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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
SEMOTUS SOLUTIONS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2)and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SEMOTUS SOLUTIONS, INC.
718 UNIVERSITY AVE., SUITE 202
LOS GATOS, CALIFORNIA 95032
(408) 399-6120
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 22, 2005
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Semotus Solutions, Inc. ("we", "our" or the "Company"). We will be holding the
Annual Meeting at the Company's offices located at 718 University Ave., Suite
202, Los Gatos, CA 95032, on Thursday, September 22, 2005, at 2:30 p.m., Pacific
Time.
At the 2005 Annual Meeting, we will ask you to:
1. Elect four (4) directors to the Board of Directors of the Company to
serve for a one-year term;
2. Ratify the appointment of LL Bradford & Company, LLC as the Company's
independent accountants for the fiscal year ending March 31, 2006;
3. Consider, and, if deemed advisable, approve the Company's 2005 Stock
Option Plan adopted by our Board of Directors, as summarized in the
accompanying Proxy Statement; and
4. Transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Enclosed with this letter is a Proxy Statement, a proxy card and a return
envelope. Also enclosed is Semotus Solutions' Annual Report on Form 10-KSB for
the fiscal year ended March 31, 2005.
Only holders of common stock of the Company of record at the close of
business on July 26, 2005 are entitled to notice of and to vote at the Annual
Meeting. The Board of Directors of the Company is soliciting the proxies.
Your vote is very important to us regardless of the number of shares that
you own. All stockholders, whether or not you expect to attend the Annual
Meeting, are urged to sign and date the enclosed Proxy and return it promptly in
the enclosed postage-paid envelope, or follow the instructions provided for
voting by phone or the internet. The prompt return of proxies or vote by phone
or internet will ensure a quorum and save the Company the expense of further
solicitation. Each proxy granted may be revoked by the stockholder appointing
such proxy at any time before it is voted. If you receive more than one proxy
card because your shares are registered in different names or addresses, each
such proxy card should be signed and returned to ensure that all of your shares
will be voted. If you elect to vote by phone or the internet, the last vote you
submit chronologically (by any means) will supersede your prior vote(s). Also,
if you vote by phone or the internet, and later decide to attend the Annual
Meeting, you may cancel your previous vote and vote in person at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Anthony N. LaPine
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Anthony N. LaPine
PRESIDENT
Los Gatos, California
July 27, 2005
SEMOTUS SOLUTIONS, INC.
718 UNIVERSITY AVE., SUITE 202
LOS GATOS, CALIFORNIA 95032
(408) 399-6120
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 22, 2005
GENERAL INFORMATION
This proxy statement provides information that you should read before you
vote on the proposals that will be presented to you at the 2005 Annual Meeting
of Semotus Solutions, Inc. (the "Company", "we" or "our"). The 2005 Annual
Meeting will be held on September 22, 2005 at the Company's offices located at
718 University Ave., Suite 202, Los Gatos, CA 95032.
This proxy statement provides detailed information about the Annual
Meeting, the proposals you will be asked to vote on at the Annual Meeting, and
other relevant information. The Board of Directors of Semotus is soliciting
these proxies.
At the Annual Meeting, you will be asked to vote on the following
proposals:
1. Elect four directors, each for a one-year term;
2. Ratify the appointment by the Board of Directors of the firm of LL
Bradford & Company, LLC as independent public accountants of Semotus
for the fiscal year ending March 31, 2006;
3. Consider, and, if deemed advisable, approve the Company's 2005 Stock
Option Plan adopted by our Board of Directors, as summarized in the
accompanying Proxy Statement; and
4. Such other matters as may properly come before the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR ELECTION
OF THE BOARD'S NOMINEES FOR DIRECTOR, FOR RATIFICATION OF THE APPOINTMENT OF LL
BRADFORD & COMPANY, LLC AS INDEPENDENT PUBLIC ACCOUNTANTS, FOR THE APPROVAL OF
THE 2005 STOCK OPTION PLAN AND FOR THE APPROVAL OF EACH OF THE OTHER PROPOSALS.
On August 2, 2005, we will begin mailing this proxy statement to people
who, according to our records, owned shares of our common stock as of the close
of business on July 26, 2005. We have mailed with this proxy statement a copy of
our Annual Report on Form 10-KSB for the fiscal year ended March 31, 2005.
INFORMATION ABOUT THE 2005 ANNUAL MEETING AND VOTING
THE ANNUAL MEETING
The Annual Meeting will be held at our corporate headquarter offices
located at 718 University Ave., Suite 202, Los Gatos, CA 95032, on Thursday,
September 22, 2005, at 2:30 p.m., Pacific Time.
THIS PROXY SOLICITATION
We are sending you this proxy statement because our Board of Directors (the
"Board") is seeking a proxy to vote your shares at the Annual Meeting. This
proxy statement is intended to assist you in deciding how to vote your shares.
On August 2, 2005, we will begin mailing this proxy statement and the
accompanying proxy card and Annual Report on Form 10-KSB to all people who,
according to our stockholder records, owned shares at the close
of business on July 26, 2005. In addition, we have provided brokers, dealers,
banks, voting trustees and their nominees, at our expense, with additional
copies of this proxy statement, proxy card and the Annual Report on Form 10-KSB
so that such record holders could supply these materials to the beneficial
owners as of July 26, 2005.
Proxies may also be solicited personally by our officers or directors at
nominal cost. We may also retain, and pay a fee to, one or more other
professional proxy solicitation firms to solicit proxies from our shareholders.
We will bear the entire cost of this proxy solicitation.
VOTING YOUR SHARES
You may vote your shares at the Annual Meeting by completing and returning
the enclosed proxy card, or by voting in person at the Annual Meeting.
Additionally, you may be able to vote by phone or via the internet, as described
below.
Whether or not you plan to attend the Annual Meeting, please take the time
to vote. Votes may be cast:
o by traditional paper proxy card;
o by phone;
o via the Internet; or
o in person at the Annual Meeting.
Please take a moment to read the instructions, choose the way to vote that
you find most convenient and cast your vote as soon as possible.
Voting by Proxy Card. If proxies in the accompanying form are properly
executed and returned, the shares of our common stock represented thereby will
be voted in the manner specified therein. If not otherwise specified, the shares
of our common stock represented by the proxies will be voted (i) FOR the
election of the nominees named below as directors of the Company; (ii) FOR the
ratification of the appointment of LL Bradford & Company, LLC as independent
accountants for the year ending March 31, 2006; (iii) FOR the approval of the
2005 Stock Option Plan; and (iv) in the discretion of the persons named in the
enclosed form of proxy on any other proposals which may properly come before the
Annual Meeting or any adjournment or adjournments thereof. Any stockholder who
has submitted a proxy may revoke it at any time before it is voted, by written
notice addressed to and received by the Secretary of the Company, by submitting
a duly executed proxy bearing a later date or by electing to vote in person at
the Annual Meeting. The mere presence at the Annual Meeting of the person
appointing a proxy does not, however, revoke the appointment. IF YOU DECIDE TO
VOTE BY PROXY, THE PROXY CARD WILL BE VALID ONLY IF YOU SIGN, DATE AND RETURN IT
BEFORE THE ANNUAL MEETING TO BE HELD ON SEPTEMBER 22, 2005.
Voting by Phone or via the Internet. If you are a stockholder of record
(that is, if your shares of our stock are registered with us in your own name),
you may vote by phone, or through the Internet, by following the instructions
included with the enclosed proxy card. If your shares are registered in the name
of a broker or other nominee, your nominee may be participating in a program
provided through ADP Investor Communication Services that allows you to vote by
phone or the Internet. If so, the voting form your nominee sent you will provide
phone and Internet voting instructions. The last vote you submit chronologically
(by any means) will supersede your prior vote(s). Also, if you vote by phone or
the Internet, and later decide to attend the Annual Meeting, you may cancel your
previous vote and vote in person at the Annual Meeting.
The deadline for voting by phone or through the Internet as a stockholder
of record is 11:59 p.m., EDT, on September 21, 2005. For stockholders whose
shares of our common stock are registered in the name of a broker or other
nominee, please consult the voting instructions provided by your broker for
information about the deadline for voting by phone or through the Internet.
Voting in Person. To vote in person, you must attend the Annual Meeting and
obtain and submit a ballot. Ballots for voting in person will be available at
the Annual Meeting. To vote by proxy, you must complete and return the enclosed
proxy card in time to be received by us by the Annual Meeting. By completing and
returning the proxy card, you will be directing the persons designated on the
proxy card to vote your shares of our common stock at the Annual Meeting in
accordance with the instructions you give on the proxy card.
Attendance at the Annual Meeting will not, by itself, result in the
revocation of a previously submitted proxy. Even if you are planning to attend
the Annual Meeting, we encourage you to submit the proxy card in advance to
ensure the representation of your shares at the Annual Meeting.
If you hold your shares with a broker and you do not tell your broker how
to vote, your broker has the authority to vote on all routine proposals.
VOTE REQUIRED FOR APPROVAL
SHARES ENTITLED TO VOTE. On July 26, 2005 (the "Record Date") 29,160,096
shares of our common stock were issued and outstanding. Each share of our common
stock issued and outstanding on the Record Date will be entitled to one vote on
each of the proposals.
QUORUM. The quorum requirement for holding the meeting and transacting
business at the Annual Meeting is that a majority of the issued and outstanding
shares of our common stock on the Record Date be present in person or
represented by proxy and entitled to be voted. Accordingly, 14,580,049 shares of
our common stock must be present in person or by proxy for a quorum to be
present. If a quorum is not present, a vote cannot occur. Both abstentions and
broker non-votes are counted as present for the purposes of determining the
presence of a quorum.
VOTES REQUIRED. In the election of directors, the four persons receiving
the highest number of "FOR" votes will be elected. All other proposals require
the affirmative "FOR" vote of a majority of those shares present and entitled to
vote on such proposal.
ADDITIONAL INFORMATION
We are mailing our Annual Report on Form 10-KSB for the fiscal year ended
March 31, 2005, including consolidated financial statements, to all shareholders
entitled to vote at the Annual Meeting together with this proxy statement. The
Annual Report on Form 10-KSB does not constitute a part of the proxy
solicitation material. The Annual Report on Form 10-KSB tells you how to get
additional information about us.
PROPOSAL 1:
ELECTION OF DIRECTORS
Nominees for election to the Board are:
Anthony N. LaPine
Robert Lanz
Mark Williams
Laurence W. Murray
Each director will be elected to serve for a one-year term, unless he
resigns or is removed before his term expires, or until his replacement is
elected and qualified. All of the four nominees are currently members of the
Board and have consented to serve as directors if re-elected. Anthony N. LaPine
is our President and Chief Executive Officer. More detailed information about
each of the nominees is available in the section of this proxy statement titled
"Directors and Executive Officers".
