EXHIBIT 2.2
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EXHIBIT C
TO
LICENSE AGREEMENT
STOCK ISSUANCE AND REGISTRATION RIGHTS AGREEMENT
THIS STOCK ISSUANCE AND REGISTRATION RIGHTS AGREEMENT, dated as of July 23,
2007 (this "Agreement"), is made by and between SEMOTUS SOLUTIONS, INC., a
Nevada corporation, with headquarters located at 000 Xxxxxxxxxx Xxxxxx, Xxxxx
000, Xxx Xxxxx, XX 00000 ("Semotus"), and Xxxxxxxx.xxx Incorporated, a Nevada
corporation located at 0000 Xxxxx Xxx., Xxxxx 0000, Xxxxx Xxxxxx, XX 00000
("Innofone").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Software
License Agreement, dated as of July 23, 2007, between Semotus and Innofone (the
"License Agreement"; terms not otherwise defined herein shall have the meanings
ascribed to them in the License Agreement), Innofone has agreed to issue and
sell to Semotus the Shares; and
WHEREAS, to induce Semotus to execute and deliver the License Agreement,
Innofone has agreed to provide certain representations and registration rights
under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Innofone and Semotus hereby agree
as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings:
(a) "Computation Date" means (A) the date which is the earlier of thirty
(30) days after the Required Filing Date or the Required Effective Date (with
respect to payments due as contemplated by Section 2(b)(ii) hereof), as the case
may be, and (B) each date which is thirty (30) days after the previous
Computation Date.
(b) "Effective Date" means the date the SEC declares a Registration
Statement covering Registrable Securities and otherwise meeting the conditions
contemplated hereby to be effective.
(c) "Semotus" means Semotus or any permitted transferee or assignee who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 hereof and who holds Registrable Securities, as the context may
require.
(d) "Shares" means the $3,750,000 worth of shares of Innofone common stock
to be issued pursuant to the License Agreement, and any shares of Innofone
common stock issued based upon the Post-Closing Purchase Price Adjustment, and
any additional shares of common stock issued pursuant to the terms of this
Registration Rights Agreement.
(e) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the Commission.
(f) "Registrable Securities" means the Shares and any additional shares of
common stock issued pursuant to this Agreement or upon conversion of a
promissory note that may be issued to Semotus in the future.
(g) "Registration Statement" means a registration statement of the Innofone
under the Securities Act covering Registrable Securities on Form S-3, if
Innofone is then eligible to file using such form, and if not eligible, on Form
SB-2 or other appropriate form.
(h) "Required Effective Date" means 60 days after the Required Filing Date.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the License Agreement or in the Rules of
the SEC.
2. REGISTRATION.
(A) MANDATORY REGISTRATION. Innofone shall prepare and file with the SEC,
as soon as practicable but not later than 90 days after Semotus sends written
notice to Innofone that Semotus desires to have the Registrable Shares
registered (the "Required Filing Date"), a Registration Statement registering
for resale by Semotus a sufficient number of shares of Common Stock for Semotus
to sell all of the Registrable Securities. The Registration Statement shall also
state that, in accordance with Rules 416 and 457 under the Securities Act, it
also covers such indeterminate number of additional shares of Common Stock as
may become issuable to prevent dilution resulting from stock splits, or stock
dividends. Innofone will use its reasonable best efforts to cause such
Registration Statement to be declared effective on a date (the "Initial Required
Effective Date") which is no later than the earlier of (Y) five (5) business
days after oral or written notice by the SEC that it may be declared effective
or (Z) the Required Effective Date.
(B) PIGGY BACK REGISTRATION RIGHTS. If (but without any obligation to do
so) Innofone proposes to register any of its securities on a registration
statement (other than a registration relating solely to the sale of securities
to participants in a Company stock option plan), Innofone shall, at such time,
promptly give Semotus written notice of such registration. Upon the written
request of Semotus given within ten (10) days after receipt of such notice by
Semotus, Innofone shall use all reasonable efforts to cause to be registered
under the Act all of the Registrable Shares that Semotus has requested to be
registered on a date (the "Initial Required Effective Date") which is no later
than the earlier of (Y) five (5) business days after
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oral or written notice by the SEC that it may be declared effective or (Z) the
Required Effective Date. For purposes of computing penalties under Section 2(c),
the actual filing date with the SEC shall be deemed the Required Filing Date
under this Section 2(b).
