EXHIBIT 4.1
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THIS NOTE, AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF, HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE REOFFERED, SOLD, TRANSFERRED,
PLEDGED, OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (1) REGISTRATION UNDER
SUCH ACT OR LAWS
OR (2) AN OPINION OF COUNSEL FOR THE COMPANY OR OTHER COUNSEL
REASONABLY
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS
NOT REQUIRED.
SEMOTUS SOLUTIONS, INC.
CONVERTIBLE PROMISSORY NOTE
$200,000
1 February, 2007
FOR VALUE RECEIVED, Semotus Solutions, Inc., a Nevada corporation
(the
"Company"), promises to pay to the order of MIRO KNEZEVIC AND GAIL
L. KNEZEVIC,
CO-TRUSTEES, KNEZEVIC FAMILY TRUST DATED JUNE 30, 1992 (the
"Payee"), at the
office of the Payee at 110 Newport Center Drive, Suite 200, Newport
Beach, CA
92660, or at such other place as Payee may designate in writing,
the principal
sum of Two Hundred Thousand Dollars ($200,000) (the "Principal
Amount") on the
terms set forth below. Interest on the unpaid principal balance
shall accrue at
a rate of ten percent (10%) per annum, from 1 February 2007 with
respect to the
Principal Amount. All payments of interest and principal hereunder
shall be made
in U.S. currency and without setoff, deduction or counterclaim.
This
Note is made in connection with that certain Investment
Agreement
dated February 1, 2007 between Company and Payee (the "Investment
Agreement").
1. DEFINITIONS.
Capitalized terms not defined herein shall have the same meaning as
set forth in
the Investment Agreement. The following terms shall have the
meanings herein
specified:
"Capital Stock" means any of the current or future authorized class
or
series of capital stock of the Company.
"Common Stock" means authorized Common Stock, $.01 par value, of
the
Company, and shall include any other class or series of capital
stock of the
Company that is not limited to a fixed sum in respect of the rights
of the
holder thereof to participate in the liquidation or winding up of
the Company.
"Conversion Notice" shall have the meaning set forth in Section
2(a).
"Conversion Price" shall mean the per share price(s) at which some
or all
of the Principal Amount plus all accrued interest thereon is
converted or
convertible pursuant to Section 2, and in all cases as adjusted
pursuant to
Section 2(e).
"Conversion Shares" means the shares of Capital Stock, issuable
upon
conversion of this Note.
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"Event of Default" means an event specified in Section 4
hereof.
"Holder" means the Payee, and each endorsee, pledgee, assignee,
owner and
holder of this Note, as such; and any consent, waiver or agreement
in writing by
the then Holder with respect to any matter or thing in connection
with this
Note, whether altering any provision hereof or otherwise, shall
bind all
subsequent Holders. Notwithstanding the foregoing, the Company may
treat the
registered holder of this Note as the Holder for all purposes.
"Principal Amount"
shall have the meaning set forth in the initial
paragraph.
"Person" means an individual, trust, partnership, firm,
association,
corporation or other organization or a government or governmental
authority.
Words of one gender include the other gender; the singular
includes
the plural; and the plural includes the singular, unless the
context otherwise
requires.
2. CONVERSION OF THE NOTE.
(a) Election to Convert. Holder may, at its option, exercise by
written notice
(the "Conversion Notice") to the Company at any time prior to
payment in full
hereof, elect to convert all or any part of the entire outstanding
principal
amount of this Note plus a pro rata share of the accrued interest
on the then
outstanding balance into Common Shares at a conversion price equal
to the lesser
of (a) ten cents ($0.10) per share (which is the equivalent of two
million
shares subject to adjustment as provided for herein) and (b) a
fifteen percent
(15%) discount from the closing price of the Company's common stock
calculated
using the average closing price over ten consecutive trading days
immediately
preceding the Conversion Notice date , and with a floor which is
not to exceed a
total maximum potential issuance of Three Million five hundred
fifty seven
thousand and sixty (3,557,060) shares (subject to adjustment in the
event of any
stock splits, stock dividends or other recapitalization of Common
Shares) (the
"Conversion Price").
(b) Conversion Price Protection. During the time period beginning
from February
1, 2007 and ending on the earlier to occur of (a) the Conversion
Notice date and
(b) February 1, 2009, 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 Conversion Price (the "Adjustment
Price"), then, at
the time of such issuance(s) the Company shall reduce a certain
number of Shares
from the Conversion Price to the
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Adjustment Price, in proportion to the number of securities the
Company actually
issues at the Adjustment Price,
For example, if the Company issues 1,000,000 shares (half as much
as the Holder
would have on full conversion) at $0.08/share, the Holder would get
a 50%
correction on his Conversion Price, to $0.09/share. If the Company
issues
2,000,000 or more shares, the Holder would get the full Conversion
Price
reduction to $0.08/share.
With respect to any adjustment to the Conversion Price or to the
number of
Common Shares as provided for in this Note, the Company shall as
soon as
practical send to Holder a detailed written explanation of each
such adjustment.
(c) Delivery of Conversion Shares. The Capital Stock issued on
conversion of
this Note (the "Conversion Shares") shall be delivered as
follows:
As
promptly as practicable after conversion, the Company shall deliver
to
Holder, or to such person or persons as are designated by Holder in
the
Conversion Notice, a certificate or certificates representing the
number of
shares of Capital Stock into which this Note or portion thereof is
to be
converted in such name or names as are specified in the Conversion
Notice,
rounded to the nearest whole share. Such conversion shall be deemed
to have been
effected at the close of business on the date when this Note
shall
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have been surrendered to the Company for conversion, so that the
person entitled
to receive such Conversion Shares shall be treated for all purposes
as having
become the record holder of such Conversion Shares at such
time.
In the event that less than the entire outstanding principal of
this
Note is converted hereunder pursuant to subsection (a) above, this
Note shall
not be surrendered for cancellation but shall have the fact and
amount of
conversion recorded on the face of this Note by writing
acknowledged by Holder
and the Company. If less than the entire principal balance of this
Note is
converted, the amount of principal converted shall be reduced to
the nearest
amount that results in no fractional shares.
(d) Reservation of Shares. The Company will use its best efforts to
gain the
approval of the American Stock Exchange to have the authority to
issue the
Conversion Shares to the Holder. The Company agrees that, during
the period
within which this Note may be converted, the Company will, at all
times, have
authorized and in reserve, and will keep available solely for
delivery upon the
conversion of this Note, Capital Stock and other securities and
properties as
from time to time shall be receivable upon the conversion of this
Note, free and
clear of all restrictions on issuance, sale or transfer other than
those imposed
by law and free and clear of all pre-emptive rights. The Company
agrees that the
Conversion Shares shall, at the time of such delivery, be validly
issued and
outstanding, fully paid and non-assessable, and the Company will
take all such
action as may be necessary to assure that the stated value or par
value per
share of the Conversion Shares is at all times equal to or less
than the
Conversion Price.
(e) Registration of Conversion Shares. See the Registration Rights
Agreement,
attached hereto as Exhibit A and incorporated herein. The Company
agrees to file
a registration statement on SEC Form S-3 within 60 days of
conversion of this
Note that includes all of the Conv