There are no known arrangements or understandings between any director or
executive officer and any other person pursuant to which any of the above-named
directors was selected as a director of the Company.
If any of the nominees cannot serve for any reason (which is not
anticipated), the Board may designate a substitute nominee or nominees. If a
substitute is nominated, we will vote all valid proxies for the election of the
substitute nominee or nominees. Alternatively, the Board may also decide to
leave the board seat or seats open until a suitable candidate or candidates are
located, or it may decide to reduce the size of the Board.
The Board has established the size of the board at four members. Proxies
for the Annual Meeting may not be voted for more than four directors.
BOARD RECOMMENDATION
The Board unanimously recommends a vote "FOR" each of the nominees to the
Board.
PROPOSAL 2:
RATIFICATION OF INDEPENDENT AUDITORS
The Board has appointed LL Bradford & Company, LLC, an accounting firm of
independent certified public accountants, to act as independent accountants for
our company and its consolidated subsidiaries for our fiscal year ending March
31, 2006. The Board believes that LL Bradford & Company's experience with and
knowledge of our company are important, and would like to continue this
relationship. LL Bradford & Company has advised our company that the firm does
not have any direct or indirect financial interest in our company or any of its
subsidiaries, other than its capacity as our independent certified public
accountants providing auditing and accounting services.
In making the recommendation for LL Bradford & Company to continue as our
company's independent accountants for the fiscal year ending March 31, 2006, our
management team and the Audit Committee reviewed past audit results and the
audit and non-audit services, if any, proposed to be performed during fiscal
year 2006. In selecting LL Bradford & Company, the Audit Committee and the Board
carefully considered LL Bradford & Company's independence.
LL Bradford & Company has confirmed to us that it is in compliance with all
rules, standards and policies of the Independence Standards Board and the
Securities and Exchange Commission ("SEC") governing auditor independence.
A representative of LL Bradford & Company is expected to attend the Annual
Meeting. This representative will have the opportunity to make a statement if he
or she desires to do so and will be able to respond to appropriate questions
from stockholders.
RECOMMENDATION
The Board unanimously recommends a vote "FOR" ratification of the
appointment of LL Bradford & Company, LLC.
PROPOSAL 3:
APPROVAL OF THE 2005 STOCK OPTION PLAN
GENERAL
The Company's shareholders are being asked to act upon a resolution to
approve the Company's 2005 Stock Option Plan. Approval of the resolution
requires the affirmative vote of the holders of a majority of the shares of our
common stock present or represented and entitled to vote at the Annual Meeting.
Shareholders abstaining from voting on the resolution will be counted for
purposes of determining a quorum, but will not be counted for any other purpose.
Broker non-votes will not be considered as present or voting, and as such each
will have no effect on the vote for this resolution.
The 2005 Stock Option Plan was unanimously approved by the Company's
unrelated and independent directors and our Board. The Board approved the
adoption of the 2005 Stock Option Plan in July of 2005, to be effective as of
September 22, 2005 only upon approval by the shareholders of the Company at the
Annual Meeting. The Board believes that the attraction and retention of high
quality personnel are essential to the Company's continued growth and success
and that a stock option plan such as the 2005 Stock Option Plan is necessary for
the Company to remain competitive in its compensation practices. If approved by
the shareholders, a total of 3,000,000 shares of our common stock will be
initially reserved for issuance under the 2005 Stock Option Plan, subject to
adjustment in the event of a stock split, stock or other extraordinary dividend,
or other similar change in the common stock or capital structure of the Company.
A general description of the principal terms of the 2005 Stock Option Plan
as proposed is set forth below. This description is qualified in its entirety by
the terms of the 2005 Stock Option Plan, a copy of which is attached to this
proxy statement as Appendix A and is incorporated herein by reference.
Capitalized terms used herein shall have the same meaning as in the 2005 Stock
Option Plan unless otherwise indicated.
DESCRIPTION OF 2005 STOCK OPTION PLAN
Purpose. The purpose of the 2005 Stock Option Plan is to provide the
Company's employees, directors, officers and consultants, whose present and
potential contributions are important to the success of the Company, an
incentive, through ownership of the Company's common stock, to encourage the
Company's employees, directors, officers and consultants to accept or continue
in service with the Company, and to help the Company compete effectively with
other enterprises for the services of qualified individuals.
Shares of Common Stock Reserved for Issuance under the 2005 Stock Option
Plan. If approved by the shareholders, a total of 3,000,000 shares of our common
stock will be initially reserved for issuance under the 2005 Stock Option Plan,
subject to adjustment only in the event of a stock split, stock or other
extraordinary dividend, or other similar change in the common stock or capital
structure of the Company.
Administration. The 2005 Stock Option Plan is administered, with respect to
grants to employees, directors, officers, and consultants, by the Board or by a
committee designated by the Board and containing at least two non-employee Board
members (in either case, the "Option Committee").
Types of Awards. The 2005 Stock Option Plan provides for the grant of
incentive stock options or non-qualified stock options. An incentive stock
option is an option to purchase our stock intended to qualify as an incentive
stock option within the meaning of Section 422 of the Internal Revenue Code, as
amended. A non-qualified stock option is an option that does not satisfy the
Internal Revenue Code requirements for an incentive stock option.
Terms and Conditions of Awards. The Option Committee has the power to
allocate the number of shares of our common stock reserved for issuance under
the 2005 Stock Option Plan to the various types of awards in its discretion.
Stock options granted under the 2005 Stock Option Plan may be either incentive
stock options under the provisions of Section 422 of the Internal Revenue Code,
or nonqualified stock options. Incentive stock options may be granted only to
employees and nonqualified stock options may be granted to employees, directors
and consultants.
Subject to the other provisions of this 2005 Stock Option Plan, the Option
Committee shall have the authority, in its discretion: (i) to grant stock
options; (ii) to determine the exercise price of stock options granted; (iii) to
determine the persons whom, and the time or times at which, stock options shall
be granted, and the number of shares of our common stock subject to each stock
option; (iv) to interpret this 2005 Stock Option Plan; (v) to prescribe, amend,
and rescind rules and regulations relating to the 2005 Stock Option Plan; (vi)
to determine the terms and provisions of each stock option granted (which need
not be identical), including but not limited to, the time or times at which
stock options shall be exercisable; (vii) with the consent of the optionee, to
modify or amend any stock option; (viii) to defer (with the consent of the
optionee) or accelerate the exercise date or vesting of any stock option; (ix)
to authorize any person to execute on behalf of our company any instrument
evidencing the grant of a stock option; and (x) to make all other determination
deemed necessary or advisable for the administration of the 2005 Stock Option
Plan. The Option Committee may delegate nondiscretionary administrative duties
to such employees of the Company as it deems proper.
Each award granted under the 2005 Stock Option Plan shall be designated in
a stock option agreement. In the case of a stock option, the stock option shall
be designated as either an incentive stock option or a nonqualified stock
option. To the extent that the aggregate fair market value of our shares of
common stock subject to stock options designated as incentive stock options
which become exercisable for the first time by a participant during any calendar
year exceeds $100,000, such excess options shall be treated as nonqualified
stock options.
The term of any award of stock options granted under the 2005 Stock Option
Plan may not be for more than ten years. No stock option granted to any person
who owns, directly or by attribution, stock possessing more than ten percent of
the total combined voting power of all classes of stock of the Company of any
Affiliate (a "Ten Percent Stockholder") shall be exercisable more than five
years after the date of grant. The 2005 Stock Option Plan authorizes the Option
Committee to grant incentive stock options and nonqualified stock options at an
exercise price not less than 100% of the fair market value of the common stock
on the date the stock option is granted. The exercise price of any stock option
granted to any Ten Percent Stockholder shall in no event be less than 110% of
the fair market value of the common stock on the date the stock option is
granted. The exercise or purchase price is generally payable in cash, certified
check, bank draft, shares of common stock or by any other form of consideration
and method of payment to the extent permitted under the California Corporations
Code.
Termination of Service. An award may not be exercised after the termination
date of such award as set forth in the award agreement. In the event a
participant in the 2005 Stock Option Plan terminates continuous service with our
company, an award may be exercised only to the extent provided in the award
agreement. Where an award agreement permits a participant to exercise an award
following termination of service, the award shall terminate to the extent not
exercised on the last day of the specified period or the last day of the
original term of the award, whichever comes first.
Transferability of Stock Options. No stock option granted under the 2005
Stock Option Plan shall be assignable or otherwise transferable by the optionee
except by will, by the laws of descent and distribution, or pursuant to a
qualified domestic relations order (limited in the case of an incentive stock
option, to a qualified domestic relations order that effects a transfer of an
incentive stock option that is community property as part of a division of
community property). During the life of the optionee, a stock option shall be
exercisable only by the optionee.
Changes in Capital Structure. The existence of outstanding stock options
shall not affect the Company's right to effect adjustments, recapitalization,
reorganizations, or other changes in its or any other corporation's capital
structure or business, any merger or consolidation, any issuance of bonds,
debentures, preferred, or prior preference stock ahead of or affecting common
stock, the dissolution or liquidation of the Company's or any other
corporation's assets or business or any other corporate act whether similar to
the events described above or otherwise. If the common stock of the Company is
changed by reason of a stock split, reverse stock split, stock dividend,
recapitalization, or other event, or converted into or exchanged for other
securities as a result of a merger, consolidation, reorganization, or other
event, appropriate adjustments shall be made in (i) the number and class of
shares of common stock subject to the 2005 Stock Option Plan and each
outstanding stock option; provided, however, that the Company shall not be
required to issue fractional shares as a result to any such adjustments. Each
such adjustment shall be subject to approval by the Option Committee in its sole
discretion, and may be made without regard to any resulting tax consequence to
the optionee.
Corporate Transactions. In connection with (i) any merger, consolidation,
acquisition, separation, or reorganization in which more than 50% of the shares
of our common stock outstanding immediately before such event are converted into
cash or into another security, (ii) any dissolution or liquidation of the
Company or any partial liquidation involving 50% or more of the assets of the
Company, (iii) any sale of more than 50% of the Company's assets, or (iv) any
like occurrence in which the Company is involved, the Option Committee may, in
its absolute discretion, do one or more of the following upon ten days' prior
written notice to optionees; (a) accelerate any vesting schedule to which a
stock option is subject; (b) cancel stock options upon payment to each optionee
in cash, with respect to each stock option to the extent then exercisable, of
any amount which, in the absolute discretion of the Option Committee, is
determined to be equivalent to any excess of the market value (at the effective
time of such event) of the consideration that such optionee would have received
of the stock option had been exercised before the effective time over the
exercise price of the stock option; (c) shorten the period during which such
stock options are exercisable (provided they remain exercisable, to the extent
otherwise exercisable, for at least ten days after the date the notice is
given); or (d) arrange that new option rights be substituted for the option
rights granted under the 2005 Stock Option Plan, or that the Company's
obligations as to stock options outstanding under the 2005 Stock Option Plan be
assumed, by an employer corporation other than the Company or by a parent or
subsidiary of such employer corporation. The actions described in this section
may be taken without regard to any resulting tax consequence to the optionee.