(C) ADJUSTMENTS AND PENALTIES.
(i) If the Registration Statement covering the Registrable Securities is
not filed by the Required Filing Date, or declared effective by the Required
Effective Date, then Innofone will make payments to Semotus in such amounts and
at such times as shall be determined pursuant to this Section 2(c).
(ii) The amount (the "Periodic Amount") to be paid by Innofone to Semotus
shall be determined as of each Computation Date (as defined below) and such
amount shall be equal to three percent (3%) of the Transaction Price.
(iii) Each Periodic Amount will be payable by Innofone, except as provided
in the other provisions of this subparagraph (iv), by the issuance of additional
shares of Common Stock to Semotus ("Periodic Amount Shares") in an amount equal
to the Periodic Amount being paid thereby divided by the average Closing Price
for the last ten (10) trading days prior to the Computation Date, OR IN CASH OR
OTHER IMMEDIATELY AVAILABLE FUNDS TO SEMOTUS (1) on the third business day after
the Required Effective Date, and (2) on the earlier of (A) the third business
day after each thirtieth day thereafter, (B) the third business day after the
date the Registration Statement is filed or is declared effective, in each case
without requiring demand therefor by Semotus. Any Adjustment Shares, to the
extent adjustment shares are issued prior to the registration statement going
effective, and any Periodic Amount Shares issued pursuant to this subsection
(iii) shares shall be included as Registrable Shares.
(iv) The parties acknowledge that the damages which may be incurred by
Semotus if the Registration Statement has not been declared effective by the
Required Effective Date may be difficult to ascertain. The parties agree that
the Periodic Amounts represent a reasonable estimate on the part of the parties,
as of the date of this Agreement, of the amount of such damages. Innofone shall
only be obligated to make payments to Semotus pursuant to this Section 2(c) for
Periodic Amounts accruing and payable through the fifteenth (15th) Computation
Date.
(v) Notwithstanding the foregoing, the amounts payable by Innofone pursuant
to this provision shall not be payable to the extent any delay in the
effectiveness of the Registration Statement occurs because of an act of, or a
failure to act or to act timely by the Semotus or its counsel.
(vi) During the time period beginning from the Closing Date and ending on
the earlier to occur of (a) 90 calendar days subsequent to the Effective Date
and (b) the two (2) year anniversary of the Closing Date, if Innofone issues
common stock or securities convertible or exercisable into stock at a price (or
conversion or exercise right) that is less than the per share Transaction Price
(the "Adjustment Price"), then, at the time of such issuance(s) Innofone shall
issue to Semotus an additional number of shares of Common Stock pursuant to the
following formula: the quotient determined by dividing (i) the Aggregate Amount
by (ii) the Adjustment
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Price and then subtracted by the Shares (the "Adjustment Shares"). Any
Adjustment Shares to be issued shall be included in the registration statement
filed by Innofone pursuant to its obligations under this Agreement to the extent
that such registration statement has not yet been declared effective by the SEC.
3. OBLIGATIONS OF INNOFONE. In connection with the registration of the
Registrable Securities, Innofone shall do each of the following:
(a) Prepare and file, with the SEC a Registration Statement with respect to
not less than the number of Registrable Securities as provided in Section 2(a)
above, but only the Registrable Securities, and thereafter use its reasonable
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective by the Required Effective Date and keep the
Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earlier of (i) the date when the
Semotus may sell all Registrable Securities under Rule 144(k) without volume or
other restrictions or limits, (ii) the date the Semotus no longer owns any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or (iii) one
(1) year after the Effective Date of the Registration Statement.
