Document:

ex4p2.htm

    
      

    

    Exhibit
4.2

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    OPTION
AGREEMENT

     

    AWARDING
OPTIONS

     

    TO
PURCHASE ______________ SHARES OF

     

    COMMON
STOCK, PAR VALUE $0.0001 PER SHARE, ISSUED BY

     

    FUTUREFUEL
CORP.

     

    

     

    

     

    This is to certify that
____________________ (“Participant”)
is entitled, upon the due exercise hereof at any time during the Exercise Period
(as defined below), to purchase, in whole or in part, from FutureFuel Corp., a
Delaware corporation (the “Company”),
_______________ shares (subject to adjustment as herein provided) of Common
Stock (as defined below) at the Exercise Price (as defined below) (subject to
adjustment as herein provided), all on the terms and conditions and pursuant to
the provisions hereinafter set forth.

     

    This Option Agreement is entered into,
and the Options hereunder are granted, pursuant to that 2007 Omnibus Incentive
Plan of the Company as adopted on May 29, 2007 by the Company’s board of
directors and approved by the Company’s shareholders on June 26,
2007.

     

    

     

    __________, 200_

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.
Definitions.  For
purposes of this Agreement, the following capitalized terms have the following
meanings.  In addition, capitalized terms used but defined herein have
the meanings ascribed to them in the Plan.

     

    “Agreement”
means this Option Agreement.

     

    “Business
Day” means a day other than a Saturday, Sunday or other day on which
commercial banks are authorized or required to close under the laws of the
United States of America or the State of Missouri.

     

    “Code”
means the Internal Revenue Code of 1986.

     

    “Commission”
means the United States Securities and Exchange Commission.

     

    “Common
Stock” means the common stock, par value $0.001 per share, of the
Company.

     

    “Company”
means FutureFuel Corp., a Delaware corporation.

     

    “$” or
“Dollar”
means United States of America dollars.

     

    “Exercise
Period” means the period commencing on the date of this Agreement and
terminating at 5:00 p.m. St. Louis time on the Option Expiration
Date.

     

    “Exercise
Price” means $_______ per Share, as such price may be adjusted from time
to time pursuant to Section 5.

     

    “Notice of
Exercise” means the form of Notice of Exercise attached hereto as
Exhibit A.

     

    “Option”
means an option granted under this Agreement to purchase Shares.

     

    “Option Expiration
Date” means [insert date].

     

    “Participant”
means the Person to whom Options have been granted as set forth on the first
page of this Agreement or to whom an Option has been assigned or transferred as
permitted hereunder.

     

    “Plan”
means the Company’s 2007 Omnibus Incentive Plan.

     

    “Shares”
means shares of Common Stock, and any class of stock of the Company now or
hereafter authorized into which such shares may be converted.

     

    2.
Intent as to Nonqualified Stock Options.  Each
Option is a Nonqualified Stock Option.  The Options granted hereunder
are not intended to be considered “nonqualified deferred compensation” within
the meaning of §409A of the Code.  It is also intended that the
receipt, transfer or exercise of the Options will be subject to taxation
pursuant to Code §83 and Treasury Regulation §1.83-7.

     

    3.
Vesting.  Options
granted hereunder vest as follows:

     

    
      	
              Period                                                                                                                                     
      

            	
              Options
      That

              Have
      Vested

            
	
              First
      annual anniversary of this Agreement

            	 
      
	
              Second
      annual anniversary of this Agreement

            	 
      
	
              Third
      annual anniversary of this Agreement

            	 
      

    

    

    Notwithstanding
the preceding, any unvested Option becomes fully vested as set forth
below.

     

    4.
Exercise of Option.

     

    4.1.
Right to Exercise.  Subject
to and upon compliance with the conditions of this Section 4, the
Participant has the right, at the Participant’s option and at any time and from
time to time during the Exercise Period, to exercise vested Options in whole or
in part.  The aggregate number of Shares which may be
purchased

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    from time
to time during the Exercise Period by the Participant upon the exercise of the
vested Options is [insert number] Shares, subject to adjustment as provided in
Section 5.

     

    4.2.
Notice of Exercise.  To
exercise a vested Option, the Participant must deliver or cause to be delivered
to the Company at the Company’s principal office at 8235 Forsyth Blvd., 4th Floor,
Clayton, Missouri 63105, Attention: Corporate Secretary (or such other place as
the Company may specify by written notice to the Participant): (i) a Notice
of Exercise duly executed by the Participant and specifying the number of full
Shares to be purchased; (ii) an amount equal to the aggregate Exercise
Price for the number of full Shares as to which Options are then being
exercised; and (iii) this Agreement.

     

    4.3.
Payment of Exercise Price.  Payment
of the Exercise Price must be made, at the option of the Participant:
(i) by wire transfer to an account in a bank located in the United States
of America designated for such purpose by the Company; or (ii) by certified
or official bank check payable to the order of the Company.  The
Company may also, at the Administrator’s option, to accept other consideration
as set forth in the Plan.

     

    4.4.
Issuance of Shares.  Upon
receipt of the Notice of Exercise and the aggregate Exercise Price set forth in
the Notice of Exercise, the Company will, as promptly as practicable and in any
event within ten Business Days thereafter, cause to be issued and delivered to
the Participant or to such other Person as is designated by the Participant in
the Notice of Exercise, one or more certificates representing the aggregate
number of full Shares issuable upon such exercise, which Shares must be
registered in the name of the Participant or such other Person.

     

    4.5.
Effective Dates.  Unless
otherwise requested by the Participant in the Notice of Exercise, for all
purposes vested Options will be deemed to have been exercised, the certificates
described in Section 4.4 will be deemed to have been issued and the
Participant will be deemed to have become the holder of record of the Shares
described in Section 4.4 as of the close of business in St. Louis on the
date the applicable Notice of Exercise, together with the payment of the
Exercise Price and this Agreement, are received by the Company.