Amendment, Suspension or Termination of the 2005 Stock Option Plan. The
Board may at any time amend, suspend or terminate the 2005 Stock Option Plan.
The 2005 Stock Option Plan will terminate ten years after its effective date,
unless terminated earlier by the Board. To the extent necessary to comply with
applicable provisions of federal securities laws, state corporate and securities
laws, the Internal Revenue Code, the rules of any applicable stock exchange or
national market system, and the rules of any U.S. jurisdiction applicable to
awards granted to residents therein, we shall obtain shareholder approval of any
such amendment to the 2005 Stock Option Plan in such a manner and to such a
degree as required. No options shall be granted after termination of the 2005
Stock Option Plan, but termination shall not affect rights and obligations under
then-outstanding stock options.
CERTAIN U.S. FEDERAL TAX CONSEQUENCES
The following summary of the U.S. federal income tax consequences of 2005
Stock Option Plan transactions is based upon federal income tax laws in effect
on the date of this proxy statement. This summary does not purport to be
complete, and does not discuss, state, local or non-U.S. tax consequences.
NONQUALIFIED STOCK OPTIONS. The grant of a nonqualified stock option under
the 2005 Stock Option Plan will not result in any federal income tax
consequences to the participant or to the Company. Upon exercise of a
nonqualified stock option, the participant is subject to income taxes at the
rate applicable to ordinary compensation income on the difference between the
option exercise price and the fair market value of the shares on the date of
exercise. This income is subject to withholding for federal income and
employment tax purposes. The Company is entitled to an income tax deduction in
the amount of the income recognized by the participant, subject to possible
limitations imposed by Section 162(m) of the Internal Revenue Code and so long
as the Company withholds the appropriate taxes with respect to such income (if
required) and the participant's total compensation is deemed reasonable in
amount. Any gain or loss on the participant's subsequent disposition of the
shares of common stock will receive long or short-term capital gain or loss
treatment, depending on whether the shares are held for more than one year
following exercise. The Company does not receive a tax deduction for any such
gain.
INCENTIVE STOCK OPTIONS. The grant of an incentive stock option under the
2005 Stock Option Plan will not result in any federal income tax consequences to
the participant or to the Company. A participant recognizes no federal taxable
income upon exercising an incentive stock option (subject to the alternative
minimum tax rules discussed below), and the Company receives no deduction at the
time of exercise. In the event of a disposition of common stock acquired upon
exercise of an incentive stock option, the tax consequences depend upon how long
the participant has held the shares of common stock. If the participant does not
dispose of the shares within two years after the incentive stock option was
granted, nor within one year after the incentive stock option was exercised, the
participant will recognize a long-term capital gain (or loss) equal to the
difference between the sale price of the shares and the exercise price. The
Company is not entitled to any deduction under these circumstances.
If the participant fails to satisfy either of the foregoing holding
periods, he or she must recognize ordinary income in the year of the disposition
(referred to as a "disqualifying disposition"). The amount of such ordinary
income generally is the lesser of (i) the difference between the amount realized
on the disposition and the
exercise price or (ii) the difference between the fair market value of the
common stock on the exercise date and the exercise price. Any gain in excess of
the amount taxed as ordinary income will be treated as a long or short-term
capital gain, depending on whether the common stock was held for more than one
year. The Company, in the year of the disqualifying disposition, is entitled to
a deduction equal to the amount of ordinary income recognized by the
participant, subject to possible limitations imposed by Section 162(m) of the
Internal Revenue Code and so long as the participant's total compensation is
deemed reasonable in amount.
The "spread" under an incentive stock option -- i.e., the difference
between the fair market value of the shares at exercise and the exercise price
- -- is classified as an item of adjustment in the year of exercise for purposes
of the alternative minimum tax. If a participant's alternative minimum tax
liability exceeds such participant's regular income tax liability, the
participant will owe the larger amount of taxes. In order to avoid the
application of alternative minimum tax with respect to incentive stock options,
the participant must sell the shares within the same calendar year in which the
incentive stock options are exercised. However, such a sale of shares within the
same year of exercise will constitute a disqualifying disposition, as described
above.
NEW PLAN BENEFITS
If the 2005 Stock Option Plan is approved at the Annual Meeting, we intend
to promptly file a registration statement with the SEC on Form S-8 to register
the 3,000,000 shares that may be issued under the 2005 Stock Option Plan.
No officer, employee, consultant or director has been granted any options
subject to shareholder approval of the 2005 Stock Option Plan. The benefits to
be received by the Company's directors, executive officers and employees
pursuant to the 2005 Stock Option Plan are not determinable at this time.
VOTE REQUIRED
The Board will ask the Shareholders to approve the following resolution at
the Annual Meeting:
"RESOLVED THAT as a resolution of the shareholders of the Company that:
a. the 2005 Stock Option Plan adopted by our Board of Directors, as
summarized in the Proxy Statement is hereby approved and adopted; and
b. any director or officer of the Company is hereby authorized and
directed in the name of and on behalf of the Company, to execute and
deliver or cause to be delivered all such documents and to do all such
other acts and things as such person may consider necessary or
desirable in order to carry out the intent of the foregoing resolution
and the matters authorized thereby."
In the absence of contrary instructions, the persons in the accompanying
form of proxy intend to vote any shares of our common stock represented by such
proxy FOR the above resolution. Abstentions will be counted toward the
tabulation of the votes cast. The resolution requires the approval of a majority
of shareholder votes that are voted at the Annual Meeting.
RECOMMENDATION
The Board unanimously recommends a vote "FOR" approval of the Company's 2005
Stock Option Plan.
OTHER BUSINESS
As of the date of this proxy statement, our management was not aware of any
other matter to be presented at the Annual Meeting other than as set forth
herein. However, if any other matters are properly brought before the Annual
Meeting, the shares of our common stock represented by valid proxies will be
voted with respect to such matters in accordance with the judgment of the
persons voting them. A majority vote of the shares of our common stock
represented at the meeting is necessary to approve any such matters.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Except as otherwise disclosed herein, none of our directors or executive
officers, no nominee for election as a director of our company and no associate
or affiliate of any of the foregoing persons has any substantial interest,
direct or indirect, by way of beneficial ownership of shares or otherwise, in
any matter to be acted upon at the Annual Meeting.
VOTING SECURITIES AND OWNERSHIP OF VOTING SECURITIES
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We have set forth in the following table certain information regarding the
common stock beneficially owned on July 26, 2005 (the record date) for (i) each
shareholder we know to be the beneficial owner of 5% or more of our common
stock, (ii) each of our company's executive officers and directors and (iii) all
executive officers and directors as a group. In general, a person is deemed to
be a "beneficial owner" of a security if that person has or shares the power to
vote or direct the voting of such security, or the power to dispose or to direct
the disposition of such security. A person is also deemed to be a beneficial
owner of any securities to which the person has the right to acquire beneficial
ownership within 60 days. As of July 26, 2005, we had 29,160,096 shares of our
common stock issued and outstanding and entitled to one (1) vote per share at
the Annual Meeting.
Unless otherwise indicated, the address of each of the individuals and
entities named below is: c/o Semotus Solutions, Inc., 718 University Ave., Suite
202, Los Gatos, CA 95032.
BENEFICIAL OWNERSHIP OF SHARES
------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENT
- ------------------------------------- ---------------- -------
Directors and Executive Officers:
Anthony LaPine 2,844,000(1) 10.0%
Pamela LaPine 2,844,000(2) 10.0%
Mark Williams 23,749(3) *
Laurence W. Murray 26,949(4) *
Robert Lanz 53,749(3) *
All Officers and Directors as a Group (7 Persons) 3,349,716(5) 11.8%
5% Stockholders: none
- -------------
* Less than 1%
(1) Includes 1,025,000 shares of common stock and exercisable options to
purchase 1,391,000 of common stock owned directly by Mr. LaPine. Also
includes 3,000 shares of common stock and exercisable options to purchase
425,000 shares of common stock owned by Mr. LaPine's wife, Pamela LaPine,
the Company's Executive Vice President and President of Financial Services,
as set forth below.
(2) Includes 3,000 shares of common stock and exercisable options to purchase
425,000 shares of common stock owned directly by Pamela LaPine. Also
includes 1,025,000 shares of common stock and exercisable options to
purchase 1,391,000 shares of common stock owned directly by Mrs. LaPine's
husband, Anthony LaPine, President and Chief Executive Officer of the
Company, as set forth above.
(3) Comprised of exercisable options to purchase shares of common stock.
(4) Includes exercisable options to purchase 17,499 shares of common stock and
3,200 shares of common stock owned directly by Mr. Murray.
(5) Includes the shares listed above as beneficially owned by Messrs. LaPine,
Williams, Murray, Lanz, and Mrs. LaPine, and 401,269 shares of common stock
underlying currently exercisable options held by other executive officers
of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended requires
the Company's officers (as defined in regulations issued by the SEC) and
directors, and persons who own more than ten percent of a registered class of
our equity securities, to file reports of ownership and changes in ownership
with the SEC. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish us with copies of all Section 16(a) forms
they file.
Based solely on a review of copies of such reports of ownership furnished
to us and certifications from executive officers and directors, we believe that
during the past fiscal year all filing requirements applicable to our directors,
officers and beneficial owners of more than 10% of a registered class of our
equity securities were complied with, except that a Form 5 disclosing the
purchase of 3,000 shares of common stock in April of 2004 for Laurence W. Murray
has not yet been filed.
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information relating to our directors and
executive officers who will continue to serve after the Annual Meeting:
NAME AGE POSITION
- ---- --- --------
Anthony N. LaPine 63 Chairman of the Board, President, and Chief
Executive Officer
Charles K. Dargan, II 50 Chief Financial and Accounting Officer
Taliesin Durant 34 Corporate Secretary and General Counsel
Pamela B. LaPine 47 Executive Vice President of Sales and Marketing
Robert Lanz (1) 63 Director
Mark Williams (2) 47 Director
Laurence W. Murray (3) 65 Director
- -------------
(1) Chairman of the Audit Committee; Member of the Compensation Committee and
the Nominating and Corporate Governance Committee.
(2) Chairman of the Nominating and Corporate Governance Committee; Member of
the Audit Committee and the Compensation Committee.
(3) Chairman of the Compensation Committee; Member of the Audit Committee and
the Nominating and Corporate Governance Committee.
