EXHIBIT 2.1
-----------
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT is dated as of May 16,
2006 (this "Purchase Agreement" or "Agreement"), by and between SEMOTUS
SOLUTIONS, INC., a Nevada corporation, having its principal place of business
located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Company"), Southridge Partners LP, a Delaware limited partnership ("SRP"), and
Southshore Capital Fund Ltd, a Cayman Island corporation ("Southshore") (each of
SRP and Southshore is an "Investor" and collectively are the "Investors"), as
listed on Annex I hereto.
W I T N E S S E T H
WHEREAS, the Company wishes to sell to the Investors, and such Investors
are willing to buy from the Company, subject to the terms and conditions set
forth herein, a certain number of shares of Common Stock, par value $.01 per
share (the "Common Stock") of the Company.
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreement contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
A. Definitions. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:
(i) "Closing Date" means the date of the closing of the purchase
and sale of the Shares and Warrants, as provided herein.
(ii) "Company Control Person" means each director, executive
officer, promoter, and such other persons as may be deemed in control of the
Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act
(as hereinafter defined).
(iii) "Effective Date" means the effective date of the
Registration Statement covering the Registrable Securities (as those terms are
defined in the Registration Rights Agreement) relating to the Shares and the
Warrant Shares.
(iv) "Escrow Funds" means the Aggregate Amount delivered to the
Escrow Agent as contemplated by Sections 5(b) and (c) hereof.
(v) "Last Audited Date" means March 31, 2005.
(vi) "Investors" shall bear the definition in the Preamble to
this Agreement
(vii) "Material Adverse Effect" means an event or combination of
events, which individually or in the aggregate, would reasonably be expected to
(w) adversely affect the legality, validity or enforceability of the Shares or
any of the Transaction Agreements, (x) have or result in a material adverse
effect on the results of operations, assets, or financial condition of the
Company and its subsidiaries, taken as a whole, (y) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Agreements or the
transactions contemplated thereby, or (z) materially and adversely affect the
value of the rights granted to the Investors in the Transaction Agreements.
(viii) "Principal Trading Market" means the American Stock
Exchange.
(ix) "Registration Rights Agreement" means the Registration
Rights Agreement in the form annexed hereto as Annex IV, as executed by the
Investors and the Company simultaneously with the execution of this Agreement.
(x) "Shares" means the shares of Common Stock issued to the
Investors.
(xi) "Transaction Agreements" means this Purchase Agreement, the
Joint Escrow Instructions, the Warrants, and the Registration Rights Agreement,
and includes all ancillary documents referred to in those agreements.
(xii) "Warrants" means warrants to purchase two million eight
hundred ten thousand (2,810,000) Warrant Shares in the form attached hereto as
Annex VI.
(xiii) "1933 Act" or "Securities Act" means the Securities Act of
1933, as amended.
(xiv) "1934 Act" or "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
1. PURCHASE AND SALE; MUTUAL DELIVERIES. (a) Upon the following terms and
conditions, the Company shall issue and sell to the Investors and the Investors
shall purchase from the Company, in aggregate, that number of shares of Common
Stock equal to five hundred sixty thousand dollars ($560,000) (the "Aggregate
Amount") divided by the Purchase Price (as hereinafter defined), resulting in an
aggregate of 3,294,118 Common Stock and 2,810,000 Warrants with a exercise price
of $0.30 per share to be issued upon the payment of the Aggregate Amount by the
Investors. The Purchase Price is seventeen cents ($0.17) per share. Upon receipt
of the Aggregate Amount by the Escrow Agent, the Company shall deliver to the
Investors, in proportion to their investment, one or more certificates
representing the Shares and the Warrants, bearing substantially the following
legend:
THE SECURITIES REPRESENTED HEREBY (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
(b ) (i) The Investors acknowledge that (1) the Shares, the
Warrants and the shares of Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") have not been and are not being registered under the
provisions of the 1933 Act and,
2
except as provided in the Registration Rights Agreement or otherwise included in
an effective registration statement, the Shares, the Warrants and the Warrant
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Investors shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Shares, the Warrants and/or the Warrant Shares to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration; (2) any
sale of the Shares, the Warrants and/or the Warrant Shares made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such Shares, the Warrants and/or the Warrant Shares under circumstances in which
the seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the
Securities and Exchange Commission ("Commission" or the "SEC") thereunder.