     

    4.6.
Partial Exercises.  If
the vested Options are exercised in part, the Company will, at the time of
delivery of the applicable certificates for Shares (unless the Options have then
expired), issue and deliver to the Participant or the Person designated by the
Participant in the applicable Notice of Exercise, a new Agreement evidencing the
right of the Participant or such other Person to purchase the aggregate number
of Shares for which Options have not been exercised and otherwise in form and
substance identical to this Agreement, upon which this Agreement will be
canceled.

     

    5.
Antidilution Provisions.

     

    5.1.
Adjustment of the Number of Shares Purchasable and Adjustment of the Exercise
Price.  The
Exercise Price in effect at any time and the number of Shares which may be
purchased upon the exercise of the Options will be subject to adjustment as set
forth in Section 17 of the Plan.

     

    5.2.
No Requirement to Issue Fractional Shares.  The
Company will not be required to issue fractional shares upon any exercise of a
vested Option.  If any fractional interest in a Share would, but for
the provisions of this Section, be deliverable upon the exercise of a vested
Option, the Company will, in lieu of delivering any certificate of such
fractional interest, satisfy such fractional interest by paying to the
Participant any amount in Dollars equal (computed to the nearest cent) to the
appropriate fraction of the Current Market Price of a Share on the date of
exercise of the Option.

     

    5.3.
Certificate as to Adjustment.  The
Company will, from time to time, immediately after the occurrence of any event
which requires an adjustment or readjustment as provided in Section 5.1,
deliver to the Participant a certificate of a national firm of certified public
accountants appointed by the Company specifying the nature of the event
requiring the adjustment or readjustment, as applicable, and the amount of the
adjustment or readjustment necessitated thereby, including the resulting
Exercise Price, and setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.

     

     

    
      
        
        

      

      
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    6.
Corporate Actions; Reservation of Shares Issuable Upon the Exercise of the
Options.

     

    6.1.
Corporate Actions.  The
Company will: (i) take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable Shares upon the exercise of the Options and any required issuance
of additional Shares pursuant to Sections 5.1 and 5.2; and (ii) take
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof and take
all such other action as may be necessary to enable the Company to perform its
obligations under this Agreement.

     

    6.2.
Reservation of Shares.  The
Company will at all times reserve and keep available, solely for issuance, sale
and delivery upon the exercise of the Options, a number of Shares equal to the
number of full Shares issuable from time to time upon the exercise of the
Options.  All Shares issuable upon the exercise of an Option will,
when issued upon such exercise: (i) be duly and validly authorized and
issued, fully paid and nonassessable; and (ii) be free from all taxes,
liens and charges with respect to the issue thereof other than any share
transfer taxes in respect of any transfer occurring contemporaneously with such
issue.  The Company will not be required to pay any stamp or other tax
or other governmental charge required to be paid in connection with any exercise
of an Option or transfer of the Shares issuable upon the exercise of an Option,
and the Company will not be required to issue or deliver any Shares issuable
upon the exercise of an Option until such tax or other charge has been paid or
it has been established to the Company’s satisfaction that no such tax or other
charge is due.

     

    7.
Restrictions on Transfer.

     

    7.1.
Transfers of Option.  The
Participant may not transfer, directly or indirectly, voluntarily or
involuntarily, by operation of law (including a merger or consolidation),
judicial decree or otherwise (including a collateral pledge), this Agreement or
any Option or any right therein, without the Company’s prior written consent,
which consent may be given or withheld in the Company’s sole
discretion.

     

    7.2.
Transfer of Shares.  Subject
to compliance with applicable securities laws, the holder of any Shares issuable
upon the exercise of a vested Option (either in whole or in part), may transfer
such Shares, in whole or in part, without the Company’s consent.

     

    7.3.
Notice of Transfers; Transfers.  The
Participant or the holder of any Shares issuable upon the exercise of a vested
Option, by acceptance hereof or thereof, agrees to give written notice to the
Company prior to any proposed transfer of an Option or any interest herein, or
any such Shares which bear the legends described in Section 7.4, of its
intention to make such transfer, which notice must include a brief description
of such proposed transfer.  If in the opinion of counsel to the
Company the proposed transfer may be effected without registration or
qualification under applicable securities laws, such counsel will, as promptly
as practicable, notify the Company and the Participant of such opinion and of
the terms and conditions, if any, to be observed in such
transfer.  Provided the Company gives its consent as set forth in
Section 6.1 and subject to the restrictions, if any, in Section 7.2,
the Participant will be entitled to transfer an Option or such Shares in
accordance with the terms of the notice delivered to the Company and the opinion
of such counsel.  In the event an Option is exercised as an incident
to such transfer, such exercise relates back and for all purposes of this
Agreement will be deemed to have occurred as of the date of such notice
regardless of delays incurred by reason of the provisions of this Section which
may result in the actual exercise on any later date.

     

    7.4.
Legend on Certificates.

     

    7.4.1.
Legend.  In
case any Shares are issued upon the exercise in whole or in part of an Option
under such circumstances that no registration under the Securities Act is
required or effected, each certificate representing such Shares must bear on the
face thereof the following legend:

     

    
      	
               
      

            	
              The
      shares represented by this certificate have not been registered under the
      Securities Act of 1933, as amended, and any transfer thereof is subject to
      compliance with the registration requirements of the Securities Act of
      1933, as amended, or an exemption therefrom.

            	 

    

     

     

    
      
        
        

      

      
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    7.4.2. 
Removal of Legend.  If
the Company receives an opinion of counsel that the legend described in
Section 7.4.1 is no longer necessary on such certificate to protect the
Company from a violation of the Securities Act, the Company will, or will
instruct its transfer agent and registrar to, issue in lieu thereof a new
certificate or certificates for such Shares in the name of the Participant
without such legend on the face thereof.  The Company is not obligated
to effect the registration of the Options or any Shares under the Securities
Act.