There is no family relationship between any director or executive officer
except that Anthony N. LaPine and Pamela B. LaPine are husband and wife. There
are no known arrangements or understandings between any director or executive
officer and any other person pursuant to which any of the above-named executive
officers or directors was selected as an officer or director.
Anthony N. LaPine has been our President and one of our directors since
June of 1996. In June of 1997 Mr. LaPine was elected Chief Executive Officer,
and in August of 1997, Mr. LaPine was elected Chairman of the Board. Mr.
LaPine's career began at IBM where he served as a member of the engineering team
that developed the modern disc drive. In 1969 he was recruited as one of the
founders of Memorex's Equipment Group where he was instrumental in developing
the floppy disc drive. After the sale of Memorex to Unisys, Mr. LaPine was
recruited to re-engineer the Irwin/Olivetti Company, where he orchestrated the
invention of the first removable cartridge tape backup in personal computers.
Subsequently, he formed LaPine Technology, raised thirty million dollars and
launched the 31/2-inch Winchester disk drive technology that is now the industry
standard. Mr. LaPine then sold LaPine Technology, and formed the LaPine Group, a
private investment and management-consulting firm. Mr.
LaPine received a BSEE Cum Laude, from San Jose State University, an MSEE from
the University of Santa Clara and an MBA from the University of San Francisco.
He later became an alumnus of Stanford's Graduate School of Business through its
Executive Program.
Charles K. Dargan, II is our Chief Financial and Accounting Officer. Mr.
Dargan was on the Board from March 1999 to July 2002; he resigned as a member of
the Board effective as of July 31, 2002. Mr. Dargan was the Executive Vice
President of Operations and Administration for the Company from April 2000 to
January 2001, at which time Mr. Dargan became our Chief Financial and Accounting
Officer. Prior to joining Semotus, Mr. Dargan served as a Managing Director of
Corporate Finance for The Seidler Companies Incorporated, a private brokerage,
investment banking and public finance firm. In addition, he was a partner and
Chief Financial Officer of the investment banking firm of Ambient Capital, was a
Managing Director of Corporate Finance at L.H. Friend, Weinress, Frankson &
Presson, Inc., and a First Vice President at Drexel Burnham Lambert,
Incorporated. His accounting and financial industry experience has made him an
expert in public and private debt and equity finance, mergers and acquisitions
and financial management of and planning for emerging growth companies. Mr.
Dargan graduated from the University of Southern California with an MBA and an
MS in Finance, and possesses an A.B. in Government and Economics from Dartmouth
College. He also holds accounting and finance industry certifications of
Chartered Financial Analyst (CFA) and Certified Public Accountant (CPA).
Taliesin (Tali) Durant joined the Company in August 1999 and has been our
Corporate Secretary and in-house counsel since January 2000. Ms. Durant provides
legal counsel for all of our corporate, financial and business matters. This
includes the drafting and negotiation of agreements connected to the development
as well as the distribution, sale and licensing of our services software and
technology. She also plays a crucial role in our business development and merger
and acquisition strategy. Ms. Durant possesses expertise in a number of business
and legal issues including those related to merger and acquisition agreements,
intellectual property licensing, as well as in software development and service
contracts. Ms. Durant has experience providing legal guidance in the areas of
consumer protection, small business development and contracts,
telecommunications, and intellectual property safeguards. She is a member of the
American Corporate Counsel Association, the American Bar Association, and the
California State Bar Association. She is an alumna of the Northwestern School of
Law at Lewis and Clark College, and has specific legal expertise in the area of
high technology. Ms. Durant holds a Bachelor of Arts in Economics from
Connecticut College.
Pamela LaPine began with the Company in 1996 and currently serves as
Executive Vice President of Sales and Marketing. She is responsible for the
sales, marketing, account management and strategic direction behind the
Company's Financial Services and HipLink product lines. Mrs. LaPine began as the
Company's Director of Administration in 1996 and then moved to Vice President of
Operations in 1997. In October of 1998 she moved into the position of Vice
President of Marketing, and in 2000 was promoted to Executive Vice President and
President of Financial Services. Pamela LaPine is a seasoned business
professional with over 20 years of management experience in Silicon Valley high
tech companies. She has extensive experience in corporate operations, finance,
marketing and business development. Mrs. LaPine started her management career as
Marketing Director at Digital Recording Corporation, and then transitioned to
LaPine Technologies, where she was responsible for strategic planning. She has
also held executive positions with Partners Petroleum and Olympiad Corporation.
Mrs. LaPine did her undergraduate studies at the University of Utah.
Robert Lanz has served on our Board and as Chairman of our Audit Committee
since November of 2001. Mr. Lanz has over 35 years of accounting and management
experience. Mr. Lanz is Managing Director of the Silicon Valley office of The
Financial Valuation Group, a business valuation consulting and litigation
services firm, and Managing Partner of RAMP Partners, LLC, an accounting and
financial management consulting firm. Mr. Lanz is a certified public accountant.
From 1998 to 2000, he was an audit and business advisory partner with BDO
Seidman, LLP, an international accounting and consulting firm, and Meredith,
Cardozo, Lanz & Chiu, LLP. Mr. Lanz previously retired from KPMG International,
after a 27-year career with that firm, where he was an audit and SEC reviewing
partner. He has also served as chief financial officer of public and private
companies, including a successful IPO. Mr. Lanz currently serves on the board of
Kelmoore Strategy Variable Trust.
Mark Williams joined our Board on August 1, 2002. Mr. Williams has over 20
years of accounting and management experience. Mr. Williams is currently a self
employed certified public accountant in the area of income tax. From 2000 to
2002 Mr. Williams was CFO and a General Partner of University Technology
Ventures.
Previously, from 1990 to 2000, he was a Partner at Ruzzo, Scholl and Murphy
Accountancy Corporation. For eight years before that, Mr. Williams was a tax
manager at Price Waterhouse. Mr. Williams is a member of the American Institute
of Certified Public Accountants. Mr. Williams filed a Chapter 7 petition under
the federal bankruptcy laws on September 29, 2004, which was discharged on
December 29, 2004.
Laurence W. Murray joined our Board on November 19, 2002. Mr. Murray has
over 30 years of experience in finance, accounting and management. Currently,
Mr. Murray is a professor of finance and international business at the
University of San Francisco, as well as a consultant, specializing in corporate
planning and financial strategy. Mr. Murray is also an adjunct professor of
international business at the University of California, Berkeley. Mr. Murray
holds a Ph.D. in economics and finance from Clark University, a M.S. in
economics from the University of Missouri, and a B.A. in business from the
University of Northern Iowa.
MEETINGS OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES.
The Board currently consists of four members. The Board held one (1)
meeting during fiscal year 2005, and executed 17 unanimous consents in lieu of
holding directors' meetings. Each of the directors appointed at that time
attended all meetings of the Board. During fiscal year 2005, the non-management
directors have met in executive sessions without the presence of management as
required from time to time.
Our Board has not adopted a formal policy regarding directors' attendance
at our annual meeting of the stockholders. However, our directors are strongly
encouraged to attend the Annual Meeting. Mr. LaPine and Mr. Lanz attended our
2004 Annual Meeting.
The standing committees of the Board include an Audit Committee, a
Compensation Committee and a Nominating and Corporate Governance Committee. The
Nominating and Corporate Governance Committee was formed in November of 2003.
All members of the Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee are independent directors as such term is defined
in the applicable listing standards imposed by the American Stock Exchange.
AUDIT COMMITTEE. The Audit Committee currently consists of Messrs. Lanz,
Williams and Murray, with Mr. Lanz as its chairman. Mr. Lanz was elected to the
Board and to the Audit Committee in November of 2001. The Board has considered
whether the members of the Audit Committee satisfy the additional "independence"
and "financial literacy" requirements for Audit Committee members as set forth
in the Item 7(d)(3)(iv) of Schedule 14A and as adopted in the applicable listing
standards imposed by the American Stock Exchange. The Board has concluded that
all current members of the Audit Committee satisfy these heightened independence
requirements. The Board has also determined that Mr. Lanz is an audit committee
financial expert and is independent of management, as required under Section 407
of the Sarbanes-Oxley Act of 2002. The Board believes that Mr. Lanz is qualified
to be an "audit committee financial expert".
The Audit Committee's responsibilities are described in a written charter
adopted by the Board of Directors. The Audit Committee Charter was amended in
fiscal year 2005. The Audit Committee serves as the representative of the Board
for the general oversight of our affairs in the area of financial accounting and
reporting, and its underlying internal controls. The Audit Committee makes
recommendations to the Board concerning the engagement of independent
accountants; reviews with the independent accountants the plans, scope and
results of the audit engagement; approves professional services provided by the
independent accountants; considers the range of audit and non-audit fees;
verifies that auditors are independent of management and are objective in their
findings; reviews the annual CPA audit and recommendations of internal controls
and related management responses; reviews the audit reports with management and
the auditor; oversees the internal audit function and the accounting and
financial reporting processes of our company; and monitors management's efforts
to correct deficiencies described in any audit examination.
The Audit Committee has also established procedures for (i) the receipt,
retention and treatment of complaints received by our company regarding
accounting, internal accounting controls, or auditing matters, and (ii) the
confidential, anonymous submission by employees of our company concerns
regarding questionable accounting or auditing matters.
The Audit Committee held a total of five (5) meetings during fiscal year
2005, which were attended by all of the Audit Committee members appointed at
that time, except Laurence Murray who missed two (2) audit committee meetings. A
report of the Audit Committee which discusses the activities of the Audit
Committee in more detail can be found on page 13 of this proxy statement. The
Audit Committee Charter, as amended, is attached hereto as Appendix B to this
proxy statement and is also available on our website at www.semotus.com, the
content of which website is not incorporated by reference into, or considered a
part of, this document.
COMPENSATION COMMITTEE. The Compensation Committee currently consists of
Messrs. Lanz, Williams and Murray, with Mr. Murray as its chairman. All members
of the Compensation Committee are independent directors, as defined under the
applicable listing standards imposed by the American Stock Exchange. The
Compensation Committee determines the compensation of senior executive officers
(such as the Chief Executive Officer and Chief Financial Officer), subject, if
the Board so directs, to the Board's further ratification of the compensation;
determines the compensation for other officers or delegates such determinations
to the chief executive officer; grants options, stock or other equity interests
under our stock option or other equity-based incentive plans; and administers
those plans and, where such plans specify, our other employee benefit plans.
The Compensation Committee held one (1) meeting during fiscal year 2005.
