or receivable by the Company for such options,
warrants or rights, is less than the then Conversion Price;
(B) issue or sell securities of the Company
convertible into or exchangeable for Common Stock at a price
per share which, when added to the amount of consideration
received or receivable from the Company for such exchangeable
or convertible securities, is less than the then Conversion
Price; or
(C) issue or sell additional shares of its Common
Stock for consideration representing less than the then
Conversion Price,
then the number of Conversion Shares issuable upon conversion of this
Note shall be adjusted so that thereafter, until further adjusted, this
Note shall entitle the Holder to convert into that number of shares of
Common Stock determined by multiplying the number of shares purchasable
hereunder by a fraction, (1) the numerator of which shall be the number
of shares of Common Stock outstanding prior to such issuance plus the
number of additional shares of Common Stock issuable upon exercise of
such options, warrants or rights, or exchangeable or convertible
securities, or the additional number of shares of Common Stock issued
at such time, and (2) the denominator of which shall be the number of
shares of Common Stock outstanding prior to such issuance plus the
number of shares of Common Stock that either (i) the sum of (x) the
aggregate exercise price of the total number of shares of Common Stock
issuable upon exercise of such options, warrants, or rights or upon
conversion or exchange of such convertible securities, and (y) the
aggregate amount of consideration, if any, received or receivable by
the Company for such options, warrants or rights or convertible or
exchangeable securities, or (ii) the aggregate consideration received
in connection with the sale of shares of its Common Stock for less than
then Conversion Price, as the case may be, would purchase at the then
Conversion Price.
Upon the expiration of any options, warrants or rights or
securities exchangeable or convertible for Common Stock, if such
expired securities have not been exercised, converted or exchanged for
shares of Common Stock, the number of shares of Common Stock issuable
upon conversion of this Note shall be readjusted to remove any
adjustment attributable to such expired options, warrants or rights or
exchangeable or convertible securities. The above notwithstanding, no
such readjustment shall have the effect of decreasing the number of
shares of Common Stock issuable upon conversion of this Note by an
amount greater than the amount of the adjustment initially made in
respect of the issuance, sale, or grant of such options, warrants, or
rights or exchangeable or convertible securities. No further adjustment
shall be required upon the exercise of any options,
warrants or rights or exchangeable or convertible securities for which
an adjustment has previously been made.
No adjustment under this Section 2(d)(ii) shall be required
for any of the following occurrences:
(A) the issuance of shares of Common Stock pursuant
to a transaction described in Section 2(d)(i) hereof;
(B) the issuance of shares of Common Stock issuable
or issued to employees, consultants or directors of the
Company pursuant to a stock option plan or restricted stock
plan approved by the Company's Board of Directors or a stock
purchase agreement unanimously approved by the Company's Board
of Directors;
(C) the issuance of shares of Common Stock in
connection with a bona fide business acquisition of or by the
Company that is approved by the Company's Board of Directors,
whether by merger, consolidation, sale or contribution of
assets, sale or exchange of stock or otherwise;
(D) the issuance of shares of Common Stock upon the
exercise of warrants or other securities or rights issued
pursuant to equipment lease financings or bank credit
arrangements approved by the Company's Board of Directors; or
(E) the issuance of shares of Common Stock upon the
exercise of warrants or other securities or rights to persons
or entities with which the Company has business relationships,
provided such issuances are for other than primarily equity
financing purposes and provided further that such issuances
are approved by the Company's Board of Directors.
(iii) DIVIDENDS IN OTHER STOCK AND PROPERTY;
RECLASSIFICATION. If at any time or from time to time the holders of
Common Stock (or any shares of stock or other securities at the time
receivable upon the conversion of this Note) shall have received or
become entitled to receive, without payment therefor,
(A) any shares of stock or other securities which
are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to
subscribe for, purchase or otherwise acquire any of the
foregoing by way of dividend or other distribution;
(B) any cash paid or payable otherwise than as a
cash dividend; or
(C) additional stock or other securities or
property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate
rearrangement (other than an event for which adjustment is
otherwise
made pursuant to this Section 2(d), then and in each such
case, the Holder hereof shall, upon the conversion of this
Note, be entitled to receive, in addition to the number of
shares of Common Stock receivable thereupon, and without
payment of any additional consideration therefor, the amount
of stock and other securities and property (other than cash
paid or payable as a cash dividend) which such Holder would
hold on the date of such conversion had he been the holder of
record of such Common Stock as of the date on which holders of
Common Stock received or became entitled to receive such other
shares of stock and other securities and property.