     

    8.
Effect of the Administrator’s Decision.  All
decisions, determinations and interpretations by the Administrator regarding
this Agreement, the Plan, any rules and regulations under the Plan and the terms
and conditions of any Option granted hereunder, are final and binding on all
Participants.  The Administrator may consider such factors as it deems
relevant, in its sole and absolute discretion, to making such decisions,
determinations and interpretations including the recommendations or advice of
any officer or other employee of the Company and such attorneys, consultants and
accountants as it may select.

     

    9.
Effect of Termination of Employment.

     

    9.1.
Generally.  Upon
a Participant’s Termination of Employment other than as a result of
circumstances otherwise described in this Section 9: (i) all vesting
with respect to the unvested Options ceases; (ii) any unvested Options
expire as of the date of such termination; and (iii) any unexercised vested
Options remain exercisable until the earlier of the Option Expiration Date or
the date that is 90 days after the date of such Termination of
Employment.

     

    9.2.
For Cause.  If
prior to the Option Expiration Date, a Participant’s employment or service, as
applicable, with the Employer is terminated by the Employer for Cause, all
unexercised Options (whether or not vested) immediately expire as of the date of
such Termination of Employment.

     

    9.3.
Retirement.  If
prior to the Option Expiration Date, a Participant’s employment or service, as
applicable, with the Employer terminates by reason of such Participant’s
retirement: (i) all vesting with respect to unvested Options ceases;
(ii) any unvested Options expire as of the date of such termination; and
(iii) any unexercised vested Options expire on the earlier of the Option
Expiration Date or the date that is 180 days after the date of such termination
due to such retirement of the Participant.  Retirement will be
determined by the Administrator in accordance with the Company’s retirement
policy.

     

    9.4.
Disability or Death.  If
prior to the Option Expiration Date, a Participant’s employment or service, as
applicable, with the Employer terminates by reason of such Participant’s death
or Disability: (i) all vesting with respect to unvested Options ceases;
(ii) any unvested Options expire as of the date of such termination; and
(iii) any unexercised Options expire on the earlier of the Option
Expiration Date or the date that is 365 days after the date of such termination
due to death or Disability of the Participant.

     

    9.5.
Divestiture.  If
a Participant will cease to be an Employee because of a divestiture by the
Company, prior to such Termination of Employment, the Administrator may, in its
sole discretion, make some or all of the outstanding unvested Options become
fully vested and exercisable and may provide that any unexercised Options remain
exercisable for a period of time to be determined by the Administrator but not
later than the 15th day of
the third month following the date at which the Options would have otherwise
expired.  The determination of whether a divestiture will occur will
be made by the Administrator in its sole discretion.  If, after the
close of the divestiture, the Participant does not exercise the unexercised
Options within the time specified therein, such Options automatically
terminate.

     

    9.6.
Work Force Restructuring or Similar Program.  If
a Participant will cease to be an Employee because of a work force restructuring
or similar program, prior to such Termination of Employment, the Administrator
may, in its sole discretion, make some or all of the outstanding unvested
Options become fully vested and exercisable and may provide that any unexercised
Options remain exercisable for a period of time to be determined by the
Administrator but not later than the 15th day of
the third month following the date at which the Options would have otherwise
expired.  The determination of whether a work force restructuring will
occur will be made by the Administrator in its sole discretion.  If,
after Participant’s Termination of Employment, the Participant does not exercise
his unexercised Options within the time specified therein, such Options
automatically terminate.

     

     

    
      
        
        

      

      
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    10.
General Provisions.

     

    10.1.
Amendment and Modification.  No
amendment, modification, supplement, termination, consent or waiver of any
provision of this Agreement, nor consent to any departure therefrom, will in any
event be effective unless the same is in writing and is signed by the
Participant and the Company.

     

    10.2.
Captions.  Captions
contained in this Agreement have been inserted herein only as a matter of
convenience and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.

     

    10.3.
Construction.  Unless
the context of this Agreement clearly requires otherwise: (i) references to
the plural include the singular and vice versa; (ii) references to any
Person include such Person’s successors and assigns but, if applicable, only if
such successors and assigns are permitted by this Agreement;
(iii) references to one gender include all genders; (iv) “including”
is not limiting; (v) “or” has the inclusive meaning represented by the
phrase “or”; (vi) the words “hereof”, “herein”, “hereby”, “hereunder” and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement; (vii) section references are to
this Agreement unless otherwise specified; (viii) reference to any
agreement (including this Agreement), document or instrument means such
agreement, document or instrument as amended or modified and in effect from time
to time in accordance with the terms thereof and, if applicable, the terms
hereof; and (ix) specific or general references to any law mean such law as
amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time.

     

    10.4.
Exhibits.  All
of the Exhibits attached to this Agreement are deemed incorporated herein by
reference.

     

    10.5.
Governing Law.  This
Agreement and the rights and obligations of the parties hereunder are to be
governed by and construed and interpreted in accordance with the laws of the
State of Delaware applicable to contracts made and to be performed wholly within
Delaware, without regard to choice or conflict of laws rules.

     

    10.6.
Invalidity.  In
the event that any provision of this Agreement is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, such
provision will be reformed, if possible, to the extent necessary to render it
legal, valid and enforceable, or otherwise deleted, and the remainder of the
terms of this Agreement will not be affected except to the extent necessary to
reform or delete such illegal, invalid or unenforceable provision.

     

    10.7.
Limitation on Liability.  The
Company and any Affiliate which is in existence or hereafter comes into
existence is not liable to a Participant or any other Person as to: (i) the
non-issuance or sale of Shares as to which the Company has been unable to obtain
from any regulatory body having jurisdiction the authority deemed by the
Company’s counsel to be necessary to the lawful issuance and sale of such Shares
hereunder; or (ii) any tax consequence expected, but not realized, by any
Participant or other Person due to the receipt, exercise or settlement of any
Option granted hereunder.