(ii) Within three (3) business days (such third business day, the
"Delivery Date") after the business day on which the Company has received a
notice of sale (by facsimile or other delivery), the original Common Stock
certificate (and if the same are not delivered to the Company on the same date,
the date of delivery of the second of such items) from the Investors or the
Investors' registered broker, and any relevant state "blue sky" information (if
necessary), the Company at its expense, (i) shall deliver, and shall cause legal
counsel selected by the Company to deliver, to its transfer agent (with copies
to Investors) an appropriate instruction and opinion of such counsel, for the
delivery of unlegended Shares issuable pursuant to the registration statement
for the Shares and/or the Warrant Shares, provided that such registration
statement at the time of sale has been declared effective by the Commission and
is current (the "Unlegended Shares"); and (ii) transmit the certificates
representing the Unlegended Shares (together, unless otherwise instructed by the
Investors, with Common Stock not sold), to the Investors at the address
specified in a notice of sale (which address may be the address for notices as
contemplated by Section 9 hereof or a different address) via express courier, by
electronic transfer or otherwise.
(iii) In lieu of delivering physical certificates representing
the Unlegended Shares, if the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
upon request of an Investor and in compliance with the provisions contained in
this paragraph, so long as the certificates therefor do not bear a legend and
the Investor holding same is not obligated to return such certificate for the
placement of a legend thereon, the Company shall use its best efforts to cause
its transfer agent to electronically transmit the Unlegended Shares by crediting
the account of the Investors's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission system.
(c) The Company shall also deliver, or cause to be delivered, the
original or execution copies of this Purchase Agreement.
3
(d) There are no preemptive rights of any shareholder of the Company,
as such, to acquire the Shares, the Warrants and/or the Warrant Shares. No party
has a currently exercisable right of first refusal which would be applicable to
any or all of the transactions contemplated by the Transaction Agreements.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Investors that:
(a) The Company has the corporate power and authority to enter into
this Purchase Agreement, and to perform its obligations hereunder. The execution
and delivery by the Company of this Purchase Agreement and the consummation by
the Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company. This Purchase
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company 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)
or Annex V, there is no pending, or to the knowledge of the Company, threatened,
judicial, administrative or arbitral action, claim, suit, proceeding or
investigation which might affect the validity or enforceability of this Purchase
Agreement or which involves the Company and which if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
(c) Except as contemplated by the Registration Rights Agreement, the
American Stock Exchange and 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 Purchase Agreement or the taking
of any action contemplated hereunder or thereunder.
(d) The Company 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 Purchase Agreement
by the Company, and the consummation of the transactions contemplated hereby,
will not (i) violate any provision of the Company'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 the Company is a party or by or to which the Company or
any of the Company'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 the Company, or the assets or
properties of
4
the Company are bound and (iv) to the Company's knowledge, violate any statute,
law or regulation.
(f) The Shares have been duly authorized and, when issued and paid for
in accordance with this Agreement, will be duly and validly issued, fully paid
and nonassessable, free and clear of all liens, claims or encumbrances. The
Company has reserved from its duly authorized capital stock the maximum number
of shares of Common Stock issuable pursuant to this Agreement and the Warrants
in order to issue the full number of the Warrant Shares as are or may become
issuable upon exercise of the Warrants.
(g) Assuming the accuracy of the Investors' respective representations
and warranties set forth herein, no registration under the Securities Act is
required for the offer and sale of the Shares, the Warrants and the Warrant
Shares by the Company to the Investors. The Company is eligible to register the
resale of its Common Stock for resale by the Purchasers 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 the American Stock Exchange and no approval of the
shareholders of the Company is required for the Company to issue and deliver to
the Investors 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 the Company's SEC Documents. Since the Last Audited Date, except as
provided in the Company's SEC Documents or disclosed in the Transaction
Documents, the Company 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 the Company'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
Company, threatened against or affecting the Company 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,
5
or the authority or ability of the Company to perform its obligations under, any
of the Transaction Agreements; (ii) the Company 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 the Company 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. The Company has no
liabilities or obligations other than those disclosed in the Transaction
Agreements or the Company's SEC Documents or those incurred in the ordinary
course of the Company'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 the Company 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 the Company 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 the Company which proposals would (x)
change the certificate of incorporation or other charter document or by-laws of
the Company, 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 the Company, including its interests in
subsidiaries.
(l) Fees to Brokers, Finders and Others. The Company has taken no
action which would give rise to any claim by any person for brokerage
commission, finder's fees or similar payments by the Company relating to this
Purchase Agreement or the transactions contemplated hereby. Investors shall have
no obligation with respect to such fees or with respect to any claims made by or
on behalf of other persons for fees of a type contemplated in this Section 4(l)
that may be due in connection with the transactions contemplated hereby. The
Company shall indemnify and hold harmless each of the Investors, their
employees, officers, directors, agents, and partners, and their respective
affiliates, from and against all claims, losses, damages, costs (including the
costs of preparation and attorney's fees) and expenses suffered in respect of
any such claimed or existing fees, as and when incurred.
(m) Absence of Certain Company Control Person Actions or Events. None
of the following has occurred during the past ten (10) years with respect to a
Company Control Person:
(1) A petition under the federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property
of such Company Control Person, or any partnership in which he was a
general partner at or within two years before
6
the time of such filing, or any corporation or business association of
which he was an executive officer at or within two years before the
time of such filing;
(2) Such Company Control Person was convicted in a criminal proceeding
or is a named subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses);
(3) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining
him from, or otherwise limiting, the following activities:
(i) acting, as an investment advisor, underwriter, broker or
dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, as a futures commission
merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, any other person regulated
by the Commodity Futures Trading Commission ("CFTC") or engaging
in or continuing any conduct or practice in connection with such
activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal
commodities laws;
(4) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any
federal or state authority barring, suspending or otherwise limiting
for more than 60 days the right of such Company Control Person to
engage in any activity described in section 2(m)(3), or to be
associated with persons engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated
any federal or state securities law, and the judgment in such civil
action or finding by the CFTC or SEC has not been subsequently
reversed, suspended, or vacated.
(n) 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 Company. The Company's executive officers
and directors have studied and fully understand the nature of the Shares and
Warrants being sold hereby and recognize that they have such a potential
dilutive effect. The board of directors of the Company has concluded, in its
good faith business judgment, that such issuance is in the best interests of the
Company. The Company specifically acknowledges that its obligation to issue the
Shares and the Warrant Shares is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company, and the Company will honor every Notice of
7
Exercise (as contemplated by the Warrants), unless the Company is subject to an
injunction (which injunction was not sought by the Company) prohibiting the
Company from doing so.
3. REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR. Each Investor hereby
represents and warrants to the Company that:
(a) The Investor has the corporate power and authority to enter into
this Purchase Agreement and to perform its obligations hereunder. The execution
and delivery by the Investor of this Purchase Agreement, and the consummation by
the Investor of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action on the part of the Investor. This Purchase
Agreement has been duly executed and delivered by the Investor and constitutes
the valid and binding obligation of the Investor, 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) The execution, delivery and performance by the Investor of this
Purchase Agreement, and the consummation of the transactions contemplated
hereby, do not and will not breach or constitute a default under any applicable
law or regulation or of any agreement, judgment, order, decree or other
instrument binding on the Investor.
(c) The Investor has such knowledge and prior substantial investment
experience in financial and business matters, including investment in non-listed
and non-registered securities, and has had the opportunity to read the SEC
Documents and to evaluate the merits and risks of investment in the Company and
the Shares.
(d) The Investor is an "accredited Investors" as that term is defined
in Rule 501(a) of Regulation D promulgated under the 1933 Act.
(e) Prior to the execution of this Purchase Agreement, the Investor
and any affiliates of Investor have not participated in any hedging transactions
involving the Company's Common Stock and have not sold short any of the
Company's Common Stock.
(f) The Investor is acquiring the Shares and the Warrants, solely for
the Investor's own account for investment and not with a view to or for sale in
connection with a distribution of any of the Shares or the Warrants.
(g) Except as set for in the Registration Rights Agreement, the
Investor does not have a present intention to sell the Shares, the Warrants or
the Warrant Shares, nor a present arrangement or intention to effect any
distribution of any of the Shares or Warrants to or through any person or entity
for purposes of selling, offering, distributing or otherwise disposing of any of
the Shares, the Warrants or the Warrant Shares.
(h) The Investor may be required to bear the economic risk of the
investment indefinitely because none of the Shares, the Warrants or the Warrant
Shares may be sold,
8
hypothecated or otherwise disposed of unless subsequently registered under the
Securities Act and applicable state securities laws or an exemption from
registration is available. Any resale of any of the Shares or the Warrant Shares
can be made only pursuant to (i) a registration statement under the Securities
Act which is effective and current at the time of sale or (ii) a specific
exemption from the registration requirements of the Securities Act. In claiming
any such exemption, the Investor will, prior to any offer or sale or
distribution of any Shares or the Warrant Shares advise the Company and, if
requested, provide the Company with a favorable written opinion of counsel, in
form and substance satisfactory to counsel to the Company, as to the
applicability of such exemption to the proposed sale or distribution.
(i) The Investor understands that the exemption afforded by Rule 144
promulgated by the Commission under the Securities Act ("Rule 144") will not
become available for at least one year from the date of payment for the Shares
and any sales in reliance on Rule 144, if then available, can be made only in
accordance with the terms and conditions of that rule, including, among other
things, a requirement that the Company then be subject to, and current, in its
periodic filing requirements under the Exchange Act, and, among other things, a
limitation on the amount of shares of Common Stock that may be sold in specified
time periods and the manner in which the sale can be made; that, while the
Company's Common Stock is registered under the Exchange Act and the Company is
presently subject to the periodic reporting requirements of the Exchange Act,
there can be no assurance that the Company will remain subject to such reporting
obligations or current in its filing obligations; and that, in case Rule 144 is
not applicable to a disposition of the Shares or the Warrant Shares, compliance
with the registration provisions of the Securities Act or some other exemption
from such registration provisions will be required.
(j) The Investor understands that legends shall be placed on the
certificates evidencing the Shares, the Warrants and the Warrant Shares to the
effect that such securities have not been registered under the Securities Act or
applicable state securities laws and appropriate notations thereof will be made
in the Company's stock books. Stop transfer instructions will be placed with the
transfer agent of the Company's Common Stock. The Investor understands that the
Warrants will bear similar legends.
(k) The Investor has taken no action which would give rise to any
claim by any person for brokerage commission, finder's fees or similar payments
by Investor relating to this Purchase Agreement or the transactions contemplated
hereby. The Company shall have no obligation with respect to such fees or with
respect to any claims made by or on behalf of other persons for fees of a type
contemplated in this Section 3(k) that may be due in connection with the
transactions contemplated hereby. The Investor shall indemnify and hold harmless
the Company, its employees, officers, directors, agents, and partners, and their
respective affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees, as and when incurred.
(l) The execution, delivery and performance of this Purchase Agreement
by the Investor, and the consummation of the transactions contemplated hereby,
will not (i)
9
violate any provision of the Investor's corporate organizational documents, (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) a default under, any contract or other agreement to which the Investor is
a party or by or to which the Investors or any of the Investor'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 the Investor, or the assets or properties of the
Investor are bound and (iv) to the Investor's knowledge, violate any statute,
law or regulation, including but not limited to the USA Patriot Act.
(m) Except with respect to sale of the Shares and/or the Warrant
Shares pursuant to Rule 144, prior to having any legend removed from the Shares
or the Warrant Shares, the Investor shall comply with the applicable state blue
sky laws and, to the extent practicable, notify the Company of the State, if
any, in which the sale of such Shares and/or the Warrant Shares by the Investor
has taken place.
4. COVENANTS OF THE COMPANY.
(a) Registration Rights Agreement. The Company covenants and agrees to
enter into a Registration Rights Agreement governing the registration of the
Shares and the Warrant Shares with the Investors dated as of the date hereof.
(b) Current Public Information. The Company has furnished or made
available to each Investor true and correct copies of all registration
statements, reports and documents, including proxy statements (other than
preliminary proxy statements), filed with the Commission by or with respect to
the Company since March 31, 2003 and prior to the date of this Agreement,
pursuant to the Securities Act or the Exchange Act (collectively, the "SEC
Documents"). The SEC Documents are the only filings made by or with respect to
the Company since March 31, 2005 pursuant to Sections 13(a), 13(c), 14 and 15(d)
of the Exchange Act or pursuant to the Securities Act. The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act since March 31,
2005 and prior to the date of this Agreement.
(c) SEC Documents. Except pursuant to a confidentiality agreement, if
any, the Company has not provided to the Investors any information which
according to applicable law, rule or regulation, should have been disclosed
publicly prior to the date hereof by the Company but which has not been so
disclosed. As of their respective dates or their restated dates (if so
restated), the SEC Documents complied, and all similar documents filed with the
SEC prior to the Closing Date will comply, in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
rules and regulations of the SEC promulgated thereunder and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC Documents contained, nor will any similar document filed with the SEC
prior to the Closing Date contain, any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in
10
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents, as of the
dates thereof (or the restated dates, if so restated), complied, and all similar
documents filed with the SEC prior to the Closing Date will comply, as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC and other applicable rules and
regulations with respect thereto. Such financial statements were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements as permitted by Form 10-Q or 10-QSB of the SEC)
and fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(d) Public Announcement. As soon as practicable the Company shall
issue a press release disclosing the material terms of the transactions
contemplated hereby and file a Current Report on Form 8-K disclosing the
transactions contemplated hereby. In addition, the Company will make such other
filings and notices in the manner and time required by the Commission and the
American Stock Exchange.
(e) Maintain Listing/S-3 Qualification. The Company shall use
commercially reasonable efforts to maintain the listing of the Shares, Warrant
Shares and the Common Stock on the American Stock Exchange. The Company shall
use commercially reasonable efforts to continue to meet the "registrant
eligibility" requirements for a secondary offering as set forth in the general
instructions in Form S-3 to enable the registration of the Registrable
Securities (as defined in the Registration Rights Agreement). The Company shall
file all reports, schedules, forms, statements and other documents required to
be filed pursuant to the Securities Exchange Act for a period of at least two
years from the Closing Date, regardless of which stock exchange the Company may
then be listed.
(f) Trading in Securities. The Company specifically acknowledges that,
except to the extent specifically provided herein or in any of the other
Transaction Agreements (but limited in each instance to the extent so
specified), and subject to applicable state and federal securities laws, each
Investor retains the right (but is not otherwise obligated) to buy, sell or
otherwise trade in the Company's Common Stock, including, but not necessarily
limited to, the Shares, at any time before, contemporaneous with or after the
execution of this Purchase Agreement or from time to time and in any manner
whatsoever permitted by applicable federal and state securities laws.