(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective at all times during the Registration
Period, and, during the Registration Period, use its reasonable best efforts to
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of Innofone covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Permit a single counsel designated by Semotus to review the
Registration Statement and all amendments and supplements thereto for a
reasonable period of time (but not less than three (3) business days) prior to
their filing with the SEC, and not file any document in a form to which such
counsel reasonably objects;
(d) Notify Semotus' Counsel and any managing underwriters immediately (and,
in the case of (i)(A) below, not less than three (3) business days prior to such
filing) and (if requested by any such person) confirm such notice in writing no
later than one (1) business day following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to the Registration
Statement is proposed to be filed; (B) whenever the SEC notifies the Innofone
whether there will be a "review" of such Registration Statement; (C) whenever
the Innofone receives (or a representative of Innofone receives on its behalf)
any oral or written comments from the SEC in respect of a Registration Statement
(copies or, in the case of oral comments, summaries of such comments (as such
comments relate to the Semotus) shall be promptly furnished by Innofone to
Semotus); and (D) with respect to the Registration Statement
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or any post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any proceedings for that
purpose; (iv) if at any time any of the representations or warranties of
Innofone contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by Innofone of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of Innofone makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, Innofone shall furnish Semotus' Counsel with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(d) that relate to Semotus not later than one (1) business
day in advance of the filing of such responses with the SEC so that Semotus
shall have the opportunity to comment thereon;
(e) Furnish to Semotus' Counsel (i) promptly after the same is prepared and
publicly distributed, filed with the SEC, or received by Innofone, one (1) copy
of the Registration Statement, each preliminary prospectus and prospectus, and
each amendment or supplement thereto, all correspondence to, with, or from the
SEC, and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto (as contemplated in Section 3(d) above) and such other
documents, as Semotus may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by Semotus;
(f) As promptly as practicable after becoming aware thereof, notify the
Semotus of the happening of any event of which Innofone has knowledge, as a
result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Semotus as such Semotus may reasonably
request;
(g) As promptly as practicable after becoming aware thereof, notify the
Semotus who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance by the SEC of
a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
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(h) Use its reasonable efforts to secure and maintain the designation and
listing of all the Registrable Securities covered by the Registration Statement
on the Principal Trading Market within the meaning of Rule 11Aa2-1 of the SEC
under the Exchange Act and the quotation of the Registrable Securities on the
Principal Trading Market;
(i) Provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the initial Effective Date;
(j) Cooperate with Semotus to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as Semotus
may reasonably request, and, within five (5) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Innofone shall deliver, and shall cause legal counsel selected by Innofone
to deliver, to the transfer agent for the Registrable Securities (with copies to
Semotus) an appropriate instruction and opinion of such counsel, which shall
include, without limitation, directions to the transfer agent to issue
certificates of Registrable Securities (including certificates for Registrable
Securities to be issued after the Effective Date and replacement certificates
for Registrable Securities previously issued) without legends or other
restrictions; provided that Innofone has received the deliveries required in the
Purchase Agreement;
(k) Take all other reasonable actions necessary to expedite and facilitate
disposition by Semotus of the Registrable Securities pursuant to the
Registration Statement; and
(l) Use its reasonable best efforts to comply with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of Innofone
after the effective date of the Registration Statement, which statement shall
cover said 12-month period, or end shorter periods as is consistent with the
requirements of Rule 158.
4. OBLIGATIONS OF SEMOTUS. In connection with the registration of the
Registrable Securities, Semotus shall have the following obligations:
(a) Semotus, by Semotus' acceptance of the Registrable Securities, agrees
to cooperate with Innofone as reasonably requested by Innofone in connection
with the preparation and filing of the Registration Statement hereunder; and
(b) Semotus agrees that, upon receipt of any notice from Innofone of the
happening of any event of the kind described in Section 3(f) or 3(g), above,
Semotus will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until Semotus' receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) or 3(g) and, if so directed by
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Innofone, Semotus shall deliver to Innofone (at the expense of Innofone) or
destroy (and deliver to Innofone a certificate of destruction) all copies in
Semotus' possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses (other than
underwriting discounts and commissions of Semotus) incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing, and qualifications fees, printers
and accounting fees, and the fees and disbursements of counsel for the Innofone
(but excluding Semotus' Counsel fees and expenses) shall be borne by Innofone.