The Compensation Committee Report which discusses the activities of the
Compensation Committee in more detail is set forth below beginning on page 14 of
this proxy statement. A copy of the Charter of the Compensation Committee, which
became effective in February of 2003, is available on our website at
www.semotus.com, the content of which website is not incorporated by reference
into, or considered a part of, this document.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. The Nominating and Corporate
Governance Committee was formed in November of 2003. The Nominating and
Corporate Governance Committee currently consists of Messrs. Lanz, Williams and
Murray, with Mr. Williams as its chairman. All members of the Nominating and
Corporate Governance Committee are independent directors, as defined under the
applicable listing standards imposed by the American Stock Exchange.
The Nominating and Corporate Governance Committee assists the Board in
identifying qualified individuals to become board members, in determining the
composition of the board of directors and its committees, in monitoring a
process to assess board effectiveness and in developing and implementing the
Company's corporate governance guidelines.
The Nominating and Corporate Governance Committee held one (1) meeting
during fiscal year 2005. A copy of the Charter of the Nominating and Corporate
Governance Committee, which became effective in November of 2003, is available
on our website at www.semotus.com, the content of which website is not
incorporated by reference into, or considered a part of, this document.
DIRECTOR NOMINEE CRITERIA AND PROCESS
The Nominating and Corporate Governance Committee is responsible for
reviewing and recommending nominees to the Board, which is responsible for
approving director candidates for nomination by the Board. The Nominating and
Corporate Governance Committee unanimously recommended the nominees for election
to the Board for the 2005 Annual Meeting. The Committee's objective, pursuant to
its charter, is to assist the Board in identifying qualified individuals to
become Board members, in determining the composition of the Board and its
committees, in monitoring a process to assess Board effectiveness and in
developing and implementing our corporate governance guidelines.
In considering director candidates, the Committee will consider, among
other things, those individuals who have the highest personal and professional
integrity, who shall have demonstrated exceptional ability and judgment and who
shall be most effective, in conjunction with the other nominees to the Board, in
collectively serving the long-term interests of the stockholders. Our Nominating
and Corporate Governance Committee has not paid a third party to identify or
evaluate potential nominees in fiscal 2005 or with respect to the current slate.
However, the Committee will take suggestions from many sources, including, but
not limited to, stockholders or third-party search firms.
STOCKHOLDER NOMINATIONS FOR DIRECTORS
Our stockholders may submit candidates for consideration as director
nominees. All candidate submissions must comply with the requirements of our
certificate of incorporation and bylaws, as well as the requirements of the
Securities Exchange Act of 1934. Our Bylaws contain certain time limitations and
procedures for stockholder nominations of directors. Any stockholder who intends
to bring before an annual meeting of stockholders any nomination for director
shall deliver a written notice to the Secretary of our company setting forth
specified information with respect to the stockholder and additional information
as would be required under Regulation 14A under the Exchange Act and Rule 14a-8
for a proxy statement used to solicit proxies for such nominee. In general, the
notice must be delivered not less than one hundred and twenty (120) days prior
to the first anniversary of the preceding year's mailing date of the annual
meeting's proxy statement.
DIRECTOR COMPENSATION
Except for reimbursement for reasonable travel expenses relating to
attendance at Board meetings and discretionary grants of stock options our
directors are not compensated for their services as directors. Directors who are
employees are eligible to participate in our equity incentive plan. In fiscal
year 2005, we granted options to purchase 10,000 shares of common stock, for a
total of 30,000 options, to each of Robert Lanz, Mark Williams and Laurence
Murray.
The following table identifies all stock options that we have granted to
our current non-employee directors since June 1996.
NUMBER OF
SHARES UNDERLYING EXERCISE GRANT DATE /
NON-EMPLOYEE DIRECTOR OPTIONS (#) PRICE ($) EXPIRATION DATE
- --------------------- ----------- --------- ---------------
Robert Lanz 10,000 (1) $ 0.15 11/5/2001 / 11/5/2006
10,000 (2) $ 0.15 6/3/2002 / 6/3/2007
30,000 (3) $ 0.14 2/24/2003 / 2/24/2008
10,000 (3) $ 0.24 11/5/2004 / 11/5/2008
Mark Williams 10,000 (4) $ 0.15 8/1/2002 / 8/1/2007
10,000 (3) $ 0.12 4/1/2003 / 4/1/2008
10,000 (3) $ 0.24 11/5/2004 / 11/5/2008
Laurence Murray 10,000 (5) $ 0.17 11/19/2002 / 11/19/2007
10,000 (3) $ 0.14 2/24/2003 / 2/24/2008
10,000 (3) $ 0.24 11/5/2004 / 11/5/2008
- --------------
(1) These options were repriced on November 6, 2001, May 16, 2002 and again on
October 23, 2002, and are all exercisable as of March 31, 2003.
(2) These options were repriced on October 23, 2002, and vest as to 50% one
year from the date of grant, or on June 3, 2003, and the remaining 50% vest
one year thereafter, or on June 3, 2004.
(3) These options vest monthly as to 1/24th for two years and have an exercise
price equal to the closing market price on the date of grant.
(4) These options are all immediately exercisable as of the grant date, and
were repriced on October 23, 2002.
(5) These options are all immediately exercisable as of the grant date, and
have an exercise price equal to the closing market price on the date of
grant, November 19, 2002.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION. The following table sets forth the compensation for
the fiscal years ended March 31 2003, 2004 and 2005 awarded to, earned by or
paid to our chief executive officer and the four other most highly paid
executive officers, as applicable. We refer to these officers as the "Named
Executive Officers."
SUMMARY COMPENSATION TABLE
- ---------------------- ---- ------------------------------------- ---------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
- ---------------------- ---- ------------------------------------- ---------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION OPTIONS/SARS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($) (#) ($)
- ---------------------- ---- ---------- --------- ------------ ------------ ------------
Anthony LaPine 2005 $ 216,000 -- $ 11,949(1) -- --
Chairman and Chief 2004 $ 216,000 -- $ 9,022(1) 500,000(2) $ 77,783(4)
Executive Officer 2003 $ 218,000 -- $ 13,859(1) 891,000(3) $ 631,435(4)
- ---------------------- ---- ---------- --------- ------------ ------------ ------------
Pamela LaPine 2005 $ 112,050 -- $ 11,969(1) -- --
Executive Vice 2004 $ 108,000 -- $ 13,995(1) 40,000(2) --
President of Sales 2003 $ 109,000 -- $ 10,966(1) 385,000(3) --
and Marketing
- ---------------------- ---- ---------- --------- ------------ ------------ ------------
- --------------
(1) Represents automobile allowances and / or mileage reimbursements.
(2) Represents new options granted to purchase shares of common stock under
the Company's 1996 Stock Option Plan during fiscal year 2004, 400,000 of
which were granted on May 16, 2003 to Anthony LaPine, 100,000 of which
were granted on July 27, 2003 to Anthony LaPine, and 40,000 of which were
granted to Pamela LaPine on July 24, 2003.
(3) Represents previously granted options to purchase shares of common stock
under the Company's 1996 Stock Option Plan that were repriced on May 16,
2002 and again on October 23, 2002 as discussed in "Report on Repricing of
Options / SARs", except for the additional grants issued to each named
executive officer on May 16, 2002 (expiring on 5/16/12) and subsequently
repriced on October 23, 2002 (81,000 to Anthony LaPine; 27,000 to Charles
Dargan; and 35,000 to Pamela LaPine).
(4) Represents the Company's forgiveness of certain loans to Anthony LaPine
for the purchase of stock; these promissory notes did not result in the
Company lending cash to Mr. LaPine.
STOCK OPTION GRANTS. No individual grants of stock options were made to any
of the Named Executive Officers during the fiscal year ended March 31, 2005. No
stock appreciation rights were granted to these individuals during the year.
AGGREGATE STOCK OPTION EXERCISES. The following table sets forth certain
information concerning individual exercises of stock options during the fiscal
year ended March 31, 2005, of which there were none, and the shares represented
by outstanding options held by each of the Named Executive Officers as of March
31, 2005.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
VALUE OF
NUMBER OF SHARES UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS OPTIONS
ACQUIRED AT MARCH 31, 2005 AT MARCH 31, 2005
ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE (1)
NAME (#) ($) (#) ($)
- ----------------- -------- -------- ------------------- -----------------
Anthony N. LaPine -0- -0- 1,391,000 / -0- 319,930 / -0-
Pamela LaPine -0- -0- 425,000 / -0- 97,750 / -0-
- --------------
(1) Options are "in the money" to the extent the closing price of our common
stock on March 31, 2005 exceeded the exercise price of the options. The
value of unexercised options represents the difference between the exercise
price of net options and $0.40, which was the closing price of our common
stock on March 31, 2005.
STOCK OPTION PLANS
We currently have one authorized stock option plan, the 1996 Stock Option
Plan, as amended, which will terminate in June of 2006. A description of the
1996 Stock Option Plan is located under FootNote 11 of our Annual Report on Form
10-KSB, a copy of which is included with this proxy statement. As part of this
Annual Meeting we are asking for shareholder approval for a second stock option
plan, the 2005 Stock Option Plan. A description of the 2005 Stock Option Plan is
located under the heading "Approval of the 2005 Stock Option Plan" on page 7 of
this proxy statement.
SUMMARY INFORMATION CONCERNING STOCK OPTION PLANS
The following table sets forth certain information relating to our option
plans as of March 31, 2005:
EQUITY COMPENSATION PLAN INFORMATION
=================================================================================================
NUMBER OF
SECURITIES
REMAINING
AVAILABLE FOR
FUTURE ISSUANCE
UNDER EQUITY
COMPENSATION
NUMBER OF SECURITIES WEIGHTED-AVERAGE PLANS (EXCLUDING
TO BE ISSUED UPON EXERCISE PRICE SECURITIES
EXERCISE OF OF OUTSTANDING REFLECTED IN
OUTSTANDING OPTIONS OPTIONS COLUMN (A))
PLAN CATEGORY PLAN NAME (a) (b) (c)
- ------------------- -------------- -------------------- ---------------- ----------------
Equity Compensation The 1996 Stock
plans approved by Option Plan
security holders 3,408,818 $ 0.29 575,399
- ------------------- -------------- -------------------- ---------------- ----------------
Clickmarks
Warrants (1) 1,000,000 $ 0.39 --
- ------------------- -------------- -------------------- ---------------- ----------------
Equity Compensation The 2005 Stock
plans not approved Option Plan
by security holders -- -- 3,000,000
- ------------------- -------------- -------------------- ---------------- ----------------
TOTAL 4,408,818 $ 0.31 3,575,399
- ------------------- -------------- -------------------- ---------------- ----------------
(1) As part of the acquisition of Clickmarks, Inc., various Clickmarks
employees were retained by our company. As a hiring and retention
incentive, in lieu of issuing stock options under the Company's stock
option plan, we issued warrants to this group of employees to purchase up
to a total of 1,000,000 shares of our common stock at an exercise price of
$0.39 per share, which was the closing price of our common stock on June
23rd, the date the acquisition closed and their date of hire, vesting over
a one year period and having a ten year term. We may also issue up to a
maximum total of 200,000 additional shares of restricted common stock to
some of these Clickmarks' employees at or before their annual anniversary
with our company.