     

    10.8.
No Right to Awards or to Employment.  No
Person (including Participant) has any claim or right to be granted an
additional award under the Plan and the grant of the Options may not be
construed as giving Participant the right to continue in the employ of the
Company or its Affiliates.  Further, the Company and its Affiliates
expressly reserve the right, at any time, to dismiss any Participant at any time
without liability or any claim under this Agreement, except as provided
herein.

     

    10.9.
Notice.  Any
written notice to the Company required by any provisions of this Agreement must
be addressed to the Corporate Secretary of the Company and is effective when
received.

     

    10.10.
Participant Not a Shareholder.  Except
as otherwise provided herein, prior to the exercise of an Option as set forth
herein, the Participant will not be entitled to any of the rights of a
shareholder of the Company by virtue of the Options, including the right as a
shareholder to: (i) vote or consent; or (ii) receive dividends or any
other distributions made to shareholders.

     

     

    
      
        
        

      

      
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    10.11.
Reliance on Reports.  The
Administrator is fully justified in relying, acting or failing to act, and is
not liable for having so relied, acted or failed to act in good faith, upon any
report made by the independent public accountant of the Company and its
Affiliates and upon any other information furnished in connection with this
Agreement by any Person other than the Administrator.

     

    10.12.
Successors.  The
terms of this Agreement inure to the benefit of and are binding upon the Company
and Participant and their respective permitted heirs, beneficiaries, successors
and assigns.

     

    10.13.
Withholding Obligations.  As
a condition to the exercise of any Option, the Administrator may require that
the Participant satisfy, through a cash payment by the Participant or, in the
discretion of the Administrator, through deduction or withholding from any
payment of any kind otherwise due to the Participant, or through such other
arrangements as are satisfactory to the Participant, the minimum amount of all
federal, state and local income and other taxes of any kind required or
permitted to be withheld in connection with such exercise.  The
Administrator in its discretion may permit Shares to be used to satisfy tax
withholding requirements and such Shares will be valued at their Current Market
Price as of the settlement date of the Option.  However, the aggregate
Current Market Price of the number of Shares that may be used to satisfy tax
withholding requirements may not exceed the minimum statutory required
withholding amount with respect to such Option.

     

    
      	 
      	
              FUTUREFUEL
      CORP.

            
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
              By:          
                                                         
      

            

    

    

     

    

     

    
      
         

      

      
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    EXHIBIT
A

     

    FORM
OF NOTICE OF EXERCISE

     

    

     

    (To be
executed upon a partial or full exercise of the Options)

     

    

     

    The undersigned registered Participant
of the within Options irrevocably exercises the within Options for and purchases
__________ shares of stock (the “Shares”)
of FutureFuel Corp. (the “Company”),
and agrees to make payment therefor in the amount of $____________, all at the
price and on the terms and conditions specified in the within
Agreement.  The undersigned requests that a certificate (or ________
certificates in denominations of _______ shares) for Shares of the Company
hereby purchased be issued in the name of and delivered to the
undersigned.  If such Shares do not include all of the Shares issuable
as provided in the within Agreement, the undersigned requests that a new
Agreement for the number of Shares of the Company not being purchased hereunder,
and otherwise in form and substance identical to the within Agreement, be issued
in the name of and delivered to the undersigned.

     

    

    
      	
              Dated:
      ___________________, 200__

            	 
      	
              [NAME
      OF HOLDER]

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              By:
      ___________________________________

            
	 
      	 
      	
              Name
      Printed: __________________________

            
	 
      	 
      	
              Title:
      _________________________________

            
	 
      	 
      	 
      
	 
      	 
      	
              (Signature
      of Registered Participant)

            

    

    

    

    

    Signature
Guaranteed:

    

    ______________________________________

    

    By:
___________________________________

    [Title]

    

    
      	
              NOTICE:

            	
              The
      signature to this Notice of Exercise must correspond exactly with the name
      of the Participant as specified on the face of the within
      Agreement.

            

    

    
      

      
        	
                 

              	
                
                  The
      signature to this Notice of Exercise must be guaranteed by a commercial
      bank or trust company in the United States of America or by a member firm
      of the New York Stock
Exchange.EXHIBIT 4.1
                                                                     -----------

THIS NOTE, AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF, HAVE
BEEN ISSUED PURSUANT TO REGULATION S, PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED ("SECURITIES ACT"), AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO (A) THE PROVISIONS OF REGULATION S, (B) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (C) SUCH OTHER
EXEMPTIONS FROM SUCH REGISTRATION. HEDGING TRANSACTIONS WITH RESPECT TO SUCH
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. AS
A CONDITION TO PERMITTING ANY TRANSFER OF THESE SECURITIES, THE COMPANY MAY
REQUIRE THAT IT BE FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT NO REGISTRATION OR QUALIFICATIONS IS LEGALLY REQUIRED
FOR SUCH TRANSFER.

                             SEMOTUS SOLUTIONS, INC.
                           CONVERTIBLE PROMISSORY NOTE

$200,000                                                          April 23, 2008

         FOR VALUE RECEIVED, Semotus Solutions, Inc., a Nevada corporation (the
"Company"), promises to pay to the order of FLINT TELECOM LIMITED, a company
limited by shares organized under the Irish Companies Act 1963 to 2003 (the
"Payee"), at the office of the Payee as listed in Section 10 below, or at such
other place as Payee may designate in writing, the principal sum of Two Hundred
Thousand US Dollars (US$200,000) (the "Principal Amount") on the terms set forth
below. Interest on the unpaid principal balance shall accrue at a rate of eight
percent (8%) per annum, from the date hereof with respect to the Principal
Amount. All payments of interest and principal hereunder shall be made in U.S.
currency.

         This Note is made in connection with that certain Investment Agreement
dated April 23, 2008 between Company and Payee (the "Investment Agreement").