(iv) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER
OR SALE. If any reorganization of the capital stock of the Company, or
any consolidation or merger of the Company with another corporation, or
the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities, or other assets
or property, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate
provisions shall be made whereby the Holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and
receivable upon the conversion of the Note) such shares of stock,
securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such stock immediately
theretofore receivable upon the conversion of the Note. In any
reorganization described above, appropriate provisions shall be made
with respect to the rights and interests of the Holder of this Note to
the end that the provisions hereof (including, without limitation,
provisions for adjustments of the number of shares of Common Stock
purchasable and receivable upon the conversion of this Note) shall
thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such
consolidation or the corporation purchasing such assets shall assume by
written instrument, executed and mailed or delivered to the registered
Holder hereof at the last address of such Holder appearing on the books
of the Company, the obligation to deliver to such Holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to receive.
(v) NOTICE OF ADJUSTMENT. Upon any adjustment pursuant to
this Section 2(d), the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered Holder
of this Note at the address of such Holder as shown on the books of the
Company, and, in case of a Holder with an address of record outside of
the United States, by facsimile, and confirmed in writing by first
class air mail. The notice shall be signed by the Company's chief
financial officer and shall state the nature of such adjustment,
setting forth in reasonable detail the method of effecting the
adjustment and the facts upon which such adjustment is based. If at any
time in addition to any of the adjustments set forth in this Section
2(d), an increase in the number of authorized and unissued shares of
Common Stock is required, the Company shall
promptly provide to the Holder a certificate of the Secretary of the
Company certifying that the requisite number of shares of Common Stock
have been authorized to permit the conversion of the Note.
(vi) OTHER NOTICES. If at any time:
(A) the Company shall declare any cash dividend
upon its Common Stock;
(B) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend or
other distribution to the holders of its Common Stock;
(C) the Company shall offer for subscription pro
rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(D) there shall be any capital reorganization or
reclassification of the capital stock of the Company; or
consolidation or merger of the Company; or consolidation or
merger of the Company with, or sale of all or substantially
all of its assets to, another corporation; or
(E) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall
give, by first class mail, postage prepaid, addressed to the
Holder of this Note at the address of such Holder as shown on
the books of the Company, (a) at least thirty (30) days' prior
written notice (by the method set forth above) of the date on
which the books of the Company shall close or a record shall
be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any
such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, and (b) in the
case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or
winding-up, at least thirty (30) days' prior written notice of
the date when the same shall take place. Any notice given in
accordance with the foregoing clause (a) shall also specify,
in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be
entitled thereto. Any notice given in accordance with the
foregoing clause (b) shall also specify the date on which the
holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, winding-up or conversion, as
the case may be.
(vii) CERTAIN EVENTS. If any change in the outstanding
Common Stock of the Company or any other event occurs as to which the
other provisions of this Section 2(d) are not strictly applicable or if
strictly applicable would not fairly protect the conversion
rights of the Holder of the Note in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in
the number and class of shares issuable upon conversion of this Note or
the application of such provisions, so as to protect such conversion
rights as aforesaid. The adjustment shall be such as will give the
Holder of the Note upon conversion for the same aggregate Conversion
Price the total number, class and kind of shares as it would have owned
had the Note been converted prior to the event and had it continued to
hold such shares until after the event requiring adjustment.
3. PAYMENT OF THIS NOTE - PRINCIPAL AND INTEREST.
(a) PAYMENT UPON MATURITY. All principal and interest that has not
been converted into Common Stock pursuant to Section 2 above shall be due and
payable on the second anniversary of this Note and, at any time thereafter, the
Holder may proceed to collect such unconverted principal and accrued interest.
(b) PAYMENT ON AN EVENT OF DEFAULT. If an Event of Default occurs and
is continuing, then the Holder of this Note may, by written notice to the
Company, declare this Note immediately due and payable and demand payment of all
principal and interest that has not been converted into Common Stock pursuant to
Section 2 above, and, at any time thereafter, the Holder may proceed to collect
such unconverted principal and accrued interest.
(c) PREPAYMENT. The Company may prepay this Note at any time after
six months after the date hereof; provided that, prior to on or before October
17, 2008, the Company shall give Holder at least 30 days' advance written
notice, and after October 17, 2008, the Company shall give Holder at least 15
days' advance written notice, of the Company's intent to prepay and Holder shall
have the right to convert all or any portion of this Note pursuant to Section
2(b) at any time during such 30-day or 15-day period, as applicable.
4. EVENTS OF DEFAULT. The existence of any of the following
conditions shall constitute an Event of Default:
(a) Commencement of proceedings under any bankruptcy or insolvency
law or other law for the reorganization, arrangement, composition or similar
relief or aid of debtors or creditors if such proceeding remains undismissed and
unstayed for a period of 60 days following notice to the Company by the Holder.