(g) Use of Proceeds. The Company will use the proceeds received
hereunder (excluding amounts paid by the Company for legal fees, finder's fees
and escrow fees in connection with the sale of the Shares) for the purposes
contemplated by the schedule attached hereto as Annex VI, and, unless
specifically consented to in advance in each instance by the Investors, the
Company shall not, directly or indirectly, use such proceeds
11
for any loan to any other corporation, partnership enterprise or other person,
including any of its affiliates.
(h) Right of First Refusal. 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 fifteen month anniversary of the
Closing Date (the "Restricted Period"), the Investors shall have a right of
first refusal with respect to any equity or debt financing undertaken by the
Company, as follows. In the event that, during the Restriction Period, the
Company proposes to issue securities in the form of debt or equity, including
securities convertible or exchangeable for Company debt or equity, in connection
with raising capital (a "Proposed Transaction"), then the Company shall send to
Investors notice in writing of all of the terms of the Proposed Transaction
(such notice, the "Offer Notice"). The Offer Notice shall constitute an
irrevocable offer to sell all of the securities which are the subject of the
Proposed Transaction (the "Offered Securities") to the Investors, on the basis
described in the Proposed Transaction.
At any time within five (5) calendar days after receipt by the Investor of
the Offer Notice (the "Option Period"), the Investor may elect to accept the
offer to purchase with respect to all of the Offered Securities under identical
terms of the Proposed Transaction and shall give written notice of such election
(the "Acceptance Notice") to the Company within the Option Period. The closing
for any purchase of Offered Securities by such Investor shall take place within
thirty (30) days following the expiration of the Option Period. After the
expiration of the Option Period, if the Investor has not provided to the Company
an Acceptance Notice for all of the Offered Securities under identical terms of
the Proposed Transaction, then the Company may offer such Offered Securities on
identical terms to third parties. However, in the course of negotiation with
third parties, if the terms of the Proposed Transaction are materially modified,
then the Company shall again send an Offer Notice to the Investors outlining any
such material modification of the Proposed Transaction (the "Revised
Transaction") and shall grant the Investors a new Offering Period in which to
accept such Revised Transaction.
(i) Most Favored Nations. 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 the Company issues common stock or securities convertible or
exercisable into stock at a price (or conversion or exercise right) that is less
than the Purchase Price (the "Adjustment Price"), then, at the time of such
issuance(s) the Company shall issue deliver to each Investor, in proportion to
the amount of Shares such Investor purchased, 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 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 the Company
pursuant to its obligations under the Registration Rights Agreement to the
extent that such registration statement has not yet been declared effective by
the SEC.
(j) S-8 Filings. Until the expiration of the Restricted Period, the
Company shall not file a Form S-8 Registration Statement with the Commission
except a Form S-8 Registration Statement that registers the shares underlying
the Company's approved 2005
12
Stock Option Plan, and shall not issue any common stock pursuant to an existing
Form S-8 Registration Statement other than common stock issued pursuant to the
exercise of vested stock options by employees pursuant to the Company's two
existing stock option plans.
5. DELIVERY OF SHARES.
(a) In accordance with the Joint Escrow Instructions, attached hereto
as Annex II and made a part hereof, promptly following the delivery by the
respective Investors of the Aggregate Amount for the Shares and the Warrants in
accordance with Section 1 hereof, the Company will irrevocably instruct its
transfer agent to issue to such Investors legended certificates representing the
Shares and the Warrants.
(b) Form of Payment; Delivery of Certificates:
(i) The Investors shall pay the Aggregate Amount for the Shares
and the Warrants by delivering immediately available good funds in
United States Dollars to the Escrow Agent no later than the date prior
to the Closing Date.
(ii) No later than the Closing Date, but in any event promptly
following payment by the Investors to the Escrow Agent of the
Aggregate Amount, the Company shall deliver the Shares and the
Warrants, each duly executed on behalf of the Company and issued in
the name of the Investors, to the Escrow Agent.