         1. DEFINITIONS.

         Capitalized terms not defined herein shall have the same meaning as set
forth in the Investment Agreement. The following terms shall have the meanings
herein specified:

         "Common Stock" means authorized Common Stock, $.01 par value, of the
Company.

         "Conversion Notice" shall have the meaning set forth in Section 2(b).
<PAGE>

         "Conversion Price" shall mean the per share price(s) at which some or
all of the Principal Amount plus all accrued interest thereon is converted or
convertible pursuant to Section 2, and in all cases as adjusted pursuant to
Section 2(e).

         "Conversion Shares" means the shares of Common Stock, issuable upon
conversion of this Note.

         "Event of Default" means an event specified in Section 4 hereof.

         "Holder" means the Payee, and each endorsee, pledgee, assignee, owner
and holder of this Note, as such; and any consent, waiver or agreement in
writing by the then Holder with respect to any matter or thing in connection
with this Note, whether altering any provision hereof or otherwise, shall bind
all subsequent Holders. Notwithstanding the foregoing, the Company may treat the
registered holder of this Note as the Holder for all purposes.

         "Principal Amount" shall have the meaning set forth in the initial
paragraph.

         "Person" means an individual, trust, partnership, firm, association,
corporation or other organization or a government or governmental authority.

         Words of one gender include the other gender; the singular includes the
plural; and the plural includes the singular, unless the context otherwise
requires.

         2. CONVERSION OF THE NOTE.

         (a)   ELECTION TO CONVERT. Holder may, at its option, exercised by
written notice (the "Conversion Notice") to the Company at any time prior to
payment in full hereof, elect to convert all or any part of the entire
outstanding Principal Amount of this Note plus a pro rata share of the accrued
interest on the then outstanding balance into the Conversion Shares at a
conversion price equal to $0.275 per share, for an aggregate of Seven Hundred
Twenty Seven Thousand, Two Hundred Seventy Two (727,272) shares (subject to
adjustment for any accrued interest, and subject to adjustment for anti-dilution
as set forth below).

         (b)   DELIVERY OF CONVERSION SHARES. Upon such conversion, the
Conversion Shares shall be delivered as follows:

                  (i)   As promptly as practicable after conversion (but in any
         event no later than five days following the delivery of such Conversion
         Notice), the Company shall deliver to Holder, or to such person or
         persons as are designated by Holder in the Conversion Notice, a
         certificate or certificates representing the number of Conversion
         Shares into which this Note or portion thereof is to be converted in
         such name or names as are specified in the Conversion Notice, rounded
         to the nearest whole share. Such conversion shall be deemed to have
         been effected at the close of business on the date when this Note shall
         have been surrendered to the Company for conversion, so that the person
         entitled to receive such Conversion Shares shall be treated for all
         purposes as having become the record holder of such Conversion Shares
         at such time.
<PAGE>

                  (ii)   In the event that less than the entire outstanding
         Principal Amount of this Note is converted hereunder pursuant to
         subsection (a) above, this Note shall not be surrendered for
         cancellation but shall have the fact and amount of conversion recorded
         on the face of this Note by writing acknowledged by Holder and the
         Company. If less than the entire Principal Amount of this Note is
         converted, the amount of principal converted shall be reduced to the
         nearest amount that results in no fractional shares.

         (c)   RESERVATION OF SHARES. The Company agrees that, during the period
within which this Note may be converted, the Company will at all times have
authorized and in reserve, and will keep available solely for delivery upon the
conversion of this Note, Common Stock and other securities and properties as
from time to time shall be receivable upon the conversion of this Note, free and
clear of all restrictions on issuance, sale or transfer other than those imposed
by law and free and clear of all pre-emptive rights. The Company agrees that the
Conversion Shares shall, at the time of such delivery, be validly issued and
outstanding, fully paid and non-assessable, and the Company will take all such
action as may be necessary to assure that the stated value or par value per
share of the Conversion Shares is at all times equal to or less than the
Conversion Price. If at any time the total number of shares of Common Stock
issuable pursuant hereto, together with the maximum number of shares of Common
Stock issuable upon conversion, exchange or exercise of (i) all then-outstanding
securities (whether debt or equity) of the Company convertible or exchangeable
for Common Stock and (ii) all then-outstanding warrants and options to purchase
Common Stock, would exceed the total number of shares of Common Stock then
authorized by the Company's articles of incorporation but unissued, the Company
shall promptly amend its articles of incorporation to increase the number of
authorized shares of Common Stock such that there shall be a sufficient number
of authorized and unissued shares of Common Stock available at all times to
effect the conversion hereof.

         (d)   PROTECTION AGAINST DILUTION.

                  (i)   STOCK DIVIDEND, SPLIT OR COMBINATION. If at any time the
         Company shall (A) pay a dividend in shares of Common Stock, (B)
         subdivide any outstanding shares of Common Stock into a greater number
         of shares of Common Stock, (C) combine its outstanding shares of Common
         Stock into a smaller number of shares of Common Stock, or (D) issue, by
         reclassification of its shares of Common Stock, any shares of its
         capital stock, the amount and type of shares purchasable upon the
         exercise of this Note immediately prior thereto shall be adjusted
         thereafter, until further adjusted pursuant to this Section (d), so
         that the Holder shall be entitled to receive upon conversion of this
         Note that number and class or series of shares of Common Stock or other
         capital stock which such Holder would have owned or have been entitled
         to receive after the happening of such event had such Holder converted
         this Note immediately prior to the record date, in the case of any such
         dividend, or the effective date in the case of any such subdivision,
         combination, reclassification, or issuance. An adjustment made pursuant
         to this Section 2(d)(i) shall be made whenever any of such events shall
         occur, but shall become effective, retroactively after such record date
         or such effective date, as the case may be, as to any Principal Amount
         or under under this Note converted between such record date or
         effective date and the date of happening of any such event.
<PAGE>

                  (ii)   BELOW MARKET VALUE ISSUANCES. In case the Company shall

                           (A)   issue any options, warrants or other rights
                  entitling the holder thereof to subscribe for or purchase
                  shares of Common Stock or other securities of the Company
                  convertible or exchangeable for Common Stock at a price per
                  share which, when added to the amount of consideration
                  received or receivable by the Company for such options,
                  warrants or rights, is less than the then Conversion Price;

                           (B)   issue or sell securities of the Company
                  convertible into or exchangeable for Common Stock at a price
                  per share which, when added to the amount of consideration
                  received or receivable from the Company for such exchangeable
                  or convertible securities, is less than the then Conversion
                  Price; or

                           (C)   issue or sell additional shares of its Common
                  Stock for consideration representing less than the then
                  Conversion Price,

         then the number of Conversion Shares issuable upon conversion of this
         Note shall be adjusted so that thereafter, until further adjusted, this
         Note shall entitle the Holder to convert into that number of shares of
         Common Stock determined by multiplying the number of shares purchasable
         hereunder by a fraction, (1) the numerator of which shall be the number
         of shares of Common Stock outstanding prior to such issuance plus the
         number of additional shares of Common Stock issuable upon exercise of
         such options, warrants or rights, or exchangeable or convertible
         securities, or the additional number of shares of Common Stock issued
         at such time, and (2) the denominator of which shall be the number of
         shares of Common Stock outstanding prior to such issuance plus the
         number of shares of Common Stock that either (i) the sum of (x) the
         aggregate exercise price of the total number of shares of Common Stock
         issuable upon exercise of such options, warrants, or rights or upon
         conversion or exchange of such convertible securities, and (y) the
         aggregate amount of consideration, if any, received or receivable by
         the Company for such options, warrants or rights or convertible or
         exchangeable securities, or (ii) the aggregate consideration received
         in connection with the sale of shares of its Common Stock for less than
         then Conversion Price, as the case may be, would purchase at the then
         Conversion Price.

                  Upon the expiration of any options, warrants or rights or
         securities exchangeable or convertible for Common Stock, if such
         expired securities have not been exercised, converted or exchanged for
         shares of Common Stock, the number of shares of Common Stock issuable
         upon conversion of this Note shall be readjusted to remove any
         adjustment attributable to such expired options, warrants or rights or
         exchangeable or convertible securities. The above notwithstanding, no
         such readjustment shall have the effect of decreasing the number of
         shares of Common Stock issuable upon conversion of this Note by an
         amount greater than the amount of the adjustment initially made in
         respect of the issuance, sale, or grant of such options, warrants, or
         rights or exchangeable or convertible securities. No further adjustment
         shall be required upon the exercise of any options,
<PAGE>

         warrants or rights or exchangeable or convertible securities for which
         an adjustment has previously been made.

                  No adjustment under this Section 2(d)(ii) shall be required
for any of the following occurrences:

                           (A)   the issuance of shares of Common Stock pursuant
                  to a transaction described in Section 2(d)(i) hereof;

                           (B)   the issuance of shares of Common Stock issuable
                  or issued to employees, consultants or directors of the
                  Company pursuant to a stock option plan or restricted stock
                  plan approved by the Company's Board of Directors or a stock
                  purchase agreement unanimously approved by the Company's Board
                  of Directors;

                           (C)   the issuance of shares of Common Stock in
                  connection with a bona fide business acquisition of or by the
                  Company that is approved by the Company's Board of Directors,
                  whether by merger, consolidation, sale or contribution of
                  assets, sale or exchange of stock or otherwise;

                           (D)   the issuance of shares of Common Stock upon the
                  exercise of warrants or other securities or rights issued
                  pursuant to equipment lease financings or bank credit
                  arrangements approved by the Company's Board of Directors; or

                           (E)   the issuance of shares of Common Stock upon the
                  exercise of warrants or other securities or rights to persons
                  or entities with which the Company has business relationships,
                  provided such issuances are for other than primarily equity
                  financing purposes and provided further that such issuances
                  are approved by the Company's Board of Directors.

                  (iii)   DIVIDENDS IN OTHER STOCK AND PROPERTY;
         RECLASSIFICATION. If at any time or from time to time the holders of
         Common Stock (or any shares of stock or other securities at the time
         receivable upon the conversion of this Note) shall have received or
         become entitled to receive, without payment therefor,

                           (A)   any shares of stock or other securities which
                  are at any time directly or indirectly convertible into or
                  exchangeable for Common Stock, or any rights or options to
                  subscribe for, purchase or otherwise acquire any of the
                  foregoing by way of dividend or other distribution;

                           (B)   any cash paid or payable otherwise than as a
                  cash dividend; or

                           (C)   additional stock or other securities or
                  property (including cash) by way of spinoff, split-up,
                  reclassification, combination of shares or similar corporate
                  rearrangement (other than an event for which adjustment is
                  otherwise
<PAGE>

                  made pursuant to this Section 2(d), then and in each such
                  case, the Holder hereof shall, upon the conversion of this
                  Note, be entitled to receive, in addition to the number of
                  shares of Common Stock receivable thereupon, and without
                  payment of any additional consideration therefor, the amount
                  of stock and other securities and property (other than cash
                  paid or payable as a cash dividend) which such Holder would
                  hold on the date of such conversion had he been the holder of
                  record of such Common Stock as of the date on which holders of
                  Common Stock received or became entitled to receive such other
                  shares of stock and other securities and property.

