STOCK ISSUANCE AND REGISTRATION RIGHTS AGREEMENT
EXHIBIT
C
TO
LICENSE
AGREEMENT
THIS
STOCK ISSUANCE AND REGISTRATION RIGHTS AGREEMENT,
dated
as of July __, 2007 (this "Agreement"), is made by and between SEMOTUS
SOLUTIONS, INC., a Nevada corporation, with headquarters located at ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (“Semotus”), and ▇▇▇▇▇▇▇▇.▇▇▇
Incorporated, a ________ corporation located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (“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
__, 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 $3,750,0000 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 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).
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(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 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.
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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 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;
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(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;
(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;
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(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
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(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 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.
8
(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 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 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.
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 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.
10
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 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.
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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 ▇▇▇▇▇ 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.
12
(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.
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SEMOTUS
SOLUTIONS, INC.
By:
Name:
Title:
▇▇▇▇▇▇▇▇.▇▇▇
Incorporated
By:
Name:
Title:
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