INDEBTEDNESS OF DIRECTORS, OFFICERS AND OTHERS
Our directors, senior officers, and their associates were not indebted to
us or to any of our subsidiaries at any time since the beginning of our last
completed fiscal year.
EMPLOYMENT AGREEMENTS
The Company entered into a three-year employment agreement with Anthony
LaPine, our CEO, which became effective on May 1, 1996, and was extended to May
1, 2004. The agreement automatically renews for one year terms unless notice is
provided by either party. As of May 1, 2005, no notice had been given by either
party, and therefore, the agreement has automatically renewed for an additional
one year term ending May 1, 2006. According to the agreement, Mr. LaPine
receives a base salary of $240,000 per year, plus discretionary increases in
conformity
with the Company's standard review procedure. However, on May 1, 2002, Mr.
LaPine voluntarily, along with all other employees with an annual salary of
$50,000 or greater, took a ten percent salary reduction. As of June 15, 2005 his
base salary was re-instated. Mr. LaPine is also given a car allowance that is
not to exceed $1,000 a month. Mr. LaPine receives health, dental and vision
insurance, but contributes the same percentage towards the monthly premium as
all of our employees. If we terminate Mr. LaPine's employment agreement prior to
the end of the current term for reasons other than disability, or if Mr. LaPine
terminates the agreement for "good reason" as defined in the agreement, we are
required to continue paying the salary and other benefits for the duration of
the term of the agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective May 1, 1996, the Company entered into a three year employment
agreement with our Chief Executive Officer, Anthony LaPine. This agreement was
extended to May 1, 2004. The agreement automatically renews for one year terms
unless notice is provided by either party. As of May 1, 2005, no notice had been
given by either party, and therefore, the agreement has automatically renewed
for an additional one year term ending May 1, 2006.
AUDIT COMMITTEE REPORT
At the time of this Report, the Audit Committee of the Board consists of
three directors who are not employees of the Company or any of its subsidiaries.
The Board believes that all the members of our Committee are "independent
directors" as defined under applicable listing standards imposed by the American
Stock Exchange.
The Board has modified its written Audit Committee Charter. A copy of the
revised Charter is attached as Attachment A.
Our Committee has met and held discussions with management and the
independent auditors at the time of such meeting, LL Bradford & Company, LLC. As
a part of this process, we have:
o reviewed and discussed the audited financial statements with
management,
o discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication
with Audit Committees), and
o received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and discussed with
the independent auditors their independence.
Based on the review and discussions referred to above, our committee
recommended to the Board that the audited financial statements be included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31,
2005, for filing with the SEC.
Audit Committee Of The Board Of Directors
/s/ Robert Lanz
Robert Lanz
CHAIRMAN
/s/ Mark Williams
Mark Williams
/s/ Laurence W. Murray
Laurence W. Murray
INFORMATION REGARDING THE FEES PAID TO LL BRADFORD & COMPANY, LLC
DURING THE YEAR ENDING MARCH 31, 2005
AUDIT FEES
The aggregate fees billed for professional services rendered to our company
by LL Bradford & Company, LLC for the year ended March 31, 2005 were:
-------------------------------------------------- ------------
2005
------------
-------------------------------------------------- ------------
Audit fees $ 36,000
-------------------------------------------------- ------------
Audit-related fees:
-------------------------------------------------- ------------
SEC filings review and consent --
-------------------------------------------------- ------------
Total audit and audit-related fees $ 36,000
-------------------------------------------------- ------------
Tax fees --
-------------------------------------------------- ------------
All other fees --
-------------------------------------------------- ------------
-------------------------------------------------- ------------
Total fees $ 36,000
-------------------------------------------------- ------------
The aggregate fees billed for all audit-related services rendered by LL
Bradford & Company, LLC for the year ended March 31, 2005 (see chart above under
heading "Audit-related fees") related to the review of various SEC filings and
correspondence, such as Form S-3s. No other professional services were rendered
or fees were billed by LL Bradford & Company, LLC for the most recent fiscal
year or for the year ending March 31, 2004.
The Audit Committee has adopted policies and procedures for the
pre-approval of the above fees. All requests for services to be provided by the
Company's independent accountants are submitted to the Audit Committee. Requests
for all non-audit related services require pre-approval form the Audit
Committee.
INFORMATION REGARDING THE FEES PAID TO BURR, PILGER & MAYER LLP
DURING THE YEAR ENDING MARCH 31, 2004
AUDIT FEES
The aggregate fees billed for professional services rendered to our company
by Burr, Pilger & Mayer LLP for the year ended March 31, 2004 were:
-------------------------------------------------- ------------
2004
------------
-------------------------------------------------- ------------
Audit fees $ 39,155
-------------------------------------------------- ------------
Audit-related fees:
-------------------------------------------------- ------------
SEC filings review and consent $ 5,595
-------------------------------------------------- ------------
Total audit and audit-related fees $ 44,750
-------------------------------------------------- ------------
Tax fees --
-------------------------------------------------- ------------
All other fees --
-------------------------------------------------- ------------
-------------------------------------------------- ------------
Total fees $ 44,750
-------------------------------------------------- ------------
The aggregate fees billed for all audit-related services rendered by Burr,
Pilger & Mayer LLP for the year ended March 31, 2004 (see chart above under
heading "Audit-related fees") related to the review of various SEC filings and
correspondence, such as Form S-3s. No other professional services were rendered
or fees were billed by Burr, Pilger & Mayer LLP for the most recent fiscal year
or for the year ending March 31, 2004.
The Audit Committee has adopted policies and procedures for the
pre-approval of the above fees. All
requests for services to be provided by the Company's independent accountants
are submitted to the Audit Committee. Requests for all non-audit related
services require pre-approval form the Audit Committee.
CORPORATE GOVERNANCE INFORMATION
Stockholders can access our corporate governance information, including our
Code of Ethics for Principal Executive Office and Senior Financial Officers and
the charters of the Audit Committee, Compensation Committee, and Nominating and
Corporate Governance Committee, at our website, www.semotus.com , the content of
which website is not incorporated by, referenced into, or considered a part of,
this document.
ADDITIONAL INFORMATION
THE COMPANY'S 2005 ANNUAL REPORT ON FORM 10-KSB, INCLUDING FINANCIAL
STATEMENTS FOR THE YEAR ENDED MARCH 31, 2005, IS BEING DISTRIBUTED TO ALL
STOCKHOLDERS OF THE COMPANY TOGETHER WITH THIS PROXY STATEMENT, IN SATISFACTION
OF THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE COMMISSION. ADDITIONAL COPIES
OF THE REPORT, EXCEPT FOR EXHIBITS, ARE AVAILABLE AT NO CHARGE UPON REQUEST. TO
OBTAIN ADDITIONAL COPIES OF THE ANNUAL REPORT ON FORM 10-KSB, PLEASE CONTACT
SEMOTUS SOLUTIONS, 718 UNIVERSITY AVE., SUITE 202, LOS GATOS, CA 95032, OR AT
TELEPHONE NUMBER (408) 399-6120.
COMMUNICATING WITH THE BOARD OF DIRECTORS
The Board does not currently have a formal process for security holders to
send communications to the Board. We, however, encourage stock holders to
communicate directly with the Board as a whole, with non-management directors or
with specified individual directors, by sending correspondence to the Secretary
at 718 University Ave., Suite 202, Los Gatos, CA 95032.
Under our company's Bylaws, stockholders may propose business to be brought
before an annual meeting. In order for a stockholder to submit a proposal for
consideration at our annual meeting, the stockholder must fulfill the
requirements set forth in our by-laws and Rule 14a-8 under the Securities
Exchange Act of 1934 setting forth specified information with respect to the
stockholder and additional information as would be required under Regulation 14A
under the Exchange Act and Rule 14a-8 for a proxy statement used to solicit
proxies for such nominee. In general, the notice must be delivered not less than
one hundred and twenty (120) days prior to the first anniversary of the
preceding year's mailing date of the annual meeting's proxy statement.
If you intend to propose any matter for action at our 2006 Annual Meeting
of Stockholders and wish to have the proposal included in our proxy statement,
you must submit your proposal to the Secretary of Semotus Solutions at 718
University Ave., Suite 202, Los Gatos, CA 95032, not later than 5:00 p.m.
Pacific Standard Time on or before April 8, 2006,. Please note that proposals
must comply with all of the requirements of Rule 14a-8 under the Securities
Exchange Act of 1934. Only then can we consider your proposal for inclusion in
our proxy statement and proxy relating to the 2006 Annual Meeting. We will be
able to use proxies you give us for the next year's meeting to vote for or
against any shareholder proposal that is not included in the proxy statement at
our discretion unless the proposal is submitted to us on or before April 8,
2006.
/s/ Anthony N. LaPine
Anthony N. LaPine
PRESIDENT
Los Gatos, California
July 27, 2005
ATTACHMENT A
SEMOTUS SOLUTIONS, INC.
2005 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 2005 Stock Option Plan (the
"Plan") of Semotus Solutions, Inc. (the "Company") are to:
(i) encourage selected officers, directors, employees and consultants to
improve operations and increase profits of the Company;
(ii) encourage selected officers and employees to accept or continue
employment with the Company or its Affiliates; and
(iii) increase the interest of selected officers, directors, employees and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company ("Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs"), intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
options" ("NQOs").
2. ELIGIBLE PERSONS. Every person who at the date of grant of an Option is an
employee of the Company or of any Affiliate (as defined below) (including
employees who are also officers or directors of the Company or of any Affiliate)
is eligible to receive NQOs or ISOs under this Plan. The term "Affiliate" as
used in the Plan means a parent or subsidiary corporation as defined in the
applicable provisions (currently Sections 424(e) and (f), respectively) of the
Code. Every person who is a director, officer, employee of or consultant to the
Company or any Affiliate at the date of grant of an Option is eligible to
receive NQOs under this Plan.
3. STOCK SUBJECT TO THIS PLAN. Subject to the provisions of Section 6.1.1 of
the Plan, the maximum aggregate number of shares of stock that may be granted
pursuant to this Plan is three million (3,000,000) shares of Common Stock. The
shares unexercised shall become available again for grants under the Plan.
4. ADMINISTRATION.
4.1 Option Committee. This Plan shall be administered by the Board of
Directors of the Company (the "Board") or by a committee of at least two
non-employee Board members to which administration of the Plan is delegated (in
either case, the "Option Committee"). No member of the Option Committee shall be
liable for any decision, action, or omission respecting the Plan, any options,
or any option shares.