                  (iv)   REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER
         OR SALE. If any reorganization of the capital stock of the Company, or
         any consolidation or merger of the Company with another corporation, or
         the sale of all or substantially all of its assets to another
         corporation shall be effected in such a way that holders of Common
         Stock shall be entitled to receive stock, securities, or other assets
         or property, then, as a condition of such reorganization,
         reclassification, consolidation, merger or sale, lawful and adequate
         provisions shall be made whereby the Holder hereof shall thereafter
         have the right to purchase and receive (in lieu of the shares of the
         Common Stock of the Company immediately theretofore purchasable and
         receivable upon the conversion of the Note) such shares of stock,
         securities or other assets or property as may be issued or payable with
         respect to or in exchange for a number of outstanding shares of such
         Common Stock equal to the number of shares of such stock immediately
         theretofore receivable upon the conversion of the Note. In any
         reorganization described above, appropriate provisions shall be made
         with respect to the rights and interests of the Holder of this Note to
         the end that the provisions hereof (including, without limitation,
         provisions for adjustments of the number of shares of Common Stock
         purchasable and receivable upon the conversion of this Note) shall
         thereafter be applicable, as nearly as may be, in relation to any
         shares of stock, securities or assets thereafter deliverable upon the
         exercise hereof. The Company will not effect any such consolidation,
         merger or sale unless, prior to the consummation thereof, the successor
         corporation (if other than the Company) resulting from such
         consolidation or the corporation purchasing such assets shall assume by
         written instrument, executed and mailed or delivered to the registered
         Holder hereof at the last address of such Holder appearing on the books
         of the Company, the obligation to deliver to such Holder such shares of
         stock, securities or assets as, in accordance with the foregoing
         provisions, such Holder may be entitled to receive.

                  (v)   NOTICE OF ADJUSTMENT. Upon any adjustment pursuant to
         this Section 2(d), the Company shall give written notice thereof, by
         first class mail, postage prepaid, addressed to the registered Holder
         of this Note at the address of such Holder as shown on the books of the
         Company, and, in case of a Holder with an address of record outside of
         the United States, by facsimile, and confirmed in writing by first
         class air mail. The notice shall be signed by the Company's chief
         financial officer and shall state the nature of such adjustment,
         setting forth in reasonable detail the method of effecting the
         adjustment and the facts upon which such adjustment is based. If at any
         time in addition to any of the adjustments set forth in this Section
         2(d), an increase in the number of authorized and unissued shares of
         Common Stock is required, the Company shall
<PAGE>

         promptly provide to the Holder a certificate of the Secretary of the
         Company certifying that the requisite number of shares of Common Stock
         have been authorized to permit the conversion of the Note.

                  (vi)   OTHER NOTICES. If at any time:

                           (A)   the Company shall declare any cash dividend
                  upon its Common Stock;

                           (B)   the Company shall declare any dividend upon its
                  Common Stock payable in stock or make any special dividend or
                  other distribution to the holders of its Common Stock;

                           (C)   the Company shall offer for subscription pro
                  rata to the holders of its Common Stock any additional shares
                  of stock of any class or other rights;

                           (D)   there shall be any capital reorganization or
                  reclassification of the capital stock of the Company; or
                  consolidation or merger of the Company; or consolidation or
                  merger of the Company with, or sale of all or substantially
                  all of its assets to, another corporation; or

                           (E)   there shall be a voluntary or involuntary
                  dissolution, liquidation or winding-up of the Company;

                  then, in any one or more of said cases, the Company shall
                  give, by first class mail, postage prepaid, addressed to the
                  Holder of this Note at the address of such Holder as shown on
                  the books of the Company, (a) at least thirty (30) days' prior
                  written notice (by the method set forth above) of the date on
                  which the books of the Company shall close or a record shall
                  be taken for such dividend, distribution or subscription
                  rights or for determining rights to vote in respect of any
                  such reorganization, reclassification, consolidation, merger,
                  sale, dissolution, liquidation or winding-up, and (b) in the
                  case of any such reorganization, reclassification,
                  consolidation, merger, sale, dissolution, liquidation or
                  winding-up, at least thirty (30) days' prior written notice of
                  the date when the same shall take place. Any notice given in
                  accordance with the foregoing clause (a) shall also specify,
                  in the case of any such dividend, distribution or subscription
                  rights, the date on which the holders of Common Stock shall be
                  entitled thereto. Any notice given in accordance with the
                  foregoing clause (b) shall also specify the date on which the
                  holders of Common Stock shall be entitled to exchange their
                  Common Stock for securities or other property deliverable upon
                  such reorganization, reclassification, consolidation, merger,
                  sale, dissolution, liquidation, winding-up or conversion, as
                  the case may be.

                  (vii)   CERTAIN EVENTS. If any change in the outstanding
         Common Stock of the Company or any other event occurs as to which the
         other provisions of this Section 2(d) are not strictly applicable or if
         strictly applicable would not fairly protect the conversion
<PAGE>

         rights of the Holder of the Note in accordance with such provisions,
         then the Board of Directors of the Company shall make an adjustment in
         the number and class of shares issuable upon conversion of this Note or
         the application of such provisions, so as to protect such conversion
         rights as aforesaid. The adjustment shall be such as will give the
         Holder of the Note upon conversion for the same aggregate Conversion
         Price the total number, class and kind of shares as it would have owned
         had the Note been converted prior to the event and had it continued to
         hold such shares until after the event requiring adjustment.

         3.   PAYMENT OF THIS NOTE - PRINCIPAL AND INTEREST.

         (a)   PAYMENT UPON MATURITY. All principal and interest that has not
been converted into Common Stock pursuant to Section 2 above shall be due and
payable on the second anniversary of this Note and, at any time thereafter, the
Holder may proceed to collect such unconverted principal and accrued interest.

         (b)   PAYMENT ON AN EVENT OF DEFAULT. If an Event of Default occurs and
is continuing, then the Holder of this Note may, by written notice to the
Company, declare this Note immediately due and payable and demand payment of all
principal and interest that has not been converted into Common Stock pursuant to
Section 2 above, and, at any time thereafter, the Holder may proceed to collect
such unconverted principal and accrued interest.