6. REPRESENTATIONS AND WARRANTIES OF INNOFONE. Innofone represents and
warrants to Semotus that:
(a) Innofone has the corporate power and authority to enter into this Agreement,
and to perform its obligations hereunder. The execution and delivery by Innofone
of this Agreement and the consummation by the Innofone of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Innofone. This Agreement has been duly executed and delivered
by Innofone and constitutes the valid and binding obligation of Innofone
enforceable against it in accordance with its respective terms, subject to the
effects of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and to general equitable
principles.
(b) Except as set forth in the SEC Documents (as hereinafter defined), there is
no pending, or to the knowledge of Innofone, threatened, judicial,
administrative or arbitral action, claim, suit, proceeding or investigation
which might affect the validity or enforceability of this Agreement or which
involves Innofone and which if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
(c) Except as contemplated by this Agreement, any applicable state or Federal
securities law filings, no consent or approval of, or exemption by, or filing
with, any party or governmental or public body or authority is required in
connection with the execution, delivery and performance under this Agreement or
the taking of any action contemplated hereunder.
(d) Innofone has been duly organized and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation.
(e) The execution, delivery and performance of this Agreement by Innofone, and
the consummation of the transactions contemplated hereby, will not (i) violate
any provision of Innofone's certificate of incorporation or bylaws, (ii)
violate, conflict with or result in the breach of any of the terms of, result in
a material modification of the effect of, otherwise, give any other contracting
party the right to terminate, or constitute (or with notice or lapse of time or
both constitute) a default under, any contract or other agreement to which
Innofone is a party or by or to which Innofone or any of Innofone's assets or
properties may be bound or subject, (iii) violate any order, judgment,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body by which Innofone, or the assets or properties of Innofone are
bound and (iv) to Innofone's knowledge, violate any statute, law or regulation.
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(f) The Shares have been duly authorized and, when issued and paid for in
accordance with the License Agreement, will be duly and validly issued, fully
paid and nonassessable, free and clear of all liens, claims or encumbrances.
Innofone has reserved from its duly authorized capital stock the maximum number
of shares of common stock issuable pursuant to this Agreement in order to issue
the full number of the Shares as are or may become issuable.
(g) Innofone is eligible to register the resale of its Common Stock for resale
by Semotus under Form S-3 promulgated under the Securities Act.
(h) The issuance and sale of the Shares hereunder does not contravene the rules
and regulations of any applicable state or Federal securities law, and no
approval of the shareholders of Innofone is required for Innofone to issue and
deliver to Semotus the maximum number of shares of common stock contemplated in
this transaction.
(i) Absence of Certain Changes. Since the Last Audited Date, there has been no
material adverse change and no Material Adverse Effect, except as disclosed in
Innofone's SEC Documents. Since the Last Audited Date, except as provided in
Innofone's SEC Documents or disclosed in the Transaction Documents, Innofone has
not (i) incurred or become subject to any material liabilities (absolute or
contingent) except liabilities incurred in the ordinary course of business
consistent with past practices; (ii) declared or made any payment or
distribution of cash or other property to shareholders with respect to its
capital stock, or purchased or redeemed, or made any agreements to purchase or
redeem, any shares of its capital stock; (iii) sold, assigned or transferred any
other tangible assets, or canceled any debts or claims, except in the ordinary
course of business consistent with past practices; (iv) suffered any substantial
losses or waived any rights of material value, whether or not in the ordinary
course of business, or suffered the loss of any material amount of existing
business; (v) made any changes in employee compensation, except in the ordinary
course of business consistent with past practices; or (vi) experienced any
material problems with labor or management in connection with the terms and
conditions of their employment.