4.2 Disinterested Administration. This Plan shall be administered in
accordance with the disinterested administrative requirements of Rule 16b-3
promulgated by the Securities and Exchange Commission ("Rule 16b-3"), or any
successor rule thereto.
SEMOTUS SOLUTIONS, INC.
2005 STOCK OPTION PLAN
4.3 Authority of the Option Committee. Subject to the other provisions of
this Plan, the Options Committee shall have the authority, in its discretion:
(i) to grant Options; (ii) to determine the fair market of the Common Stock
subject to Options; (iii) to determine the exercise price of Options granted;
(iv) to determine the persons whom, and the time or times at which, Options
shall be granted, and the number of shares of Common Stock subject to each
Option; (v) to interpret this Plan; (vi) to prescribe, amend, and rescind rules
and regulations relating to this Plan; (vii) to determine the terms and
provisions of each Option granted (which need not be identical), including but
not limited to, the time or times at which Options shall be exercisable; (viii)
with the consent of the optionee, to modify or amend any Option; (ix) to defer
(with the consent of the optionee) or accelerate the exercise date or vesting of
any Option; (x) to authorize any person to execute on behalf of the Company any
instrument evidencing the grant of an Option; and (xi) to make all other
determination deemed necessary or advisable for the administration of this Plan.
The Option Committee may delegate nondiscretionary administrative duties to such
employees of the Company as it deems proper.
4.4 Determinations Final. All questions of interpretation,
implementation, and application of this Plan shall be determined by the Option
Committee. Such determinations shall be final and binding on all persons.
5. GRANTING OF OPTIONS: OPTION AGREEMENT.
5.1 Ten-Year Term. The Board shall grant no Options under this Plan after
ten years from the date of adoption of this Plan.
5.2 Option Agreement. Each Option shall be evidenced by a written stock
option agreement, in form satisfactory to the Company, executed by the Company
and the person to whom such Option is granted; provided, however, that the
failure by the Company, the optionee, or both to execute such an agreement shall
not invalidate the granting of any Option.
5.3 Designation as ISO or NQO. The agreement shall specify whether each
Option it evidences is a NQO or an ISO. Notwithstanding designation of any
Option as an ISO or a NQO, if the aggregate fair market value of the shares
under Options designated as ISOs would become exercisable for the first time by
any Optionee at a rate in excess of $100,000 in any calendar year (under all
plans of the Company), then unless otherwise provided in the stock option
agreement or by the Option Committee, such Options shall be NQOs to the extent
of the excess above $100,000. For purposes of this Section 5.3, the Options
shall be taken into account in the order in which they were granted, and the
fair market value of the shares shall be determined as of the time the Option
with respect to such shares is granted.
5.4 Grant to Prospective Employees. The Option Committee may approve the
grant of Options under this Plan to persons who are expected to become employees
of the Company, but are not employed at the date of approval. In such cases, the
Option shall be deemed granted, without further approval, on the date the
optionee is first treated as an employee for payroll purposes.
6. TERMS AND CONDITIONS OF OPTIONS. Each Option granted under this Plan shall
SEMOTUS SOLUTIONS, INC.
2 2005 STOCK OPTION PLAN
be designated as a NQO or an ISO. Each Option shall be subject to the terms and
conditions set forth in Section 6.1. NQOs shall be also subject to the terms and
conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. All Options
granted under this Plan shall be subject to the following terms and conditions:
6.1.1 Changes in Capital Structure. The existence of outstanding
Options shall not affect the Company's right to effect adjustments,
recapitalization, reorganizations, or other changes in its or any other
corporation's capital structure or business, any merger or consolidation, any
issuance of bonds, debentures, preferred, or prior preference stock ahead of or
affecting Common Stock, the dissolution or liquidation of the Company's or any
other corporation's assets or business or any other corporate act whether
similar to the events described above or otherwise. Subject to Section 6.1.2, if
the stock of the Company is changed by reason of a stock split, reverse stock
split, stock dividend, recapitalization, or other event, or converted into or
exchanged for other securities as a result of a merger, consolidation,
reorganization, or other event, appropriate adjustments shall be made in (i) the
number and class of shares of stock subject to this Plan and each outstanding
Option; provided, however, that the Company shall not be required to issue
fractional shares as a result to any such adjustments. Each such adjustment
shall be subject to approval by the Option Committee in its sole discretion, and
may be made without regard to any resulting tax consequence to the optionee.
6.1.2 Corporate Transactions. In connection with (i) any merger,
consolidation, acquisition, separation, or reorganization in which more than 50%
of the shares of Common Stock of the Company outstanding immediately before such
event are converted into cash or into another security, (ii) any dissolution or
liquidation of the Company or any partial liquidation involving 50% or more of
the assets of the Company, (iii) any sale of more than 50% of the Company's
assets, or (iv) any like occurrence in which the Company is involved, the Option
Committee may, in its absolute discretion, do one or more of the following upon
ten days' prior written notice to optionees; (a) accelerate any vesting schedule
to which an Option is subject; (b) cancel Options upon payment to each optionee
in cash, with respect to each Option to the extent then exercisable, of any
amount which, in the absolute discretion of the Option Committee, is determined
to be equivalent to any excess of the market value (at the effective time of
such event) of the consideration that such optionee would have received of the
Option had been exercised before the effective time over the exercise price of
the Option; (c) shorten the period during which such Options are exercisable
(provided they remain exercisable, to the extent otherwise exercisable, for at
least ten days after the date the notice is given); or (d) arrange that new
option rights be substituted for the option rights granted under this Plan, or
that the Company's obligations as to Options outstanding under this Plan be
assumed, by an employer corporation other than the Company or by a parent or
subsidiary of such employer corporation. The actions described in this Section
6.1.2 may be taken without regard to any resulting tax consequence to the
optionee.
6.1.3 Time of Option Exercise. Except as necessary to satisfy the
requirements of Section 422 of the Code and subject to Section 5, Options
granted under this Plan shall be exercisable (a) immediately as of the effective
date of the stock option agreement granting the
SEMOTUS SOLUTIONS, INC.
3 2005 STOCK OPTION PLAN
Option, or (b) at such other times as are specified in the written stock option
agreement relating to such Option: provided, however, that so long as the
optionee is a director or officer, as those terms are used in Section 16 of the
Exchange Act, such Option may not be exercisable, in whole or in part, at any
time prior to the six-month anniversary of the date of the Option grant, unless
the Option Committee determines that the foregoing provision is not necessary to
comply with the provisions of Rule 16b-3 or that Rule 16b-3 is not applicable to
the Plan. No Option shall be exercisable, however, until a written stock option
agreement in form satisfactory to the Company is executed by the Company and the
optionee. The Option Committee, in its absolute discretion, may later waive any
limitations respecting the time at which an Option or any portion of an Option
first becomes exercisable.
6.1.4 Option Grant Date. Except as provided in Section 5.4 or as
otherwise specified by the Option Committee, the date of grant of an Option
under this Plan shall be the date as of which the Option Committee approves the
grant.
6.1.5 Nonassignability of Option Rights. No Option granted under this
Plan shall be assignable or otherwise transferable by the optionee except by
will, by the laws of descent and distribution, or pursuant to a qualified
domestic relations order (limited in the case of an ISO, to a qualified domestic
relations order that effects a transfer of an ISO that is community property as
part of a division of community property). During the life of the optionee, an
Option shall be exercisable only by the optionee.
6.1.6 Payment. Except as provided below, payment in full shall be
made for all stock purchased at the time written notice of exercise of an Option
is given to the Company, and proceeds of any payment shall constitute general
funds of the Company. Payment may be made in cash, by delivery to the Company of
shares of Common Stock owned by the optionee (duly endorsed in favor of the
Company or accompanied by a duly endorsed stock power), or by any other form of
consideration and method of payment to the extent permitted under any applicable
laws. Any shares delivered shall be valued as of the date of exercise of the
Option in the manner set forth in Section 6.1.12. Optionees may not exercise
Options by delivery of shares more frequently than at six-month intervals.
6.1.7 Termination of Employment. Unless determined otherwise by the
Option Committee in its absolute discretion to the extent not already expired or
exercised, every Option granted under this Plan shall terminate at the earlier
of (a) the Expiration Date (as defined in Section 6.1.12) or (b) three months
after termination of employment with the Company or any Affiliate; provided,
that an Option shall be exercisable after the date of termination of employment
only to the extent exercisable on the date of termination; and provided further,
that if termination of employment is due to the optionee's death or "disability"
( as determined in accordance with Section 22(e)(3) of the Code), the optionee,
or the optionee's personal representative (or any other person who acquires the
Option from the optionee by will or the applicable laws of descent and
distribution), may at any time within 18 months after the termination of
employment (or such lesser period as is specified in the option agreement but in
no event after the Expiration Dare of the Option), exercise the rights to the
extent they were exercisable on the date of termination. Transfer of an optionee
from the Company to an Affiliate or vice versa, or from one Affiliate to
another, or a leave of absence due to sickness, military service, or other cause
duly approved by the Company,
SEMOTUS SOLUTIONS, INC.
4 2005 STOCK OPTION PLAN
shall not be deemed a termination of employment for purposes of this Plan. For
the purpose of this Section 6.1.7, "employment" means engagement with the
Company or any subsidiary of the Company either as an employee, as a director,
or as a consultant.
6.1.8 Repurchase of Stock. At the time the Company grants Options
under this Plan, the Company may retain, for itself or others, rights to
purchase the shares acquired under the Option or impose other restrictions on
the shares. The terms and conditions of any such rights or other restrictions
shall be set forth in the stock option agreement evidencing the Option.
6.1.9 Withholding and Employment Taxes. At the time of exercise of an
Option (or at such later time(s) as the Company may prescribe), the optionee
shall remit to the Company in cash all applicable (as determined by the Company
in its sole discretion) federal and state withholding taxes. Subject to
compliance with all applicable laws, the Option Committee may, in the exercise
of its sole discretion, permit an optionee to pay some or all of such taxes by
means of a promissory note on such terms as the Option Committee deems
appropriate. If authorized by the Option Committee in its sole discretion, and
if the Option has been held for six months or more, an optionee may elect to
have shares of Common Stock which are acquired upon exercise of the Option
withheld by the Company or to tender to the Company other shares of Common Stock
or other securities of the Company owned by the optionee on the date of
determination of the amount of tax to be withheld as a result of the exercise of
such Option (the "Tax Date") to pay the amount of tax that is required by law to
be withheld by the Company as a result of the exercise of such Option, provided
that the election satisfies the following requirements:
(i) the election shall be irrevocable, shall be made at least
six months before the Option exercise, and shall be subject to the disapproval
of the Option Committee at any time before consummation of the Option exercise;
or
(ii) the election shall be made in advance to take effect in a
subsequent "window period" (as defined below) in which the Option is exercised,
and the Option Committee shall approve the election when it is made or at any
time thereafter up to consummation of the Option exercise; or
(iii) the election shall be made in a window period and the
approval of the Option Committee shall be given after the election is made and
within the same window period, and the Option exercise shall be consummated
within such window period; or
(iv) shares or other previously owned securities shall be
tendered (but stock shall not be withheld.) at any time up to the consummation
of the Option exercise (in which event, neither a prior irrevocable election nor
window period timing nor shall be required).