(iii) By signing this Agreement, the Investors and the Company,
subject to acceptance by the Escrow Agent, agree to all of the terms
and conditions of, and becomes a party to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein
by this reference as if set forth in full.
(c) Method of Payment. Payment into escrow of the Aggregate Amount
shall be made by wire transfer of funds to:
For credit to the account of __________
Account No.:
Re: SEMOTUS Transaction
6. CLOSING DATE.
(a) The Closing Date shall occur on the date which is the first AMEX
trading day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
(b) The closing of the purchase and issuance of the Shares and the
Warrants shall occur on the Closing Date at the offices of the Escrow Agent and
shall take place no
13
later than 3:00 P.M., New York time, on such day or such other time as is
mutually agreed upon by the Company and a majority in interest of the Investors.
(c) Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Funds to the Company and
to others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Investors understand that the Company's obligation to sell the Shares
and issue the Warrants to the Investors pursuant to this Agreement on the
Closing Date is conditioned upon:
(a) The execution and delivery of this Purchase Agreement, the
Registration Rights Agreement, and the Investor Questionnaire annexed hereto as
Annex VIII by such Investors;
(b) Delivery by the Investors to the Escrow Agent of good funds as
payment in full of an amount equal to the Aggregate Amount set forth on the
execution page hereof for the Shares and Warrants in accordance with this
Purchase Agreement;
(c) The accuracy on such Closing Date of the representations and
warranties of the Investors contained in this Purchase Agreement, each as if
made on such date, and the performance by the Investors on or before such date
of all covenants and agreements of the Investors required to be performed on or
before such date; and
(d) There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE INVESTORS' OBLIGATION TO PURCHASE.
The Company understands that the Investors' obligation to purchase the
Shares and receive the Warrants on the Closing Date is conditioned upon:
(a) The execution and delivery of this Purchase Agreement and the
other Transaction Agreements by the Company;
(b) Delivery by the Company to the Escrow Agent of the Shares and
Warrants in accordance with this Purchase Agreement;
(c) The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Purchase
Agreement, each as if made on such date, and the performance by the Company on
or before such date of all covenants and agreements of the Company required to
be performed on or before such date;
14
(d) There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained, including but not
limited to the listing of the Shares and the Warrant Shares on the American
Stock Exchange; and
(e) From and after the date hereof to and including such Closing Date,
each of the following conditions will remain in effect: (i) the trading of the
Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) no minimum prices shall been established for the Common
Stock traded on the Principal Trading Market; and (iii) there shall not have
been any material adverse change in any financial market that, in the reasonable
judgment of the Investors, makes it impracticable or inadvisable to purchase the
Shares. In addition, on the Closing Date, trading in Common Stock or in
securities generally on the Principal Trading Market shall not have been
suspended or limited.
9. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given upon personal delivery or seven (7) business days after deposit in the
United States Postal Service, by (a) advance copy by fax, and/or (b) mailing or
delivery by express courier or registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days advance written notice to each of the other parties hereto.
COMPANY SEMOTUS SOLUTIONS, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Silicon Valley Law Group
▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇-▇▇▇-▇▇▇▇)
Telecopier No.: (408-573-5701)
Investors: As set forth in Annex I hereto.
with a copy to: Southridge Capital Management LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
15
10. SEVERABILITY. If a court of competent jurisdiction determines that any
provision of this Purchase Agreement is invalid, unenforceable or illegal for
any reason, such determination shall not affect or impair the validity, legality
and enforceability of the other provisions of this Purchase Agreement in any
other jurisdiction. If any such invalidity, unenforceability or illegality of a
provision of this Purchase Agreement becomes known or apparent to any of the
parties hereto, the parties shall negotiate promptly and in good faith in an
attempt to make appropriate changes and adjustments to such provision
specifically and this Purchase Agreement generally to achieve as closely as
possible, consistent with applicable law, the intent and spirit of such
provision specifically and this Purchase Agreement generally.