(j) Absence of Litigation. Except as disclosed in Innofone's SEC Documents, (i)
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board or body pending or, to the knowledge of the Innofone,
threatened against or affecting Innofone before or by any governmental authority
or nongovernmental department, commission, board, bureau, agency or
instrumentality or any other person, wherein an unfavorable decision, ruling or
finding would have a Material Adverse Effect or which would adversely affect the
validity or enforceability of, or the authority or ability of Innofone to
perform its obligations under, any of the Transaction Agreements; (ii) Innofone
is not aware of any valid basis for any such claim that (either individually or
in the aggregate with all other such events and circumstances) could reasonably
be expected to have a Material Adverse Effect; or (iii) there are no outstanding
or unsatisfied judgments, orders, decrees, writs, injunctions or stipulations to
which Innofone is a party or by which it or any of its properties is bound, that
involve the transaction contemplated herein or that, alone or in the aggregate,
could reasonably be expect to have a Material Adverse Effect.
(k) No Undisclosed Liabilities or Events. Innofone has no liabilities or
obligations other than those disclosed in the Transaction Agreements or
Innofone's SEC Documents or those incurred
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in the ordinary course of Innofone's business since the Last Audited Date, or
which individually or in the aggregate, would have a Material Adverse Effect. No
event or circumstances has occurred or exists with respect to Innofone or its
properties, business, operations, financial condition, or results of operations,
which, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by Innofone but which has not been so
publicly announced or disclosed. There are no proposals currently under
consideration or currently anticipated to be under consideration by the board of
directors or the executive officers of Innofone which proposals would (x) change
the certificate of incorporation or other charter document or by-laws of
Innofone, each as currently in effect, with or without shareholder approval,
which change would reduce or otherwise adversely affect the rights and powers of
the shareholders of the Common Stock or (y) materially or substantially change
the business, assets or capital of Innofone, including its interests in
subsidiaries.
(l) The number of Shares issuable hereunder may have a dilutive effect on the
ownership interests of the other shareholders (and persons having the right to
become shareholders) of the Innofone. Innofone's executive officers and
directors have studied and fully understand the nature of the Shares being
issued hereby and recognize that they have such a potential dilutive effect. The
board of directors of Innofone has concluded, in its good faith business
judgment, that such issuance is in the best interests of Innofone. Innofone
specifically acknowledges that its obligation to issue the Shares is binding
upon Innofone and enforceable regardless of the dilution such issuance may have
on the ownership interests of other shareholders of Innofone.
7. INDEMNIFICATION. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, Innofone will indemnify and hold
harmless each Semotus who holds such Registrable Securities, the directors, if
any, of such Semotus, the officers, if any, of such Semotus, each person, if
any, who controls any Semotus within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person" or "Indemnified Party"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if Innofone files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Innofone of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to clause (b) of this Section 6, Innofone shall reimburse Semotus, promptly as
such expenses are incurred and are due and
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payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) shall not (I) apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to Innofone by or on behalf of any Indemnified
Person expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, after such
prospectus was made available by Innofone pursuant to Section 3(c) hereof; (II)
be available to the extent such Claim is based on a failure of the Semotus to
deliver or cause to be delivered the prospectus made available by Innofone or
the amendment or supplement thereto made available by Innofone; (III) be
available to the extent such Claim is based on the delivery of a prospectus by
the Semotus after receiving notice from Innofone under Section 3(f), (g) or (h)
hereof (other than a notice regarding the effectiveness of the Registration
Statement or any amendment or supplement thereto), or (IV) apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of Innofone, which consent shall not be unreasonably withheld or
delayed. Each Semotus will indemnify, severally and not jointly, Innofone and
its officers, directors and agents (each, an "Indemnified Person" or
"Indemnified Party") against any claims arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to Innofone, by or on behalf of such Semotus, expressly for use in
connection with the preparation of the Registration Statement or the amendment
or supplement thereto, subject to such limitations and conditions as are
applicable to the indemnification provided by Innofone to this Section 6. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by Semotus pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be. In case any
such action is brought against any Indemnified Person or Indemnified Party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such Indemnified Person or Indemnified Party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such Indemnified Person or Indemnified Party under this Section 6 for