         (c)   PREPAYMENT. The Company may prepay this Note at any time after
six months after the date hereof; provided that, prior to on or before October
17, 2008, the Company shall give Holder at least 30 days' advance written
notice, and after October 17, 2008, the Company shall give Holder at least 15
days' advance written notice, of the Company's intent to prepay and Holder shall
have the right to convert all or any portion of this Note pursuant to Section
2(b) at any time during such 30-day or 15-day period, as applicable.

         4.   EVENTS OF DEFAULT. The existence of any of the following
conditions shall constitute an Event of Default:

         (a)   Commencement of proceedings under any bankruptcy or insolvency
law or other law for the reorganization, arrangement, composition or similar
relief or aid of debtors or creditors if such proceeding remains undismissed and
unstayed for a period of 60 days following notice to the Company by the Holder.

         (b)   If the Company shall dissolve, liquidate or wind up its affairs
or sell substantially all of its assets.

         (c)   If the Company breaches any of its representations, warranties,
covenants or agreements set forth in the Investment Agreement and such breach
shall not be cured within 15 days after written notice thereof shall have been
given to the Company by the Holder.
<PAGE>

         (d)   One or more final judgments are entered against the Company
involving aggregate unpaid liability not covered by insurance in excess of
$1,000,000, and such amounts are not paid in full within 30 days.

         (e) Attachment or similar process of execution is levied against a
material portion of the Company's assets and such process is not terminated and
any orders issued pursuant thereto canceled within 90 calendar days.

         (f) The Company is in material breach of any provision of this Note,
which breach (other than a breach described in Section 4(a) above) continues for
more than 15 calendar days following notice to the Company by the Holder.

         5.   TRANSFER.

         (a)   Transfer of this Note shall be subject to prior delivery by the
proposed transferee to the Company of an opinion of counsel that such transfer
is in compliance with all federal and all applicable securities laws. In order
to transfer this Note, the Holder, or its duly authorized attorney, shall
surrender this Note at the office of the Company pursuant to Section 10 herein,
accompanied by an assignment duly executed by the Holder hereof.

         (b)   This Note is, and each certificate representing Conversion Shares
shall be, stamped or otherwise imprinted with a legend substantially in the form
set forth on the first page hereof.

         6.   LOSS OR MUTILATION OF NOTE. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, together with an indemnity reasonably satisfactory to
the Company, in the case of loss, theft, or destruction, or the surrender and
cancellation of this Note, in the case of mutilation, the Company shall execute
and deliver to the Holder a new Note of like tenor and denomination as this
Note.

         7.   HOLDER NOT SHAREHOLDER. This Note does not confer upon the Holder
any right to vote or to consent or to receive notice as a shareholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a shareholder, prior to the conversion hereof.

         8.   WAIVERS. The failure of Holder to enforce at any time any of the
provisions of this Note shall not, absent an express written waiver signed by
Holder specifying the provision being waived, be construed to be a waiver of any
such provision, nor in any way to affect the validity of this Note or any part
hereof or the right of Holder thereafter to enforce each and every such
provision. No waiver of any breach of this Note shall be held to be a waiver of
any other or subsequent breach.

         9.   TAXES. The issuance of certificates for shares of Common Stock
upon the conversion of the Note shall be made without charge to the Holder of
the Note for any issue tax (other than any applicable income taxes) in respect
thereof; PROVIDED, HOWEVER, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the
<PAGE>

issuance and delivery of any certificate in a name other than that of the then
Holder of the Note being converted.

         10.   NOTICES. All notices or other communications to a party required
or permitted hereunder shall be in writing and shall be delivered personally or
by facsimile (receipt confirmed electronically) to such party (or, in the case
of an entity, to an executive officer of such party) or shall be sent by a
reputable express delivery service or by certified mail, postage prepaid with
return receipt requested, addressed as follows:

if to Payee to:

         Flint Telecom Limited
                                    Carrick House
                                    49 Fitzwilliam Square
                                    Dublin 2
                                    Ireland
                                    Attn: Vincent Brown, Chief Executive Officer
                                    Facsimile No.:  [___________]

         with a copy to:            Paul, Hastings, Janofsky & Walker LLP
                                    600 Peachtree Street, NE, Suite 2400
                                    Atlanta, Georgia  30308-2222
                                    Attn:  Kevin Conboy
                                    Facsimile No.:  (404) 815-2424

if to the Company to:

                                    Semotus Solutions, Inc.
                                    Attn: Tony LaPine
                                    718 University Avenue, Suite 202
                                    Los Gatos, CA 95032
                                    Facsimile No.: (408) 904-7699

         Any party may change the above specified recipient and/or mailing
address by notice to all other parties given in the manner herein prescribed.
All notices shall be deemed given on the day when actually delivered as provided
above (if delivered personally or by facsimile, provided that any such facsimile
is received during regular business hours at the recipient's location) or on the
day shown on the return receipt (if delivered by mail or delivery service).

         11.   HEADINGS. The titles and headings to the Sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Note. This Note shall be
construed without regard to any presumption or other rule requiring construction
hereof against the party causing this Note to be drafted.
<PAGE>

         12.   APPLICABLE LAW AND JURISDICTION. The legality, validity,
enforceability and interpretation of this Note and the relationship of the
parties hereunder shall be governed by the laws of the State of Nevada, without
giving effect to the principles of conflict of laws. Any claim, cause of action,
suit or demand allegedly arising out of or related to this Note, or the
relationship of the parties, shall be brought exclusively in the state or
federal courts located in Santa Clara County, California, and the parties
irrevocably consent to the exclusive jurisdiction and venue of such courts and
waive any objections they may have at any time to such exclusive jurisdiction
and venue.

         IN WITNESS WHEREOF, Semotus Solutions, Inc. has caused this Convertible
Promissory Note to be signed in its name by the signature of its duly authorized
representative.

SEMOTUS SOLUTIONS, INC.

/s/ Anthony LaPine
--------------------------------
By: Anthony LaPine
Its: Chairman

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