11. EXECUTION IN COUNTERPARTS. This Purchase Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same Purchase Agreement. A facsimile signature of
this Agreement shall be legal and binding on all parties hereto.
12. JURY TRIAL WAIVER. The Company and the Investors hereby waive a trial
by jury in any action, proceeding or counterclaim brought by any Party hereto
against any of the others in respect of any matter arising out or in connection
with the Transaction Agreements.
13. GOVERNING LAW: MISCELLANEOUS.
(a) The corporate laws of the State of Nevada shall govern all issues
concerning the relative rights of the Company and the Investors 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
New York without regard to the principles of conflicts of law thereof. Each of
the parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the State of New York, New York County in connection with
any dispute arising under this Purchase Agreement and hereby waives, to the
maximum extent permitted by law, any objection, including any objection based on
FORUM NON CONVENIENS, to the bringing of any such proceeding in such
jurisdictions.
(b) Failure of any party to exercise any right or remedy under this
Purchase Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(c) This Purchase Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties hereto.
(d) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(e) The headings of this Purchase Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Purchase Agreement.
(f) This Agreement may be amended only by an instrument in writing
signed by both parties; no waiver shall be effective unless signed by the person
charged with making such waiver.
16
(g) This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Investors' representations and warranties herein shall survive the execution and
delivery of this Purchase Agreement and the delivery of the Shares and the
Warrants and the payment of the Aggregate Amount, and shall inure to the benefit
of the Investors and the Company and their respective successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
(if an entity, by one of its officers thereunto duly authorized) as of the date
set forth below.
AMOUNT AND PURCHASE PRICE OF COMMON STOCK: $ 84,000
--------
NUMBER OF SHARES: 494,118
--------
NUMBER OF WARRANTS: 421,500
--------
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Common Stock
Purchase Agreement to be duly executed on its behalf this 16th day of May, 2006.
Southshore Capital Fund Ltd.
----------------------------
Printed Name of Investor
By: /s/ ▇▇▇▇▇ ▇▇▇▇
------------------------
(Signature of Authorized Person)
▇▇▇▇▇ ▇▇▇▇, Director
--------------------
Printed Name and Title
If Investor is a partnership, corporation, limited liability company or
other entity:
I. Jurisdiction where Investor's investment decision was made:
X Jurisdiction of mailing address listed in Annex I
_ Other: __________________________________________
II. Jurisdiction of Incorporation or Organization: Cayman Islands
As of the date set forth below, the undersigned hereby accepts this
Purchase Agreement and represents that the foregoing statements are true and
correct and that it has caused this Purchase Agreement to be duly executed on
its behalf.
SEMOTUS SOLUTIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------
Title: CEO
Date: May 16, 2006
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
(if an entity, by one of its officers thereunto duly authorized) as of the date
set forth below.
AMOUNT AND PURCHASE PRICE OF COMMON STOCK: $ 476,000
NUMBER OF SHARES: 2,800,000
----------
NUMBER OF WARRANTS: 2,388,500
----------
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Common Stock
Purchase Agreement to be duly executed on its behalf this 16th day of May, 2006.
Southridge Partners LP
----------------------
Printed Name of Investor
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
(Signature of Authorized Person)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Managing Director
-----------------------------------
Printed Name and Title
If Investor is a partnership, corporation, limited liability company or
other entity:
I. Jurisdiction where Investor's investment decision was made:
X Jurisdiction of mailing address listed in Annex I
_ Other: ___________________________________________
II. Jurisdiction of Incorporation or Organization: Delaware
As of the date set forth below, the undersigned hereby accepts this
Purchase Agreement and represents that the foregoing statements are true and
correct and that it has caused this Purchase Agreement to be duly executed on
its behalf.
SEMOTUS SOLUTIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: CEO
Date: May 16, 2006