any legal or other reasonable out-of-pocket expenses subsequently incurred by
such Indemnified Person or Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless the indemnifying
party shall not pursue the action to its final conclusion. The Indemnified
Person or Indemnified Party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
reasonable out-of-pocket expenses of such counsel shall not be at the expense of
the indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably
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satisfactory to the Indemnified Person or Indemnified Party provided such
counsel is of the opinion that all defenses available to the Indemnified Party
can be maintained without prejudicing the rights of the indemnifying party. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
8. CONTRIBUTION. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
except where the seller has committed fraud (other than a fraud by reason of the
information included or omitted from the Registration Statement as to which
Innofone has not given notice as contemplated under Section 3 hereof) or
intentional misconduct, contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
9. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view to making
available to Semotus the benefits of Rule 144 promulgated under the Securities
Act or any other similar rule or regulation of the SEC that may at any time
permit Semotus to sell securities of Innofone to the public without Registration
("Rule 144"), Innofone agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Innofone under the Securities Act and the Exchange Act; and
(c) furnish to Semotus so long as Semotus owns Registrable Securities,
promptly upon request, (i) a written statement by the Innofone that it has
complied with the reporting requirements of the Securities Act and the Exchange
Act, (ii) a copy of the most recent annual or quarterly report of the Innofone
and such other reports and documents so filed by the Innofone and (iii) such
other information as may be reasonably requested to permit Semotus to sell such
securities pursuant to Rule 144 without Registration.
(d) Innofone will, at the request of any Holder of Registrable Securities,
in connection with the sale of some or all of the Registrable Securities
pursuant to Rule 144 upon receipt from such Holder of a certificate certifying
(i) that such Holder has held such Registrable Securities for a period of not
less than one (1) year, (ii) that such Holder has not been an affiliate (as
defined in Rule 144) of Innofone for more than the ninety (90) preceding days,
and (iii) as to
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such other matters as may be appropriate in accordance with such Rule, remove
from the stock certificate representing such Registrable Securities that portion
of any restrictive legend which relates to the registration provisions of the
Securities Act, provided, however, that, if Innofone fails to provide such
instructions and opinion within three business days of receipt of the above
certifications (i) through (iii), at Innofone's cost and expense, counsel to
Semotus may provide such instructions and opinion to the transfer agent
regarding the removal of the restrictive legend.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have Innofone
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by Semotus to any transferee of the Registrable
Securities.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of Innofone and Semotus. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon Semotus and Innofone.
11. MISCELLANEOUS.
(a) Notices required or permitted to be given hereunder shall be given in
the manner contemplated by the Purchase Agreement, (i) if to the Innofone or to
the Semotus, to their respective address contemplated by the Purchase Agreement,
and (ii) if to any other Semotus, at such address as such Semotus shall have
provided in writing to the Innofone, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) The corporate laws of the State of Nevada shall govern all issues
concerning the relative rights of Innofone and Semotus as its stockholder. All
other questions concerning this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of California without
regard to the principles of conflicts of law thereof. The parties hereto hereby
submit to the exclusive jurisdiction of the United States federal and state
courts located in Santa Xxxxx County, State of California with respect to any
dispute arising under this Agreement or the transactions contemplated hereby.
(e) Innofone and Semotus hereby waive a trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other in respect of any matter arising out of or in connection with this
Agreement or any of the other Transaction Agreements.
(f) If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
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(g) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(h) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(j) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(k) Innofone acknowledges that any failure by Innofone to perform its
obligations under Section 2(a) hereof, or any delay in such performance could
result in loss to Semotus, and Innofone agrees that, in addition to any other
liability Innofone may have by reason of such failure or delay, Innofone shall
be liable for all direct damages caused by any such failure or delay, unless the
same is the result of force majeure. Neither party shall be liable for
consequential damages.
(l) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
SEMOTUS SOLUTIONS, INC.
By: /s/ Xxxxxxx XxXxxx
----------------------
Name: Xxxxxxx XxXxxx
Title: CEO
XXXXXXXX.XXX INCORPORATED
By: /s/ Xxxx Xxxxxxxx
----------------------
Name: Xxxx Xxxxxxxx
Title: CEO
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