(b) If the Company shall dissolve, liquidate or wind up its affairs
or sell substantially all of its assets.
(c) If the Company breaches any of its representations, warranties,
covenants or agreements set forth in the Investment Agreement and such breach
shall not be cured within 15 days after written notice thereof shall have been
given to the Company by the Holder.
(d) One or more final judgments are entered against the Company
involving aggregate unpaid liability not covered by insurance in excess of
$1,000,000, and such amounts are not paid in full within 30 days.
(e) Attachment or similar process of execution is levied against a
material portion of the Company's assets and such process is not terminated and
any orders issued pursuant thereto canceled within 90 calendar days.
(f) The Company is in material breach of any provision of this Note,
which breach (other than a breach described in Section 4(a) above) continues for
more than 15 calendar days following notice to the Company by the Holder.
5. TRANSFER.
(a) Transfer of this Note shall be subject to prior delivery by the
proposed transferee to the Company of an opinion of counsel that such transfer
is in compliance with all federal and all applicable securities laws. In order
to transfer this Note, the Holder, or its duly authorized attorney, shall
surrender this Note at the office of the Company pursuant to Section 10 herein,
accompanied by an assignment duly executed by the Holder hereof.
(b) This Note is, and each certificate representing Conversion Shares
shall be, stamped or otherwise imprinted with a legend substantially in the form
set forth on the first page hereof.
6. LOSS OR MUTILATION OF NOTE. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, together with an indemnity reasonably satisfactory to
the Company, in the case of loss, theft, or destruction, or the surrender and
cancellation of this Note, in the case of mutilation, the Company shall execute
and deliver to the Holder a new Note of like tenor and denomination as this
Note.
7. HOLDER NOT SHAREHOLDER. This Note does not confer upon the Holder
any right to vote or to consent or to receive notice as a shareholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a shareholder, prior to the conversion hereof.
8. WAIVERS. The failure of Holder to enforce at any time any of the
provisions of this Note shall not, absent an express written waiver signed by
Holder specifying the provision being waived, be construed to be a waiver of any
such provision, nor in any way to affect the validity of this Note or any part
hereof or the right of Holder thereafter to enforce each and every such
provision. No waiver of any breach of this Note shall be held to be a waiver of
any other or subsequent breach.
9. TAXES. The issuance of certificates for shares of Common Stock
upon the conversion of the Note shall be made without charge to the Holder of
the Note for any issue tax (other than any applicable income taxes) in respect
thereof; PROVIDED, HOWEVER, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Note being converted.
10. NOTICES. All notices or other communications to a party required
or permitted hereunder shall be in writing and shall be delivered personally or
by facsimile (receipt confirmed electronically) to such party (or, in the case
of an entity, to an executive officer of such party) or shall be sent by a
reputable express delivery service or by certified mail, postage prepaid with
return receipt requested, addressed as follows:
if to Payee to:
Flint Telecom Limited
Xxxxxxx Xxxxx
00 Xxxxxxxxxxx Xxxxxx
Xxxxxx 0
Xxxxxxx
Attn: Xxxxxxx Xxxxx, Chief Executive Officer
Facsimile No.: [___________]
with a copy to: Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, XX, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx Xxxxxx
Facsimile No.: (000) 000-0000
if to the Company to:
Semotus Solutions, Inc.
Attn: Xxxx XxXxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Any party may change the above specified recipient and/or mailing
address by notice to all other parties given in the manner herein prescribed.
All notices shall be deemed given on the day when actually delivered as provided
above (if delivered personally or by facsimile, provided that any such facsimile
is received during regular business hours at the recipient's location) or on the
day shown on the return receipt (if delivered by mail or delivery service).
11. HEADINGS. The titles and headings to the Sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Note. This Note shall be
construed without regard to any presumption or other rule requiring construction
hereof against the party causing this Note to be drafted.
12. APPLICABLE LAW AND JURISDICTION. The legality, validity,
enforceability and interpretation of this Note and the relationship of the
parties hereunder shall be governed by the laws of the State of Nevada, without
giving effect to the principles of conflict of laws. Any claim, cause of action,
suit or demand allegedly arising out of or related to this Note, or the
relationship of the parties, shall be brought exclusively in the state or
federal courts located in Santa Xxxxx County, California, and the parties
irrevocably consent to the exclusive jurisdiction and venue of such courts and
waive any objections they may have at any time to such exclusive jurisdiction
and venue.
IN WITNESS WHEREOF, Semotus Solutions, Inc. has caused this Convertible
Promissory Note to be signed in its name by the signature of its duly authorized
representative.
SEMOTUS SOLUTIONS, INC.
/s/ Xxxxxxx XxXxxx
--------------------------------
By: Xxxxxxx XxXxxx
Its: Chairman