A "window period" is the period beginning on the third business day following
the date of release for publication of quarterly or annual summary statements of
sales and earnings and ending on the 12th business day following such date. Any
securities so withheld or tendered shall be valued by the Company as of the Tax
Date.
SEMOTUS SOLUTIONS, INC.
5 2005 STOCK OPTION PLAN
6.1.10 Other Provisions. Each Option granted under this Plan may
contain such other terms, provisions, and conditions not consistent with this
Plan as may be determined by the Option Committee, and each ISO granted under
this Plan shall include such provisions and conditions as are necessary to
qualify the Option as an "incentive stock option" within the meaning of Section
422 of the Code.
6.1.11 Determination of Value. For purposes of the Plan, the value of
Common Stock or other securities of the Company shall be determined as follows:
(i) If the Common Stock of the Company is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers Automated Quotation System, its fair market value shall be the closing
sales price for such Common Stock or the closing bid if no sale was reported, as
quoted on such system or exchange (or the largest such exchange) for the date
the value is to be determined (or if there is no sale for such date, then for
the last preceding business day on which there was at least one sale), as
reported in the Wall Street Journal.
(ii) If the Common Stock of the Company is regularly quoted by
a recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
Common Stock on the date the value is to be determined (or if there is no quoted
price for the date of grant, then for the last preceding business day on which
there was a quoted price).
(iii) If the Common Stock of the Company is as described in
Section 6.1.11(i) or (ii), but is restricted by law, contract, market
conditions, or otherwise as to salability or transferability, its fair market
value shall be as set forth in Section 6.1.11(i) or (ii), as appropriate, less,
as determined by the Option Committee, an appropriate discount, based on the
nature and terms of the restrictions.
(iv) In the absence of an established market for the Common
Stock, the fair market value thereof shall be determined by the Option
Committee, with reference to the Company's net worth, prospective earning power,
dividend-paying capacity, and other relevant factors, including the goodwill of
the Company, the economic outlook in the Company's industry, the Company's
position in the industry and its management, and the values of stock of other
corporations in the same or a similar line of business.
6.1.12 Option Term. No Option shall be exercisable more than ten
years after the date of grant, or such lesser period of time is set forth in the
stock option agreement (the end of the maximum exercise period stated in the
stock option agreement is referred to in this Plan as the "Expiration Date"). No
Option/ISO granted to any person who owns, directly or by attribution, stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company of any Affiliate (a "Ten Percent Stockholder")
shall be exercisable more than five years after the date of grant.
6.1.13 Exercise Price. The exercise price of any Option granted to
any Ten Percent Stockholder shall in no event be less than 110 percent of the
fair market value (determined in
SEMOTUS SOLUTIONS, INC.
2005 STOCK OPTION PLAN6
accordance with Section 6.1.11) of the stock covered by the Option at the time
the Option is granted.
6.1.14 Compliance with Securities Laws. The Company shall not be
obligated to offer or sell any shares of Common Stock upon exercise of an Option
unless the shares of Common Stock are at that time effectively registered or
exempt from registration under the federal securities laws and the offer and
sale of the shares of Common Stock are otherwise in compliance with all
applicable state and local securities laws. The Company shall have no obligation
to register the shares of Common Stock under the federal securities laws or take
whatever other steps may be necessary to enable the shares of Common Stock to be
offered and sold under federal or other securities laws. Upon exercising all or
any portion of an Option, an optionee may be required to furnish representations
or undertakings deemed appropriate by the Company to enable the offer and sale
of the shares of Common Stock or subsequent transfers of any interest in the
shares of Common Stock to comply with applicable securities laws. Stock
certificates evidencing shares of Common Stock acquired upon exercise of options
shall bear any legend required by, or useful for purposes of compliance with,
applicable securities laws, this Plan, or the stock option agreement evidencing
the Option.
6.2 Terms and Conditions to Which Only NQOs Are Subject. Options granted
under this Plan which are designated as NQOs shall be subject to the following
terms and conditions:
6.2.1 Exercise Price. Except as set forth in Section 6.1.13, the
exercise price of a NQO shall not be less than 85 percent of the fair market
value (determined in accordance with Section 6.1.12) of the stock subject to the
Option on the date of grant.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options granted
under this Plan which are designated as ISOs shall be subject to the following
terms and conditions:
6.3.1 Exercise Price. Except as set forth in Section 6.1.13, the
exercise price of an ISO shall be determined in accordance with the applicable
provisions of the Code and shall in no event be less than the fair market value
(determined in accordance with Section 6.1.11) of the Common Stock covered by
the Option at the time the Option is granted.
6.3.2 Disqualifying Dispositions. If Common Stock acquired upon
exercise of an ISO is disposed of in a "disqualifying disposition" within the
meaning of Section 422 of the Code, the holder of the Common Stock immediately
before the disposition shall notify the Company in writing of the date and terms
of the disposition and comply with any other requirements imposed by the Company
in order to enable the Company to secure any related income tax deduction to
which it is entitled.
7. MANNER OF EXERCISE.
7.1 Notice of Exercise. An optionee wishing to exercise an Option shall
give written notice to the Company at its principal executive office, to the
attention of the officer of the Company designated by the Option Committee,
accompanied by payment of the exercise price as
SEMOTUS SOLUTIONS, INC.
7 2005 STOCK OPTION PLAN
provided in Section 6.1.6. The date the Company receives written notice of an
exercise hereunder accompanied by payment of the exercise price and, if
required, by payment of any federal or state withholding or employment taxes
required to be withheld by virtue of exercise of the Option will be considered
as the date such Option was exercised.
7.2 Issuance of Certificates. Promptly after receipt of written notice of
exercise of an Option, the Company shall, without stock issue or transfer taxes
to the optionee or other person entitled to exercise the Option, deliver to the
optionee or such other person a certificate or certificates for the requisite
number of shares of Common Stock. Unless the Company specifies otherwise, an
optionee or transferee of an optionee shall not have any privileges as a
shareholder with respect to any Common Stock covered by the Option until the
date of issuance of a stock certificate. Subject to Section 6.1.1 hereof, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date the certificates are delivered.
8. EMPLOYMENT RELATIONSHIP. Nothing in this Plan or any Option granted
thereunder shall interfere with or limit in any way the right of the Company or
of any of its Affiliates to terminate any optionee's employment at any time, nor
confer upon any optionee any right to continue in the employ of the Company or
any of its Affiliates.
9. AMENDMENTS TO PLAN. The Board may amend this Plan at any time. Without the
consent of an optionee, no amendment may affect outstanding Options except to
conform this Plan and ISOs granted under this Plan to federal or other tax laws
relating to incentive stock options. No amendment shall require shareholder
approval unless shareholder approval is required to preserve incentive stock
option treatment for tax purposes or the Board otherwise concludes that
shareholder approval is advisable.
10. SHAREHOLDER APPROVAL: TERM. The Board of Directors of the Company adopted
this Plan on July 21, 2005, and the Company's shareholders approved this Plan on
____________, 2005. This Plan shall terminate ten years after initial adoption
by the Board unless terminated earlier by the Board. The Board may terminate
this Plan without shareholder approval. No Options shall be granted after
termination of this Plan, but termination shall not affect rights and
obligations under then-outstanding Options.
SEMOTUS SOLUTIONS, INC.
8 2005 STOCK OPTION PLAN
PROXY
SEMOTUS SOLUTIONS, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Anthony N. LaPine with the power to
appoint his substitute, and hereby authorizes him to represent and to vote as
designated below, all the shares of common stock of Semotus Solutions, Inc. held
of record by the undersigned on July 26, 2005, at the Annual Meeting of
Shareholders to be held at the Company's offices located at 718 University Ave.,
Suite 202, Los Gatos, CA 95032, on Thursday, September 22, 2005, at 2:30 p.m.,
Pacific Time or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SEMOTUS SOLUTIONS, INC. PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED
PRE-ADDRESSED ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE
IN PERSON IF YOU ATTEND THE MEETING.
SHARES OF COMPANY STOCK REPRESENTED BY THIS PROXY WILL BE VOTED AT
THE MEETING IN ACCORDANCE WITH THE SHAREHOLDER'S SPECIFICATIONS ON THE REVERSE
SIDE. THIS PROXY CONFERS DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN
OR DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF
SHAREHOLDERS TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders, Proxy Statement and Annual Report on Form 10-KSB.
(To be signed on the other side)
SEMOTUS SOLUTIONS, INC.
718 UNIVERSITY AVE.
SUITE 202
LOS GATOS, CA 95032
ATTN: TALI DURANT
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have the enclosed proxy card in hand when you
access the web site. You will be prompted to enter a 12-digit Control Number to
obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have the
enclosed proxy card in hand when you call. You will be prompted to enter the
12-digit Control Number and then follow the simple instructions the Vote Voice
provides you.
VOTE BY MAIL
Mark, sign, and date the enclosed proxy card and return it in the postage-paid
envelope we have provided or return it to Semotus Solutions, Inc., c/o ADP, 51
Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR SEMTS1 KEEP THIS PORTION FOR YOUR
BLACK INK AS FOLLOWS: RECORDS DETACH AND RETURN
THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
SEMOTUS SOLUTIONS, INC.
1. Election of four (4) Directors of the Company to serve until the next
Annual Meeting of Shareholders and until their successors have been duly
elected and qualified:
01) Anthony N. LaPine, 02) Robert Lanz, 03) Mark Williams,
04) Laurence W. Murray
For Withhold For All To withhold authority to vote, mark "For All
All All Except: Except" and write the nominee's number on
[_] [_] [_] the line below.
--------------------------------------------
Vote On Proposals
2. The ratification of the appointment of L.L. Bradford & Company, as the
Company's independent accountants for the fiscal year ending March 31,
2006:
For Against Abstain
[_] [_] [_]
3. The approval of the Company's 2005 Stock Option Plan.
For Against Abstain
[_] [_] [_]
4. The transaction of such other business as may properly come before the
Annual Meeting or any adjournment thereof:
Signature(s) should agree with the name(s) stenciled hereon. Executors,
administrators, trustees, guardians and attorneys should indicate when
signing. Attorneys should submit powers of attorney.
- ----------------------------------------- ----------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners)