SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
HIGH SPEED NET SOLUTIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
FLORIDA 65-0185306
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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Two Hanover Square, Suite 2120, 434 Fayetteville Street Mall, Raleigh, NC 27601
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(Address of Principal Executive Offices) (Zip Code)
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(919) 807-0507
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(Registrant's Telephone Number, including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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None N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock $.001 Par Value
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(Title of Class)
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SUMMARY TABLE OF CONTENTS
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ITEM 1. BUSINESS.................................................................................................5
RISK FACTORS............................................................................................17
ITEM 2. FINANCIAL INFORMATION...................................................................................35
ITEM 3. PROPERTIES..............................................................................................42
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..........................................43
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS........................................................................46
ITEM 6. EXECUTIVE COMPENSATION..................................................................................49
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................................................57
ITEM 8. LEGAL PROCEEDINGS.......................................................................................62
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................................................63
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.................................................................65
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.................................................70
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS...............................................................73
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................................................74
ITEM 14. CHANGES IN ACCOUNTANTS..................................................................................75
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.......................................................................76
SIGNATURES.......................................................................................................79
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This Form 10 and the documents incorporated herein by reference contain
forward-looking statements that have been made pursuant to the provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on current expectations, estimates and projections about
High Speed's industry, management's beliefs, and certain assumptions made by
management. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks" and "estimates" and similar expressions are intended to
identify forward-looking statements. These statements are not guarantees of
future performance and actual actions or results may differ materially. These
statements are subject to certain risks, uncertainties and assumptions that are
difficult to predict, including those set forth in Item 1 "Business - Risk
Factors." High Speed undertakes no obligation to update publicly any
forward-looking statements as a result of new information, future events or
otherwise, unless required by law. Readers should, however, carefully review the
risk factors included herein or in other reports or documents to be filed by
High Speed from time to time with the Securities and Exchange Commission,
particularly the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and
any Current Reports on Form 8-K.
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Item 1. Business.
ITEM 1. BUSINESS.
GENERAL
We are launching a new business of providing clients with Internet
service for rich media (audio/video/graphics) direct marketing and content
delivery services over the Internet. This business will utilize technology
licensed from Summus Ltd., which owns shares of our Common Stock. See "New
Agreements with Summus."
HISTORY OF HIGH SPEED NET SOLUTIONS (HIGH SPEED)
We were incorporated as a Florida corporation in 1984 under the
original name of EMN Enterprises, Inc. To the best of our knowledge from our
inception in 1984 until mid-1998 High Speed was inactive and had no significant
operations.
In September of 1998, we changed our name from EMN Enterprises to
ZZAP.NET, Inc., in association with a transaction in which we acquired all of
the assets and liabilities of Marketers World, Inc., in exchange for issuing
9,275,000 shares of our Common Stock, a transaction which was accounted for as a
reverse acquisition. While under the name of ZZAP.NET, our Common Stock began
trading on the NASD's Over the Counter Bulletin Board (OTCBB). On January 25,
1999, we changed our trading symbol from ZZNT to HSNS to reflect our new name,
High Speed Net Solutions, Inc.
During 1998, we operated our business based on the assets of Marketers
World. By the end of 1998, however, all business operations based on Marketer's
World assets had ceased. During 1999, our operations were limited to obtaining
financing and changing our business plan.
In February 1999, we and Summus Ltd., entered into the Marketing
License Agreement, in which we obtained the right to distribute certain Summus
products and technology. In exchange for these rights, we agreed to make an
upfront payment of $3,000,000 dollars in several installments during the first
year of the Marketing License Agreement. We recently terminated the Marketing
License Agreement and entered into new agreements with Summus to support the
requirements of our new business plan. For a description of the new agreements,
see Item 1 "Business - New Agreements with Summus."
In August 1999, Summus acquired 9,542,360 shares of our Common Stock
(approximately 51% of our outstanding shares, and approximately 49% on a fully
diluted basis) from the shareholders who obtained our stock in our acquisition
of Marketers World. As of February 10, 2000, Summus held 8,574,360 shares (40.7%
of our outstanding Common Stock, and 39.1% on a fully diluted basis). Summus
also has the power to vote an additional 2,792,167 shares of our Common Stock
through voting agreements with and/or proxies from 17 persons. Summus' total
voting power is 54.0% of our outstanding Common Stock.
Andrew L. Fox became our acting president and chief executive officer
in August of 1999 to develop a new business strategy and start our business
operations. In September of 1999, we moved our operations from Florida to
Raleigh, North Carolina into office space at 434 Fayetteville St. Mall, Suite
2120.
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Item 1. Business.
BUSINESS STRATEGY
In September of 1999, we began investigating Internet opportunities to
generate revenue as a service business using Summus' solution for digital
content management and distribution. This research and subsequent discussions
with potential customers and strategic partners led us to launch our new service
called Rich Media Direct(SM) on January 24, 2000. Rich Media Direct is an
Internet service for rich media (media that contains one or more of the
following: audio/video/graphics/animation) direct marketing, where users can
target customers' that have specific demographic characteristics. Our Rich Media
Direct service will utilize Summus' technology but will not be wholly dependent
on it. Our Rich Media Direct service is intended to provide services to web
commerce companies and other entities on the Internet that desire to increase
traffic, awareness and e-commerce revenue.
We believe that the creation, delivery and consumption of rich media on
the Internet is increasing substantially. During the past few years many
advertisers have shifted part of their advertising away from mass medium radio
and television to the Internet in an effort to increase distribution beyond
their traditional channels. However, the Internet is evolving into a collection
of distinct communities and individuals with specific wants and needs. High
Speed's service will deliver rich media advertisements and content to defined
groups of individuals based on their preferences, a concept known as
microcasting. If people only receive what they favor, it increases the
probability of a response. Initially, we intend to use e-mail applications to
deliver advertising to targeted individuals and demographic groups. However, we
plan to expand from e-mail to other applications.
Because of our license agreement with Summus, we have access to, among
other things, multimedia compression known as Dynamic Wavelet(TM) technology. We
believe that Dynamic Wavelet technology will give us competitive advantages as a
service provider for rich media direct marketing and content delivery. We will
seek to partner with market leading providers of complementary services and
solutions to offer customers a total solution. Targeted partners include telecom
and network service providers, e-mail list vendors and brokers, advertising
agencies, broadcast and entertainment companies, content creation agencies and
Internet portals. In addition, we may partner with developers of other
compression technologies such as MP3, MPEG4 and RealNetworks.
HIGH SPEED AND SUMMUS RELATIONSHIP
Our business strategy depends initially on our nonexclusive rights to
Summus' Dynamic Wavelet and information access technology and products under our
license agreement with Summus. Summus develops media compression, information
access and delivery software. We intend to use Summus' software to deliver our
services. In addition, Summus has indicated it intends to search for, find, and
validate additional customer requirements to sustain fundamental research and
improve the media compression information access software it is developing.
We are in the initial stages of launching our service. In order to
quickly ramp up our business operations and satisfy anticipated future customer
demand, we will utilize resources from Summus to satisfy basic business needs
such as operations, communications, website development and product management.
This "borrowing" of resources is meant to temporarily support our operations
until qualified individuals can be hired to operate these functions. High Speed
is currently in the process of recruiting these individuals. For a description
of Summus and Dynamic Wavelet technology, see Item 1 "Business - Summus Ltd.
Overview."
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Item 1. Business.
RICH MEDIA DIRECT(SM) SERVICE.
We announced our Rich Media Direct service in February of 2000 based on
Summus' wavelet technology. Rich Media Direct is an Internet direct marketing
service that delivers rich media advertising and content to targeted demographic
groups through applications such as opt-in email. This service allows customers
to distribute rich media advertisements for purposes such as creating or
increasing (1) product or brand awareness, (2) customer traffic to web
properties, and (3) e-commerce revenue for Internet e-commerce offerings. Our
Rich Media Direct network will provide customers with dedicated bandwidth and a
distributed infrastructure to efficiently distribute rich media advertisements
to targeted audiences. In addition, our Rich Media Direct service will offer
customers the following features after we are able to hire additional employees
and establish our operational capability:
- 7x24 service and support
- Content packaging and compression
- Online tracking and reporting of campaigns
- Customized videomail player graphical user interfaces
for brand extension and hyperlinks
- Online repeat campaign and list selection
- Truste' compliance (to maintain the privacy of
customer data)
- Streaming services
We believe that our Rich Media Direct service will enable our clients
to achieve a higher response rate in the market than traditional Internet banner
advertisements. Our Rich Media Direct advertisements will initially be in the
form of a rich media commercial (audio, video, graphics) attached to an `opt-in'
email message. This will offer advertisers, publishers and media buyers an
advertising distribution medium through e-mail attachments which affords the
ability to: (1) target a demographically selective audience; (2) focus on the
first application that Internet users typically open; and (3) take advantage of
the tendency of many users to forward relevant information to friends and family
(a concept known as viral marketing), thereby extending the effective reach of
the campaign.
COMPETITION
We believe that the primary competitive factors in the rich media
content and advertising delivery services market will include:
- pricing and licensing terms;
- compatibility with new and existing media formats;
- compatibility with the user's existing network components and
software systems;
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Item 1. Business.
- scalability of rich media content and advertising deliver
technology and cost per user;
- the quality and reliability of the overall rich media
advertisement or content;
- access to distribution channels necessary to achieve broad
distribution and use of our services;
- the availability of content for delivery over the Internet and
access to necessary intellectual property rights;
- the ability to license or develop and support secure formats
for digital media delivery, particularly video;
- the ability to license and support popular and emerging media
formats for digital media delivery, particularly video, in a
market where competitors may control the intellectual property
rights for these formats;
- the size of the active audience for rich media advertisements
and its appeal to content providers and advertisers;
- features for creating, editing and adapting content for the
Internet;
- ease of use and interactive user features in products;
- ease of finding and accessing content over the Internet;
- challenges caused by bandwidth constraints and other
limitations of the Internet infrastructure.
Our failure to adequately address any of the above factors could harm
our business strategy and operating results.
We believe that the quality and robustness of Summus' Dynamic Wavelet
technology and information access solution will allow us to provide our clients
with a higher quality advertisement content than our competitors who do not use
wavelet technology. Because wavelet technology has superior compression
capabilities versus older, traditional compression solutions, we expect to be
able to offer rich media advertisements that are higher in quality and smaller
in file size than comparable solutions. Users will benefit from a faster and
more engaging experience, which we expect, will lead to a higher percentage of
clickthroughs.
In addition, Summus' Dynamic Wavelet technology is capable of
displaying media at substantially lower processing cycles than current industry
standard compression. This may allow our rich media advertisements to reach low
power processing devices, such as Internet appliances and other networked
devices.
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Item 1. Business.
Finally, Summus' technology can offer a wide-array of rich media data
types that will offer content creators a dynamic medium on which to convert
existing advertising content or create new advertising content.
If wavelet technology proves to be superior to other technologies, we
expect our competition will switch to wavelet technologies. Summus is not the
only provider of wavelet technology. In addition, since our license rights are
nonexclusive, Summus may provide wavelet technology to our competition.
Therefore, our ability to compete will ultimately depend on aggressive marketing
and providing quality service efficiently.
The marketplace for rich media advertisement delivery is extremely
competitive and rapidly evolving. Traditional Internet advertisement network
companies such as CMGI, 24/7 Media and DoubleClick have included rich media
advertisements, through banner ads, as part of their product mix. These rich
media ads have typically utilized animation (Enliven), streaming audio and video
(RealNetworks and Microsoft) and Java.
We believe our service will be more like direct response marketing than
pure advertising and will not initially compete directly with these companies,
although we recognize that these companies may change their products and
services and compete with us in the future.
We will compete with many companies in the Internet direct marketing
space, including companies that currently utilize e-mail (specifically `opt-in'
e-mail) as a way to target specific demographic groups. These companies include
Message Media, Digital Impact, YesMail, Juno Mail Services, E-commercial.com and
others. Several companies, such as E-commercial.com and RadicalMail are focusing
more specifically on rich media delivery.
We may experience additional competition from Internet service
providers, advertising and direct marketing agencies and other large established
businesses such as America Online, DoubleClick, Microsoft, IBM, AT&T, Yahoo!,
and RealNetworks. Each of these companies possesses large, existing customer
bases, substantial financial resources and established distribution channels and
could develop, market or resell a rich media direct marketing service that could
target customer demographic groups through applications like e-mail. These
potential competitors may also choose to enter this marketplace by acquiring one
of our existing competitors or by forming strategic alliances with these
competitors or others, including alliances with Summus.
MARKET OPPORTUNITY
According to Jupiter Communications, a leading consultant on online
advertising, use of e-mail is the number one activity on the web (95.7% of all
users) followed by searching (87.5%) and research products (71.7%). Advertisers
are well aware of the role that the Internet could play in influencing purchases
and creating awareness, and are increasing their spending for Internet
advertising.
ADVERTISING ON THE WEB. Internet advertising budgets in the US and
elsewhere continue to grow at a healthy pace as companies' demand for media
exposure continues to increase. Industry trends indicate that users are staying
on the Internet for longer lengths of time, which has caused online advertising
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Item 1. Business.
to grow as a percentage of all media advertising. Although Internet advertising
was only 1.25% of the total amount spent by advertisers in 1998, by 2003 Jupiter
Communications expects Internet advertising to be 5.3% of the total amount spent
by advertisers in all media. Jupiter Communications believes that online
advertising will grow from $2.1 billion in 1998 to $11.5 billion in 2003, fueled
by increases in the online population, time spent online, and Internet commerce
adoption.
Other studies also predict aggressive growth in Web advertising revenue
through the year 2002. On the low side, Yankee Group projects advertising
revenue to go from $2.2 billion in year 2000 to $6.5 billion in year 2002. On
the high side, The Forester Group predicts advertising revenue to go from
$4.1 billion in year 2000 to $8.1 billion in year 2002.
The nature of web advertising is competitive and in a state of flux.
Nielson/NetRatings, in a report published on May 17, 1999, found that typical
web surfers saw 120 banners on average and clicked on only 1.2 banners. This is
a click-through rate of 1%, which is half the rate of just two years ago. We
believe that rich-media advertising (advertising with multimedia) will increase
the average click on rate compared to traditional banner advertising. In
addition, as online advertising evolves into a more sophisticated and more
effective targeting media, CPM rate (cost per thousand impressions times
percentage of inventory sold) is expected by Forester Research to increase from
$2.60 in 1998 to $4.80 in 2003.
DIRECT RESPONSE MARKETING ON THE WEB. While online advertising can be
an effective branding device, Internet Direct Response marketing will play a
critical role in driving revenue for web properties. Forester Research expects
direct response marketing on the web (mainly through e-mail) to make up 60% of
all Internet advertising by 2003, compared to 15% in 1998.
According to the Direct Marketing Association, over $160 billion was
spent on direct marketing in 1998 in all media, including the Internet,
television and radio. While there were no reports for revenue generated through
the web, as opposed to traditional direct response marketing through the mail,
90% of DMA members report having a website for the purposes of distributing
information about their company, and 50% utilize the web for sales and
e-commerce activities.
While only 21% indicated that they have combined digital media
(audio/video) into their Internet applications, this represents a 133% increase
over 1998. Of that group, 75% combined audio/video (up from 42% one year ago)
into their web site applications. (DMA Electronic Media Survey). As direct
response marketing migrates to the Internet, we expect that rich media will play
an increasingly significant role.
MARKET SEGMENTS. Our ability to offer a rich media direct marketing
service through applications such as `opt-in e-mail' will position us to provide
services for a number of broad industry segments that are looking to increase
product and brand recognition, web traffic and e-commerce revenue. We expect
that these segments will include:
- Media/Entertainment - expected by Jupiter
Communications to account for $1.5 billion
in Internet advertising by 2003.
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Item 1. Business.
- Financial Services - expected by Jupiter
Communications to account for $1.5 billion in
Internet advertising by 2003.
- Automotive - expected by Jupiter Communications to
account for $1.2 billion in
Internet advertising by 2003.
- Computer hardware and software - expected by Jupiter
Communications to account for $900 million in
Internet advertising by 2003.
- Travel - expected by Jupiter Communications to
account for $800 million in Internet advertising by
2003.
- Consumer Packaged Goods - expected by Jupiter
Communications to account for $650 million in
Internet advertising by 2003.
SALES AND MARKETING
We currently have no contracts with customers nor any orders from
customers. We have been actively marketing our services since December of 1999,
and have several customer prospects in development or negotiation stage. We
currently have two sales personnel, one full time sales representative and one
part time sales representative. We intend to sell our rich media direct
marketing services through a combination of both inside and outside sales
forces, as well as resellers.
We intend to focus our marketing efforts on dedicated Internet
companies with web properties, as well as traditional companies seeking to take
advantage of the commercial opportunities afforded by Internet direct marketing.
We intend to use a range of marketing activities to pursue our objectives,
including trade shows, trade advertisements, selected media events and our own
website and service. We intend to publish additional marketing materials to
support the sales process, including company brochures, feature descriptions,
technology research papers and client case studies. Currently, we lack funding
for such activities and will need to raise substantial capital to implement our
plans.
RESEARCH AND DEVELOPMENT
We do not invest in research and development of wavelet technology
information access or media distribution products. Instead, we rely on a close
relationship with Summus Ltd., a leader in wavelet compression solutions for
multimedia. Summus Ltd. was founded by Dr. Bjorn Jawerth, the founder and a
pioneer of the field of wavelet mathematics. Summus Ltd. has been applying
wavelet theory for military and commercial applications. We believe Summus'
Dynamic Wavelet technology is currently more advanced than the wavelet
technology of Summus' competition.
As a service provider using leading edge media delivery technology to
implement and differentiate our services, our potential for success is
substantially tied to Summus' research and development progress. However, we
anticipate our services will use both proprietary technology licensed from
Summus and generally available, licensable Internet technology
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Item 1. Business.
Summus has a limited track record in developing generally available
commercial software products; however, it has applied its Dynamic Wavelet
technology and intelligent information access expertise in defense-related and
contract research projects with success. In the last two years, Summus has
focused on commercial applications. In doing so, it has not developed commercial
products as quickly as we anticipated in 1999 when we first entered into
agreements with Summus. Summus is currently developing a suite of products
labeled Maxx System. To develop Maxx System, Summus has recently expanded its
management team and product development organization to develop this suite of
software products. Limited financial resources may limit Summus' ability to
develop products.
INTELLECTUAL PROPERTY
We do not hold any patents nor do we hold any trademark or servicemark
registrations. We do not have any U.S. patent applications pending. We recently
filed a US servicemark application for Rich Media Direct(SM) and we intend to
file applications for the same mark in strategic foreign countries. There is no
assurance, however, that our servicemark application will result in our service
mark being approved.
Our success and ability to compete are substantially dependent upon
technology and intellectual property. While we will rely on copyright, trade
secret and trademark law to protect our technology and intellectual property, we
believe that factors such as the technological and creative skills of our
personnel, new service developments and frequent service enhancements are more
essential than establishing and maintaining an intellectual property leadership
position.
We anticipate entering into confidentiality agreements with our
employees and consultants. We will implement confidentiality agreements, which
require our employees and consultants to hold in confidence and not disclose any
of our proprietary information. Despite our efforts to protect our proprietary
information, unauthorized parties may attempt to obtain and use our proprietary
information. Policing unauthorized use of our proprietary information is
difficult, and the steps we will take might not prevent misappropriation,
particularly in foreign countries where the laws may not protect our proprietary
rights as fully as do the laws of the United States.
We will collect and use data derived from our clients, within the
limits assigned by Truste - an online privacy rights organization. This creates
the potential for claims to be made against us, either directly or through
contractual indemnification provisions with customers, including copyright or
trademark infringement, invasion of privacy, or other legal theories. Our
insurance may not cover potential claims of this type or may not be adequate to
protect us for all liability that may be imposed.
Substantial litigation regarding intellectual property rights exists in
the technology industry. From time to time, third parties have asserted and may
assert exclusive patent, copyright, trademark and other intellectual property
rights to technologies and related standards that are important to us or to
Summus. We and/or Summus may increasingly face infringement claims as the number
of competitors in our industry segments grows and the functionality of products
and services in different industry segments overlaps. In addition, we believe
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Item 1. Business.
that many of our competitors have filed or intend to file patent applications
that may claim infringement via intellectual property developed by Summus.
Although we have not been party to any litigation asserting claims that allege
infringement of intellectual property rights, we may be party to litigation in
the future. Any third party claims, with or without merit, could be
time-consuming to defend, result in costly litigation, divert management's
attention and resources or require us to enter into royalty or licensing
agreements. Such royalty or licensing agreements, if required, may not be
available on terms acceptable to us, if at all. A successful claim of
infringement against us or Summus could harm our future competitiveness and
profitability.
NEW AGREEMENTS WITH SUMMUS
To facilitate the implementation of our business plan, in February of
2000, we entered into a Master Agreement with Summus Ltd. ("Summus"). The Master
Agreement includes a Software License Agreement ("SLA"), a Software Maintenance
Agreement ("SMA") and a Revenue Sharing Agreement ("RSA") (collectively with the
Master Agreement, the "New Agreements"). The New Agreements entirely replace the
Marketing License Agreement and the related agreements incorporated by it or
referenced by it, and replace the various letter agreements between Summus and
us concerning one potential customer, Samsung Electronics of America, Inc.
(collectively, the "Terminated Agreements").
The New Agreements with Summus give us a nonexclusive license to
Summus' current and future products for digital content management solutions for
rich media distribution through the ability to create multiple rich media data
types (audio, video, animation, and graphics). Summus' system leverages the high
compression, high quality nature of Dynamic Wavelets and intelligent information
access technology. Summus' solution implementing these features is called
MaxxSystem. MaxxSystem allows rich media advertising to be attached to e-mails
or streamed from websites. The New Agreements give us non-exclusive rights to
distribute dynamic wavelet encoded content over the Internet or over private
network environments, using MaxxSystem for the purposes of advertising or
content delivery.
Our use of MaxxSystem requires us to make ongoing royalty payments of
ten percent (10%) of the revenues we generate from the use of Summus'
technology. No royalty is payable by us until our cumulative revenue exceeds $10
million.
Under the New Agreements we also have: (i) rights to maintenance,
support, and any new versions of MaxxSystem at an annual fee, although this fee
is waived for the first year; and (ii) the right to make a public announcement
of our use of MaxxSystem two weeks in advance of our competition. The
capabilities of MaxxSystem will allow us to offer a variety of customized
services for advertising and content delivery.
The term of the New Agreements is six years, three years longer than
the Terminated Agreements. The New Agreements give us access to software support
and upgrades from Summus Ltd. We had no maintenance support rights under the
Terminated Agreements.
Under the New Agreements, we have the right to maintenance and all
upgrades for six years. For software support and upgrades, we will pay, on an
annual basis, a percentage of the upfront license fee. Use of MaxxSystem
requires that we pay an upfront license fee, however, this upfront fee was
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Item 1. Business.
waived in consideration for payments we made under the Terminated Agreements. We
will pay $180,000 annually for maintenance and upgrades. This amount cannot
increase at a rate greater than a U.S. government published inflationary index.
Summus waived this fee for the first year. Support from Summus will include the
following:
- Level 2 and 3 support
- Upgrades or `dot' releases of the software system or
components of the software system. These are upgrades
that increment to the right of the 'dot' (i.e.
Version 1.2 to 1.3)
- Generational releases of the software system. These
are upgrades to the left of the 'dot' (i.e. Version
2.0 to 3.0)
We do not have an exclusive license to MaxxSystem or any other Summus
product or technology. Instead, Summus has agreed to pay us 20% of all revenues
that Summus receives during the six year term of the New Agreements from third
party licensees of MaxxSystem who also operate as a service bureau. Summus has
reserved the right to operate as a service bureau in which case we would not
receive revenue from Summus' use of its system as a service bureau. Summus has
not generated any revenue with MaxxSystem because the system is still under
development.
During the six year term of the New Agreements, for all qualified
engagements that we refer to Summus for technology licensing, consulting or
other products and/or service sales, Summus will pay us 15% of the revenue
received from such engagements during the first year of the agreement between
Summus and the customer.
Under the New Agreements, we and Summus have agreed to a mutual revenue
sharing arrangement for all revenues derived from Samsung Electronics of
America, Inc. We have entered into a letter of intent by and among Samsung,
Summus, and High Speed. There can be no assurance that the letter of intent will
result in an agreement with Samsung or actual revenues for us. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Recent Developments."
Under the Samsung provisions, Summus will pay us 50% of the revenue it
receives from Samsung during the first and second years of an agreement between
Summus and Samsung; Summus will pay us 40% of the revenue it receives during the
third year; and Summus will pay us 20% of the revenue it receives during the
fourth, fifth, and sixth years. Similarly, we will pay Summus 50% of the revenue
we receive from Samsung during the first and second years of an agreement
between High Speed and Samsung; we will pay Summus 40% of the revenue we receive
during the third year; and we will pay Summus 20% of the revenue we receive
during the fourth, fifth, and sixth years. There can be no assurance that either
Summus or High Speed will enter into any agreement with Samsung.
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Item 1. Business.
TERMINATION OF THE MARKETING LICENSE AGREEMENT
The New Agreements replace entirely the Terminated Agreements. The
Terminated Agreements gave us certain exclusive and non-exclusive rights to
market and distribute Summus products and technology. We no longer have these
rights. Our former rights included:
- Exclusive rights to license a streaming product
demonstration utilizing Summus wavelet technology
- Non-exclusive rights to license maxxNote 1.0 and 2.0
(a videomail product)
- Non-exclusive rights to license 4U2C - an image
compression tool
- Non-exclusive rights to license version 1.0 of a
video conferencing product
To date we have not used these rights to generate revenue in the
marketplace.
SUMMUS LTD. OVERVIEW.
This section describes material information concerning the business and
products of Summus. This information is included because our future ability to
deliver our services and execute our business plan depends in part upon Summus
products and technology.
HISTORY OF SUMMUS LTD. Historically, since its founding in 1991,
Summus' business has focused on contract engineering and research and
development for the Department of Defense. These projects included battlefield
and armament imaging and object recognition. Other public sector projects
include real-time imaging from vehicles over limited-bandwidth private radio
systems and applying Summus' wavelet technology to space programs where it
achieved large scale image compression for a space probe scheduled to launch for
a comet investigation.
As of January 31, 2000, Summus employs 45 persons on a full time basis
and has one part time employee. A majority of Summus' shares are owned by its
founder, Dr. Bjorn Jawerth, and there is no public market for Summus shares.
Summus is a private corporation in the state of Delaware. Although we own
167,000 shares of Summus Common Stock and Summus owns 8,574,360 shares of our
Common Stock, Summus is an independent entity from High Speed. Except as
provided in the agreements between us and Summus that are described in this
document, we have no rights to any products or technology of Summus. Our 167,000
shares of Summus Common Stock constituted approximately 14.0% of the issued and
outstanding shares of Summus at January 31, 2000. When options, warrants and
convertible securities are taken into account, we owned only 12.8% of Summus'
shares on a fully diluted basis at January 31, 2000. Summus will continue to
seek to raise capital to support its investment in research and product
development. Therefore, there is potential future dilution to our ownership
position in Summus.
In 1998, Summus commercialized some of its technology through software
development kits and licensed its technology using the software development kits
to companies such as Corel, Fuji and Symbol. Summus' business plan calls for
continued commercialization of its technology and expansion into the commercial
products market and Internet solution business. Specific Summus' objectives
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Item 1. Business.
include creating widespread use and ubiquity of its wavelet technology through
licensing and distribution and completion of its MaxxSystem for digital media
distribution and management.
SUMMUS DYNAMIC WAVELET TECHNOLOGY. Summus' wavelet solutions utilize
image outlines or edges as the basis for information processing in a way similar
to how human vision works. This natural basis for compression and decompression
allows Summus to achieve compression ratios that are among the highest in the
industry, while preserving image and video quality. Most standard Internet
compression solutions utilize Discrete Cosine Transforms ("DCT") or fractal
compression that results in a blocky affect after compression. In contrast,
Summus' wavelet solution maintains a fidelity that is void of blocky artifacts
and is visually appealing. In addition, Summus' wavelet solution gives the user
powerful and faster functionality for manipulating the image after compression,
for applications such as pattern recognition, motion compensation and contrast
adjustments.
In summary, Summus' Dynamic Wavelets can:
- Allow fast upload and download of media over existing
connections
- Require less buffering for streaming and produce faster
rendering for browsers
- Provide higher quality compression than existing encoders
- Lower file storage footprint for existing media
- Reduce end-user and hosted server storage costs
- Reduce end-user and hosted network data load costs
- Require less CPU processing cycles
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Risk Factors
RISK FACTORS
This Form 10 contains forward-looking statements. These forward-looking
statements are based on current expectations, estimates and projections about
our industry, management's beliefs, and certain assumptions made by management.
Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks"
and "estimates" and similar expressions are intended to identify forward-looking
statements. These statements are not guarantees of future performance and actual
actions or results may differ materially. These statements are subject to
certain risks, uncertainties and assumptions that are difficult to predict. We
undertake no obligation to update publicly any forward-looking statements as a
result of new information, future events or otherwise, unless required by law.
You should carefully consider the risks described below, together with
all of the other information included in this Form 10, before making an
investment decision. The risks and uncertainties described below are not the
only ones we face. If any of the following risks actually occurs, our business,
financial condition or operating results could be harmed. In such case, the
trading price of our Common Stock could decline, and you could lose all or part
of your investment.
RISKS RELATED TO SUMMUS LTD.
OUR CURRENT SYSTEM REQUIRES ENHANCEMENTS TO ALLOW US TO PROVIDE
SERVICES THAT WILL REMAIN ATTRACTIVE TO POTENTIAL CUSTOMERS.
Our current system only allows us to provide services for customers to
attach rich media advertising to e-mails. We believe this capability will need
to be enhanced for us to remain competitive.
WE DO NOT DEVELOP THE TECHNOLOGY NECESSARY TO EXECUTE OUR BUSINESS
PLAN.
All the technology we currently use has been developed by Summus Ltd.
We have no technology development capability and all enhancements and new
technology we need to execute our business plan will depend upon Summus or third
parties being able to develop such enhancements and new technology. Any
unfavorable developments at Summus that may delay or prevent development of
Summus' products would have a material adverse effect on us.
OUR TECHNOLOGY SUPPLIER, SUMMUS, HAS NO CONTRACTUAL OBLIGATION TO
DELIVER NEW TECHNOLOGY OR ENHANCEMENTS TO US.
The agreements between Summus and us give us nonexclusive rights to
certain technology of Summus if it is developed, but the agreements create no
contractual obligation by Summus to develop technology for us other than
MaxxSystem. Summus may fail to develop technology in time for us to sell
products and generate revenue and future delays could have a material adverse
effect on our business.
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Risk Factors
WE HAVE LIMITED RIGHTS TO SUMMUS TECHNOLOGY AND OUR RIGHTS ARE
NONEXCLUSIVE.
Our rights to Summus' technology are limited to those rights defined in
the agreements between Summus and us. In addition, our rights are nonexclusive.
Summus is free to license to our competitors.
CONFLICTS OF INTEREST BETWEEN SUMMUS AND US MAY LIMIT OUR
OPPORTUNITIES.
As of February 10, 2000, Summus held 8,574,360 shares of our Common
Stock (40.7% of our outstanding Common Stock, and 39.1% on a fully diluted
basis). Summus also has the right to vote an additional 2,792,167 shares of our
Common Stock under voting agreements with and/or proxies from 17 persons. Total
Summus voting power is 54.0% of our outstanding Common Stock. Two members of our
Board of Directors are officers of Summus. In addition, one of our officers owns
Summus stock and stock options and both of our officers were formerly employed
by Summus. Furthermore, Alan Kleinmaier, who is our Acting CFO and our Executive
Vice President, Secretary and Treasurer, is the Acting CFO of Summus. If Summus
decides that our business conflicts with the interests of Summus, conflict of
interests between us and our major shareholder, our Board members, and our
officers, may limit our ability to operate in a way that is contrary to the
interest of Summus.
If Summus changes its technology development direction, we could be
deprived of vital technology.
Even if Summus grows and is successful, Summus could decide to dedicate
its development resources to applications that are not useful to us. In that
case, we would not benefit from improvements that are necessary for us to remain
competitive.
OUR RELATIONSHIP WITH SUMMUS MAY PREVENT US FROM ENTERING INTO
STRATEGIC RELATIONSHIPS WITH OTHER COMPANIES.
It may be in our interest to enter into strategic relationships with
companies that are competitive with Summus or that otherwise would not want to
have a relationship with us because of our relationship with Summus. Our
relationship with Summus, therefore, could cause us to miss opportunities to
enter into strategic alliances with other companies that would be of greater
value to us.
SALES OF OUR SHARES BY SUMMUS MAY HAVE AN ADVERSE EFFECT ON THE MARKET
PRICE OF OUR COMMON STOCK.
As of February 10, 2000, Summus owns 8,574,360 shares of our Common
Stock. Summus has sold 2,415,000 shares of our Common Stock since August 25,
1999 for prices ranging from $1.35 to $8.50 per share. Our shares are the
primary liquid asset of Summus, which may sell more of our shares to finance its
own operations. Future sales of our shares by Summus could adversely affect the
market price of our Common Stock.
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Risk Factors
SHAREHOLDERS MAY BE UNABLE TO EXERCISE CONTROL BECAUSE SUMMUS OWNS A
LARGE PERCENTAGE OF OUR STOCK.
As of February 10, 2000, our strategic partner and technology source,
Summus, owns 8,574,360 shares of our Common Stock (40.7% of our outstanding
Common Stock, and 39.1% on a fully diluted basis). Dr. Bjorn Jawerth, the
founder and chairman of the Board of Summus, beneficially owns approximately
39.1% of our Common Stock. Summus also has the right to vote an additional
2,792,167 shares of our Common Stock under voting agreements with and/or proxies
from 17 persons. Total Summus voting power is 54.0% of our outstanding Common
Stock. As a result, Dr. Jawerth and Summus will have significant influence to:
- Elect or defeat the election of our directors;
- Amend or prevent amendment of our articles of
incorporation or bylaws;
- Effect or prevent a merger, sale of assets or other
corporate transaction; and
- Control the outcome of any other matter submitted to
the shareholders for vote.
WE NEED TO ENTER INTO ADDITIONAL STRATEGIC RELATIONSHIPS TO IMPLEMENT
OUR BUSINESS PLAN.
In addition to our relationship with Summus, we believe we will need
strategic relationships with other entities to help us:
- Maximize adoption of our services through
distribution arrangements;
- Increase the type of rich media content developed or
hosted;
- Increase the amount and availability of compelling
media content available for our rich media direct
marketing services to help boost demand for our
services;
- Enhance our brand;
- Expand the range of commercial activities based on
our technology;
- Expand the distribution of our rich media direct
marketing without a degradation in fidelity; and
- Increase the performance and utility of our services.
Many of these goals are beyond our resources. We anticipate that the
efforts of our strategic partners will become more important as the multimedia
experience over the Internet matures. For example, we may become more reliant on
strategic partners to provide multimedia content, provide more secure and
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<PAGE>
Risk Factors
easy-to-use electronic commerce solutions and build out the necessary
infrastructure for media delivery. We may not be successful in forming strategic
relationships. In addition, the efforts of our strategic partners may be
unsuccessful. Furthermore, these strategic relationships may be terminated
before we realize any benefit.
RISK RELATED TO OTCBB STATUS AND MARKET FACTORS
OUR STOCK MAY CEASE TO BE QUOTED IN THE OTCBB.
Under current rules, our Common Stock will cease to be quoted on the
OTCBB if our Form 10 filed with the Securities and Exchange Commission does not
clear comments and become effective on or before May 17, 2000. There can be no
assurance our Form 10 will become effective before this date. If our stock
ceases to be quoted on the OTCBB, our shareholders are likely to lose liquidity,
and as trading volume decreases the market price of our stock is likely to
decrease substantially. In addition, if our Form 10 does not become effective on
or before April 17, 2000, our stock will trade with a warning that it may cease
to be quoted on the OTCBB. If that occurs, some shareholders may sell their
shares and price of our stock may decline as a result even if our stock
continues to be quoted on the OTCBB.
OUR STOCK PRICE MAY BE VOLATILE.
The trading price of our Common Stock has been and is likely to
continue to be highly volatile. For example, during the 52-week period ended
January 29, 2000, the price of our Common Stock ranged from $1.125 to $31.875
per share. We are not aware of any reason for the increase in the price of our
stock. Our stock price could be subject to wide fluctuations in response to
factors such as:
- Actual or anticipated variations in quarterly
operating results;
- Announcements of technological innovations, new
products or services by us or our competitors;
- Changes in financial estimates or recommendations by
securities analysts;
- The addition or loss of strategic relationships;
- Conditions or trends in the Internet, rich media
delivery and on-line commerce markets;
- Changes in the market valuations of other Internet,
on-line service or software companies;
- Announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures
or capital commitments;
- Legal or regulatory developments;
- Additions or departures of key personnel;
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<PAGE>
Risk Factors
- Sales of our Common Stock;
- General market conditions;
- Better understanding of our business by the investing
public as the information disclosed in this document
becomes available to the market.
In addition, the stock market in general, and the Over the Counter
Bulletin Board (OTCBB) and the market for Internet and technology companies in
particular, have experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of these
companies. These broad market and industry factors may reduce our stock price,
regardless of our operating performance. The trading prices of the stocks of
many technology companies are at or near historical highs and reflect
price-earnings ratios substantially above historical levels. These trading
prices and price-earnings ratios may not be sustained.
THE OTCBB MAY LIMIT THE VALUE OF OUR STOCK.
Our shares are traded on the Over the Counter Bulletin Board (OTCBB),
an electronic quotation service. Approximately 23 broker-dealer firms are
currently market makers for our Common Stock. The OTCBB does not impose listing
standards or requirements, does not provide automatic trade executions and does
not maintain relationships with quoted issuers. Stocks traded on the OTCBB may
face a loss of market makers, lack of readily available bid and ask prices for
its stock, experience a greater spread between the bid and ask price of its
stock and a general loss of liquidity with its stock. In addition, many
investors have policies against purchasing or holding OTCBB securities. Both
trading volume and the market value of the securities have been, and will
continue to be, affected by trading on the OTCBB.
As an OTCBB company, the market price of our securities has the
potential to be very volatile as a result of many factors, some of which are
outside of our control, including, but not limited to, quarterly variations in
financial results, announcements by us, our competitors, partners, customers,
potential customers or government agencies and predictions by industry analysts,
as well as general economic conditions. Sales by our existing stockholders
(including Summus), trading by short-sellers and other market factors may
adversely affect the market price of our securities. Any or all these risks have
had and are likely to have a material adverse affect on the market price of our
securities. With the potential for substantially lower trading volumes that may
occur because we are an OTCBB company, the foregoing factors would then have a
greater adverse impact on the market price of the our securities.
RISKS RELATED TO FINANCIAL RESULTS AND CONDITION
WE HAVE A LIMITED OPERATING HISTORY, WHICH MAKES IT DIFFICULT TO
EVALUATE OUR BUSINESS.
We have a limited operating history because we terminated operations in
all market segments during the fourth quarter 1998. In the third quarter of
1999, we began preparations to enter the Internet rich media delivery services
market. We have extremely limited financial results on which future performance
can be predicted. Our prospects must be considered in light of the risks,
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<PAGE>
Risk Factors
expenses and difficulties frequently encountered by companies in new and rapidly
evolving markets, such as, Internet advertising, media delivery systems and
electronic commerce.
To address the risks and uncertainties we face, we must:
- establish and maintain market acceptance of our
services and convert that acceptance into direct and
indirect sources of revenues;
- establish target markets and channels of
distributions to those markets;
- establish, maintain and develop our brand name;
- timely and successfully develop new services and
increase the value of existing services;
- successfully respond to competition; and
- develop and maintain strategic relationships to
enhance the distribution, features and utility of our
services.
Our business strategy may be unsuccessful and we may be unable to
address the risks we face in a cost-effective manner, if at all. Our inability
to successfully address these risks will harm our business.
WE LACK SUFFICIENT FINANCIAL RESOURCES TO IMPLEMENT OUR BUSINESS PLAN.
At January 31, 2000, we had approximately $200,000 of cash. Summus has
advanced us $154,000 since August 25, 1999 to allow us to pay our expenses. We
have no commitment from Summus to continue to advance money to sustain
operations. Therefore, to implement our business plan we will need to raise
additional capital in the near future from investors other than Summus. There
can be no assurance that we will be able to raise capital on terms that are
favorable to us. We may be forced to sell shares at prices below the market
price of our stock on the OTCBB. Our sale of shares of capital stock to finance
implementation of our business plan will dilute the ownership of our existing
shareholders.
WE HAVE A HISTORY OF LOSSES AND MAY NOT BECOME PROFITABLE.
We have not yet generated any revenue in the rich media delivery
services market and we may never become profitable. As of December 31, 1999, we
had an accumulated deficit of approximately $11.8 million dollars. We will
devote significant resources to enhancing, selling, marketing and delivering our
services. As a result, we will need to generate significant revenues to achieve
profitability. We may not achieve a growth pattern or generate sufficient
revenues to begin, sustain or increase profitability on a quarterly or annual
basis in the future.
OUR OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY.
As a result of our limited operating history and the rapidly changing
nature of the markets in which we compete, our quarterly and annual revenues and
operating results are likely to fluctuate from period to period. These
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<PAGE>
Risk Factors
fluctuations may be caused by a number of factors, many of which are beyond our
control. These factors include the following, as well as others discussed
elsewhere in this section:
- How and when we introduce new services and enhance
these services;
- The timing and success of our brand building and
marketing campaigns;
- Our ability to establish and maintain strategic
relationships;
- Our ability to attract, train and retain key
personnel;
- The demand for Internet advertising and sponsorships;
- The emergence and success of new and existing
competition;
- Varying operating costs and capital expenditures
related to the expansion of our business operations
and infrastructure, including the hiring of new
employees;
- Technical difficulties with our services, system
downtime, system failures or interruptions in
Internet access;
- Costs related to the acquisition of businesses or
technology; and
- Costs of litigation and intellectual property
protection.
In addition, because the market for our services is relatively new and
rapidly changing, it is difficult to predict future financial results. Our sales
and marketing efforts, and business expenditures generally, are partially based
on predictions regarding certain developments for rich media delivery services.
To the extent that these predictions prove inaccurate, our revenues and
operating expenses may fluctuate.
For these reasons, investors should not rely on period-to-period
comparisons of our financial results as indications of future results. Our
future operating results could fall below the expectations of public market
analysts or investors and significantly reduce the market price of our Common
Stock. Fluctuations in our operating results will likely increase the volatility
of our stock price.
RISKS RELATED TO OUR OPERATIONS
WE MAY BE UNABLE TO SUCCESSFULLY COMPETE IN THE RICH MEDIA DIRECT
MARKETING MARKET.
The market for software and services for rich media advertising and
direct marketing over the Internet is relatively new, constantly changing and
competitive. Rich media direct marketing services are a specialized form of
Internet media delivery, regardless of whether such delivery is via downloading
or streaming.
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<PAGE>
Risk Factors
Our services may apply a direct response advertising model to Internet
e-mail advertising by adding media content to enhance the viewer's experience
and give the viewer the option to choose to obtain more information, provide
feedback, or even make a purchase decision. We do not know whether the direct
response model will be accepted for Internet e-mail advertising. Furthermore, we
do not know whether there is a sustainable market for these services. Even if
that market exists, we may be unable to develop a revenue model or sufficient
demand to take advantage of the market opportunity.
Our business success depends on the general growth of Internet
advertising and website content distribution. While Internet advertising
revenues across the industry continue to grow, the number of services competing
for advertising revenues is also growing. Other Internet content and advertising
services that compete with our service may be more attractive to advertisers,
which would harm our business.
Our rich media delivery service will also compete with traditional
media such as television, radio and print for a share of advertisers' total
advertising budgets. Our advertising sales force and infrastructure are still in
early stages of development relative to those of our competitors. We cannot be
certain that advertisers will place advertising with us or that revenues derived
from such advertising will be meaningful. If we lose advertising customers, fail
to attract new customers, are forced to reduce advertising rates or otherwise
modify our rate structure to retain or attract customers, our business could be
harmed.
Increased competition may result in price reductions, reduced margins,
loss of market share, loss of customers, and a change in our business and
marketing strategies, any of which could harm our business.
WE MAY BE UNABLE TO SUCCESSFULLY COMPETE WITH OTHER COMPANIES THAT
OPERATE IN THE BROADER MEDIA DELIVERY MARKET.
Our rich media delivery services are a specialized form of Internet
media delivery because our services target multimedia messages to end users
based on user preferences - a concept known as microcasting. In contrast, the
broader general media delivery market offers capability to deliver media over
the Internet for a variety of purposes, including the potential capability to
deliver media in a similar fashion. The technology providing the foundation for
our Rich Media Direct Service competes in this general media delivery market.
As media delivery evolves into a central component of the Internet
experience, more companies are entering the market for, and are expending
increasing resources to develop, media delivery software and services. We expect
that competition will continue to intensify in the general media delivery
market. This increases the chance that companies operating in the general media
delivery market will target niche applications such as the one that we intend to
enter.
Many of our potential competitors have longer operating histories,
greater name recognition, more employees and significantly greater financial,
technical, marketing, public relations and distribution resources than we do.
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Risk Factors
The competitive environment may require us to make changes in our services or
marketing to maintain and extend our current brand and technology franchise.
Price concessions or the emergence of other pricing or distribution strategies
of competitors may diminish our revenues, impact our margins or lead to a
reduction in our market share, any of which will harm our business.
WE MAY NOT SUCCESSFULLY DEVELOP NEW SERVICES.
To date, technology we license from Summus only allows rich media
messages to be attached to emails. Our growth depends on our ability to license
from Summus other media distribution and management solutions. Our business and
operating results would be harmed if we fail to develop services that achieve
widespread market acceptance or that fail to generate significant revenues to
offset development costs. We may not timely and successfully identify, develop
and market new service opportunities. If we introduce new services, they may not
attain broad market acceptance or contribute meaningfully to our revenues or
profitability.
Because the markets for our services are rapidly changing, we must
develop new offerings quickly. Delays and cost overruns could affect our ability
to respond to technological changes, evolving industry standards, competitive
developments or customer requirements. Our services also may contain undetected
errors that could cause increased development costs, loss of revenues, adverse
publicity, reduced market acceptance of the services or lawsuits by customers.
WE DEPEND ON KEY PERSONNEL WHO MAY LEAVE US AT ANY TIME.
Our success substantially depends on the continued employment of our
executive officers and key employees, particularly Andrew Fox, our acting CEO
and President. The loss of the services of Mr. Fox or any of our other executive
officers or key employees could harm our business.
None of our executive officers has a contract that guarantees
employment. Summus will provide "key person" life insurance policies on Mr. Fox
and Mr. Kleinmaier for us until we put our own policy in place. We do not have
noncompete clauses in our contracts with our officers.
WE DO NOT HAVE THE KEY EMPLOYEES REQUIRED TO IMPLEMENT OUR BUSINESS
PLAN AND WE MUST RECRUIT AN ENTIRE NEW TEAM.
We have only three employees. Key officers, including Andrew Fox,
acting President and CEO, and Alan Kleinmaier, (acting CFO), will have to be
replaced with a permanent CEO and CFO. In addition, an entire marketing, service
and financial staff must be recruited. There is a very limited number of people
with experience in Internet marketing and service. In addition, since we lack an
operating history or financial resources, people we desire to recruit may not
find us to be an attractive employer. Therefore, we may not be able to recruit
the team required to implement our business plan.
Our success also depends on our ability to attract, train and retain
qualified personnel, specifically those with management and service provider
skills. In particular, we must hire skilled technology employees to establish
our service business. Competition for such personnel is intense, particularly in
high-technology centers such as the Research Triangle Park and surrounding
cities of Raleigh, Durham, and Chapel Hill, North Carolina.
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Risk Factors
In making employment decisions, particularly in the Internet and
high-technology industries, job candidates often consider the value of stock
options they may receive in connection with their employment. As a result of
potential volatility in our stock price because we are an OTCBB company, we may
be disadvantaged in competing with companies that have not experienced similar
volatility or that have not yet sold their stock publicly. If we do not succeed
in attracting new personnel or retaining and motivating our current personnel,
our business could be harmed.
WE CURRENTLY LACK EQUIPMENT AND SYSTEMS TO IMPLEMENT OUR BUSINESS PLAN.
We are entering a new market with a new business plan. We currently
lack the underlying infrastructure and service network as well as employees
needed to manage these systems. Our inability to successfully implement these
systems in a timely fashion could impede our ability to grow our business and
could harm revenue generation.
We are in the process of implementing new management information
software systems. This will affect many aspects of our business, including our
accounting, operations, electronic commerce, customer service, purchasing, sales
and marketing functions. The purchase, implementation and testing of these
systems will require significant capital expenditures and could disrupt our
day-to-day operations. If these systems are not implemented as expected, our
ability to provide services to our customers on a timely basis will suffer and
delays in the recording and reporting of our operating results could occur.
OUR BUSINESS WILL SUFFER IF OUR SYSTEMS FAIL OR BECOME UNAVAILABLE.
A reduction in the performance, reliability and availability of our
websites and network infrastructure once acquired will harm our ability to
distribute our services to our users, as well as our reputation and ability to
attract and retain users, customers, advertisers and content providers. Our
systems and operations could be damaged or interrupted by fire, flood, power
loss, telecommunications failure, Internet breakdown, earthquake and similar
events. Our systems are also subject to break-ins, sabotage, intentional acts of
vandalism and similar misconduct. Our computer and communications infrastructure
is located at a single leased facility in Raleigh. Due to insufficient capital,
we do not plan to have fully redundant systems. We currently lack a formal
disaster recovery plan, and we do not carry adequate business interruption
insurance to compensate us for losses that may occur from a system outage.
Our electronic commerce and digital distribution activities will be
managed by sophisticated software and computer systems to be acquired when we
raise capital. We may encounter delays in developing or upgrading these systems,
and the systems may contain undetected errors that could cause system failures.
Any system error or failure that causes interruption in availability of our
services or content or an increase in response time could result in a loss of
potential or existing business services customers, users, advertisers or content
providers. If we suffer sustained or repeated interruptions, our services and
websites could be less attractive to such entities or individuals and our
business would be harmed.
A sudden and significant increase in traffic on our websites could
strain the capacity of the software, hardware and telecommunications systems
that we deploy or use. This could lead to slower response times or system
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<PAGE>
Risk Factors
failures. Our operations will also depend on receipt of timely content feeds
from our content providers, and any failure or delay in the transmission or
receipt of such content feeds could disrupt our operations. We will depend on
Web browsers, ISPs and on-line service providers who have experienced
significant outages in the past, and could experience outages, delays and other
difficulties due to system failures unrelated to our systems. In addition, ISPs
could temporarily interrupt our website operations in response to a heavy load
of rich media content transmission. These types of interruptions could continue
or increase in the future.
OUR NETWORK WILL BE SUBJECT TO SECURITY RISKS THAT COULD HARM OUR
REPUTATION AND EXPOSE US TO LITIGATION OR LIABILITY
On-line commerce and communications depend on the ability to transmit
confidential information securely over public networks. Any compromise of our
ability to transmit confidential information securely, and costs associated with
preventing or eliminating any problems, could harm our business. On-line
transmissions are subject to a number of security risks, including:
- our own or licensed encryption and authentication technology
may be compromised, breached or otherwise be insufficient to
ensure the security of customer information;
- we could experience unauthorized access, computer viruses and
other disruptive problems, whether intentional or accidental;
- a third party could circumvent our security measures and
misappropriate proprietary information or interrupt
operations; and
- credit card companies could restrict on-line credit card
transactions.
The occurrence of any of these or similar events could damage our
reputation and expose us to litigation or liability. We may also be required to
expend significant capital or other resources to protect against the threat of
security breaches or to alleviate problems caused by such breaches.
WE WILL RELY ON CONTENT PROVIDED BY THIRD PARTIES TO INCREASE MARKET
ACCEPTANCE OF OUR SERVICES.
If third parties do not develop or offer compelling content to be
delivered over the Internet, our business will be harmed and our services may
not achieve or sustain broad market acceptance. We and our advertisers and
content creators will rely on third-party content providers, such as radio and
television stations, record labels, media companies, websites and other
companies, to develop and offer content in our formats that can be delivered
using our media delivery services and viewed using our microcasting services. We
cannot guarantee that third-party content providers will decide to rely on our
technology or offer compelling content in our formats to encourage and sustain
broad market acceptance of our services. Their failure to do so would harm our
business.
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Risk Factors
RISKS RELATED TO OUR INDUSTRY
THE GROWTH OF OUR BUSINESS DEPENDS ON THE INCREASED USE OF THE INTERNET
FOR COMMUNICATIONS, ELECTRONIC COMMERCE AND ADVERTISING.
The growth of our business will depend on the continued growth of the
Internet as a medium for communications, electronic commerce and advertising.
Our business will be harmed if Internet usage does not continue to grow,
particularly as a source of media information and entertainment and as a vehicle
for commerce in goods and services. Our success will also depend on the efforts
of third parties to develop the infrastructure and complementary products and
services necessary to maintain and expand the Internet as a viable commercial
medium. The Internet may not be accepted as a viable commercial medium for
broadcasting multimedia content or media delivery for a number of reasons,
including:
- potentially inadequate development of the necessary
infrastructure to accommodate growth in the number of users
and Internet traffic;
- lack of acceptance of the Internet as a medium for
distributing streaming media content or for media delivery;
- unavailability of compelling multimedia content;
- inadequate commercial support for Internet-based advertising;
and
- delays in the development or adoption of new technological
standards and protocols or increased governmental regulation,
which could inhibit the growth and use of the Internet.
In addition, we believe that other Internet-related issues, such as
security, reliability, cost, ease of use and quality of service and privacy
remain largely unresolved and may affect the amount of business that is
conducted over the Internet.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by such growth, specifically the demands of
delivering high-quality media content. As a result, its performance and
reliability may decline. In addition, websites have experienced interruptions in
service as a result of outages and other delays occurring throughout the
Internet network infrastructure. If these outages or delays occur frequently in
the future, Internet usage, as well as the usage of our services and websites,
could grow more slowly or decline.
OUR INDUSTRY IS EXPERIENCING CONSOLIDATION THAT MAY INTENSIFY
COMPETITION.
The Internet industry has recently experienced substantial
consolidation and a proliferation of strategic transactions. We expect this
consolidation and strategic partnering to continue. Acquisitions or strategic
relationships could harm us in a number of ways. For example:
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<PAGE>
Risk Factors
- competitors could acquire or partner with companies with which
we have strategic relationships and discontinue our
relationship, resulting in the loss of these distribution
channels;
- competitors could obtain exclusive access to desirable
multimedia content and prevent that content from being
available in our formats, thus decreasing the use of our
services to distribute and experience the content that
audiences most desire, and hurting our ability to attract
advertisers to our rich media advertising offerings;
- a competitor could be acquired by a party with significant
resources and experience that could increase the ability of
the competitor to compete with our services;
- A competitor could acquire similar wavelet intellectual
property and develop a similar business and offering.
Recent announcements and consolidations that could adversely affect our
business include:
- Microsoft's strategic investments in broadband initiatives,
including its recently announced $5 billion investment in
AT&T;
- AT&T's acquisition of TCI and its announcement that it will
acquire MediaOne Communications;
- At Home's acquisition of Excite;
- Yahoo!'s acquisitions of Broadcast.com and GeoCities;
- The Walt Disney Company's recent announcement that it intends
to combine its Internet assets with, and acquire a majority
ownership of, Infoseek, and create a single business called
go.com;
- NBC's announcement that it intends to merge its Internet
assets with XOOM.com, Inc. and Snap.com, a subsidiary of CNET;
- RealNetworks announcement of a strategic partnership with
DoubleClick;
- IBM's recent announcement of a partnership with Olgivy &
Mathers; and
- AOL and Time-Warner's announced merger.
CHANGES IN NETWORK INFRASTRUCTURE, TRANSMISSION METHODS AND BROADBAND
TECHNOLOGIES POSE RISKS TO OUR BUSINESS.
We believe that increased Internet use may depend on the availability
of greater bandwidth or data transmission speeds (also known as broadband
transmission). If broadband access becomes widely available, we believe it
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<PAGE>
Risk Factors
presents a significant business challenge for us. Development of rich media
services for a broadband transmission infrastructure involves a number of
additional risks, including:
- changes in content delivery methods and protocols;
- the emergence of new competitors, such as traditional media
advertising companies as well as broadcast and cable
television companies, which have significant control over
access to content, substantial resources and established
relationships with media providers;
- the development of relationships by our current competitors
with companies that have significant access to or control over
the broadband transmission infrastructure or content;
- the need to establish new relationships with non-PC based
providers of broadband access, such as providers of television
set-top boxes and cable television, some of which may compete
with us; and
- the general risks of new service development, including the
challenges to develop error-free enhancements, develop
compelling services and achieve market acceptance for these
services.
We will depend on the efforts of third parties to develop and provide a
successful infrastructure for broadband transmission. Even if broadband access
becomes widely available, heavy use of the Internet may negatively impact the
quality of media delivered through broadband connections. If these third parties
experience delays or difficulties establishing a widespread broadband
transmission infrastructure or if heavy usage limits the broadband experience,
the release of our rich media services for broadband transmission could be
delayed. Even if a broadband transmission infrastructure is developed for
widespread use, our services may not achieve market acceptance or generate
sufficient revenues to offset our development costs.
RISKS RELATED TO LEGAL UNCERTAINTY
WE ARE SUBJECT TO RISKS ASSOCIATED WITH GOVERNMENTAL REGULATION AND
LEGAL UNCERTAINTIES.
Few existing laws or regulations specifically apply to the Internet,
other than laws and regulations generally applicable to businesses. Certain U.S.
export controls and import controls of other countries, including controls on
the use of encryption technologies, may apply to our services. However, it is
likely that a number of laws and regulations may be adopted in the United States
and other countries with respect to the Internet. These laws may relate to areas
such as content issues (such as obscenity, indecency and defamation), copyright
and other intellectual property rights, encryption, use of key escrow data,
caching of content by servers, electronic authentication or "digital
signatures," personal privacy, advertising, taxation, electronic commerce
liability, e-mail, network and information security and the convergence of
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<PAGE>
Risk Factors
traditional communication services with Internet communications, including the
future availability of broadband transmission capability. Other countries and
political organizations are likely to impose or favor more and different
regulation than that which has been proposed in the United States, thus
furthering the complexity of regulation. The adoption of such laws or
regulations, and uncertainties associated with their validity and enforcement,
may affect the available distribution channels for and costs associated with our
services, and may affect the growth of the Internet. Such laws or regulations
may therefore harm our business.
We do not know for certain how existing laws governing issues such as
property ownership, copyright and other intellectual property issues, taxation,
illegal or obscene content, retransmission of media and personal privacy and
data protection apply to the Internet. The vast majority of such laws were
adopted before the advent of the Internet and related technologies and do not
address the unique issues associated with the Internet and related technologies.
Most of the laws that relate to the Internet have not yet been interpreted.
Changes to or the interpretation of these laws could:
- limit the growth of the Internet;
- create uncertainty in the marketplace that could reduce demand
for our services;
- increase our cost of doing business;
- expose us to significant liabilities associated with content
available on our websites or distributed or accessed through
our services; or
- lead to increased service delivery costs, or otherwise harm
our business.
On October 28, 1998, the Digital Millennium Copyright Act (DMCA) was
enacted. The DMCA includes statutory licenses for the performance of sound
recordings and for the making of recordings to facilitate transmissions. Under
these statutory licenses, we and customers or our rich media services will be
required to pay licensing fees for sound recordings we deliver in original and
archived programming. The DMCA does not specify the rate and terms of the
licenses, which will be determined either through voluntary inter-industry
negotiations or arbitration. We currently anticipate that representatives of the
webcasting industry will engage in arbitration with the Recording Industry
Association of America to determine what, if any, licensee fee should be paid.
Depending on the rates and terms adopted for the statutory licenses, our
business could be harmed both by increasing our own cost of doing business, as
well as by increasing the cost of doing business for our customers.
The Child Online Protection Act and the Child Online Privacy Protection
Act (COPA) were enacted in October 1998. The COPA impose civil and criminal
penalties on persons distributing material harmful to minors (e.g., obscene
material) over the Internet to persons under the age of 17, or collecting
personal information from children under the age of 13. We do not knowingly
collect and disclose personal information from such minors. The manner in which
the COPA may be interpreted and enforced cannot be fully determined, and future
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<PAGE>
Risk Factors
legislation similar to the COPA could subject us to potential liability, which
in turn could harm our business. Such laws could also damage the growth of the
Internet generally and decrease the demand for our services.
OUR EFFORTS TO PROTECT OUR TRADEMARKS MAY NOT BE ADEQUATE TO PREVENT
THIRD PARTIES FROM MISAPPROPRIATING OUR INTELLECTUAL PROPERTY RIGHTS.
The protective steps we have taken in the past have been, and may in
the future continue to be, inadequate to deter misappropriation of our trademark
rights. Although we do not believe that we have suffered any material harm from
misappropriation to date, we may be unable to detect the unauthorized use of, or
take appropriate steps to enforce our trademark rights. We have filed for
registration of one of our servicemarks in the United States. In the future we
may file for registration of our marks in Europe and Canada and other countries.
Effective trademark protection may not be available in every country in which we
offer or intend to offer our products and services. Failure to adequately
protect our trademark rights could damage or even destroy our Rich Media
Direct(SM) brand and our company name and impair our ability to compete
effectively. Furthermore, defending or enforcing our trademark rights could
result in the expenditure of significant financial and managerial resources.
WE MAY BE SUBJECT TO ASSESSMENT OF SALES AND OTHER TAXES FOR THE SALE
OF OUR SERVICES.
We may have to pay past sales or other taxes that we have not collected
from our customers. We do not currently collect sales or other taxes on the sale
of our services in states and countries other than those in which we have
offices or employees.
In October 1998, the Internet Tax Freedom Act (ITFA) was signed into
law. Among other things, the ITFA imposes a three-year moratorium on
discriminatory taxes on electronic commerce. Nonetheless, foreign countries or,
following the moratorium, one or more states, may seek to impose sales or other
tax obligations on companies that engage in such activities within their
jurisdictions. Our business would be harmed if one or more states or any foreign
country were able to require us to collect sales or other taxes from current or
past sales of services, particularly because we would be unable to go back to
customers to collect sales taxes for past sales and may have to pay such taxes
out of our own funds.
YEAR 2000 COMPLIANCE ISSUES COULD HARM OUR BUSINESS.
We are in the process of assessing any potential Year 2000 issues
associated with our envisioned services, and the computer systems, software,
other property and equipment we plan to purchase and use. Despite our efforts,
our envisioned services and systems, and those of third parties, including
content providers, advertisers, affiliates and end users, may contain errors or
faults with respect to the year 2000. Known or unknown errors or defects that
affect the operation of our services and systems or those of third parties could
result in delay or loss of revenues, interruptions of services, cancellation of
customer contracts, diversion of development resources, damage to our
reputation, increased service and warranty costs and litigation costs, any of
which could harm our business.
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<PAGE>
Risk Factors
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.
We have made forward-looking statements in this document, all of which
are subject to risks and uncertainties. Forward-looking statements include
information concerning our possible or assumed future business success or
financial results. Such forward-looking statements include, but are not limited
to, statements as to our expectations regarding:
- the future development and growth of, and opportunities for
rich media advertising and content distribution services, the
Internet and the on-line media delivery market;
- the future adoption of our planned future services and
technologies;
- future revenue opportunities;
- the establishment and future growth of our customer base;
- our ability to successfully develop and introduce future
services;
- future international revenues;
- future expense levels (including cost of revenues, research
and development, sales and marketing and general and
administrative expenses);
- future sales and marketing efforts;
- future capital needs;
- the future of our relationships with Summus and other
companies;
- the effect of past and future acquisitions;
- the future effectiveness of our intellectual property rights
should we acquire any such rights;
- the effect of any litigation in which we would become
involved; and
- the effect of the Year 2000 situation.
When we use words such as "believe," "expect" and "anticipate" or
similar words, we are making forward-looking statements.
You should note that an investment in our Common Stock involves certain
risks and uncertainties that could affect our future business success or
financial results. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in this "Risk Factors" section and elsewhere in this
Form 10.
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<PAGE>
Risk Factors
We believe that it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. Before you invest in our
Common Stock, you should be aware that the occurrence of the events described in
this "Risk Factors" section and elsewhere in this Form 10 could materially and
adversely affect our business, financial condition and operating results.
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<PAGE>
Item 2. Financial Information
ITEM 2. FINANCIAL INFORMATION
A. SELECTED FINANCIAL DATA
We derived the statement of operations data for the years ended
December 31, 1998 and 1999 and the balance sheet data as of December 31, 1998
and December 31, 1999 from the audited financial statements included in this
document.
The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes thereto included
elsewhere in this document. All amounts, except per share amounts, are presented
in dollars. No cash dividends have been declared or paid in any of the periods
presented.
We have been in existence since our original incorporation in 1984,
however, we have had no substantial operations until 1998. We have audited
financial statements of High Speed for 1996 and 1997. These audited financial
statements present the audited balance sheets as of December 31, 1996 and
December 31, 1997 and the related statements of operations and cash flows for
each the two years in the period ended December 31, 1997, however, they show no
assets or liabilities or no revenues or expenses and no activity in the capital
accounts. Consequently, we have not presented statement of operations or balance
sheet data for 1995, 1996, or 1997 in the following table of selected financial
data because any amounts presented for these time periods would show zero
amounts except for the outstanding shares of Common Stock. From the beginning of
1995 through the end of 1997, we had 5,000 shares of our Common Stock issued and
outstanding.
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<PAGE>
Item 2. Financial Information.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Year Ended Year Ended
December 31, December 31,
1998 1999
---------------------------------------------------------------------------------------------
<S> <C> <C>
Statement of Operations Data :
------------------------------
Selling, general and administrative expenses $427,841 $7,488,627
Interest expense --- 2,655,749
---------------------------------
Loss from continuing operations (427,841) (10,144,376)
Loss from discontinued operations (1,265,965) ---
---------------------------------
Net loss $(1,693,806) $(10,144,376)
==================================
Per Share Amounts:
------------------
Loss from continuing operations $(0.06) $(0.53
Loss from discontinued operations $(0.20) ---
Net loss per share $(0.26) $(0.53)
==================================
Weighted average shares outstanding 6,438,508 19,030,492
=================================
Balance Sheet Data
------------------
Cash and Cash Equivalents $18,609 $248,740
Total Assets $95,058 6,717,722
Total Stockholders' (Deficit) Equity $(208,957) $5,228,081
=================================
</TABLE>
B. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES, WHICH APPEAR ELSEWHERE
IN THIS DOCUMENT. IT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING
THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS DOCUMENT, PARTICULARLY UNDER THE
HEADING "RISK FACTORS."
OVERVIEW
We are a development stage company, and as stated in Item 1 "Business,"
we did not operate as an active business for the majority of 1999. The statement
of operations for the year ended December 31, 1999 reflect High Speed's efforts
to launch a marketing and distribution company focused on licensing and
reselling Summus Ltd. technology and products, granted through a Marketing
License Agreement. See Item 1 "Business." During 1998, High Speed acquired,
through an asset purchase, operated and terminated the business of Marketers
World, Inc.
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<PAGE>
Item 2. Financial Information.
In January of 2000, we launched a new Internet service for rich media
direct marketing and content delivery. We plan to derive our revenues from
providing a turnkey service for creation, hosting and delivery of rich media
advertisements and content for customer campaigns. In addition, we plan to
derive revenues from complementary services that are offered to customers such
as call center routing and Voice Over IP services.
We anticipate that revenues will result from revenue-sharing agreements
as well as fixed rate pricing and flat fees. Revenues will be recognized when
services are provided for initiating a campaign, when rich media advertisements
are delivered and when results of a campaign (such as `revenue' or `reach') are
reported.
Our prospects must be considered in light of our limited operating
history. We face all the risks and uncertainties of development-stage companies.
Our future success depends upon, among other things, our ability to generate
revenues from future customers. Specifically, we must:
- Generate sales of our Rich Media Direct service to web
properties, e-commerce companies and other entities interested
in direct marketing on the Internet
- Generate sales of our complementary service offerings such as
content hosting, streaming, Voice-over-IP services and call
center services
- Add personnel to establish and begin operating our sales and
marketing programs in connection with our Rich Media Direct
service
- Establish our ability to resell our services through reseller
channels
RECENT DEVELOPMENTS
We have recently accomplished a number of key milestones that are
strategic to our business and revenue generation. Since the beginning of January
2000 we have:
We have restructured our license agreement with Summus Ltd. See Item 1
"Business." The new agreements give High Speed a non-exclusive right to
distribute wavelet encoded content over the Internet or over private network
environments, for the purposes of advertising or content delivery. In addition,
our license agreements give us a number of revenue sharing arrangements with
third parties who license software from Summus for the same purpose. In
addition, the revenue sharing agreements give us a percentage of the revenue
Summus may derive from Samsung Electronics of America, Inc..
We have entered into a "Letter of Intent" with Samsung Electronics of
America, Inc. and Summus Ltd. The Letter of Intent covers certain business
relationships, joint development agreements and other similar arrangements to
integrate and optimize Summus Dynamic Wavelet technology on Samsung's DSP
platform. Our role in these negotiations is as a marketing partner with revenue
rights determined by the New Agreements that we have with Summus.
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<PAGE>
Item 2. Financial Information.
We have entered into a "Letter of Intent" with BuyitNow. Upon the
Letter of Intent becoming a definitive agreement we anticipate delivering rich
media advertisements for BuyitNow E-commerce campaigns.
There can be no assurance that any of these letters of intent will
result in actual agreements or revenues for us.
The remainder of this Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read considering the brief history
of High Speed as summarized below.
High Speed was incorporated in 1984 and was inactive until it acquired
all of the assets of Marketers World, Inc. ("MWI") on August 24, 1998. The
acquisition was accounted for as reverse merger whereby MWI was treated for
accounting purposes as the acquirer and High Speed as the acquiree since the
sole shareholder of MWI owned approximately 90% of the outstanding shares of the
combined company after the merger. The results of MWI have been presented as
discontinued operations since all operating activity ceased as of December 31,
1998. The results of operations for the year ended December 31, 1999 relate
solely to the operations of High Speed. Marketers World had no operating
activity in 1999.
YEAR ENDED DECEMBER 31, 1999
REVENUE
We had no revenue during the year ended December 31, 1999, because we
had no products to sell nor any capacity to provide services during this period.
NET LOSS
Our net loss during the year ended December 31, 1999 was $10,144,376,
$.53 per share. The net loss was attributable to general and administrative
expenses and non-cash interest expense.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $7,488,627 for the year ended
December 31, 1999. Of this amount, $5,698,038 relates to non-cash compensation
and consulting costs related to the granting of stock options and stock awards
to employees and stockholders for services rendered and the execution of stock
subscription agreements with per share selling prices set below the traded value
of the common stock. The stock options and stock awards vested upon issuance and
had nominal or no exercise prices. Of this amount $91,250 has been netted
against the non-cash charges resulting from the cancellation in 1999 of 555,000
shares of Common Stock that were originally issued in 1998 and 1999 and valued
at $91,250. During 1999, it was determined that these services were not
satisfactorily performed in 1998 and 1999 and therefore the common stock was
voluntarily returned to us and canceled. The remaining balance of general and
administrative expenses incurred during this period of approximately $1,790,589
related primarily to salary and other operating costs.
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<PAGE>
Item 2. Financial Information.
INTEREST EXPENSE
Non-cash interest expense of $2,655,749 was incurred relating to the
issuance of convertible debentures during 1999 that included Common Stock
conversion prices which were below the fair market value of the Common Stock on
the date the debentures were issued. Since all of the debentures were
convertible into Common Stock upon their issuance, the beneficial conversion
feature of $2,655,749 that reflects the difference between the debentures'
conversion prices and the fair market value of the Common Stock has been
recorded as non-cash interest expense during the year ended December 31, 1999.
YEAR ENDED DECEMBER 31, 1998.
REVENUES
We had no revenues during the year ended December 31, 1998, because we
had no products to sell nor any capacity to provide services during this period.
NET LOSS
Our net loss for the year ended December 31, 1998 was $1,693,806, which
consisted of a net loss from continuing operations of $427,841 and a loss from
discontinued operations of $1,265,965.
The loss from continuing operations included non-cash compensation
costs of $76,500 related to the granting of stock to employees for services
rendered. The remaining loss was attributable to salary and other operating
costs.
The loss from discontinued operations of $1,265,965 reflects the
operating results of MWI for the year ended December 31, 1998. MWI ceased all
operating activity by the end of 1998. During 1998, MWI earned revenues of
$1,335,300 and generated a loss from operations of $1,265,965. MWI incurred no
operating costs subsequent to December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Our operations to date have been primarily funded by private placements
of shares of our Common Stock, related party loans and debentures. As of
December 31, 1999, we had cash and cash equivalents of $248,740, and current
liabilities of $1,489,691, resulting in a working capital deficiency of
$1,240,951.
Summus has funded itself in part by selling shares of our Common Stock
that Summus owns. From August 25, 1999 to date, Summus has sold 2,415,000 shares
of our Common Stock for an aggregate of $6,134,100. With less than $2.61 million
of cash as of January 31, 2000, Summus lacks sufficient resources to continue to
make loans to us.
Net cash used in operating activities of $885,885 during the year ended
December 31, 1999 reflects cash paid for salaries and our other operating
expenses plus $60,000 paid to Summus as a prepaid royalty. The total amount of
prepaid royalties paid to Summus as of September 30, 1999 is $4,528,125, which
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<PAGE>
Item 2. Financial Information.
consists of: (i) the issuance of 1,500,000 shares of our Common Stock valued at
$2,278,125; (ii) the $60,000 cash payment made by us to Summus; and (iii)
$2,190,000 paid by our shareholders to Summus on our behalf and for which we
issued debentures that were converted into 3,968,640 shares of our Common Stock.
Net cash used in investing activities of $106,052 during the year ended
December 31, 1999 include $4,052 paid for office furniture, and $102,000 paid in
connection with the acquisition of our ownership interest in Summus. Our total
investment in Summus as of September 30, 1999 is $1,897,127, which consists of a
cash payment of $102,000 and the issuance of 795,001 shares of our Common Stock
valued at $1,792,127.
Net cash provided by financing activities of $1,222,068 during the year
ended December 31, 1999 resulted from the proceeds of the sale of our Common
Stock of $242,062, proceeds from the issuance of convertible debentures of
$558,640 and net advances from stockholders totaling $421,366. During 1999,
$2,097,109 of convertible debentures were issued to a stockholder as partial
settlement for cash advances made by the stockholder to Summus, on our behalf,
for the payment of royalties.
Net cash used in operating activities from continuing operations during
the year ended December 31, 1998 of $291,685, resulted from the payment of
salaries and other operating costs. Net cash used in discontinued operations of
$1,265,965 represents the net cash used to operate MWI during 1998. Net
investing activities for the year ended December 31, 1998 included the purchase
of equipment. Net financing activities during the year ended December 31, 1998
of $1,626,407 included proceeds from the sale of our Common Stock of $317,000,
stockholder capital contributions of $1,091,648 and stockholder advances of
$445,378, less $227,619 used to acquire 38,500 shares of our stock.
We are currently negotiating an agreement to obtain financing in the
amount of $2,000,000 by issuing convertible preferred stock to an investor.
There can be no assurance that the current negotiations will result in our
obtaining financing. If this financing occurs, we anticipate that the proceeds
of this offering, plus internally generated cash from operations will be
sufficient to fund our capital requirements for the next 12 months. However, we
are also engaged in discussions to raise additional capital. There can be no
assurance that additional equity or debt financing, if required, will be
available on terms that are acceptable, or at all.
The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a timely
basis, to obtain additional financing as may be required, and ultimately to
attain profitability. Management expects that eventually we will obtain customer
orders for our services which will produce revenues to reduce our operating
losses. Management also expects additional capital can be raised to further fund
operations. However, there can be no assurances that management's plans will be
executed as anticipated.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities.
SFAS 133 requires that derivative instruments be recognized as either assets or
liabilities in the consolidated balance sheet based on their fair values.
Changes in the fair values of such derivative instruments will be recorded
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<PAGE>
Item 2. Financial Information.
either in results of operations or in other comprehensive income, depending on
the intended use of the derivative instrument. The initial application of SFAS
133 will be reported as the effect of a change in accounting principle. SFAS 133
is effective for all fiscal years beginning after June 15, 2000. We have not yet
determined the effect that the adoption of SFAS will have on our consolidated
financial statements.
YEAR 2000
Because we have no operations and no material operational assets it has
not been necessary for us to undertake traditional Year 2000 measures such as
inventory, assessment, remediation and testing.
Our primary Year 2000 risk exists to the extent that suppliers of
products, service and systems that we anticipate purchasing in the future, and
others with whom we may transact business, do not have business systems or
products that comply with Year 2000 requirements. We plan to obtain assurances
from these future suppliers with regard to Year 2000 compliance of their
products and services as we engage with these suppliers. We believe that
obtaining these assurances will not produce additional material cost beyond the
ordinary and customary costs of interacting with suppliers.
Although we believe that our Year 2000 compliance plan is adequate to
address Year 2000 concerns, there can be no assurance that we will not
experience negative consequences as a result of undetected defects or the
non-compliance of third parties with whom we interact. If realized, these risks
could result in adverse affect on the business, results of operations and
financial condition.
C. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discusses our exposure to market risk related to changes
in interest rates, equity prices and foreign currency exchange rates. This
discussion contains forward-looking statements that are subject to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors including those set forth in the section entitled "Risk Factors."
We do not use any derivative financial instruments for hedging,
speculative or trading purposes. We do not own any equity investments other than
the shares of Summus. Because Summus is a private company and is not traded on
any public market, our investment in Summus is not subject to market risk.
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<PAGE>
Item 3. Properties
ITEM 3. PROPERTIES.
Our headquarters is in 1,900 square feet of office space located at 434
Fayetteville Street Mall, Suite 2120, in Raleigh, North Carolina. Our lease
expires September 30, 2004. We pay $31,054 on an annualized basis. We believe
the terms are consistent with local market conditions. We plan to lease an
additional 2,100 square feet in the same building in the second quarter of 2000.
The space that we currently occupy, combined with the planned
additional space, is adequate for our projected growth needs over the next 12
months.
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<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the only stockholders known by us to be
the beneficial owners, as of February 10, 2000, of more than five percent (5%)
of the outstanding shares of Common Stock of High Speed.
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY SHARES
NAME AND ADDRESS OWNED <F1> OUTSTANDING
- ---------------- ------------ -----------
<S> <C> <C> <C>
Summus Ltd. 11,366,527 <F2><F3> 54.0%
Two Hanover Square, Suite 2120
434 Fayetteville St. Mall
Raleigh, NC 27601
Dr. Bjorn Jawerth 11,366,527 <F2><F3> 54.0%
Two Hanover Square, Suite 2120
434 Fayetteville St. Mall
Raleigh, NC 27601
William Bradford Silvernail 11,366,527 <F3><F4> 54.0%
Two Hanover Square, Suite 2120
434 Fayetteville St. Mall
Raleigh, NC 27601
<FN>
<F1> The persons and entities named in the table have sole voting and
investment power with respect to all shares shown as beneficially owned by them,
except as noted below.
<F2> Includes 8,574,360 shares beneficially owned by Summus Ltd. Dr. Jawerth
owns 53.6% of the outstanding shares of Summus Ltd., and is the President and
Chairman of the Board of Directors of Summus Ltd. Dr. Jawerth exercises shared
voting and investment power with respect to all High Speed shares owned by
Summus Ltd.
<F3> Includes 2,792,167 shares for which Summus has voting power through
voting agreements with and/or proxies from 17 persons.
<F4> Includes 8,574,360 shares beneficially owned by Summus Ltd. Mr.
Silvernail is the Chief Executive Officer and is a member of the Board of
Directors of Summus Ltd. Mr. Silvernail exercises shared voting and investment
power with respect to all High Speed shares owned by Summus Ltd.
</FN>
</TABLE>
43/79
<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
The table below gives the number of shares of our Common Stock
beneficially owned as of February 10, 2000 by persons who were members of the
Board of Directors and executive officers of High Speed during 1999 or who are
currently members of our Board of Directors or are executive officers.
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY SHARES
NAME OWNED <F1> OUTSTANDING
- ------------------------------------------------------ ---------------------- --------------------------
<S> <C> <C>
Andrew L. Fox
Director, Acting President and Chief Executive 80,000 <F2> <F3> *
Officer, and Executive Vice President
Dr. Bjorn Jawerth
Chairman of the Board of Directors 11,366,527 <F4> 54%
Richard F Seifert
Director 250,000 <F5> <F6> 1.1%
William Bradford Silvernail
Director 11,366,527 <F7> 54%
Alan Kleinmaier
Executive Vice President, Acting Chief Financial 90,000 <F8> *
Officer, Secretary, and Treasurer
Michael M. Cimino
Former Director, President, Secretary and Treasurer 500,000 <F9> 2.3%
Michael Kim
Former President and Chief Executive Officer 265,000 <F10> 1.2%
Peter Rogina
Former President and Chief Executive Officer 200,000 <F11> *
All current directors and executive
officers as a group (5 Persons) 11,786,527 <F12> 55.5% (12)
* Represents beneficial ownership of less than one percent (1%) of
Common Stock.
<FN>
<F1> The persons and entities named in the table have sole voting and
investment power with respect to all shares shown as beneficially owned
by them, except as noted below. Share ownership also includes shares of
Common Stock issuable within 90 days upon exercise of outstanding
options.
<F2> These shares do not include 240,000 shares that Mr. Fox may acquire
pursuant to stock options exercisable over three years in equal
installments from the anniversary date of August 25, 1999.
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<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
<F3> These shares represent 80,000 shares that Mr. Fox may acquire pursuant
to an agreement with Summus that Summus will transfer 80,000 High Speed
shares in exchange for 10,000 Summus shares owned by Mr. Fox.
<F4> These shares include 8,574,360 shares owned by Summus Ltd. Dr. Jawerth
owns 53.6% of the outstanding shares of Summus Ltd. and is the
President and Chairman of the Board of Directors of Summus Ltd. Dr.
Jawerth exercises shared voting and investment power with respect to
all High Speed shares owned by Summus Ltd. These shares also include
2,792,167 shares for which Summus has voting power through voting
agreements with and/or proxies from 17 persons.
<F5> These shares include 50,000 shares that Mr. Seifert may immediately
acquire pursuant to stock options.
<F6> These shares include 200,000 shares that are beneficially owned with
his wife, Karen Seifert.
<F7> These shares include 8,574,360 shares owned by Summus Ltd. These shares
also include 2,792,167 shares for which Summus has voting power through
voting agreements with and/or proxies from 17 persons. Mr. Silvernail
is the Chief Executive Officer and is a member of the Board of
Directors of Summus Ltd. Mr. Silvernail exercises shared voting and
investment power with respect to all High Speed shares owned by Summus
Ltd.
<F8> These shares include 20,000 shares that Mr. Kleinmaier owns with Pamela
B. Kleinmaier, the wife of Mr. Kleinmaier. These shares include 50,000
shares that Mr. Kleinmaier may acquire pursuant to stock options
immediately exercisable.
<F9> These shares include shares that Mr. Cimino beneficially owns with his
wife, Gina M. Cimino.
<F10> These shares include 65,000 shares that Mr. Kim may immediately acquire
pursuant to stock options.
<F11> These shares include 200,000 shares that Mr. Rogina may immediately
acquire pursuant to stock options, but does not include stock options
exercisable for 40,000 shares of Common Stock after July 1, 2000.
<F12> This total counts the percentage of ownership attributable to the
Summus shares only once.
</FN>
</TABLE>
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<PAGE>
Item 5. Directors and Executive Officers
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
A. CURRENT DIRECTORS
The following table sets forth information regarding the members of our
Board of Directors:
<TABLE>
<CAPTION>
First Year
Elected as Term
Name Director Expires Age
- ---- -------- ------- ---
<S> <C> <C> <C>
Dr. Bjorn Jawerth 2000 2001 47
William Bradford Silvernail 2000 2001 41
Andrew L. Fox 2000 2001 36
Richard F. Seifert 1999 2001 49
</TABLE>
B. EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers are elected annually and serve at the pleasure of
the Board of Directors. Our current executive officers are as follows:
<TABLE>
<CAPTION>
Name Office Officer Since Age
---- ------ ------------- ---
<S> <S> <C> <C>
Andrew L. Fox Acting President and Chief Executive Officer; 1999 36
Executive Vice President
Alan Kleinmaier Executive Vice President, Acting Chief Financial 2000 52
Officer, Secretary, and Treasurer
</TABLE>
C. BIOGRAPHIES OF DIRECTORS AND EXECUTIVE OFFICERS
Andrew L. Fox is our acting President and Chief Executive Officer and
our Executive Vice President. Before coming to High Speed, Mr. Fox spent over 2
1/2 years at RealNetworks as a Senior Marketing Manager responsible for
RealNetworks corporate enterprise business. He developed RealNetwork's entrance
into the corporate enterprise marketplace. He managed marketing and sales
operations for the corporate enterprise division of RealNetworks during a time
period when this division's business grew by multiple millions of dollars in
sales each year. Before RealNetworks, Mr. Fox spent 10 years at IBM in a variety
of sales, marketing and product management roles. He was responsible for
marketing and sales for IBM's Wireless Data Division and was a product manager
at IBM's Networking Hardware Division responsible for bringing Token ring,
Ethernet, Modems and Wireless Data products to market. Mr. Fox was also employed
by Summus Ltd. from August 1999 until January 2000 as its Executive Vice
President of Sales and Marketing and served as a member on the board of
directors of Summus. Mr. Fox has an MBA degree from Duke University's Fuqua
School of Business and an undergraduate degree in Computer Science and
Electrical Engineering from Duke's School of Engineering.
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<PAGE>
Item 5. Directors and Executive Officers
Dr. Bjorn Jawerth, Chairman, President and Founder of Summus Ltd.,
received an M.Sc. in Mathematics and Statistics, as well as an M.Sc. in
Technical Physics and Electrical Engineering in 1974 from Lund Institute of
Technology, Lund, Sweden. He also received his Ph.D. in Mathematics from Lund
Institute in 1977. Dr. Jawerth is the David W. Robinson Palmetto Professor,
Professor of Mathematics and Adjunct Professor of Computer Science at the
University of South Carolina. He directs a group of approximately 50 researchers
in Mathematics, Computer Science, Mechanical Engineering and Chemistry at the
University of South Carolina and Chalmers University of Technology in
Gothenburg, Sweden. Dr. Jawerth has more than 25 years of experience as a
consultant in the areas of image processing and finite element analysis. Dr.
Jawerth has over 90 publications to his credit in books and referred journals.
He has won and administered numerous grant awards from both industry and
government agencies such as the Office of Naval Research, the Air Force Office
of Scientific Research, the Army's NVESD, the NSF and DARPA. His research
interests include computational harmonic analysis and partial differential
equations, image processing and pattern recognition.
Alan Kleinmaier is our Executive Vice President, Acting Chief Financial
Officer, Secretary, and Treasurer. Mr. Kleinmaier has more than 20 years of
management experience. He has served as President and CEO of Specialty Retail
Concepts, Inc., a retail chain of more than 400 confectionery and coffee stores
which he founded in 1976. Mr. Kleinmaier was a principal and consultant for EK
Retail Group, Inc., a privately held management and consulting firm. Mr.
Kleinmaier is currently the Acting Chief Financial Officer of Summus Ltd. He
joined Summus in May 24, 1999. Mr. Kleinmaier is a graduate of the University of
North Carolina, Chapel Hill, where he was a Morehead Scholar. Mr. Kleinmaier is
also a graduate of UNC School of Business Executive Program and holds his North
Carolina Real Estate Broker's license.
W. Bradford Silvernail is the Chief Executive Officer of Summus Ltd.
Mr. Silvernail joined Summus in May, 1999 and brings a strong background in
general management, technology and product management and marketing and sales.
Mr. Silvernail's most recent position was General Manager, Metering Systems, ABB
Power T&D Company, where he created a new business from the ground up developing
energy information solutions for the deregulating electric utility industry. In
a little over two years, Mr. Silvernail put in place a management team and a
functional business with software development, product management and marketing
and sales with a staff of over 50. Under Mr. Silvernail's leadership, first year
revenues for this ABB division exceeded $10 million and the business unit
shipped four new hardware/software products during the first year of Mr.
Silvernail's tenure. Prior to joining ABB, Mr. Silvernail spent more than
fifteen years with IBM Corporation in a variety of business unit management,
product management and sales positions associated with wireless, mobile
computing and networking products. Mr. Silvernail received a B.A. in
Communications from Auburn University in 1980 and an M.S. in Telecommunications
from Syracuse University in 1981.
Richard Seifert is a Director at High Speed Net Solutions, having
joined us in March of 1999 as the Vice President of Operations. In late 1999 Mr.
Seifert discontinued his operational role but continued to serve us as a member
of our board of directors. Under and advisory and consulting agreement with us,
Mr. Seifert has been involved in formulating strategic partnerships and raising
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<PAGE>
Item 5. Directors and Executive Officers
capital for us. Mr. Seifert has over 20 years experience in the areas of
business development, finance, strategic planning and marketing. Before coming
to High Speed, Mr. Seifert was involved in a number of entrepreneurial ventures
including the launching of Internet Plus, an Internet ISP, the launching of Cal
Sierra Airlines, and he was CEO of ERA Park Place, a real estate franchise.
While CEO of ERA Park Place, Seifert was also elected President of the
Philadelphia Regional Brokers Council, and was instrumental in expanding its
marketing and promotional activities. Mr. Seifert began his career in the
aviation industry where he flew and ran operations for several private and
commercial airlines, including Summit Airlines, Air Indiana, Nevada Airlines,
and the Royal Family of Saudi Arabia. Mr. Seifert holds a degree in Business
Administration from Montgomery County College and Penn State University.
Executive officers are appointed by the board of directors on an annual
basis and serve until their successors have been duly elected and qualified.
There are no family relationships among any of our directors or executive
officers.
D. COMPOSITION OF OUR BOARD OF DIRECTORS
Our bylaws provide that the number of members of our board of directors
will consist of at least one director and that the board has the power to
determine the number of directors, when not determined by the stockholders, and
to fill vacancies on the board. Currently, the number of directors is fixed at
four and we have four directors and no vacancies on the board of directors. All
directors are elected annually to serve until the next annual stockholders'
meeting following their election and until their successors are elected and
qualified.
The compensation committee of the board of directors reviews the
performance of all executive officers, determines the salaries and benefits for
all executive officers and administers our stock option plan. The members of the
compensation committee are Mr. Fox, Mr. Seifert, Dr. Jawerth and Mr. Silvernail.
48/79
<PAGE>
Item 6. Executive Compensation
ITEM 6. EXECUTIVE COMPENSATION
A. SUMMARY COMPENSATION TABLE
The following table and the narrative text disclose the compensation
paid during 1999, 1998, and 1997 to the various individuals who served as our
President and Chief Executive Officer 1999. The table also shows the three (3)
other highest paid executive officers whose annual salary and bonuses exceeded
$100,000 during 1999, including individuals who were not serving as an executive
officer at the end of 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
Awards <F3>
------------------------------------- ------------------------
Other Annual Restricted Options/ All Other
Name and Salary Bonus Compensation Stock SARS Compensation
Principal Position Year ($) ($) <F1> ($) Awards (#) <F2> ($)
------------------ ---- ------- ------- ------------ ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Andrew L. Fox <F5> 1999 66,100 55,000 30,891 <F4> 240,000 <F4>
Director, Acting President 1998 -- -- -- -- -- --
and 1997 -- -- -- -- -- --
Chief Executive Officer,
Executive Vice President
Alan Kleinmaier <F6> 1999 <F4> <F4> 13,300 <F4> 50,000 <F4>
Executive Vice President, 1998 -- -- -- -- -- --
Acting Chief Financial 1997 -- -- -- -- -- --
Officer, Secretary, and
Treasurer
Michael Cimino <F7> 1999 <F4> <F4> 50,879 425,000 <F4> <F4>
Former President and Chief 1998 <F4> <F4> 11,000 705,000 <F4> <F4>
Executive Officer, 1997 -- -- -- -- -- --
Secretary, and Treasurer
Michael Kim <F8> 1999 66,346 <F4> 12,153 <F4> 265,000 100,000 <F11>
Former President and Chief 1998 -- -- -- -- -- --
Executive Officer 1997 -- -- -- -- -- --
Peter Rogina <F9> 1999 17,308 <F4> 8,895 <F4> 240,000 110,000 <F11>
Former President and Chief 1998 -- -- -- -- -- --
Executive Officer 1997 -- -- -- -- -- --
Richard Seifert <F10> 1999 24,000 <F4> 112,646 <F4> 250,000 <F4>
Former Vice President of 1998 -- -- -- -- -- --
Operations 1997 -- -- -- -- -- --
<FN>
<F1> Amounts in this column include amounts earned during the year
specified but deferred for payment either the following year or thereafter.
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<PAGE>
Item 6. Executive Compensation
<F2> Number of shares of Common Stock issuable upon exercise of options
granted during 1999. We did not grant any Stock Appreciation Rights during 1999.
<F3> Long Term Incentive Plan compensation for executive officers is not
reported because we did not pay any compensation of this type and we have never
had a Long Term Incentive Plan for our executive officers.
<F4> No compensation of this type received.
<F5> Mr. Fox has served as our Acting President and Chief Executive
Officer and Executive Vice President from August 25, 1999, to present.
<F6> Mr. Kleinmaier has served as our Acting Chief Financial Officer,
Secretary, Treasurer and Executive Vice President since August 25, 1999.
<F7> Mr. Cimino served as our President and Chief Executive Officer from
September 10, 1998 to March 1, 1999. He continued to be employed as Chairman of
the Board of Directors from September 10, 1998 to August 25, 1999.
<F8> Mr. Kim served as our President and CEO from April 20, 1999 to
August 25, 1999. We agreed to pay Mr. Kim a termination amount of $100,000 per a
verbal agreement. ($21,346.00 was disbursed to Mr. Kim in calendar 1999 and
$78,654 is scheduled to be disbursed in 2000. See footnote 11).
<F9> Mr. Rogina served as our President and CEO from March 15, 1999 to
April 20, 1999. We paid Mr. Rogina $110,000 in connection with the termination
of his employment contract, as well as 240,000 options on our Common Stock.
<F10> Rick Seifert served as our Vice President of Operations from
February 10, 1999 to August 25, 1999. The amount under Other Annual Compensation
for Mr. Seifert includes $62,500 that we paid to Mr. Seifert pursuant to our
agreement with him under which Mr. Seifert receives a fee for identifying
successful financing opportunities for us.
<F11> Represents disbursements in connection with termination of
employment, see footnote numbers 8 and 9.
</FN>
</TABLE>
B. EMPLOYMENT AGREEMENTS
We entered into an employment agreement with Andrew L. Fox by a letter
dated January 20, 2000 (the "Fox Employment Agreement"). Set forth below is a
summary of certain terms of the Fox Employment Agreement. This summary is not a
complete description of the terms and conditions of the Fox Employment Agreement
and is qualified in its entirety by reference to the Fox Employment Agreement, a
copy of which is filed as an exhibit to this registration statement.
In August of 1999, under an employment arrangement without a fixed term
that either party may terminate at any time, we employed Andrew Fox as our
acting president and chief executive officer and executive vice president and
elected him as a director. Under this agreement, Mr. Fox's base annual salary is
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<PAGE>
Item 6. Executive Compensation
$135,000 and he is eligible to receive a bonus initially targeted to be up to an
amount equal to his base annual salary. The bonus is based upon goals and
objectives to be established by the compensation committee of the board of
directors annually following our fiscal year-end. While employed as acting CEO,
Mr. Fox will receive an additional bonus of $2,500 per month. These bonuses may
be increased or decreased by the compensation committee. Mr. Fox will receive
COBRA reimbursement until we establish our health care plan, and will receive
life insurance coverage through Summus Ltd. until we establish life insurance
coverage. Finally, Mr. Fox receives a $600 per month car allowance. If we
terminate Mr. Fox's employment we are obligated to pay him six months of salary
paid monthly or in a lump sum.
Mr. Fox received an option to purchase 240,000 shares of High Speed
Common Stock that will vest in three equal installments over a three year period
beginning on August 25, 1999. The vesting of these options is dependent on the
attainment of certain performance goals such as revenue, EBITDA or other metrics
to be determined by our Board of Directors. The exercise price for the options
is Four Dollars and Thirty Eight Cents ($4.38) per share for Eighty Thousand
(80,000) of the Two Hundred Forty Thousand (240,000) shares of Common Stock, and
Thirteen Dollars ($13.00) per share for the remaining One Hundred and Sixty
Thousand (160,000) shares of our Common Stock.
We entered into an employment agreement with Alan R. Kleinmaier by a
letter dated February 7, 2000 (the "Kleinmaier Employment Agreement"). Set forth
below is a summary of certain terms of the Kleinmaier Employment Agreement. This
summary is not a complete description of the terms and conditions of the
Kleinmaier Employment Agreement and is qualified in its entirety by reference to
the Kleinmaier Employment Agreement, a copy of which is filed as an exhibit to
this registration statement.
In August of 1999, under an employment arrangement without a fixed term
that either party may terminate at any time, we employed Alan Kleinmaier as our
executive vice president, secretary, treasurer and acting chief financial
officer. Under this agreement, Mr. Kleinmaier's base annual salary is $100,000
and he is eligible to receive a bonus initially targeted to be up to an amount
equal to his base annual salary. The bonus is based upon goals and objectives to
be established by the compensation committee of the board of directors annually
following our fiscal year-end. These bonuses may be increased or decreased by
the compensation committee. Mr. Kleinmaier will receive full medical, dental and
vision for himself and his dependents. Finally, Mr. Kleinmaier receives a $600
per month car allowance. If we terminate Mr. Kleinmaier's employment, we are
obligated to pay him six months of salary.
Mr. Kleinmaier received an option to purchase 50,000 shares of High
Speed Common Stock that are fully vested as of August 25, 1999. The exercise
price for the options is Four Dollars ($4.00) per share of our Common Stock.
Mr. Kleinmaier is also employed by Summus and currently serves as Summus' Chief
Financial Officer. Mr. Kleinmaier allocates approximately 10% of his time to
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<PAGE>
Item 6. Executive Compensation
Summus and the remainder of his time to High Speed. Mr. Kleinmaier is paid
$25,000 annually by Summus and owns 5,000 shares of Summus common stock. He has
been granted an additional 5,000 shares of Summos stock which becomes fully
vested in May 2000. Additionally, he has options to purchase 10,000 shares of
Summus' Common Stock, which vests in May 2001.
C. STOCK OPTIONS GRANTED
The following table sets forth information about the stock options
granted to our executive officers during 1999. We did not grant any stock
options to our executive officers during 1998.
No stock appreciation rights have ever been exercised by any of our
executive officers because we have never granted any stock appreciation rights.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
% of Total Market
Options Price on Fair Market
Granted to Exercise or Date of Annual Rates of Stock Value on
Options Employees in Base Price Grant Expiration Price Appreciation for February 11,
Name Granted Fiscal Year ($/Sh) ($/Sh) Date Option Term <F1> 2000
---- ------- ----------- ----------- ------ ---------- ---------------------- -------------
0% 5% 10%
-- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Michael Cimino 425,000 <F2> 24% $ 0.01 $2.375 01/01/05 $1,005,125 -- <F3> -- <F3> $10,992,625
Peter Rogina 200,000 <F4> 11% $ 0.01 $2.75 9/22/04 $548,000 $699,955 $883,781 $ 5,173,000
Peter Rogina 40,000 <F5> 2% $ 0.01 $2.75 9/22/04 $109,600 $139,991 $176,756 $ 1,034,600
Richard F. 50,000 <F6> 3% $ 4.00 $2.375 5/27/09 -- <F7> -- <F7> $108,007 $ 1,093,750
Seifert
Richard F. 200,000 <F6> 11% $ 0.01 $2.375 5/27/09 $473,000 -- <F3> -- <F3> $ 5,173,000
Seifert
Myung K. Kim 200,000 <F8> 11% $ 0.01 $2.375 4/12/09 $473,000 -- <F3> -- <F3> $ 5,173,000
Myung K. Kim 65,000 <F8> 4% $ 4.00 $2.375 4/12/09 -- <F7> -- <F7> $108,007 $ 1,421,875
Andrew Fox 160,000 <F9> 9% $13.00 $4.38 8/25/09 -- <F7> -- <F7> -- <F7> $ 2,060,000
Andrew Fox 80,000 <F9> 5% $ 4.38 $4.38 8/25/09 $0 $220,365 $558,447 $ 1,719,600
Alan Kleinmaier 50,000 <F10> 3% $ 4.00 $4.38 8/25/09 $19,000 $156,728 $368,030 $ 1,093,750
<FN>
<F1> The potential realizable value of the options reported above was
calculated by assuming 5% and 10% annual rates of appreciation of the price of
our Common Stock from the date of grant of the options until the expiration of
the options. These assumed annual rates of appreciation were used in compliance
with the rules of the Securities and Exchange Commission and are not intended to
forecast future price appreciation of our Common Stock. We chose not to report
the present value of the options because we do not believe any formula will
determine with reasonable accuracy a present value because of unknown or
volatile factors. The actual value realized from the options could be
substantially higher or lower than the values reported above, depending upon the
future appreciation or depreciation of the Common Stock during the option period
and the timing of exercise of the options. We have reported the 0% column to
describe the value of the options granted to the named executive on the date of
the grant.
<F2> These options were granted in May of 1999 per Mr. Cimino's verbal
employment agreement.
<F3> No value is reported because these options have been exercised.
These options are included in this table to show their value to the named
executive on the grant date because the options were granted at an exercise
price below the market price at the date of the grant.
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<PAGE>
Item 6. Executive Compensation
<F4> Pursuant to a settlement agreement with Peter Rogina, dated
September 22, 1999, we granted Mr. Rogina an option, exercisable in full on
September 22, 1999, to purchase 200,000 shares of Common Stock having an
exercise price of $0.01. The option may be exercised by Mr. Rogina at any time
during the five-year period commencing on September 22, 1999. The option
includes protection from dilution due to recapitalizations, issuances of
securities at less than 67% of fair market value, granting of other options or
similar rights, and dividend or distribution rights. We have not issued any new
diluting shares after the grant date of Mr. Rogina's option for 200,000 shares,
therefore, Mr. Rogina's option is now exercisable for 200,000 shares.
<F5> Pursuant to the settlement agreement with Mr. Rogina, dated
September 22, 1999, we granted Mr. Rogina an option to purchase 40,000 shares of
Common Stock having an exercise price of $0.01. The option may be exercised by
Mr. Rogina during the period commencing on July 1, 2000 and ending on September
22, 2004.
<F6> These options were granted on May 27, 1999 per Mr. Seifert's
verbal employment agreement.
<F7> There is no calculated potential realized value for these options
for the 5% and 10% annual rates of appreciation because at these rates the
exercise price remains higher than the market price during the entire period of
the options life.
<F8> Mr. Kim's options were originally granted as an option to purchase
200,000 shares at an exercise price of $0.01 per share of Common Stock and an
option to purchase 50,000 shares at an exercise price of $4.00 price per share.
Mr. Kim has exercised the option for 200,000 shares. The remaining option for
50,000 shares included protection from dilution due to recapitalizations,
issuances of securities at less than 67% of fair market value, granting of other
options or similar rights, and dividend or distribution rights. Mr. Kim has
agreed to exchange an additional 15,000 options for termination of his
antidilution rights. The additional 15,000 options are included in Mr. Kim's
total number of options in the above table. Based on this, Mr. Kim's option is
now exercisable for 65,000 shares of our Common Stock.
<F9> These options were granted on August 25, 1999 per Mr. Fox's
employment agreement and become exercisable, subject to continued employment, in
cumulative annual increments of one third each beginning on the date of grant
and the first, second and third anniversaries of the date of grant.
<F10> We employed Alan Kleinmaier in August of 1999 as our acting Chief
Financial Officer. We have granted Mr. Kleinmaier an option to purchase 50,000
shares of our Common Stock that are immediately exercisable.
</FN>
</TABLE>
D. STOCK OPTIONS EXERCISED AND YEAR END VALUES OF UNEXERCISED OPTIONS
The following table sets forth information about the stock options
exercised by our named executive officers during 1999.
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<PAGE>
Item 6. Executive Compensation
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1999
Number of Unexercised Value of Unexercised In-the-
Shares Acquired Value Options At Fy-End (#) Money Options At Fy-End ($)
On Exercise Realized -------------------------- -----------------------------
Name (#) ($)(1) Exercisable/Unexercisable Exercisable/unexercisable <F2>
---- --------------- ---------- -------------------------- ------------------------------
<S> <C> <C> <C> <C>
Michael Cimino 425,000 <F3> $952,000 <F3> 0/0 0/0
Richard F. Seifert 200,000 $448,000 50,000/0 $600,000/0
Michael Kim 200,000 $448,000 65,000/0 780,000/0
Peter Rogina 0 0 200,000/40,000 3,198,000/$639,600
Andrew L. Fox 0 0 0/240,000 0/$1,409,600
Alan Kleinmaier 0 0 50,000/0 600,000/0
<FN>
<F1> Upon exercise of the option an option holder did not receive the
amount reported above under the column Value Realized. The amounts reported
above under the column Value Realized merely reflect the amount by which the
value of our Common Stock, on the date the option was exercised, exceeded the
exercise price of the option. The option holder does not realize any cash until
the shares of Common Stock issued upon exercise of the options are sold.
<F2> The value of our Common Stock on December 31, 1999 was $16.00 per
share. Value was determined by taking the last sale price of our Common Stock on
that date as reported by OTCBB. The value of options was determined by
subtracting the aggregate exercise prices of the options from the value of the
Common Stock issuable upon exercise of the options.
<F3> This grant of an option to purchase 425,000 shares of Common Stock
was exercised by Mr. Cimino for all 425,000 shares. Later, the shares acquired
by Mr. Cimino were reduced to 95,000 shares of Common Stock through share
cancellations implemented by High Speed. The value realized amount at the grant
date would have been $213,750 if the original option grant had been for 95,000
shares of our Common Stock.
</FN>
</TABLE>
E. STOCK OPTION PLAN
The following summary description of Equity Compensation Plan is not
intended to be complete and is qualified by reference to the copy of the Equity
Compensation Plan, filed as an exhibit to this registration statement.
Our Equity Compensation Plan was adopted by our board of directors on
January 27, 2000, and approved by our stockholders on February 11, 2000. The
plan provides that the board may grant stock options to acquire our Common Stock
to officers, other employees, directors, consultants and independent contractors
who provide services to us pursuant to the terms of the plan. An aggregate of
2,000,000 shares of Common Stock is reserved for issuance under this plan, some
of which has been issued and is outstanding. If shares subject to outstanding
stock options are not purchased or are reacquired because of termination,
expiration or cancellation of such stock options or for other reasons, the plan
provides that those shares will be available for issuance pursuant to future
stock option grants under the plan. Shares of Common Stock subject to the stock
option plan are made available from authorized and unissued shares of our Common
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Item 6. Executive Compensation
Stock. As of February of 2000, all of the outstanding options that we have
issued were issued to our executive officers and are detailed in Part D of this
Item 6.
The plan is currently administered by the compensation committee of the
board of directors. The compensation committee may interpret the plan and may
prescribe, amend and rescind rules and make all other determinations necessary
or desirable for the administration of the plan. The stock option plan permits
the compensation committee to select the eligible parties who will receive stock
option awards under the plan and generally to determine the terms and conditions
of those awards.
We may issue two types of stock options under this plan: incentive
stock options, which are intended to qualify for certain tax treatment under
section 422 of the Internal Revenue Code of 1986, as amended, and which may be
granted only to eligible parties who are employees; and nonqualified stock
options, which may be granted to all types of eligible parties. The plan
contains special provisions applicable to incentive stock options granted under
the plan, including but not limited to the requirement that the exercise price
of each incentive stock option be at least equal to the fair market value of a
share of Common Stock on the date the incentive stock option is granted. Stock
options granted under the plan are generally not transferable by the optionees.
If a reorganization, recapitalization, reclassification, stock split,
stock dividend, or consolidation of shares of our Common Stock, merger or
consolidation of High Speed or sale or other disposition by us of all or a
portion of its assets, other change in our corporate structure, or any
distribution to shareholders other than a cash dividend results in the
outstanding shares of our Common Stock, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
shares of our Common Stock or other securities we might issue, or for shares of
Common Stock or other securities of any other corporation, or new, different or
additional shares or other securities of the company or of any other corporation
being received by the holders of outstanding shares of Common Stock, then the
compensation committee of our board of directors shall make equitable
adjustments in the limitation on the aggregate number of shares of Common Stock
that may be awarded as stock option grants under the plan, the number and class
of stock that may be subject to the grant of stock options under the plan and
which have not been issued or transferred under outstanding stock options, and
the terms, conditions or restrictions of any stock option or the corresponding
award agreement (including the exercise price thereunder). However, the plan
requires that all such adjustments shall be made such that incentive stock
options granted under the plan shall continue to constitute incentive stock
options within the meaning of section 422 of the Internal Revenue Code of 1986,
as amended. The plan provides that our board of directors may amend or terminate
this plan at any time, provided, however, that certain types of amendments
require approval of our stockholders and no such action may be taken which
adversely affects any rights under outstanding stock options without the
holder's consent.
F. COMPENSATION OF DIRECTORS
Directors who are not full-time employees of High Speed: (i) are
reimbursed for reasonable travel expenses incurred in attending meetings of the
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Item 6. Executive Compensation
Board or committees of the Board; (ii) are paid a fee of $ 1000 for each day on
which the Board and/or committee meets or is in conference, which such Directors
attend, except for committee meetings held on the same date as a Board meeting
or conference; and (iii) in the future may be granted stock options pursuant to
the terms of our Equity Compensation Plan.
G. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We have only recently put the compensation committee in place, and
currently all members of the board of directors serve on the compensation
committee. The compensation committee made recent decisions concerning the
compensation of our recently appointed executive officers, one of which, Andrew
L. Fox, serves on our board of directors. Mr. Fox is the former Executive Vice
President of Sales and Marketing and served as a member on the board of
directors of Summus.
Several of the members of our board of directors and our compensation
committee are members of the board of directors of Summus. Dr. Bjorn Jawerth and
William Bradford Silvernail serve on our board of directors and on our
compensation committee. Dr. Jawerth is the Chairman of the board of directors of
Summus, our controlling shareholder. Mr. Silvernail is an executive officer of
Summus and is a member of the board of directors of Summus. Also, one of our
executive officers, Alan Kleinmaier, is a member of the board of directors of
Summus.
Other than the interlocking relationships with Summus, no other
interlocking relationships exist.
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Item 7. Certain Relationships and Related Transactions
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Summus directors and executive officers serve on our board of
directors. Dr. Bjorn Jawerth, the Chairman, President, and majority shareholder
of Summus, is the Chairman of the Board of High Speed. William Bradford
Silvernail, the CEO of Summus, is a director of High Speed.
OUR OWNERSHIP IN SUMMUS
We own 167,000 shares of Summus Ltd. Our shares represent approximately
14.0% of the outstanding Common Stock of Summus, but represent only 12.8% of
Summus' Common Stock on a fully diluted basis. We acquired 1,000,182 shares of
the Common Stock of Summus Technologies, Inc. during the first half of 1999. We
acquired these Summus Technologies, Inc., shares from transactions with
individuals who owned shares of Summus Technologies, Inc. in exchange for cash
and shares of our Common Stock. In August of 1999 Summus Technologies, Inc. and
Summus Ltd merged. Pursuant to the merger, our 1,000,182 shares of Summus
Technologies, Inc. were converted into 167,000 shares of Summus Ltd. In
conjunction with the merger, we entered into a shareholders agreement in August
of 1999 where under certain conditions we cannot transfer our shares without
first granting Summus the opportunity to purchase our shares. The shareholders
agreement obligates parties to the agreement to vote on certain matters as
directed by Dr. Bjorn Jawerth, however, High Speed is exempted from these voting
provisions of the shareholder agreement.
THE ASSET PURCHASE OF MARKETERS WORLD, INC.
In August 1998, we acquired the business and assets of, and assumed the
liabilities of, Marketers World, Inc. To pay the sole shareholder of Marketers
World, Mr. Bradford Richdale, we issued 9,275,000 shares of Common Stock to
Marketers World, Inc. Immediately before issuing these 9,275,000 shares of
Common Stock there were 1,000,000 shares of our Common Stock issued and
outstanding. In addition to the issuance of these shares, the president and then
sole director and sole corporate officer of High Speed, Mr. Rene Hamouth,
transferred 725,000 shares of his personal High Speed Common Stock to Marketers
World to effect the transaction. The transaction was accounted for as a reverse
merger whereby Marketers World was treated as the accounting acquirer and High
Speed as the acquiree. At the time of the merger High Speed had no assets or
liabilities and accordingly, the transaction was accounted for as a
recapitalization of High Speed. Subsequently, the 10,000,000 shares that
Marketers World received in the transaction were assigned by Mr. Richdale as
follows: (i) 6,835,000 shares to Ormond Trust, an entity established by Mr.
Richdale; (ii) 140,000 shares to Mr. Cimino; and (iii) the remaining 3,025,000
shares to 24 other persons.
Marketers World was incorporated in January 1998. The Marketers World
officer executing the asset purchase agreement as president of Marketers World
was Mr. Michael Cimino, who subsequently was elected the sole director and
executive officer of High Speed.
Immediately after and as a result of the foregoing transaction, Mr.
Bradford Richdale became our primary shareholder. No independent valuation was
made of this transaction. Subsequent to the transaction, we decided not to
continue in the line of business we acquired in the transaction. We do not
believe that the transaction added value to our company on an ongoing basis.
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Item 7. Certain Relationships and Related Transactions
1998 OFFERING
In September of 1998 we issued 1,550,000 shares of our Common Stock to
Mr. Bradford Richdale as forgiveness of a debt valued at $149,820 that we owed
to him. Mr. Richdale loaned us these funds to finance our operations. We also
issued 1,100,000 shares of Common Stock to StoneLeigh Ltd., an entity
established by Mr. Richdale, and we issued 2,330,000 shares of Common Stock to
Rene Hamouth. These shares of our Common Stock were issued in conjunction with
shares issued to thirty other investors. The aggregate consideration we received
for these issuances was $317,000, including forgiveness of debt.
BRD ACQUISITION
In September of 1998 we acquired Brad Richdale Direct, Inc., ("BRD").
In exchange for all of the outstanding and issued stock of Brad Richdale Direct
we issued: (i) 775,000 shares of Common Stock to Ormond Trust, Brad Richdale
Direct's major shareholder, and an entity established by Mr. Bradford Richdale;
and (ii) 225,000 shares of Common Stock to Mr. Michael Cimino, who at the
execution of the transaction was president of Brad Richdale Direct and president
of High Speed. The transaction was accounted for as an acquisition of licensing
rights rather than a business combination because at the time of the acquisition
BRD's primary asset was marketing and licensing rights for Summus technology. In
connection with this transaction, in February of 1999 we issued an immediately
vested option for 1,000,000 shares of Common Stock to Mr. Bradford Richdale,
exercisable at a price of $0.01 per share. Also, in connection with this
transaction, in September of 1998, we issued 140,000 shares of our Common Stock
to Mike Cimino. Finally, we issued 100,000 shares to Mr. Cimino as consideration
for his services in effecting this transaction. BRD was incorporated in August
of 1997. The acquisition of BRD was a transaction between us and a company owned
by our primary shareholder. No independent valuation was made. Subsequent to the
transaction we decided not to operate the business we acquired in the
transaction. Other than the licensing rights for Summus technology, we do not
believe that the transaction added value to our company on an ongoing basis.
NATIONAL DIRECT CORPORATION AND HEALTHTEC ACQUISITION
In September of 1998, under a stock purchase agreement, we issued
300,000 shares of Common Stock for the purpose of acquiring HealthTec, Inc., and
National Direct Corporation. We issued 100,000 of these shares to Mr. Bradford
Richdale and we issued 100,000 of these shares to Mr. Michael Cimino. The final
100,000 shares were issued to an unrelated party. This transaction was rescinded
in November of 1998 and in August of 1999 we implemented the cancellation of the
300,000 shares issued for this acquisition.
VR MALL AND GOLF VACATIONS RESORT ACQUISITION
In September of 1998, under a stock purchase agreement, we agreed to
issue 200,000 shares of Common Stock to Mr. Bradford Richdale for the purpose of
acquiring all of the stock of VR Mall, Inc. In September of 1998, under a stock
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Item 7. Certain Relationships and Related Transactions
purchase agreement, we agreed to issue 600,000 shares of Common Stock to Mr.
Bradford Richdale for the purpose of acquiring all of the stock of Golf
Vacations Resort. These two transactions were canceled in November of 1998. The
Common Stock issuances contemplated by these transactions were never
implemented.
ADVISORY AGREEMENT WITH A DIRECTOR
In February of 1999 we entered into an advisory agreement with Mr.
Richard F. Seifert under which Mr. Seifert provides advisory services for
investor relations and identification of funding and revenue opportunities. Mr.
Seifert is a member of our board of directors. For successful funding
opportunities introduced by Mr. Seifert, we pay 10% of the amount secured for
non-debt funding and revenue opportunities, and for introductions which result
in successful debt funding we pay 5% of the amount secured. As of February 2000,
Mr. Seifert has been paid $62,500 under this agreement.
ISSUANCE OF CONVERTIBLE DEBENTURES
During the period between March 3, 1999 and May 24, 1999, we issued
$1,636,858 principal amount of convertible debentures. The debentures boar
interest at a rate of 8% per annum and were convertible into shares of our
Common Stock at a conversion rate of $0.50 per share. The principal on these
debentures was due July 31, 2000. The aggregate consideration we received by
issuing these debentures was $1,636,858. All of these debentures were issued to
Mr. Bradford Richdale or to entities established by Mr. Richdale: Ormond Trust
and StoneLeigh Ltd. On May 24, 1999, all holders converted these debentures into
shares of our Common Stock and we issued 3,273,716 shares of our Common Stock
upon conversion of these debentures.
On July 15, 1999, we issued a $62,500 principal amount convertible
debenture to Mr. Bradford Richdale. The debenture bore interest at a rate of 8%
per annum and were convertible into shares of our Common Stock at a conversion
rate of $0.25 per share. The principal on these debentures was due July 15,
2000. The consideration we received for this debenture was $62,500. On July 15,
1999, the holder converted this debenture into shares of our Common Stock and we
issued 250,000 shares of our Common Stock upon conversion of this debenture.
In August of 1999 we issued $458,640 principal amount of convertible
debentures to Mr. Bradford Richdale and to Ormond Trust, an entity established
by Mr. Richdale. The debentures bore interest at a rate of 8% per annum and were
convertible into shares of our Common Stock at a conversion rate of $1.00 per
share. The principal on these debentures was due August 5, 2000 and August 12,
2000. The consideration we received for these three debentures was $458,640. On
the date they were issued, the holder converted these debentures into shares of
our Common Stock and we issued 458,640 shares of our Common Stock upon
conversion of these debentures.
The convertible debentures described above were issued as partial
consideration for $2,190,000 that was directly paid by Mr. Bradford Richdale to
Summus to cover a portion of the first three payments that we were obligated to
make to Summus under the Marketing License Agreement. Under the Marketing
License Agreement, we were to make four payments of $750,000 each for our rights
under the agreement.
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Item 7. Certain Relationships and Related Transactions
ISSUANCE OF SHARES FOR BRD OPTION
In August of 1999, we issued 1,000,000 shares of our Common Stock when
Mr. Bradford Richdale exercised his Common Stock option which were issued with
an exercise price of $0.01 per share. We waived payment of the exercise price in
exchange for Mr. Richdale transferring to us certain marketing rights to Summus
technology. Mr. Richdale received these stock options in connection with the
purchase by High Speed of all of the stock of Brad Richdale Direct, Inc., as
discussed above.
CANCELLATION OF PRIOR ACQUISITIONS
In August of 1999, we canceled 5,461,100 shares of Common Stock for the
following transactions. We canceled 300,000 shares of Common Stock because we
rescinded the acquisitions of National Direct Corporation and HealthTec.
Furthermore, we canceled 5,161,100 shares of Common Stock as part of a partial
voluntary unwinding of the Marketers World acquisition subsequent to Marketers
World ceasing operations.
PAYMENTS TO SUMMUS UNDER THE MARKETING LICENSE AGREEMENT
During February of 1999 we entered into a Marketing License Agreement
with Summus. During 1999, we made payments of $2,250,000 in cash and a payment
in the form of 1,500,000 shares of our Common Stock, valued at $2,278,125, for
the purpose of making the final payment to Summus under the Marketing License
Agreement as described in Item 1 "Business." As described in Item 1 "Business,"
we have replaced the Marketing License Agreement and its related agreements with
new agreements under which we will have to make future payments to Summus for
our use of their software products. The new agreements include: a Master
Agreement, a Software License Agreement, a Revenue Sharing Agreement, and a
Software Maintenance Agreement.
In August of 1999, we issued the payment in the form of 1,500,000
shares of our Common Stock to Summus Ltd. as part of the payment for our rights
under the Marketing License Agreement. These shares were issued in lieu of
paying Summus the final of four $750,000 payments due to Summus under the
Marketing License Agreement.
ISSUANCE OF COMMON STOCK TO AFFILIATES OF A DIRECTOR
In August of 1999, we issued 250,000 shares of our Common Stock at
$1.00 per share to two investors under a subscription agreement. These investors
are the parents of Mr. Richard F. Seifert, a member of our board of directors.
LOANS DUE TO A SHAREHOLDER.
As of December 31, 1999, we owe $435,815 to entities controlled by Mr.
Bradford Richdale. We owe these amounts to Mr. Richdale for loans that he
extended to us to finance our operations. The loans are unsecured and are
payable on demand.
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Item 7. Certain Relationships and Related Transactions
LOANS DUE TO SUMMUS.
Since August of 1999, Summus has advanced $154,000 to us to provide us
with funds to operate. The loans are unsecured and are payable on demand.
SUMMUS OWNERSHIP OF HIGH SPEED
In August of 1999, under a stock purchase agreement, Summus purchased
9,542,360 shares of our Common Stock from Mr. Bradford Richdale in exchange for
132,888 shares of Summus Ltd. Under amendment number 1 to this agreement, Mr.
Richdale agreed that he would not serve on the board of directors of High Speed
without Summus written consent. Amendment number 2 to this agreement states that
the purchase of the High Speed shares by Summus is conditioned upon Mr. Michael
Cimino resigning as a member of the board of directors of High Speed and Summus,
and upon Mr. Michael Cimino signing a release in favor of High Speed for any
claims, past or future. As of February 10, 2000, Summus held 8,574,360 shares of
our Common Stock (40.7% of our outstanding Common Stock, and 39.1% on a fully
diluted basis). Summus also has the power to vote 2,792,167 shares of our Common
Stock through voting agreements with and/or proxies from 17 persons. Total
Summus voting power is 54.0% of our outstanding Common Stock.
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Item 8. Legal Proceedings
ITEM 8. LEGAL PROCEEDINGS
In January 2000, Mr. William R. Dunavant filed a lawsuit against us in
the circuit court of the eleventh judicial circuit of Dade county, Florida. The
lawsuit seeks damages of $13,330,000 resulting from our alleged failure to
register 350,000 shares of our Common Stock that Mr. Dunavant owns under the
Securities Act of 1933, as amended, and from our alleged failure to deliver to
Mr. Dunavant two allotments of 25,000 shares of stock as an alleged penalty for
our failure to register Mr. Dunavant's shares. Under our agreement with Mr.
Dunavant, for each month his shares remain unregistered, we must issue and
include in the registration an additional 25,000 shares of our Common Stock to
Mr. Dunavant. Mr. Dunavant purchased the 350,000 shares of our Common Stock in
an asset purchase agreement, dated August 13, 1999. Under this agreement we
conveyed $100,000 in cash and issued 350,000 shares of our Common Stock in
exchange for 250,000 shares of Summus Technologies, Inc., Common Stock owned by
Mr. Dunavant. We are incurring the costs of defense against Mr. Dunavant's
claims. Our present understanding of these claims is preliminary. Based on our
present understanding, however, management does not believe that the outcome of
Mr. Dunavant's lawsuit or claims will have a material adverse effect on our
financial condition or results of operations.
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Item 9. Market for Common Equity and Related Stockholder Matters.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
A. Market Information
------------------
Our Common Stock, $.001 par value, is traded in the over-the-counter
market and is quoted on the NASD Over The Counter Bulletin Board ("OTCBB") under
the symbol "HSNS." Prior to January 25, 1999, we were quoted on the OTCBB under
the symbol "ZZNT."
The following tables set forth the high and low daily bid prices for
each quarter during the entire trading history of our Common Stock as reported
by the OTCBB. Such quotations reflect inter-dealer prices without markup,
markdown or commissions and may not necessarily represent actual transactions.
2000 LOW HIGH
- ---- --- ----
First Quarter through $11.750 $32.375
February 9, 2000
1999 LOW HIGH
- ---- --- ----
First Quarter $ 1.125 $ 2.250
Second Quarter $ 1.250 $ 4.750
Third Quarter $ 1.440 $ 6.590
Fourth Quarter $ 4.062 $18.125
1998 LOW HIGH
- ---- --- ----
First Quarter Not Traded Not Traded
Second Quarter Not Traded Not Traded
Third Quarter $ 2.125 $ 7.250
Fourth Quarter $ 2.125 $5.875
The OTCBB is a regulated quotation service that displays real-time
quotes and volume information in over-the-counter (OTC) equity securities. The
OTCBB does not impose listing standards or requirements, does not provide
automatic trade executions and does not maintain relationships with quoted
issuers. Stocks traded on the OTCBB may face a loss of market makers, lack of
readily available bid and ask prices for its stock, experience a greater spread
between the bid and ask price of its stock and a general loss of liquidity with
its stock. In addition, certain investors have policies against purchasing or
holding OTC securities. Both trading volume and the market value of our
securities have been, and will continue to be, materially affected by the
trading on the OTCBB.
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Item 9. Market for Common Equity and Related Stockholder Matters.
B. HOLDERS
As of February 10, 2000, there were 138 holders of record of the High
Speed's Common Stock. As of February 10, 2000 we had 21,062,149 shares of Common
Stock issued and outstanding.
As of February 10, 2000, an amount of 895,000 shares of our Common
Stock are subject to outstanding options.
C. DIVIDENDS
We have never paid any cash dividends on our capital stock. We
anticipate that we will retain earnings, if any, to finance the growth and
development of our business. Therefore, we do not expect to pay cash dividends
on our Common Stock for the foreseeable future. Any future determination to pay
cash dividends will be at the discretion of the board of directors and will be
dependent upon our financial condition, operating results, capital requirements
and such other factors as the board of directors deems relevant.
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Item 10. Recent Sales of Unregistered Securities.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
As of January 1, 1997, 5,000 shares of our Common Stock were issued and
outstanding. Of this 5,000 shares, High Speed's sole director and corporate
officer at this time owned beneficially 4,875 shares of Common Stock and 25
non-affiliates of High Speed each owned 5 shares of our Common Stock. From our
inception through July 21, 1998, our articles of incorporation authorized the
issuance of up to 5000 shares of Common Stock.
Since January 1, 1997, we have issued the following securities as
described below. In the summary below, all references to "High Speed," "us,"
"we," or "our" refer to High Speed Net Solutions, Inc. under any of its prior
corporate names (ZZAP.NET Inc., and EMN Enterprises, Inc.).
(1) During the period commencing on January 1, 1997, and ending on June 20,
1998, no Common Stock was issued.
(2) On June 20, 1998, the outstanding 5000 shares of Common Stock were
split 200:1, creating an issued and outstanding capitalization of
1,000,000 shares of our Common Stock.
(3) In August 1998, we issued 1,550,000 shares of Common Stock to Mr.
Bradford Richdale as forgiveness of a debt valued at $149,820 that we
owed to him. Mr. Richdale loaned us these funds to enable us to finance
our operations.
(4) In August of 1998, we issued 3,766,600 shares of Common Stock for an
aggregate consideration of $317,000. Included in these issuances were:
(i) issuance of 1,100,000 shares to StoneLeigh Ltd., and entity
established by Mr. Richdale; (ii) issuance of 2,330,000 shares to Mr.
Rene Hamouth, the sole director and sole corporate officer of High
Speed; (iii) issuance of 116,600 shares to 24 investors; and (iv)
issuance of 220,000 shares to six investors. The proceeds from these
transactions were used to finance operations.
(5) In August 1998, we acquired the business and assets of, and assumed the
liabilities of, Marketers World, Inc. To pay Marketers World, we issued
9,275,000 shares of Common Stock to Marketers World, Inc. Mr. Bradford
Richdale was the sole shareholder of Marketers World. In addition, the
president and then sole director and sole corporate officer of High
Speed, Mr. Hamouth, transferred 725,000 shares of his personal Common
Stock to Marketers World to effect the transaction. No independent
valuation was made of the amount of assets we acquired and the
liabilities we assumed. The value of assets obtained from Marketers
World was $420,259. The Marketers World officer executing the asset
purchase agreement was Mr. Michael Cimino, who subsequently was elected
the sole director and officer of High Speed. Subsequently, the
10,000,000 shares that Marketers World received in the transaction were
assigned by Mr. Richdale as follows: (i) 6,835,000 shares to Ormond
Trust, an entity established by Mr. Richdale; (ii) 140,000 shares to Mr.
Cimino; and (iii) the remaining 3,025,000 shares to 24 other persons.
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Item 10. Recent Sales of Unregistered Securities.
(6) In September of 1998 we acquired the business, assets and liabilities of
Brad Richdale Direct, Inc. In exchange for all of the outstanding and
issued stock of Brad Richdale Direct we issued: (i) 775,000 shares of
Common Stock to Ormond Trust, Brad Richdale Direct's major shareholder,
and an entity established by Mr. Bradford Richdale; and (ii) 225,000
shares of Common Stock to Mr. Michael Cimino, who at the execution of
the transaction was President of Brad Richdale Direct and President of
High Speed.
In connection with this transaction, in February of 1999 we issued an
immediately vested option for 1,000,000 shares of Common Stock to Mr.
Bradford Richdale, exercisable at a price of $0.01 per share. As
discussed below, this option was later exercised in August of 1999.
Also, in connection with this transaction, in September of 1999, we
issued 140,000 shares of Common Stock to Mike Cimino. Finally, we issued
100,000 shares to Mr. Cimino as consideration for his services in
effecting this transaction.
(7) In September of 1998, we issued 300,000 shares of Common Stock for the
purpose of acquiring HealthTec, Inc., and National Direct Corporation.
We issued 100,000 of these shares to Mr. Bradford Richdale and we issued
100,000 of these shares to Mr. Michael Cimino. This transaction was
rescinded in November of 1998 and in August of 1999 we implemented the
cancellation of the 300,000 shares issued for this acquisition. In
September of 1998, under a stock purchase agreement, we agreed to issue
200,000 shares of Common Stock to Mr. Bradford Richdale for the purpose
of acquiring all of the stock of VR Mall, Inc. In September of 1998,
under a stock purchase agreement, we agreed to issue 600,000 shares of
Common Stock to Mr. Bradford Richdale for the purpose of acquiring all
of the stock of Golf Vacations Resort. These two transactions were
rescinded in November of 1998. The Common Stock issuances contemplated
by these transactions were never implemented.
(8) In February of 1999 we issued 157,323 shares of Common Stock to GEM
Singapore for an agreement that GEM Singapore pay us $471,987. On July
16, 1999, we canceled these shares for lack of consideration because the
transaction did not close.
(9) From February to April of 1999 we issued 338,188 shares of our Common
Stock to 16 individuals for a price per share ranging from $1.00 to
$2.50 per share and we received an aggregate investment of $347,500 for
these shares. The proceeds from these investments were used to finance
operations.
(10) In May of 1999, we issued 795,001 shares of Common Stock in exchange for
a 16.7% investment in Summus Technologies, Inc. Subsequent to this
transaction, Summus Technologies merged with Summus Ltd. giving us a
16.7% ownership in Summus Ltd. We issued the 795,001 shares to 5
individuals for their shares of Summus Technologies. Except for one
individual, we gave no other consideration for the Summus Technologies
shares beyond the issuance of our Common Stock. Of the 795,001 shares
issued, 350,000 shares were issued to Mr. Roger Dunavant under a stock
purchase agreement. In addition to the issuance of the 350,000 shares,
we also paid Mr. Dunavant $100,000 in cash. In return we received
250,000 shares of the Common Stock of Summus Technologies.
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Item 10. Recent Sales of Unregistered Securities.
(11) In May of 1999, we issued 200,000 shares of our Common Stock when Myung
K. Kim exercised his Common Stock options for an exercise price of
$0.01 per share. Mr. Kim received these stock options under his
employment agreement as our President.
(12) In May of 1999, we issued 200,000 shares of our Common Stock when
Richard F. Seifert exercised his Common Stock options for an exercise
price of $0.01 per share. Mr. Seifert received these stock options under
his verbal employment agreement as our Vice President.
(13) In May of 1999, we issued 425,000 shares of our Common Stock when Mike
Cimino exercised his Common Stock options for an exercise price of $0.01
per share. Mr. Cimino received these stock options under his verbal
employment agreement as our President.
(14) During the four month period between February 1, 1999 and May 24, 1999,
we issued 17 convertible debentures at 8% per annum at a $0.50 per share
conversion rate. The aggregate consideration we received by issuing
these debentures was $1,986,858. Except for one debenture in the amount
of $350,000, all of these debentures were issued to Mr. Bradford
Richdale or to entities established by Mr. Richdale: Ormond Trust and
StoneLeigh Ltd. On May 24, 1999, all holders converted these debentures
into shares of our Common Stock and we issued 3,973,720 shares of our
Common Stock upon conversion of these debentures.
(15) From July 1, 1999 through July 15, 1999 we issued 6 convertible
debentures at 8% per annum at $0.50 per share conversion rate. The
aggregate consideration we received by issuing these debentures was
$47,750. On July 15, 1999, all holders converted these debentures into
shares of our Common Stock and we issued 95,500 shares of our Common
Stock upon conversion of these debentures.
(16) On July 15, 1999 we issued 1 convertible debentures to Mr. Bradford
Richdale at 8% per annum at a $0.25 per share conversion rate. The
consideration we received for this debenture was $62,500. On July 15,
1999, the holder converted this debenture into shares of our Common
Stock and we issued 250,000 shares of our Common Stock upon conversion
of this debenture.
(17) In August of 1999 we issued 1 convertible debenture to Mr. Bradford
Richdale and 2 convertible debentures to Ormond Trust, an entity
established by Mr. Richdale, all at 8% per annum at a $1.00 per share
conversion rate. The consideration we received for these three
debentures was $458,640. On the date they were issued, the holder
converted these debentures into shares of our Common Stock and we issued
458,640 shares of our Common upon conversion of these debentures.
(18) On August 5, 1999 we issued 1 convertible debenture at 8% per annum at a
$1.50 per share conversion rate. The consideration for this debenture
was $100,000. On the date it was issued, the holder converted this
debenture into shares of our Common Stock and we issued 75,000 shares of
our Common Stock upon conversion of this debenture.
67/79
<PAGE>
Item 10. Recent Sales of Unregistered Securities.
To summarize the debenture issuances, the total aggregate consideration
for all 28 convertible debentures issued was $2,655,748. Of the amounts
given above for issuance of the convertible debentures, $2,190,000 was
directly paid by Mr. Bradford Richdale to Summus to cover a portion of
the first three payments that we were obligated to make to Summus under
the Marketing License Agreement. Under the Marketing License Agreement,
we were obligated to make four payments of $750,000 each for our rights
under the agreement. The remaining $558,640 was used to finance
operations. As discussed in the items above, all of these debentures
were converted shortly after their issuance by the respective holders to
an aggregate of 4,852,856 shares of Common Stock.
(19) In July of 1999, we issued 500 shares of our Common Stock to Mr. Jason
Parsons in exchange for Mr. Parson's services in developing our company
logo.
(20) In July of 1999, we issued 50,000 shares of our Common Stock to Ron De
Jong as payment for his services as a consultant to us.
(21) In July of 1999, we issued 25,000 shares of our Common Stock to Mr.
Bradford Richdale beneficially in exchange for Mr. Richdale's assistance
in the Roger Dunavant Summus Technology stock acquisition.
(22) In July of 1999, we issued 10,000 shares of our Common Stock to Mr.
Greg Catinella in exchange for Mr. Catinella's fundraising services.
(23) In August of 1999, we issued 1,000,000 shares of our Common Stock when
Mr. Bradford Richdale exercised his Common Stock options which we issued
with an exercise price of $0.01 per share. We waived payment of the
exercise price in exchange for Mr. Richdale transferring to us certain
marketing rights to Summus technology. Mr. Richdale received these stock
options in connection with the purchase by High Speed of all of the
stock of Brad Richdale Direct, Inc.
(24) In August of 1999, we implemented the cancellation of 5,873,423 shares
of Common Stock for lack of consideration for to the following
acquisitions and investments. We canceled 300,000 shares of Common Stock
because we rescinded the acquisitions of National Direct Corporation and
Healthtec. We canceled 5,161,100 shares of Common Stock as part of a
voluntary rollback of the Marketers World acquisition subsequent to
Marketers World ceasing operations. We canceled the 25,000 shares issued
to Mr. Bradford Richdale for his assistance with the Roger Dunavant
transaction. We canceled the 230,000 shares issued to Mr. Michael Cimino
for his services. Finally, we canceled 157,323 shares due to lack of
consideration for a transaction involving GEM Singapore.
(25) In August of 1999, we issued 1,500,000 shares of our Common Stock to
Summus Ltd. as part of the payment for our rights under a Marketing
License Agreement. These shares were issued in lieu of paying Summus the
final of four $750,000 payments due to Summus under the Marketing
License Agreement.
(26) In August of 1999, we issued 250,000 shares of our Common Stock at $1.00
per share to two investors under a subscription agreement. These
investors are the parents of Mr. Richard F. Seifert, a member of our
board of directors.
68/79
<PAGE>
Item 10. Recent Sales of Unregistered Securities.
The sales and issuances of securities in the above transactions were
made in reliance on the exemptions from registration under the Securities Act of
1933, as amended (the "Securities Act"), provided by Section 4(2) thereof,
and/or Regulation D and/or Rule 701 thereunder.
The purchasers of restricted securities represented their intention to
acquire the securities for investment only and not with a view to the
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. We believe that all recipients or restricted
securities had adequate access, through employment or other relationships, to
information about High Speed to make an informed investment decision.
Sales were made as follows:
(i) 1,390,000 shares were issued to persons who were officers, directors
or employees of High Speed in exchange for services valued at
$1,687,551 in transactions that were exempt under Rule 701.
(ii) 1,285,500 shares were issued to persons who were consultants and
advisors in exchange for services valued at $2,147,646 in transactions
that were exempt under Rule 701.
(iii) 1,120,500 shares were sold for $747,450 to 10 persons not in the
foregoing categories in transactions that were exempt under Section
4(2).
(iv) 11,550,000 shares were issued to acquire the assets of two companies
owned by Mr. Bradford Richdale and to acquire rights under agreements
with Summus in transactions that were exempt under Section 4(2).
(v) 3,982,356 shares were sold for $2,158,299 to Mr. Bradford Richdale,
the founder of High Speed, and related parties in transactions that
were exempt under Section 4(2).
(vi) 795,001 shares were issued in exchange for Summus shares valued at
$1,792,127 in transactions that were exempt under Section 4(2).
(vii) 5,654,788 shares were sold for $814,320 to 46 persons in transactions
that were exempt under Rule 504.
69/79
<PAGE>
Item 11. Description of Registrant's Securities to be Registered
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
In accordance with our amended and restated certificate of
incorporation, we are authorized to issue up to 50,000,000 shares of Common
Stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par
value $0.001 per share. As of February 10, 2000, there were 21,062,149 shares of
Common Stock outstanding and no shares of preferred stock outstanding.
The following summary description of our capital stock is not intended
to be complete and is qualified by reference to our amended and restated
certificate of incorporation and our amended and restated bylaws, filed as
exhibits to this registration statement, and is qualified by the applicable
provisions of the Florida Business Corporation Act (the "FBCA").
COMMON STOCK
As of February 10, 2000, there were 21,062,149 shares of Common Stock
outstanding held by 138 stockholders of record. In addition, as of February 10,
2000, there were outstanding stock options to purchase 895,000 shares of Common
Stock. Based upon the number of shares outstanding as of that date and giving
effect to the issuance of Common Stock upon the exercise of all outstanding
stock options, assuming that these options fully vest, there will be 21,957,149
shares of Common Stock outstanding.
Each share of Common Stock entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the election of
directors. Holders of Common Stock are entitled to receive ratably the
dividends, if any, declared from time to time by the board of directors out of
legally available funds. Holders of Common Stock have no conversion, redemption
or preemptive rights to subscribe to any of our securities. In the event of any
liquidation, dissolution or winding-up of our affairs, holders of Common Stock
will be entitled to share ratably in our assets remaining after provision for
payment of liabilities to creditors. The rights, preferences and privileges of
holders of Common Stock may be subject to the rights of the holders of any
shares of preferred stock, which we may issue in the future.
PREFERRED STOCK
Prior to February 10, 2000, there were no issued and outstanding shares
of our preferred stock and before that date we have never issued any shares of
preferred stock.
We have recently amended and restated our articles of incorporation to
eliminate the specific rights and privileges originally associated with our
preferred stock. We have replaced these specific rights and privileges with
language in our articles of incorporation granting the board of directors the
power to determine by resolution at a future date the designations, rights and
privileges of the preferred stock. We have taken this action to prepare
generally for the future possibility of issuing preferred stock in a financing
transaction.
The board of directors, without further action by shareholders, may
from time to time authorize the issuance of shares of preferred stock in one or
more series and with certain limitations, rights, preferences, qualifications,
or restrictions thereon and the number of shares constituting such series and
70/79
<PAGE>
Item 11. Description of Registrant's Securities to be Registered
the designation of such series. Satisfaction of any dividend preferences on
outstanding preferred stock would reduce the amount of funds available for the
payment of dividends on our Common Stock. Holders of preferred stock would
normally be entitled to receive a preference payment in the event of any
liquidation, dissolution, or winding up of High Speed before any payment is made
to the holders of Common Stock. In addition, under certain circumstances, the
issuance of such preferred stock may render more difficult or tend to discourage
a change in control of High Speed. The board of directors of High Speed, without
shareholder approval, may issue preferred stock with voting and conversion
rights, which could adversely affect the rights of holders of Common Stock.
We are currently negotiating an agreement to obtain financing in the
amount of $2,000,000 by issuing convertible preferred stock to an investor.
There can be no assurance that the current negotiations will result in our
obtaining financing.
REGISTRATION RIGHTS
The following summary description of registration rights outstanding on
some of our Common Stock is not intended to be complete and is qualified by
reference to certain exhibits filed with this registration statement.
We entered into an agreement with Mr. William R. Dunavant on August 13,
1999 under whom Mr. Dunavant has a claim or right with respect to the
registration of our shares under the Securities Act of 1933, as amended. The
agreement grants Mr. Dunavant registration rights for 350,000 shares of our
Common Stock. The agreement specifies that we must register Mr. Dunavant's
shares as of a date a certain number of days from the date of the agreement.
Under our agreement with Mr. Dunavant, for each month his shares remain
unregistered, we must issue and include in the registration an additional 25,000
shares of our Common Stock to Mr. Dunavant. Mr. Dunavant claims that his rights
for additional shares will continue to accrue at a per month rate of 25,000
shares until we have satisfied our obligations under this agreement. As of the
date of this registration, under the agreement Mr. Dunavant has a claim for
registration of 50,000 additional shares.
Under a stock option agreement with Mr. Bradford Richdale, we granted
Mr. Richdale piggyback registration rights for 1,000,000 shares of Common Stock
that Mr. Richdale later purchased by exercising the option. In general, Mr.
Richdale's registration rights are for a Securities Act registration, such as a
registration on form S-1.
Under stock options granted in 1999 to former executive officers and
consultants of High Speed who served during 1999 we granted piggyback
registration rights for up to 950,00 shares of our Common Stock. Under
debentures dated in April through August of 1999 and issued to Mr. Bradford
Richdale and related parties we granted piggyback registration rights for up to
3,968,640 shares of our Common Stock.
Under debentures granted to 8 individuals we granted piggyback
registration rights for up to 316,500 shares of our Common Stock, to be effected
upon our first Securities Act registration. Under the debentures we must
register the remaining shares derived from the debentures, 104,000 shares, in
subsequent Securities Act registrations.
71/79
<PAGE>
Item 11. Description of Registrant's Securities to be Registered
RIGHTS TO COMMON STOCK AND OPTIONS FOR COMMON STOCK IN EXCHANGE FOR SERVICES
We have a consulting agreement dated September 24, 1999 with Mr. Kyoung
Park under which Mr. Park receives the rights to 2,000 shares of our Common
Stock for revenue we derive from a potential customer of High Speed and Summus.
Under this consulting agreement we also pay Mr. Park 4% of all revenue we
receive from this customer. If revenues with this potential customer in 2000 are
$1,000,000 then Mr. Park would receive 20,000 shares. As revenue levels rise Mr.
Park has the right to proportionally receive more shares for higher revenue
levels. To date, we have no agreement with this potential customer.
Consequently, we have not paid Mr. Park any funds nor issued Mr. Park any shares
under this agreement.
We have a consulting agreement dated December 15, 1999 with RPC
Consulting under which RPC Consulting receives option rights to purchase up to
200,000 shares of our Common Stock at an exercise price of $10.00 per share for
certain levels of business revenue we may derive. RPC Consulting's options shall
vest and become exercisable in increments of 50,000 shares in accordance with a
revenue-based vesting schedule starting at $2,000,000 and ending at $20,000,000.
To date, none of RPC Consulting's options have vested.
72/79
<PAGE>
Item 12. Indemnification of Directors and Officers
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The following summary description of indemnification and limitation of
liability for our officers is not intended to be complete and is qualified by
reference to our amended and restated certificate of incorporation and our
amended and restated bylaws, filed as exhibits to this registration statement,
and is qualified by the applicable provisions of the Florida Business
Corporation Act (the "FBCA").
Our Articles of Incorporation and Bylaws provide for indemnification of
officers and directors to the fullest extent permitted by Florida law and, to
the extent permitted by such law, eliminate, or limit the personal liability of
directors to High Speed and its shareholders for monetary damages for certain
breaches of fiduciary duties. The liability of a director is not eliminated or
limited (i) for any breach of the director's duty of loyalty to High Speed or
its shareholders; (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (iii) for any improper
distribution under the FBCA; or (iv) for any transaction from which the director
derived an improper personal benefit. Insofar as indemnification for liabilities
under the Securities Act may be permitted to directors, officers, or persons
controlling High Speed pursuant to the foregoing provisions, we have been
informed that, in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
We intend to obtain liability insurance for our directors and officers.
At present, there is no pending litigation or proceeding involving any director,
officer, employee or agent as to which indemnification will be required or
permitted under the amended and restated certificate of incorporation. We are
not aware of any threatened litigation or proceeding that may result in a claim
for this type of indemnification.
73/79
<PAGE>
Items 13 and 14
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Financial Statements and Supplementary Data required by this Item
are filed as part of this Form 10. See Index to Financial Statement Information
at Page F-1 of this Form 10.
ITEM 14. CHANGES IN ACCOUNTANTS
In November of 1999 we engaged Ernst and Young LLP as our independent
public accountants to prepare audited financials for filing this registration
statement. Our prior management had most recently prepared financial statements
in mid-1998 and these financials were audited and reviewed by a sole
practitioner CPA whose office was located in the state of Nevada. Our new
management desired to have accounting services provided by an accounting firm
with experience with public reporting companies and, therefore, we engaged Ernst
and Young.
74/79
<PAGE>
Item 15. Financial Statements and Exhibits.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
A. FINANCIAL STATEMENTS.
The information required by this item is contained in the "Index to
Financial Statements" on Page F-1 of this Form 10 registration statement and
such information is incorporated herein by reference.
B. INDEX TO EXHIBITS
Exhibit Number Exhibit Description
- -------------- -------------------
3.01 Articles of Incorporation, dated April 30, 1984 (as formerly in
effect, as amended in Exhibits 3.02, 3.03, 3.04)
3.02 Amendment to Articles of Incorporation, dated July 20, 1998
3.03 Amendment to Articles of Incorporation, dated August 24, 1998
3.04 Amendment to Articles of Incorporation, dated December 10, 1998
3.05 Restated Articles of Incorporation, dated February 11, 2000 (as
currently in effect)
3.06 Bylaws
3.07 Amended and Restated Bylaws
4.01 Specimen common stock certificate
10.01 Master Agreement ("MA") with Summus, Ltd. ("Summus"), dated in
February, 2000*
10.02 Software License Agreement ("SLA") with Summus, dated in
February, 2000*
10.03 Software Maintenance Agreement ("SMA") with Summus, dated in
February, 2000*
10.04 Revenue Sharing Agreement ("RSA") with Summus, dated in
February, 2000*
10.05 Equity Compensation Plan, effective January 31, 2000
10.06 Marketing License Agreement ("MLA") with Summus, including
Exhibit A and Exhibit E, dated as of February, 1999
10.07 First Amendment to MLA, dated August 16, 1999
10.08 Letter Agreement among Bradford J. Richdale, Michael M. Cimino,
President of Zzap.net, Inc., predecessor in interest to High
Speed Net Solutions, Inc. ("HSNS"), and Dr. Bjorn Jawerth,
President of Summus, Ltd., and Summus Technologies, Inc., dated
January 14, 1999
10.09 First Amendment to Letter Agreement, dated August 16, 1999
75/79
<PAGE>
Item 15. Financial Statements and Exhibits.
Exhibit Number Exhibit Description
- -------------- -------------------
10.10 Letter to Samsung Electronics, dated March 25, 1999
10.11 Samsung Non-Circumvention Agreement with Summus, dated April 15,
1999
10.12 Letter to Samsung Electronics, dated August 9, 1999
10.13 Letter concerning Agency Agreement for Samsung negotiations,
dated March 25, 1999
10.14 Capital Associates Lease Agreement between HSNS and Phoenix
Limited Partnership of Raleigh, dated October 15, 1999
10.15 Stock Purchase Agreement with Mr. William R. Dunavant, dated
August 13, 1999.
10.16 Supplement to Agreement by and Between HSNS and William
Dunavant, dated August 13, 1999.
10.17 Advisory Agreement with R J Seifert Enterprises, dated
February 6, 1999
10.18 Non-Circumvention and Non-Disclosure Agreement with R J Seifert
Enterprises, dated February 6, 1999
10.19 Employment Offer Letter with Andrew Fox, dated January 20, 2000.
10.20 Stock Option Award Agreement with Andrew Fox, dated August 25,
1999.
10.21 Employment Offer Letter with Alan R . Kleinmaier, dated
February 7, 2000.
10.22 Stock Option Award Agreement with Alan Kleinmaier, dated
August 25, 1999.
10.23 Settlement Agreement with Peter Rogina, dated September 22, 1999
10.24 Employment and Stock Option Agreement with Peter Rogina, dated
March 1, 1999
10.25 Consulting Agreement with Kyoung Park, Summus, dated
September 24, 1999
10.26 Consulting Agreement with RPC International, dated December 15,
1999
10.27 Shareholders' Agreement with Summus, Sharon Stairs, Ahmad
Moradi, Antonio Bianco, Joseph Peretta, Rich, Bahman & Berger,
David Anderson, Stephen Purkiss, Kerstin Jawerth, Ron Compton,
dated August 16, 1999
10.28 Letter of Intent among HSNS, Samsung Electronics of America,
Inc. and Summus, dated February 15, 2000.
76/79
<PAGE>
Item 15. Financial Statements and Exhibits.
Exhibit Number Exhibit Description
- -------------- -------------------
23.1 Consent of Ernst & Young LLP
27 Financial Data Schedule
- -------------------------------
* To be filed by amendment.
77/79
<PAGE>
<PAGE>
INDEX TO
High Speed Net Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
Financial Statements
Years ended December 31, 1999 and 1998
CONTENTS
Report of Independent Auditors.............................................F-1
Financial Statements
Balance Sheet at December 31, 1998 and 1999................................F-2
Statements of Operations for the Year Ended December 31,
1998 and 1999 and for the Period of Inception to
December 31, 1999.......................................................F-3
Statements of Stockholders' Equity (Deficit)...............................F-4
Statements of Cash Flows for the Year Ended December 31,
1998 and 1999 and for the Period of Inception to
December 31, 1999.......................................................F-6
Notes to Financial Statements..............................................F-8
F-1
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
High Speed Net Solutions, Inc.
We have audited the accompanying balance sheets of High Speed Net Solutions,
Inc. (a development stage company) as of December 31, 1999 and 1998, and the
related statements of operations, stockholders' equity (deficit), and cash flows
for the years ended December 31, 1999 and 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of High Speed Net Solutions, Inc.
(a development stage company) at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for the years ended
December 31, 1999 and 1998 in conformity with accounting principles generally
accepted in the Unites States.
The accompanying financial statements have been prepared assuming that High
Speed Net Solutions, Inc. (a development stage company) will continue as a going
concern. As more fully described in Note 2, the Company has incurred operating
losses since inception and will require additional capital in 2000 to continue
operations. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 2. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
/s/ Ernst & Young LLP
February 15, 2000
Raleigh, North Carolina
<PAGE>
High Speed Net Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
Balance Sheets
<TABLE>
<CAPTION>
December 31
1998 1999
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,609 $ 248,740
Accounts receivable 7,559 --
----------- ------------
Total current assets 26,168 248,740
Furniture and equipment, net -- 3,720
Investment in common stock of related party -- 1,894,127
Prepaid royalties -- 4,528,125
Licensing rights, less accumulated amortization of $8,610 and $25,830 for
years ended 1998 and 1999 68,890 43,060
----------- ------------
Total assets $ 95,058 $ 6,717,722
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Payables to related parties $ 295,558 $ 589,815
Accounts payable and accrued expenses 8,457 99,876
Loss contingency accrual -- 800,000
----------- ------------
Total current liabilities 304,015 1,489,691
Stockholders' equity (deficit):
Preferred Stock, $0.001 par value; 5,000,000 shares authorized,
no shares issued and outstanding -- --
Common stock, $.001 par value, authorized 50,000,000 shares; issued
and outstanding 17,131,700 and 21,062,149 shares
17,132 21,062
Additional paid-in capital 1,695,336 17,272,820
Deficit accumulated during the development stage (1,693,806) (11,838,182)
Treasury stock, at cost (38,500 shares) (227,619) (227,619)
----------- ------------
Total stockholders' equity (deficit) (208,957) 5,228,081
----------- ------------
$ 95,058 $ 6,717,772
=========== ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-2
<PAGE>
High Speed Net Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations
<TABLE>
<CAPTION>
Period From
January 2, 1998
(Inception) to
December 31
Year Ended December 31
1998 1999 1999
----------- ------------ ------------
<S> <C> <C> <C>
Selling, general and administrative expenses $ 427,841 $ 7,488,627 $ 7,916,468
Interest expense -- 2,655,749 2,655,749
----------- ------------ ------------
Loss from continuing operations (427,841) (10,144,376) (10,572,217)
Loss from discontinued operations (1,265,965) -- (1,265,965)
----------- ------------ ------------
Net loss $(1,693,806) $(10,144,376) $(11,838,182)
=========== ============ ============
Per share amounts (basic and diluted):
Loss from continuing operations $ (0.06) $ (0.53) $ (0.83)
=========== ============ ============
Loss from discontinued operations $ (0.20) $ -- $ (0.10)
=========== ============ ============
Net loss $ (0.26) $ (0.53) $ (0.93)
=========== ============ ============
Weighted average shares outstanding 6,566,883 19,030,492 12,798,688
=========== ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
High Speed Net Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Date of Common Stock
Transaction Shares Par Value
------------------ --------------- --------------
<S> <C> <C> <C>
Balance at January 2, 1998 (inception) - $ -
Stock sold for cash Jan. 1998 100 -
Shareholders capital contributions June-July 1998
Recapitalization upon reverse acquisition of High Speed Net
Solutions, Inc. Aug. 1998 10,275,000 10,275
Common stock sold for cash Sept. 1998 3,766,600 3,767
Common stock issued for payment of debt to a shareholder Sept. 1998 1,550,000 1,550
Treasury stock acquired for cash - -
Common stock issued to acquire licensing rights Sept. 1998 775,000 775
Common stock issued for services Sept. 1998 765,000 765
Net loss for the year ended December 31, 1998 - -
--------------- --------------
Balance at December 31, 1998 17,131,700 17,132
Compensation expense related to grant of stock option to
purchase 1,000,000 shares at no exercise price Feb. 1999 - -
Common stock sold for cash March 1999 118,188 118
Common stock issued to shareholder for advances made on
behalf of the Company April 1999 220,000 220
Compensation expense related to grant of options to purchase
825,000 shares at $.01 per share May 1999 - -
Common stock issued for investment in related party May 1999 795,001 795
Common stock issued for services July 1999 85,500 85
Common stock issued for advance royalty payment Aug. 1999 1,500,000 1,500
Common stock issued in exchange for convertible debentures
Aug. 1999 4,852,860 4,853
Beneficial conversion feature related to convertible debt Aug. 1999 - -
Common stock canceled in connection with merger between High
Speed Net Solutions, Inc. and Marketers World, Inc. in
August 1998 Aug. 1999 (5,161,100) (5,161)
Cancellation of compensatory stock issued in 1998 and 1999 Aug. 1999 (555,000) (555)
Stock option exercises Aug. 1999 1,825,000 1,825
Common stock issued in conjunction with subscription
agreement, 250,000 shares at $1.00 per share Aug. 1999 250,000 250
Compensation expense related to grant of option to purchase
240,000 shares at $.01 per share Sept. 1999 - -
Net loss for the year ended December 31, 1999 - -
--------------- --------------
Balance at December 31, 1999 21,062,149 $ 21,062
=============== ==============
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
Deficit
Accumulated
During the
Paid-in Development Treasury
Capital Stage Stock Total
----------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Balance at January 2, 1998 (inception) $ - $ - $ - $ -
Stock sold for cash - - - -
Shareholders capital contributions 1,091,648 - - 1,091,648
Recapitalization upon reverse acquisition of High Speed Net (10,275) - - -
Solutions, Inc. 313,233 - - 317,000
Common stock sold for cash
Common stock issued for payment of debt to a shareholder 148,270 - - 149,820
Treasury stock acquired for cash - - (227,619) (227,619)
Common stock issued to acquire licensing rights 76,725 - - 77,500
Common stock issued for services 75,735 - - 76,500
Net loss for the year ended December 31, 1998 - (1,693,806) - (1,693,806)
----------------- ----------------- -------------- -----------------
Balance at December 31, 1998 1,695,336 (1,693,806) (227,619) (208,957)
Compensation expense related to grant of stock option to
purchase 1,000,000 shares at no exercise price 1,640,000 - - 1,640,000
Common stock sold for cash 127,382 - - 127,500
Common stock issued to shareholder for advances made on
behalf of the Company 219,780 - - 220,000
Compensation expense related to grant of options to purchase 1,791,332 - - 1,792,127
825,000 shares at $.01 per share
Common stock issued for investment in related party 2,000,000 - - 2,000,000
Common stock issued for services 130,729 - - 130,814
Common stock issued for advance royalty payment 2,276,625 - - 2,278,125
Common stock issued in exchange for convertible debentures 2,650,896 - - 2,655,749
Beneficial conversion feature related to convertible debt 2,655,749 - - 2,655,749
Common stock canceled in connection with merger between High
Speed Net Solutions, Inc. and Marketers World, Inc. in
August 1998 5,161 - - -
Cancellation of compensatory stock issued in 1998 and 1999 (90,695) - - (91,250)
Stock option exercises (1,825) - - -
Common stock issued in conjunction with subscription
agreement, 250,000 shares at $1.00 per share 1,094,750 - - 1,095,000
Compensation expense related to grant of option to purchase
240,000 shares at $.01 per share 1,077,600 - - 1,077,600
Net loss for the year ended December 31, 1999 - (10,144,376) - (10,144,376)
----------------- ----------------- -------------- -----------------
Balance at December 31, 1999 $ 17,272,820 $(11,838,182) $ (227,619) $ 5,228,081
================= ================= ============== =================
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
<TABLE>
<CAPTION>
High Speed Net Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows
Period From
January 2, 1998
(Inception) to
Year Ended December 31 December 31
1998 1999 1999
----------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Loss from continuing operations $ (427,841) $(10,144,376) $(10,572,217)
Adjustments to reconcile net loss to net cash used in operating
activities:
Loss on disposal of equipment 36,858 -- 36,858
Non cash compensation and consulting charges relating to
stock awards and stock subscriptions -- 5,698,038 5,698,038
Depreciation and amortization 21,900 26,162 48,062
Common stock issued for services 76,500 39,564 116,064
Interest expense relating to beneficial conversion feature
of convertible debt -- 2,655,749 2,655,749
Changes in operating assets and liabilities:
Prepaid royalties -- (60,000) (60,000)
Accounts receivable (7,559) 7,559 --
Accounts payable and accrued expenses 8,457 91,419 99,876
Loss contingency -- 800,000 800,000
Net cash used in operating activities from continuing operations
(291,685) (885,885) (1,177,570)
Net cash used in discontinued operations (1,265,965) -- (1,265,965)
----------- ------------ ------------
Total net cash used in operating activities (1,557,650) (885,885) (2,443,535)
INVESTING ACTIVITIES
Capital expenditures (50,148) (4,052) (54,200)
Cash investment in related party -- (102,000) (102,000)
----------- ------------ ------------
Net cash used in investing activities (50,148) (106,052) (156,200)
FINANCING ACTIVITIES
Proceeds from sale of common stock 317,000 242,062 559,062
Shareholder capital contributions 1,091,648 -- 1,091,648
Advances from stockholders 445,378 430,852 876,230
Repayments to stockholders -- (9,486) (9,486)
Proceeds from issuance of convertible debentures -- 558,640 558,640
Purchase of treasury stock (227,619) -- (227,619)
----------- ------------ ------------
Net cash provided by financing activities 1,626,407 1,222,068 2,848,475
----------- ------------ ------------
Net increase in cash and cash equivalents 18,609 230,131 248,740
Cash and cash equivalents at beginning of year -- 18,609 --
----------- ------------ ------------
Cash and cash equivalents at end of year $ 18,609 $ 248,740 $ 248,740
=========== ============ ============
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
High Speed Net Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows
Period From
January 2, 1998
(Inception) to
Year Ended December 31 December 31
1998 1999 1999
----------- ------------ ------------
<S> <C> <C> <C>
NONCASH INVESTING AND FINANCING ACTIVITIES
Common shares issued for investment in related party
$ -- $ 1,792,127 $1,792,127
========= ================ ==========
Common stock issued in exchange for convertible debentures
$ -- $ 2,665,749 $2,665,749
========= ================ ==========
Common stock issued for prepaid royalties $ -- $ 2,278,125 $2,278,125
========= ================ ==========
Debentures issued for shareholder advances on behalf of company
$ -- $ 2,097,109 $2,097,109
========= ================ ==========
Common stock issued for licensing rights $ 77,500 $ -- $ 77,500
========= ================ ==========
Common stock issued for payment of debt to stockholder
$ 149,820 $ -- $ 149,000
========= ================ ==========
Common stock issued for stockholder advances on behalf of Company
$ -- $ 220,000 $ 220,000
========= ================ ==========
</TABLE>
SEE ACCOMPANYING NOTES.
F-7
<PAGE>
High Speed Net Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS, ORGANIZATION AND DEVELOPMENT STAGE COMPANY
High Speed Net Solutions, Inc. ("the Company" or "HSNS") was incorporated in
1984 and was inactive until it merged with Marketers World, Inc. ("MWI") on
August 24, 1998. In legal form, this merger was effected by HSNS issuing its
shares in exchange for the net assets of MWI. However, the transaction was
accounted for as a reverse merger whereby MWI was treated as the accounting
acquirer and HSNS as the acquiree, because the sole shareholder of MWI owned
approximately 90% of the outstanding shares of the combined company after the
merger. Total outstanding shares of HSNS common stock subsequent to the merger
were 10,275,000, which consisted of the 1,000,000 shares outstanding prior to
the merger and the 9,275,000 shares issued to acquire the net assets of MWI. At
the time of the merger, HSNS had no assets or liabilities, and accordingly, the
transaction was accounted for as a recapitalization of HSNS. The accompanying
1998 financial statements include the operating results of MWI since its
inception on January 2, 1998 and the results of HSNS from the merger date,
August 24, 1998.
MWI was incorporated in January 1998 and its planned principal operations were
to lease computer systems to businesses and to distribute Internet oriented
products and perform related services. During 1998, MWI was not able to execute
its planned activities, other than the sale of pilot products and services, and
consequently ceased all operating activities in December 1998. MWI was
subsequently legally dissolved in September 1999. Accordingly, the operating
results of MWI have been presented as discontinued operations for the year ended
December 31, 1998. Earned revenues during the year ended December 31, 1998 of
MWI were approximately $1,335,300 and the loss totaled $1,265,965. Results for
the year ended December 31, 1999 represent solely the activity of HSNS which
primarily related to raising capital and establishing strategic relationships.
Since the Company has not yet commenced its planned principal operations and
since MWI also never commenced its planned principal operations, the
accompanying financial statements are presented as those of a development stage
company.
In 1984, the Company was incorporated under the name EMN Enterprises, Inc. The
Company was inactive from the time of its incorporation in 1984 until the time
of the MWI transaction in 1998. In September 1998, in conjunction with the MWI
merger, the Company changed its name to ZZAP.NET, Inc. and in January 1999 the
name changed to High Speed Net Solutions, Inc.
F-8
<PAGE>
1. BUSINESS, ORGANIZATION AND DEVELOPMENT STAGE COMPANY (CONTINUED)
In August 1999, Summus Ltd. ("Summus") acquired 51% of the outstanding common
stock of the Company. Subsequently, Summus sold certain of the shares it
acquired and at December 31, 1999, Summus owned 40.7% of the Company's
outstanding common stock. The Company's operating and business strategy is
dependent on the development of Summus' technology and products under the terms
of various agreements between both parties. Summus is developing media
compression and delivery software that the Company intends to use to deliver its
services to its customers. The strategic relationship with Summus is such that
the Company will bring customer requirements to Summus for inclusion into future
releases of the various products. In addition, Summus plans to search and
validate additional customer requirements to create market leading media
compression and delivery software.
2. BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the basis that High
Speed Net Solutions, Inc. will continue as a going concern. The Company has
incurred operating losses since inception and has experienced negative cash
flows and expects these losses and negative cash flow to continue into the
foreseeable future. The Company's ability to continue operations as a going
concern is predicated on its ability to continue to raise capital, including
significant new capital in 2000, the successful completion of its operational
plan and, ultimately, upon achieving profitable operations.
3. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
EQUIPMENT AND FURNITURE
Equipment and furniture is stated at cost. Depreciation, as recorded by MWI, was
computed using the straight-line method over the estimated useful lives of the
assets beginning when assets were placed in service. Depreciation expense
amounted to $13,290 for the year ended December 31, 1998. Based on the
termination of MWI's operations in 1998, along with no future alternative use,
the net book value of MWI's equipment and furniture at December 31, 1998,
totaling $36,858, was written off.
F-9
<PAGE>
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PREPAID ROYALTIES AND LICENSING RIGHTS
Prepaid royalties represent prepayments made to Summus under various agreements
further described in Note 4. As future revenues from services subject to the
provisions of these agreements are earned, the prepaid royalties will be charged
to royalty expense over the terms of the various agreements.
Licensing rights represent the cost of acquiring the right to license certain
products developed by Summus. These costs are being amortized on a straight-line
basis over the term of the related agreements.
Management continuously evaluates the future realization of the prepaid
royalties and licensing rights and currently anticipates fully recovering these
costs and, accordingly, no valuation adjustment has been recorded to date. This
conclusion is based on management's expectation of significant future revenues
from products covered under these agreements and rights. This process
necessarily involves significant management judgment. Should management
determine in the future that permanent diminution in value of these assets has
occurred, a charge against operating results would be recorded for the amount of
the decline in value.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of unrestricted cash accounts and highly
liquid investments with an original maturity of three months or less when
purchased.
STOCK BASED COMPENSATION
The Company accounts for stock based compensation under the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations. In accordance with APB 25,
the Company has valued employee stock awards and stock issued to employees for
services performed based on the traded value of the Company's common stock, or
its estimated fair value prior to it becoming traded, at the measurement date of
the stock options and awards.
F-10
<PAGE>
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Income taxes are accounted for using the liability method in accordance with
FASB Statement No. 109, ACCOUNTING FOR INCOME TAXES (See Note 10).
LOSS PER SHARE
Loss per share has been calculated in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings per Share." The Company has potential
common stock equivalents related to its outstanding stock options. These
potential common stock equivalents were not included in loss per share for all
periods because the effect would have been antidilutive.
INVESTMENT IN COMMON STOCK OF RELATED PARTY
Investment in common stock of related party represents the Company's 14.0%
ownership interest in Summus (see Note 8). The Company accounts for its
investment in Summus using the cost method. Under this method, the investment is
recorded at its historical cost. Although the market value of this investment is
not readily determinable, management believes its fair value is not less than
its carrying amount.
REVENUE RECOGNITION
Revenue was recognized by MWI when products were shipped and services were
performed. Operating activity for MWI has been presented as discontinued
operation for the year ended December 31, 1998. To date, no revenues have been
generated by HSNS.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, The Financial Accounting Standards Board issued Statement No. 133
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"),
which is required to be adopted in years beginning after June 15, 2000. Because
of the Company's minimal use of derivatives, management does not anticipate that
the adoption of the new statement will have a significant effect on earnings or
the financial position of the Company.
F-11
<PAGE>
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING
MWI expensed advertising costs as incurred. Advertising expense was
approximately $128,000 for the year ended December 31, 1998. To date, High Speed
Net Solutions has not incurred any advertising expense.
4. PREPAID ROYALTIES
In February 1999, the Company entered into a Marketing and Licensing Agreement
("MLA") with Summus. As consideration for this agreement, the Company prepaid
royalty payments to Summus. The amount of prepaid royalties consists of cash
payments of $2,250,000 ($2,190,000 of which was made by a stockholder on behalf
of the Company) and the issuance of 1,500,000 shares of the Company's common
stock valued at $2,278,125, for a total aggregate value of $4,528,125. This
amount is presented as a non-current asset in the accompanying balance sheet as
of December 31, 1999.
In January 2000, the Company and Summus entered into a Master Agreement, which
includes a Software License Agreement ("SLA"), a Software Maintenance Agreement
("SMA") and an Agency and a Revenue Sharing Agreement ("RSA") (collectively with
the Master License Agreement, the "New Agreements"). The New Agreements entirely
replace the MLA entered in February 1999.
The SLA gives the Company the right to license Summus' current and future
products for digital content management solutions for rich media distribution.
Additionally, the SLA gives the Company non-exclusive rights to distribute
wavelet encoded content over the Internet or over private network environments
for the purposes of advertising or content delivery. The Company will be
credited for the $1.0 million upfront license fee due under the SLA from the
prepayments made under the MLA. The Company is also required to make ongoing
payments equal to 10% of revenues generated from use of the Summus' products, as
defined in the agreement. The Company was granted a $1.0 million credit, from
the prepayments made under the MLA, for such payments. The Company has been
granted other rights under the SLA which are defined in the agreement. The SLA
has a term of six years.
F-12
<PAGE>
4. PREPAID ROYALTIES (CONTINUED)
The RSA entitles the Company to receive 20% of all revenues that Summus receives
from third party licenses of its products for rich media distribution. For all
customers that the Company refers to Summus for technology licensing, consulting
or other product or services sales, the Company will receive 15% of the first
year revenue earned by Summus. The RSA also provides for revenue sharing with
respect to sales to a potential customer by either the Company or Summus.
Revenue earned from this customer in the first two years by either the Company
or Summus will be shared equally between both parties. Beginning in the third
year, 40% of revenue earned by the Company will be remitted to Summus decreasing
to 20% in the final two years. Conversely, 40% of revenue earned by Summus in
the third year and 20% of revenue earned by Summus in years four, five and six
will be shared with the Company.
5. LICENSING RIGHTS
In Septemer 1998, the Company issued 775,000 shares of its common stock, valued
at $77,500 for all of the issued and outstanding common stock of Brad Richdale
Direct, Inc. ("BRD"). The primary purpose of this transaction was to obtain
certain licensing and marketing rights held by BRD for certain products to be
developed by Summus. Since BRD had nominal assets and operations, this
transaction was accounted for as an acquisition of licensing rights, rather than
as a business combination. The value of this transaction was based on recent
transactions in the Company's common stock on the date of the transaction, and
has been recorded as an intangible asset in the accompanying balance sheet.
Subsequent to this transaction, the Company has negotiated new terms and
agreements with Summus relating to the licensing and marketing of certain
products developed by Summus (see Note 4).
6. CONVERTIBLE DEBENTURES
During 1999, the Company issued $2,655,749 in convertible debentures (the
"debentures") to officers, stockholders and third parties. These debentures were
issued in exchange for both cash of $558,640 and in partial satisfaction of
advances of $2,097,109 from a stockholder of the Company. The debentures were
convertible into the Company's common stock at conversion prices ranging from
$0.25 to $1.33 per share (all of which were substantially "in-the-money" at date
of issuance).
F-13
<PAGE>
6. CONVERTIBLE DEBENTURES (CONTINUED)
Shortly after the issuance of the debentures, the debenture holders exercised
the conversion feature and converted all outstanding debentures into 4,852,860
shares of the Company's common stock. The debentures were convertible at the
date of issuance. Since the conversion price of the debentures was below the
fair market value of the common stock, the Company recorded a $2,655,749
beneficial conversion feature as debt discount and additional paid-in-capital on
the date the debentures were issued. The resulting interest expense was
immediately recognized because the debentures were convertible upon issuance.
As of December 31, 1999, all debentures had been converted.
7. RELATED PARTY TRANSACTIONS
As of December 31, 1999 Summus holds a 40.7% ownership interest in the Company.
The Company's operating and business strategy is dependent on the development of
Summus' technology and products under the New Agreements. Summus is developing
media compression and delivery software that the Company has rights to under its
various agreements with Summus to use to deliver services to its customers.
During 1999, Summus has been funding certain expenses of the Company. For the
year ended December 31, 1999, Summus paid $154,000 of operating expenses on
behalf of the Company. This amount is owed to Summus and is included in Payables
to Related Parties in the accompanying balance sheet at December 31, 1999.
Payables to related parties, also includes advances made to the Company from a
former majority shareholder during 1998 and 1999. These amounts are unsecured
and are payable on demand.
F-14
<PAGE>
8. STOCKHOLDERS' EQUITY
On June 20, 1998, the Company amended its articles of incorporation to increase
the number of authorized shares of its $.001 par value common stock to
50,000,000 and to effect a 200 for one stock split thereby increasing its issued
and outstanding shares to 1,000,000. The Company has 5,000,000 authorized shares
of $.001 par value preferred stock. No preferred shares have ever been issued
and outstanding as of December 31, 1999.
During the year ended December 31, 1998 the Company issued 765,000 shares of its
stock to employees for services rendered. These shares were valued at $76,500
based on the estimated fair value of the common stock, which at the time was not
publicly traded. During the year ended December 31, 1999, the Company issued
85,500 shares of common stock to employees for services rendered. These shares
were valued at $130,814 based on the traded value of the common stock.
During 1998, the Company acquired 38,500 shares of its common stock for $227,619
in cash and currently holds these shares as treasury stock.
In August 1999, the Company issued 795,001 shares of its common stock valued at
$1,792,127, along with a cash payment of $102,000, to acquire 1,000,182 shares
of common stock, or 19%, of Summus, Technologies Inc. Subsequently, Summus
Technologies, Inc. and Summus Ltd. merged. Summus Ltd. was the surviving entity.
The Company's ownership in Summus Ltd. after the merger was 16.7% and as of
December 31, 1999 is 14.0%. The Company's shares of Summus Ltd. are subject to a
shareholder agreement which restricts the Company's ability to transfer or sell
its shares without first granting Summus Ltd. the opportunity to purchase them.
In August, 1999, former management of the Company entered into a stock
subscription agreement with a related party. The agreement provided for the
Company to sell 250,000 shares of its common stock for $1.00 per share. Since
the subscription price was below the fair market value of the underlying stock
on the date of the agreement, $845,000 has been charged to the statement of
operations in 1999.
F-15
<PAGE>
8. STOCKHOLDER' EQUITY (CONTINUED)
STOCK OPTIONS
During 1999, the Company granted to certain employees and directors 2,705,000
stock options that had exercise prices below the fair value of the underlying
common stock. Compensation expense of $4,717,600 has been recognized based upon
the difference between the exercise price and the traded value of the common
stock on the date of grant. These options vested immediately upon issuance and
1,825,000 of these options were exercised during 1999. Unexercised options
expire between 5 and 10 years.
In connection with a 200,000 stock option grant, the optionee received
protection from potential dilution resulting from future issuances of the
Company's securities, as defined. The maximum shares number of common shares
issuable under this agreement is 400,000.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123; "Accounting for Stock-Based
Compensation." As permitted by the rules of SFAS No. 123, the Company continues
to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees' and related interpretations for its stock-based awards.
During 1999, the Company issued options to purchase 2,705,000 shares of its
common stock at exercise prices less than market value and recognized $4.2
million in compensation expense related to these options.
A summary of the Company's stock option activity is as follows:
Weighted
Average
Shares Exercise Price
--------- --------------
Outstanding - December 31, 1998 -- $ --
Granted 2,720,000 1.21
Exercised 1,825,000 0.06
Forfeited -- .00
--------- --------
Outstanding - December 31, 1999 895,000 2.29
========= ========
F-16
<PAGE>
8. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding
- ------------------------------------------------------------------------------------------------------------
Range of Number Weighted Average Weighted Average
Exercise Prices Outstanding Contractual Life Exercise Price
--------------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
$ .01 240,000 5 years $ .01
2.00 - 4.38 295,000 6.9 years 3.45
10.00 - 13.00 360,000 7 years 11.33
--------
895,000 6.4 years 5.70
========
</TABLE>
Options Exercisable
---------------------------------------
Range of Number Weighted Average
Exercise Prices Exercisable Exercise Price
--------------- ----------- --------------
$ .01 240,000 $ .01
2.00 - 4.38 165,000 4.00
10.00 - 13.00 - -
-------
405,000 1.18
=======
In accordance with SFAS 123, the fair value of each option grant was determined
by using the Black-Scholes option pricing model with the following weighted
average assumptions for the twelve month period ended December 31, 1999:
dividend yield of 0%; volatility of 2.054; risk free interest rate of 4.25% and
expected option lives of 5 years. The weighted average fair value at the date of
grant was $2.29 per option. Had compensation cost for the Company's stock
options been determined based on the fair value at the date of grant consistent
with the provisions of SFAS 123, the Company's net loss and net loss per share
would have been $13.5 million and $.71 for the twelve months ended December 31,
1999.
F-17
<PAGE>
8. STOCKHOLDERS' EQUITY (CONTINUED)
During August 1999, the Company negotiated and Board of Directors approved the
cancellation of 5,161,100 shares of its common stock which were originally
issued in connection with the merger between the Company and MWI. This
cancellation was a result of MWI ceasing its operations in 1998. Both the
majority holder of these shares and the Company agreed that the initial purchase
price was over valued and accordingly, the shares were voluntary returned to the
Company and the Company then canceled the shares. Since no value was ascribed to
the initial shares issued in connection with the MWI merger, no value was
ascribed to the subsequent cancellation. Also during 1999, the Company
negotiated and the Board of Directors approved the cancellation of 555,000
shares of its common stock which were originally issued in 1998 and 1999 for
services rendered by an employee valued at $91,250. During 1999, it was
determined that these services had not been performed satisfactorily and
therefore the common stock was voluntarily returned to the Company and canceled.
9. LEASES
During 1999, the Company established it headquarters in Raleigh, North Carolina
and entered into a noncancelable lease for office space and certain office
equipment. Rent expense incurred during the twelve months ended December 31,
1999 was approximately $11,375.
The following is a schedule of future minimum lease payments for operating
leases:
2000 $ 32,973
2001 32,973
2002 32,973
2003 32,973
2004 32,973
---------
$ 164,865
=========
During 1998, MWI leased its office facility and certain office equipment under
noncancelable operating leases, all which were terminated in 1998. Total rent
expense incurred in 1998 by MWI was approximately $40,000.
F-18
<PAGE>
10. INCOME TAXES
No provision for income taxes has been recorded during the current year due to
the Company's significant losses.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets are as follows:
DECEMBER 31 DECEMBER 31
1998 1999
--------- ---------
Deferred tax assets:
Net operating loss carryforwards 29,300 206,000
Start-up expenses 134,000 100,500
Related party expenses 178,000 234,000
Other deductible temporary differences 79,000 79,000
--------- ---------
Total deferred tax assets 420,000 619,500
Deferred tax asset valuation allowance (420,000) (619,500)
--------- ---------
Net deferred taxes $ -- $ --
========= =========
Management has determined that a 100% valuation allowance for existing deferred
tax assets is appropriate given uncertainty regarding the ultimate realization
of any such assets.
At December 31, 1999, the Company had federal and state net operating loss
carryforwards of approximately $515,000 for income tax purposes. The tax benefit
of these carryforwards are reflected in the above table of deferred tax assets.
If not used, these carryforwards begin to expire in 2018 for federal tax
purposes and in 2003 for state tax purposes. U. S. tax rules impose limitations
on the use of net operating losses following certain changes in ownership. If
such a change occurs, the limitation could reduce the amount of these benefits
that would be available to offset future taxable income each year, starting with
the year of ownership change.
F-19
<PAGE>
11. COMMITMENTS
In December 1999, the Company entered into a consulting agreement whereby the
consulting firm received options rights to purchase up to 200,000 shares of the
Company's common stock at an exercise price of $10.00 per share. The options
vest and become exercisable in increments of 50,000 shares based on the
achievement of certain levels of revenue earned by the Company. As of December
31, 1999, no options were vested under this agreement.
In October 1999, the Company entered into a consulting agreement whereby the
consultant will receive the rights to purchase 2,000 shares of the Company's
common stock based on the achievement of revenue, as defined, from a potential
customer of the Company and Summus. The Company is also obligated to pay the
consultant 4% of all revenue the Company earns from this potential customer. As
revenues earned from this potential customer increase, the consultant has the
right to proportionally receive more shares based on the higher levels of
revenues earned. As of December 31, 1999, no amounts have been earned under this
agreement.
12. SUBSEQUENT EVENT
In January 2000, a former shareholder of Summus Technologies, Inc. who received
350,000 shares of HSNS common stock and $100,000 in cash in exchange for his
shares of Summus Technologies, Inc. stock (see Note 8) has filed a lawsuit
against the Company, seeking damages of $13.3 million resulting from the
Company's alleged failure to register such shares under the Securities Act of
1933 (the "Act"). Under an agreement between the former shareholder and the
Company, the Company is required to issue and include in a registration
statement under the Act an additional 25,000 shares of the Company's common
stock for each additional month that passes subsequent to the Company's initial
deadline date to register the 350,000 shares. Management is attempting to settle
this matter out-of-court. The Company as accrued $800,000 for settlement of this
matter, representing management's best estimate of the ultimate outcome.
However, the ultimate exposure could be more or less, depending on the outcome
of settlement discussions, the length of time that passes prior to the
effectiveness of a registration statement covering shares of the Company held by
the plaintiff and the ultimate value of the Company's shares on the date of
settlement. Because the matter is expected to be resolved by issuing additional
shares, the ultimate outcome is not expected to have an adverse impact on the
Company's liquidity or cash flow.
F-20
<PAGE>
<PAGE>
Signatures
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
HIGH SPEED NET SOLUTIONS, INC.
By: /s/ Andrew L. Fox
Andrew L. Fox
Acting President and CEO, and
Executive Vice President
By: /s/ Alan Kleinmaier
Alan Kleinmaier
Executive Vice President, Acting Chief
Financial Officer, Secretary, and
Treasurer
Date: 2/18/00
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit Description
- -------------- -------------------
3.01 Articles of Incorporation, dated April 30, 1984 (as formerly in
effect, as amended in Exhibits 3.02, 3.03, 3.04)
3.02 Amendment to Articles of Incorporation, dated July 20, 1998
3.03 Amendment to Articles of Incorporation, dated August 24, 1998
3.04 Amendment to Articles of Incorporation, dated December 10, 1998
3.05 Restated Articles of Incorporation, dated February 11, 2000 (as
currently in effect)
3.06 Bylaws
3.07 Amended and Restated Bylaws
4.01 Specimen common stock certificate
10.05 Equity Compensation Plan, effective January 31, 2000
10.06 Marketing License Agreement ("MLA") with Summus, including
Exhibit A and Exhibit E, dated February __, 1999
10.07 First Amendment to MLA, dated August 16, 1999
10.08 Letter Agreement among Bradford J. Richdale, Michael M. Cimino,
President of Zzap.net, Inc., predecessor in interest to High
Speed Net Solutions, Inc. ("HSNS"), and Dr. Bjorn Jawerth,
President of Summus, Ltd., and Summus Technologies, Inc., dated
January 14, 1999
10.09 First Amendment to Letter Agreement, dated August 16, 1999
10.10 Letter to Samsung Electronics, dated March 25, 1999
10.11 Samsung Non-Circumvention Agreement with Summus, dated April 15,
1999
10.12 Letter to Samsung Electronics, dated August 9, 1999
10.13 Letter concerning Agency Agreement for Samsung negotiations,
dated March 25, 1999
10.14 Capital Associates Lease Agreement between HSNS and Phoenix
Limited Partnership of Raleigh, dated October 15, 1999
10.15 Stock Purchase Agreement with Mr. William R. Dunavant, dated
August 13, 1999.
10.16 Supplement to Agreement by and Between HSNS and William
Dunavant, dated August 13, 1999.
10.17 Advisory Agreement with R J Seifert Enterprises, dated
February 6, 1999
10.18 Non-Circumvention and Non-Disclosure Agreement with R J Seifert
Enterprises, dated February 6, 1999
10.19 Employment Offer Letter with Andrew Fox, dated January 20, 2000.
10.20 Stock Option Award Agreement with Andrew Fox, dated August 25,
1999.
10.21 Employment Offer Letter with Alan R . Kleinmaier, dated
February 7, 2000.
10.22 Stock Option Award Agreement with Alan Kleinmaier, dated
August 25, 1999.
10.23 Settlement Agreement with Peter Rogina, dated September 22, 1999
10.24 Employment and Stock Option Agreement with Peter Rogina, dated
March 1, 1999
10.25 Consulting Agreement with Kyoung Park, Summus, dated
September 24, 1999
10.26 Consulting Agreement with RPC International, dated December 15,
1999
10.27 Shareholders' Agreement with Summus, Sharon Stairs, Ahmad
Moradi, Antonio Bianco, Joseph Peretta, Rich, Bahman & Berger,
David Anderson, Stephen Purkiss, Kerstin Jawerth, Ron Compton,
dated August 16, 1999
10.28 Letter of Intent among HSNS, Samsung Electronics of America,
Inc. and Summus, dated February 15, 2000.
23.1 Consent of Ernst & Young LLP
27 Financial Data Schedule
ARTICLES OF INCORPORATION
OF
EMN ENTERPRISES, INC.
---------------------------------------------------
ARTICLE I - NAME
----------------
The name of this corporation is EMN ENTERPRISES, INC.
ARTICLE II - DURATION
---------------------
This corporation shall exist perpetually, commencing on the date of
filing of these Articles.
ARTICLE III - PURPOSE
---------------------
This corporation is organized for the following purposes:
To engage in the business of investing in and/or operating businesses,
and to do all or anything connecting therewith or incidental thereto in
connection with the foregoing; and for the purpose of transacting or all lawful
businesses of any kind or description.
ARTICLE IV - CAPITAL STOCK
--------------------------
This Corporation is authorized to issue 5,000 shares of One Cent
($0.01) par value common stock, which shall be designated "Common Shares".
ARTICLE V - PREEMPTIVE RIGHTS
-----------------------------
Every shareholder, upon the sale of any new stock of this corporation
of the same kind, class or series as that which he already holds, shall have the
right to purchase his pro rata share thereof (as nearly as may be done without
issuance of fractional shares) at the price at which it is offered to others.
ARTICLE VI - INITIAL REGISTERED OFFICE AND
AGENT; REGISTERED AGENT
------------------------------------------
The street address of the initial registered office of this corporation
is Suite 2001, 1800 NE 114 Street, North Miami, Florida 33181, and the name of
the initial registered agent of this corporation at that address is: DALE
NEWBURG.
<PAGE>
The name and street address of the Resident Agent is: DALE NEWBURG,
Suite 2001, 1800 NE 114 Street, North Miami, Florida 33181.
ARTICLE VII - INITIAL BOARD OF DIRECTORS
----------------------------------------
This corporation shall have one (1) director initially. The number of
all directors may be increased from time to time by the By-Laws, but shall never
be less than one. The name and address of the initial director of this
corporation is:
DALE NEWBURG Suite 12001
1800 NE 114 Street
North Miami, Florida 33181
ARTICLE VIII - INCORPORATOR
---------------------------
The name and the address of the person signing these Articles is:
DALE NEWBURG
Suite 2001
1800 NE 114 Street
North Miami, Florida 33181
ARTICLE IX - INDEMNIFICATION
----------------------------
The corporation shall indemnify any officer or director, or any former
officer or director, to the full extent permitted by the law. In addition, this
corporation shall have the power to make any other or further indemnification,
except an indemnification against gross negligence or willful misconduct, under
any By-Law, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action taken in a person's official capacity and as to
action in another capacity while holding such office.
ARTICLE X - AMENDMENT
---------------------
This corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation, or any amendment hereto, and any
right conferred upon the shareholders is subject to this reservation.
IN WITNESS WHEREOF, the undersigned subscriber has executed these
Articles of Incorporation, on this 30th day of April 1984.
/s/ Dale Newburg
------------------------
DALE NEWBURG, Subscriber
<PAGE>
STATE OF FLORIDA X
ss.
COUNTY OF DADE X
BEFORE ME, a Notary Public, authorized to take acknowledgements in the
State and County set forth above, personally appeared DALE NEWBURG, known to me
and known by me to be the person who executed the foregoing Articles of
Incorporation, and she acknowledged before me that she executed those Articles
of Incorporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal in the State and County aforesaid, on this 30th day of April 1984.
/s/ (Signature Illegible)
-------------------------
NOTARY PUBLIC
My commission expires:
NOTARY PUBLIC STATE OF FLORIDA AT LARGE
MY COMMISSION EXPIRES MAY 16, 1984
BONDED THRU GENERAL INS. UNDERWRITERS
ARTICLES OF AMENDMENT TO
EMN ENTERPRISES, INC.
THE UNDERSIGNED, being the sole director and president of EMN
Enterprises, Inc. does hereby amend its Articles of Incorporation as follows:
ARTICLE I
CORPORATE NAME
The Name of the Corporation is EMN Enterprises, Inc.
ARTICLE II
PURPOSE
The company shall be organized for any and all purposes authorized
under the laws of the state of Florida.
ARTICLE III
PERIOD OF EXISTENCE
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
SHARES
The capital stock of this corporation shall consist of 50,000,000
shares of common stock , $.001 par value.
ARTICLE V
PLACE OF BUSINESS
The address of the principal place of business of this corporation in
the State of Florida shall be 7695 S.W. 104th Street, Suite 210, Miami, FL
33156. The Board of Directors may at any time and from time to time move the
principal office of this corporation.
ARTICLE VI
DIRECTORS AND OFFICERS
The business of this corporation shall be managed by its Board of
Directors. The number of such directors shall not be less than one (1) and
subject to such minimum may be increased or decreased from time to time in the
manner provided in the By-laws.
<PAGE>
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No shareholder shall have any right to acquire shares or other
securities of the corporation except to the extent such right has may be granted
by an amendment to these Articles of Incorporation or by a resolution of the
board of Directors.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Anything in these Articles of Incorporation, the By-laws, or the
Florida Corporation Act notwithstanding, bylaws shall not be adopted, modified,
amended or repealed by the shareholders of the corporation except upon the
affirmative vote of a simple majority vote of the holders of all the issued and
outstanding shares of the corporation entitled to vote thereon.
ARTICLE IX
SHAREHOLDERS
9.1. INSPECTION OF BOOKS The board of directors shall make reasonable
rules to determine at what times and places and under what conditions the books
of the corporation shall be open to inspection by shareholders or a duly
appointed representative of a shareholder.
9.2. CONTROL SHARE ACQUISITION. The provisions relating to any
control share acquisition as contained in Florida Statutes now or hereinafter
amended, and any successor provision shall not apply to the Corporation.
9.3. QUORUM. The holders of shares entitled to one-third of the votes
at a meeting of shareholder's shall constitute a quorum.
9.4. REQUIRED VOTE. Acts of shareholders shall require the approval
of holders of 50.01% of the outstanding votes of shareholders.
ARTICLE X
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the fullest extent permitted by the law, no director or officer of
the Corporation shall be personally liable to the Corporation or its
shareholders for damages for breach of any duty owed to the Corporation or its
shareholders. In addition, the corporation shall have the power in its By-Laws
or in any resolution of its stockholders or directors to undertake to indemnify
the officers and directors of this corporation against any contingency or peril
as may be determined to be in the best interests of this corporation, and in
conjunction therewith, to procure, at this corporation's expense, policies of
insurance.
<PAGE>
ARTICLE XI
CONTRACTS
No contract or other transaction between this corporation and any
person, firm or corporation shall be affected by the fact that any officer or
director of this corporation is such other party or is, or at sometime in the
future becomes, an officer, director or partner of such other contracting party,
or has now or hereafter a direct or indirect interest in such contract.
I hereby certify that the following was adopted by a majority vote of
the shareholders and directors of the corporation on July 20, 1998 and that the
number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this
Amendment to Articles of Incorporation this on July 20,1998.
/s/ Eric P. Littman
- ------------------------------
Eric P. Littman, Sole Director
The foregoing instrument was acknowledged before me this on July 20,
1998 by Eric P. Littman, who is personally known to me.
/s/ Isabel J. Cantera
---------------------
Notary Public
My commission expires: ISABEL J. CANTERA
MY COMMISSION CC 29509
EXPIRES: February 25, 1999
Bonded through Notary Public Underwriters
ARTICLES OF AMENDMENT TO
EMN ENTERPRISES, INC.
THE UNDERSIGNED, being the president of EMN Enterprises, Inc., does
hereby amend its Articles of Incorporation, effective August 24, 1998, as
follows:
ARTICLE I
CORPORATE NAME
The name of the Corporation shall be zzap.net, Inc.
ARTICLE IV
SHARES
The capital stock of this corporation shall consist of 50,000,000
shares of common stock, $.001 par value and 5,000,000 shares of preferred stock,
no par value.
SERIES A CONVERTIBLE PREFERRED STOCK
1. CREATION OF SERIES A CONVERTIBLE STOCK PREFERRED STOCK. There is
hereby created a series of preferred stock consisting of 5,000,000 shares and
designated as the Series A Convertible Preferred Stock, no par value, having the
voting powers, preferences, relative, participating, limitations, qualifications
optional and other special rights and the qualifications, limitations and
restrictions thereof that are set forth below.
2. DIVIDEND PROVISIONS. In the event a dividend is declared with
respect to the Company's Common Stock prior to Conversion of the Series A
Convertible Preferred Stock, upon such conversion, such dividend shall be paid
with respect to the Shares of Common Stock into which the Series A Convertible
Preferred Stock were converted. Each share of Series A Convertible Preferred
Stock shall rank on a parity with each other share of Series A Convertible
Preferred Stock with respect to dividends.
3. REDEMPTION PROVISIONS. Each share of the Series A Convertible
Preferred Stock is redeemable on the following manner, at a price of $8.00 per
Share (the "Redemption Price'). The Holder of the Preferred Stock and the
Corporation shall have the right to redeem each Share within 72 hours after the
Notice of Redemption is given by a Holder or the Corporation with respect to
such Shares. The Corporation shall effect such redemption by payment to the
Holder by wire transfer or certified check payable to the Holder on or before
the Redemption Date, which shall be the later of (i) the tenth calendar after
the Notice of Conversion or (ii) the date on which the Holder has delivered the
certificates representing the Preferred Stock proposed to be converted pursuant.
In the event the Corporation shall not make such payment it shall be deemed to
have waived its right to redemption as to those Shares. The Corporation shall
have the right to redeem less than all of the Shares which are the subject of
the Notice of Conversion.
<PAGE>
4. LIQUIDATION PROVISIONS. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the Series A
Convertible Preferred Stock shall be entitled to receive an amount equal to
$3.00 per share. After the full preferential liquidation amount has been paid
to, or determined and set apart for the Series A Convertible Preferred Stock and
all other series of Preferred Stock hereafter authorized and issued, if any, the
remaining assets of the Corporation available for distribution to shareholders
shall be distributed ratably to the holders of the common stock. In the event
the assets of the Corporation available for distribution to its shareholders are
insufficient to pay the full preferential liquidation amount per share required
to be paid the Corporation's Series A Convertible Preferred Stock, the entire
amount of assets of the Corporation available for distribution to shareholders
shall be paid up to their respective full liquidation amounts first to the
Series A Convertible Preferred Stock, then to any other series of Preferred
Stock hereafter authorized and issued, all of which amounts shall be distributed
ratably among holders of each such series of Preferred Stock, and the common
stock shall receive nothing. A reorganization, or any other consolidation or
merger of the Corporation with or into any other corporation, or any other sale
of all or substantially all of the assets of the Corporation, shall not be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of this Section 4, and the Series A Convertible Preferred Stock
shall be entitled only to (i) the right provided in any agreement or plan
governing the reorganization or other consolidation, merger or sale of assets
transaction, (ii) the rights contained in the Florida Business Corporation Act
and (iii) the rights contained in other Sections hereof.
5. CONVERSION PROVISIONS. The holders of shares of Series A
Convertible Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) RIGHT TO CONVERT - OPTION OF HOLDER. Subject to Section 5(h) hereof
each share of Series A Convertible Preferred Stock (the "Preferred
Shares") shall be convertible, at the option of its holder, at any
time, into shares of common stock of the Company (the "Common Stock")
at the conversion rate. The conversion rate shall be increased
proportionally for any reverse stock split and decreased proportionally
for any forward stock split or stock dividend.
(b) No fractional shares of Common Stock shall be issued upon
conversion of the Preferred Shares, and in lieu thereof the number of
shares of Common Stock issuable for each Preferred Share converted
shall be rounded to the nearest whole number. Such number of whole
shares of Common Stock issuable upon the conversion of one Preferred
Share shall be multiplied by the number of Preferred Shares submitted
for conversion pursuant to the Notice of Conversion (defined below) to
determine the total number of shares of Common Stock issuable in
connection with any conversion.
(c) In order to convert the Preferred Shares into shares of Common
Stock, the holder of the Preferred Shares shall: (i) complete, execute
and deliver to the Corporation the conversion certificate set forth in
Section 5 (f) hereto (the "Notice of Conversion"); and (ii) surrender
the certificate or certificates representing the Preferred Shares being
converted (the "Converted Certificate") to the Corporation. The Notice
of Conversion shall be effective and in full force and effect if
delivered to the Corporation by facsimile transmission. Provided that a
copy of the Notice of Conversion is delivered to the Corporation on
such date by facsimile transmission or otherwise, and provided that the
<PAGE>
original Notice of Conversion and the Converted Certificate are
delivered to the Corporation within three (3) business days thereafter
at the Corporation's principal place of business, the date on which
notice of conversion is given (the "Conversion Date") shall be deemed
to be the date set forth therefor in the Notice of Conversion; and the
person or persons entitled to receive the shares of Common Stock
issuable upon conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of the
Conversion Date. If the original Notice of Conversion and the Converted
Certificate are not delivered to the Corporation within three (3)
business days following the Conversion Date, the Notice of Conversion
shall become null and void as if it were never given and the
Corporation shall, within two (2) business days thereafter, return to
the holder by overnight courier any Converted Certificate that may have
been submitted in connection with any such conversion.
(d) Upon receipt of a Notice of Conversion, the Corporation shall
absolutely and unconditionally be obligated to cause a certificate or
certificates representing the number of shares of Common Stock to which
a converting holder of Preferred Shares shall be entitled as provided
herein, which shares shall constitute fully paid and nonassessable
shares of Common Stock to be issued to, delivered by overnight courier
to, and received by such holder by the fifth (5th) calendar day
following the Conversion Date unless the Company has duly redeemed the
Preferred Shares which are the subject of the Notice of Conversion in
accordance with Section 3 hereof. Such delivery shall be made at such
address as such holder may designate therefor in its Notice of
Conversion or in its written instructions submitted together therewith.
(e) Intentionally omitted.
(f) The Notice of Conversion shall be in substantially the
following form:
"The undersigned holder (the "Holder") is
surrendering to The Havana Republic, Inc., a Florida
corporation (the "Company"), one or more certificates
representing shares of Series A Convertible Preferred Stock of
the Company (the "Preferred Stock") in connection with the
conversion of all or a portion of the Preferred Stock into
shares of Common Stock, no par value per share, of the Company
(the "Common Stock") as set forth below.
1. The Holder understands that the Preferred Stock were issued
by the Company pursuant to the exemption from registration
under the United States Securities Act of 1933, as amended
(the "Securities Act"), provided by Regulation D and/or
Section 4(2) thereunder promulgated thereunder.
2. The Holder represents and warrants that all offers and
sales of the Common Stock issued to the Holder upon such
conversion of the Preferred Stock shall be made (a) pursuant
to an effective registration statement under the Securities
Act, (in which case a prospectus has been delivered to the
purchaser) (b) in compliance with Rule 144, or (c) pursuant to
some other exemption from registration.
<PAGE>
Number of Shares of Preferred Stock being converted:
Number of Shares of Common Stock issuable:
Conversion Date:
Delivery Instructions for certificates of Common Stock and for
new certificates representing any remaining shares of
Preferred Stock:
NAME OF HOLDER:
-----------------------------
(Signature of Holder)
(b) ADJUSTMENTS TO CONVERSION RATE. (1) RECLASSIFICATION,
EXCHANGE AND SUBSTITUTION. If the Common Stock issuable on conversion
of the Series A Convertible Preferred Stock shall be changed into the
same or a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification, reverse
stock split or forward stock split or stock dividend or otherwise
(other than a subdivision or combination of shares provided for above),
the holders of the Series A Convertible Preferred Stock shall, upon its
conversion, be entitled to receive, in lieu of the Common Stock which
the holders would have become entitled to receive but for such change,
a number of shares of such other class or classes of stock that would
have been subject to receipt by the holders if they had exercised their
rights of conversion of the Series A Convertible Preferred Stock
immediately before that change.
(2) REORGANIZATIONS, MERGERS, CONSOLIDATION OR SALE OF ASSETS. If at
any time there shall be a capital reorganization of the Corporation's
common stock (other than a subdivision, combination, reclassification
or exchange of shares provided for elsewhere in this Section (5) or
merger of the Corporation into another corporation, or the sale of the
Corporation's properties and assets as, or substantially as, an
entirety to any other person, then, as a part of such reorganization,
merger or sale, lawful provision shall be made so that the holders of
the Series A Convertible Preferred Stock shall thereafter be entitled
to receive upon conversion of the Series A Convertible Preferred Stock,
the number of shares of stock or other securities or property of the
Corporation, or of the successor corporation resulting from such
merger, to which holders of the Common Stock deliverable upon
conversion of the Series A Convertible Preferred Stock would have been
entitled on such capital reorganization, merger or sale if the Series A
Convertible Preferred Stock had been converted immediately before that
capital reorganization, merger or sale to the end that the provisions
of this paragraph (b)(2) (including adjustment of the Conversion Rate
then in effect and number of shares purchasable upon conversion of the
Series A Convertible Preferred Stock) shall be applicable after that
event as nearly equivalently as may be practicable.
<PAGE>
(c) NO IMPAIRMENT. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization,
recapitalization, transfer of assets, merger, dissolution, or any other
voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying
out of all the provision of this Section 5 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Convertible Preferred
Stock against impairment.
(d) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for any shares of
Series A Convertible Preferred Stock, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series
A Convertible Preferred Stock effected thereby a certificate setting
forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series A
Convertible Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Rate at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion
of such holders shares of Series A Convertible Preferred Stock.
(e) NOTICES OF RECORD DATE. In the event of the establishment by the
Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other
distribution, the Corporation shall mail to each holder of Series A
Preferred Stock at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution and the amount
and character of such dividend or distribution.
(f) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Convertible Preferred Stock
such number of its shares of Common Stock as shall from time to time be
sufficient, based on the Conversion Rate then in effect, to effect the
conversion of all then outstanding shares of the Series A Preferred
Stock. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Preferred Stock, then, in addition to
all rights, claims and damages to which the holders of the Series A
Convertible Preferred Stock shall be entitled to receive at law or in
equity as a result of such failure by the Corporation to fulfill its
obligations to the holders hereunder, the Corporation will take any and
all Corporate or other action as may, in the opinion of its counsel, be
helpful, appropriate or necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
<PAGE>
(g) NOTICES. Any notices required by the provisions hereof to be given
to the holders of shares of Series A Convertible Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid
and return receipt requested, and addressed to each holder of record at
its address appearing on the books of the Corporation or to such other
address of such holder or its representative as such holder may direct.
(h) MANDATORY CONVERSION. All outstanding shares of Series A
Convertible Preferred Stock (not sooner converted into Common Stock)
shall be mandatorily convertible into Common Stock two years from the
issuance of the Preferred stock.
6. VOTING PROVISIONS. Except as otherwise expressly provided or
required by law, the Series A Convertible Preferred Stock shall have no voting
rights.
I hereby certify that the following was adopted by a majority vote of
the shareholders and directors of the corporation on August 24, 1998 and that
the number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this
Amendment to Articles of Incorporation this on August 24, 1998.
/S/ Rene M. Hamouth
- -------------------------
Rene Hamouth, President
The foregoing instrument was acknowledged before me on August 24, 1998,
by Rene Hamouth, who is personally known to me.
/s/ (Signature Unreadable)
Notary Public
My commission expires:
does not expire -
Barrister-Solicitor
ARTICLES OF AMENDMENT TO
ZZAP.NET, INC.
THE UNDERSIGNED, being the president of ZZAP.NET, INC. does hereby
amend its Articles of Incorporation, effective December 10, 1998 as follows:
ARTICLE 1
CORPORATE NAME
The name of the Corporation shall be High Speed Net Solutions, Inc.
I hereby certify that the following was adopted by a majority vote of
the shareholders and directors of the corporation on August 24, 1998 and that
the number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this
Amendment to Articles of Incorporation this on December 10, 1998.
/s/ Michael M. Cimino, Pres.
- ------------------------------
Michael M. Cimino, President
The foregoing instrument was acknowledged before me on December 10,
1998 by Michael M Cimino, who is personally known to me.
/s/ Thomas J. Hess
- ----------------------------
Notary Public:
Print Name: Thomas J. Hess
My commission expires: Thomas J. Hess
Notary Public, State of Florida
Commission No. CC 616081
My Commission Exp. 1/26/2001
Bonded through Fla. Notary Service & Bonding Co.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
HIGH SPEED NET SOLUTIONS, INC.
(Pursuant to Sections 607.001, 607.1003, and 607.1007 of the Business
Corporation Act of the State of Florida)
High Speed Net Solutions, Inc. (the "Corporation"), a corporation
organized and existing under the laws of the State of Florida, hereby certifies
as follows:
1. The name of the corporation is High Speed Net Solutions, Inc. The
Certificate of Incorporation of the Corporation was originally filed with the
Secretary of State of the State of Florida on May 10, 1984. The Certificate of
Incorporation of the Corporation was amended by filing a Certificate of
Amendment of the Certificate of Incorporation of the Corporation with the
Secretary of State of the State of Florida on:
(a) July 21, 1998; changing the authorized capital stock from
5,000 shares of common stock to 50,000,000 shares of common stock; removing
preemptive rights granted in the original charter; and making certain other
changes.
(b) September 2, 1998; changing the name of the Corporation to
zzap.net, Inc.; and authorizing 5,000,000 shares of Series A Convertible
Preferred Stock with various associated rights, of which no shares are issued
and outstanding and of which the Corporation has never issued any shares.
(c) December 29, 1998; changing the name of the Corporation to
High Speed Net Solutions, Inc.
2. Pursuant to Sections 607.1003 and 607.1007 of the Business
Corporation Act of the State of Florida, this Restated Certificate of
Incorporation restates and integrates and further amends the provisions of the
Corporation's Certificate of Incorporation.
3. This Restated Certificate of Incorporation amends the provisions of
the Certificate of Incorporation of the Corporation in the following manner:
(a) Change the address of the registered office of the
Corporation.
(b) Modify the rights and privileges of the Series A
Convertible Preferred Stock by removing the rights and privileges granted in the
earlier amendment and specifying, pursuant to Section 607.0602 of the Business
Corporation Act of the State of Florida, that the Board of Directors may
determine, in whole or in part, the preferences, limitations, and relative
rights, within the limits of state law, of the Series A Convertible Preferred
Stock.
1
<PAGE>
(c) Modify the pre-existing article concerning the "Liability
and Indemnification of Directors and Officers" to more concretely state the
Corporations' provisions of such.
(d) Modify the pre-existing article concerning contracts
entered into between the Corporation and an officer and/or director to
acknowledge that state law may proscribe a different treatment for such
contracts.
4. The terms and provisions of this Restated Certificate of
Incorporation have been duly approved by written consent of the stockholders of
the Corporation pursuant to Section 607.0704 of the Business Corporation Act of
the State of Florida, and notice of these actions taken by written consent of
the stockholders has been duly given to non-consenting stockholders pursuant to
such Section.
5. The text of the Amended and Restated Certificate of Incorporation
reads in its entirety as follows:
ARTICLE I
CORPORATE NAME
The Name of the Corporation is High Speed Net Solutions, Inc.
ARTICLE II
PURPOSE
The company shall be organized for any and all purposes authorized
under the laws of the State of Florida.
ARTICLE III
PERIOD OF EXISTENCE
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
SHARES
The capital stock of this corporation shall consist of 50,000,000
shares of common stock, $.001 par value, and 5,000,000 shares of preferred
stock, $.001 par value.
PREFERRED STOCK
Subject to the provisions of this ARTICLE IV, and these Articles of
Incorporation, shares of preferred stock may be issued from time to time in one
or more series as may be determined by the Board of Directors. The Board of
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Directors is authorized to determine or alter the designations, voting powers,
preferences, and relative, participating, optional, or other special rights, and
the qualifications, limitations, and restrictions on such rights, as the Board
of Directors may authorize by resolutions duly adopted prior to the issuance of
any shares of a series of preferred stock, including, but not limited to: (a)
the distinctive designation of each series and the number of shares that will
constitute such series (except that any decrease in the number of shares
constituting such series shall not be below the number of shares of such series
then outstanding); (b) the voting rights, if any, of shares of such series and
whether the shares of any such series having voting rights shall have multiple
votes per share; (c) the dividend rate, if any dividends are to be paid, on the
shares of any such series, any restrictions, limitations, or conditions upon the
payment of such dividends, whether such dividends shall be cumulative, and the
dates on which such dividends are payable; (d) the prices at which, and the
terms and conditions on which, the shares of such series may be redeemed, if
such shares are redeemable; (e) the purchase or sinking fund provisions, if any,
for the purchase or redemption of shares of such series; (f) any preferential
amount payable upon shares of such series in the event of the liquidation,
dissolution, or winding-up of the Corporation, or the distribution of its
assets; and (g) the prices or rates of conversion or exchange at which, and the
terms and conditions on which, the shares are convertible into or exchangeable
for other capital stock of the Corporation, if such shares are convertible or
exchangeable.
ARTICLE V
PLACE OF BUSINESS
The address of the principal place of Business of this Corporation in
the State of Florida shall be 1201 Hays Street, Tallahassee, FL 32301. The Board
of Directors may at any time and from time to time move the principal office of
this Corporation.
ARTICLE VI
DIRECTORS AND OFFICERS
The business of this corporation shall be managed by its Board of
Directors. The number of such directors shall not be less than one (1) and
subject to such minimum may be increased or decreased from time to time in the
manner provided in the By-laws.
Notwithstanding the foregoing, whenever the holders of one or more
classes or series of preferred stock shall have the right, voting separately as
a class or series, to elect directors, the election, term of office, filling of
vacancies, removal, and other features of such directorships shall be governed
by the terms of the resolution or resolutions adopted by the Board of Directors
pursuant to ARTICLE IV applicable thereto, and each director so elected shall
not be subject to the provisions of this ARTICLE VI unless otherwise provided
therein.
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ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No shareholder shall have any right to acquire shares or other
securities of the corporation except to the extent such right has been or may be
granted by an amendment to these Articles of Incorporation or by a resolution of
the board of Directors.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Anything in these Articles of Incorporation, the By-laws, or the
Florida Corporation Act notwithstanding, bylaws shall not be adopted, modified,
amended or repealed by the shareholders of the corporation except by a simple
majority vote of the holders of all the issued and outstanding shares of the
corporation entitled to vote thereon.
ARTICLE IX
SHAREHOLDERS
9.1. INSPECTION OF BOOKS. The board of directors shall make reasonable
rules to determine at what times and places and under what conditions the books
of the corporation shall be open to inspection by shareholders or a duly
appointed representative of a shareholder.
9.2. CONTROL SHARE ACQUISITION. The provisions relating to any control
share acquisition as contained in Florida statutes now or hereinafter amended,
and any successor provision shall not apply to the Corporation.
9.3. QUORUM. The holders of shares entitled to one-third of the votes
at a meeting of shareholder's shall constitute a
quorum.
9.4. REQUIRED VOTE. Acts of Shareholders shall require the approval of
holders of 50.01% of the outstanding votes of shareholders.
ARTICLE X
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
10.1 SCOPE OF AUTHORITY. The Corporation shall indemnify each of the
Corporation's directors and officers in each and every situation where, under
Section 607.0850 of the Florida Business Corporation Act, or any successor
provision of such Act (the "Indemnity Section"), the Corporation is permitted or
empowered to make such indemnification. The Corporation may, in the sole
discretion of the Board of Directors, indemnify any other person who may be
indemnified pursuant to the Indemnity Section to the extent the Board of
Directors deems advisable, as permitted by the Indemnity Section. The
Corporation shall promptly make or cause to be made any determination required
to be made pursuant to the Indemnity Section.
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10.2. LIMITATIONS ON CERTAIN PERSONAL LIABILITY. No person shall be
personally liable to the Corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director; PROVIDED, HOWEVER, that the
foregoing shall not eliminate or limit the liability of a director (a) for any
breach of the director's duty of loyalty to the Corporation or its shareholders;
(b) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; (c) under the Indemnity Section of the
Florida Business Corporation Act; or (d) for any transaction from which the
director derived an improper personal benefit.
ARTICLE XI
CONTRACTS
Subject to the limitation of state law, no contract or other
transaction between this corporation and any person, firm or corporation shall
be affected by the fact that any officer or director of this corporation is such
other party or is, or at sometime in the future becomes, an officer, director or
partner of such other contracting party, or has now or hereafter a direct or
indirect interest in such contract.
(The remainder of this page is leftintentionally blank.)
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IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be executed in its name and on its
behalf by its President and attested to by its Secretary this ____th day of
January, 2000, hereby declaring and certifying that this is the act and deed of
the Corporation and that the statements contained herein are affirmed as true
under penalties of perjury.
HIGH SPEED NET SOLUTIONS, INC.
[CORPORATE SEAL]
By: /s/ Andrew Fox
ATTEST: Andrew Fox, Acting President
By: /s/ Alan Kleinmaier
Alan Kleinmaier, Secretary
BY-LAWS
OF
ZZAP.NET, INC.
ARTICLE I. MEETINGS OF SHAREHOLDERS
-----------------------------------
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of this
corporation shall be held on the 30th day of June of each year or at such other
time and place designated by the Board of Directors of the corporation. Business
transacted at the annual meeting shall include the election of directors of the
corporation. If the designated day shall fall on a Sunday or legal holiday, then
the meeting shall be held on the first business day thereafter.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders shall be
held when directed by the President or the Board of Directors, or when requested
in writing by the holders of not less than 10% of all the shares entitled to
vote at the meeting. A meeting requested by shareholders shall be called for a
date not less than 3 nor more than 30 days after the request is made, unless the
shareholders requesting the meeting designate a later date. The call for the
meeting shall be issued by the Secretary, unless the President, Board of
Directors, or shareholders requesting the meeting shall designate another person
to do so.
SECTION 3. PLACE. Meetings of shareholders shall be held at the principal
place of business of the corporation or at such other place as may be designated
by the Board of Directors.
SECTION 4. NOTICE. Written notice stating the place, day and hour of the
meeting and in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than 3 nor more than 30 days
before the meeting, either personally or by first class mail, or by the
direction of the President, the Secretary or the officer or persons calling the
<PAGE>
meeting to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
SECTION 5. NOTICE OF ADJOURNED MEETING. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. If, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this Article to each shareholder
of record on a new record date entitled to vote at such meeting.
SECTION 6. SHAREHOLDER QUORUM AND VOTING. A majority of the shares entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders unless otherwise provided by
law.
SECTION 7. VOTING OF SHARES. Each outstanding share shall be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders.
SECTION 8. PROXIES. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or his duly authorized attorney-in-fact.
No proxy shall be valid after the duration of 11 months from the date thereof
unless otherwise provided in the proxy.
SECTION 9. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action required by
law or authorized by these by-laws or the Articles of Incorporation of this
corporation or taken or to be taken at any annual or special meeting of
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shareholders, or any action which may be taken at any annual or special meeting
of shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.
ARTICLE II. DIRECTORS
---------------------
SECTION 1. FUNCTION. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation shall be managed
under the direction of, the Board of Directors.
SECTION 2. QUALIFICATION. Directors need not be residents of this state or
shareholders of this corporation.
SECTION 3. COMPENSATION. The Board of Directors shall have authority to fix
the compensation of directors.
SECTION 4. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless he
votes against such action or abstains from voting in respect thereto because of
an asserted conflict of interest.
SECTION 5. NUMBER. This corporation shall have a minimum of 1 director but
no more than 7.
SECTION 6. ELECTION AND TERM. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors shall hold office
until the first annual meeting of shareholders, and until his successor shall
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have been elected and qualified or until his earlier resignation, removal from
office or death. At the first annual meeting of shareholders and at each annual
meeting thereafter the shareholders shall elect directors to hold office until
the next succeeding annual meeting. Each director shall hold office for a term
for which he is elected and until his successor shall have been elected and
qualified or until his earlier resignation, removal from office or death.
SECTION 7. VACANCIES. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
Directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
SECTION 8. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
SECTION 9. QUORUM AND VOTING. A majority of the number of directors fixed by
these by-laws shall constitute a quorum for the transaction of business. The act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
SECTION 10. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an executive committee and one or more other committees
each of which, to the extent provided in such resolution shall have and may
exercise all the authority of the Board of Directors, except as is provided by
law.
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SECTION 11. PLACE OF MEETING. Regular and special meetings of the Board of
Directors shall be held at the principal place of business of the corporation or
as otherwise determined by the Directors.
SECTION 12. TIME, NOTICE AND CALL OF MEETINGS. Regular meetings of the Board
of Directors shall be held without notice on the first Monday of the calendar
month two (2) months following the end of the corporation's fiscal, or if the
said first Monday is a legal holiday, then on the next business day. Written
notice of the time and place of special meetings of the Board of Directors shall
be given to each director by either personal delivery, telegram or cablegram at
least three (3) days before the meeting or by notice mailed to the director at
least 3 days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted at, nor the purpose, of any regular or
special meeting of the Board of Directors need be specified in the notice of
waiver of notice of such meeting. A majority of the directors present, whether
or not a quorum exists, may adjourn any meeting of the Board of Directors to
another time and place. Notice of any such adjourned meeting shall be given to
the directors who were not present at the time of the adjournment, and unless
the time and place of adjourned meeting are announced at the time of the
adjournment, to the other directors. Meetings of the Board of Directors may be
called by the chairman of the board, by the president of the corporation or by
any two directors.
Members of the Board of Directors may participate in a meeting of such board
by means of a conference telephone or similar communications equipment by means
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of which all persons participating in the meeting can hear each other at the
same time. Participation by such means shall constitute presence in person at a
meeting.
SECTION 13. ACTION WITHOUT A MEETING. Any action, required to be taken at a
meeting of the Board of Directors, or any action which may be taken at a meeting
of the Board of Directors or a committee thereof, may be taken without a meeting
if a consent in writing, setting forth the action so to be taken, is signed by
such number of the directors, or such number of the members of the committee, as
the case may be, as would constitute the requisite majority thereof for the
taking of such actions, is filed in the minutes of the proceedings of the board
or of the committee. Such actions shall then be deemed taken with the same force
and effect as though taken at a meeting of such board or committee whereat all
members were present and voting throughout and those who signed such action
shall have voted in the affirmative and all others shall have voted in the
negative. For informational purposes, a copy of such signed actions shall be
mailed to all members of the board or committee who did not sign said action,
provided however, that the failure to mail said notices shall in no way
prejudice the actions of the board or committee.
ARTICLE III. OFFICERS
---------------------
SECTION 1. OFFICERS. The officers of this corporation shall consist of a
president, a secretary and a treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers and agents as may
be deemed necessary may be elected or appointed by the Board of Directors from
time to time. Any two or more offices may be held by the same person.
SECTION 2. DUTIES. The officers of this corporation shall have the following
duties:
The President shall be the chief executive officer of the corporation, shall
have general and active management of the business and affairs of the
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corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the shareholders and Board of Directors.
The Secretary shall have custody of, and maintain, all of the corporate
records except the financial records; shall record the minutes of all meetings
of the shareholders and Board of directors, send all notices of all meetings and
perform such other duties as may be prescribed by the Board of Directors or the
President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of shareholders and whenever else
required by the Board of Directors or the President, and shall perform such
other duties as may be prescribed by the Board of Directors or the President.
SECTION 3. REMOVAL OF OFFICERS. An officer or agent elected or appointed by
the Board of Directors may be removed by the board whenever in its judgment the
best interests of the corporation will be served thereby. Any vacancy in any
office may be filled by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
------------------------------
SECTION 1. ISSUANCE. Every holder of shares in this corporation shall be
entitled to have a certificate representing all shares to which he is entitled.
No certificate shall be issued for any share until such share is fully paid.
SECTION 2. FORM. Certificates representing shares in this corporation shall
be signed by the President or Vice President and the Secretary or an Assistant
Secretary and may be sealed with the seal of this corporation or a facsimile
thereof.
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SECTION 3. TRANSFER OF STOCK. The corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. If the shareholder shall
claim to have lost or destroyed a certificate of shares issued by the
corporation, a new certificate shall be issued upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed, and, at the discretion of the Board of Directors, upon the deposit
of a bond or other indemnity in such amount and with such sureties, if any, as
the board may reasonably require.
ARTICLE V. BOOKS AND RECORDS
----------------------------
SECTION 1. BOOKS AND RECORDS. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders, Board of Directors and committee of directors.
This corporation shall keep at its registered office, or principal place of
business a record of its shareholders, giving the names and addresses of all
shareholders and the number of the shares held by each.
Any books, records and minutes may be in written form or in any other form
capable of being converted into written form within a reasonable time.
SECTION 2. SHAREHOLDERS INSPECTION RIGHTS. Any person who shall have been a
holder of record of shares of voting trust certificates therefore at least six
months immediately preceding his demand or shall be the holder of record of, or
the holder of record of voting trust certificates for, at least five percent of
the outstanding shares of the corporation, upon written demand stating the
purpose thereof, shall have the right to examine, in person or by agent or
attorney, at any reasonable time or times, for any proper purpose its relevant
books and records of accounts, minutes and records of shareholders and to make
extracts therefrom.
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SECTION 3. FINANCIAL INFORMATION. Not later than four months after the close
of each fiscal year, this corporation shall prepare a balance sheet showing in
reasonable detail the financial condition of the corporation as of the close of
its fiscal year, and a profit and loss statement showing the results of the
operations of the corporation during the fiscal year.
Upon the written request of any shareholder or holder of voting trust
certificates for shares of the corporation, the corporation shall mail to each
shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement. The balance sheets and profit
and loss statements shall be filed in the registered office of the corporation
in this state, shall be kept for at least five years, and shall be subject to
inspection during business hours by any shareholder or holder of voting trust
certificates, in person or by agent.
ARTICLE VI. DIVIDENDS
---------------------
The Board of Directors of this corporation may, from time to time, declare
and the corporation may pay dividends on its shares in cash, property or its own
shares, except when the corporation is insolvent or when the payment thereof
would render the corporation insolvent subject to the provisions of the Florida
Statutes.
ARTICLE VII. CORPORATE SEAL
---------------------------
The Board of Directors shall provide a corporate seal which shall be in
circular form.
ARTICLE VIII. AMENDMENT
-----------------------
These by-laws may be altered, amended or repealed, and new by-laws may be
adopted by the majority vote of the directors of the corporation.
9
AMENDED AND RESTATED BY-LAWS
OF
HIGH SPEED NET SOLUTIONS, INC.
ARTICLE I. SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the Shareholders of
this corporation shall be held at the time and place designated by the Board of
Directors of the corporation. The annual meeting shall be held within four (4)
months after the close of the corporation's fiscal year. The annual meeting of
Shareholders for any year shall be held no later than thirteen (13) months after
the last preceding annual meeting of Shareholders. Business transacted at the
annual meeting shall include the election of Directors of the corporation.
SECTION 2. SPECIAL MEETINGS. Special meetings of the Shareholders shall
be held when directed by the President or the Board of Directors, or when
requested in writing by the holders of not less than ten percent (10%) of all
the shares entitled to vote at the meeting. A meeting requested by Shareholders
shall be called for a date not less than ten (10) nor more than sixty (60) days
after the request is made, unless the Shareholders requesting the meeting
designate a later date. The call for the meeting shall be issued by the
Secretary, unless the President or the Board of Directors designates another
person to do so.
SECTION 3. PLACE. Meetings of Shareholders may be held within or
without the State of Florida.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, day
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called shall be delivered not less than ten
(10) nor more than sixty (60) days before the meeting, either personally or by
first class mail, by or at the direction of the President, the Secretary, or the
Officer or persons calling the meeting to each Shareholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the Shareholder at his
address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid.
SECTION 5. NOTICE OF ADJOURNED MEETINGS. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. If, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this Section to each Shareholder
of record on the new record date entitled to vote at such meeting.
<PAGE>
SECTION 6. FIXING RECORD DATE. For the purpose of determining
Shareholders entitled to notice of or to vote at any meeting of Shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of Shareholders for any other purpose, the Board
of Directors shall fix in advance a date as the record date for any
determination of Shareholders, such date in any case to be not more than seventy
days prior to the date on which the particular action requiring such
determination of Shareholders is to be taken. When a determination of
Shareholders entitled to vote at any meeting of Shareholders has been made as
provided in this Section, such determination shall apply to any adjournment
thereof, unless the Board of Directors fixes a new record date for the adjourned
meeting, which it must do if the meeting is more than 120 days after the date
fixed for the original meeting.
SECTION 7. VOTING RECORD. The Officers or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten (10)
days before each meeting of Shareholders or such shorter time as exists between
the record date and the meeting, a complete alphabetical list of the
Shareholders entitled to vote at such meeting or any adjournment thereof, with
the address of and the number and class and series, if any, of shares held by
each. The list, for a period of ten (10) days prior to such meeting or such
shorter time as exists between the record date and the meeting, shall be kept on
file at the principal place of business of the corporation or at the office of
the transfer agent or registrar of the corporation and any Shareholder, on
written demand, shall be entitled to inspect the list at any time during the
usual business hours. The list shall also be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
Shareholder at any time during the meeting.
If the requirements of this Section have not been substantially
complied with, the meeting on demand of any Shareholder in person or by proxy,
shall be adjourned until the requirements are complied with. If no such demand
is made, failure to comply with the requirements of this Section shall not
affect the validity of any action taken at such meeting.
SECTION 8. SHAREHOLDER QUORUM AND VOTING. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of Shareholders. When a specified item of business is required to
be voted on by a class or series of stock, a majority of the shares of such
class or series shall constitute a quorum for the transaction of such item of
business by that class or series.
After a quorum has been established at a Shareholders' meeting, the
subsequent withdrawal of Shareholders, so as to reduce the number of
Shareholders entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or any
adjournment thereof.
If a quorum is present, action on a matter (other than the election of
Directors) by a voting group is approved if the votes cast within the voting
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group favoring the action exceed the votes cast opposing the action, unless a
greater or lesser number of affirmative votes is required by the articles of
incorporation or by law.
Unless otherwise provided in the articles of incorporation, Directors
will be elected by a plurality of the votes cast by the shares entitled to vote
in the election at a meeting at which a quorum is present.
SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one (1) vote on each matter submitted to a vote at a
meeting of Shareholders.
Shares of stock of this corporation owned by another corporation the
majority of the voting stock of which is owned or controlled by this
corporation, shall not be voted, directly or indirectly, at any meeting, and
shall not be counted in determining the total number of outstanding shares at
any given time.
A Shareholder may vote either in person or by proxy executed in writing
by the Shareholder or his duly authorized attorney-in-fact.
At each election for Directors every Shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are Directors to be elected at
that time and for whose election he has a right to vote.
Shares standing in the name of another corporation, domestic or
foreign, may be voted by the Officer, agent, or proxy designated by the Bylaws
of the corporate Shareholder; or, in the absence of any applicable Bylaw, by
such person as the Board of Directors of the corporate Shareholder may
designate. Proof of such designation may be made by presentation of a certified
copy of the Bylaws or other instrument of the corporate Shareholder. In the
absence of any such designation, or in case of conflicting designation by the
corporate Shareholder, the Chairman of the Board, President, any Vice President,
Secretary and Treasurer of the corporate Shareholder shall be presumed to
possess, in that order, authority to vote such shares.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
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A Shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee or his nominee shall be entitled to vote the shares so
transferred.
On and after the date on which a written notice of redemption of
redeemable shares has been mailed to the holders thereof and a sum sufficient to
redeem such shares has been deposited with a bank or trust company with
irrevocable instruction and authority to pay the redemption price to the holders
thereof upon surrender of certificates therefor, such shares shall not be
entitled to vote on any matter and shall not be deemed to be outstanding shares.
SECTION 10. PROXIES. Every Shareholder entitled to vote at a meeting of
Shareholders or to express consent or dissent without a meeting or any
Shareholder's duly authorized attorney-in-fact may authorize another person or
persons to act for him by proxy.
Every proxy must be signed by the Shareholder or his attorney-in-fact.
No proxy shall be valid after the expiration of eleven months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the Shareholder executing it, except as otherwise provided by
law.
The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the Shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the corporate officer responsible
for maintaining the list of Shareholders.
If a proxy for the same shares confers authority upon two (2) or more
persons and does not otherwise provide, a majority of them present at the
meeting, or if only one (1) is present then that one, may exercise all the
powers conferred by the proxy; but if the proxy holders present at the meeting
are equally divided as to the right and manner of voting in any particular case,
the voting of such shares shall be prorated.
If a proxy expressly provides, any proxy holder may appoint in writing
a substitute to act in his place.
SECTION 11. VOTING TRUSTS. Any number of Shareholders of this
corporation may create a voting trust for the purpose of conferring upon a
trustee or trustees the right to vote or otherwise represent their shares, as
provided by law. Where the counterpart of a voting trust agreement and the copy
of the record of the holders of voting trust certificates has been deposited
with the corporation as provided by law, such documents shall be subject to the
same right of examination by a Shareholder of the corporation, in person or by
agent or attorney, as are the books and records of the corporation, and such
counterpart and such copy of such record shall be subject to examination by any
holder of record of voting trust certificates either in person or by agent or
attorney, at any reasonable time for any proper purpose.
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SECTION 12. SHAREHOLDERS' AGREEMENTS. Two (2) or more Shareholders of
this corporation may enter into an agreement or agreements providing for the
exercise of voting rights in the manner provided in the agreement(s) or relating
to any phase of the affairs of the corporation as provided by law.
SECTION 13. ACTION WITHOUT A MEETING. Any action required to be taken
at any annual or special meeting of Shareholders of the corporation or any
action which may be taken at any annual or special meeting of Shareholders, may
be taken without a meeting, without prior notice, and without a vote if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. If any class of
shares is entitled to vote thereon as a class, such written consent shall be
required of the holders of a majority of the shares of each class entitled to
vote as a class thereon and of the total shares entitled to vote thereon.
Within ten (10) days after first obtaining such authorization by
written consent, notice must be given to those Shareholders who have not
consented in writing. The notice shall fairly summarize the material features of
the authorized action and, if the action be a merger, consolidation, or sale or
exchange of assets for which dissenters' rights are provided, the notice shall
contain a clear statement of the right of Shareholders dissenting therefrom to
be paid the fair value of their shares upon compliance with the Florida Statutes
provision concerning dissenters rights of Shareholders.
ARTICLE II. DIRECTORS
SECTION 1. FUNCTION. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of a corporation shall be
managed under the direction of, the Board of Directors.
SECTION 2. QUALIFICATION. Directors must be natural persons who are
eighteen (18) years of age but need not be residents of this state or
Shareholders of this corporation.
SECTION 3. COMPENSATION. The Board of Directors shall have authority to
fix the compensation of Directors.
SECTION 4. DUTIES OF DIRECTORS. A Director shall perform his duties as
a Director, including his duties as a member of any committee of the Board upon
which he may serve, in good faith, in a manner he reasonably believes to be in
the best interests of the corporation, and with such care as an ordinarily
prudent person in a like position would use under similar circumstances.
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In performing his duties, a Director shall be entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, in each case prepared or presented by:
(a) one (1) or more Officers or employees of the corporation
whom the Director reasonably believes to be reliable and competent in the
matters presented,
(b) counsel, public accountants or other persons as to
matters which the Director reasonably believes to be within such person's
professional or expert competence, or
(c) a committee of the Board upon which he does not serve,
duly designated in accordance with a provision of the Articles of Incorporation
or the Bylaws, as to matters within its designated authority, which committee
the Director reasonably believes to merit confidence.
A Director shall not be considered to be acting in good faith if he has
actual knowledge concerning the matter in question that would cause such
reliance described above to be unwarranted.
A person who performs his duties in compliance with this Section shall
have no liability by reason of being or having been a Director of the
corporation.
SECTION 5. PRESUMPTION OF ASSENT. A Director of the corporation who is
present at a meeting of its Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless he
objects at the beginning of the meeting to holding it or transacting specified
business or he votes against such action or abstains from voting in respect
thereto.
SECTION 6. NUMBER. This corporation shall initially have one (1)
Director. The number of Directors may be increased or decreased from time to
time by amendment to these Bylaws, but no decrease shall have the effect of
shortening the terms of any incumbent Director.
SECTION 7. ELECTION AND TERM. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors shall hold office
until the first annual meeting of Shareholders, and until his successor shall
have been elected and qualified or until his earlier resignation, removal from
office or death.
At the first annual meeting of Shareholders and at each annual meeting
thereafter the Shareholders shall elect Directors to hold office until the next
succeeding annual meeting. Each Director shall hold office for the term for
which he is elected and until his successor shall have been elected and
qualified or until his earlier resignation, removal from office or death.
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SECTION 8. VACANCIES. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
Directors, may be filled by the affirmative vote of a majority of the remaining
Directors though less than a quorum of the Board of Directors. A Director
elected to fill a vacancy shall hold office only until the next election of
Directors by the Shareholders.
SECTION 9. REMOVAL OF DIRECTORS. At a meeting of Shareholders called
expressly for that purpose, any Director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of Directors.
SECTION 10. RESIGNATION OF DIRECTORS. Any Director may resign at any
time by giving written notice to the corporation, the Board of Directors, or its
chairman. The resignation of such Director shall take effect when the notice is
delivered unless the notice specifies a later effective date, in which event the
Board of Directors may fill the pending vacancy before the effective date if it
provides that the successor does note take office until the effective date.
SECTION 11. QUORUM AND VOTING. A majority of the number of Directors
fixed by these Bylaws shall constitute a quorum for the transaction of business.
The act of the majority of the Directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors.
SECTION 12. DIRECTOR CONFLICTS OF INTEREST. No contract or other
transaction between this corporation and one (1) or more of its Directors or any
other corporation, firm, association or entity in which one (1) or more of the
Directors are Directors or Officers or are financially interested, shall be
either void or voidable because of such relationship or interest or because such
Director or Directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction or because his or their votes are counted for such purpose, if:
(a) the fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested Directors; or
(b) the fact of such relationship or interest is disclosed or
known to the Shareholders entitled to vote and they authorize, approve or ratify
such contract or transaction by vote or written consent; or
(c) the contract or transaction is fair and reasonable as to
the corporation at the time it is authorized by the Board, a committee or the
Shareholders.
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Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
SECTION 13. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an executive committee and one (1) or more other
committees each of which, to the extent provided in such resolution shall have
and may exercise all the authority of the Board of Directors, except that no
committee shall have the authority to:
(a) approve or recommend to Shareholders actions or proposals
required by law to be approved by Shareholders;
(b) fill vacancies on the Board of Directors or any committee
thereof;
(c) amend the Bylaws;
(d) authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the Board of Directors; or
(e) authorize or approve the issuance or sale of, or any
contract to issue or sell, shares or designate the terms of a series of a class
of shares, except that the Board of Directors, having acted regarding general
authorization for the issuance or sale of shares, or any contract therefor, and,
in the case of a series, the designation thereof, may, pursuant to a general
formula or method specified by the Board of Directors, by resolution or by
adoption of a stock option or other plan, authorize a committee to fix the terms
of any contract for the sale of the shares and to fix the terms upon which such
shares may be issued or sold, including, without limitation, the price, the rate
or manner of payment of dividends, provisions for redemption, sinking fund,
conversion, voting or preferential rights, and provisions for other features of
a class of shares, or a series of a class of shares, with full power in such
committee to adopt any final resolution setting forth all the terms thereof and
to authorize the statement of the terms of a series for filing with the
Department of State.
The Board of Directors, by resolution adopted in accordance with this
Section, may designate one (1) or more Directors as alternate members of any
such committee, who may act in the place and stead of any absent member or
members at any meeting of such committee.
SECTION 14. PLACE OF MEETINGS. Regular and special meetings by the
Board of Directors may be held within or without the State of Florida.
SECTION 15. TIME, NOTICE AND CALL OF MEETINGS. Regular meetings of the
Board of Directors shall be held without notice immediately following the annual
meeting of Shareholders. Written notice of the time and place of special
meetings of the Board of Directors shall be given to each Director by either
personal delivery, telegram, telex or cable at least two (2) days before the
meeting or by notice mailed to the Director at least five days before the
meeting.
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Notice of a meeting of the Board of Directors need not be given to any
Director who signs a waiver of notice either before or after the meeting.
Attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a Director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted at nor the purpose of any regular
or special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
A majority of the Directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of any such adjourned meeting shall be given to the Directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
Directors.
Meetings of the Board of Directors may be called by the Chairman of the
Board, by the President of the corporation, or by any two (2) Directors.
Members of the Board of Directors may participate in a meeting of such
Board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
SECTION 16. ACTION WITHOUT A MEETING. Any action required to be taken
at a meeting of the Directors of a corporation, or any action which may be taken
at a meeting of the Directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, signed
by all of the Directors, or all the members of the committee, as the case may
be, is filed in the minutes of the proceedings of the Board or of the committee.
Such consent may: (a) be signed in counterparts, (b) may have faxed signatures,
copies of which shall be effective when received by the Corporation and (c)
shall have the same effect as a unanimous vote.
ARTICLE III. OFFICERS
SECTION 1. OFFICERS. The Officers of this corporation shall consist of
a President and a Secretary, each of whom shall be elected by the Board of
Directors. Such other Officers and Assistant Officers and agents as may be
deemed necessary may be elected or appointed by the Board of Directors from time
to time. Any two (2) or more offices may be held by the same person.
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SECTION 2. DUTIES. The Officers of this corporation shall have the
following duties:
The President shall be the chief executive officer of the corporation,
and shall have general management of the business and affairs of the
corporation, subject to the direction of the Board of Directors.
The Secretary shall have custody of, and maintain, all of the corporate
records except the financial records; shall record the minutes of all meetings
of the Shareholders and Board of Directors, send all notices of meetings out,
and perform such other duties as may be prescribed by the Board of Directors or
the President.
SECTION 3. REMOVAL OF OFFICERS. Any Officer or agent elected or
appointed by the Board of Directors may be removed by the Board, with or without
cause, whenever in its judgment the best interests of the corporation will be
served thereby. In addition, any Officer or assistant Officer appointed by
another Officer may also be removed by such Officer.
Any vacancy, however occurring, in any office may be filled by the
Board of Directors, unless the Bylaws shall have expressly reserved such power
to the Shareholders.
Removal of any Officer shall be without prejudice to the contract
rights, if any, of the person so removed; however, election or appointment of an
Officer or agent shall not of itself create contract rights.
SECTION 4. COMPENSATION. The compensation of the President and
Secretary, and such other Officers elected or appointed by the Board of
Directors, shall be fixed by the Board of Directors and may be changed from time
to time by a majority vote of the Board. The fact that an Officer is also a
Director shall not preclude such person from receiving compensation as either a
Director or Officer, nor shall it affect the validity of any resolution by the
Board of Directors fixing such compensation. The President shall have authority
to fix the salaries of all employees of the corporation other than Officers
elected or appointed by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
SECTION 1. ISSUANCE. Every holder of shares in this corporation shall
be entitled to have a certificate, representing all shares to which he is
entitled. No certificate shall be issued for any share until such share is fully
paid.
SECTION 2. FORM. Certificates representing shares in this corporation
shall be signed by the President or Vice President and/or the Secretary or an
Assistant Secretary and may be sealed with the seal of this corporation or a
facsimile thereof. The signatures of the President or Vice President and/or the
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Secretary or Assistant Secretary may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or a registrar, other than the
corporation itself or an employee of the corporation. In case any Officer who
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such Officer before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such Officer at the
date of its issuance.
Every certificate representing shares which are restricted as to the
sale, disposition or other transfer of such shares shall state that such shares
are restricted as to transfer and shall set forth or fairly summarize upon the
certificate, or shall state that the corporation will furnish to any Shareholder
upon request and without charge a full statement of, such restrictions.
Each certificate representing shares shall state upon the face thereof:
the name of the corporation; that the corporation is organized under the laws of
this state; the name of the person or persons to whom issued; the number and
class of shares, and the designation of the series, if any, which such
certificate represents.
SECTION 3. TRANSFER OF STOCK. The corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney.
SECTION 4. LOST, STOLEN, OR DESTROYED CERTIFICATES. The corporation
shall issue a new stock certificate in the place of any certificate previously
issued if the holder of record of the certificate (a) makes proof in affidavit
form that it has been lost, destroyed or wrongfully taken; (b) requests the
issue of a new certificate before the corporation has notice that the
certificate has been acquired by a purchaser for value in good faith and without
notice of any adverse claim; and (c) satisfies any other reasonable requirements
imposed by the corporation, including bond in such form as the corporation may
direct, to indemnify the corporation, the transfer agent, and registrar against
any claim that may be made on account of the alleged loss, destruction or theft
of a certificate.
ARTICLE V. BOOKS AND RECORDS
SECTION 1. BOOKS AND RECORDS. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its Shareholders, Board of Directors and committees of Directors.
This corporation shall keep at its registered office or principal place
of business, or at the office of its transfer agent or registrar, an
alphabetical listing of its Shareholders, giving the names and addresses of all
Shareholders, and the number, class and series, if any, of the shares held by
each.
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The Shareholders shall have the right to inspect the books and records
of the corporation provided under the Florida Business Corporation Act.
The corporation's annual financial statements shall be mailed to each
shareholder of the corporation within 120 days of the close of the corporation's
fiscal year.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
ARTICLE VI. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation.
ARTICLE VII. INDEMNIFICATION
SECTION 1. CERTAIN DEFINITIONS. For the purposes of this Section,
certain terms and phrases used herein shall have the meanings set forth below:
(a) The term "enterprise" shall include, but not be limited
to, any employee benefit plan.
(b) An "executive" shall mean any person, including a
volunteer, who is or was a Director or Officer of the Corporation or who is or
was serving at the request of the corporation as a Director or Officer of
another corporation, limited liability company, partnership, joint venture,
trust or other enterprise.
(c) The term "expenses" shall include, but not be limited to,
all costs and expenses (including attorneys' fees and paralegal expenses) paid
or incurred by an executive, in, for or related to a proceeding or in connection
with investigating, preparing to defend, defending, being a witness in or
participating in a proceeding, including such costs and expenses incurred on
appeal. Such attorneys' fees shall include, but not be limited to (a) attorneys'
fees incurred by an executive in any and all judicial or administrative
proceedings, including appellate proceedings, arising out of or related to a
proceeding; (b) attorneys' fees incurred in order to interpret, analyze or
evaluate that person's rights and remedies in a proceeding or under any
contracts or obligations which are the subject of such proceeding; and (c)
attorneys' fees to negotiate with counsel with any claimants, regardless of
whether formal legal action is taken against him.
(d) The term "liability" shall include, but not be limited to,
the obligation to pay a judgment, settlement, penalty or fine (including an
excise tax assessed with respect to any employee benefit plan), and expenses
actually and reasonably incurred with respect to a proceeding.
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(e) The term "proceeding" shall include, but not be limited
to, any threatened, pending or completed action, suit or other type of
proceeding, whether civil, criminal, administrative or investigative and whether
formal or informal, including, but not limited to, an action by or in the right
of any corporation of any type or kind, domestic or foreign, or of any
partnership, joint venture, trust, employee benefit plan or other enterprise,
whether predicated on foreign, federal, state or local law, to which an
executive is a party by reason of the fact that he is or was or has agreed to
become a Director or Officer of the corporation or is now or was serving at the
request of the corporation as a Director or Officer of another corporation,
partnership, joint venture, trust or other enterprise.
(f) The phrase "serving at the request of the corporation"
shall include, but not be limited to, any service as a Director or Officer of
the corporation that imposes duties on such person, including duties related to
an employee benefit plan and its participants or beneficiaries.
(g) The phrase "not opposed to the best interests of the
corporation" describes the actions of a person who acts in good faith and in a
manner which he reasonably believes to be in the best interests of the
corporation or the participants and beneficiaries of an employee benefit plan.
SECTION 2. PRIMARY INDEMNIFICATION. The corporation shall indemnify to
the fullest extent permitted by law, and shall advance expenses therefor, to any
executive who was or is a party to a proceeding against any liability incurred
in such proceeding, including any appeal thereof, unless a court of competent
jurisdiction establishes by non-appealable judgment or adjudication that his
actions, or omissions to act, were material to the cause of action so
adjudicated and constitute: (a) a violation of the criminal law, unless the
executive had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful; (b) a transaction from
which the executive derived an improper personal benefit; (c) in a case of
Director, a circumstance under which the liability provisions of Section
607.0834; Florida Statutes, or any successor provision, are applicable; or (d)
willful misconduct or conscious disregard for the best interests of the
corporation in a proceeding by or in the right of the corporation to procure a
judgment in its favor or in a proceeding by or in the right of a shareholder.
Notwithstanding the failure to satisfy conditions (a) through (d) of this
Section, the corporation shall nevertheless indemnify an executive pursuant to
Sections 4 or 5 hereof unless a determination is reasonably and promptly made
pursuant to Section 3 hereof that the executive did not meet the applicable
standard of conduct set forth in Sections 4 or 5.
SECTION 3. DETERMINATION OF RIGHT OF INDEMNIFICATION IN CERTAIN CASES.
Any indemnification under Sections 4 or 5 hereof (unless ordered by a court)
shall be made by the corporation unless a determination is reasonably and
promptly made that the executive did not meet the applicable standard of conduct
set forth in Sections 4 or 5. Such determination shall be made by: (a) the Board
of Directors by a majority vote of a quorum consisting of Directors who were not
parties to such proceeding; (b) if such a quorum is not obtainable or, even if
obtainable, by majority vote of a committee duly designated by the Board of
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Directors (in which Directors who are parties may participate) consisting solely
of two (2) or more Directors not at the time parties to the proceeding; (c) by
independent counsel (i) selected by the Board of Directors prescribed in
subparagraph (a) or the committee prescribed in subparagraph (b), or (ii) if a
quorum of the Directors cannot be obtained under subparagraph (a), and the
committee cannot be designated under subparagraph (b), selected by majority vote
of the full Board of Directors (in which Directors who are parties may
participate); or (d) by the shareholders by a majority vote of a quorum
consisting of shareholders who are not parties to such proceeding, or if no such
quorum is attainable, by a majority vote of the shareholders who were not
parties to such proceeding. If the determination of the permissibility of
indemnification is made by independent legal counsel as set forth in
subparagraph (c) above, the other persons specified in this Section 3 shall
evaluate the reasonableness of expenses.
SECTION 4. PROCEEDING OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
The corporation shall indemnify any executive who was or is a party to any
proceeding (other than an action by, or in the right of, the corporation)
against liability in connection with such proceeding, including any appeal
thereof, if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the corporation and, with respect
to any criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any proceeding by judgment, order, settlement or
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in, or not opposed to, the best
interests of the corporation or, with respect to any criminal proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 5. PROCEEDING BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any executive who was or is a party to any
proceeding by or in the right of the corporation to procure a judgment in its
favor against expenses and amounts paid in settlement not exceeding, in the
judgment of the Board of Directors, the estimated expense of litigating the
proceeding to conclusion, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof, if
such person acted in good faith and in manner which he reasonably believed to be
in, or not opposed to, the best interests of the corporation, except that no
indemnification shall be made under this Section 5 in respect to any claim,
issue or matter as to which such person shall have been adjudged to be liable
unless, and only to the extent that, the court in which such proceeding was
brought, or any other court of competent jurisdiction, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
SECTION 6. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Section, to the extent that an
executive is successful on the merits or otherwise, including the dismissal of
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an action without prejudice or the settlement of an action without admission of
liability, in defense of any proceeding or in defense of any claim, issue or
matter therein, the corporation shall indemnify such executive against all
expenses incurred in connection with such defense.
SECTION 7. ADVANCEMENT OF EXPENSES. Notwithstanding anything in the
corporation's articles of incorporation, these bylaws or any agreement to the
contrary, if so requested by an executive, the corporation shall advance (within
two (2) business days of such request) any and all expenses relating to a
proceeding (an "expense advance"), upon the receipt of a written undertaking by
or on behalf of such person to repay such expense advance if a judgment or other
final adjudication adverse to such person (as to which all rights of appeal have
been exhausted or lapsed) establishes that he, with respect to such proceeding,
is not eligible for indemnification under the provisions of this Section.
Expenses incurred by other employees or agents of the corporation may be paid in
advance upon such terms and conditions as the Board of Directors deems
appropriate.
SECTION 8. RIGHT OF EXECUTIVE TO INDEMNIFICATION UPON APPLICATION;
PROCEDURES UPON APPLICATION. Any indemnification or advancement of expenses
under this Section shall be made promptly upon the written request of the
executive, unless, with respect to a request under Section 4 or 5, a
determination is reasonably and promptly made under Section 3 that such
executive did not meet the applicable standard of conduct set forth in Section 4
or 5. The right to indemnification or advances as granted by this Section shall
be enforceable by the executive in any court of competent jurisdiction, if the
claim is improperly denied, in whole or in part, or if no disposition of such
claim is made promptly. The executive's expenses incurred in connection with
successfully establishing his right to indemnification or advancement of
expenses, in whole or in part, under this Section shall also be indemnified by
the corporation.
SECTION 9. COURT ORDERED INDEMNIFICATION. Notwithstanding the failure
of the corporation to provide indemnification due to a failure to satisfy the
conditions of Section 2, and despite any contrary determination by the
corporation in the specific case under Sections 4 or 5, an executive of the
corporation who is or was a party to a proceeding may apply for indemnification
or advancement of expenses, or both, to the court conducting the proceeding, to
the circuit court, or to another court of competent jurisdiction, and such court
may order indemnification and advancement of expenses, including expenses
incurred in seeking court ordered indemnification or advancement of expenses, if
the court determines that:
(a) The executive is entitled to indemnification or
advancement of expenses, or both, under this Section; or
(b) The executive is fairly and reasonably entitled to
indemnification or advancement of expenses, or both, in view of all the
relevant circumstances, regardless of whether such person met any
applicable standards of conduct set forth in this Section.
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SECTION 10. PARTIAL INDEMNITY, ETC. If an executive is entitled under
any provisions of this Bylaw to indemnification by the corporation for some or a
portion of the expenses, judgments, fines, penalties, excise taxes and amounts
paid or to be paid in settlement of a proceeding, but not, however, for all of
the total amount therefor, the corporation shall nevertheless indemnify such
person for the portion thereof to which he is entitled. In connection with any
determination by the Board of Directors or arbitration that an executive is not
entitled to be indemnified hereunder, the burden shall be on the corporation to
establish that he is not so entitled.
SECTION 11. OTHER RIGHTS AND REMEDIES. Indemnification and advancement
of expenses provided by this Section: (a) shall not be deemed exclusive of any
other rights to which an executive seeking indemnification may be entitled under
any statute, Bylaw, agreement, vote of shareholders or disinterested Directors
or otherwise, both as to action in his official capacity and as to action in any
other capacity while holding such office; (b) shall continue as to a person who
has ceased to be an executive; and (c) shall inure to the benefit of the heirs,
executors and administrators of such a person. It is the intent of this Bylaw to
provide the maximum indemnification possible under applicable law. To the extent
applicable law or the articles of incorporation of the corporation, as in effect
on the date hereof or at any time in the future, permit greater indemnification
than is provided for in this Bylaw, the executive shall enjoy by this Bylaw the
greater benefits so afforded by such law or provision of the articles of
incorporation, and this bylaw and the exceptions to indemnification set forth
herein, to the extent applicable, shall be deemed amended without any further
action by the corporation to grant such greater benefits. All rights to
indemnification under this Section shall be deemed to be provided by a contract
between the corporation and the executive who serves in such capacity at any
time while these Bylaws and other relevant provisions of the Florida Business
Corporation Act and other applicable law, if any, are in effect. Any repeal or
modification thereof shall not affect any rights or obligations then existing.
SECTION 12. INSURANCE. By resolution passed by the Board of Directors,
the corporation may purchase and maintain insurance on behalf of any person who
is or was an executive against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether or
not the corporation would have the power to indemnify him against such liability
under this Section.
SECTION 13. CERTAIN REDUCTIONS IN INDEMNITY. The corporation's
indemnification of any executive shall be reduced by any amounts which such
person may collect as indemnification:(a) under any policy of insurance
purchased and maintained on his behalf by the corporation, or (b) from any other
corporation, partnership, joint venture, trust or other enterprise for whom the
executive has served at the request of the corporation.
SECTION 14. NOTIFICATION TO SHAREHOLDERS. If any expenses or other
amounts are paid by way of indemnification other than by court order or action
by the shareholders or by an insurance carrier pursuant to insurance maintained
by the corporation, the corporation shall, not later than the time of delivery
to the shareholders of written notice of the next annual meeting of
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shareholders, unless such meeting is held within 3 months from the date of such
payment, and, in any event, within 15 months from the date of such payment,
deliver either personally or by mail to each shareholder of record at the time
entitled to vote for the election of Directors a statement specifying the
persons paid, the amounts paid, and the nature and status at the time of such
payment of the litigation or threatened litigation.
SECTION 15. CONSTITUENT CORPORATIONS. For the purposes of this Section,
references to the "corporation" shall include, in addition to any resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any executive of
such a constituent corporation shall stand in the same position under the
provisions of this Section with respect to the resulting or surviving
corporation as he would if its separate existence had contained.
SECTION 16. SAVINGS CLAUSE. If this Section or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each executive as to liability with
respect to any proceeding, whether internal or external, including a grand jury
proceeding or an action or suit brought by or in the right of the corporation,
to the full extent permitted by any applicable portion of this Section that
shall not have been invalidated, or by any applicable provision of Florida law.
SECTION 17. EFFECTIVE DATE. The provisions of this Section shall be
applicable to all proceedings commenced after the adoption hereof, whether
arising from acts or omissions occurring before or after its adoption.
ARTICLE VIII. AMENDMENT
These Bylaws may be repealed or amended, and new Bylaws may be adopted,
by either the Board of Directors or the Shareholders, but the Board of Directors
may not amend or repeal any Bylaw adopted by Shareholders if the Shareholders
specifically provide such Bylaw not subject to amendment or repeal by the
Directors.
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
---------------------------
CUSIP No. 429793 10 2
---------------------------
HIGH SPEED NET
SOLUTIONS, INC.
AUTHORIZED COMMON STOCK: 50,000,000 SHARES
PAR VALUE: $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
-- Shares of HIGH SPEED NET SOLUTIONS, INC. common stock --
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ Michael M. Cimino /s/ Michael M. Cimino
-------------------------- --------------------------------
SECRETARY PRESIDENT
INTERWEST TRANSFER CO. INC. COUNTERSIGNED & REGISTERED
P.O. Box 17136
Salt Lake City, UTAH 84117 ------------------------------------
COUNTERSIGNED Transfer Agent-
Authorized Signature
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a saving
bank), or a trust company. The following abbreviations, when used in
the inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or
regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT --
Custodian
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with signs of under Uniform Gifts to
ownership and not as tenants in common Minor's Act (State)
Additional abbreviations may also be used though not in the above
list.
For Value Received, _______________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
------------------------------------
| |
------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _____________________________
-----------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER
HIGH SPEED NET SOLUTIONS, INC.
2000 EQUITY COMPENSATION PLAN
ARTICLE I - GENERAL PROVISIONS
1.1 The Plan is designed for the benefit of the Company to secure and
retain the services of Eligible Participants. The Board believes the Plan will
promote and increase personal interests in the welfare of the Company by, and
provide incentive to, those who are primarily responsible not only for its
regular operations but also for shaping and carrying out the long-range plans of
the Company and ordering its continued growth and financial success.
1.2 Awards under the Plan may be made to Participants in the form of
(i) Incentive Stock Options; (ii) Nonqualified Stock Options; (iii) Stock
Appreciation Rights; (iv) Restricted Stock; (v) Deferred Stock; (vi) Stock
Awards; (vii) Performance Shares; and (viii) Other Stock-Based Awards and other
forms of equity-based compensation as may be provided and are permissible.
1.3 The Plan shall be effective January 31st, 2000 (the "Effective
Date"). Notwithstanding any other provision of this Plan, any Award granted to a
Participant prior to approval of the shareholders of the Company at the
Company's 2000 Annual Meeting shall be conditioned upon and subject to such
approval.
ARTICLE II - DEFINITIONS
Except where the context otherwise indicates, the following definitions
apply:
2.1 "Act" means the Securities Exchange Act of 1934, as now in effect
or as hereafter amended. All citations to sections of the Act or rules
thereunder are to such sections or rules as they may from time to time be
amended or renumbered.
2.2 "Agreement" means the written agreement between the Company and the
Participant evidencing each Award granted to a Participant under the Plan.
2.3 "Award" means an award granted to a Participant under the Plan of a
Stock Option, Stock Appreciation Rights or of Restricted Stock, Deferred Stock,
Stock Awards, Performance Shares, Other Stock-Based Awards or of any combination
of the foregoing.
2.4 "Board" means the Board of Directors of High Speed Net Solutions,
Inc.
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2.5 "Code" means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended. All citations to sections of the Code are to such sections
as they may from time to time be amended or renumbered.
2.6 "Committee" means the Compensation Committee of the Board or such
other committee consisting of two or more members as may be appointed by the
Board to administer this Plan pursuant to Article III.
2.7 "Company" means High Speed Net Solutions, Inc., a Florida
corporation, and its successors and assigns. The term "Company" shall include
any company during any period that it is a "parent corporation" or a "subsidiary
corporation" of the Company within the meaning of Code section 424(d). With
respect to all purposes of the Plan, including, but not limited to, the
establishment, amendment, termination, operation and administration of the Plan,
High Speed Net Solutions, Inc. shall be authorized to act on behalf of all other
entities included within the definition of "Company."
2.8 "Deferred Stock" means the stock awarded under Article IX of the
Plan.
2.9 "Disability," with respect to any Incentive Stock Option, means
disability as determined under section 22(e)(3) of the Code, and, with respect
to any other Award, means (i) with respect to a Participant who is eligible to
participate in the Company's program of long-term disability insurance, if any,
a condition with respect to which the Participant is entitled to commence
benefits under such program of long-term disability insurance, and (ii) with
respect to any Participant (including a Participant who is eligible to
participate in the Company's program of long-term disability insurance, if any),
a disability as determined under procedures established by the Committee or in
any Award.
2.10 "Eligible Participant" means an active full-time employee of the
Company (including officers), as shall be determined by the Committee, as well
as any other person, including members of the Board and consultants who provide
services to the Company, subject to limitations as may be provided by the Code,
the Act or the Committee, as shall be determined by the Committee.
2.11 "Fair Market Value" means the fair market value of a share of
Stock, as determined in good faith by the Committee; provided, however, that
(a) if the Stock is listed on a national securities exchange,
Fair Market Value on a date shall be the closing sale price reported
for the Stock on such exchange on such date if at least 100 shares of
Stock were sold on such date or, if fewer than 100 shares of stock were
sold on such date, then Fair Market Value on such date shall be the
closing sale price reported for the Stock on such exchange on the last
prior date on which at least 100 shares were sold, all as reported in
THE WALL STREET JOURNAL or such other source as the Committee deems
reliable; and
2
<PAGE>
(b) if the Stock is not listed on a national securities
exchange but is admitted to quotation on the National Association of
Securities Dealers Automated Quotation System or other comparable
quotation system, Fair Market Value on a date shall be the last sale
price reported for the Stock on such system on such date if at least
100 shares of Stock were sold on such date or, if fewer than 100 shares
of Stock were sold on such date, then Fair Market Value on such date
shall be the average of the high bid and low asked prices reported for
the Stock on such system on such date or, if no shares of Stock were
sold on such date, then Fair Market Value on such date shall be the
last sale price reported for the Stock on such system on the last date
on which at least 100 shares of Stock were sold, all as reported in THE
WALL STREET JOURNAL or such other source as the Committee deems
reliable; and
(c) If the Stock is not traded on a national securities
exchange or reported by a national quotation system, if any
broker-dealer makes a market for the Stock, then the Fair Market Value
of the Stock on a date shall be the average of the highest and lowest
quoted selling prices of the Stock in such market on such date if at
least 100 shares of Stock were sold on such date or, if fewer than 100
shares of Stock were sold on such date, then Fair Market Value on such
date shall be the average of the high bid and low asked prices for the
Stock in such market on such date or, if no prices are quoted on such
date, then Fair Market Value on such date shall be the average of the
highest and lowest quoted selling prices of the Stock in such market on
the last date on which at least 100 shares of Stock were sold.
2.12 Incentive Stock Option" means a Stock Option granted to an
Eligible Participant under Article IV of the Plan.
2.13 "Nonqualified Stock Option" means a Stock Option granted to an
Eligible Participant under Article V of the Plan.
2.14 "Nontandem Stock Appreciation Right" means any Stock Appreciation
Right granted pursuant to Article VI of the Plan in a manner not related to a
grant of a Stock Option.
2.15 "Option Grant Date" means, as to any Stock Option, the latest of:
(a) the date on which the Committee takes action to grant the
Stock Option to the Participant;
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<PAGE>
(b) the date the Participant receiving the Stock Option becomes
an employee of the Company, to the extent employment status is a
condition of the grant or a requirement of the Code or the Act; or
(c) such other date (later than the dates described in (a) and
(b) above) as the Committee may designate.
2.16 "Participant" means an Eligible Participant to whom an Award has
been granted and who has entered into an Agreement evidencing the Award.
2.17 "Performance Shares" means shares of Stock that are subject to an
Award pursuant to Article XI of the Plan.
2.18 "Plan" means the High Speed Net Solutions, Inc. 1999 Equity
Compensation Plan, as amended from time to time.
2.19 "Restricted Stock" means an Award of Stock under Article VIII of
the Plan, which Stock is issued with the restriction that the holder may not
sell, transfer, pledge, or assign such Stock and with such other restrictions as
the Committee, in its sole discretion, may impose, including without limitation,
any restriction on the right to vote such Stock, and the right to receive any
cash dividends, which restrictions may lapse separately or in combination at
such time or times, in installments or otherwise, as the Committee may deem
appropriate.
2.20 "Restriction Period" means the period commencing on the date an
Award of Restricted Stock is granted and ending on such date as the Committee
shall determine.
2.21 "Retirement" means retirement from active employment with the
Company, as determined by the Committee.
2.22 "Stock" means the common stock of High Speed Net Solutions,
Inc., as may be adjusted pursuant to the provisions of Plan Section 3.10.
2.23 "Stock Appreciation Right" means a Stock Right, as described in
Article VI of this Plan, which provides for an amount payable in Stock and/or
cash, as determined by the Committee, equal to the excess of the Fair Market
Value of a share of Stock on the day the Stock Right is exercised over the price
at which the Participant could exercise a related Stock Option to purchase the
share of Stock.
2.24 "Stock Appreciation Right Fair Market Value" means a value
established by the Committee for the exercise of a Stock Appreciation Right or a
Limited Stock Appreciation Right.
2.25 "Stock Award" means an Award of Stock granted in payment of
compensation, as provided in Article X of the Plan.
4
<PAGE>
2.26 "Stock Option" means an Incentive Stock Option or a Nonqualified
Stock Option. Stock Options granted under the Plan shall be designated as either
Incentive Stock Options or Nonqualified Stock Options, and in the absence of
such designation shall be treated as Nonqualified Stock Options.
2.27 "Stock Right" means an Award under Article VI of the Plan. A
Stock Right may be either a Tandem Stock Appreciation Right or a Nontandem Stock
Appreciation Right.
2.28 "Tandem Stock Appreciation Right" means any Stock Appreciation
Right granted pursuant to Article VI of the Plan in conjunction with all or part
of any Stock Option granted under the Plan pursuant to a Stock Option agreement
which states that the Participant may, in lieu of exercising the Stock Option,
surrender the Stock Option and receive shares of Stock equal in value to the
Stock Appreciation Right.
2.29 "Termination of Employment" means the discontinuance of employment
of a Participant with the Company for any reason or, if the Participant is a
non-employee member of the Board, the termination of the Participant's
directorship, or, if the Participant is a consultant to the Company, the
termination of the Participant's relationship as a consultant. The determination
of whether a Participant has incurred a Termination of Employment shall be made
by the Committee in its discretion. In determining whether a Termination of
Employment has occurred, the Committee may provide that service as a consultant
or service with a business enterprise in which the Company has a significant
ownership interest shall be treated as employment with the Company. With respect
to any Incentive Stock Option, employment shall be interpreted in a manner
consistent with section 422 of the Code. A Participant shall not be deemed to
have incurred a Termination of Employment if the Participant is on military
leave, sick leave, or other bona fide leave of absence approved by the Company
of 90 days or fewer (or any longer period during which the Participant is
guaranteed reemployment by statute or contract.) In the event a Participant's
leave of absence exceeds this period, he will be deemed to have incurred a
Termination of Employment on the day following the expiration date of such
period.
ARTICLE III - ADMINISTRATION
3.1 This Plan shall be administered by the Committee. The Committee, in
its discretion, may delegate to one or more of its members such of its powers as
it deems appropriate. The Committee also may limit the power of any member to
the extent necessary to comply with rule 16b-3 under the Act, Code section
162(m) or any other law or for any other purpose. Members of the Committee shall
be appointed originally, and as vacancies occur, by the Board, to serve at the
pleasure of the Board. The Board may serve as the Committee, if by the terms of
the Plan all Board members are otherwise eligible to serve on the Committee.
5
<PAGE>
3.2 The Committee shall meet at such times and places as it determines.
A majority of its members shall constitute a quorum, and the decision of a
majority of those present at any meeting at which a quorum is present shall
constitute the decision of the Committee. A memorandum signed by all of its
members shall constitute the decision of the Committee without necessity, in
such event, for holding an actual meeting.
3.3 The Committee shall have the exclusive right to interpret, construe
and administer the Plan, to select the persons who are eligible to receive an
Award, and to act in all matters pertaining to the granting of an Award and the
contents of the Agreement evidencing the Award, including without limitation,
the determination of the number of Stock Options, Stock Rights, shares of Stock
or Performance Shares subject to an Award and the form, terms, conditions and
duration of each Award, and any amendment thereof consistent with the provisions
of the Plan. All acts, determinations and decisions of the Committee made or
taken pursuant to grants of authority under the Plan or with respect to any
questions arising in connection with the administration and interpretation of
the Plan, including the severability of any and all of the provisions thereof,
shall be conclusive, final and binding upon all Participants, Eligible
Participants and their estates and beneficiaries.
3.4 The Committee may adopt such rules, regulations and procedures of
general application for the administration of this Plan, as it deems
appropriate.
3.5 Subject to adjustment as provided in Plan Section 3.10, the
aggregate number of shares of Stock which are available for issuance pursuant to
Awards under the Plan shall be Two Million (2,000,000) shares of Stock. Such
shares of Stock shall be made available from authorized and unissued shares. If,
for any reason, any shares of Stock awarded or subject to purchase under the
Plan are not delivered or purchased, or are reacquired by the Company, for
reasons including, but not limited to, a forfeiture of Restricted Stock or
termination, expiration or cancellation of a Stock Option, such shares of Stock
shall not be charged against the aggregate number of shares of Stock available
for issuance pursuant to Awards under the Plan and shall again be available for
issuance pursuant to Award under the Plan. If the exercise price and/or
withholding obligation under a Stock Option is satisfied by tendering shares of
Stock to the Company (either by actual delivery or attestation), only the number
of shares of Stock issued net of the share of Stock so tendered shall be deemed
delivered for purposes of determining the maximum number of shares of Stock
available for issuance under the Plan.
3.6 Each Award granted under the Plan shall be evidenced by a written
Award Agreement. Each Award Agreement shall be subject to and incorporate, by
reference or otherwise, the applicable terms and conditions of the Plan, and any
other terms and conditions, not inconsistent with the Plan, as may be imposed by
the Committee.
3.7 The Company shall not be required to issue or deliver any
certificates for shares of Stock prior to:
6
<PAGE>
(a) the listing of such shares on any stock exchange on which
the Stock may then be listed; and
(b) the completion of any registration or qualification of
such shares of Stock under any federal or state law, or any ruling or
regulation of any government body which the Company shall, in its
discretion, determine to be necessary or advisable.
The Company will from time to time, as is necessary to accomplish the purposes
of this Plan, seek to obtain from any regulatory agency having jurisdiction any
requisite authority in order to issue and sell shares of Stock hereunder. The
inability of the Company to obtain from any regulatory agency having
jurisdiction the authority deemed by the Company's counsel to be necessary to
the lawful issuance and sale of any shares of the Stock hereunder shall relieve
the Company of any liability in respect of the nonissuance or sale of the Stock
as to which the requisite authority shall not have been obtained.
3.8 All certificates for shares of Stock delivered under the Plan shall
also be subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed and any applicable federal or state laws, and the
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions. In making such determination,
the Committee may rely upon an opinion of counsel for the Company.
3.9 Subject to the restrictions on Restricted Stock, as provided in
Article VIII of the Plan and in the Restricted Stock Award Agreement, each
Participant who receives an Award of Restricted Stock shall have all of the
rights of a shareholder with respect to such shares of Stock, including the
right to vote the shares to the extent, if any, such shares possess voting
rights and receive dividends and other distributions. Except as provided
otherwise in the Plan or in an Award Agreement, no Participant awarded a Stock
Option, Stock Right, Deferred Stock, Stock Award or Performance Share shall have
any right as a shareholder with respect to any shares of Stock covered by his or
her Stock Option, Stock Right, Deferred Stock, Stock Award or Performance Share
prior to the date of issuance to him or her of a certificate or certificates for
such shares of Stock.
3.10 If any reorganization, recapitalization, reclassification, stock
split, stock dividend, or consolidation of shares of Stock, merger or
consolidation or separation, including a spin-off, of the Company or sale or
other disposition by the Company of all or a portion of its assets, any other
change in the Company's corporate structure, or any distribution to shareholders
other than a cash dividend results in the outstanding shares of Stock, or any
securities exchanged therefor or received in their place, being exchanged for a
7
<PAGE>
different number or class of shares of Stock or other securities of the Company,
or for shares of Stock or other securities of any other corporation; or new,
different or additional shares or other securities of the Company or of any
other corporation being received by the holders of outstanding shares of Stock,
then the Committee may make equitable adjustments in:
(a) the limitation on the aggregate number of shares of Stock
that may be awarded as set forth in Plan Section 3.5;
(b) the number of shares and class of Stock that may be
subject to an Award, and which have not been issued or transferred
under an outstanding Award;
(c) the purchase price to be paid per share of Stock under
outstanding Stock Options; and
(d) the terms, conditions or restrictions of any Award
and Award Agreement, including the price payable for the acquisition of
Stock;
provided, however, that all adjustments made as the result of the foregoing in
respect of each Incentive Stock Option shall be made so that such Stock Option
shall continue to be an incentive stock option within the meaning of Code
section 422, unless the Committee takes affirmative action to treat such Stock
Option instead as a Nonqualified Stock Option.
3.11 In addition to such other rights of indemnification as they may
have as directors or as members of the Committee, the members of the Committee
shall be indemnified by the Company against reasonable expenses, including
attorney's fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Award
granted thereunder, and against all amounts paid by them in settlement thereof,
provided such settlement is approved by independent legal counsel selected by
the Company, or paid by them in satisfaction of a judgment or settlement in any
such action, suit or proceeding, except as to matters as to which the Committee
member has been negligent or engaged in misconduct in the performance of his
duties; provided, that within 60 days after institution of any such action, suit
or proceeding, a Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
3.12 The Committee may require each person purchasing shares of Stock
pursuant to a Stock Option or other Award under the Plan to represent to and
agree with the Company in writing that he is acquiring the shares of Stock
without a view to distribution thereof. The certificates for such shares of
Stock may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer.
3.13 The Committee shall be authorized to make adjustments in
performance based criteria or in the terms and conditions of other Awards in
recognition of unusual or nonrecurring events affecting the Company or its
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financial statements or changes in applicable laws, regulations or accounting
principles. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award Agreement in the manner and
to the extent it shall deem desirable to carry it into effect. In the event the
Company shall assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the acquisition of
another corporation or business entity, the Committee may, in its discretion,
make such adjustments in the terms of Awards under the Plan as it shall deem
appropriate.
3.14 All outstanding Awards to any Participant may be canceled if (a)
the Participant, without the consent of the Committee, while employed by the
Company or after termination of such employment, becomes associated with,
employed by, renders services to, or owns any interest in, other than any
insubstantial interest, as determined by the Committee, any business that is in
competition with the Company or with any business in which the Company has a
substantial interest as determined by the Committee; or (b) is terminated for
cause as determined by the Committee.
ARTICLE IV - INCENTIVE STOCK OPTIONS
4.1 Each provision of this Article IV and of each Incentive Stock
Option granted under the Plan shall be construed in accordance with the
provisions of Code section 422, and any provision hereof that cannot be so
construed shall be disregarded.
4.2 Incentive Stock Options shall be granted only to Eligible
Participants who are in the active employment of the Company, and to individuals
to whom grants are conditioned upon active employment, each of whom may be
granted one or more such Incentive Stock Options for a reason related to his
employment at such time or times determined by the Committee following the
Effective Date through the date which is ten (10) years following the Effective
Date, subject to the following conditions:
(a) The Incentive Stock Option exercise price per share of
Stock shall be set in the Agreement, but shall not be less than 100% of
the Fair Market Value of the Stock on the Option Grant Date. If the
Eligible Participant owns more than 10% of the outstanding Stock (as
determined pursuant to Code section 424(d)) on the Option Grant Date,
the Incentive Stock Option exercise price per share shall not be less
than 110% of the Fair Market Value of the Stock on the Option Grant
Date; provided, however, that if an Incentive Stock Option is granted
to such an Eligible Participant at an exercise price per share that is
less than 110% of Fair Market Value of the stock on the Option Grant
Date, such Option shall be deemed a Nonqualified Stock Option.
(b) The Incentive Stock Option may be exercised in whole or in
part from time to time within ten (10) years from the Option Grant Date
(five (5) years if the Eligible Participant owns more than 10% of the
Stock on the Option Grant Date), or such shorter period as may be
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<PAGE>
specified by the Committee in the Award; provided, that in any event,
the Incentive Stock Option and related Stock Right shall lapse and
cease to be exercisable upon a Termination of Employment or within such
period following a Termination of Employment as shall have been
specified in the Incentive Stock Option Award Agreement, which period
shall in no event exceed three months unless:
(i) employment shall have terminated as a result of
death or Disability, in which event such period shall not
exceed one year after the date of death or Disability; or
(ii) death shall have occurred following a
Termination of Employment and while the Incentive Stock Option
or Stock Right was still exercisable, in which event such
period shall not exceed one year after the date of death;
provided, further, that such period following a Termination of
Employment shall in no event extend the original exercise
period of the Incentive Stock Option.
(c) To the extent the aggregate Fair Market Value, determined
as of the Option Grant Date, of the shares of Stock with respect to
which incentive stock options (determined without regard to this
subsection) are first exercisable during any calendar year (under this
Plan or any other plan of the Company and its parent and subsidiary
corporations (within the meaning of Code sections 424(e) and 424(f),
respectively)), by Participant exceeds $100,000, such Incentive Stock
Options granted under the Plan shall be treated as Nonqualified Stock
Options granted under Article V.
(d) The Committee may adopt any other terms and conditions
which it determines should be imposed for the Incentive Stock Option to
qualify under Code section 422, as well as any other terms and
conditions not inconsistent with this Article IV as determined by the
Committee.
(e) Subject to the limitations of Plan Section 3.5, the
maximum number of shares of Stock subject to Incentive Stock Option
Awards shall be 2,000,000.
4.3 To the extent an Incentive Stock Option fails to meet the
requirements of Code section 422, it shall be deemed a Nonqualified Stock
Option.
4.4 The Committee may at any time offer to buy out for a payment in
cash, Stock, Deferred Stock or Restricted Stock an Incentive Stock Option
previously granted, based on such terms and conditions as the Committee shall
establish and communicate to the Participant at the time that such offer is
made.
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4.5 If the Incentive Stock Option Award Agreement so provides, the
Committee may require that all or part of the shares of Stock to be issued upon
the exercise of an Incentive Stock Option shall take the form of Deferred or
Restricted Stock, which shall be valued on the date of exercise, as determined
by the Committee, on the basis of the Fair Market Value of such Deferred Stock
or Restricted Stock determined without regard to the deferral limitations and/or
forfeiture restrictions involved.
4.6 Any Incentive Stock Option that fails to qualify under section 422
of the Code shall be treated as a Nonqualified Stock Option granted under
Article V.
ARTICLE V - NONQUALIFIED STOCK OPTIONS
5.1 Nonqualified Stock Options may be granted to Eligible Participants
to purchase shares of Stock at such time or times determined by the Committee,
following the Effective Date, subject to the terms and conditions set forth in
this Article V.
5.2 The Nonqualified Stock Option exercise price per share of Stock
shall be established in the Agreement and may be more than, equal to or less
than 100% of the Fair Market Value at the time of the grant, but may not be less
than par value of the Stock.
5.3 A Nonqualified Stock Option may be exercised in full or in part
from time to time within such period as may be specified by the Committee in the
Agreement; provided, that, in any event, the Nonqualified Stock Option shall
lapse and cease to be exercisable upon a Termination of Employment or within
such period following a Termination of Employment as shall have been specified
in the Nonqualified Stock Option Award Agreement, provided, that such period
following a Termination of Employment shall in no event extend the original
exercise period of the Nonqualified Stock Option.
5.4 The Nonqualified Stock Option Award Agreement may include any other
terms and conditions not inconsistent with this Article V or Article VII, as
determined by the Committee.
ARTICLE VI - STOCK APPRECIATION RIGHTS
6.1 A Stock Appreciation Right may be granted to an Eligible
Participant in connection with an Incentive Stock Option or a Nonqualified Stock
Option granted under Article IV or Article V of this Plan (referred to as a
"Tandem Stock Appreciation Right"), or may be granted independent of any related
Stock Option (referred to as a "Nontandem Stock Appreciation Right"). A Stock
Appreciation Right granted under the Plan shall be designated as either a: (i)
Tandem Stock Appreciation Right, or (ii) Nontandem Stock Appreciation Right.
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6.2 A Tandem Stock Appreciation Right shall entitle a holder of a Stock
Option, within the period specified for the exercise of the Stock Option, to
surrender the unexercised Stock Option, or a portion thereof, and to receive in
exchange therefor a payment in cash or shares of Stock having an aggregate value
equal to the amount by which the Fair Market Value of each share of Stock
exceeds the Stock Option price per share of Stock, times the number of shares of
Stock under the Stock Option, or portion thereof, which is surrendered.
6.3 Each Tandem Stock Appreciation Right granted hereunder shall be
subject to the same terms and conditions as the related Stock Option, including
limitations on transferability, and shall be exercisable only to the extent such
Stock Option is exercisable and shall terminate or lapse and cease to be
exercisable when the related Stock Option terminates or lapses. The grant of
Tandem Stock Appreciation Rights related to Incentive Stock Options must be
concurrent with the grant of the Incentive Stock Options. With respect to
Nonqualified Stock Options, the grant of Tandem Stock Appreciation Rights either
may be concurrent with the grant of the Nonqualified Stock Options, or in
connection with Nonqualified Stock Options previously granted under Article V,
which are unexercised and have not terminated or lapsed.
6.4 Upon exercise of a Tandem Stock Appreciation Right, the number of
shares of Stock subject to exercise under any related Stock Option shall
automatically be reduced by the number of shares of Stock represented by the
Stock Option or portion thereof which is surrendered.
6.5 The Committee may grant Nontandem Stock Appreciation Rights and
shall specify at the time of grant the number of shares of Stock covered by such
right and the base price of a share of Stock (the "Base Price"), which shall not
be less than 100% of Fair Market Value of a share of Stock on the date of grant.
A Nontandem Stock Appreciation Right shall be exercisable during such period as
the Committee shall determine. Upon exercise of a Nontandem Stock Appreciation
Right, the Participant shall be entitled to receive from the Company cash and/or
Stock having an aggregate Fair Market Value equal to the (i) the excess of (A)
the Fair Market Value of one (1) share of Stock at the time of exercise over (B)
the Base Price, multiplied by (ii) the number of shares of Stock covered by the
Nontandem Stock Appreciation Right, or the portion thereof being exercised.
6.6 The Committee shall have sole discretion to determine in each case
whether the payment with respect to the exercise of a Stock Appreciation Right
will be in the form of all cash or all Stock, or any combination thereof. If
payment is to be made in Stock, the number of shares of Stock shall be
determined based on the Fair Market Value of the Stock on the date of exercise.
If the Committee elects to make full payment in Stock, no fractional shares of
Stock shall be issued and cash payments shall be made in lieu of fractional
shares.
6.7 The Committee shall have sole discretion as to the timing of any
payment made in cash or Stock, or a combination thereof, upon exercise of Stock
Appreciation Rights. Payment may be made in a lump sum, in annual installments
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or may be otherwise deferred; and the Committee shall have sole discretion to
determine whether any deferred payments may bear amounts equivalent to interest
or cash dividends.
6.8 The exercise of a Stock Appreciation Right shall be effective only
upon the Participant's satisfaction (as determined by the Committee in its
discretion) of any tax withholding obligations with respect to such exercise.
ARTICLE VII - INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS
7.1 Each Stock Option and Stock Right shall be granted subject to such
terms and conditions, if any, not inconsistent with this Plan, as shall be
determined by the Committee, including any provisions as to continued employment
as consideration for the grant or exercise of such Stock Option or Stock Right
and any provisions that may be advisable to comply with applicable laws,
regulations or rulings of any governmental authority.
7.2 The maximum number of shares of Stock that may be covered by Stock
Options and Stock Rights granted to any one individual during any calendar year
(including Stock Options or Stock Rights that are subsequently canceled) shall
be 500,000 shares. If a Stock Option or Stock Right is canceled, terminated or
repriced with respect to an individual, the canceled, terminated or repriced
Stock Option or Stock Right shall be counted against the maximum number of
shares for which Stock Options or Stock Rights may be granted to such
individual.
7.3 Except as provided below, a Stock Option or Stock Right shall not
be transferable by the Participant other than by will or by the laws of descent
and distribution, or, to the extent otherwise allowed by applicable law,
pursuant to a qualified domestic relations order as defined by the Code or the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, and shall be exercisable during the lifetime of the Participant only
by him or in the event of his death or Disability, by his guardian or legal
representative; provided, however, that a Nonqualified Stock Option (including a
Tandem Stock Appreciation Right related thereto) may be transferred and
exercised by the transferee to the extent determined by the Committee to be
consistent with securities and other applicable laws, rules and regulations and
with Company policy. Notwithstanding any language herein or in any Agreement to
the contrary, any restrictions on transfer of a Stock Option or Stock Right in
the Plan or an Agreement shall be void and of no effect if the Committee
determines that a transfer can be made consistent with securities and other
applicable laws, rules and regulations.
7.4 Shares of Stock purchased upon exercise of a Stock Option shall be
paid for at the time of exercise (or, in case of an exercise pursuant to a
cashless exercise mechanism described below, as soon as practicable after such
exercise) in cash or by tendering (either by actual delivery or by attestation)
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shares of Stock acceptable to the Committee and valued as of the exercise date
or in any combination thereof in such amounts, at such times and upon such terms
as shall be determined by the Committee, subject to limitations set forth in the
corresponding Stock Option Award Agreement. The Committee may establish a
cashless exercise mechanism by which a Participant may pay the exercise price
under a Stock Option by irrevocably authorizing a third party to sell shares of
Stock (or a sufficient portion of the shares) acquired upon exercise of the
Stock Option and remit to the Company a sufficient portion of the sales proceeds
to pay the entire exercise price and/or any tax withholding resulting from such
exercise. Without limiting the foregoing, the Committee may establish payment
terms for the exercise of Stock Options which permit the Participant to deliver
shares of Stock, or other evidence of ownership of Stock satisfactory to the
Company, with a Fair Market Value equal to the Stock Option price as payment.
7.5 No cash dividends shall be paid on shares of Stock subject to
unexercised Stock Options or Stock Rights. The Committee may provide, however,
that a Participant to whom a Stock Option or Stock Right has been granted which
is exercisable in whole or in part at a future time for shares of Stock shall be
entitled to receive an amount per share equal in value to the cash dividends, if
any, paid per share on issued and outstanding Stock, as of the dividend record
dates occurring during the period between the date of the grant and the time
each such share of Stock is delivered pursuant to exercise of such Stock Option
or Stock Right. Such amounts (herein called "dividend equivalents") may, in the
discretion of the Committee, be:
(a) paid in cash or Stock either from time to time prior to, or at
the time of the delivery of, such Stock, or upon expiration of
the Stock Option or Stock Right if it shall not have been
fully exercised; or
(b) converted into contingently credited shares of Stock, with
respect to which dividend equivalents may accrue, in such
manner, at such value, and deliverable at such time or times,
as may be determined by the Committee.
Such Stock, whether delivered or contingently credited, shall be
charged against the limitations set forth in Plan Section 3.5.
7.6 The Committee, in its sole discretion, may authorize payment of
interest equivalents on dividend equivalents which are payable in cash at a
future time.
7.7 In the event of Disability or death, the Committee, with the
consent of the Participant or his legal representative, may authorize payment,
in cash or in Stock, or partly in cash and partly in Stock, as the Committee may
direct, of an amount equal to the difference at the time between the Fair Market
Value of the Stock subject to a Stock Option and the option price in
consideration of the surrender of the Stock Option.
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7.8 If a Participant is required to pay to the Company an amount with
respect to income and employment tax withholding obligations in connection with
exercise of a Nonqualified Stock Option or Stock Right, and/or with respect to
certain dispositions of Stock acquired upon the exercise of an Incentive Stock
Option, the Committee, in its discretion and subject to such rules as it may
adopt, may permit the Participant to satisfy the obligation, in whole or in
part, by surrendering shares of Stock which the Participant already owns or by
making an irrevocable election that, in lieu of the issuance of Stock, a portion
of the total Fair Market Value of the shares of Stock subject to the
Nonqualified Stock Option or Stock Right and/or with respect to certain
dispositions of Stock acquired upon the exercise of an Incentive Stock Option,
be surrendered for cash and that such cash payment be applied to the
satisfaction of the withholding obligations. The amount to be withheld shall not
exceed the statutory minimum federal and state income and employment tax
liability arising from the Stock Option exercise transaction.
7.9 The Committee may permit the voluntary surrender of all or a
portion of any Stock Option granted under the Plan to be conditioned upon the
granting to the Participant of a new Stock Option for the same or a different
number of shares of Stock as the Stock Option surrendered, or may require such
surrender as a condition precedent to a grant of a new Stock Option to such
Participant. Subject to the provisions of the Plan, such new Stock Option shall
be exercisable at such price, during such period and on such other terms and
conditions as are specified by the Committee at the time the new Stock Option is
granted. Upon surrender, the Stock Options surrendered shall be canceled and the
shares of Stock previously subject to them shall be available for the grant of
other Stock Options.
7.10 The Committee may provide in any Stock Option Agreement entered
into pursuant to the Plan, or by separate agreement, that if a Participant makes
payment upon the exercise of any Stock Option granted hereunder in whole or in
part through the surrender of shares of Stock, such Participant shall
automatically receive a new Stock Option for the number of shares of Stock so
surrendered by him at a price equal to the Fair Market Value of the shares of
Stock at the time of surrender, exercisable on the same basis and having the
same terms as the underlying Stock Option or on such other basis as the
Committee shall determine and provide in the Stock Option Agreement.
ARTICLE VIII - RESTRICTED STOCK
8.1 Restricted Stock Awards may be made to Participants as an incentive
for the performance of future services that will contribute materially to the
successful operation of the Company. Awards of Restricted Stock may be made
either alone or in addition to or in tandem with other Awards granted under the
Plan.
8.2 With respect to Awards of Restricted Stock, the Committee
shall:
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(a) determine the purchase price, if any, to be paid for such
Restricted Stock, which may be more than, equal to, or less than par
value and may be zero, subject to such minimum consideration as may be
required by applicable law;
(b) determine the length of the Restriction Period;
(c) determine any restrictions applicable to the Restricted
Stock such as service or performance;
(d) determine if the restrictions shall lapse as to all shares
of Restricted Stock at the end of the Restriction Period or as to a
portion of the shares of Restricted Stock in installments during the
Restriction Period; and
(e) determine if dividends and other distributions on the
Restricted Stock are to be paid currently to the Participant or paid to
the Company for the account of the Participant.
8.3 Awards of Restricted Stock must be accepted within a period of 60
days, or such shorter period as the Committee may specify, by executing a
Restricted Stock Award Agreement and paying whatever price, if any, is required.
The prospective recipient of a Restricted Stock Award shall not have any rights
with respect to such Award, unless such recipient has executed a Restricted
Stock Award Agreement and has delivered a fully executed copy thereof to the
Committee, and has otherwise complied with the applicable terms and conditions
of such Award.
8.4 Except when the Committee determines otherwise, or as otherwise
provided in the Restricted Stock Agreement, if a Participant terminates
employment with the Company for any reason before the expiration of the
Restriction Period, all shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant and shall be reacquired by the Company.
8.5 Except as otherwise provided in this Article VIII, or as otherwise
provided in the Restricted Stock Agreement, no shares of Restricted Stock
received by a Participant shall be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of during the Restriction Period.
8.6 The Committee may designate whether any Restricted Stock Award is
intended to be "performance-based compensation" within the meaning of Code
section 162(m). Any such award shall be conditioned on achievement of one or
more performance measures selected by the Committee.
The grant of such Awards and the establishment of the performance measures shall
be made during the period required under Code section 162(m). No more than
500,000 shares of Stock may be subject to Restricted Stock Awards that are
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intended to constitute "performance-based compensation" within the meaning of
Code section 162(m) granted to any one individual during any calendar year.
8.7 To the extent not otherwise provided in a Restricted Stock
Agreement, in cases of death, Disability or Retirement or in cases of special
circumstances, the Committee may in its discretion elect to waive any or all
remaining restrictions with respect to such Participant's Restricted Stock.
8.8 In the event of hardship or other special circumstances of a
Participant whose employment with the Company is involuntarily terminated, the
Committee may in its discretion elect to waive in whole or in part any or all
remaining restrictions with respect to any or all of the Participant's
Restricted Stock, based on such factors and criteria as the Committee may deem
appropriate.
8.9 Upon an Award of Restricted Stock to a Participant, one or more
stock certificates representing the shares of Restricted Stock shall be
registered in the Participant's name. Such certificates may either:
(a) be held in custody by the Company until the Restriction
Period expires or until restrictions thereon otherwise lapse, and the
Participant shall deliver to the Company one or more stock powers
endorsed in blank relating to the Restricted Stock; and/or
(b) be issued to the Participant and registered in the name of
the Participant, and shall bear an appropriate restrictive legend and
shall be subject to appropriate stop-transfer orders.
8.10 Except as provided in this Article VIII, a Participant receiving a
Restricted Stock Award shall have, with respect to such Restricted Stock Award,
all of the rights of a shareholder of the Company, including the right to vote
the shares to the extent, if any, such shares possess voting rights and the
right to receive any dividends; provided, however, the Committee may require
that any dividends on such shares of Restricted Stock shall be automatically
deferred and reinvested in additional Restricted Stock subject to the same
restrictions as the underlying Award, or may require that dividends and other
distributions on Restricted Stock shall be paid to the Company for the account
of the Participant. The Committee shall determine whether interest shall be paid
on such amounts, the rate of any such interest, and the other terms applicable
to such amounts.
8.11 If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
unrestricted certificates for such shares shall be delivered to the Participant;
provided, however, that the Committee may cause such legend or legends to be
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placed on any such certificates as it may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission and
any applicable federal or state law.
8.12 In order to better ensure that Award payments actually reflect the
performance of the Company and the service of the Participant, the Committee may
provide, in its sole discretion, for a tandem performance-based or other Award
designed to guarantee a minimum value, payable in cash or Stock to the recipient
of a Restricted Stock Award, subject to such performance, future service,
deferral and other terms and conditions as may be specified by the Committee.
ARTICLE IX - DEFERRED STOCK
9.1 Shares of Deferred Stock together with cash dividend equivalents,
if so determined by the Committee, may be issued either alone or in addition to
other Awards granted under the Plan in the discretion of the Committee. The
Committee shall determine the individuals to whom, and the time or times at
which, such Awards will be made, the number of shares to be awarded, the price,
if any, to be paid by the recipient of a Deferred Stock Award, the time or times
within which such Awards may be subject to forfeiture, and all other conditions
of the Awards. The Committee may condition Awards of Deferred Stock upon the
attainment of specified performance goals or such other factors or criteria as
the Committee may determine.
9.2 Deferred Stock Awards shall be subject to the following terms and
conditions:
(a) Subject to the provisions of this Plan and the applicable
Award Agreement, Deferred Stock Awards may not be sold,
transferred, pledged, assigned or otherwise encumbered during
the period specified by the Committee for purposes of such
Award (the "Deferral Period"). At the expiration of the
Deferral Period, or the Elective Deferral Period defined in
Section 9.3, share certificates shall be delivered to the
Participant, or his legal representative, in a number equal to
the number of shares of Stock covered by the Deferred Stock
Award.
Based on service, performance and/or such other factors or
criteria as the Committee may determine, the Committee,
however, at or after grant, may accelerate the vesting of all
or any part of any Deferred Stock Award and/or waive the
deferral limitations for all or any part of such Award.
(b) Unless otherwise determined by the Committee, amounts equal to
any dividends that would have been payable during the Deferral
Period with respect to the number of shares of Stock covered
by a Deferred Stock Award if such shares of Stock had been
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outstanding shall be automatically deferred and deemed to be
reinvested in additional Deferred Stock, subject to the same
deferral limitations as the underlying Award.
(c) Except to the extent otherwise provided in this Plan or in the
applicable Award Agreement, upon Termination of Employment
during the Deferral Period for a given Award, the Deferred
Stock covered by such Award shall be forfeited by the
Participant; provided, however, the Committee may provide for
accelerated vesting in the event of Termination of Employment
due to death, Disability or Retirement, or in the event of
hardship or other special circumstances as the Committee deems
appropriate.
(d) The Committee may require that a designated percentage of the
total Fair Market Value of the shares of Deferred Stock held
by one or more Participants be paid in the form of cash in
lieu of the issuance of Stock and that such cash payment be
applied to the satisfaction of the federal and state income
and employment tax withholding obligations that arise at the
time the Deferred Stock becomes free of all restrictions. The
designated percentage shall be equal to the minimum income and
employment tax withholding rate in effect at the time under
applicable federal and state laws.
(e) The Committee may provide one or more Participants subject to
the mandatory cash payment with an election to receive an
additional percentage of the total value of the Deferred Stock
in the form of a cash payment in lieu of the issuance of
Deferred Stock. The additional percentage shall not exceed the
difference between 50% and the designated percentage cash
payment.
(f) The Committee may impose such further terms and conditions on
partial cash payments with respect to Deferred Stock as it
deems appropriate.
9.3 A Participant may elect to further defer receipt of Deferred Stock
for a specified period or until a specified event (the "Elective Deferral
Period"), subject in each case to the Committee's approval and to such terms as
are determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must generally be made at least 12 months prior to
completion of the Deferral Period for the Deferred Stock Award in question, or
for the applicable installment of such an Award.
9.4 Each Award shall be confirmed by, and subject to the terms of, a
Deferred Stock Award Agreement.
9.5 In order to better ensure that the Award actually reflects the
performance of the Company and the service of the Participant, the Committee may
provide, in its sole discretion, for a tandem performance-based or other Award
designed to guarantee a minimum value, payable in cash or Stock to the recipient
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of a Deferred Stock Award, subject to such performance, future service, deferral
and other terms and conditions as may be specified by the Committee.
ARTICLE X - STOCK AWARDS
10.1 A Stock Award shall be granted only in payment of compensation
that has been earned or as compensation to be earned, including without
limitation, compensation awarded concurrently with or prior to the grant of the
Stock Award.
10.2 For the purposes of this Plan, in determining the value of a Stock
Award, all shares of Stock subject to such Stock Award shall be valued at not
less than 100% of the Fair Market Value of such shares of Stock on the date such
Stock Award is granted, regardless of whether or when such shares of Stock are
issued or transferred to the Participant and whether or not such shares of Stock
are subject to restrictions which affect their value.
10.3 Shares of Stock subject to a Stock Award may be issued or
transferred to the Participant at the time the Stock Award is granted, or at any
time subsequent thereto, or in installments from time to time, as the Committee
shall determine. If any such issuance or transfer shall not be made to the
Participant at the time the Stock Award is granted, the Committee may provide
for payment to such Participant, either in cash or shares of Stock, from time to
time or at the time or times such shares of Stock shall be issued or transferred
to such Participant, of amounts not exceeding the dividends which would have
been payable to such Participant in respect of such shares of Stock, as adjusted
under Section 3.10, if such shares of Stock had been issued or transferred to
such Participant at the time such Stock Award was granted. Any issuance payable
in shares of Stock under the terms of a Stock Award, at the discretion of the
Committee, may be paid in cash on each date on which delivery of shares of Stock
would otherwise have been made, in an amount equal to the Fair Market Value on
such date of the shares of Stock which would otherwise have been delivered.
10.4 A Stock Award shall be subject to such terms and conditions,
including without limitation, restrictions on the sale or other disposition of
the Stock Award or of the shares of Stock issued or transferred pursuant to such
Stock Award, as the Committee shall determine; provided, however, that upon the
issuance or transfer of shares pursuant to a Stock Award, the Participant, with
respect to such shares of Stock, shall be and become a shareholder of the
Company fully entitled to receive dividends, to vote to the extent, if any, such
shares possess voting rights and to exercise all other rights of a shareholder
except to the extent otherwise provided in the Stock Award. Each Stock Award
shall be evidenced by a written Award Agreement in such form as the Committee
shall determine.
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ARTICLE XI - PERFORMANCE SHARES
11.1 Awards of Performance Shares may be made to certain Participants
as an incentive for the performance of future services that will contribute
materially to the successful operation of the Company. Awards of Performance
Shares may be made either alone, in addition to or in tandem with other Awards
granted under the Plan and/or cash payments made outside of the Plan.
11.2 With respect to Awards of Performance Shares, which may be issued
for no consideration or such minimum consideration as is required by applicable
law, the Committee shall:
(a) determine and designate from time to time those Participants
to whom Awards of Performance Shares are to be made;
(b) determine the performance period (the "Performance Period")
and/or performance objectives the "Performance Objectives")
applicable to such Awards;
(c) determine the form of settlement of a Performance Share; and
(d) generally determine the terms and conditions of each such
Award. At any date, each Performance Share shall have a value
equal to the Fair Market Value, determined as set forth in
Section 2.11.
11.3 Performance Periods may overlap, and Participants may participate
simultaneously with respect to Performance Shares for which different
Performance Periods are prescribed.
11.4 The Committee shall determine the Performance objectives of Awards
of Performance Shares. Performance Objectives may vary from Participant to
Participant and between Awards and shall be based upon such performance criteria
or combination of factors as the Committee may deem appropriate, including for
example, but not limited to, minimum earnings per share or return on equity. If
during the course of a Performance Period there shall occur significant events
which the Committee expects to have a substantial effect on the applicable
Performance Objectives during such period, the Committee may revise such
Performance Objectives.
11.5 The Committee shall determine for each Participant the number of
Performance Shares which shall be paid to the Participant if the applicable
Performance objectives are exceeded or met in whole or in part.
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11.6 If a Participant terminates service with the Company during a
Performance Period because of death, Disability, Retirement or under other
circumstances in which the Committee in its discretion finds that a waiver would
be appropriate, that Participant, as determined by the Committee, may be
entitled to a payment of Performance Shares at the end of the Performance Period
based upon the extent to which the Performance objectives were satisfied at the
end of such period and pro rated for the portion of the Performance Period
during which the Participant was employed by the Company; provided, however, the
Committee may provide for an earlier payment in settlement of such Performance
Shares in such amount and under such terms and conditions as the Committee deems
appropriate or desirable. If a Participant terminates service with the Company
during a Performance Period for any other reason, then such Participant shall
not be entitled to any payment with respect to that Performance Period unless
the Committee shall otherwise determine.
11.7 Each Award of a Performance Share shall be paid in whole shares of
Stock, or cash, or a combination of Stock and cash as the Committee shall
determine, with payment to be made as soon as practicable after the end of the
relevant Performance Period.
11.8 The Committee shall have the authority to approve requests by
Participants to defer payment of Performance Shares on terms and conditions
approved by the Committee and set forth in a written Award Agreement between the
Participant and the Company entered into in advance of the time of receipt or
constructive receipt of payment by the Participant.
ARTICLE XII - OTHER STOCK-BASED AWARDS
12.1 Other awards that are valued in whole or in part by reference to,
or are otherwise based on, Stock ("Other Stock-Based Awards"), including without
limitation, convertible preferred stock, convertible debentures, exchangeable
securities, phantom stock and Stock awards or options valued by reference to
book value or performance, may be granted either alone or in addition to or in
tandem with Stock Options, Stock Rights, Restricted Stock, Deferred Stock or
Stock Awards granted under the Plan and/or cash awards made outside of the Plan.
Subject to the provisions of the Plan, the Committee shall have
authority to determine the Eligible Participants to whom and the time or times
at which such Awards shall be made, the number of shares of Stock subject to
such Awards, and all other conditions of the Awards. The Committee also may
provide for the grant of shares of Stock upon the completion of a specified
Performance Period.
The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.
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12.2 Other Stock-Based Awards made pursuant to this Article XII
shall be subject to the following terms and conditions:
(a) Subject to the provisions of this Plan and the Award
Agreement, shares of Stock subject to Awards made under this
Article XII may not be sold, assigned, transferred, pledged or
otherwise encumbered prior to the date on which the shares are
issued, or, if later, the date on which any applicable
restriction, performance or deferral period lapses.
(b) Subject to the provisions of this Plan and the Award Agreement
and unless otherwise determined by the Committee at the time
of the Award, the recipient of an Award under this Article XII
shall be entitled to receive, currently or on a deferred
basis, interest or dividends or interest or dividend
equivalents with respect to the number of shares covered by
the Award, as determined at the time of the Award by the
Committee, in its sole discretion, and the Committee may
provide that such amounts, if any, shall be deemed to have
been reinvested in additional Stock or otherwise reinvested.
(c) Any Award under this Article XII and any Stock covered by any
such Award shall vest or be forfeited to the extent so
provided in the Award Agreement, as determined by the
Committee, in its sole discretion.
(d) Upon the Participant's Retirement, Disability or death, or in
cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the
remaining limitations imposed hereunder, if any, with respect
to any or all of an Award under this Article XII.
(e) Each Award under this Article XII shall be confirmed by, and
subject to the terms of, an Award Agreement.
(f) Stock, including securities convertible into Stock, issued on
a bonus basis under this Article XII may be issued for no cash
consideration.
12.3 Other Stock-Based Awards may include a phantom stock Award,
which is subject to the following terms and conditions:
(a) The Committee shall select the Eligible Participants who may
receive phantom stock Awards. The Eligible Participant shall
be awarded a phantom stock unit, which shall be the equivalent
to a share of Stock.
(b) Under an Award of phantom stock, payment shall be made on the
dates or dates as specified by the Committee or as stated in
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the Award Agreement and phantom stock Awards may be settled in
cash, Stock, or some combination thereof.
(c) The Committee shall determine such other terms and conditions
of each Award as it deems necessary in its sole discretion.
ARTICLE XIII - AMENDMENT AND TERMINATION
13.1 The Board at any time and from time to time, may amend or
terminate the Plan. To the extent required by Code section 422 and/or the rules
of the exchange upon which the Stock is traded, no amendment, without approval
by the Company's shareholders, shall:
(a) alter the group of persons eligible to participate in the
Plan;
(b) except as provided in Plan Section 3.5, increase the
maximum number of shares of Stock which are available for issuance
pursuant to Awards granted under the Plan;
(c) extend the period during which Incentive Stock Options may
be granted beyond the date which is ten (10) years following the
Effective Date.
(d) limit or restrict the powers of the Committee with respec
to the administration of this Plan;
(e) change the definition of an Eligible Participant for the
purpose of Incentive Stock Options or increase the limit or the value
of shares of Stock for which an Eligible Participant may be granted an
Incentive Stock Option;
(f) materially increase the benefits accruing to Participants
under this Plan;
(g) materially modify the requirements as to eligibility for
participation in this Plan; or
(h) change any of the provisions of this Article XIII.
13.2 No amendment to or discontinuance of this Plan or any provision
thereof by the Board or the shareholders of the Company shall, without the
written consent of the Participant, adversely affect, as shall be determined by
the Committee, any Award previously granted to such Participant under this Plan;
provided, however, the Committee retains the right and power to treat any
outstanding Incentive Stock Option as a Nonqualified Stock Option in accordance
with Plan Section 4.3.
24
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13.3 Notwithstanding anything herein to the contrary, if the right to
receive or benefit from any Award, either alone or together with payments that a
Participant has the right to receive from the Company, would constitute a
"parachute payment" under Code section 280G, all such payments may be reduced,
in the discretion of the Committee, to the largest amount that will avoid an
excise tax to the Participant under Code section 280G.
ARTICLE XIV - MISCELLANEOUS PROVISIONS
14.1 Nothing in the Plan or any Award granted under the Plan shall
confer upon any Participant any right to continue in the employ of the Company,
or to serve as a director thereof, or interfere in any way with the right of the
Company to terminate his or her employment at any time. Unless agreed by the
Board, no Award granted under the Plan shall be deemed salary or compensation
for the purpose of computing benefits under any employee benefit plan or other
arrangement of the Company for the benefit of its employees. No Participant
shall have any claim to an Award until it is actually granted under the Plan. To
the extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall, except as otherwise provided by the Committee,
be no greater than the right of an unsecured general creditor of the Company.
All payments to be made under the Plan shall be paid from the general funds of
the company, and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts, except as
provided in Article VIII with respect to Restricted Stock and except as
otherwise provided by the Committee.
14.2 The Committee may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of any taxes which the
Company is required by any law or regulation of any governmental authority,
whether federal, state or local, domestic or foreign, to withhold in connection
with any Award or the exercise thereof, including, but not limited to,
withholding the payment of all or any portion of such Award or another Award
under this Plan until the Participant reimburses the Company for the amount the
Company is required to withhold with respect to such taxes, or canceling any
portion of such Award or another Award under this Plan in an amount sufficient
to reimburse itself for the amount it is required to so withhold, or selling any
property contingently credited by the Company for the purpose of paying such
Award or another Award under this Plan in order to withhold or reimburse itself
for the amount it is required to so withhold. The amount to be withheld shall
not exceed the statutory minimum federal and state income and employment tax
liability arising from the exercise transaction.
14.3 The Plan and the grant of Awards shall be subject to all
applicable federal and state laws, rules, and regulations and to such approvals
by any United States government or regulatory agency as may be required.
14.4 The terms of the Plan shall be binding upon the Company, and its
successors and assigns.
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14.5 The Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payments not yet made
to a Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company. In its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver shares of Stock or payments in lieu of or with respect to Awards under
the Plan; provided, however, that, unless the Committee otherwise determines
with the consent of the affected Participant, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
14.6 Each Participant exercising an Award under the Plan agrees to give
the Committee prompt written notice of any election made by such Participant
under Code section 83(b) or any similar provision thereof.
14.7 If any provision of this Plan or an Award Agreement is or becomes
or is deemed invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or any Award Agreement under any law deemed applicable by
the Committee, such provision shall be construed or deemed amended to conform to
applicable laws or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan or
the Award Agreement, it shall be stricken and the remainder of the Plan or the
Award Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, this Plan is executed this the 18th day of
February, 2000.
HIGH SPEED NET SOLUTIONS, INC.
ATTEST: By: /s/ Andrew Fox
---------------------------
Authorized Officer
(Corporate Seal)
/s/ Alan R. Kleinmaier
- ----------------------------------
Secretary
MARKETING LICENSE AGREEMENT
THIS MARKETING LICENSE AGREEMENT (this "Agreement"), dated as of the __
day of February 1999, is by and between Summus, LTD. ("LTD"), a Missouri
corporation, and High Speed Net Solutions, Inc. (formerly known as zzap.net,
inc.) ("HSNS"), a Florida corporation;
WHEREAS, LTD owns certain computer software programs and related
documentation;
WHEREAS, pursuant to the terms of a Letter Agreement dated January 14,
1999 (the "Letter Agreement") among LTD, Summus Technologies, Inc., a Delaware
corporation, HSNS, and Brad Richdale, LTD has agreed to grant certain rights, as
hereinafter described, to market, distribute, and license such programs and
related documentation;
WHEREAS, HSNS further desires to receive such rights to such programs
and their related documentation from LTD;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, LTD and HSNS, intending to be legally bound by the provisions hereof,
hereby agree as follows:
1. DEFINITIONS. Except as indicated herein, capitalized terms contained
herein shall have the meanings contained in Appendix A hereto.
2. RIGHTS; RESTRICTIONS AND REFUSAL RIGHTS.
2.1 LTD hereby grants to HSNS (but to HSNS only and not to any
affiliates of HSNS), and HSNS accepts from LTD, subject to the
terms and conditions set forth herein, the following license
and marketing rights to the Products (the "Rights") in the
Territory:
(a) the exclusive right to market and license the
streaming product as identified on Exhibit A hereto
(including Revisions, Enhancements and Upgrades) (the
"Streaming Product"), except for the Government
Sector. LTD will also have the right to market the
Streaming Product in the OEM market. LTD retains the
exclusive rights to sell the Streaming Product in the
Government Sector.
(b) HSNS shall have the exclusive worldwide direct
response ("DR") rights in and to the existing
Products, and a right of first refusal for the DR
rights in and to newly developed Products of LTD on
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mutually agreed upon terms, under any and all names
and trademarks, in the following channels of
distribution: direct mail, print (not including
catalogues or image or two-step advertising in trade
magazines), DR television and radio, multi-level
(a/k/a network marketing) and syndication. The
Products cannot be sold in the channels and
vertical markets where HSNS has exclusivity under
this Section 2.1(b), bundled or unbundled, through
the specified exclusive means and methods. This shall
not prohibit a third party OEM manfufacturer from
promoting the attributes of the Products in any form
of advertising promoting the sale of the third
party's items in which LTD's products are embedded,
such as QuickTime. All sales to the Government
Sector are outside the scope of this Agreement,
however, any contract with the government shall
prohibit the government, directly or indirectly, from
making same or similar Product(s) available through
DR means and/or retail.
(c) a non-exclusive license to market and license the
other Products, including newly developed Products,
of LTD.
2.2 In connection with the Rights granted hereunder, HSNS has the
right to:
(a) Demonstrate and promote the Products to prospective
End Users pursuant to the terms herein. The Products
and Documentation may not be provided to any
prospective End User (for evaluation, use, or any
other purpose) except pursuant to a License
Agreement, provided that limited copies of the
Products and Documentation may, as necessary, be
provided to prospective End Users for evaluation or
trial use pursuant to a form of agreement containing
provisions acceptable to LTD for confidentiality,
ownership and protection of intellectual property
rights; limitation of liability; restrictions on use;
the return of the Product, Documentation and any
other materials provided to such prospective End User
upon termination of such Agreement; and term and
termination.
(b) Grant End Users sublicenses to the Products and
Documentation pursuant to License Agreements. To the
extent so provided in the applicable License
Agreements, such sublicenses may extend after
termination of this Agreement, notwithstanding the
limited term of this Agreement.
(c) Grant sublicense rights to Authorized Sublicensees
pursuant to the terms of a Sublicense Agreement.
2.3 The Rights granted pursuant to this Agreement are subject to
the rights to terminate such Rights under this Agreement and
compliance with the terms, conditions and obligations under
2
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the Letter Agreement and this Agreement required to maintain
such Rights. Further, the Rights granted pursuant to this
Agreement are subject to certain licensing/marketing
agreements of LTD with third parties as identified on EXHIBIT
E, including LTD's obligations thereunder, entered into prior
to the date of execution of the Letter Agreement.
2.4 HSNS shall not, without LTD's prior written approval:
(a) use the Products, the Documentation or any
Confidential Information that it may acquire in
connection with this Agreement or the Letter
Agreement to develop, support, or invest in, directly
or indirectly, the development of any product which
has, entirely or partially, the same functions as any
of the Products or which would be in direct or
indirect competition with any of the Products;
(b) make any changes or other modifications to the
Products or grant any such rights to any End User or
Authorized Sublicensee or distribute the Products in
a form or manner other than as provided by LTD to
HSNS; or
(c) grant any other rights to any other person other
than to End Users or Authorized Sublicensees pursuant
to a License Agreement or Sublicensee Agreement
respectively, including any rights to incorporate any
Product or related intellectual property rights into
the products or services of any other person (except
as contemplated by and set forth in Exhibit A, Part 2
regarding the license of the right to create a
product utilizing the DLL which product cannot have
any more functionality or uses or applications than
any single Product of the Products listed on Exhibit
A, Part 1, and agreed to in writing by LTD).
2.5 Except as otherwise expressly stated in this Agreement, the
Rights granted to HSNS shall cease upon termination of this
Agreement.
2.6 Except with respect to the Streaming Product, there will be no
first refusal rights. With respect to any new Product,
including, but not limited to, a chip, that directly or
indirectly supplants, replaces, competes with, is similar to
in its function or intended use, or obsoletes the Streaming
Product, HSNS will have first refusal rights for forty-five
days after receipt of notice from LTD to fund the development,
and such funding will include the right to market the new
product on an exclusive basis, on terms and conditions
mutually agreed upon by HSNS and LTD through reasonable good
faith negotiations.
3
<PAGE>
3. MARKETING OBLIGATIONS.
3.1 HSNS agrees to do the following during the term of this
Agreement: (a) use its best efforts to market, promote and
license the Products in the Territory; and (b) hire and
maintain sufficient staff in HSNS's reasonable opinion,
including a sales force in HSNS's reasonable opinion of
sufficient size, to market, promote and license the Products
throughout the Territory. HSNS shall use its best efforts to
market, promote and license the Products in all possible
channels and/or sectors of distribution. In connection with
these efforts, HSNS shall not make any false or misleading
representations or statements regarding any of the Products or
their capabilities.
3.2 HSNS agrees to provide LTD upon its reasonable request with
information regarding HSNS's marketing plans and forecasts;
such plans and forecasts shall be non-binding and subject to
change, and may be delivered formally or informally, but shall
be sufficient to demonstrate that the effort and resources
being devoted by HSNS are sufficient to comply with its
obligations under Section 3.1. HSNS also shall meet with LTD
upon the reasonable request of LTD on matters relating to
market conditions, sales forecasting, planning, Product
marketing and Product competitiveness and similar factors.
3.3 The parties will work together to develop appropriate pricing
so that neither party undercuts one another in the
marketplace.
3.4 With respect to the OEM market, HSNS and LTD will work
together and keep one another informed so that there is no
duplication of effort or confusion in the marketplace.
4. LTD SERVICES. In the event that HSNS requests assistance or services
from LTD which are beyond the scope of LTD's commitments in this Agreement or
the Letter Agreement, LTD will attempt to accommodate HSNS's request by
providing such assistance or services on such basis as mutually agreed to in
writing between HSNS and LTD from time to time. Such assistance or services may
include, but is not limited to, maintenance and support services relating to the
Products, professional consulting services and marketing and promotional support
such as providing demonstrations and participation in trade shows. In the event
that such services relate to creating Enhancements for which HSNS pays LTD to
develop, the parties will also agree as to what additional marketing and
licensing rights HSNS shall have with respect to such Enhancements which shall
reasonably protect HSNS.
5. CHANGES. LTD agrees to provide HSNS with such Changes to the Products
(in Object Code form) and/or Documentation, if any, as LTD may make or obtain
from time to time and authorize for general release. LTD shall keep HSNS
generally advised with regard to Changes that are available or that LTD has
announced are planned, to the extent such Changes are or may be provided under
this Section 5.
4
<PAGE>
6. TITLE; INTELLECTUAL PROPERTY.
6.1 HSNS may copy the Products and Documentation only in Object
Code and only as required to perform its duties hereunder.
HSNS agrees to include all copyright, trademark and other
proprietary notices and legends of LTD on each copy of any
Product or Documentation as they appear in the versions
provided by LTD to HSNS and HSNS further agrees not to remove,
destroy or otherwise alter any such notices or legends on any
copy of any Product or Documentation provided to HSNS. All
copies of the Products and Documentation provided to or made
by or for HSNS shall be accounted for upon LTD's request.
6.2 LTD retains all right, title, and interest in and to the
Products, Documentation, any changes or modifications thereto
and all intellectual property rights throughout the world
contained therein. To the extent that any changes or
modifications to the Products or Documentation, including all
associated intellectual property rights, are not owned in
their entirety by LTD immediately upon their creation, HSNS
agrees to assign (and hereby automatically assigns) and shall
cause all other persons and entities who create or contribute
to any changes or modifications to assign, all right, title
and interest therein to LTD, to be effective immediately
without the necessity of consideration or further
documentation; provided, however, that this assignment
provision shall not apply to any changes, modifications or
other work performed by LTD on behalf of HSNS for which there
is a written agreement executed by LTD which provides that the
ownership of such changes, modifications or other work shall
be owned by a party other than LTD. HSNS agrees to take such
further action and execute such further documentation as LTD
may reasonably request to give effect to this Section 6.2.
6.3 HSNS may not distribute, sell, sublease, sublicense, assign,
give, pledge or transfer in any way any copies of the Products
or Documentation except as provided in this Agreement. HSNS
may not, and shall not authorize any other party to, modify,
reverse engineer, decompile, or translate the Products or
Documentation without the prior written consent of LTD.
6.4 HSNS is authorized to identify HSNS as an independent business
which has been authorized by LTD to market the Products to End
Users and Authorized Sublicensees, and to use and display
LTD's trade names, trademarks, service marks and logos for
purposes of promoting, advertising and marketing the Products
to prospective End Users and Authorized Sublicensees;
provided, however, that HSNS shall obtain LTD's prior written
approval of the content and form of any promotional,
advertisement or marketing materials utilizing such trade
names, trademarks, service marks or logos. LTD's approval
shall not be unreasonably withheld and shall be deemed given
if LTD does not object in writing within two (2) business days
5
<PAGE>
after HSNS submits its request to LTD in writing together with
a copy of the proposed promotional, advertisement or marketing
materials. In connection with the foregoing approval
requirements, HSNS is not required to submit for reapproval
any promotional, advertisement or marketing materials which
are in substantially the form of such materials previously
approved by LTD in writing in accordance with this Section
6.4. All such actions shall further be subject to reasonable
advertising and usage guidelines and any other quality
standards or specifications provided by LTD, if any, from time
to time during the term of this Agreement. In all other
respects, this Agreement confers no right or license with
regard to LTD's trade names, trademarks, service marks or
logos, or any related goodwill, all of which shall be the
exclusive property of LTD. HSNS shall assist LTD, at LTD's
request, in perfecting and maintaining LTD's rights under
trademark and similar laws in each country in the Territory by
advising LTD of any special registration, recording or notice
requirements. HSNS will not at any time (i) challenge LTD's
right, title or interest in any such marks, names or logos of
LTD or the validity thereof or any registration thereof, (ii)
do or cause to be done or omit to do anything, the doing,
causing or omitting of which would contest or in any way
impair or lead to impair the rights of LTD in such marks,
names or logos, (iii) use any trademark, service mark, trade
name, insignia or logo that is confusingly similar to or a
colorable imitation of any such marks, names or logos of LTD,
or (iv) use or authorize any other person to use such marks,
names or logos in a manner which disparages such names, marks
or logos or the Products identified thereby or which
diminishes the stature or image of quality of such names,
marks or logos among the public or causes confusion or
deception among the public with respect thereto. LTD expressly
reserves the right from time to time, upon providing notice
and a transition period that is reasonable under the
circumstances, to modify and change its names, marks and logos
and such names, marks and logos as modified or changed shall
for all purposes be deemed the marks, names and logos referred
to in this Agreement.
6.5 HSNS shall notify LTD in the event that it discovers any
infringement of LTD's rights in any Product or any of LTD's
trade names, trademarks, service marks or logos or any
violation of the terms of a License Agreement or Sublicense
Agreement, and shall cooperate with LTD and assist in the
prosecution of LTD's claims, provided that LTD retains
financial responsibility for costs of assistance and
prosecution. LTD shall be entitled to retain any proceeds from
such claims, including settlement amounts.
7. THIRD PARTY MATERIALS. The Products and/or Documentation may include
or require commercially available programming or materials from third-party
licensors, sellers or distributors (collectively, "Third-Party Materials"). The
Third-Party Materials may be subject to restrictions, payment obligations or
procurement responsibilities that are different from or in addition to the
restrictions and charges applicable to the Products and Documentation hereunder
6
<PAGE>
and HSNS and/or each End User or Authorized Sublicensee shall be responsible for
obtaining such Third Party Materials pursuant to a separate agreement with each
such third party. Exhibit D hereto lists the Third-Party Materials that are
pertinent on the date of execution of this Agreement. The Products are not
compatible with and are not warranted for any other kind of computer programming
or operating system other than the Third Party Materials. LTD reserves the right
to augment the Exhibit upon reasonable written notice to HSNS.
8. CONFIDENTIAL INFORMATION AND DISCLOSURE.
8.1 Each party, as recipient ("Recipient") of Confidential
Information obtained directly or indirectly from the other
party (the "Disclosing Party"), agrees to the following
confidentiality obligations:
8.2 HSNS, as Recipient, agrees at all times to protect and
preserve the confidentiality of the Products, Documentation,
and all other Confidential Information of LTD, as Disclosing
Party. HSNS agrees not to permit or authorize access to, or
disclosure of, the Products, Documentation, or any other
Confidential Information of LTD to any person or entity other
than (i) End Users or Authorized Sublicensees who have entered
into confidentiality agreements approved by LTD, to the extent
necessary for such End Users or Authorized Sublicensees to
evaluate the Products in advance of entering into a License
Agreement or Sublicense Agreement, (ii) End Users or
Authorized Sublicensees who have entered into License
Agreements or Sublicense Agreements, to the extent necessary
for such End Users or Authorized Sublicenses to exercise their
rights under applicable License Agreements or Sublicense
Agreements, and (iii) employees and professional advisors of
HSNS who have agreed in a written agreement to be bound by the
terms of this Agreement and have a "need to know" such
information in order to enable HSNS to perform HSNS's
obligations under this Agreement and applicable License
Agreements and Sublicense Agreements. HSNS may disclose
necessary portions of the Products, Documentation, or other
Confidential Information of LTD to governmental regulatory
authorities if such disclosure is required for compliance with
applicable laws, but HSNS shall notify LTD of the applicable
legal requirements before such disclosure occurs and HSNS
shall use its best efforts to help LTD obtain protection as
may be available to preserve the confidentiality of such
information following disclosure.
8.3 LTD, as Recipient, agrees at all times to protect and preserve
the confidentiality of all Confidential Information of HSNS,
as Disclosing Party. LTD agrees not to permit or authorize
access to, or disclosure of, the Confidential Information of
HSNS to any person or entity other than employees and
professional advisors of LTD who have agreed in a written
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<PAGE>
agreement to be bound by the terms of this Agreement and have
a "need to know" such information in order to enable LTD to
perform LTD's obligations under this Agreement and applicable
License Agreements and Sublicense Agreements. LTD may disclose
necessary portions of the Confidential Information of HSNS to
governmental regulatory authorities if such disclosure is
required for compliance with applicable laws, but LTD shall
notify HSNS of the applicable legal requirements before such
disclosure occurs and LTD shall use its best efforts to help
HSNS obtain protection as may be available to preserve the
confidentiality of such information following disclosure.
8.4 Prior to disposal of any media or materials that contain any
part of the Confidential Information of the Disclosing Party,
the Recipient shall obliterate or otherwise destroy all code,
instructions, commentary, or further evidence of Confidential
Information, for example, by erasing, incinerating, or
shredding such materials.
8.5 The restrictions in this Section 8 are in addition to any
other restrictions on use and disclosure set forth elsewhere
in this Agreement (for example, additional restrictions are
set forth in Section 2.1(a) regarding limited disclosure of
the Products to prospective End Users for evaluation
purposes).
8.6 The parties agree that money damages would not be a sufficient
remedy for any breach of this Section 8 and that either party
shall be entitled to equitable relief, including injunctive
relief and specific performance, as a remedy for any such
breach by the other party. Such remedies shall not be deemed
exclusive remedies, but shall be in addition to all other
remedies available at law or in equity.
9. FEES AND CHARGES; RECORDS AND AUDIT RIGHTS.
9.1 HSNS shall collect all license and other fees for the Products
under License Agreements and Sublicense Agreements from the
End Users and Authorized Sublicensees. HSNS shall use its best
efforts to ensure that LTD receives the benefits contemplated
by this Agreement and will not price Products in a manner to
minimize, circumvent, evade or attempt to avoid the payment of
royalties to LTD.
9.2 For the Rights granted hereunder, HSNS shall pay LTD as
follows:
(a) Upfront Payment
(1) HSNS will pay upfront $3,000,000 for this
Agreement. The $3,000,000 will be paid by HSNS in installments
of $750,000 over four months with the first installment due
upon the execution of this Agreement and each remaining
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installment due at the end of each successive one month period
thereafter. This Agreement will not be effective until the
first $750,000 payment is made. Except for the first payment,
with respect to these payments, there is a thirty day cure
period before this Agreement terminates, but interest at 8%
per annum will accrue on any late payments. The $3 Million
advance payment is only recoverable from or against 20% of the
royalties as specified in Section 9.2(b)(2) hereof.
(2) After the initial three year term of this
Agreement, HSNS will have the option to renew this Agreement
for an upfront payment per year repayable against royalties of
the greater of (i) $2.5 Million or (ii) 15% of the prior
year's Royalty payments to LTD under this Agreement. This
renewal upfront payment will be paid in six equal monthly
installments, with the first payment being made at the
beginning of the additional term. This upfront payment will be
repaid pursuant to the same formula (i.e., the 70/30 of net)
used in the repayment of the initial $3 Million advance as
stated in Section 9.2(b)(2) hereof.
(b) Royalties.
(1) LTD will receive seven and a half percent (7
1/2%) of the Adjusted Gross Revenue generated relating to,
incorporating, or involving, Summus Products by HSNS outside
of the OEM market. The full amount of this seven and one-half
percent (7 1/2%) will be paid to LTD on a monthly basis, and
there will be no deductions from such royalties.
(2) Royalties for sales of the Streaming Product in
the OEM market will be divided 50/50 of net, with each party
recouping direct costs as documented. Until HSNS recoups the
initial $3 Million payment for the Agreement set forth in
Section 9.2(a)(1) above, the royalty payment shall be split
70/30 of net, with LTD receiving 30%, and the other 20% which
otherwise would be payable to LTD being applied to pay down
the $3 Million. The terms and conditions of any OEM sale not
involving the Streaming Product in which HSNS has involvement,
including the appropriate compensation for HSNS and LTD, will
be determined through reasonable good faith negotiations
between LTD and HSNS on a case by case basis.
All required payments of royalties hereunder shall be due and
payable monthly no later than the fifteenth (15th) day of each
month following the immediately preceding month.
9.3 HSNS shall further pay LTD for any services rendered by LTD in
accordance with any agreement reached pursuant to Section 4
hereof. Any payments for such services shall be due and
payable by HSNS to LTD within fifteen (15) days from the date
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LTD issues an invoice to HSNS for such services, or as may
otherwise be agreed to in writing by HSNS and LTD.
9.4 HSNS shall retain accurate records in accordance with sound
accounting practices to support all payments owed to LTD
hereunder. HSNS will provide LTD, on a monthly basis, a
written account, certified by an authorized officer of HSNS,
of all amounts which may be due to LTD hereunder, which
account shall show in detail the calculations and any relevant
materials or information required to determine such amounts.
This written account shall accompany the payment by HSNS of
such amounts. To the extent no such payment is owed for a
particular month, the written account shall be provided to LTD
no later than the fifteenth (15th) day of the month following
the immediately preceding month showing in detail why no
payment is owed. During the first three months of this
Agreement, in addition to the general rights set forth in
Section 9.5 (and not in limitation thereof), LTD and HSNS
agree that Mr. Dan Stansky (or if replaced his successor) will
participate in the monthly reconciliation for HSNS and will
have access, on a confidential basis, to all of HSNS's records
and information relating thereto, including the records and
information of its affiliates. As part of this process, HSNS
and LTD will agree on appropriate procedures to protect LTD
hereunder and to ensure LTD receives appropriate payment
hereunder. During these three months, HSNS and LTD shall agree
upon the appropriate form of the written account contemplated
by this Section 9.4, as well as what materials or other
information should accompany such account.
9.5 During the term of this Agreement and for a period of two (2)
years after any termination of this Agreement, upon fifteen
(15) business days advance notice by LTD, HSNS shall allow the
employees of LTD (which shall include Mr. Dan Stansky (or if
replaced his successor) and only such employees of LTD which
such officer may reasonably need to provide support and
assistance), an independent accountant appointed by LTD and
any other experts or advisors of LTD (provided, however, that
there shall not be more than three (3) people at any time on
HSNS's premises) access, at all reasonable times during normal
business hours, and on a confidential basis, to HSNS's
business records and information, including the records and
information of its affiliates, for purposes of verifying the
royalties and the performance of HSNS's other obligations
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under this Agreement or the Letter Agreement. The cost of any
audit by any such employees, accountants, experts and advisors
shall be borne by LTD unless the royalties previously paid by
HSNS for any period are less than ninety-four percent (94%) of
the royalties determined by such employees, accountants,
experts or advisors as payable for that period, in which event
HSNS shall immediately reimburse to LTD the costs of such
audit. Unless LTD provides legitimate business reasons to HSNS
in writing, (i) after the initial three month period described
in Section 9.4, LTD shall not be entitled, during the next two
(2) year period, to the above described access more than
quarterly, and (ii) after the two (2) year period described in
(i), LTD shall not be entitled thereafter to the above
described access more than semiannually. Upon the reasonable
request of LTD, HSNS agrees to modify its procedures and
methods of operation to best ensure that LTD properly receives
the benefits contemplated under this Agreement.
9.6 HSNS shall collect, report and pay to the relevant taxing
authority, and indemnify LTD for any liability relating to,
all applicable excise, property, VAT, sales and use, or
similar taxes, any withholding requirement in addition to or
in lieu thereof, and any customs, import, export or other
duties, levies, tariffs, taxes, or other similar charges that
are imposed by any jurisdiction for the transactions
contemplated herein (excluding any taxes based on the net
income of LTD).
9.7 In addition to any other rights or remedies available to a
party hereunder, except as otherwise specifically provided
herein, the other party shall pay interest on any amounts past
due at the rate of eighteen percent (18%) per annum.
10. LIMITED WARRANTY AND REMEDY; INFRINGEMENT AND OBLIGATION TO DEFEND.
10.1 LTD warrants that, for a period of ninety (90) days from the
date that a Product is licensed to an End User or an
Authorized Sublicensee, LTD will correct the computer programs
of the most current edition of a Product if such Product fails
to operate in accordance with the Documentation if LTD is
provided written notice within such ninety (90) day period.
This limited warranty is the sole and exclusive remedy in the
event of the discovery of any such failure or nonconformity in
any Product. LTD makes no warranty that operation of any
Product will be uninterrupted or error free. This limited
warranty shall not apply to (i) changes or modifications made
to any Product other than those made by LTD, or (ii) any
Product used with hardware or operating environments other
than those approved in writing by LTD.
10.2 LTD agrees to indemnify and defend HSNS, its shareholders,
officers, directors and employees and agents and hold them
harmless from and against all claims, and related liabilities,
damages and expenses, arising from the actual or alleged
infringement by any Product of a United States patent or
copyright; provided that HSNS notifies LTD in writing within
five (5) business days of the receipt by HSNS of any such
claim or notice of any such claim and permits LTD upon
request, and at LTD's cost and expense, to assume and control
the defense for settlement thereof. HSNS agrees to cooperate
with LTD in every reasonable manner in the defense of such
claim. In defending or settling any such claim LTD may elect
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to (1) obtain the right of continued use of such Product or
part thereof, which is alleged to be infringing or (2) replace
or modify such Product, or part thereof, so as to avoid such
claim of infringement and HSNS will cease use of the edition
of the Product, or part thereof, which was replaced or
modified. LTD will not be obligated to defend or settle any
such claim of infringement resulting from HSNS's or any other
parties additions to, changes in, or modifications of a
Product, or resulting from HSNS's use of any Product in
combination with materials other than the Third Party
Materials.
The foregoing provisions constitute LTD's sole liability, and
HSNS's sole recourse, in the event of any infringement of
third-party rights by the Products.
11. DISCLAIMER OF WARRANTIES AND ASSURANCES.
11.1 EXCEPT AS PROVIDED IN SECTION 10 HEREOF, LTD MAKES AND HSNS
RECEIVES NO WARRANTIES OF ANY KIND (WHETHER, EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE, OR WHETHER IN ANY PROVISION OF THIS
AGREEMENT OR ANY OTHER COMMUNICATION OR OTHERWISE), AND LTD
SPECIFICALLY DISCLAIMS ANY WARRANTY OF TITLE, MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
11.2 IT IS MUTUALLY ACKNOWLEDGED THAT NEITHER PARTY HAS GIVEN ANY
ASSURANCE TO THE OTHER CONCERNING THE RESULTS, PROFITABILITY
OR SUCCESS OF ANY MARKETING EFFORT WHICH HSNS MAY UNDERTAKE.
11.3 HSNS understands and agrees that use of or connection to the
internet is inherently insecure and that connection to the
internet provides opportunity for unauthorized access by a
third party to HSNS's or any End User's or Authorized
Sublicensee's computer systems, networks, and any and all
information stored therein. ALL INFORMATION TRANSMITTED AND
RECEIVED THROUGH THE INTERNET CANNOT BE EXPECTED TO REMAIN
CONFIDENTIAL AND LTD CANNOT AND DOES NOT GUARANTEE THE
PRIVACY, SECURITY, AUTHENTICITY, OR NONCORRUPTION OF ANY
INFORMATION SO TRANSMITTED, OR STORED IN ANY SYSTEM CONNECTED
TO THE INTERNET. LTD SHALL NOT BE RESPONSIBLE FOR ANY ADVERSE
CONSEQUENCES WHATSOEVER OF HSNS'S OR ANY END USER'S OR
AUTHORIZED SUBLICENSEE'S CONNECTION TO OR USE OF THE INTERNET,
AND LTD SHALL NOT BE RESPONSIBLE FOR ANY USE BY HSNS OR ANY
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END USER OR ANY AUTHORIZED SUBLICENSEE OF ANY INTERNET
CONNECTION IN VIOLATION OF ANY LAW, RULE OR REGULATION OR ANY
VIOLATION OF THE INTELLECTUAL PROPERTY RIGHTS OF ANOTHER.
12. LIMITATION OF LIABILITY.
12.1 LTD'S LIABILITY FOR ANY AND ALL DAMAGES SHALL BE LIMITED TO
THE EXCLUSIVE REMEDY SET FORTH IN SECTION 10.
12.2 UNDER NO CIRCUMSTANCES SHALL LTD BE LIABLE UNDER THIS
AGREEMENT OR THE LETTER AGREEMENT FOR ANY INCIDENTAL,
INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF HSNS OR ANY
OTHER PERSON, INCLUDING, BUT NOT LIMITED TO, LOST SAVINGS OR
PROFITS.
12.3 THE PARTIES HEREBY AGREE THAT THE LIMITATIONS OF LIABILITY AND
EXCLUSION OF CERTAIN DAMAGES SET FORTH IN SECTION 12.2 WILL
SURVIVE AND SHALL APPLY REGARDLESS OF THE SUCCESS OR
EFFECTIVENESS OF OTHER REMEDIES CONTAINED HEREIN, INCLUDING
THE TOTAL FAILURE OR FAILURE OF ESSENTIAL PURPOSE OF THE
LIMITED REMEDY SET FORTH IN SECTION 10.
12.4 HSNS ACKNOWLEDGES THAT LTD HAS SET ITS FEES, AGREED TO THE
ROYALTY PROVISIONS AND ENTERED INTO THIS AGREEMENT AND THE
LETTER AGREEMENT IN RELIANCE UPON THE LIMITATIONS OF LIABILITY
AND THE DISCLAIMERS OF WARRANTIES AND DAMAGES SET FORTH IN
THIS AGREEMENT, AND THAT THE SAME FORM AN ESSENTIAL BASIS OF
THE BARGAIN BETWEEN THE PARTIES.
13. INDEMNIFICATION . HSNS agrees to indemnify LTD, its shareholders, officers,
directors and employees and agents and hold them harmless from and against any
and all claims, liabilities, damages and expenses (including reasonable
attorneys' fees) (a) asserted by any End User or any Authorized Sublicensee in
excess of the limitations set forth in this Agreement or the applicable proper
form of a License Agreement or Sublicense Agreement if such claims, liabilities
or damages result from a failure by HSNS to enter into the proper form of a
License Agreement or Sublicensee Agreement or other failure by HSNS to comply
with this Agreement or (b) arising out of or resulting from (i) HSNS's or any
Authorized Sublicensee's false or misleading advertising in connection with any
of the Products licensed by HSNS or its Authorized Sublicensees, (ii) any
violation of any applicable law or regulation in connection with the marketing,
distribution, license, advertisement or promotion of any of the Products, or
(iii) any use of the Products or actions, statements, or representations of HSNS
or its Authorized Sublicensees not authorized by this Agreement.
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14. NOTICES. All notices or other communications to be given hereunder
shall be in writing and delivered personally, by telecopy (confirmation
by air mail), or by commercial overnight courier (second day courier in
the case of international dispatch), courier charges prepaid, and
addressed to the appropriate party as set forth below.
If to HSNS: High Speed Net Solutions, Inc.
4542 S. Peninsula Drive
Ponce Inlet, FL 32127
ATTN: Michael Cimino, President
Telecopy No: (904) 767-3035
With a Copy to: High Speed Net Solutions, Inc.
P. O. Box 21237
Daytona Beach, FL 32115
Telecopy No: (954) 484-9664
If to LTD: Summus, LTD.
2000 Center Point Road, Suite 2200
Columbia, SC 29210
ATTN: Dr. Bjorn Jawerth
Telecopy No: 803-750-5679
With a Copy to: Summus, LTD.
2000 Center Point Road, Suite 2200
Columbia, SC 29210
ATTN: Dan Stansky
Telecopy No: 803-750-5679
Notices delivered personally shall be effective upon delivery and
notices delivered by mail shall be effective upon their receipt by the
party to whom they are addressed.
15. ASSIGNMENT.
15.1 If either party (a "Transferring Party") provides the other party thirty
(30) days advance written notice, the Transferring Party may assign or otherwise
transfer this Agreement and the Letter Agreement to an Equivalent Entity. For
purposes of this Section, an Equivalent Entity is an entity the ownership of
which is not materially different from the Transferring Party and the financial
condition of which is equivalent to or better than the Transferring Party. The
other party shall have the right to request, and the Transferring Party shall
provide within five (5) days, any information reasonably necessary to confirm
and establish that any proposed transferee is an Equivalent Entity.
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15.2 In addition, HSNS may transfer this Agreement and the Letter Agreement in
connection with a sale of HSNS provided that (a) the transferee agrees in
writing to assume all the obligations of HSNS hereunder and to be bound by the
terms and conditions of this Agreement; (b) the assignee is an entity that is
capable of performing under this Agreement and is not a direct competitor of
LTD; and (c) LTD receives a nonrefundable cash payment of the greater of (i) $10
Million or (ii) 15% of the prior year's royalties paid under this Agreement.
15.3 Except as set forth in this Section, neither this Agreement nor the Letter
Agreement can be assigned or otherwise transferred by either HSNS or LTD without
the written consent of the other party, which consent shall not be unreasonably
withheld.
16. COMPLIANCE WITH LAWS.
16.1 The parties shall in the performance of this Agreement comply
with all applicable laws, executive orders, regulations,
ordinances, rules, proclamations, demands and requisitions of
national governments or of any state, local or other
governmental authority which may now or hereafter govern
performance hereunder.
16.2 HSNS shall, at its own expense, comply with all laws relating
to the marketing, distribution or licensing of the Products,
and shall procure all licenses and pay all fees and other
charges required thereby.
16.3 Notwithstanding anything in this Agreement to the contrary, it
is acknowledged and agreed that neither LTD nor HSNS may ship,
export or re-export the Products or Documentation, or any
other information, process, product or service obtained
directly or indirectly from LTD, to any country or entity
which is the subject of any prohibition imposed by the U.S.
Export Administration Act of 1979, U.S. Executive Orders, the
U.S. Department of Commerce, and the North Atlantic Treaty
Organization. HSNS understands that, if such a prohibition
applies and an export license cannot be obtained with
reasonable effort, the disclosure or delivery of the Products
and Documentation may not occur. To assure compliance, HSNS
agrees to notify LTD of each prospective End User as soon as
possible so that LTD can evaluate whether prohibitions may
apply or export licenses may be available. HSNS shall be
responsible for all of the costs to obtain any export
licenses.
17. INSURANCE. Each party shall include the other party as a named
beneficiary for purposes of any product liability or general liability
insurance that may cover claims or liabilities with which the other
party could be charged because of personal or property damage or
injuries suffered by any person or entity, or any other liability,
resulting from the Products or the use or license thereof. Each party
shall provide the other party with evidence satisfactory to the other
party of such insurance.
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18. INDEPENDENT CONTRACTOR. Each party hereto shall be and remain an
independent contractor; nothing herein shall be deemed to constitute
the parties as partners, and neither party shall have any authority to
act, or attempt to act, or represent itself, directly or by
implication, as an agent of the other or in any manner assume or
create, or attempt to assume or create, any obligation on behalf of or
in the name of the other, nor shall either by deemed the agent or
employee of the other.
19. SEVERABILITY. If any court should find any particular provision of this
Agreement void, illegal, or unenforceable, then that provision shall be
regarded as stricken from this Agreement and the remainder of this
Agreement shall remain in full force and effect.
20. PUBLICITY; ANNOUNCEMENTS. Neither party shall, except as may be
required by law or federal regulation, or except with the prior written
permission of the other party, publicly advertise or otherwise disclose
the terms or conditions of this Agreement or the Letter Agreement. All
public announcements by HSNS, including but not limited to press
releases, mentioning or relating to LTD, including any announcements
concerning LTD, LTD's technology or its business or business
relationships, shall be approved in writing by Bjorn Jawerth or his
written designee prior to their being made or issued. If any
announcement is properly sent to Bjorn Jawerth's attention at LTD, and
he does not respond within two business days, then HSNS shall be free
to make such announcement without his written approval as set forth in
the information provided to Bjorn. All such announcements shall be
accurate and complete and take into consideration the business and
other concerns of LTD.
21. NOTICE OF DELAY. Whenever any occurrence is delaying or threatens to
delay either party's timely performance under this Agreement, that
party shall promptly give notice thereof, including all relevant
information with respect thereto, to the other party.
22. GOVERNING LAW: COUNTERPARTS. This Agreement and the Letter Agreement
shall be governed by and construed and enforced in accordance with the
laws of the United States of America and the State of South Carolina,
without regard to conflict of law provisions. This Agreement is entered
into in the United States of America, all funds shall be paid to LTD in
U.S. dollars in the United States of America, and nothing herein shall
be construed to require LTD to do business or maintain any office of
business establishment outside the United States of America. This
Agreement may be executed in any number of counterparts, each of which
together shall constitute one and the same instrument.
23. NO THIRD PARTY RIGHTS. Notwithstanding anything else in this Agreement to
the contrary, the End Users and Authorized Sublicensees of HSNS shall not have
any right or otherwise be entitled to assert any claim against LTD under this
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Agreement as a third party beneficiary or otherwise, and LTD shall have no duty
or responsibility in connection with this Agreement to any such End User or
Authorized Sublicensee.
24. ENTIRE AGREEMENT; WAIVER.
24.1 This Agreement together with the Letter Agreement,
constitutes the entire agreement between the parties with
respect to the subject matter hereof and shall supersede all
previous proposals, negotiations, representations,
commitments, writings, agreements and other communications,
both oral and written, between the parties. In this
connection, the parties agree that this Agreement and the
Letter Agreement supersede that certain Letter Memorandum
Agreement between LTD, Summus Technologies, Inc. and Brad
Richdale Direct, Inc. and such agreement is hereby terminated.
All Addenda, attachments and exhibits referred to as
accompanying this Agreement are hereby incorporated in and
made part of this Agreement. This Agreement may not be
released, discharged, changed or modified except by an
instrument in writing signed by a duly authorized
representative of each of the parties (other than changes to
the Exhibits by LTD as expressly contemplated by this
Agreement). The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or
interpretation hereof.
24.2 A waiver by either party of its rights hereunder shall
not be binding unless contained in a writing signed by an
authorized representative of the party waiving its rights. The
non-enforcement or waiver of any provision on one occasion
shall not constitute a waiver of such provision on any other
occasions unless expressly so agreed in writing. It is agreed
that no usage of trade or other regular practice or method of
dealing between the parties hereto shall be used to modify,
interpret, supplement or alter in any manner the terms of this
Agreement or the Letter Agreement.
25. SURVIVAL OF PROVISIONS. In addition to the rights and obligations which
survive as expressly provided for elsewhere in this Agreement, the Sections and
Addenda which by their nature should survive (including, without limitation,
Sections 6.2, 6.3, 6.5, 8, 9, 11, 12, 13, 14, 16, 17, 20, 22 and 23) shall
survive and continue after any termination or cancellation of this Agreement. In
the event that this Agreement is terminated pursuant to Section 26, the license
rights granted under Section 2.1(b) shall also survive any such termination as
well as any other provisions which by their nature should survive to give effect
to the responsibilities, obligations and rights of the parties relating to such
license rights.
26. TERMINATION.
26.1 If any payment required by Section 9.2(a)(1) hereof is not
timely made (taking into consideration any applicable cure
period and required notice relating thereto) this Agreement
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may be terminated by LTD. In addition, unless a renewal
payment is made in accordance with Section 9.2(a)(2) hereof,
this Agreement shall terminate on February 23, 2002 (or, if
renewed, following the initial three year term of this
Agreement, this Agreement shall terminate when an upfront
renewal payment that is due in accordance with Section
9.2(a)(2) is not made).
26.2 Without limiting Section 26.1 regarding LTD's ability to
terminate this Agreement, the exclusive Rights granted under
this Agreement may be terminated by LTD, and shall become
nonexclusive rights, if HSNS fails to perform its obligations
under this Agreement or under the Letter Agreement in any
material respect; provided, however, that LTD notifies HSNS of
such breach and gives HSNS, in the case of a failure to make
any payment required under this Agreement or under the Letter
Agreement thirty (30) days, and in all other cases ninety (90)
days, to cure such breach.
26.3 Any rights under this Section 26 are in addition to and
without prejudice to any right or remedy otherwise existing
under this Agreement or at law in respect of any breach of
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
Summus, LTD. High Speed Net Solutions, Inc.
By:______________________________ By:______________________________________
Title:___________________________ Title:___________________________________
Date:____________________________ Date:____________________________________
Brad Richdale Direct, Inc. (which is a party hereto solely for the purposes of
Section 24 hereof).
By:______________________________
Title:___________________________
Date:____________________________
Summus Technologies, Inc. (which is a party hereto solely for the purpose of
Section 24 hereof).
By:______________________________
Title:___________________________
Date:____________________________
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APPENDIX A
DEFINITIONS
-----------
"Adjusted Gross Revenue" shall mean the total amount of funds actually received
by HSNS (excluding postage and handling, C.O.D. charges, sales, value added and
other taxes) relating to the Products minus returns, chargebacks, cancellations,
undeliverables and bad debt.
"Agreement" shall mean this Marketing License Agreement.
"Authorized Sublicensee" means any person who has executed a Sublicense
Agreement approved in writing by LTD and HSNS.
"Changes" means Revisions, Enhancements and Upgrades to any Product or the
Documentation, if any, including translations into foreign languages used in the
Territory.
"Confidential Information" shall mean any competitively sensitive or secret
business, marketing or technical information of a Disclosing Party. (References
to the "Disclosing Party" and the "Recipient" are defined in Section 8). The
Disclosing Party shall take reasonable steps to call the Recipient's attention
to the confidentiality of its Confidential Information at the time of
disclosure, including by legending as "Confidential" documentation and media
containing Confidential Information, and summarizing in writing oral disclosures
of Confidential Information so the summaries are provided following disclosure
as evidence of the Confidential Information that has been imparted. In all
cases, however, LTD's Confidential Information shall include the Products (in
Object Code and Source Code form) and Documentation, including all Changes and
derivative works or translations thereof. Confidential Information shall not
include, however, information which (i) is generally known to the public or
readily ascertainable from public sources (other than as a result of a breach of
confidentiality by the Recipient or any person or entity associated with the
Recipient), (ii) is independently developed without reference to or reliance on
any Confidential Information of the Disclosing Party, as demonstrated by written
records in the Recipient's possession (which shall be provided to the Disclosing
Party at the Disclosing Party's request), or (iii) is obtained from an
independent third party who created or acquired such information without
reference to or reliance on Confidential Information of the Disclosing Party, as
demonstrated by written records in the Recipient's possession (which shall be
provided to the Disclosing Party at the Disclosing Party's request).
"DLL" shall mean, with respect to each Product listed on Exhibit A, Part 1, the
functions and data in the dynamic-link libraries of LTD which have been utilized
by LTD to create such Product.
"Documentation" means the technical and operating documentation and
specifications relating to a Product provided to HSNS by LTD for HSNS to provide
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to End Users and Authorized Sublicensees and attached hereto as Exhibit B, as
amended or supplemented from time to time in writing by LTD.
"End User" shall mean any person who has executed a License Agreement.
"Enhancement" means improved performance to the existing functionality for any
portion of a Product owned by LTD that has been released to HSNS, which does not
constitute a material change in the Product or its programs.
"Government Sector" shall be defined in the traditional sense to include
national government agencies worldwide (excluding state, county, local and other
similar governmental agencies) and government contractors, but only to the
extent the government contractor is actually dealing with such a government.
"HSNS" shall mean High Speed Net Solutions, Inc. (formerly known as zzap.net,
inc.), a Florida corporation.
"Letter Agreement" shall mean the Letter Agreement dated January 14, 1999, among
LTD, Summus Technologies, Inc., a Delaware corporation, HSNS and Brad Richdale.
"License Agreement" means a license agreement directly between an End User and
HSNS containing terms and conditions in substantially the form of Exhibit C
hereto. LTD and HSNS shall, subsequent to the date hereof and prior to entering
into any particular License Agreement, agree in writing on the form or forms of
scope of use, pricing and other provisions of such form of License Agreement,
which are identified in such form as subject to variation or subsequent approval
by the parties, and periodically agree in writing on any changes to the standard
form of the License Agreement. The License Agreement shall in all cases contain
provisions acceptable to LTD regarding scope of use, confidentiality, ownership
by LTD of the Products and Documentation and protection of all applicable
intellectual property rights, limited warranties and remedies, limitation of
liability, and provisions permitting the End User to use the Products only for
its own internal operations. The parties acknowledge and agree that the form of
License Agreement set forth in Exhibit C must be modified (particularly the
scope of use rights) for use in connection with the license of the right (as set
forth in Exhibit A, Part 2) to create a product utilizing the DLL which product
cannot have any more functionality or uses or applications than any single
Product of the Products listed on Exhibit A, Part 1. The parties shall,
subsequent to the date hereof, agree in writing on the form or forms of License
Agreements for the license relating to the use of the DLL to create such a
product and prior to entering into each such License Agreement, HSNS shall
obtain LTD's prior written approval of the final form of such License Agreement,
which approval shall not be unreasonably withheld. No License Agreement shall be
effective, and no license to use a Product shall be valid, unless a License
Agreement has been signed by HSNS and the End User or HSNS has received
confirmation that End User agrees to be bound by the terms of the License
Agreement pursuant to a method consistent with current industry practice for the
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distribution and license of software by means similar to the distribution of the
Products. HSNS agrees to consult with LTD in advance and obtain LTD's written
approval for any method of licensing of the Products to End Users in a form
other than by written agreement.
"LTD" shall mean Summus, LTD., a Missouri corporation.
"Object Code" shall mean the machine executable form or forms of a Product which
results from the compilation and/or assembly of Source Code. LTD shall have the
right to specify the form of the Object Code to be provided to any category or
categories of End Users or Authorized Sublicensees.
"Products" shall mean any and all services and/or products which incorporate or
utilize the technology which currently is being, or has been, or will be
developed by LTD, including Revisions, Enhancements and Upgrades, together with
the Documentation thereof. Such Products are and shall be identified in Exhibit
A hereto, as amended or supplemented in writing from time to time by LTD. The
Products shall be provided to HSNS in only Object Code form. The Products shall
include all Changes, if any, provided to HSNS, End Users or Authorized
Sublicensees by LTD.
"Rights" shall have the meaning set forth in Section 2.1 of this Agreement.
"Revision" means a change made in a Product to correct errors or defects in the
Product or to make the Product conform to LTD's then current Documentation.
"Source Code" shall mean the version of a Product in symbolic programming
language(s) employed by LTD to develop the Product which when compiled and/or
assembled is transformed into an Object Code form of the Product.
"Sublicense Agreement" means a sublicense agreement directly between an
Authorized Sublicensee and HSNS containing terms and conditions substantially
similar to this Agreement granting an Authorized Sublicensee the right to grant
Rights to the Products to End Users pursuant to a License Agreement. The parties
acknowledge and agree that the terms of a Sublicense Agreement must be modified
from the terms of this Agreement for use in connection with the license of the
right (as set forth in Exhibit A, Part 2) to create a product utilizing the DLL
which product cannot have any more functionality or uses or applications than
any single Product of the Products listed on Exhibit A, Part 1. The terms and
conditions of any Sublicense Agreement must be approved in advance in writing by
LTD and HSNS and prior to entering into each Sublicense Agreement, HSNS shall
obtain LTD's prior written approval of the final form of such Sublicense
Agreement, which approval shall not be unreasonably withheld. In this
connection, HSNS will use all reasonable efforts to protect the legitimate
interests of LTD (including the ownership by LTD of the Products and associated
intellectual property rights and the rights to receive royalties consistent with
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the intent of this Agreement and the Letter Agreement (and to verify those
royalties)) in selecting Authorized Sublicensees and, if mutually agreed,
negotiating Sublicense Agreements.
"Territory" means anywhere in the world. It is agreed and acknowledged that LTD
reserves the right to condition licenses granted in the Territory, or make
adjustments to the Products or Documentation licensed in the Territory, to the
extent advisable in LTD's judgment to protect LTD's intellectual property rights
and upon providing HSNS with specifically stated reasons in reasonable detail
for such conditions or adjustments. Such conditions or adjustments may include
disabling codes with expiration dates of short duration, limitation of
installation to urban areas or specified regions, exclusion of development
tools, compliance with local laws at HSNS's or the End User's expense, special
signature, insurance or indemnity requirements, special audit requirements,
and/or reasonable standards for all in-country use of the Products and
Documentation.
"Upgrade" shall mean changes (if any) made in any Product to permit the Product
to be used and to operate properly with versions of an operating system that are
supported by LTD or a release of a Product subsequent to the initial delivery in
which LTD has incorporated accumulated Revisions or Enhancements, together with
new or revised Documentation which properly describes the updated Product.
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EXHIBIT A
1. DESCRIPTION OF PRODUCTS
--------------------------
The Streaming Product, Video Mail Product (Release 1.0), and 4U2C Product as
further identified and specified in the Documentation on Exhibit B hereto.
As and when developed and completed, the contemplated Video Conferencing Product
currently in process of development shall also be a Product hereunder and at
such time as such Product is developed and completed, LTD will supplement this
Exhibit to add such Product and supplement Exhibit B to add the related
Documentation.
As and when completed, the contemplated Release 2.0 of the Video Mail Product
currently in process of completion shall be an Upgrade to an existing Product
hereunder and at such time as such Release 2.0 is completed, LTD will supplement
this Exhibit to add such Release 2.0 as an Upgrade and supplement Exhibit B to
add the related Documentation.
2. ADDITIONAL LICENSE RIGHTS
----------------------------
In addition to the Products listed above, HSNS may license to End Users and
Authorized Sublicensees, in accordance with the terms and conditions of this
Agreement, the right to create a product utilizing the DLL which product cannot
have any more functionality or uses or applications than any single Product of
the Products listed above in Part 1, pursuant to a License Agreement or
Sublicensee Agreement, each of which must be agreed to in advance in writing by
LTD. Although the DLL is not a Product, the foregoing additional license rights
shall be included in the definition of Product hereunder.
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EXHIBIT B
DOCUMENTATION
-------------
The Documentation for the Streaming Product, Video Mail Product (Release 1.0)
and 4U2C Product is attached hereto.
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EXHIBIT C
FORM OF LICENSE AGREEMENT
-------------------------
The attached form of License Agreement contains the required terms for the
License Agreement.
26
<PAGE>
EXHIBIT D
THIRD PARTY MATERIALS
---------------------
See Exhibit B. The Documentation for each Product as listed in Exhibit B lists
any Third Party Materials for such Product.
27
<PAGE>
EXHIBIT E
EXISTING LICENSING/MARKETING AGREEMENTS:
----------------------------------------
To the best of LTD's knowledge, after due diligence and investigation,
the existing licensing/marketing agreements are as attached hereto.
HSNS shall cooperate with LTD, and permit LTD to amend this Exhibit, to
the extent that additional existing licensing/marketing agreements are
identified after the date hereof which do not unreasonably interfere with HSNS's
rights hereunder.
<TABLE>
<CAPTION>
EXHIBIT E
---------
AGREEMENT TYPE COMPANY NAME DATE
- -------------- ------------ ----
<S> <C> <C>
IDV Adobe Systems, Inc. 6/15/96
MDI Adobe Systems, Inc. 9/26/97
NDA Applied Communications Concerts, Inc. 3/11/96
PDA Ball Corp. 9/7/94
CA Base-Ten Systems Inc. 9/2/94
PDA BellSouth 10/6/95
NDA Booz-Allen & Hamilton Inc. 10/18/95
NDA Cambridge Parallel Processing Ltd. 11/5/95
CNCA Carolina First 5/14/98
NDA CBI Microsystems 7/29/97
NDA Century Business Services 3/2/98
PLA Chori America Inc. 5/15/98
SLA Clorepo Inc. 12/4/95
PLA Compaq Computer Corp. 2/21/97
Compression Systems 10/16/96
NDA CompuServe 3/15/96
SLA Computer Presentations Inc. 3/15/93
LMA Computer Presentations Inc. 12/9/94
SLA Concept Corp. 10/17/96
NDA Concurrent Computers 2/17/98
NDA Connectix Corp. 7/18/96
PDA Continuum Technology Corp. 8/17/95
PDA Conversant Systems 8/1/94
NDA Corel Corp. 1/19/96
SLA Corel Corp. 4/24/96
NDA CRYPTEK Secure Communications 3/31/98
NDA Cycore Computers 11/1/97
1
<PAGE>
AGREEMENT TYPE COMPANY NAME DATE
- -------------- ------------ ----
LA DANA Commercial Credit 3/9/95
NDA Danzell Investment Management Co. 2/23/98
PLA Digital Equipment Corp. 7/24/97
PLA Digital Equipment Corp. 1/15/98
NDA Eastman Kodak Co. 10/29/97
NDA EDI of S.C. 7/11/97
PDA Envisage Systems Ltd. 1/29/96
LA Ervin Leasing Co. 10/23/95
NDA Fiber & Wireless Inc. 12/11/96
MOU/NDA Fiber & Wireless Inc. 8/11/97
NDA Friedman, Billings, Ramsey & Co. Inc. 2/3/98
SLA FujiFilm 4/7/97
NDA Fuji Medical Systems 8/6/97
SLA The Great Human Infocom 9/22/97
PDA Harris Corp. 1/19/94
NDA Harris Corp. 2/20/95
LA Harris Corp. 12/11/96
SLA Harris Corp. 2/24/97
NDA HAWA Communications Inc. 2/25/98
PNDA HDS 12/7/94
SLA HDS 5/11/95
NDA I/O Software Inc. 4/9/97
SLA IBM 11/30/95
LA Idmatics 12/8/97
NDA Image Data LLC 9/16/97
PDA Image etc. 10/2/95
SLA Image etc. 1/8/96
SLA Infogrames 3/15/96
NDA Information Sciences Group Inc. 7/23/97
NDA InMedia Presentations Inc. 6//9/97
SLA InMedia Presentations Inc. 7/2/97
NDA InSoft Inc. 4/24/96
NDA Infomedia Inc. 8/27/97
SLA Integrated Computing Engines Inc. 12/19/96
TRA Integrated Computing Engines Inc. 2/7/97
TRA Integrated Computing Engines Inc. 2/7/97
TRA Integrated Computing Engines Inc. 2/24/97
NDA Integrated Computing Engines Inc. 9/10/97
NDA Iomega 11/3/97
NDA Iomega 11/10/97
PDA ION Corp. 4/9/96
NDA IPIX 2/18/98
2
<PAGE>
AGREEMENT TYPE COMPANY NAME DATE
- -------------- ------------ ----
MOU Kinsey, Vincent, Pyle P.A. 3/6/98
NDA Ledge Multimedia 8/25/97
NDA LG Electronics 4/29/96
NDA Live Pix Co. 5/15/97
NDA McDonnell Douglas Corp. 5/11/92
PDA Magnavox 7/1/93
RDA Magnavox 4/11/94
PDA Magnavox 5/26/94
SBA Magnavox 10/21/94
MOU Magnavox 1/13/95
LA Magnavox 8/11/95
NDA Medison 10/29/97
PNDA MEGA International Services Inc. 8/26/96
NDA Megahertz Corp. 11/7/94
NDA MicroSoft Corp. 11/7/96
LA Mitre Corp. 12/10/97
DA Motorola 8/16/95
PDA National Access 1/29/96
PDA Naval Undersea Warfare Center 9/21/95
PDA NBS 12/14/95
PNDA Odectics/Gyyr Inc. 12/1/95
NDA Old Dominion Funding Group 5/14/98
NDA Omni Vision Technologies Inc. 12/18/97
PDA OptiMed Tech 10/12/95
PDA Origin Ltd. 3/5/96
TPSA Panasonic Technologies Inc. 4/3/98
LA PassTech Inc. 8/11/97
SA PEN-TECH Associates Inc. 9/18/95
BNDA Philips Semiconductors 12/8/98
PNDA Photo Telesis Corp. 9/7/94
CA Prodigy Services Co. 7/27/95
PDA PROSTAR 2/1/96
MOU Prosolvia Research & Technology 4/9/97
Trm. Agrmnts. Pyrotechnix Inc. 2/28/96
Trm. Contrcts. Pyrotechnix Inc. 4/18/96
SLA Raytheon Co. 2/23/95
PDA Raytheon TI Systems Inc. 10/28/97
PLA Raytheon TI Systems Inc. 3/4/98
PDA Rockwell International 8/11/95
NDA SATC 10/8/97
PDA SCRA 7/18/95
NCNDCA Law Offices of Paresh Shah 5/20/98
3
<PAGE>
AGREEMENT TYPE COMPANY NAME DATE
- -------------- ------------ ----
NCNDCA Law Offices of Paresh Shah 5/20/98
PDA Seaside Consulting 3/4/96
SLA SEMS 7/11/96
NDA Sonetech Corp. 4/4/97
MOU Sonetech Corp. 8/12/97
NDA Surgical Navigation Technologies 2/6/98
LMA Symbol Technologies Inc. 9/17/96
ADS Symbol Technologies Inc. 7/22/97
NDA Tactics US 5/22/98
NDA Texas Gilbert Co. Inc. 2/19/98
SLA 3D Cubed 12/1/97
USC 8/26/93
Research Arg. USC 7/21/97
USC 11/21/97
NDA Verinet Inc. 9/12/97
Settlmnt. Arg. Verinet Inc. 5/5/98
CA Virtual Resources Inc. 2/5/98
LMA Voxware Inc. 5/6/98
LMA Waite Group Inc. 7/15/96
NDA White Pine Software 12/4/96
LOI White Pine Software 3/6/97
NDA Winnov 11/1/96
TRA Winnov 4/5/97
NDA William K. Woodruff & Co. Inc. 2/5/98
DDA Visualmail Systems Inc. 10/31/97
CA WorldScape L.L.C. 11/12/96
NDA WorldScape L.L.C. 7/15/97
NDA Xaos Tools 10/16/97
NDA Kalman Barson 5/15/98
NDA James Bellew 2/24/98
Manufactures Sales Jim Burch 8/10/94
Agent Agreement
NDA Knox Carey 5/20/98
Receipt for Gary Hewer 11/5/96
Software
Acknowledgement
Technical Rights Martin Lindberg 5/26/97
Agreement
NDA Michael Myrick 5/28/98
NDA Abe Ostovsky 2/13/98
NDA Andy Prokop
NDA Fritz Reichert 2/12/98
4
<PAGE>
AGREEMENT TYPE COMPANY NAME DATE
- -------------- ------------ ----
NDA B.W. Stuck 2/8/98
LMA Telia
LMA World Connect
LMA ICC
LMA BARAKA Intra Com
</TABLE>
5
<PAGE>
KEY:
- ---
ADS Agreement for Development Services
BNDA Bilateral Non-Disclosure Agreement
CA Confidentiality Agreement
CNCA Confidentiality and Non-Competition Agreement
DDA Development and Distribution Agreement
IDV Agreement for Receipt of Confidential Information
LA Lease Agreement
LMA License and Marketing Agreement
MDI Mutual Disclosure of Information
MOU Memorandum Agreement
NCNDCA Non-Circumvention, Non-Disclosure, and Confidentiality Agreement
NDA Non-Disclosure Agreement
PDA Proprietary Information Agreement
PLA Product Loan Agreement
PNDA Proprietary Non-Disclosure Agreement
RDA Research and Development Agreement
SA Sales Agreement
SBA Special Bailment Agreement
SLA Software License Agreement
Stt.A Settlement Agreement
TPSA Temporary Personnel Services Agreement
TRA Technical Rights Agreement
6
FIRST AMENDMENT TO MARKETING LICENSE AGREEMENT
This First Amendment to the Marketing License Agreement (the "MLA") by and
between Summus, Ltd. ("LTD") and High Speed Net Solutions, Inc. ("HSNS") is made
and entered into as of the 16th day of August, 1999.
1. The MLA is hereby amended to provide that the initial three year term of the
MLA ends three years from June 15, 1999. Accordingly, the second sentence of
Section 26.1 is hereby amended by changing "February 23, 2002" to read "June
15, 2002". Any reference in the MLA to the initial three year term of the
MLA shall mean the three year term ending June 15, 2002.
2. This Amendment shall become effective upon the consummation of the merger of
Summus, Ltd. and Summus Technologies, Inc. If the merger is not consummated,
then this Amendment shall be null and void and of no force or effect.
3. Except as otherwise specifically modified herein the remaining terms of the
MLA, as amended, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have signed this First Amendment to the
MLA as of the date first above written.
SUMMUS, LTD.
By: /S/ Bjorn Jawerth
-----------------------------------------
Its: President
-----------------------------------------
HIGH SPEED NET SOLUTIONS, INC.
By: /s/ Michael M. Cimino
-----------------------------------------
Its: Chairman
-----------------------------------------
Mr. Bradford J. Richdale
864 John Anderson Drive
Ormond Beach, FL 32176
Michael M. Cimino
President, Zapp.net, Inc.
2570 West International Speedway Blvd.
Daytona Beach, FL 32114
Dear Brad and Michael:
This letter confirms our agreement relating to Summus, Ltd. and Summus
Technologies, Inc. As we discussed, we have agreed to the following:
1. Brad Richdale personally will lend $250,000 in cash in immediately
available funds to Summus Ltd. upon the execution of this agreement.
Contemporaneously with payment of this $250,000 to Summus Ltd., Summus
Ltd. will execute a convertible note for the $250,000. The note will
bear interest at 8% per annum and will be payable from the first
$750,000 payment regarding the Marketing Agreement referred to in
Section 2 below. If this note is not repaid when due, you will have the
option to convert it into 0.9% of the issued and outstanding shares of
Summus Ltd. common stock. It is understood that the $250,000 will be
used by Summus, Ltd. primarily to fund its operating expenses.
2. Summus, Ltd. and High-Speed Net Solutions, Inc., currently named
Zzap.net, Inc. ("Net Solutions") will enter into a Marketing License
Agreement (the "Marketing Agreement") no latter than 40 days from the
execution of this agreement. This Marketing Agreement will contain
non-business terms and conditions substantially similar to the final
draft of the Marketing License Agreement from December 10, 1998,
relating to the previous ZAP transaction (the "Previous Agreement"). In
this regard, Net Solutions will have the sublicense rights specified in
and in accordance with the Previous Agreement. The basic business terms
of the Marketing Agreement will be as follows:
a. An initial three year term. After the initial three year term,
Net Solutions will have the option to renew the Marketing
Agreement for an upfront payment per year repayable against
royalties of the greater of (i) $2.5 Million or (ii) 15% of
the prior year's royalty payments to Summus, Ltd. under the
Agreement. The $2.5 Million will be paid in four equal monthly
installments, with the first payment being made at the
beginning of the additional term. This upfront payment will be
repaid pursuant to the same formula used in the repayment of
the initial $3 Million advance as stated in Section 2b hereof.
<PAGE>
b. Net Solutions will have an exclusive right to sell the video
streaming product as such product was defined in the Previous
Agreement, except for the government market. Summus, Ltd. will
also have the right to market the video streaming products in
the OEM market. OEM video streaming sales royalties will be
divided 50/50 of net, with each party recouping direct costs
as documented. Until New Solutions recoups the initial $3
Million payment for the Marketing Agreement, the royalty
payment shall be split 70/30 of net, with Summus, Ltd.
receiving 30%, and the other 20% which otherwise would be
payable to Summus, Ltd. being applied to pay down the $3
Million. Summus, Ltd. retains the exclusive rights to sell the
video streaming product in the government market.
c. Net Solutions will have a non-exclusive license to sell the
other products, including newly developed products, of Summus,
Ltd. as defined in the previous Agreement.
d. Summus, Ltd. will receive seven and a half percent (7 1/2%) of
the Adjusted Gross Revenue (as defined in the Binding Letter
Agreement dated October 28, 1998) generated relating to Summus
products by Net Solutions outside of the OEM market. The full
amount of this seven and one-half percent (7 1/2%) will be
paid to Summus, Ltd. on a monthly basis, and there will be no
deductions from the royalties.
e. The terms and conditions of any OEM sale not involving video
streaming in which Net Solutions has involvement, including
the appropriate compensation for Net Solutions and Summus,
Ltd, will be determined through reasonable good faith
negotiations between Summus, Ltd. and Net Solutions on a case
by case basis.
f. With respect to the OEM Market, Net Solutions and Summus, Ltd
will work together and keep one another informed so that there
is no duplication of effort or confusion in the marketplace.
g. The parties will work together to develop appropriate pricing
so that neither party undercuts one another in the
marketplace.
h. The Marketing Agreement cannot be assigned or transferred
without the prior written consent of Summus, Ltd., which
consent will not be unreasonably withheld. Notwithstanding the
foregoing, the Marketing Agreement can be assigned to an
entity capable of performing under the Marketing Agreement
that is not a direct competitor of Summus, Ltd. if Summus,
Ltd. receives a nonrefundable cash payment of the greater of
(i) $10 Million or (ii) 15% of the prior year's royalties paid
under the Marketing Agreement.
2
<PAGE>
i. Net Solutions will pay $3,000,000 for this Marketing
Agreement. The $3,000,000 will be paid by Net Solutions in
installments of $750,000 over four months with the first
installment due upon the execution of the Marketing Agreement
and each remaining installment due at the end of each
successive one month period thereafter. The Marketing
Agreement will not be effective until the first $750,000
payment is made. Except for the first payment, with respect to
these payments, there is a thirty day cure period before the
Marketing Agreement terminates, but interest at 8% per annum
will accrue on any late payments. The $3 Million advance
payment is only recoverable from or against the royalties as
specified in Section 2b hereof.
j. Except as specifically enlarged herein, the Marketing
Agreement shall also contain the Marketing Rights granted in
the Brad Richdale Agreement dated March 2, 1998, but Brad
Richdale and/or his designee Brad Richdale Direct or Net
Solutions shall be relieved of the advertising requirements
contained in the Brad Richdale Agreement.
k. Except with respect to the video streaming product, there will
be no first refusal rights. With respect to any new product,
including, but not limited to, a chip, that directly or
indirectly suppliants, replaces, competes with, is similar to
in its function or intended use, or obsoletes the video
streaming product defined in the Marketing Agreement, New
Solutions will have first refusal rights to fund the
development, and such funding will include the right to market
the new product on an exclusive basis, on terms and conditions
mutually agreed upon by Summus Ltd. and Net Solutions through
reasonable good faith negotiations.
Notwithstanding anything contained in this section two, if the
Marketing Agreement is not executed with two weeks of this agreement,
for whatever reason, then Brad Richdale will personally lend an
additional $150,000 in cash in immediately available funds to Summus
Ltd. on the first day of the third week following the execution of this
agreement. The terms of this note will be the same as the terms
contained in the note referred in Section 1, except for the dollar
amount.
3. Except for the payments contemplated by this agreement, Summus, Ltd.
will agree to compensate individuals (to initially include Brad
Richdale, Michael Cimino, and Mike Pruitt) for equity capital invested
in Summus Ltd. on terms agreeable to Summus Ltd., such compensation in
accordance with the following formula: 5% on 1st Million, 4% on 2nd
Million, 3% on 3rd Million, 2% on 4th Million, and 1% on all amounts
over $4 Million.
4. Summus Technologies shall, unequivocally, and with all due speed merge
with Summus, Ltd. (or a merger subsidiary thereof) structured to be tax
free, on appropriate terms and conditions, once the Marketing Agreement
has been executed and Summus, Ltd. has obtained the first two $750,000
3
<PAGE>
payments under the Marketing Agreement in accordance with section 2i.
Brad Richdale (or his designee) and Cale Yarborough will receive the
same percentage ownership in Summus, Ltd. as they respectively own in
Summus Technologies. It is anticipated that prior to the merger Summus,
Ltd. will be redomiciled in Delaware. In the meantime, Brad Richdale
agrees that we should move forward with the steps pertaining to the
Florida operations of Summus Technologies as outlined in our fax dated
January 5, 1999. Following the merger, Brad Richdale and a designee
(Michael Cimino) will serve on a seven member board as Class One
members of a classified board, whereby Class One Directors will have a
three year term. If the Board is increased, Brad Richdale will retain
the equivalent of 18% (rounded up) representation on the Board.
5. Within one year from the execution of this agreement, Net Solutions
agrees to deliver a $2.5 Million factorable Purchase Order that is
satisfactory to Summus, Ltd. for products of Summus, Ltd. the
specifications of which will be mutually agreed upon by you and Summus,
Ltd. Upon your execution of this agreement, you will receive common
shares of Summus Technologies equal to 3% of the issued and outstanding
common shares of Summus Technologies. Upon delivery of the purchase
order to Summus Ltd. and its acceptance, which will not be unreasonably
withheld, by Bjorn Jawerth, as the President of Summus, Ltd., you will
receive additional common shares of Summus Technologies up to 6% of the
issued and outstanding common shares of Summus Technologies as cash is
received for the purchase of products under the Purchase Order at a
rate of 1% per $277,777.78. If the above referenced nine (%) percent is
not issued, then Brad Richdale (and his designees) specifically do not
waive any rights they now may have with respect to their existing
ownership claim thereto.
Brad, I think there are terms that are mutually beneficial to both Summus, Ltd.,
you and to Net Solutions and hopefully these will help make the Summus companies
a success. If you agree to the foregoing, I would appreciate your signing where
indicated below and returning this executed agreement to me. At that time, I
would appreciate your forwarding to Summus, Ltd. the $250,000, at which time
this Agreement will become effective.
4
<PAGE>
Sincerely,
/s/ Bjorn Jawerth
Dr. Bjorn Jawerth
President
Summus, Ltd.
Summus Technologies, Inc.
Agreed and Accepted:
/S/ BRAD RICHDALE
Brad Richdale, as it applies to him individually
/S/ MICHAEL M. CIMINO 1/14/99
- -------------------------------------------
Michael Cimino, President, Zzap.net, Inc.
(to be renamed High-Speed Net Solutions Inc.)
FIRST AMENDMENT TO LETTER AGREEMENT
This First Amendment to the Letter Agreement dated January 14, 1999,
(the "Letter Agreement") by and among Summus, Ltd., a Delaware corporation
("Summus, Ltd."); Summus Technologies, Inc., a Delaware corporation ("Summus
Technologies"); Brad Richdale; and High Speed Net Solutions, Inc., a Florida
corporation ("High Speed"); is made and entered into as of the 16th day of
August, 1999.
1. The Letter Agreement is hereby amended as follows:
A. The last two sentences of Paragraph 4 are hereby amended to read
in their entirety as follows:
Following the merger, Net Solutions shall have the
right to appoint two designees to serve on a seven
member board. If the Board is increased, Net
Solutions will retain the equivalent of 18% (rounded
up) representation on the Board.
B. Paragraph 5 of the Letter Agreement is hereby amended to read in
its entirety as follows:
Within one year from April 14, 1999, Net Solutions
agrees to deliver a $2.5 Million factorable Purchase
Order that is satisfactory to Summus, Ltd. for
products of Summus, Ltd. the specifications of which
will be mutually agreed upon by you and Summus, Ltd.
Upon your execution of this agreement, you received
148,182 common shares of Summus Technologies, which
equalled 3% of the issued and outstanding common
shares of Summus Technologies at that time. Upon
delivery of the purchase order to Summus Ltd. and its
acceptance, which will not be unreasonably withheld,
by Bjorn Jawerth, as the President of Summus, Ltd.,
you will receive additional common shares of Summus,
Ltd. up to 60,000 of the issued and outstanding
common shares of Summus, Ltd. as cash is received for
the purchase of products under this Purchase Order at
a rate of 10,000 shares per $416,666.66. (These
60,000 shares are intended to represent 6% of the
issued and outstanding shares of Summus, Ltd.
immediately following the merger of Summus, Ltd. and
Summus Technologies, Inc.) If the above referenced
shares are not issued in accordance with the terms
hereof, then Brad Richdale (and his designees)
specifically do not waive any rights they now may
have with respect to their existing ownership claim
thereto.
<PAGE>
2. This Amendment shall become effective upon the consummatio
of the merger of Summus, Ltd. and Summus Technologies. If the
merger is not consummated, then this Amendment shall be null
and void and of no force or effect.
3. Except as otherwise specifically modified herein the remaining
terms of the Letter Agreement, as amended, shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have signed this First Amendment to the
Letter Agreement as of the date first above written.
SUMMUS, LTD.
By: /s/ Bjorn Jawerth
Its: President
SUMMUS TECHNOLOGIES, INC.
By: /s/ Bjorn Jawerth
Its: President
HIGH SPEED NET SOLUTIONS, INC.
By:_______________________
Its:______________________
_____________________________
Brad Richdale
March 25, 1999
Mr. Hank Byun
Samsung Electronics
105 Challenger Road
Ridgefield Park, NJ 07660
Dear Hank:
The purpose of this letter is to confirm that Summus, Ltd. and High Speed Net
Solutions, Inc. (HSNS) have entered into a marketing license agreement. This
agreement authorizes HSNS to act solely, on behalf of Summus, Ltd., as the point
of contact for all commercial discussions and negotiations with Samsung relating
to Summus' video streaming product. For purposes of these negotiations with
Samsung, HSNS will also represent Summus Ltd. with regard to Summus' other
products and technology. We are confident that this arrangement will help to
ensure a prosperous relationship between all our companies.
Thank you for the opportunity to clarify this point with you.
Best regards,
Summus, Ltd. High Speed Net Solutions, Inc.
/S/ Daniel E. Stansky /S/ Peter R. Rogina
- ------------------------------- -------------------
Daniel E. Stansky Peter R. Rogina
Chief Operating Officer President
SAMSUNG NON-CIRCUMVENTION AGREEMENT
This Agreement ("Agreement") is made this 15th day of April, 1999 by
and between Summus, Ltd. ("Summus") and High Speed Net Solutions ("HSNS").
Whereas Summus and HSNS have entered into an agreement granting HSNS
certain exclusive and non-exclusive rights, and have entered into a letter of
intent granting HSNS certain agent rights in connection with Samsung in certain
of Summus' products;
Whereas Summus acknowledges that HSNS has opened a discussion with
Samsung that may result to the mutual benefit of Summus and HSNS.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, Summus and HSNS, intending to be legally bound by the provisions
hereof, hereby agree as follows:
1. Summus, Ltd., its principals, employees, associates, and
agents shall not independently of High Speed Net Solutions,
Inc. ("HSNS"), directly or indirectly, pursue a business
relationship with Samsung related to Summus' products,
technology, or related intellectual property for a period of
one (1) year beginning as of April 15th, 1999.
2. Summus, Ltd., shall be a signatory to all contracts pertaining
to Summus' products, technology and intellectual property in
the event such products, technology and related intellectual
property are not within the rights granted by the Marketing
License Agreement effective as of March 31, 1999 ("Marketing
License Agreement").
3. Nothing in this Non-Circumvent Agreement will extend, limit or
otherwise change the rights granted in the Marketing License
Agreement. In the event of a conflict between this
Non-Circumvent Agreement and the Marketing License Agreement,
the Marketing License Agreement shall take precedence.
Summus, Ltd. High Speed Net Solutions, Inc.
/s/ Daniel Stansky ___________________________
Daniel Stansky Myung K. Kim
Chief Operating Officer President
Monday, August 09, 1999
Mr. Hank Byun
Director, Product Innovation Lab
Samsung Electronics
105 Challenger Road
Ridgefield Park, NJ 07660
Subject: Summus Ltd. and High Speed Net Solutions (HSNS) Relationship
Dear Hank:
Per your request the following letter outlines the relationship between Summus
Ltd. and HSNS as it relates to our current discussions with Samsung.
Summus and HSNS have signed a Marketing License Agreement (MLA) which provides
to HSNS certain exclusive and non-exclusive marketing rights to selected
products. These products include the current version of: 1) wavelet still image
"4U2C"; 2) video e-mail "MaxxNotes"; 3) wavelet streaming video. Rights vary by
product, for example, HSNS has exclusive rights for "Direct Marketing" of video
e-mail, and a non-exclusive marketing right in other channels. There are further
clauses which set terms and conditions for OEM deals and allow HSNS to bring
technology deals to Summus. At all times, Summus retains ownership and control
of it's technology, and sets the terms and conditions for sub-licensing.
In the case of Samsung, Summus and HSNS have entered into an additional brief
agreement stipulating that HSNS brought the Samsung opportunity forward, and
they will receive compensation in the form of an "agents" agreement of
approximately 18% of revenue from Samsung for items not covered by the MLA. HSNS
has no license rights or sub-license rights to enter into technology agreements.
They may only handle products as defined in the agreement.
Therefore, Summus and HSNS are cooperating to "win" the Samsung business. HSNS
will be appropriately compensated for bringing forward the opportunity. But, all
technology agreements must be negotiated with Summus and any agreement with
Samsung will be signed by all three parties.
Regarding the e-mail from Mr. Kyoungbum Park, it was inappropriate for him to
comment on the Summus proposal. Mr. Park is not a principal or executive in
either Summus or HSNS. Mr. Park has entered into an agreement with HSNS to
receive a "finders fee" for the Samsung opportunity equivalent to 4% of revenue.
Mr. Park is not our representative nor intermediary and should not receive
copies of our confidential proposals or communications. Mr. Park has not
executed nor will he be granted a Confidential Disclosure Agreement with Summus
Ltd.
<PAGE>
At the appropriate time, we would be glad to provide you copies of any existing
agreements as necessary.
We hope that this information meets your requirements and that you will continue
to favorably view the Summus Proposal of August 6, 1999.
Please feel free to contact me with any questions.
Sincerely,
/s/ W.B. Silvernail /s/ Michael M. Cimino
W. Bradford Silvernail Michael Cimino
Chief Executive Officer Chairman
Summus Ltd. High Speed Net Solutions, Inc.
Cc: Dr. Bjorn Jawerth
Thursday, March 25, 1999
Mr. Peter Rogina
President
High Speed Network Solutions, Inc.
1 Waldron Drive
Martinsville, NJ 08836-2201
Dear Pete,
Pursuant to discussions held today between you and Summus, Ltd., we have agreed
to execute an agency agreement between HSNS and Summus Ltd. For purposes of
facilitating negotiations with Samsung. This agency agreement is intended to
address products not incorporated within the Marketing License Agreement with
HSNS has executed and for which Summus is awaiting completion of the first
$750,000 payment. Both this Marketing License agreement and the agency agreement
will be execute before our planned joint trip in April to Samsung in Korea. We
have agreed that the agency agreement will incorporate the following business
terms.
1. In the event of a conflict between the Marketing License agreement
and the agency agreement, the Marketing License agreement will have
precedence.
2. HSNS will receive an 18% agent's commission on revenues to Summus
Limited generated, as a result of the negotiations with Samsung, and
which are note otherwise covered by the Marketing License Agreement.
3. Summus will not reimburse HSNS for any direct expenses related to its
participation in these negotiations or for its costs incurred in the
fulfillment of its responsibilities under the agreement.
4. The term of the agency agreement will be for 1 year.
5. The agency agreement will solely relate to discussions with Samsung.
These terms are mutually accepted on behalf of HSNS and Summus by:
Summus, Ltd. High Speed Net Solutions, Inc.
/s/ Daniel E. Stansky /s/ Peter R. Rogina
Daniel E. Stansky COO Peter R. Rogina, President
2
CAPITAL ASSOCIATES
LEASE AGREEMENT
by and between
PHOENIX LIMITED PARTNERSHIP OF RALEIGH
LANDLORD
and
HIGH SPEED NET SOLUTIONS, INC.
TENANT
Dated as of: 10-15, 1999
(C)1999 Capital Associates. All rights reserved.
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into on this
15th day of October, 1999, by and between PHOENIX LIMITED PARTNERSHIP OF
RALEIGH, a Delaware limited partnership ("Landlord") and HIGH SPEED NET
SOLUTIONS, INC., a Florida corporation ("Tenant"), on the terms and conditions
set forth below.
ARTICLE 1- LEASED PREMISES
1.01 LEASED PREMISES.
Landlord leases to Tenant and Tenant leased from Landlord the space
(the "Leased Premises") set forth in SUBSECTIONS (a) AND (b) of the Basic Lease
Provisions below and shown on the floor plan(s) attached hereto as Exhibit A-1
upon the terms and conditions set forth in this Lease. The office building in
which the Leased Premises are located, the land on which the office building is
located (described on EXHIBIT A-2 attached hereto), the parking facilities and
all improvement and appurtenances to the building are collectively referred to
as the "Building". The Building and any larger complex of which the Building is
a part are collectively referred to as the "Project".
ARTICLE 2 - BASIC LEASE PROVISIONS
2.01 BASIC LEASED PROVISIONS.
The following provisions as set forth various basic terms of this Lease
and are sometimes referred to as the "Basic Lease Provisions".
<TABLE>
<S> <C> <C>
(a) Building Name: Two Hannover Square
Address: 434 Fayetteville Street Mall
Raleigh, North Carolina 27601
(b) Floor(s) Twenty-first
Suite # 2120
Square Feet Area: 1,911
(c) Total Area of Building 444,051 square feet
(d) Annual Base Rent: $31,053.72 ($16.25 per square foot)
Monthly Base Rent: $2,587.81
(e) Base Operating Expense Factor: 1999 actual Operating Expenses
per square foot
(f) Parking: 4 parking spaces per 1,000 square
feet of space
Monthly Rent per Parking Space: see EXHIBIT I
(g) Term: 5 Year(s) 0 Month(s) 0 Day(s)
<PAGE>
(h) Target Commencement Date: October 1, 1999
Target Expiration Date: September 30, 2004
(See EXHIBIT B for confirmation of the actual Commencement Date and Expiration
Date of this Lease.)
(i) Intentionally deleted
(j) Permitted Use: General business office, computer software
development, sales and administration
(k) Addresses for notices and other communications under this Lease:
LANDLORD TENANT
-------- ------
Phoenix Limited Partnership of Raleigh High Speed Net Solutions, Inc.
c/o Capital Associates Two Hannover Square
Two Hannover Square 434 Fayetteville Street Mall,
434 Fayetteville Street Mall, Suite 2120
Suite 1510 Raleigh, North Carolina 27601
Raleigh, North Carolina 27601 Attn: Alan Kleinmaier
---------------
(l) Broker: Capital Associates
Co-Broker: None
</TABLE>
ARTICLE 3 - TERM AND POSSESSION
3.01 TERM.
This Lease shall be and continue in full force and effect for the term
set forth in SUBSECTION 2.01(g). Subject to the remaining provisions of this
Article, the Term shall commence on the Target Commencement Date shown in
Subsection 2.01(h) and shall expire without notice to Tenant, on the Target
Expiration Date shown in SUBSECTION 2.01(h); provided, however, that if the
Commencement Date is other than the first (1st) day of the month, the Expiration
Date shall nevertheless be the last day of the last month of the Term. Such
term, as it may be modified, renewed and extended, in accordance with EXHIBIT G
herein, is herein called the "Term".
3.02 COMMENCEMENT.
Subject to SECTION 3.03 hereof, if on the Target Commencement Date any
of the work described in this Lease that is required to be performed by Landlord
at Landlord's expense to prepare the Leased Premises for occupancy has not been
substantially completed, or if Landlord is unable to tender possession of the
Leased Premises to Tenant on the specified date due to any other reason beyond
the reasonable control of Landlord, the hereinafter defined Commencement Date
(and commencement of installments of Base Rent) shall be postponed until the
work to be performed in the Leased Premised at Landlord's expense is
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substantially completed, and the postponement shall operate to extend the
Expiration Date in order to give full effect to the stated duration of the Term.
The deferment of installments of Base Rent shall be Tenant's exclusive remedy
for postponement of the Commencement Date, and Tenant shall have no, and waives
any, claim against Landlord because of any such delay.
3.03 TENANT'S DELAY.
No delay in the completion of the Leased Premises resulting from delay
or failure on the part of Tenant in furnishing information or other matters
required in this Lease, and no delay resulting from the completion of work, if
any, that is to be performed at Tenant's expense pursuant to this Lease, shall
delay the Commencement Date, Expiration Date or commencement of payment of Rent
(as defined in SUBSECTION 4.02 below).
3.04 TENANT'S POSSESSION
If, prior to the Commencement Date, Tenant shall enter into possession
of all or any part of the Leased Premises, the Term, the payment of monthly
installments of Base Rent and all other obligations of Tenant to be performed
during the Term shall commence on, and the Commencement Date shall be deemed to
be, the date of such entry; provided, no such early entry shall operate to
change the Expiration Date.
3.05 CONFIRMATION OF DATES.
Tenant shall confirm its acceptance of the Leased Premises by execution
of the Acceptance of Leased Premises Memorandum attached hereto as EXHIBIT B. If
either the actual commencement date ("Commencement Date") or actual expiration
date ("Expiration Date") are different from the Target Commencement Date and the
Target Expiration Date, respectively set forth in SUBSECTION 2.01(h), Landlord
and Tenant shall execute an amendment to the Lease setting forth such actual
date. If such amendment is not executed, the Commencement Date and Expiration
Date shall be conclusively deemed to be the Target Commencement Date and the
Target Expiration Date set forth in SUBSECTION 2.01(h).
3.06 HOLDOVER.
If Tenant shall remain in possession of the Leased Premises after the
expiration or earlier termination of this Lease, Tenant shall be deemed a
tenant-at-sufferance, terminable at any time on one (1) days' notice, and shall
pay daily rent at double the per day Rent payable with respect to the last full
calendar month immediately prior to the end of the Term or termination of this
Lease, but otherwise shall be subject to all of the obligations of Tenant under
this Lease. Tenant shall indemnify Landlord (i) against all claims for damages
by any other tenant to whom Landlord may have leased all or any part of the
Leased Premises effective upon the termination or expiration of this Lease, and
(ii) for all other losses, costs and expenses, including consequential damages
and reasonable attorneys' fees, sustained or incurred by reason of such holding
over.
ARTICLE 4 - RENT AND SECURITY DEPOSIT
4.01 BASE RENT.
Tenant agrees to pay to Landlord rent ("Base Rent") throughout the Term
in the amount of the Annual Base Rent set forth in SUBSECTION 2.01(d), subject
to adjustment as provided in this Lease. Base Rent shall be payable in monthly
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<PAGE>
installments in the amount set forth in SUBSECTION 2.01(d) ("Monthly Base Rent")
in advance and without demand, deduction or set-off, on the first day of each
and every calendar month during the Term. If the Commencement Date is not the
first day of a month, Tenant shall be required to pay on the Commencement Date a
pro rata portion of the Monthly Base Rent for the first partial month of the
Term.
4.02 PAYMENT OF RENT.
As used in this Lease, "Rent" shall mean the Base Rent, Additional Rent
(defined below) and all other amounts required to be paid by Tenant in this
Lease. The Rent shall be paid at the times and in the amounts provided herein in
legal tender of the United states of America to Landlord at its address
specified in SUBSECTION 2.01(k) above or at such other address as Landlord may
from time to time designate in writing. The Rent shall be paid without notice,
demand, abatement, deduction or offset except as may be expressly set forth in
this Lease.
4.03 ADDITIONAL RENT.
The term "Additional Rent" shall mean the total of the "Operating
Expense Adjustment", the "Cost of Living Adjustment", as such terms are defined
below, and any other amounts in addition to Base Rent which Tenant is required
to pay to Landlord under this Lease.
4.04 OPERATING EXPENSE ADJUSTMENT.
If the Expense (defined below) for the Building for any calendar year,
expressed on a per square foot basis, exceed the Base Operating Expense Factor
specified in SUBSECTION 2.01(e), Tenant shall pay to Landlord increased Rent (an
"Operating Expense Adjustment") in an amount equal to the product of such excess
times the square feet of the Leased Premises as stated in SUBSECTION 2.01(b).
The Operating Expense Adjustment shall be payable in monthly installments on the
first day of each calendar month based on Landlord's estimate of the Operating
Expenses for the then current calendar year. Landlord may at any time give
Tenant written notice specifying Landlord's estimate of the Operating Expenses
for the then current calendar year or the subsequent calendar year and
specifying the Operating Expense Adjustment to be paid by Tenant for each such
year. Within one hundred twenty (120) days after the end of each calendar year,
Landlord shall give written notice to Tenant specifying the actual Operating
Expenses for the prior calendar year and any necessary adjustment to the
Operating Expense Adjustment paid by Tenant for that calendar year. Tenant shall
pay any deficit amount to Landlord within fifteen (15) days after receipt of
Landlord's written notice. Any excess payment by Tenant for the prior calendar
year shall reduce the Operating Expense Adjustment for the following year. The
provisions of this paragraph shall survive the cancellation or termination of
this Lease.
The term "Operating Expenses" shall mean, except as otherwise specified
in this definition, all expenses, costs, and disbursements of every kind and
nature, computed on an accrual basis, which Landlord shall pay or become
obligated to pay because of or in connection with the ownership and operation of
the Building, or Landlord's efforts to reduce Operating Expenses, including
without limitation: (1) wages and salaries of all employees to an extent
commensurate with such employees' involvement in the operation, repair,
replacement, maintenance, and security of the Building, including, without
limitation, amounts attributable to the employer's Social Security Tax,
unemployment taxes, and insurance, and any other amount which may be levied on
such wages and salaries, and the costs of all insurance and other employee
4
<PAGE>
benefits related thereto; (2) all supplies and materials used in the operation,
maintenance, repair, replacement and security of the Building; (3) the rental
costs of any and all leased capital improvements and the annual costs of any and
all capital improvements made to the Building which, although capital in nature,
can reasonably be expected to reduce the normal operating costs of the Building,
to the extent of the lesser of such expected reduction in operating expenses or
the annual cost of such capital improvements, as well as all capital
improvements made in order to comply with any legal requirement hereafter
promulgated by any government authority relating to the environment, energy,
conservation, public safety, access for the disabled or security, as amortized
over the useful life of such improvements by Landlord for federal income tax
purposes; (4) the cost of all utilities, other than the cost of electricity
supplied to tenants of the Building which is separately metered and reimbursed
to Landlord by such tenants; (5) the costs of all maintenance and service
agreements with respect to the operation of the Building or any part thereof,
including, without limitation, management fees, alarm service, equipment, window
cleaning, elevator maintenance, landscape maintenance and parking area
maintenance and operation; (6) the costs of all insurance relating to the
Building, including without limitation, casualty and liability insurance
applicable to the Building and Landlord's personal property used in connection
therewith; (7) all taxes and assessments and government charges, whether
federal, state, county, or municipal, and whether by taxing districts or
authorities presently taxing or by others, subsequently created or otherwise,
including all taxes levied or assessed against or for leasehold improvements and
any other taxes and assessments attributable to the Building and/or the
operation thereof, together with the reasonable costs (including attorneys,
consultants and appraisers) of any negotiation, contest or appeal pursued by
Landlord in an effort to reduce any such tax, assessment or charge, excluding,
however, federal and state taxes on Landlord's income, but including all rental,
sales, use and occupancy taxes or other similar taxes, if any, levied or imposed
by any city, state, county, or other governmental body having jurisdiction; and
(8) the cost of all repairs, replacements, removals and general maintenance with
respect to the Building. Specifically excluded from Operating Expenses are
expenses for capital improvements made to the Building, other than capital
improvements described in clause (3) of this definition and except for items
which, through capital for accounting purposes, are properly considered
maintenance and repair items, such as painting of common areas, replacement of
carpet in elevator lobbies and like items; expenses for repair, replacement and
general maintenance paid by proceeds of insurance or by Tenant or other third
parties; alterations attributable solely to tenants of the Building other than
Tenant; depreciation of the Building; leasing commissions; and federal and state
income taxes imposed on Landlord.
If, during all or part of any calendar year, the Building is less than
95% occupied, or if Landlord is providing less than 95% of the Building with any
item or items of work or service which would constitute an Operating Expense
hereunder, then the amount of the Operating Expenses for such period shall be
adjusted to include any and all items enumerated under the definition of
Operating Expenses set forth in this Subsection which Landlord reasonably
determines Landlord would have incurred if the Building had been at least 95%
leased and occupied with all tenant improvements constructed or if Landlord has
been providing such item or items of work or service to at least 95% of the
Building. If the actual occupancy of the Building is between 95% and 100%, then
the actual occupancy percentage shall be used for this computation.
5
<PAGE>
4.05 COST OF LIVING ADJUSTMENT.
At the end of each Lease year during the Term, the Monthly Base Rent
for the following Lease year shall be increased in accordance with the following
formula:
(Annual Base Rent for the current Lease year x 1.03) / by twelve =
Monthly Base Rent for the following Lease year.
The resulting figure will be the Monthly Base Rent for the following
year, and Tenant shall adjust its payments of Monthly Base Rent accordingly
beginning on the first day of the first month in the following Lease year.
4.06 INTENTIONALLY DELETED.
4.07 LATE CHARGE.
If Tenant fails or refuses to pay any installment of Rent when due,
Landlord, at Landlord's option, shall be entitled to collect a late charge of
five percent (5%) of the amount of the late payment to compensate Landlord for
the additional expense involved in handling delinquent payments and not as
interest; provided, however, that Tenant shall be entitled to one (1) late
payment of Rent in each calendar year of the Term, which late payment shall not
be subject to a late charge hereunder so long as the Rent then due is paid
within five (5) days of the due date. If the payment of a late charge required
by this Section is found to constitute interest notwithstanding the contrary
intention of Landlord and Tenant, the late charge shall be limited to the
maximum amount of interest that lawfully may be collected by Landlord under
applicable law, and if any payment is determined to exceed such lawful amount,
the excess shall be applied to any unpaid Rent then due and payable hereunder
and/or credited against the next succeeding installment of Rent payable
hereunder. If all Rent hereunder has been paid in full, any excess shall be
refunded to Tenant. Tenant shall reimburse Landlord for any processing fees
charged to Landlord as a result of Tenant's checks having been returned for
insufficient funds.
ARTICLE 5 - SERVICES
5.01 SERVICES.
Landlord shall furnish Tenant while occupying the Leased Premises:
(a) Subject to curtailment as required by governmental laws, rules or
regulations, central heat and air conditioning in season, at such times as
Landlord normally furnishes these services to other tenants in the Building and
at such temperatures and in such amounts as are considered by Landlord to be
standard, but such service on Saturday afternoons, Sundays and holidays to be
furnished only upon request of Tenant, who shall bear the entire cost thereof as
provided in EXHIBIT F attached hereto; elevator service; and routine maintenance
and electric lighting service for all public areas and special service areas of
the Building in the manner and to the extent deemed by Landlord to be standard.
Landlord will furnish janitor service on a five (5) day week basis at no extra
charge. Failure by Landlord to any extent to furnish these services, or any
cessation thereof, resulting from causes beyond the control of Landlord, shall
not render Landlord liable in any respect for damages to either person or
property, nor be construed as an eviction of Tenant, nor work an abatement of
rent, nor relieve Tenant from its obligation to fulfill any covenant or
6
<PAGE>
agreement thereof. Should any of Landlord's equipment or machinery break down,
or for any cause cease to function property, Landlord shall use reasonable
diligence during normal business hours to repair same promptly, but Tenant shall
have no claim for rebate of rent or damages on account of any interruptions in
service occasioned thereby or resulting therefrom.
(b) Proper electrical facilities to furnish sufficient power for
personal computers, fax machines, desktop computer printers, calculating
machines and other machines of similar low electrical consumption, but no
including electricity required for electronic data processing equipment which
(singly) consumes more than 0.25 kilowatts per hour at a rated capacity or
requires a voltage other than 120 volts single phase. Tenant shall pay to
Landlord, monthly as billed, such charges as may be separately metered or as
Landlord's engineer shall reasonably compute for any electrical service usage in
excess of that stated above. If Tenant uses any heat generating machines,
equipment, fixtures or other devices of any nature whatsoever in the Leased
Premises which effect the temperature otherwise maintained by the building
standard air conditioning. Tenant shall pay the additional cost necessitated by
Tenant's use of such machines, equipment, fixtures or other devices, including
the cost of installation of any necessary additional air conditioning equipment
and the cost of operation and maintenance thereof.
ARTICLE 6 - USE AND OCCUPANCY
6.01 USE.
The Leased Premises are to be used and occupied by Tenant (and its
permitted assignees, subtenants, invitees, customers, and guests) solely for the
purpose specified in SUBSECTION 2.01(j) with no more than one (1) person per two
hundred (200) square feet of space; provided, however, the Tenant may change
such purpose upon Landlord's prior written agreement. Tenant agrees not to
occupy or use, or permit any portion of the Leased Premises to be occupied or
used for any business or purpose which is unlawful, disreputable or deemed to be
extra-hazardous on account of fire or exposure to or interference from
electromagnetic rays and/or fields, or permit anything to be done which would in
any way increase the rate of insurance coverage on the Building and/or its
contents. Tenant further agrees to conduct its business and control its agents,
employees, invitees and visitors in such manner as not to create any nuisance,
or interfere with, annoy or disturb any other tenant or Landlord in its
operation of the Building.
6.02 CARE OF THE LEASED PREMISES.
Tenant shall no commit or allow to be committed any waste or damage to
any portion of the Leased Premises or the Building and, at the termination of
this Lease, by lapse of time or otherwise, Tenant shall deliver up the Leased
Premises to Landlord in as good a condition as existed on the date of possession
by Tenant, ordinary wear and tear excepted. Upon such termination of this Lease.
Landlord shall have the right to re-enter and resume possession of the Leased
Premises.
6.03 ENTRY FOR REPAIRS AND INSPECTION.
Tenant shall permit Landlord and its contractors, agents and
representatives to enter into and upon any part of the Leased Premises at all
reasonable hours to inspect and clean the same, make repairs, alterations and
addition thereto, show the same to prospective tenants or purchasers, and for
any other purpose as Landlord may deem necessary or desirable. Tenant shall not
7
<PAGE>
be entitled to any abatement or reduction of Rent by reason of any such entry.
In the event of an emergency when entry to the Leased Premises shall be
necessary, and if Tenant shall not be personally present to open and permit
entry into the Leased Premises, Landlord or Landlord's agent may enter the same
by master key, code, card or switch, or may forcibly enter the same, without
rendering Landlord or such agents liable therefor, and without, in any manner,
affecting the obligations and covenants of this Lease.
6.04 COMPLIANCE WITH LAWS; RULES OF BUILDING.
Tenant shall comply with an Tenant shall cause its visitors, employees,
contractors, agents and invitees to comply with, all laws, ordinances, orders,
rules and regulations (state, federal, municipal and other agencies or bodies
having any jurisdiction thereof) relating to the use, condition or occupancy of
the Leased Premises, including, without limitation, all local, state and federal
environmental laws, and the rules of the Building reasonably adopted and altered
by Landlord from time to time, all of which Building rules will be sent by
Landlord to Tenant in writing and shall thereafter be carried out and observed
by Tenant, its employees, contractors, agents, invitees and visitors. The
initial rules of the Building are attached hereto EXHIBIT D.
6.05 ACCESS TO BUILDING.
Subject to Landlord's security measures and the terms and conditions
set forth below in this Lease, Tenant and its employees shall have access to the
Building and the Leased Premises twenty-four (24) hours a day, three hundred
sixty-five (365) days per year. Landlord shall have the right to limit access to
the Building after normal business hours; provided, Landlord shall have no
responsibility to prevent, and shall not be liable to Tenant for, and shall be
indemnified by Tenant against, liability and loss to Tenant, its agents,
employees and visitors, arising out of losses due to theft, burglary and damage
and injury to persons and property caused by persons gaining access to the
Building or Leased Premises, and Tenant waives and releases Landlord from all
liability relating thereto. Landlord expressly reserves the right in its sole
discretion, to temporarily or permanently change the location of, close, block
and otherwise alter any entrances, corridors, skywalks, tunnels, doorways and
walkways leading to or providing access to the Building or any part thereof and
otherwise restrict the use of same provided such activities do not unreasonably
impair Tenant's access to the Leased Premises. Landlord shall not incur any
liability whatsoever to Tenant as a consequence thereof. Such activities shall
not be deemed to be a breach of any of Landlord's obligations hereunder.
Landlord agrees to exercise good faith in notifying Tenant a reasonably time in
advance of any alterations, modifications or other actions of Landlord under
this Section.
6.06 PEACEFUL ENJOYMENT.
Landlord covenants that Tenant shall and may peacefully have, hold and
enjoy the Leased Premises without interference from any party claiming by or
through Landlord, subject to the terms of this Lease, provided Tenant pays the
Rent and other sums required to be paid by Tenant and performs all of Tenant's
covenants and agreements herein contained. It is understood and agreed that this
covenant and any and all other covenants of Landlord contained in this Lease
shall be binding upon Landlord and its successors only with respect to breaches
occurring during its and their respective ownership of Landlord's interest in
the Building. Landlord shall not be responsible for the acts or omissions of any
other tenant or third party that may interfere with Tenant's use and enjoyment
8
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of the Leased Premises; provided, however, that Landlord shall use its best
efforts to enforce the rules and regulations of the Building.
6.07 RELOCATION.
Landlord shall have the option to relocate the Tenant to alternative
space in the Project in accordance with this Section. The alternative space
shall be of comparable size to the Leased Premises, or larger. Landlord shall
give Tenant not less than sixty (60) days prior written notice of any such
relocation, which notice shall include the date on which Tenant shall be
required to relocate or move and a description of the space to which Tenant will
be relocated. Landlord shall pay all out-of-pocket costs and expenses of
relocating Tenant, including the cost of reconstruction of all Tenant furnished
and Landlord furnished improvements. In the event of such relocation, the
alternative space shall be deemed the Leased Premises hereunder and this Lease
shall continue in full force and effect without any change in the other terms
and conditions hereof; provided, however, that upon Landlord's request, Tenant
shall execute an amendment to this Lease substituting such alternative space for
the space previously occupied by Tenant.
ARTICLE 7 - CONSTRUCTION ALTERATIONS AND REPAIRS
7.01 CONSTRUCTIONS.
Tenant has had an opportunity to inspect and satisfy itself as to the
condition of the Leased Premises and accepts the Leased Premises "AS IS", "WHERE
IS" and "WITH ALL FAULTS".
7.02 ALTERATIONS.
Tenant shall make no alterations, installations, additions or
improvements in, on or to the Leased Premises without Landlord's prior written
consent. All such work shall be designed and made in a manner, and by
architects, engineers, workmen and contractors, satisfactory to Landlord. All
alterations, installations, additions and improvements (including, without
limitation, paneling, partitions, millwork and fixtures) made by or for Tenant
to the Leased Premises shall remain upon and be surrendered with the Leased
Premises and become the property of Landlord at the expiration or termination of
this Lease or the termination of Tenant's right to possession of the Leased
Premises; provided, Landlord may require Tenant to remove any or all of such
items that are not Building standard upon the expiration or termination of this
Lease or the termination of Tenant's right to possession of the Leased Premises
in order to restore the Leased Premises to the condition existing at the time
Tenant took possession. Tenant shall bear the costs of removal of Tenant's
property from the Building and of all resulting repairs thereto. All work
performed by Tenant with respect to the Leased Premises shall: (a) not alter the
exterior appearance of the Building or adversely affect the structure, safety,
systems or services of the Building; (b) comply with all Building safety, fire
and other codes and governmental and insurance requirements; (c) not result in
any usage in excess of Building standard of water, electricity, gas, heating,
ventilating or air conditioning, (either during or after such work) unless prior
written arrangements satisfactory to Landlord are entered into; (d) be completed
promptly and in a good and workmanlike manner; (e) be performed in such a manner
that does not cause interference or disharmony with any labor used by Landlord,
Landlord's contractors or mechanics or by any other tenant or such other
tenant's contractors or mechanics; and (f) not cause any mechanic's,
materialman's or other similar liens to attach to Tenant's leasehold estate.
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Tenant shall not permit, or be authorized to permit, any liens (valid or
alleged) or other claims to be asserted against Landlord or Landlord's rights,
estates and interest with respect to the Building or this Lease in connection
with any work done by or on behalf of Tenant, and Tenant shall indemnify and
hold Landlord harmless against any such liens.
7.03 REPAIRS BY LANDLORD.
Unless otherwise expressly stipulate herein, Landlord shall not be
required to make any improvements or repairs of any kind or character to the
Leased Premises during the Term, except such repairs to Building standard
improvements as may be deemed necessary by Landlord for normal maintenance
operations. Non-Building standard leasehold improvements will, at Tenant's
written request, be maintained by Landlord at Tenant's expense, at a cost or
charge equal to the costs incurred in such maintenance plus an additional charge
of fifteen percent (15%). Notwithstanding any provisions of this Lease to the
contrary, all repairs, alterations or additions to the base Building and its
systems (as opposed to those involving only Tenant's leasehold improvements),
and all repairs, alterations and additions to Tenant's non-Building standard
leasehold improvements which affect the Building's structural components or
major mechanical, electrical or plumbing systems, made by, for or on behalf of
Tenant and any other tenants in the Building shall be made by Landlord or its
contractor only, and, if on behalf of Tenant, shall be paid for by Tenant in an
amount equal to Landlord's costs plus fifteen percent (15%). Landlord shall not
be liable to Tenant, except as expressly provided in this Lease, for any damage
or inconvenience, and Tenant shall not be entitled to any abatement or reduction
of rent by reason of any repairs, alterations or additions made by Landlord
under this Lease.
7.04 REPAIRS BY TENANT.
Tenant shall, at its own cost and expense, repair or replace any damage
or injury done to its leasehold improvements or any other part thereof caused by
Tenant or Tenant's agents, contractors, employees, invitees, and visitors. If
Tenant fails to make such repairs or replacements to its leasehold improvements
promptly, Landlord may, at its option, make such repairs or replacements, and
Tenant shall repay the cost thereof plus a charge of fifteen percent (15%) to
the Landlord on demand. Any damage or injury to the Leased Premises or the base
Building and its systems (as opposed to those involving only Tenant's leasehold
improvements) and any damage or injury to Tenant's leasehold improvements which
affects the Building's structural components or major mechanical, electrical or
plumbing systems caused by Tenant, its agents, contractors, employees, invitees
and visitors, shall be repaired by replaced by Landlord, but at Tenant's expense
plus a charge of fifteen percent (15%).
ARTICLE 8 - CONDEMNATION, CASUALTY, INSURANCE AND INDEMNITY
8.01 CONDEMNATION.
If all or substantially all of the Leased Premises is taken by virtue
of eminent domain or for any public or quasi-public use or purpose, this Lease
shall terminate on the date the condemning authority takes possession. If only a
part of the Leased Premises is so taken, or if a portion of the Building not
including the Leased Premises is taken, this Lease shall, at the election of
Landlord, either (i) terminate on the date the condemning authority takes
possession by given notice thereof to Tenant within thirty (30) days after the
date of such taking of possession or (ii) continue in full force and effect as
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to that part of the Leased Premises not so taken and Rent with respect to any
portion of the Leased Premises taken or condemned shall be reduced or abated on
a square footage basis. All proceeds payable from any taking or condemnation of
all or any portion of the Leased Premises and the Building shall belong to and
be paid to Landlord, and Tenant hereby expressly assigns to Landlord any and all
right, title and interest of Tenant now or hereafter arising in and to any such
awards. Tenant shall have no, and waives any, claim against Landlord and the
Condemnor for the value of any unexpired term.
8.02 DAMAGES FROM CERTAIN CAUSES.
Landlord shall not be liable or responsible to Tenant for any loss or
damage to any property or person occasioned by theft, fire, act of God, public
enemy, injunction, riot, strike, insurrection, war, court order, requisition
order of governmental body or authority, or any cause beyond Landlord's control,
or for any damage or inconvenience which may arise through repair or alteration
of any of the Building.
8.03 FIRE CLAUSE.
In the event of a fire or other casualty in the Leased Premises, Tenant
shall immediately give notice thereof to Landlord. If the Leased Premises or any
portion of the Building is damaged by fire or other casualty, Landlord shall
have the right to terminate this Lease or to repair the Leased Premises with
reasonable dispatch, subject to delays resulting from adjustment of the loss and
any other cause beyond Landlord's reasonable control; provided, Landlord shall
not be required to repair or replace any furniture, furnishings or other
personal property which Tenant may be entitled to remove from the Leased
Premises or any installations in excess of Building standard. Until Landlord's
repairs are completed the Rent shall be abated in proportion to the portions of
the Leased Premises, if any which are untenantable or unsuited for the conduct
of Tenant's business. Notwithstanding anything contained in this Section
Landlord shall only be obligated to restore or rebuild the Leased Premises to a
Building standard condition and Landlord shall not be required to expend more
funds than the amount received by Landlord from the proceeds of any insurance
carried by Landlord.
8.04 TENANT'S INSURANCE POLICIES.
Tenant shall, at its expense, maintain (i) standard fire and extended
coverage insurance on all of its personal property including removable trade
fixtures, located in the Leased Premises and on its non-Building standard
leasehold improvements and all other additions and improvements (including
fixtures) made by Tenant; (ii) a policy or policies of comprehensive general
liability insurance, such insurance to afford minimum protection (which may be
effected by primary and/or excess coverage) of not less than $2,000,000.00 for
personal injury or death in any one occurrence and of not less than
$1,000,000.00 for property damage in any or all occurrence, provided, Tenant
shall carry such greater limits of liability coverage as Landlord may reasonably
request from time to time; and (iii) a policy or policies, if available,
insuring against injury or damage from exposure to or interference from
electromagnetic rays and/or fields. All insurance policies required to be
maintained by Tenant shall (a) be issued by and binding upon solvent insurance
companies licensed to conduct business in the State of North Carolina, (b) have
all premiums fully paid on or before the due dates, (c) name Landlord as an
additional insured, and (d) provide that they shall not be cancelable and/or the
coverage thereunder shall not be reduced without at least ten (10) days advance
written notice to Landlord. Tenant shall deliver to Landlord certified copies of
all policies or, at Landlord's option, certificates of insurance in a form
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satisfactory to landlord not less than fifteen (15) days prior to the
Commencement Date or the expiration of current policies.
8.05 HOLD HARMLESS.
Landlord shall not be liable to Tenant, its agents, servants,
employees, contractors, customers or invitees, for any damage to person or
property caused by any act, omission or neglect of Tenant, its agents, servants,
employees, contractors, customers or invitees, including any claims which may be
made for compensation or damages based upon exposure to or interference from
electromagnetic rays and/or fields emanating from the Leased Premises, and
Tenant agrees to indemnify and hold harmless Landlord and its partners, agents,
directors, officers, and employees from all liability and claims for any such
damage, including, without limitation, court costs, attorneys' fees and costs of
investigation.
8.06 WAIVER OF SUBROGATION RIGHTS.
Anything in this Lease to the contrary notwithstanding, Landlord and
Tenant each hereby waives to the extent that such waiver will not invalidate any
insurance policy maintained by Landlord or Tenant nor increase any premiums
thereon, any and all rights of recovery, claims, actions or causes of action,
against the other, its agents, servants, partners, shareholders, officers and
employees, for any loss or damage that may occur to the Leased Premises or the
Building, or any improvements thereto, or any personal property of such party
therein, by reason of fire, the elements, and any other cause which is insured
against under the terms of the standard fire and extended coverage insurance
policies referred to in Section 8.04 hereof, to the extent that such loss or
damage is recovered under said insurance policies, regardless of cause or
origin, including negligence of the other party hereto, its agents, officers,
partners, shareholders, servants or employees, and covenants that no insurer
shall hold any right of subrogation against such other party. If the respective
insurers of Landlord and Tenant do not permit such a waiver without an
appropriate endorsement to such party's insurance policy, Landlord and Tenant
covenant and agree to notify the insurers of the waiver set forth herein and to
secure from each such insurer an appropriate endorsement to its respective
insurance policy concerning such waiver.
8.07 LIMITATION OF LANDLORD'S PERSONAL LIABILITY.
Tenant agrees to look solely to Landlord's interest in the Building and
the Land for the recovery of any judgment against Landlord, and Landlord, its
partners, officers, directors and employees, shall never be personally liable
for any such judgment. The provisions contained in the foregoing sentence are
not intended to, and shall not, limit any right that Tenant might otherwise have
to obtain injunctive relief against Landlord or Landlord's successors in
interest or any suit or action in connection with enforcement or collection of
amounts which may become owing or payable under or on account of liability
insurance maintained by Landlord.
ARTICLE 9 - LANDLORD'S LIEN, DEFAULT, REMEDIES AND SUBORDINATION
9.01 INTENTIONALLY DELETED.
9.02 DEFAULT BY TENANT.
If Tenant shall default in the payment of any Rent or other sum
required to be paid by Tenant under this Lease when due: provided, however, that
Tenant shall be allowed one (1) late payment of Rent in each calendar year of
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the Term, which late payment shall not be deemed a default hereunder so long as
such Rent is paid within five (5) days of the due date; then Landlord may treat
the occurrence of the foregoing event as a breach of this Lease. If Tenant shall
default in the performance of any of the other covenants or conditions which
Tenant is required to observe and to perform under this Lease and such default
shall continue for twenty (20) days after written notice to Tenant; or the
interest of Tenant under this Lease shall be levied on under execution or other
legal process; or any petition shall be filed by or against Tenant to declare
Tenant a bankrupt or to delay, reduce or modify Tenant's debts or obligations;
or any petition shall be filed or other action taken to reorganize or modify
Tenant's debts or obligations; or any petition shall be filed or other action
taken to reorganize or modify Tenant's capital structure; or Tenant is declared
insolvent according to law; or any assignment of Tenant's property shall be made
for the benefit of creditors' or if a receiver or trustee is appointed for
Tenant or its property; or Tenant shall vacate or abandon the Leased Premises or
any part thereof at any time during the Term for a period of fifteen (15) or
more continuous days; or Tenant is a corporation and Tenant shall cease to exist
as a corporation in good standing in the state of its incorporation; or Tenant
is a partnership or other entity and Tenant shall be dissolved or otherwise
liquidated; then Landlord may treat the occurrence of any one or more of the
foregoing events as a breach of this Lease (provided, no such levy, execution,
legal process or petition filed against Tenant shall constitute a breach of this
Lease if Tenant shall vigorously contest the same by appropriate proceedings and
shall remove or vacate the same within thirty (30) days from the date of its
creation, service or filing). Upon the breach of this Lease by Tenant, at
Landlord's option and in addition to all other rights and remedies provided at
law or in equity, Landlord may terminate this Lease and repossess the Leased
Premises and be entitled to recover as damages a sum of money equal to the total
of (a) the cost of recovering the Leased Premises (including attorneys' fees and
costs of suit), (b) the unpaid rent earned at the time of termination, (c) the
present value (discounted at the rate of eight percent (8%) per annum) of the
balance of the rent for the remainder of the Term less the present value
(discounted at the same rate) of the fair market rental value of the Leased
Premises for said period, (d) the amount of any unamortized leasing commissions
or any allowances or concessions previously made by Landlord to Tenant, (e) any
other sum of money, and damages owed by Tenant to Landlord and (f) interest on
(a) (b) (c) (d) and (e) above at a rate equal to the average of the prime rate
of interest published from time to time and made available to the general public
by the three (3) largest commercial banks in the marketplace, plus five percent
(5%) or the highest rate allowed by applicable North Carolina law.
9.03 NON WAIVER.
Failure of Landlord to declare any default immediately upon occurrence
thereof, or delay in taking any action in connection therewith, shall not waive
such default and Landlord shall have the right to declare any such default at
any time and take such action as might be lawful or authorized hereunder, either
in law or in equity.
9.04 ATTORNEY'S FEES.
Should either party hereto institute any action or proceeding in court
to enforce any provision hereof or for damages by reason of any alleged breach
of any provisions of this Lease or for any other judicial remedy, the prevailing
party shall be entitled to receive from the non-prevailing party all actual
reasonable attorneys' fees and all court costs in connection with said
proceeding.
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9.05 SUBORDINATION; ESTOPPEL CERTIFICATE.
This Lease is and shall be subject and subordinate to any and all
ground or similar leases affecting the Building, and to all mortgages which may
now or hereafter encumber or affect the Building and to all renewals,
modifications, consolidations, replacements and extensions of any such leases
and mortgages; provided, at the option of any such landlord or mortgagee, this
Lease shall be superior to the lease or mortgage of such landlord or mortgagee.
The provisions of this Section shall be self-operative and shall require no
further consent or agreement by Tenant. Tenant agrees, however, to execute and
return any estoppel certificate, consent or agreement reasonably requested by
any such landlord or mortgagee, or by Landlord, within ten (10) days after
receipt of same, including, without limitation, an estoppel certificate in the
form attached hereto as Exhibit E. Tenant shall, at the request of Landlord or
any mortgagee of Landlord secured by alien on the Building or any landlord to
Landlord under a ground Lease of the Building, furnish such mortgagee and/or
landlord with written notice of any default or breach by Landlord at least sixty
(60) days prior to the exercise by Tenant of any rights and/or remedies of
Tenant hereunder arising out of such default or breach.
9.06 ATTORNMENT.
If any ground or similar lease or mortgage is terminated or foreclosed,
Tenant shall, upon request, attorn to the landlord under such lease or the
mortgagee or purchaser at such foreclosure sale, as the case may be, and execute
instrument(s) confirming such attornment. In the event of such a termination or
foreclosure and upon Tenant's attornment as aforesaid, Tenant will automatically
become the tenant of the successor to Landlord's interest without change in the
terms or provisions of this Lease; provided, such successor to Landlord's
interest shall not be bound by (i) any payment of rent for more than one month
in advance except prepayments for security deposits, if any, or (ii) any
amendments or modifications of this Lease made without the prior written consent
of such landlord or mortgagee.
ARTICLE 10 - ASSIGNMENT AND SUBLEASE
10.01 ASSIGNMENT OR SUBLEASE.
Tenant shall not, voluntarily, by operation of law, or otherwise,
assign, transfer, mortgage, pledge, or encumber this Lease or sublease the
Leased Premises or any part thereof, or allow any person other than Tenant, its
employees, agents, servants and invitees, to occupy or use the Leased Premises
or any portion thereof, without the express prior written consent of Landlord,
such consent not to be unreasonably withheld, and any attempt to do any of the
foregoing without such written consent shall be null and void and shall
constitute a default under this Lease. Notwithstanding the foregoing, in no
event shall Tenant assign this Lease or sublease the Leased Premises to any
entity engaged in the commercial real estate business, including, without
limitation, property management or the brokerage, ownership or development of
competitive properties. Landlord's consent to any assignment or sublease
hereunder does not constitute a waiver of its rights to consent to any further
assignment or sublease. If Tenant desires to assign this Lease or sublet the
Leased Premises or any part thereof, Tenant shall give Landlord written notice
of such desire at least sixty (60) days in advance of the date on which Tenant
desires to make such assignment or sublease, together with a non-refundable fee
of Seven Hundred Fifty Dollars ($750.00) (the "Transfer Fee"). Landlord shall
then have a period of thirty (30) days following receipt of such notice within
which to notify Tenant in writing that Landlord elects (a) to terminate this
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Lease as to the space so affected as of the date so specified by Tenant, in
which event Tenant shall be relieved of all further obligations hereunder as to
such space, or (b) to permit Tenant to assign this Lease or sublet such space
(provided, however, if the rent agreed upon between Tenant and subtenant is
greater than the Monthly Base Rent that Tenant must pay Landlord, such excess
rent shall be deemed additional rent owed by Tenant and payable to Landlord in
the same manner that Tenant pays the Rent hereunder), or (c) to refuse to
consent to Tenant's assignment or subleasing such space and to continue this
Lease in full force and effect as to the entire Leased Premises. If Landlord
shall fail to notify Tenant in writing of such election within the thirty (30)
day period, Landlord shall be deemed to have elected option (c) above. Tenant
agrees to pay Landlord's actual reasonable attorneys' fees associated with
Landlord's review and documentation of any requested assignment or sublease
hereunder regardless of whether Landlord consents to any such assignment or
sublease. No assignment or subletting by Tenant shall relieve Tenant of any
obligations under this Lease, and Tenant shall remain fully liable hereunder. If
Tenant is not a public company that is registered on a national stock exchange
or that is required to register its stock with the Securities and Exchange
Commission under Section 12(g) of the Securities and Exchange Act of 1934, any
change in a majority of the voting rights or other controlling rights or
interests of Tenant shall be deemed an assignment for the purposes hereof.
10.02 ASSIGNMENT BY LANDLORD.
Landlord shall have the right to transfer and assign, in whole or in
part, all its rights and obligations hereunder and in the Building, and all
other property referred to herein, and in such event and upon such transfer (any
such transferee to have the benefit of, and be subject to, the provisions of
Section 6.06 and Section 8.07 hereof) no further liability or obligation shall
thereafter accrue against Landlord under this Lease.
ARTICLE 11 - NOTICES AND MISCELLANEOUS
11.01 NOTICES.
Except as otherwise provided in this Lease, any statement, notice, or
other communication which Landlord or Tenant may desire or is required to give
to the other shall be in writing and shall be deemed sufficiently given or
rendered if hand delivered, or if sent registered or certified mail, postage
prepaid, return receipt requested, or Federal Express or similar overnight
courier with evidence of delivery, to the addresses for Landlord and Tenant set
forth in Subsection 2.01(k), or at such other address(es) as either party shall
designate from time to time by ten (10) days prior written notice to the other
party.
11.02 MISCELLANEOUS.
(a) This Lease shall be binding upon and inure to the benefit
of the legal representatives, successors and assigns of Landlord, and shall be
binding upon and inure to the benefit of Tenant, its legal representatives and
successors, and, to the extent assignment may be approved by Landlord hereunder,
Tenant's assigns. Pronouns of any gender shall include the other genders, and
either the singular or the plural shall include the other.
(b) All rights and remedies of Landlord under this Lease
shall be cumulative and none shall exclude any other rights or remedies allowed
by law. This Lease is declared to be a North Carolina contract, and all of the
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terms thereof shall be construed according to the laws of the State of North
Carolina.
(c) This Lease may not be altered changed or amended, except
by an instrument in writing executed by all parties hereto. Further, the terms
and provisions of this Lease shall not be construed against or in favor of a
party hereto merely because such party is the "Landlord" or the "Tenant"
hereunder or such party or its counsel is the draftsman of this Lease.
(d) The terms and provision of EXHIBITS A-I described herein
and attached hereto are hereby made a part hereof for all purposes; provided,
however, that, unless otherwise expressly stated, in the event of a conflict
between the terms of this Lease and the terms of any Exhibit attached hereto,
the terms of this Lease shall control.
(e) If Tenant is a corporation, partnership or other entity,
Tenant warrants that all consents and approvals required of third parties
(including, without limitation, its Board of Directors or partners) for the
execution, delivery and performance of this Lease have been obtained and that
Tenant has the right and authority to enter into and perform its covenants
contained in this Lease.
(f) Whenever in this Lease there is imposed upon Landlord the
obligation to use its best efforts, reasonable efforts or diligence, Landlord
shall be required to do so only to the extent the same is economically feasible
and otherwise will not impose upon Landlord extreme financial or other business
burdens.
(g) If any term or provision of this Lease, or the application
thereof to any person or circumstance, shall to any extent to invalid or
unenforceable, the remainder of this Lease, or the application of such provision
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each provision of this Lease
shall be valid and shall be enforceable to the extent permitted by law.
(h) If applicable in the jurisdiction where the Leased
Premises are situated, Tenant shall pay and be liable for all rental, sales, and
use taxes or other similar taxes, if any, levied or imposed by any city, state,
county or other governmental body having authority, such payments to be in
addition to all other payments required to be paid to Landlord by Tenant under
the terms of this Lease. Any such payment shall be paid concurrently with the
payment of the rent upon which the tax is based as set forth above.
(i) Tenant at all times shall use the occupy the Leased
Premises in compliance with Environmental Laws (as hereinafter defined). Neither
Tenant nor any of Tenant's employees, agents, contractors, subcontractors,
licensees or invitees shall use, handle, store, or dispose of (or permit the
use, handling, storing, or disposal of) any hazardous or toxic waste or
substance in or at the Leased Premises or the Building (or transport, transship
or permit the transportation or transshipment of the same over or through the
Leased Premises or Building) which is regulated, controlled, or prohibited by
any federal, state, or local statutes, ordinances, regulations, or laws,
including without limitation the Resource Conservation and Recovery Act, 42
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U.S.C. ss. 6901, et seq. ("RCRA"); the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601, et. seq.
("CERCLA"); the Hazardous Materials Transportation Act, 49 U.S.C. ss. 801, et.
seq; the Federal Water Pollution Control Act, 33 U.S.C. ss. 1321, et. seq; the
Toxic Substances Control Act, 15 U.S.C. ("TSCA"); and the Occupational Safety
and Health Act, 29 U.S.C. ss. 651 et seq. (as subsequently amended,
"Environmental Laws"). As used herein, hazardous or toxic substances or
materials shall include without limitation the following: (1) "hazardous wastes"
as defined under RCRA or any other federal, state or local law or regulation,
(2) "hazardous substances" as defined under CERCLA or any other federal, state
or local law or regulation, (3) gasoline, petroleum, or other hydrocarbon
products, by-products, derivatives, or fractions (including spent products), (4)
"toxic substances" as defined under TSCA, (5) "regulated medical waste" as
defined by 40 C.F.R. ss. 259.30, (6) any radioactive materials or substances, or
(7) asbestos and asbestos containing products. Tenant shall indemnify Landlord,
its successors and assigns and hold the same harmless from any loss, damage,
claims, costs, liabilities, and cleanup costs arising out of Tenant's violation
of this Section. Tenant's violation of this Section shall constitute an Event of
Default under this Lease, and, in addition to any other remedies available to
Landlord under this Lease, at law, or in equity, at Landlord's election Tenant,
at Tenant's sole cost and expense, shall immediately and diligently remove any
such hazardous or toxic materials from the Leased Premises and/or the Building,
as applicable, and shall restore the same to its condition prior to the time of
the release of such material or substance and to Landlord's satisfaction. If
Tenant fails to comply with the Tenant's obligations hereunder, Landlord, at its
option, may clean up and remove such material or substance and Tenant shall
reimburse Landlord upon demand for any and all of the costs thereof (including
without limitation fees and expenses for attorneys, engineers, environmental
specialists, and similar professionals). Tenant's obligations hereunder shall
survive the expiration or earlier termination of this Lease.
(j) Tenant is prohibited from recording this Lease or any
memorandum thereto without the prior written consent of Landlord.
(k) Landlord agrees to provide Tenant with 4 unreserved
parking spaces per 1,000 square feet of space, as set forth in EXHIBIT I herein.
Tenant agrees to notify Landlord promptly of any additional parking needs which
shall be handled on a case -by-case basis.
(l) "Square feet" or "square foot" as used in this Lease
includes the area contained within the space occupied by Tenant together with a
common area percentage factor of Tenant's space proportionate to the Building
area.
(m) Landlord agrees to pay to the Broker named in SUBSECTION
2.01(l), a real estate brokerage commission only as set forth in the separate
Management and Leasing Agreement, as amended, dated October 22, 1996, by and
between Landlord and Broker. Broker shall pay Co-Broker, if any, named in
SUBSECTION 2.01(l), a real estate brokerage commission only as set forth in the
separate commission agreement(s) between Broker and the named Co-Broker.
Landlord and Tenant each hereby represent and warrant to the other that they
have not employed any other agents, brokers or other parties in connection with
this Lease, and each agrees that it shall hold the other harmless from and
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against any and all claims of all other agents, brokers or other parties
claiming by, through or under the respective indemnifying party.
(n) Tenant understands and agrees that the Property Manager
for the Building is the agent of Landlord and is acting at all times in the best
interest of Landlord. Any and all information pertaining to this Lease that is
received by the Property Manager shall be treated as though received directly by
Landlord.
(o) This Lease may be executed in any number of counterparts,
each of which shall be an original, but all of which taken together shall
constitute one and the same instrument.
(The remainder of this page intentionally left blank)
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ARTICLE 12 - ENTIRE AGREEMENT AND LIMITATION OF WARRANTIES
12.01 ENTIRE AGREEMENT AND LIMITATION OF WARRANTIES
TENANT AGREES THAT THIS LEASE AND THE EXHIBITS ATTACHED HERETO
CONSTITUTE THE ENTIRE AGREEMENT OF THE PARTIES AND ALL PRIOR CORRESPONDENCE,
MEMORANDA, AGREEMENTS AND UNDERSTANDINGS (WRITTEN AND ORAL) ARE MERGED INTO AND
SUPERSEDED BY THIS LEASE AND THERE ARE AND WERE NO VERBAL REPRESENTATIONS,
WARRANTIES, UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES MADE BY
LANDLORD IN CONNECTION WITH THIS LEASE. TENANT FURTHER AGREES THAT THERE ARE NO,
AND TENANT EXPRESSLY WAIVES ANY AND ALL WARRANTIES WHICH EXTEND BEYOND THOSE
EXPRESSLY SET FORTH IN THIS LEASE OR IMPLIED WARRANTIES OF MERCHANTABILITY,
HABITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT
OF THIS LEASE.
IN TESTIMONY WHEREOF, the parties hereto have executed this
Lease as of the date aforesaid.
LANDLORD:
Phoenix Limited Partnership of Raleigh, a
Delaware limited partnership (SEAL)
By: Acquisition Group, Inc., Its Managing
General Partner (SEAL)
By: /s/ Craig Shimomura (SEAL)
---------------------------------
Craig Shimomura, Vice President
TENANT:
High Speed Net Solutions, Inc., a Florida
corporation
By: /s/ Alan R. Kleinmaier
----------------------------------------
Name: Alan R. Kleinmaier
-------------------------------------
Title: Vice President
-------------------------------------
(Corporate Seal)
Attest:
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By: _________________________________
______________ Secretary
20
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EXHIBIT A-1
FLOOR PLAN(S)
-------------
Two Hannover Square
434 Fayetteville Street Mall, Suite 2120
Raleigh, North Carolina 27601
[graphic representation of floor plan inserted here]
1,662 Occupied Square Feet
x 1.15 Common Area Percentage Factor
- ------
1,911 Square Feet
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EXHIBIT A-2
THE LAND
--------
Lying and being in the City of Raleigh, County of Wake, State of North Carolina
and being more particularly described as follows:
BEGINNING at a point in the eastern technical property line of South Salisbury
Street, said point being located South 06 degrees 45 minutes West 330.69 feet
(measured along said property line) from the point of intersection of said
property line with the southern technical property line of West Davie Street,
said point also being the Southwest corner of the property of the City of
Raleigh designed as "Designated Street R/W" (said right of way having been
closed) on a map prepared by Bennie R. Smith recorded in Book of Maps 982, Page
853 of the Wake County Registry; thence with the property line of the City of
Raleigh South 83 degrees 15 minutes East 70.00 feet to a point; thence North 06
degrees 45 minutes East 28.56 feet to a point; thence South 83 degrees 15
minutes East 6.67 feet to a point; thence North 06 degrees 45 minutes East 20.50
feet to a point in the southern property line of York-Hannover (Greenwich), Inc.
(formerly Raleigh Hotel Associates, Ltd.); thence along the southern property
line of York-Hannover (Greenwich), Inc. South 83 degrees 17 minutes 30 seconds
East 63.33 feet to a point; thence with the property line of the City of Raleigh
and One Hannover Square Associates Limited Partnership South 06 degrees 45
minutes West 219.11 feet to a point; thence with the property line of the City
of Raleigh North 83 degrees 15 minutes West 140.00 feet to a point in the
eastern technical property line of South Salisbury Street; thence with said
property line of South Salisbury Street North 06 degrees 45 minutes East 170.00
feet to the point and place of BEGINNING; and being the property of
York-Hannover (Raleigh), Inc. according to a recombination map dated February
1989, prepared by Robert T. Newcomb, III, R.L.S., recorded in Book of Maps 1989,
Page 608, of the Wake County Registry.
(The remainder of this page intentionally left blank).
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EXHIBIT B
ACCEPTANCE OF LEASED PREMISES MEMORANDUM
----------------------------------------
Landlord and Tenant hereby agree that:
1. Tenant has had an opportunity to inspect and satisfy itself as to the
condition of the Leased Premises and accepts the Leased Premises "AS
IS", "WHERE IS" and "WITH ALL FAULTS".
2. The Leased Premises are tenantable, Landlord has no further obligation
for construction, and Tenant acknowledges that the Leased Premises are
satisfactory in all respects.
All other terms and conditions of the Lease are hereby ratified and
acknowledged to be unchanged.
Agreed and Executed this _____ day of __________________, 19___.
TENANT:
High Speed Net Solutions, Inc., a Florida
corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
(Corporate Seal)
Attest:
By:_________________________________
_______________ Secretary
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EXHIBIT C
Intentionally Deleted
24
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EXHIBIT D
BUILDING RULES
--------------
(1) The sidewalks, walks, plaza entries, corridors, concourses, ramps,
staircases, escalators and elevators shall not be obstructed or used by Tenant,
or the employees, agents, servants, visitors or licensees of Tenant, for any
purpose other than ingress and egress to and from the Leased Premises. No
bicycle or motorcycle shall be brought into the Building or kept on the Leased
Premises without the prior written consent of Landlord.
(2) No freight, furniture or bulky matter of any description shall be
received into the Building or carried into the elevators except in such a
manner, during such hours and using such elevators and passageways as may be
approved by Landlord, and then only upon having been scheduled in advance. Any
hand trucks, carryalls or similar appliances used for the delivery or receipt of
merchandise or equipment shall be equipped with rubber tries, side guards and
such other safeguards as Landlord shall require.
(3) Landlord shall have the right to prescribe the weight, position and
manner of installation of safes, concentrated filing/storage systems or other
heavy equipment which shall, if considered necessary by Landlord, be installed
in a manner which shall insure satisfactory weight distribution. All damage done
to the Building by reason of a safe or any other article of Tenant's office
equipment being on the Leased Premises shall be required at the expense of
Tenant. The time, routing and manner of moving safes or other heavy equipment
shall be subject to prior written approval by Landlord.
(4) Only persons authorized by Landlord shall be permitted to furnish
newspaper, ice, drinking water, towels, barbering, shoe shining, janitorial
services, floor polishing and other similar services and concessions to Tenant,
and only at hours and under regulations fixed by Landlord. Tenant shall use no
other method of heating or cooling than that supplied by Landlord.
(5) Tenant, and the employees, agents, servants, visitors or licensees
of Tenant, shall not at any time place, leave or discard any rubbish, paper,
articles or objects of any kind whatsoever outside the doors of the Leased
Premises or in the corridors or passageways of the Building. No animals, except
for dogs trained to assist disabled persons, shall be brought or kept in or
about the Leased Premises or the Building without the prior written consent of
Landlord.
(6) Landlord shall have the right to prohibit any advertising by Tenant
which, in Landlord's opinion, tends to impair the reputation of the Building or
its desirability for offices, and, upon written notice from Landlord, Tenant
shall refrain from or discontinue such advertising. Landlord shall have the
right to use Tenant's name in advertising announcements.
(7) Tenant shall not place, or cause or allow to be placed, any sign or
lettering whatsoever, in or about the Leased Premises except in and at such
places as may be designated by Landlord and consented to by Landlord in writing.
All lettering and graphics on corridor doors and walls shall conform to the
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Building standard prescribed by Landlord. No trademark shall be displayed on
corridor doors and walls in any event, except on any floor fully leased by
Tenant. Tenant may display trademarks on interior walls and doors of the Leased
Premises. Landlord shall provide and maintain an alphabetical directory board in
the ground floor lobby of the Building.
(8) Canvassing, soliciting or peddling in the Building is prohibited
and Tenant shall cooperate to prevent same.
(9) Landlord shall have the right to exclude any person from the
Building other than during customary business hours, and any person in the
Building shall be subject to identification by employees and agents of Landlord.
All persons in or entering the Building shall be required to comply with the
security policies of the Building. If Tenant desires any additional security
services for the Leased Premises, Tenant shall have the right (only with the
advance written consent of Landlord) to obtain such additional services at
Tenant's sole cost and expense. Tenant shall keep doors to unattended areas
locked and shall otherwise exercise reasonable precautions to protect property
from theft, loss, or damage. Landlord shall not be responsible for the theft,
loss or damage of any property.
(10) Only workmen employed, designated or approved by Landlord may be
employed for repairs, installations, alterations, painting, material moving and
other similar work that may be done in or on the Leased Premises.
(11) Tenant shall not do any cooking or conduct any restaurant,
luncheonette, automat or cafeteria for the sale or service of food or beverages
to its employees or to others, nor shall Tenant provide any vending machines
without the prior written consent of Landlord. Tenant may, however, operate
coffee bars by and for its employees and invitees.
(12) Tenant shall not bring or permit to be brought or kept in or on
the Leased Premises any inflammable, combustible, corrosive, caustic, poisonous,
toxic or explosive substance or any substance deemed to be a hazardous substance
under applicable environmental laws, or cause or permit any odors to permeate or
emanate from the Leased Premises.
(13) Tenant shall not mark, paint, drill into or in any way deface any
part of the Building or the Leased Premises. No boring, driving of nails or
screws, cutting or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct. Tenant shall not
install coat hooks or identification plates on doors nor any resilient tile or
similar floor covering in the Leased Premises except with the prior written
approval of Landlord. The use of cement or other similar adhesive material is
expressly prohibited.
(14) Tenant shall not place any additional locks or bolts of any kind
on any door in the Building or the Leased Premises or change or alter any lock
on any door therein in any respect. Landlord shall furnish two (2) keys for each
lock on exterior doors to the Leased Premises and shall, on Tenant's request and
at Tenant's expense, provide additional duplicate keys. Tenant shall not make
any duplicate keys. All keys shall be returned to Landlord upon the termination
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of the Lease, and Tenant shall give to Landlord the explanation of the
combination of all safes, vaults and combination locks in the Leased Premises.
Landlord may at all times keep a pass key to the Leased Premises. All entrance
doors to the Leased Premises shall be left locked when the Leased Premises are
not in use.
(15) Tenant shall give immediate notice to Landlord in case of theft,
unauthorized solicitation or accident in the Leased Premises or in the Building
or of defects therein or in any fixtures or equipment, or of any known emergency
in the Building.
(16) Tenant shall place a water-proof tray under all plants in the
Leased Premises and shall be responsible for any damage to the floors and/or
carpets caused by over-watering such plans.
(17) Tenant shall not use the Leased Premises or permit the Leased
Premises to be used for photographic, multilith or multigraph reproductions,
except in connection with its own business and not as a service for others,
without Landlord's prior written permission.
(18) Tenant shall not use or permit any portion of the Leased Premises
to be used as an office for a public stenographer or typist, offset printing,
the sale of liquor or tobacco, a barber or manicure shop, an employment bureau,
a labor union office, a doctor's or dentist's office, a dance or music studio,
any type of school, or for any use other than those specifically granted in this
Lease.
(19) Tenant shall not advertise for laborers giving the Leased Premises
as an address, nor pay such laborers at a location in the Leased Premises.
(20) Employees of Landlord shall not perform any work or do anything
outside of their regular duties, unless under special instructions from the
management office in the Building.
(21) Tenant shall not place a load upon any floor of the Leased
Premises which exceeds the load per square foot which such floor was designed to
carry and which is allowed by law. Business machines and mechanical and
electrical equipment belonging to Tenant which cause noise, vibration,
electrical or magnetic interference, or any other nuisance that may be
transmitted to the structure or other portions of the Building or to the Leased
Premises to such a degree as to be objectionable to Landlord or which interfere
with the use or enjoyment by other tenants of their leased premises or the
public portions of the Building, shall be placed and maintained by Tenant, at
Tenant's expense, in settings of cork, rubber, spring type or other vibration
eliminators sufficient to eliminate noise or vibration.
(22) Tenant shall furnish and install a chair mat for each desk chair
in the Leased Premises.
(23) No solar screen materials, awnings, draperies, shutters, or other
interior or exterior window coverings that are visible from the exterior of the
Building or from the exterior of the Leased Premises within the Building may be
installed by Tenant.
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(24) Tenant shall not place, install or operate within the Leased
Premises or any other party of the Building any engine, stove or machinery, or
conduct mechanical operations therein, without the written consent of Landlord.
(25) No portion of the Leased Premises or any other party of the
Building shall at any time be used or occupied as sleeping or lodging quarters.
(26) For purposes of the Lease, holidays shall be deemed to mean and
including the following: (a) New Year's Day; (b) Good Friday; (c) Memorial Day;
(d) Independence Day; (e) Labor Day; (f) Thanksgiving Day and the Friday
following; (g) Christmas Day; and (h) any other holidays taken by tenants
occupying at least one-half (1/2) of the Square Footage of office space in the
Building.
(27) Tenant shall at all times keep the Leased Premises neat and
orderly.
(28) All requests for overtime air conditioning or heating should be
submitted in writing to the Building management office by 2:00 P.M. on the last
prior business day.
(29) Landlord reserves the right to rescind, add to and amend any rules
or regulations, to add new rules or regulations, and to waive any rules or
regulations with respect to any tenant or tenants.
(30) Corridor doors, when not in use, shall be kept closed.
(31) All permitted alterations and additions to the Leased Premises
must conform to applicable building and fire codes. Tenant shall obtain approval
from the office of the Building with respect to any such modifications and shall
deliver "as-built" plans therefor to the office of the Building on completion.
(32) It is the intent of both Landlord and Tenant that any portion of
the Leased Premises visible to the public hold a high quality professional image
at all times. If, at any time during the Term, Landlord or Landlord's agent
deems such visible area to hold less than a high quality professional image,
Landlord will advise Tenant of desired changes to be made to such area to
conform to the intent of this paragraph. Within three working days, Tenant will
cause the desired changes to be made, or present Landlord with a plan for
accomplishing such changes. Tenant shall have such additional times as is
reasonably required to implement the plan, not to exceed 2 months; provided,
however, that if Tenant is not diligently pursuing the plan for accomplishing
such changes within ten working days, Landlord will provide draperies or blinds
for the glassed area as Tenant's expense; Tenant will keep such draperies or
blinds closed at all times.
The carpet and wall coverings, which are to be located in the lobby
of any Leased Premises that are visible to the public, use be consistent in
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color and style with the carpet and wall coverings located in the lobby area of
the Building, and must be approved by Landlord prior to installation.
(33) The Building has been designated a "non-smoking" building. Tenant
and its employees, agents, servants, visitors and licensees are prohibited from
smoking in the common areas both inside and outside of the Building, except in
those areas designated as smoking areas. Tenant may designate the Leased
Premises a "non-smoking" area, upon such terms as may be approved in advance by
Landlord, at any time during the Term.
(34) Tenant shall not play nor permit the playing of loud music in the
Leased Premises or common areas.
(35) No firearms, whether concealed or otherwise, shall be allowed in
the Building at any time.
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EXHIBIT E
FORM OF ESTOPPEL CERTIFICATE
----------------------------
The undersigned _______________________________________________ ("Tenant"), in
consideration of One Dollar ($1.00) and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, hereby certifies to
_________________________________ ("Landlord"), [the holder or prospective
holder of any mortgage covering the property] (the "Mortgagee") and [the vendee
under any contract of sale with respect to the Property] (the "Purchaser") as
follows:
1. Tenant and Landlord executed a certain Lease Agreement (the "Lease"), dated
___________, 19___, covering the _________ floor(s) shown attached on the plan
annexed hereto as EXHIBIT A-1 (the "Leased Premises") in the building located in
the __________________________ known as and by the street number
_______________________ (the "Building"), for a term commencing on
_______________, 19_____, and expiring on ___________________________.
2. The Lease is in full force and effect and has not been modified, changed,
altered or amended in any respect.
3. Tenant has accepted and is now in possession of the Leased Premises and is
paying the full Rent under the Lease.
4. The Base Rent payable under the Lease is $________________ per month. The
Base Rent and all Additional Rent and other charges required to be paid under
the Lease have been paid for the period up to and including ________________.
5. Tenant has paid to Landlord the sum of $______________ as security deposit
under the Lease.
6. No rent under the Lease has been paid for more than thirty (30) days in
advance of its due date.
7. All work required under the Lease to be performed by Landlord has been
completed to the full satisfaction of Tenant.
8. There are no defaults existing under the Lease on the part of either Landlord
or Tenant.
9. There is no existing basis for Tenant to cancel or terminate the Lease.
10. As of the date hereof, there exist no valid defenses, offsets, credits,
deductions in rent or claims against the enforcement of any of the agreements,
terms, covenants or conditions of the Lease.
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11. Tenant affirms that any dispute with Landlord giving rise to a claim against
Landlord is a claim under the Lease only and is subordinate to the rights of the
holder of all first lien mortgages on the Building and shall be subject to all
the terms, conditions and provisions thereof. Any such claims are not offsets to
or defenses against enforcement of the Lease.
12. Tenant affirms that any dispute with Landlord giving rise to a claim against
Landlord is a claim under the Lease only and is subordinate to the rights of the
Purchaser pursuant to any contract of sale. Any such claims are not offsets to
or defenses against enforcement of the Lease.
13. Tenant affirms that any claims pertaining to matters in existence at the
time Tenant took possession and which are known to or which were then readily
ascertainable by Tenant shall be enforced solely by money judgment and/or
specific performance against the Landlord named in the Lease and may not be
enforced as an offset to or defense against enforcement of the Lease.
14. There are no actions, whether voluntary or otherwise, pending against or
contemplated by Tenant under the bankruptcy laws of the United States or any
state thereof.
15. There has been no material adverse change in Tenant's financial condition
between the date hereof and the date of the execution and delivery of the Lease.
16. Tenant acknowledges that Landlord has informed Tenant that an assignment of
Landlord's interest in the Lease has been or will be made to the Mortgagee and
that no modification, revision, or cancellation of the Lease or amendments
thereto shall be effective unless a written consent thereto of the Mortgagee is
first obtained, and that until further notice payments under the Lease may
continue as heretofore.
17. Tenant acknowledges that Landlord has informed Tenant that Landlord has
entered into a contract to sell the Property to Purchaser and that no
modification, revision or cancellation of the Lease or amendments thereto shall
be effective unless a written consent thereto of the Purchaser has been
obtained.
18. This certification is made to induce Purchaser to consummate a purchase of
the Property and to induce Mortgagee to make and maintain a mortgage loan
secured by the Property and/or to disburse additional funds to Landlord under
the terms of its agreement with Landlord, knowing that said Purchaser and
Mortgagee rely upon the truth of this certificate in making and/or maintaining
such purchase or mortgage or disbursing such funds, as applicable.
19. Except as modified herein, all other provisions of the Lease are hereby
ratified and confirmed.
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TENANT:
High Speed Net Solutions, Inc., a Florida
corporation
By: _____________________________________
Name: ___________________________________
(Corporate Seal) Title: __________________________________
Date: ___________________________________
Attest:
By: __________________________
____________ Secretary
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EXHIBIT F
HVAC SCHEDULE
-------------
Subject to the provisions of SECTION 5.01 of the Lease and excluding
holidays, Landlord will furnish Building standard heating, ventilating and air
conditioning between 8:00 a.m. and 6:00 p.m. on weekdays (from Monday through
Friday, inclusive) and Saturdays between 8:00 a.m. and 1:00 p.m. Upon request of
Tenant made in accordance with the rules and regulations for the Building,
Landlord will furnish air conditioning and heating at other times (that is, at
times other than the times specified above), in which event Tenant shall
reimburse Landlord for furnishing such services on the following basis:
Tenant shall reimburse Landlord at the rate of Thirty-five and No/100
Dollars ($35.00) per hour per air handling unit which is activated to provide
the requested air conditioning or heating service; provided, such rate is based
upon the "Kilowatt Hour rate" (as hereinafter defined) for electricity as of
January 1, 1995 (the "Base Rate"), and if and when the Kilowatt Hour Rate
increases over the Base Rate, the aforesaid rate of Thirty-five and No/100
Dollars ($35.00) per hour per air handling unit thereof shall automatically
increase proportionately. For example, if the Kilowatt Hour Rate increases by
10% over the Base Rate, said rate shall automatically increase by 10%. The
"Kilowatt Hour Rate" shall mean the actual average cost per kilowatt hour
charged by the public utilities providing electricity to the Building, or if
said public utilities shall cease charging for electricity on the basis of a
kilowatt hour, the Kilowatt Hour Rate shall mean the actual average cost per
equivalent unit of measurement substituted therefor by said public utilities.
The Base Rate is hereby stipulated to be $.0600 per kilowatt hour.
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EXHIBIT G
RENEWAL OPTION
--------------
Subject to the conditions set forth below, Tenant is granted the option
to renew the Term of this Lease for a period of five (5) additional years
("Renewal Term"), to commence at the expiration of the initial Term of this
Lease. Tenant shall exercise its option to renew by delivering written notice of
such election to Landlord at least twelve (12) months prior to the expiration of
the initial Term. The renewal of this Lease shall be upon the same terms and
conditions of this Lease, except (a) the Base Rate during the Renewal Term shall
commence at Twenty Dollars ($20.00) per square foot of space and shall be
subject to the same escalation as set forth in Section 4.05 of the Lease, (b)
Tenant shall have no option to renew this Lease beyond the expiration of the
Renewal Term, (c) Tenant shall not have the right to assign its renewal rights
to any subtenant of the Leased Premises or assignee of the Lease, nor may any
such subtenant or assignee exercise such renewal rights, and (d) the leasehold
improvements will be provided in their then existing condition (on an "as is"
basis) at the time the Renewal Term commences.
The Renewal Option shall be conditioned upon the following:
(a) Tenant has fulfilled all material conditions of the Lease
throughout the portion of the Term of the Lease that has expired prior
to the exercise of the Renewal Option and Tenant is not in default of
any of the terms or conditions of the Lease at the time Tenant notifies
Landlord of its election to renew the Term of the Lease or at the time
the Renewal Term commences, nor has Tenant ever been in default of any
of the terms or conditions of the Lease; and
(b) Tenant shall be in occupancy of the Leased Premises at the time
Tenant notifies Landlord of its election to renew the Term of the Lease
and at the time the Renewal Term commences and Tenant has not assigned
or subleased any portion of the Leased Premises.
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EXHIBIT H
Intentionally Deleted
35
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EXHIBIT I
PARKING
-------
Provided Tenant is not in default of the terms, conditions or
provisions of this Lease, during the Term, as such may be amended or renewed,
Landlord shall allocate to Tenant 4 unreserved parking spaces per 1,000 square
feet of space leased. Such parking may be located in the (i) 416 Salisbury
Street parking deck (the "416 Parking Garage"), (ii) the Cabarrus Street Deck
and (iii) the surface parking lot(s) adjacent to the 416 Parking Garage and the
Cabarrus Street Deck.
In the event Landlord shall lose the availability of parking spaces
within the 416 Parking Garage, the Cabarrus Street Deck or the surface parking
lots, Landlord shall be responsible for providing Tenant with an equivalent
number of parking spaces at a location to be mutually agreed upon by Landlord
and Tenant, with Landlord responsible for any increased cost due to the
difference in parking rates.
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36
AGREEMENT
This Agreement, dated and effective August 13, 1999, between and among
High Speed Net Solutions, Inc., a Florida corporation (the "Company"), and
William R. Dunavant, an individual residing in Weston, Florida.
W I T N E S S E T H:
WHEREAS, Dunavant owns 250,000 shares of common stock of Summus
Technologies, Inc., a Florida corporation (the "Summus Stock"); and
WHEREAS, Summus Technologies, Inc. is a privately held corporation,
there is no registration statement in effect with respect to the sale of the
Summus Stock, and no right to register the Summus Stock for sale is expressly or
impliedly promised by or anticipated by any of the parties to this Agreement
pursuant to or as a result of this Agreement; and
WHEREAS, the Company is desirous of purchasing the Summus Stock and
Dunavant is desirous of selling the Summus Stock to the Company in exchange for
the consideration described in Section 2(b) herein;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following respective meanings:
a. Applicable Law: The Securities Act, the Exchange Act (to the extent
applicable to offers or sales of securities) and any applicable state securities
law, and the rules and regulations thereunder.
b. Common Stock: Stock of the Company of the class or classes having
general voting power under ordinary circumstances to elect at least a majority
<PAGE>
of the Board of Directors of the Company (irrespective of whether or not at the
time stock of any other class or classes shall have or might have voting power
by reason of the happening of any contingency).
c. Exchange Act: The Securities Exchange Act of 1934, as now or
hereafter amended, and the rules and regulations thereunder which shall be in
effect at the time.
d. Nasdaq: The Nasdaq Stock Market.
e. Registrable Securities: (i) The shares of Common Stock to be covered
by this Agreement, which, as of the date hereof, are not covered by an effective
registration statement under the Securities Act, and (ii) any securities issued
or issuable with respect to any such shares (A) by way of stock dividend or
stock split or (B) in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. The number of Registrable Shares
that are to be covered by this Agreement shall never be less than the number of
Registrable Shares computed as of the date of the execution of this Agreement,
without respect to any later reverse splits or other corporate acts designed to
reduce the number of shares issued or outstanding at any time, and shall be
computed as follows:
i. Upon the execution of this Agreement, 350,000 shares;
ii. If the registration statement for the sale of the Registrable
Shares does not become effective within 120 days of the execution of this
Agreement, an additional 25,000 shares per month for each 30-day period (or
portion thereof if more than 15 days) after 120 days from the date of execution
of this Agreement.
f. Securities Act: The Securities Act of 1933, as now or hereafter
amended, and the rules and regulations thereunder which shall be in effect at
the time.
g. SEC: The United States Securities and Exchange Commission, or any
successor agency responsible for administering the Securities Act;
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<PAGE>
h. Summus Stock: 250,000 shares of common stock of Summus Technologies,
Inc. a Florida corporation;
2. EXCHANGE OF SHARES.
a. Dunavant agrees to sell and the Company agrees to purchase the
Summus Stock, now owned by him, the consideration for which purchase and sale
shall be as set forth in Section 2(b), and which purchase and sale shall be
contingent on the full completion of the Company's responsibilities under this
Agreement.
b. In exchange for Dunavant's Summus Stock, the Company agrees as
follows:
i. Simultaneously with the execution of this Agreement by all
of the parties hereto, the Company shall deliver to Dunavant (a)
$100,000 in cash, and (b) duly-authorized certificates for 350,000
shares of Registrable Securities, bearing a legend referring to the
Registration Rights conferred hereby.
ii. If a Registration Statement filed with the SEC with
respect to the Registrable Shares pursuant to Section 3 hereof has not
become effective for any reason on or before 120 days from the date of
the execution of this Agreement, then, 135 days from the date of
execution of this Agreement, duly-authorized certificates for 25,000
shares of Registrable Securities, bearing a legend referring to the
Registration Rights conferred hereby; and each 30 days thereafter at
which point a Registration Statement filed with the SEC with respect to
the Registrable Shares pursuant to Section 3 hereof has not become
effective for any reason, an additional 25,000 shares of Registrable
Securities.
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<PAGE>
3. DEMAND REGISTRATION.
a. As expeditiously as possible, but in no event later than 60 days
after the date hereof, the Company shall file a registration statement with the
SEC on Form S-1, or such other form as the Commission may prescribe for the sale
of the Registrable Securities, so as to permit the sale or other disposition of
the Registrable Shares promptly upon the effectiveness of such registration. The
registration statement shall cover that number of Registrable Shares to which,
at the time of the effectiveness of the registration statement, Dunavant shall
be entitled pursuant to this Agreement. The registration process with respect to
Registrable Securities pursuant to this Section 3 shall be referred to herein as
"Demand Registration".
b. The Company shall thereafter diligently, conscientiously and
actively pursue the processing of such registration statement through the
Commission's Division of Corporation Finance, and shall use its best efforts to
have the registration declared effective by the Company as soon as practicable.
c. The Company shall maintain the effectiveness of such registration
statement and, if necessary, amend the registration statement and supplement the
prospectus included therein for a period of no less than two (2) years from the
effective date of such registration statement, or such sooner time as counsel
for the Company shall render his written unqualified legal opinion, in a form
reasonably satisfactory to Dunavant and the Company's Transfer Agent, that
Dunavant is legally permitted to sell all such Registrable Securities held by
Dunavant without volume restrictions under Rule 144 promulgated under the
Securities Act.
4. EXPENSES OF REGISTRATION. The Company shall be responsible for and
shall pay all expenses (including, without limitation, registration fees, filing
fees, qualification fees, Blue Sky fees and expenses, Company legal fees and
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<PAGE>
expenses, printing expenses and costs of special audits or "cold comfort"
letters, underwriting discounts and commissions incident to the Demand
Registration.
5. INDEMNIFICATION. In connection with any registration, qualification,
notification, or exemption of Registrable Securities hereunder, the Company and
each of its undersigned officers and directors shall indemnify Dunavant against
all losses, claims, damages and liabilities caused by any untrue, or alleged
untrue, statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (and as amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) or
any preliminary prospectus or caused by any omission, or alleged omission, to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or alleged untrue
statement or omission based upon information furnished in writing to the Company
by Dunavant, and the Company, the underwriter for the Company and each person
who controls the Company within the meaning of Section 15 of the Securities Act
shall be indemnified by Dunavant for all such losses, claims, damages and
liabilities caused by any untrue, or alleged untrue, statement or any omission
or alleged omission, based upon information furnished in writing to the Company
by Dunavant for any such use.
6. REGISTRATION PROCEDURES AND COVENANTS. The Company shall
periodically keep Dunavant advised, in writing, as to the initiation progress
and effective date of the Demand Registration, and, at the expense of the
Company, the Company shall:
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<PAGE>
a. unless the Registrable Securities are exempt by law from the blue
sky laws of any jurisdiction, use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as Dunavant reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Holder (provided that the Company will not be required to: (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section hereof; (ii) subject
itself to taxation in any such jurisdiction; or (iii) consent to general service
of process in any such jurisdiction);
b. cause to be filed any and all notifications to any governmental
authority under any federal or state securities law to be sent and any and all
listings with any securities exchange or Nasdaq to be obtained, as may be
reasonably necessary or advisable to enable Dunavant to consummate the
disposition of their Registrable Securities pursuant to the registration;
c. notify Dunavant at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the occurrence of any event
as a result of which the prospectus included in such registration statement
contained an untrue statement, and
d. notify Dunavant of a material fact or omission to state any fact
necessary to make the statements therein not misleading, and promptly prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus shall not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
e. provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement.
7. RULE 144 REPORTING AND SALES. With a view to making available to
Dunavant the benefits of certain regulations of the SEC which may permit the
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<PAGE>
sale of the Registrable Securities to the public without registration, the
Company agrees that, so long as Dunavant owns any Registrable Securities, the
Company shall:
a. make and keep available "public information," as that term is
defined in SEC Rule 144 or its successor, and as may be applicable to the
Company at the time;
b. timely file with the SEC all reports and other documents required to
be filed under the Securities Act and the Exchange Act, if during such time, the
Company shall be required to do so;
c. comply with all rules and regulations of the SEC applicable in
connection with the use of Rule 144; and
d. take such other actions and furnish Dunavant with such other
information as he may reasonably request in order to avail him of the benefits
of any rule or regulation of the SEC allowing him to sell any Registrable
Securities without registration. The Company also agrees to furnish to Dunavant
promptly upon request a written statement by the Company as to its compliance
for a period of at least ninety (90) days prior to the date of the certificate
with the reporting requirements of the Securities Act and the Exchange Act and a
copy of the most recent annual or quarterly report of the Company.
e. Nothing in this Section 7 or elsewhere in this Agreement shall be
construed to limit the Company's obligations with respect to the registration of
the Registrable Securities. Dunavant's rights under Rule 144 shall be
supplementary to and independent of his rights with respect to the registration
of the Registrable Securities, and he may choose, in his sole option and
discretion, to avail himself of the benefits under Rule 144.
8. SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns. In addition, and
7
<PAGE>
whether or not any express assignment shall have been made, the provisions of
this Registration Rights Agreement which are for the benefit of Dunavant shall
also be for the benefit of and enforceable by any subsequent Holder of any
Registrable Securities, subject to the provisions and obligations hereof.
9. ENTIRE AGREEMENT AND MODIFICATIONS. This Agreement constitutes the
entire understanding between the parties and supersedes all other agreements,
whether written or oral, with respect to the transactions contemplated by this
Agreement. The Agreement may not be amended or modified by either party unless
such amendment or modification is memorialized in a writing signed by each of
the parties hereto. Any such amendment or modification of this Agreement shall
be binding upon and inure to the benefit of all Holders of Registrable
Securities.
10. WAIVER. Any waiver by either party of any breach of any term or
condition in this Agreement shall not operate as a waiver of any other breach of
such term or condition or of any other term or condition, nor shall any failure
to enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof or constitute or be deemed a waiver or release of any
other rights, in law or in equity.
11. GOVERNING LAW. All issues concerning this Agreement will be
governed by and construed in accordance with the laws of the State of Florida,
without giving effect to any choice of law or conflict of law provision or rule
whether of the State of Florida or any other jurisdiction) that would cause the
application of the law of any other jurisdiction. The parties hereto agree that
any action to enforce this Agreement may be properly brought in any court within
the State of Florida.
12. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
8
<PAGE>
(jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
13. ADDITIONAL STEPS AND PROCEDURES. From time to time after the
execution of this Agreement, each of the parties hereto hereby agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper and advisable under applicable laws,
rules and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its best efforts to obtain all
necessary waivers, consents and approvals. In case at any time after the
execution of this Agreement further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each of
the parties shall take all such necessary action.
14. NOTICES. All notices and other communications which are required or
may be given under this Agreement shall be in writing and shall be deemed to
have been given if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid:
To the Company:
High Speed Network Solutions, Inc.
4542 South Peninsula Drive
Ponce Inlet, Florida 32127
Attn: Michael Cimino
To Dunavant:
William R. Dunavant
2461 Provence Circle
Weston, Florida 33327
9
<PAGE>
with a copy to:
Richard E. Brodsky, P.A.
Suite 919, 25 SE Second
Miami, Florida 33131
or to such other place as either party shall have specified by notice in writing
to the other.
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement
or caused this Agreement to be executed on its behalf as of the date indicated
below:
HIGH SPEED NETWORK SOLUTIONS, INC.
ATTEST:
By: /s/ Michael M. Cimino
----------------------------------------
Its: Michael M. Cimino, Chairman
__________________________ PRINT NAME: ________________________
Secretary DATED:______________________________
WILLIAM R. DUNAVANT:
ATTEST:
/s/ William R. Dunavant
-------------------------------------------
/s/ (illegible signature) DATED: Aug. 13th, 1999
- -------------------------- ------------------------
RALLIB01:537559.01
10
SUPPLEMENT TO AGREEMENT BY AND BETWEEN
HIGH SPEED NET SOLUTIONS, INC. AND WILLIAM DUNAVANT
WHEREAS, on or about January 15, 1999, the parties entered into an oral
agreement (the "Oral Agreement") for the exchange of common stock of High Speed
Net Solutions, Inc. for common stock of Summus Technologies, Inc.; and
WHEREAS, the parties have just now memorialized the Oral Agreement in
writing by a written agreement (the "Written Agreement") dated and effective
August 13, 1999 by and between the parties.
NOW THEREFORE, it is agreed as follows:
1. The actual effective date for the Written Agreement shall be January 15,
1999.
HIGH SPEED NET SOLUTIONS, INC.
/s/ William R. Dunavant By: /s/ Michael M. Cimino
- ---------------------------- -------------------------------------
William R. Dunavant Michael Cimino, Chairman of the Board
ADVISORY AGREEMENT
This Agreement is made and entered into this sixth day of February, by and
between: High Speed Net Solutions, represented by Mike Cimino whose principal
address is 4542 S. Peninsula Drive, Ponce Inlet, FL 32127 (hereinafter referred
to as the "Company") and R J. Seifert Enterprises and or assigns, represented by
Richard Seifert, whose principal address is 7611 Woodlawn Avenue, Elkins Park,
PA 19027 (hereinafter referred to as the "Advisor");
W I T N E S S E T H:
Whereas, Advisor is in the business of securing and/or finding entities
which possess the ability to fund venture capital projects, introduce potential
marketing channels and sources of revenues, Joint Ventures, Strategic alliances
or acquirers and;
Whereas, Advisor desires to introduce the Company to eligible entities
with the ability to provide funding for, sources of revenue, Joint Ventures, and
Strategic alliances to the Company, and;
Whereas, the Company hereby engages Advisor and its affiliates, giving
them Authorization to advise and assist the Company in obtaining funding and
additional revenue sources, and;
Advisor will offer any investment opportunity only to accredited/exempt
investors.
Therefore, in consideration of the premises and the respective mutual
covenants, agreements, representations and warranties hereinafter set forth, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1.01 DEFINITIONS
Funding: For the purpose of this Agreement, all references to funding
will represent sources as follows: cash moneys, loans, letters of credit, debt,
convertible debt, equity capital, debt or equity investments by joint venture
partners, strategic alliances or acquirers, wired money transfers and all like
transactions, any sources of revenue to the Company, including product or
service sales, licensing fees, royalties, etc. originated, initiated and closed
by advisor's primary efforts.
SECTION 2.01 THE COMPANY'S COMMITMENT
The Company agrees that any funding it receives during the term of this
Agreement shall require a payment of success fee to Advisor as follows:
a) The Company agrees that any funding/sources of revenue
received from any entity directly or indirectly controlled by
any agency introduced to the Company by Advisor for as long as
<PAGE>
such funding/source of revenue shall last, excepting Milton
Barbarosh of Stenton Leigh, Rick Mark and any other advisor
under contract with the company, shall earn a success fee for
Advisor as outlined in this agreement. It is understood that
an investor who was an initial investor and invests again in
the Company within two years will precipitate an additional
Advisor's fee.
b) The Company recognizes that the personal and business contacts
introduced to the Company by Advisor are proprietary to
Advisor.
c) The Company will be responsible for all expenses in connection
with its fundraising efforts, including legal fees, copying,
mailing, conference arrangements, etc. Any expenses incurred
by Advisor that are to be reimbursed must be approved by the
Company in advance such as travel expenses reasonably related
to the advisor's dissemination of information about the
Company.
SECTION 2.02 THE ADVISOR'S COMMITMENT
a) The Advisor agrees to make reasonable and "best efforts" to
advise and assist the Company to obtain the funding sought.
b) The Advisor agrees to supply a report at the conclusion of the
term of this Agreement that contains a list of the potential
entities to whom this opportunity has been introduced directly
or indirectly. Only entities on the report will entitle the
Advisor to a fee after the term of this Agreement.
SECTION 3.01 TERM
The term of this agreement is one year and will be renewed for
successive one-year terms unless canceled in writing by either party on thirty
days written notice prior to the end of any term. The Company may terminate this
agreement on thirty (30) days' notice for any reason; however, advisor shall
remain entitled to any success fees earned during the term hereof. Additionally
advisor shall have right to success fee for funding sources, as defined in
section 1.01, Definitions of funding, that are introduced prior to termination
but closed within six months after termination.
SECTION 4.01 SUCCESS FEE
Subject to the terms of this Agreement, the Company hereby expressly
agrees to pay the Advisor a success fee for its services as follows:
a) For equity capital raised, or any non-debt source of funding
or revenue secured by the Company during the term of this
Agreement resulting from any source, contact, or introduction
by Advisor, a success fee in cash equal to 10% of the gross
dollar amount of any equity funding or sources of revenue, or
its equivalent.
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<PAGE>
b) For debt funding raised by the Company during the term of this
Agreement resulting from any, course, contact, or introduction
by Advisor, a success fee, in cash equal to the amount of 5%
of the gross dollar amount of the debt funding received.
SECTION 5.01 THE COMPANY'S OBLIGATION TO PAY
The Company hereby expressly agrees to pay the Advisor the success fees
owed as follows:
a) In the case of cash success fees, the Company will remit fees
to Advisor within five business days of receipt of cleared
funds in the Company's account.
b) If there is a failure to make any payment to Advisor at the
time required, the delinquent sum(s) shall bear interest at
the rate of 15% per year, or the maximum non-usurious interest
rate for loans permitted by the Pennsylvania law, whichever is
the lower of the two rates.
SECTION 6.01 BOARD APPROVAL
This Agreement must be approved by the Company's Board of Directors.
SECTION 7.01 BINDING COVENANT
Mike Cimino's signature to this agreement represents and warrants that
this Agreement will be binding and enforceable against the corporation.
SECTION 8.01 NONCOMPETE - NON-DISCLOSURE
The attached Non-Compete, Non-Disclosure Agreement is an integral part of this
Agreement.
SECTION 9.01 MISCELLANEOUS TERMS
a) NO PERSONAL LIABILITY. It is agreed that there will be no
personal liability for any individual, Director or Officer of
the companies involved in this Agreement.
b) WAIVER. No waiver by a party of any provision of this
Agreement shall be considered a waiver of any other provision
or subsequent breach of the same or any other provision. The
exercise by a party of any remedy provided in this Agreement
or at law shall not prevent the exercise by that party of any
other remedy provided in this Agreement or at law.
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<PAGE>
c) SEVERABILITY. If any condition or covenant herein is held to
be invalid or void by any court of competent jurisdiction, the
same shall be deemed severable from the remainder of this
Agreement and shall in no way affect the other covenants and
conditions contained herein.
d) NOTICE. All written notices, demands, or requests of any kind
must be served by registered or certified mail, with postage
prepaid and return receipt requested, or by personal service
or facsimile, provided that acknowledgment of receipt is made.
Notices shall be delivered to the parties at the addresses
specified at the beginning of this Agreement, or at such
others as may be from time to time specified.
e) ENTIRE AGREEMENT. This Agreement, including any Exhibits or
Schedules attached hereto, contains all of the
representations, warranties, and the entire understanding and
agreement between the parties.
f) GOVERNING LAW AND VENUE. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Pennsylvania. The exclusive venue for any lawsuit of
arbitration under this Agreement shall be the County of
Montgomery, Pennsylvania.
g) TIME. Time is of the essence in this Agreement.
IN WITNESS WHEREOF, the parties hereto have this Agreement as of the
date and year first above written.
Date: 02/08/99 By: /s/ Richard Seifert
--------------------- ------------------------------------------
R. J. SEIFERT ENTERPRISES
Date: 2/9/99 By: /s/ Michael M. Cimino
--------------------- ------------------------------------------
President High Speed Net Solutions
4
NON-CIRCUMVENTION AND NON-DISCLOSURE AGREEMENT
This Non-Circumvention and Non-Disclosure Agreement (hereinafter referred to
as the "Agreement" is made this 6th of February, 1999 by and between High Speed
Net Solutions and R. J. Seifert Enterprises. Collectively, all the parties
hereto may be referred to hereinafter as the "Parties", shall include both
disclosing party and informed party without prejudice.
Whereas, the Parties wish to associate themselves for the purpose of working
together for their individual and common benefit.
Now, therefore, in consideration of the representations, agreements,
promises and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties agree as follows:
1. The Parties agree to abide by the following rules of non-circumvention
and non-disclosure for a period of Two years from the effective date hereof.
Such covenant and agreement shall survive termination of this Agreement for any
reason whatsoever.
a) Each Party, for itself and its associates as defined below,
represents and warrants that it shall not conduct business with any sources or
contacts, or said source's or contact's associates as defined below, that are
originally made known and/or available by another Party hereto, at any time or
in any manner, without the express written permission (not to be unreasonably
withheld) of the Party who made the source(s) known and/or available.
b) For purposes of this Agreement, the term "associates" or "contacts"
shall be defined as: in the case of a business entity its officers, directors,
affiliates, subsidiaries, associated entities, and any other business entity in
which the business entity owns five percent (5%) or more of the outstanding
equity interest.
c) The Parties will maintain complete confidentiality regarding this
Agreement and all transactions occurring thereunder, each other's business,
business sources and affiliates and each other's propriety knowledge and
know-how, and will disclose such information only pursuant to the express
written permission of the party who made such information available save where
such information deemed to be in the public domain or under the order of a
competent Court or Government Agency.
d) This Agreement and each additional agreement concluded or written or
verbal disclosure made between the Parties, shall be kept confidential and is
not to be reproduced, communicated or distributed in any manner whatsoever
except on a "need to know" basis to persons directly involved with the closing
of any transaction contemplated between the Parties, or legal counsel of a
Party.
e) It is understood and agreed that by reason of this "Agreement" the
"Parties" that are involved during the course of business transactions may learn
from one another, or from the principals the names, addresses, telephone numbers
<PAGE>
of lenders, agents, brokers, clients or others hereafter referred to as
"Contracts" and or "Associates".
f) It is understood and agreed that the "Contracts" of each party
hereto are and shall be recognized as exclusive and valuable "Contracts" and
that the parties will not directly or indirectly negotiate or participate in any
transaction circumventing the party who first provided the "Contract".
2. The Agreement is valid and effective for all purposes, business,
communications, negotiations, disclosures and transactions of whatever nature
between the Parties for a period of two (2) years from the effective date
hereof.
3. Each Party represents, warrants and covenants that all information
furnished by said party, or to be furnished by said Party, or to any other Party
or Parties hereto is, or will be, true, complete, correct and accurate to best
of said Party's knowledge, ability and belief.
4. In the event of circumvention by the "Parties" involved in this
transaction, either directly or indirectly, it is agreed and guaranteed that a
monetary penalty will be paid by the person or persons engaged in or
circumvention. This payment will additionally include all reasonable legal
expenses incurred by the aggrieved party.
5. This Agreement contains the entire and complete understanding existing
between the Parties of the date of its execution regarding the subject matters
contained herein, and all former representations, promises or covenants, whether
written or verbal, are null and void.
6. This Agreement may be modified only by written agreement duly executed by
all Parties hereto.
7. This Agreement shall be binding upon, and inure to the benefit of the
heirs, legal representatives, successors, designees, and/or assigns of the
Parties. The executor, administrator, or personal representative of a deceased
party shall execute and deliver any document(s) or legal instrument(s) necessary
or desirable to carry out the provisions hereof.
8. Any written notice required or allowed to be given hereunder shall be
deemed to have been duly and properly given and delivered (a) as of the date
actually hand delivered to the Party to be charged with receipt.
9. Any copy of this Agreement, or any other documents executed and/or signed
by any of the Parties hereto, and sent to another Party hereto by facsimile
transmission carries the full force and effect as if it were the hand delivered
original.
10. This Agreement was negotiated and prepared jointly by all Parties
hereto, and each Party acknowledges that they have had ample opportunity to
consult legal, financial and other counsel concerning all aspects, terms and
2
<PAGE>
condition of this Agreement. This Agreement may be executed in multiple
counterpart copies, each of which shall be deemed a duplicate original.
11. No party shall be considered or adjudged to be in violation of this
Agreement when the violation is due to situations beyond the said party's
control, such as acts of God, civil disturbances, theft, or said Party's
connections having prior knowledge or possession of privileged information,
contacts, or contacts without the disclosure, intervention or assistance of said
party or aid Parties associates as defined herein. Essentially, the spirit
behind this Agreement is one of mutual trust, confidence and reliance upon each
party to do what is fair and equitable.
12. This Agreement is a full recourse agreement concluded under the laws of
Pennsylvania and said forum shall be applicable law covering the construction,
interpretation, execution, validity, enforceability, performance, and any other
such matters in respect to this Agreement, including any breach or claim of
breach hereof.
13. This Agreement shall be governed by law and construed to be in
accordance with the laws of the State of Pennsylvania applicable to contracts
made and to be performed solely in such State by parties thereof. Any dispute
arising out of this Agreement shall be adjudicated in arbitration under the
rules of the American Arbitration Association. The prevailing party in any
dispute shall be reimbursed reasonable attorneys fees.
IN WITNESS WHEREOF, THE "PARTIES" HERETO HAVE EXECUTED THIS "AGREEMENT" ON
THE DATES SET FORTH BELOW.
Agreed, executed and acknowledged on 2/9/99 , 1999
/s/ Michael M. Cimino /s/ Richard Seifert 02/08/99
- --------------------------------- --------------------------------
Mike Cimino for High Speed Net Richard Seifert for R J Seifert
Solutions Enterprises
3
January 20, 2000
Mr. Andrew L. Fox
Chapel Hill, NC
Dear Andy:
This letter will stipulate the terms of your employment as a senior executive in
High Speed Net Solutions, Inc. (HSNS) in Raleigh, North Carolina, effective
August 25th, 1999. Your anticipated title will be Executive Vice President;
however, you will assume the role of Acting President and Chief Executive
Officer until such time as a new executive can be recruited by the Board of
Directors. This arrangement will not preclude the new CEO asking you to serve as
President and Chief Operating Officer.
The details of this offer are:
TITLE: Executive Vice President; Acting President and Chief Executive Officer
BOARD OF DIRECTORS: Board seat for a minimum of one year.
DESCRIPTION: As acting president and CEO, you are expected, with active
participation and support of the Board, to prepare the Form 10 filing for review
and approval of the board, develop a suitable business strategy, negotiate and
acquire the necessary technology or products license to perform the intended
business operation, establish and manage fiscal controls, recruit and direct an
appropriate management team, establish the appropriate procedures to manage
stockholder relations and secure the necessary operating capital. In this
connection, it is expected that you will commit support in the presentation of
HSNS to potential investors. A precise job description will be formulated
between you and the Board of Directors upon acceptance of this offer. This
agreement is with the understanding that this is an offer for at will employment
and does not constitute an employment agreement.
RELATIONSHIP WITH SUMMUS LTD: Acceptance of fulltime employment with HSNS
terminates your active relationship with Summus, Ltd. (Summus) and cancels any
and all stock grants, stock options or other compensation plans.
SALARY: $135,000 annually plus Performance Bonus as outlined below. During each
month you serve as the Acting President and CEO, you will receive additional
compensation of $2,500 per month.
REPORT TO: You will report to the Board of Directors or a Board designated
Executive in HSNS.
PERFORMANCE BONUS PROGRAM: You will be eligible to receive up to 1.0x your
annual salary based on specified performance goals to be jointly defined by you
and the President/CEO and approved by the Board of Directors. The bonus will be
<PAGE>
paid after receipt of the audited fiscal year end financial statements of HSNS
certified by Ernst & Young. Based on work done in 1999 for HSNS your bonus will
be $28.125 which has been based on performance and has been prorated for 1999.
You must be employed by HSNS on December 31, 2000 to be eligible to receive your
Year 2000 cash bonus.
STOCK OWNERSHIP: I will take all reasonably appropriate action to cause the HSNS
board of directors (or compensation committee, if appropriate) to confirm (if
necessary) a prior grant of stock options covering 240,000 shares of HSNS stock.
The terms of the option are that it will vest in full on August 25, 2006 if you
remain in the employment of the company (the seventh anniversary of the date of
grant); provided, however, that the options may vest sooner if HSNS attains
certain performance goals such as Revenue, EBITDA or other metrics to be
determined by the HSNS Board of Directors. Performance vesting will generally
occur in equal installments over a three year period beginning on August 25,
1999. The strike price for the options will be $4.38 (the FMV of the stock on
August 25, 1999) for 80,000 shares and $13.00/share for the remaining 160,000.
Any additional shares of stock issued by HSNS will be for reasonable business
purposes and for valid consideration. Other terms of these stock options
(including change of control) shall be governed in their entirety by the terms
and conditions of the Stock Option Plan to be adopted by the Board of Directors
and Shareholders, if necessary.
LOCATION OF EMPLOYMENT: Your place of employment will be in Raleigh, North
Carolina.
PRE-TAX DEDUCTIONS: Any authorized payroll deductions are done under IRS Section
125.
SEVERANCE: If you are terminated from employment, you will receive six months of
salary paid monthly or in lump sum at the discretion of the company.
HEALTH INSURANCE: HSNS currently does not have a Healthcare plan; however, you
will receive reimbursement for COBRA payments or reimbursement directly to your
prior employer for maintaining coverage.
PERSONAL/SICK DAYS: You are provided 6 paid sick/personal days to be used as
necessary during the calendar year. These days may be used for personal or
family illnesses, death of a family member, or to attend to personal business.
Days are pro-rated during your first calendar year of employment. Sick/personal
days cannot be carried forward into the next calendar year, nor can they be used
in lieu of vacation time.
VACATION POLICY: Upon hiring, you will be entitled to four (4) weeks (or 20
working days) of vacation time annually. Your vacation is accrued throughout the
calendar year but is available to you upon you date of hire and the start of
each calendar year following. If you do not take all of your vacation during
this time, you may carry over up to 50% of the remaining time to the next year.
Your total may never be greater than 150% of the vacation time you are entitled
to.
<PAGE>
BENEFITS: You will also be entitled to other benefits generally available to the
executives of HSNS from time to time. Currently these benefits are:
CAR ALLOWANCE: $600 per month.
Please sign and return this agreement. The offer will remain in effect for a
period of ten days. This entire agreement is subject to endorsement by the HSNS
Board of Directors.
Sincerely, ACCEPTED AND AGREED
/s/ Rick Seifert /s/ Andrew Fox
- ------------------------------- ----------------------
Rick Seifert, Director Andrew L. Fox
On behalf of the
Board of Directors
High Speed Net Solutions, Inc.
<PAGE>
Addendum to Employment Agreement
Accelerated Vesting of Options: In the event of a change of control - defined
as a "merger or consolidation, tender offer for 50% of the shares of the
corporation or any other acquisition or reorganization of the corporate capital
structure - your options shall be immediately vested according to the following
schedule:
50% of remaining unvested options
Approved: /s/ Rick Reifert
Rick Seifert, Director
On behalf of the Board
of Directors
High Speed Net Solutions, Inc.
Dated: Feb 26, 2000
HIGH SPEED NET SOLUTIONS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is made as
of the 25th day of August, 1999 (the "Grant Date"), by and between High Speed
Net Solutions, Inc., a Florida corporation (the "Corporation"), and Andrew L.
Fox (the "Participant").
WHEREAS, the Board granted Participant an option to purchase shares of
the Corporation's Stock pursuant to the Plan; and
WHEREAS, this Agreement evidences the grant of such option.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises set forth below and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. GRANT OF OPTION. The Board granted Participant an option to purchase
from the Corporation, during the period specified in section 2 of this
Agreement, a total of Two Hundred Forty Thousand (240,000) shares of Stock, at
the purchase price of Four Dollars and Thirty Eight Cents ($4.38) per share for
Eighty Thousand (80,000) of the Two Hundred Forty Thousand (240,000) shares of
Stock (the "First Purchase Price") and at the purchase price of Thirteen Dollars
($13.00) per share for the remaining One Hundred and Sixty Thousand (160,000)
shares of Stock (the "Second Purchase Price"), in accordance with the terms and
conditions stated in this Agreement. The shares of Stock subject to the option
are referred to below as the "Shares," and the option to purchase such Shares is
referred to below as the "Option."
2. VESTING AND EXERCISE OF OPTION. The Option shall vest and become
exercisable in increments in accordance with the schedule set forth below
measured from the Grant Date provided that the Option shall vest and become
exercisable with respect to an increment as specified only if there has not been
a Termination of Employment of the Participant as of the specified date for such
increment.
(a) If the Board of Directors of the Corporation determines
that the Corporation has attained certain performance goals that the Board of
Directors will specify to Participant sufficiently in advance, then the Option
shall fully-vest and be exercisable in three (3) equal installments of Eighty
Thousand (80,000) shares of stock. The first installment of Eighty Thousand
(80,000) shares of stock shall vest on the first anniversary of the Grant Date
at the First Purchase Price and the remaining two installments of Eighty
Thousand (80,000) shares of stock shall vest on the second and third anniversary
of the Grant Date at the Second Purchase Price; or
(b) the Option shall vest in full on August 25, 2006.
<PAGE>
The schedule set forth above is cumulative, so that Shares as to which the
Option has become vested and exercisable on and after a date indicated by the
schedule may be purchased pursuant to exercise of the Option at any subsequent
date prior to termination of the Option. The Option may be exercised at any time
and from time to time to purchase up to the number of Shares as to which it is
then vested and exercisable.
Notwithstanding the foregoing, the Option shall vest and become exercisable, to
the extent not already vested and exercisable, on the date of Participant's
death or Disability, provided Participant has not incurred a Termination of
Employment prior to such date.
Notwithstanding the foregoing, fifty percent (50%) of the Option that has not
yet vested shall become fully vested and exercisable, to the extent not already
fully vested and exercisable, as of the effective date of a Corporate
Reorganization or Change in Control, provided that the Optionee has not
experienced a Termination of Employment prior to such date, unless in connection
with the Corporate Reorganization or Change in Control the surviving entity or
an affiliate assumes the Option or replaces the Option with an option of
equivalent value and with comparable terms. In the event of a Corporate
Reorganization or Change in Control, the Corporation shall send the Optionee
prior written notice of the effectiveness of such event and the last day on
which the Optionee may exercise the Option. On or prior to the last day
specified in such notice, the Optionee may, upon compliance with the terms of
this Agreement, exercise the Option to the extent it is then vested, conditioned
upon and subject to completion of the Corporate Reorganization or Change in
Control. To the extent the Option is not so exercised, it shall terminate at
5:00 P.M., eastern standard time, on the last day specified in such notice,
conditioned upon and subject to the completion of the Corporate Reorganization.
If the surviving entity in such Corporate Reorganization or Change in Control
assumes or replaces the Option as described above, the proceeding provisions of
this paragraph shall not apply; however, if there is an Involuntary Termination
of Participant's employment within the eighteen (18) month period following the
effective date of such Corporate Reorganization or Change in Control, the Option
shall vest and become exercisable, to the extent not already vested and
exercisable, on the date of such termination.
3. TERMINATION OF OPTION. The Option shall remain exercisable as
specified in section 2 above until the earliest to occur of the dates specified
below, upon which date the Option shall terminate:
(a) the date all of the Shares are purchased pursuant to the
terms of this Agreement;
(b) upon the expiration of ninety (90) days following the
Termination of Employment of Participant for any reason other than Cause, death
or Disability;
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(c) immediately upon the Termination of Employment of
Participant for Cause;
(d) upon the expiration of one (1) year following
Participant's Termination of Employment where employment shall have terminated
as a result of death or Disability;
(e) upon the expiration of one (1) year following the date of
Participant's death, if death shall have occurred following Participant's
Termination of Employment and while the Option was still exercisable;
(f) at 5:00 P.M., eastern standard time, on the thirtieth
(30th) day following the date that the Corporation files articles of dissolution
with the Florida Secretary of State or is otherwise dissolved under Florida law;
(g) at 5:00 P.M., eastern standard time, on the last day
specified in the notice described in section 2 above in the event of a Change in
Control or Corporate Reorganization; or
(h) the ten year anniversary of the Grant Date at 5:00 P.M.,
eastern standard time.
Upon its termination, the Option shall have no further force or effect and
Participant shall have no further rights under the Option or to any Shares which
have not been purchased pursuant to prior exercise of the Option.
4. MANNER OF EXERCISE OF OPTION.
----------------------------
(a) The Option may be exercised only by (i) Participant's
completion, execution and delivery to the Corporation of a notice of exercise
and, if required by the Corporation, an "investment letter" as supplied by the
Corporation confirming Participant's representations and warranties in section
16 of this Agreement, including the representation that Participant is acquiring
the Shares for investment only and not with a view to the resale or other
distribution thereof, and (ii) the payment to the Corporation, pursuant to the
terms of this Agreement, of an amount equal to the Purchase Price multiplied by
the number of Shares being purchased as specified in Participant's notice of
exercise. Participant's right to exercise the Option shall be conditioned upon
and subject to satisfaction, in a manner acceptable to the Corporation, of any
withholding liability under any state or federal law arising in connection with
exercise of the Option. Participant must provide notice of exercise of the
Option with respect to no fewer than 100 Shares (or any lesser number of Shares
with respect to which the Option is then vested and exercisable). Participant's
3
<PAGE>
notice of exercise shall be given in the manner specified in section 12 but any
exercise of the Option shall be effective only when the items required by the
preceding sentence are actually received by the Corporation. The notice of
exercise and the "investment letter" may be in the form set forth in EXHIBIT A
attached to this Agreement. Notwithstanding anything to the contrary in this
Agreement, the Option may be exercised only if compliance with all applicable
federal and state securities laws can be effected, as determined by the
Committee in its discretion. Payment of the aggregate Purchase Price for Shares
Participant has elected to purchase shall be made by cash or good check.
(b) Upon any exercise of the Option by Participant or as soon
thereafter as is practicable, the Corporation shall issue and deliver to
Participant a certificate or certificates evidencing such number of Shares as
Participant has then elected to purchase. Such certificate or certificates shall
be registered in the name of Participant and shall bear such legends as the
Corporation deems appropriate.
5. DEFINITIONS; AUTHORITY OF COMMITTEE.
-----------------------------------
(a) All capitalized terms used in this Agreement shall have
the meanings set out in the Plan unless otherwise specified in this Agreement.
(b) "Cause" shall mean that Participant's employment with the
Company shall have terminated principally because (i) of Participant's breach of
any employment, noncompetition or other agreement with the Company; (ii)
Participant commits any act of dishonesty toward the Company, theft of corporate
property or unethical business conduct, or is convicted of any misdemeanor or
felony involving dishonest, immoral or unethical conduct; or (iii) Participant
commits any act of insubordination, fails to comply with any instructions of his
or her supervisors or the board of directors of the Company, or commits any act
or omission which the Board determines, in good faith, may materially adversely
affect the Company's business or operations, unless Participant cures such
action or omission within five (5) days after notice from the Company.
(c) A "Change in Control" shall be deemed to have occurred if,
after the Corporation has consummated a public offering of the Stock pursuant to
the Securities Act of 1933, as amended:
(i) any "Person" as defined in Paragraph 3(a)(9) of
the Securities Exchange Act of 1934 (the "Act"), including a "group" (as that
term is used in paragraphs 13(d)(3) and 14(d)(2) of the Act), but excluding the
Corporation and any employee benefit plan sponsored or maintained by the
Corporation, including any trustee of such plan acting as trustee:
4
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(A) consummates a tender or exchange offer
for any shares of the Stock pursuant to which at least fifty percent (50%) of
the outstanding shares of the Stock are purchased; or
(B) together with its "affiliates" and
"associates" (as those terms are defined in Rule 12b-2 under the Act) becomes
the "Beneficial Owner" (within the meaning of Rule 13d-3 under the Act) of at
least fifty percent (50%) of the Stock;
(ii) a merger or consolidation of the Corporation
with or into another corporation is consummated and the Corporation's
shareholders immediately prior to the transaction do not own at least fifty
percent (50%) of the surviving company's outstanding stock immediately following
the transaction, a sale or other disposition of all or substantially all of the
Corporation's assets, or the liquidation of the Corporation; or
(iii) during any period of 24 consecutive months
during the existence of this Agreement, the individuals who, at the beginning of
such period, constitute the Board of Directors of the Corporation (the
"Incumbent Directors") cease for any reason other than death to constitute at
least a majority thereof; provided, however, that a director who was not a
director at the beginning of such 24 month period shall be deemed to have
satisfied such 24 month requirement, and be an Incumbent Director, if such
director was elected by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent Directors
either actually, because they were directors at the beginning of such 24 month
period, or by prior operation of this subparagraph (iii).
(d) A "Corporate Reorganization" means the happening of any
one of the following events prior to the time at which the Corporation has
consummated a public offering of the Stock pursuant to the Securities Act of
1933, as amended: (i) the dissolution or liquidation of the Corporation; (ii) a
reorganization, merger, or consolidation involving the Corporation unless (A)
the transaction involves only the Corporation and one or more of the
Corporation's parent corporation and wholly-owned (excluding interests held by
employees, officers and directors) subsidiaries; or (B) the shareholders who had
the power to elect a majority of the board of directors of the Corporation
immediately prior to the transaction have the power to elect a majority of the
board of directors of the surviving entity immediately following the
transaction; (iii) the sale of all or substantially all of the assets of the
Corporation to another corporation, person or business entity; or (iv) an
acquisition of Corporation stock, unless the shareholders who had the power to
elect a majority of the board of directors of the Corporation immediately prior
to the acquisition have the power to elect a majority of the board of directors
of the Corporation immediately following the transaction.
(e) An "Involuntary Termination" is any termination of
employment of the Optionee: (i) by the Optionee during the eighteen (18) month
period following a Change in Control or Corporate Reorganization (A) following
5
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the assignment to the Optionee by the surviving entity following a Corporate
Reorganization of any duties that are significantly incompatible with, and
detract from, the Optionee's position, duties, titles, responsibilities or
status with the Corporation immediately prior to the effective date of the
Corporate Reorganization, (B) following a significant reduction in the
Optionee's annual base salary in effect immediately prior to the effective date
of the Change in Control or Corporate Reorganization; or (C) following the
Corporation's assignment of the Optionee to a location other than his principal
location of employment immediately prior to the effective date of the Change in
Control or Corporate Reorganization (except for required travel on Corporation
business to an extent substantially consistent with the Optionee's business
travel obligations immediately prior to the effective date of the Change in
Control or Corporation Reorganization), or, in the event he consents to any such
relocation, the failure of the Corporation to pay (or reimburse the Optionee
for) all reasonable moving expenses incurred by him relating to a change of his
principal residence in connection with such relocation, or (ii) by the surviving
entity during the eighteen (18) month period following the effective date of a
Change in Control or Corporate Reorganization for any reason other than for
Cause.
(f) "Plan" means the High Speed Net Solutions, Inc. 199
Equity Compensation Plan adopted by the Corporation effective ___________, 2000,
as it may be amended from time to time.
(g) All determinations made by the Committee with respect to
the interpretation, construction and application of any provision of this
Agreement shall be final, conclusive and binding on the parties.
6. RESTRICTIONS ON TRANSFER.
------------------------
(a) The Option shall not be sold, exchanged, delivered,
assigned, bequeathed or gifted, pledged, mortgaged, hypothecated or otherwise
encumbered, transferred or permitted to be transferred, or otherwise disposed
of, whether voluntarily, involuntarily or by operation of law (including,
without limitation, the laws of bankruptcy, intestacy, descent and distribution
or succession) or on an absolute or contingent basis. For this purpose, any
reference to Participant shall (when applicable) be deemed to be and include
references to Participant's estate, executors or administrators, personal or
legal representatives and transferees (direct or indirect).
(b) In the event of Participant's death, the Option may be
transferred to any executor, administrator, personal or legal representative,
legatee, heir or distributee of the estate of Participant; provided, that, as a
condition precedent to such transfer of any of the Option, each and every
6
<PAGE>
prospective transferee shall (i) provide or cause to be provided to the
Corporation, at its request, sufficient evidence of the legal right and
authority of such prospective transferee to have the Option so transferred and
(ii) comply with the provisions of section 7 below.
(c) Notwithstanding any provision of this Agreement to the
contrary, Shares issued to Participant upon exercise of the Option shall be
subject to a Market Stand-Off, as provided in Section 3.15 of the Plan.
7. SHAREHOLDERS AGREEMENT. As a condition to receipt of any Shares,
Participant shall become a party to the shareholders agreement between the
corporation and its shareholders in place at such time and shall sign a copy of
such agreement. All restrictions applicable to Stock under such agreement shall
apply to the Shares.
8. RIGHTS PRIOR TO EXERCISE. Participant will have no rights as a
shareholder with respect to the Shares except to the extent that Participant has
exercised the Option and has been issued and received delivery of a certificate
or certificates evidencing the Shares so purchased.
9. SALE OR OTHER DISPOSITION BY MAJORITY INTEREST. Participant hereby
irrevocably appoints the Corporation and its President, or either of them, as
Participant's agents and attorneys-in-fact, with full power of substitution for
and in Participant's name, to sell, exchange, transfer or otherwise dispose of
all or a portion of Participant's Shares and to do any and all things and to
execute any and all documents and instruments (including, without limitation,
any stock transfer powers) in connection therewith, such powers of attorney not
to become operable until such time as the holder or holders of a majority of the
issued and outstanding shares of Stock of the Corporation sell, exchange,
transfer or otherwise dispose of, or contract to sell, exchange, transfer or
otherwise dispose of, all or a majority of the issued and outstanding shares of
Stock of the Corporation. Any sale, exchange, transfer or other disposition of
all or a portion of Participant's Shares pursuant to the foregoing powers of
attorney shall be made upon substantially the same terms and conditions
(including sale price per share) applicable to a sale, exchange, transfer or
other disposition of shares of Stock of the Corporation owned by the holder or
holders of a majority of the issued and outstanding shares of Stock of the
Corporation. For purposes of determining the sale price per share of the Shares
under this section 9, there shall be excluded the consideration (if any) paid or
payable to the holder or holders of a majority of the issued and outstanding
shares of Stock of the Corporation in connection with any employment,
consulting, noncompetition or similar agreements which such holder or holders
may enter into in connection with or subsequent to such sale, transfer, exchange
or other disposition. The foregoing power of attorney shall not impose or be
deemed to impose any fiduciary duty or any other duty (except as set forth in
7
<PAGE>
this section 9) or obligation on either the Corporation or its President, shall
be irrevocable and coupled with an interest and shall not terminate by operation
of law, whether by the death, bankruptcy or adjudication of incompetency or
insanity of Participant or the occurrence of any other event.
10. ENGAGEMENT OF PARTICIPANT. Nothing in this Agreement shall be
construed as constituting a commitment, guarantee, agreement or understanding of
any kind or nature that the Company shall continue to employ Participant, nor
shall this Agreement affect in any way the right of the Company to terminate the
employment of Participant at any time and for any reason. By Participant's
execution of this Agreement, Participant acknowledges and agrees that
Participant's employment is "at will." No change of Participant's duties as an
employee of the Company shall result in, or be deemed to be, a modification of
any of the terms of this Agreement.
11. BURDEN AND BENEFIT. This Agreement shall be binding upon, and shall
inure to the benefit of, the Company and Participant, and their respective
heirs, personal and legal representatives, successors and assigns. As used in
this section 11, the term the "Company" shall include the Company and any
corporation which is the parent or a subsidiary of the Company or any
corporation or entity which is an affiliate of the Company by virtue of common
(although not identical) ownership or any successor entity following a Change in
Control or Corporate Reorganization, and for which Participant is providing
services in any form during Participant's employment with the Company or any
such other corporation or entity. Participant hereby consents to the enforcement
of any and all of the provisions of this Agreement by or for the benefit of the
Company and any such other corporation or entity.
12. NOTICES. Any and all notices under this Agreement shall be in
writing, and sent by hand delivery or by certified or registered mail (return
receipt requested and first-class postage prepaid), in the case of the
Corporation, to its principal executive offices to the attention of the
President, and in the case of Participant, to Participant's address as shown on
the Company's records.
13. SPECIFIC PERFORMANCE. Strict compliance by Participant shall be
required with each and every provision of this Agreement. The Corporation and
Participant agree that the Shares are unique, that Participant's failure to
perform the obligations provided by this Agreement will result in irreparable
damage to the Corporation and that specific performance of Participant's
obligations may be obtained by suit in equity.
14. MODIFICATIONS. No change or modification of this Agreement shall be
valid unless the same is in writing and signed by the Participant and on behalf
of the Corporation.
15. TERMS AND CONDITIONS OF PLAN. The terms and conditions included in
the Plan, the receipt of a copy of which Participant hereby acknowledges by
execution of this Agreement, are incorporated by reference herein, and to the
extent that any conflict may exist between any term or provision of this
8
<PAGE>
Agreement and any term or provision of the Plan, such term or provision of the
Plan shall control.
16. COVENANTS AND REPRESENTATIONS OF PARTICIPANT. Participant
represents, warrants, covenants and agrees with the Corporation as follows:
(a) The Option is being received for Participant's own account
without the participation of any other person, with the intent of holding the
Option and the Shares issuable pursuant to the Option for investment and without
the intent of participating, directly or indirectly, in a distribution of the
Shares and not with a view to, or for resale in connection with, any
distribution of the Shares or any portion of the Shares.
(b) Participant is not acquiring the Option or any Shares
based upon any representation, oral or written, by any person with respect to
the future value of, or income from, the Shares, but rather upon an independent
examination and judgment as to the prospects of the Corporation.
(c) Participant has had the opportunity to ask questions of
and receive answers from the Corporation and its executive officers and to
obtain all information necessary for Participant to make an informed decision
with respect to the investment in the Corporation represented by the Option and
any Shares issued upon its exercise.
(d) Participant is able to bear the economic risk of any
investment in the Shares, including the risk of a complete loss of the
investment, and Participant acknowledges that Participant must continue to bear
the economic risk of any investment in Shares received upon exercise of the
Option for an indefinite period.
(e) Participant understands and agrees that the Shares subject
to the Option may be issued and sold to Participant without registration under
any state or federal laws relating to the registration of securities and in that
event will be issued and sold in reliance on exemptions from registration under
appropriate state and federal laws.
(f) Shares issued to Participant upon exercise of the Option
will not be offered for sale, sold or transferred by Participant other than
pursuant to: (i) an effective registration under applicable state securities
laws or in a transaction which is otherwise in compliance with those laws; (ii)
an effective registration under the Securities Act of 1933, or a transaction
otherwise in compliance with such Act; and (iii) evidence satisfactory to the
Corporation of compliance with all applicable state and federal securities laws.
The Corporation shall be entitled to rely upon an opinion of counsel
satisfactory to it with respect to compliance with the foregoing laws.
9
<PAGE>
(g) The Corporation will be under no obligation to register
the Shares issuable pursuant to the Option or to comply with any exemption
available for sale of the Shares by Participant without registration, and the
Corporation is under no obligation to act in any manner so as to make Rule 144
promulgated under the Securities Act of 1933 available with respect to any sale
of the Shares by Participant.
(h) Participant has not relied upon the Company with respect
to any tax consequences related to the grant or exercise of this Option, or the
disposition of Shares purchased pursuant to its exercise. Participant
acknowledges that, as a result of the grant and/or exercise of the Option,
Participant may incur a substantial tax liability. Participant assumes full
responsibility for all such consequences and the filing of all tax returns and
elections Participant may be required or find desirable to file in connection
with the Option. In the event any valuation of the Option or Shares purchased
pursuant to its exercise must be made under federal or state tax laws and such
valuation affects any return or election of the Company, Participant agrees that
the Corporation may determine such value and that Participant will observe any
determination so made by the Corporation in all returns and elections filed by
Participant. In the event the Company is required by applicable law to collect
any withholding, payroll or similar taxes by reason of the grant or any exercise
of the Option, Participant agrees that the Company may withhold such taxes from
any monetary amounts otherwise payable by the Company to Participant and that,
if such amounts are insufficient to cover the taxes required to be collected by
the Company, Participant will pay to the Company such additional amounts as are
required.
(i) The agreements, representations, warranties and covenants
made by Participant herein with respect to the Option shall also extend to and
apply to all of the Shares issued to Participant from time to time pursuant to
exercise of the Option. Acceptance by Participant of any certificate
representing Shares shall constitute a confirmation by Participant that all such
agreements, representations, warranties and covenants made herein shall be true
and correct at that time.
(j) Participant agrees that he shall, during the entire period
of his employment with the Company and for a period of ninety (90) days
following Termination of Employment, observe the Company's securities trading
policies in effect from time to time during such period of employment and/or
during such post-employment period.
[SIGNATURES APPEAR ON THE NEXT PAGE]
10
<PAGE>
IN WITNESS WHEREOF, the Corporation and Participant have executed this
Agreement and affixed their seals hereto as of the day and year first above
written.
ATTEST: HIGH SPEED NET SOLUTIONS, INC.
/s/ Alan R. Kleinmaier By: /s/ Rick Seifert
- ------------------------------- ------------------------------
Alan R. Kleinmaier, Secretary Rick Seifert
------------------------------
[Name]
Director
------------------------------
[Title]
[CORPORATE SEAL]
WITNESS: PARTICIPANT
illegible /s/ Andy Fox (SEAL)
- ----------------------------------- ------------------------------
11
<PAGE>
EXHIBIT A
High Speed Net Solutions, Inc.
[ADDRESS]
Attention: President
Re: Exercise of Nonqualified Stock Option under the High Speed Net
Solutions, Inc. 1999 Equity Compensation Plan
Dear Sir:
Pursuant to the terms and conditions of that certain High Speed Net
Solutions, Inc. Nonqualified Stock Option Agreement dated ______________________
(the "Agreement"), I hereby provide notice of my desire to exercise the stock
option evidenced by the Agreement (the "Option") and thereby purchase
_________________ shares [MUST BE AT LEAST 100 SHARES OR ANY SMALLER NUMBER OF
SHARES AS TO WHICH THE OPTION IS VESTED AND EXERCISABLE] of the common stock of
High Speed Net Solutions, Inc., and I hereby tender payment in full for such
shares in accordance with the terms of the Agreement.
I hereby reaffirm that the representations and warranties made in
section 16 of the Agreement are true and correct as of the date of exercising
this option.
Very truly yours,
__________________________
[Signature]
__________________________
[Print Name]
__________________________
[Date]
February 7, 2000
Mr. Alan R. Kleinmaier
8412 Kempton Road
Raleigh, NC 27615
Dear Alan:
This letter will stipulate the terms of your employment as a senior executive in
High Speed Net Solutions, Inc. (HSNS) in Raleigh, North Carolina, effective
August 25th, 1999. Your title will be Executive Vice President, Secretary,
Treasurer and acting CFO and you will report directly to the President and Chief
Executive Officer at such time as a President and CEO is elected to the Company.
In the interim, you will work with the acting President and CEO and report
directly to the Board of Directors or its designee.
The details of this offer are:
TITLE: Executive Vice President, Secretary and Treasurer, acting CFO
BOARD OF DIRECTORS: You will be asked to participate in all meetings of the
Board of Directors, however, you will not be a member of the board.
DESCRIPTION: You are expected, with active participation and support of the
Board, to assist in the development and execution of a business plan in the
Internet advertising space. Additionally, you will develop a financial plan for
the Company, manage the fiscal activity and lead the search for a full time
Chief Financial Officer.
SALARY: $100,000 annually plus Performance Bonus as outlined below.
INSURANCE: You will receive full indemnification from Summus during your time of
service prior to Directors and Officers insurance being secured excluding any
action resulting from your fraud, gross negligence, willful misconduct or
intentional breach of any fiduciary responsibility of your positions.
REPORT TO: You will report to the Board of Directors or a Board designated
Executive in HSNS.
PERFORMANCE BONUS PROGRAM: You will be eligible to receive up to 1.0x your
annual salary based on specified performance goals to be jointly defined by you
and the President/CEO and approved by the Board of Directors. The bonus will be
paid after receipt of the audited fiscal year end financial statements of HSNS
certified by Ernst & Young. You will be eligible to receive a prorated portion
of this cash bonus for 1999 based performance goals and achievements as
negotiated between you and the Board of Directors. You must be employed by HSNS
on December 31, 2000 to be eligible to receive your Year 2000 cash bonus.
<PAGE>
STOCK OWNERSHIP: 50,000 fully vested shares granted as of August 25, 1999 at an
exercise price of $4.00 per share.
LOCATION OF EMPLOYMENT: Your place of employment will be in Raleigh, North
Carolina.
BENEFITS: You will also be entitled to other benefits generally available to the
executives of HSNS from time to time. Currently these benefits are:
CAR ALLOWANCE: $600 per month.
PRE-TAX DEDUCTIONS: Any authorized payroll deductions are done under IRS Section
125.
SEVERANCE: If you are terminated from employment, you will receive six months of
salary
HEALTH INSURANCE: Full medical, dental and vision for you and your dependents.
PERSONAL/SICK DAYS: Upon the first day of employment you will receive 6 paid
personal or sick days to be used during the calendar year. These may be used at
your discretion. Unused days will be forfeited. These 6 days are renewed at the
start of each calendar year.
VACATION POLICY: Upon hiring, you will be entitled to four (4) weeks (or 20
working days) of vacation time annually. Your vacation year starts and ends on
your date of hire. If you do not take all of your vacation during this time, you
may carry over up to 50% of the remaining time to the next year. Your total may
never be greater than 150% of the vacation time you are entitled to.
Please sign and return this agreement. The offer will remain in effect for a
period of ten days. This entire agreement is subject to endorsement by the HSNS
Board of Directors.
Sincerely, ACCEPTED AND AGREED
/s/ Rick Seifert /s/ Alan R. Kleinmaier
- ---------------------- ---------------------------
Rick Seifert Alan R. Keinmaier
Director
HIGH SPEED NET SOLUTIONS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is made as
of the 25th day of August, 1999 (the "Grant Date"), by and between High Speed
Net Solutions, Inc., a Florida corporation (the "Corporation"), and Alan R.
Kleinmaier (the "Participant").
WHEREAS, the Board granted Participant an option to purchase shares of
the Corporation's Stock pursuant to the Plan; and
WHEREAS, this Agreement evidences the grant of such option.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises set forth below and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. GRANT OF OPTION. The Board granted Participant an option to purchase
from the Corporation, during the period specified in section 2 of this
Agreement, a total of Fifty Thousand (50,000) shares of Stock, at the purchase
price of Four Dollars ($4.00) per share of Stock (the "Purchase Price"), in
accordance with the terms and conditions stated in this Agreement. The shares of
Stock subject to the option are referred to below as the "Shares," and the
option to purchase such Shares is referred to below as the "Option."
2. VESTING AND EXERCISE OF OPTION. The Option shall vest in full and be
exercisable as of the Grant Date.
The Option may be exercised at any time and from time to time to purchase up to
the number of Shares vested and exercisable.
Notwithstanding the foregoing, the Option shall vest and become exercisable, to
the extent not already vested and exercisable, on the date of Participant's
death or Disability, provided Participant has not incurred a Termination of
Employment prior to such date.
Notwithstanding the foregoing, the Option shall become fully vested and
exercisable, to the extent not already fully vested and exercisable, as of the
effective date of a Corporate Reorganization or Change in Control, provided that
the Optionee has not experienced a Termination of Employment prior to such date,
unless in connection with the Corporate Reorganization or Change in Control the
surviving entity or an affiliate assumes the Option or replaces the Option with
an option of equivalent value and with comparable terms. In the event of a
Corporate Reorganization or Change in Control, the Corporation shall send the
<PAGE>
Optionee prior written notice of the effectiveness of such event and the last
day on which the Optionee may exercise the Option. On or prior to the last day
specified in such notice, the Optionee may, upon compliance with the terms of
this Agreement, exercise the Option to the extent it is then vested, conditioned
upon and subject to completion of the Corporate Reorganization or Change in
Control. To the extent the Option is not so exercised, it shall terminate at
5:00 P.M., eastern standard time, on the last day specified in such notice,
conditioned upon and subject to the completion of the Corporate Reorganization.
If the surviving entity in such Corporate Reorganization or Change in Control
assumes or replaces the Option as described above, the proceeding provisions of
this paragraph shall not apply; however, if there is an Involuntary Termination
of Participant's employment within the eighteen (18) month period following the
effective date of such Corporate Reorganization or Change in Control, the Option
shall vest and become exercisable, to the extent not already vested and
exercisable, on the date of such termination.
3. TERMINATION OF OPTION. The Option shall remain exercisable as
specified in section 2 above until the earliest to occur
of the dates specified below, upon which date the Option shall terminate:
(a) the date all of the Shares are purchased pursuant to the
terms of this Agreement;
(b) upon the expiration of ninety (90) days following the
Termination of Employment of Participant for any reason other than Cause, death
or Disability;
(c) immediately upon the Termination of Employment of
Participant for Cause;
(d) upon the expiration of one (1) year following
Participant's Termination of Employment where employment shall have terminated
as a result of death or Disability;
(e) upon the expiration of one (1) year following the date of
Participant's death, if death shall have occurred following Participant's
Termination of Employment and while the Option was still exercisable;
(f) at 5:00 P.M., eastern standard time, on the thirtieth
(30th) day following the date that the Corporation files articles of dissolution
with the Florida Secretary of State or is otherwise dissolved under Florida law;
(g) at 5:00 P.M., eastern standard time, on the last day
specified in the notice described in section 2 above in the event of a Change in
Control or Corporate Reorganization; or
(h) the ten year anniversary of the Grant Date at 5:00 P.M.,
eastern standard time.
2
<PAGE>
Upon its termination, the Option shall have no further force or effect and
Participant shall have no further rights under the Option or to any Shares which
have not been purchased pursuant to prior exercise of the Option.
4. MANNER OF EXERCISE OF OPTION.
----------------------------
(a) The Option may be exercised only by (i) Participant's
completion, execution and delivery to the Corporation of a notice of exercise
and, if required by the Corporation, an "investment letter" as supplied by the
Corporation confirming Participant's representations and warranties in section
16 of this Agreement, including the representation that Participant is acquiring
the Shares for investment only and not with a view to the resale or other
distribution thereof, and (ii) the payment to the Corporation, pursuant to the
terms of this Agreement, of an amount equal to the Purchase Price multiplied by
the number of Shares being purchased as specified in Participant's notice of
exercise. Participant's right to exercise the Option shall be conditioned upon
and subject to satisfaction, in a manner acceptable to the Corporation, of any
withholding liability under any state or federal law arising in connection with
exercise of the Option. Participant must provide notice of exercise of the
Option with respect to no fewer than 100 Shares (or any lesser number of Shares
with respect to which the Option is then vested and exercisable). Participant's
notice of exercise shall be given in the manner specified in section 12 but any
exercise of the Option shall be effective only when the items required by the
preceding sentence are actually received by the Corporation. The notice of
exercise and the "investment letter" may be in the form set forth in EXHIBIT A
attached to this Agreement. Notwithstanding anything to the contrary in this
Agreement, the Option may be exercised only if compliance with all applicable
federal and state securities laws can be effected, as determined by the
Committee in its discretion. Payment of the aggregate Purchase Price for Shares
Participant has elected to purchase shall be made by cash or good check.
(b) Upon any exercise of the Option by Participant or as soon
thereafter as is practicable, the Corporation shall issue and deliver to
Participant a certificate or certificates evidencing such number of Shares as
Participant has then elected to purchase. Such certificate or certificates shall
be registered in the name of Participant and shall bear such legends as the
Corporation deems appropriate.
5. DEFINITIONS; AUTHORITY OF COMMITTEE.
-----------------------------------
(a) All capitalized terms used in this Agreement shall have
the meanings set out in the Plan unless otherwise specified in this Agreement.
3
<PAGE>
(b) "Cause" shall mean that Participant's employment with the
Company shall have terminated principally because (i) of Participant's breach of
any employment, noncompetition or other agreement with the Company; (ii)
Participant commits any act of dishonesty toward the Company, theft of corporate
property or unethical business conduct, or is convicted of any misdemeanor or
felony involving dishonest, immoral or unethical conduct; or (iii) Participant
commits any act of insubordination, fails to comply with any instructions of his
or her supervisors or the board of directors of the Company, or commits any act
or omission which the Board determines, in good faith, may materially adversely
affect the Company's business or operations, unless Participant cures such
action or omission within five (5) days after notice from the Company.
(c) A "Change in Control" shall be deemed to have occurred if,
after the Corporation has consummated a public offering of the Stock pursuant to
the Securities Act of 1933, as amended:
(i) any "Person" as defined in Paragraph 3(a)(9) of the
Securities Exchange Act of 1934 (the "Act"), including a "group" (as that term
is used in paragraphs 13(d)(3) and 14(d)(2) of the Act), but excluding the
Corporation and any employee benefit plan sponsored or maintained by the
Corporation, including any trustee of such plan acting as trustee:
(A) consummates a tender or exchange offer for any
shares of the Stock pursuant to which at least fifty percent (50%) of the
outstanding shares of the Stock are purchased; or
(B) together with its "affiliates" and "associates"
(as those terms are defined in Rule 12b-2 under the Act) becomes the "Beneficial
Owner" (within the meaning of Rule 13d-3 under the Act) of at least fifty
percent (50%) of the Stock;
(ii) a merger or consolidation of the Corporation with
or into another corporation is consummated and the Corporation's shareholders
immediately prior to the transaction do not own at least fifty percent (50%) of
the surviving company's outstanding stock immediately following the transaction,
a sale or other disposition of all or substantially all of the Corporation's
assets, or the liquidation of the Corporation; or
(iii) during any period of 24 consecutive months during
the existence of this Agreement, the individuals who, at the beginning of such
period, constitute the Board of Directors of the Corporation (the "Incumbent
Directors") cease for any reason other than death to constitute at least a
majority thereof; provided, however, that a director who was not a director at
the beginning of such 24 month period shall be deemed to have satisfied such 24
4
<PAGE>
month requirement, and be an Incumbent Director, if such director was elected
by, or on the recommendation of or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either actually, because
they were directors at the beginning of such 24 month period, or by prior
operation of this subparagraph (iii).
(d) A "Corporate Reorganization" means the happening of any
one of the following events prior to the time at which the Corporation has
consummated a public offering of the Stock pursuant to the Securities Act of
1933, as amended: (i) the dissolution or liquidation of the Corporation; (ii) a
reorganization, merger, or consolidation involving the Corporation unless (A)
the transaction involves only the Corporation and one or more of the
Corporation's parent corporation and wholly-owned (excluding interests held by
employees, officers and directors) subsidiaries; or (B) the shareholders who had
the power to elect a majority of the board of directors of the Corporation
immediately prior to the transaction have the power to elect a majority of the
board of directors of the surviving entity immediately following the
transaction; (iii) the sale of all or substantially all of the assets of the
Corporation to another corporation, person or business entity; or (iv) an
acquisition of Corporation stock, unless the shareholders who had the power to
elect a majority of the board of directors of the Corporation immediately prior
to the acquisition have the power to elect a majority of the board of directors
of the Corporation immediately following the transaction.
(e) An "Involuntary Termination" is any termination of
employment of the Optionee: (i) by the Optionee during the eighteen (18) month
period following a Change in Control or Corporate Reorganization (A) following
the assignment to the Optionee by the surviving entity following a Corporate
Reorganization of any duties that are significantly incompatible with, and
detract from, the Optionee's position, duties, titles, responsibilities or
status with the Corporation immediately prior to the effective date of the
Corporate Reorganization, (B) following a significant reduction in the
Optionee's annual base salary in effect immediately prior to the effective date
of the Change in Control or Corporate Reorganization; or (C) following the
Corporation's assignment of the Optionee to a location other than his principal
location of employment immediately prior to the effective date of the Change in
Control or Corporate Reorganization (except for required travel on Corporation
business to an extent substantially consistent with the Optionee's business
travel obligations immediately prior to the effective date of the Change in
Control or Corporation Reorganization), or, in the event he consents to any such
relocation, the failure of the Corporation to pay (or reimburse the Optionee
for) all reasonable moving expenses incurred by him relating to a change of his
principal residence in connection with such relocation, or (ii) by the surviving
entity during the eighteen (18) month period following the effective date of a
Change in Control or Corporate Reorganization for any reason other than for
Cause.
5
<PAGE>
(f) "Plan" means the High Speed Net Solutions, Inc.
2000 Equity Compensation Plan adopted by the Corporation effective January 31,
2000, as it may be amended from time to time.
(g) All determinations made by the Committee with respect to
the interpretation, construction and application of any provision of this
Agreement shall be final, conclusive and binding on the parties.
6. RESTRICTIONS ON TRANSFER.
------------------------
(a) The Option shall not be sold, exchanged, delivered,
assigned, bequeathed or gifted, pledged, mortgaged, hypothecated or otherwise
encumbered, transferred or permitted to be transferred, or otherwise disposed
of, whether voluntarily, involuntarily or by operation of law (including,
without limitation, the laws of bankruptcy, intestacy, descent and distribution
or succession) or on an absolute or contingent basis. For this purpose, any
reference to Participant shall (when applicable) be deemed to be and include
references to Participant's estate, executors or administrators, personal or
legal representatives and transferees (direct or indirect).
(b) In the event of Participant's death, the Option may be
transferred to any executor, administrator, personal or legal representative,
legatee, heir or distributee of the estate of Participant; provided, that, as a
condition precedent to such transfer of any of the Option, each and every
prospective transferee shall (i) provide or cause to be provided to the
Corporation, at its request, sufficient evidence of the legal right and
authority of such prospective transferee to have the Option so transferred and
(ii) comply with the provisions of section 7 below.
(c) Notwithstanding any provision of this Agreement to the
contrary, Shares issued to Participant upon exercise of the Option shall be
subject to a Market Stand-Off, as provided in Section 3.15 of the Plan.
7. SHAREHOLDERS AGREEMENT. As a condition to receipt of any Shares,
Participant shall become a party to the shareholders agreement between the
corporation and its shareholders in place at such time and shall sign a copy of
such agreement. All restrictions applicable to Stock under such agreement shall
apply to the Shares.
8. RIGHTS PRIOR TO EXERCISE. Participant will have no rights as a
shareholder with respect to the Shares except to the extent that Participant has
exercised the Option and has been issued and received delivery of a certificate
or certificates evidencing the Shares so purchased.
6
<PAGE>
9. SALE OR OTHER DISPOSITION BY MAJORITY INTEREST. Participant hereby
irrevocably appoints the Corporation and its President, or either of them, as
Participant's agents and attorneys-in-fact, with full power of substitution for
and in Participant's name, to sell, exchange, transfer or otherwise dispose of
all or a portion of Participant's Shares and to do any and all things and to
execute any and all documents and instruments (including, without limitation,
any stock transfer powers) in connection therewith, such powers of attorney not
to become operable until such time as the holder or holders of a majority of the
issued and outstanding shares of Stock of the Corporation sell, exchange,
transfer or otherwise dispose of, or contract to sell, exchange, transfer or
otherwise dispose of, all or a majority of the issued and outstanding shares of
Stock of the Corporation. Any sale, exchange, transfer or other disposition of
all or a portion of Participant's Shares pursuant to the foregoing powers of
attorney shall be made upon substantially the same terms and conditions
(including sale price per share) applicable to a sale, exchange, transfer or
other disposition of shares of Stock of the Corporation owned by the holder or
holders of a majority of the issued and outstanding shares of Stock of the
Corporation. For purposes of determining the sale price per share of the Shares
under this section 9, there shall be excluded the consideration (if any) paid or
payable to the holder or holders of a majority of the issued and outstanding
shares of Stock of the Corporation in connection with any employment,
consulting, noncompetition or similar agreements which such holder or holders
may enter into in connection with or subsequent to such sale, transfer, exchange
or other disposition. The foregoing power of attorney shall not impose or be
deemed to impose any fiduciary duty or any other duty (except as set forth in
this section 9) or obligation on either the Corporation or its President, shall
be irrevocable and coupled with an interest and shall not terminate by operation
of law, whether by the death, bankruptcy or adjudication of incompetency or
insanity of Participant or the occurrence of any other event.
10. ENGAGEMENT OF PARTICIPANT. Nothing in this Agreement shall be
construed as constituting a commitment, guarantee, agreement or understanding of
any kind or nature that the Company shall continue to employ Participant, nor
shall this Agreement affect in any way the right of the Company to terminate the
employment of Participant at any time and for any reason. By Participant's
execution of this Agreement, Participant acknowledges and agrees that
Participant's employment is "at will." No change of Participant's duties as an
employee of the Company shall result in, or be deemed to be, a modification of
any of the terms of this Agreement.
11. BURDEN AND BENEFIT. This Agreement shall be binding upon, and shall
inure to the benefit of, the Company and Participant, and their respective
heirs, personal and legal representatives, successors and assigns. As used in
this section 11, the term the "Company" shall include the Company and any
corporation which is the parent or a subsidiary of the Company or any
corporation or entity which is an affiliate of the Company by virtue of common
(although not identical) ownership or any successor entity following a Change in
7
<PAGE>
Control or Corporate Reorganization, and for which Participant is providing
services in any form during Participant's employment with the Company or any
such other corporation or entity. Participant hereby consents to the enforcement
of any and all of the provisions of this Agreement by or for the benefit of the
Company and any such other corporation or entity.
12. NOTICES. Any and all notices under this Agreement shall be in
writing, and sent by hand delivery or by certified or registered mail (return
receipt requested and first-class postage prepaid), in the case of the
Corporation, to its principal executive offices to the attention of the
President, and in the case of Participant, to Participant's address as shown on
the Company's records.
13. SPECIFIC PERFORMANCE. Strict compliance by Participant shall be
required with each and every provision of this Agreement. The Corporation and
Participant agree that the Shares are unique, that Participant's failure to
perform the obligations provided by this Agreement will result in irreparable
damage to the Corporation and that specific performance of Participant's
obligations may be obtained by suit in equity.
14. MODIFICATIONS. No change or modification of this Agreement shall be
valid unless the same is in writing and signed by the Participant and on behalf
of the Corporation.
15. TERMS AND CONDITIONS OF PLAN. The terms and conditions included in
the Plan, the receipt of a copy of which Participant hereby acknowledges by
execution of this Agreement, are incorporated by reference herein, and to the
extent that any conflict may exist between any term or provision of this
Agreement and any term or provision of the Plan, such term or provision of the
Plan shall control.
16. COVENANTS AND REPRESENTATIONS OF PARTICIPANT. Participant
represents, warrants, covenants and agrees with the Corporation as follows:
(a) The Option is being received for Participant's own account
without the participation of any other person, with the intent of holding the
Option and the Shares issuable pursuant to the Option for investment and without
the intent of participating, directly or indirectly, in a distribution of the
Shares and not with a view to, or for resale in connection with, any
distribution of the Shares or any portion of the Shares.
(b) Participant is not acquiring the Option or any Shares
based upon any representation, oral or written, by any person with respect to
the future value of, or income from, the Shares, but rather upon an independent
examination and judgment as to the prospects of the Corporation.
8
<PAGE>
(c) Participant has had the opportunity to ask questions of
and receive answers from the Corporation and its executive officers and to
obtain all information necessary for Participant to make an informed decision
with respect to the investment in the Corporation represented by the Option and
any Shares issued upon its exercise.
(d) Participant is able to bear the economic risk of any
investment in the Shares, including the risk of a complete loss of the
investment, and Participant acknowledges that Participant must continue to bear
the economic risk of any investment in Shares received upon exercise of the
Option for an indefinite period.
(e) Participant understands and agrees that the Shares subject
to the Option may be issued and sold to Participant without registration under
any state or federal laws relating to the registration of securities and in that
event will be issued and sold in reliance on exemptions from registration under
appropriate state and federal laws.
(f) Shares issued to Participant upon exercise of the Option
will not be offered for sale, sold or transferred by Participant other than
pursuant to: (i) an effective registration under applicable state securities
laws or in a transaction which is otherwise in compliance with those laws; (ii)
an effective registration under the Securities Act of 1933, or a transaction
otherwise in compliance with such Act; and (iii) evidence satisfactory to the
Corporation of compliance with all applicable state and federal securities laws.
The Corporation shall be entitled to rely upon an opinion of counsel
satisfactory to it with respect to compliance with the foregoing laws.
(g) The Corporation will be under no obligation to register
the Shares issuable pursuant to the Option or to comply with any exemption
available for sale of the Shares by Participant without registration, and the
Corporation is under no obligation to act in any manner so as to make Rule 144
promulgated under the Securities Act of 1933 available with respect to any sale
of the Shares by Participant.
(h) Participant has not relied upon the Company with respect
to any tax consequences related to the grant or exercise of this Option, or the
disposition of Shares purchased pursuant to its exercise. Participant
acknowledges that, as a result of the grant and/or exercise of the Option,
Participant may incur a substantial tax liability. Participant assumes full
responsibility for all such consequences and the filing of all tax returns and
elections Participant may be required or find desirable to file in connection
with the Option. In the event any valuation of the Option or Shares purchased
pursuant to its exercise must be made under federal or state tax laws and such
valuation affects any return or election of the Company, Participant agrees that
the Corporation may determine such value and that Participant will observe any
determination so made by the Corporation in all returns and elections filed by
Participant. In the event the Company is required by applicable law to collect
9
<PAGE>
any withholding, payroll or similar taxes by reason of the grant or any exercise
of the Option, Participant agrees that the Company may withhold such taxes from
any monetary amounts otherwise payable by the Company to Participant and that,
if such amounts are insufficient to cover the taxes required to be collected by
the Company, Participant will pay to the Company such additional amounts as are
required.
(i) The agreements, representations, warranties and covenants
made by Participant herein with respect to the Option shall also extend to and
apply to all of the Shares issued to Participant from time to time pursuant to
exercise of the Option. Acceptance by Participant of any certificate
representing Shares shall constitute a confirmation by Participant that all such
agreements, representations, warranties and covenants made herein shall be true
and correct at that time.
(j) Participant agrees that he shall, during the entire period
of his employment with the Company and for a period of ninety (90) days
following Termination of Employment, observe the Company's securities trading
policies in effect from time to time during such period of employment and/or
during such post-employment period.
[SIGNATURES APPEAR ON THE NEXT PAGE]
10
<PAGE>
IN WITNESS WHEREOF, the Corporation and Participant have executed this
Agreement and affixed their seals hereto as of the day and year first above
written.
Attest: High Speed Net Solutions, Inc.
/S/ Alan R. Kleinmaier By: /s/ Andrew Fox
- --------------------------- --------------
Alan R. Kleinmaier, Secretary Andrew L. Fox
-------------
[Name]
Acting Ceo
----------
[Title]
[Corporate Seal]
Witness: Participant
/S/ Illegible Signature /s/ Alan R. Kleinmaier (Seal)
- ---------------------------- ---------------------------------
Alan R. Kleinmaier
11
<PAGE>
EXHIBIT A
High Speed Net Solutions, Inc.
[ADDRESS]
Attention: President
Re: Exercise of Nonqualified Stock Option under the High Speed Net
Solutions, Inc. 1999 Equity Compensation Plan
Dear Sir:
Pursuant to the terms and conditions of that certain High Speed Net
Solutions, Inc. Nonqualified Stock Option Agreement dated ______________________
(the "Agreement"), I hereby provide notice of my desire to exercise the stock
option evidenced by the Agreement (the "Option") and thereby purchase
_________________ shares [MUST BE AT LEAST 100 SHARES OR ANY SMALLER NUMBER OF
SHARES AS TO WHICH THE OPTION IS VESTED AND EXERCISABLE] of the common stock of
High Speed Net Solutions, Inc., and I hereby tender payment in full for such
shares in accordance with the terms of the Agreement.
I hereby reaffirm that the representations and warranties made in
section 16 of the Agreement are true and correct as of the date of exercising
this option.
Very truly yours,
[Signature]
--------------------------
[Print Name]
--------------------------
[Date]
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is entered into this 22nd
day of September, 1999, by HIGH SPEED NET SOLUTIONS, INC. ("HSNS"), a Florida
corporation, SUMMUS LTD. ("SUMMUS"), a Delaware corporation, and PETER ROGINA,
an individual formerly employed by HSNS. HSNS, SUMMUS and Mr. Rogina will be
referred to collectively as the "Parties."
RECITALS
A. Mr. Rogina served as President of HSNS from March 15, 1999, until
April 20, 1999.
B. On or about March 1, 1999, HSNS and Mr. Rogina executed
an Employment and Stock Option Agreement (the "Employment Agreement"), which
obligates HSNS to transfer to Mr. Rogina certain stock options and contains
among others, provisions regarding non-solicitation and non-competition and
anti-dilution and adjustment provisions regarding the stock options. A copy of
the Employment Agreement is attached hereto as EXHIBIT "A."
C. On or about April 27, 1999, HSNS filed a lawsuit agains
Mr. Rogina in the United States District Court, Middle District of Florida,
Orlando Division, Case No. 99-513-CIV-ORL-19A for breach of the Employment
Agreement and damages (the "Lawsuit").
D. Mr. Rogina has certain claims against HSNS, Michael Cimino,
Myung K. Kim, Bradford Richdale and Richard Seifert, who, at various times were,
or still are, officers, directors or shareholders of HSNS.
E. The Parties desire to settle the Lawsuit and any and all
other claims, causes of action or rights that any of the parties may have
against one another.
TERMS AND CONDITIONS
For the mutual promises, representations, covenants and agreements, and
on the conditions set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties respectfully represent, covenant and agree as follows:
1. HSNS agrees to pay to Mr. Rogina One-hundred and Ten Thousand
and no/100 Dollars ($110,000.00), payable Sixty Thousand and no/100 Dollars
($60,000.00) immediately upon execution of this Agreement, and Twenty-Five
Thousand and no/100 Dollars ($25,000.00) on November 16, 1999, and December 16,
1999.
2. If HSNS fails to pay to Mr. Rogina any payments as described
in paragraph 1 of this Agreement, the entire balance shall become immediately
payable to Mr. Rogina.
<PAGE>
3. SUMMUS guarantees payment to Mr. Rogina of all monies due
under this Agreement, and SUMMUS represents and warrants that it has sufficient
funds to pay the guaranteed amount upon HSNS' default.
4. If HSNS fails to pay to Mr. Rogina any monies due and owing
under this Agreement, an ex parte judgment for the accelerated balance will be
entered against HSNS and SUMMUS without further hearing or action by the Court.
SUMMUS hereby consents to the jurisdiction of the United States District Court,
Middle District of Florida, Orlando Division, for the purpose of entry of a
judgment, if HSNS defaults on its obligations under this Agreement.
5. Contemporaneously with the execution of this Agreement, HSN
shall execute a General Release in favor of Mr. Rogina, in the form attached
hereto as EXHIBIT "B." The General Release shall include, but not be limited to,
the release of Mr. Rogina's obligations under the non-competition provisions of
the Employment Agreement.
6. Upon payment in full by HSNS to Mr. Rogina, Mr. Rogina shall
execute a General Release in favor of HSNS, Mr. Cimino, Mr. Kim, Mr. Richdale,
Mr. Seifert, and SUMMUS in the form attached hereto as EXHIBIT "C."
7. Upon execution of this Agreement by HSNS, HSNS' claims against
Mr. Rogina shall be released and waived. Until HSNS has performed all of its
obligations under this Agreement, HSNS shall hold the Lawsuit in abeyance. At
such time as all monies have been paid and stock options transferred to Mr.
Rogina or the escrow agent, HSNS shall dismiss the Lawsuit with prejudice. Mr.
Rogina's right to pursue a counter-claim and third party claim against HSNS, Mr.
Cimino, Mr. Richdale and Mr. Seifert shall not be waived until HSNS has
performed all of its obligations under this Agreement.
8. Contemporaneously with the execution of this Agreement, HSNS shall
issue to Mr. Rogina an option to purchase Two-Hundred Forty Thousand (240,000)
shares of common stock of HSNS, exercisable in whole or in part for a period of
five (5) years from the date of issuance, subject to the terms hereof. Two
Hundred Thousand (200,000) shares subject to the option shall be subject to the
provisions of the Employment Agreement and Annex "A" of the Employment Agreement
relating to the anti-dilution language, audit ability, and strike price as is
set forth therein. The anti-dilution provision shall be limited to twice the
amount of the anti-diluted options or Four Hundred Thousand (400,000) shares.
The remaining Forty-Thousand (40,000) stock options shall be exercisable in
whole or on part on or after July 1, 2000, and within five (5) years from the
date hereof, at the same strike price as set forth in the Employment Agreement.
Ten (10) business days after receipt of a written request from Mr. Rogina, HSNS
shall provide all documentation and evidence of the number of anti-diluted
shares that Mr. Rogina is entitled to under this Agreement. HSNS shall reserve
shares for issuance upon exercise of the option. Within five (5) days after HSNS
receives notice of exercise, together with the option exercise price, HSNS shall
deliver the shares to Mr. Rogina and/or his designee.
9. The Parties shall hold confidential and not disclose to any person
or entity the facts underlying this Settlement, its terms, any information about
the facts or circumstances regarding the allegations of the Lawsuit and the
<PAGE>
allegations referenced in paragraph D of this Agreement, except as necessary to
report information for tax purposes to the federal government, at which point
the Parties may disclose to their counsel and accountants the fact and terms of
this Agreement only, or except as may be required by law, including but not
limited to all applicable rules, regulations and interpretations of the
Securities and Exchange Commission.
10. If any of the parties receive any form of question or inquiry about
(i) the Lawsuit, (ii) the disputes between the Parties, (iii) the allegations
referred in paragraph D of this Agreement, or (iv) the settlement contemplated
in this Agreement, the party to whom such question or inquiry is posed shall
make the following statement (using these words or words to the same effect) as
the sole response to such question or inquiry:
"I am not at liberty to discuss it."
11. No party to this Agreement shall publish false or defamatory
statements about any other party of this Agreements or about the directors,
officers, employees, goods and services of such party.
12. HSNS represents that it has full corporate authority and the
necessary corporate approval to enter into and perform HSNS' obligations under
this Agreement and that this Agreement shall apply to all affiliates, parents,
subsidiaries, and divisions of HSNS. This Agreement shall be binding upon HSNS'
successors, assigns and any entity that purchases substantially all of HSNS'
assets or stock, including SUMMUS.
13. This Agreement represents the entire agreement between the parties
and may not be altered or modified, except in writing, duly executed by all
parties to this Agreement.
14. The laws of the State of Florida shall apply to this Agreement.
15. In the event of any dispute or litigation between the parties, the
prevailing party shall be entitled to recover his cost of suit, expenses and
attorneys' fees.
16. Each party hereto agrees to perform all further acts and execute,
acknowledge, and deliver any documents which may be reasonably necessary,
appropriate or desirable to carry out the provisions of this Agreement.
17. This Agreement may be executed by facsimile, and in counter-
parts, all of which shall be construed together as a single instrument.
<PAGE>
HIGH SPEED NET SOLUTIONS, INC.
By: /s/ Andrew Fox
Its: CEO & President
STATE OF NORTH CAROLINA
COUNTY OF WAKE
I HEREBY CERTIFY, that on this day personally appeared before me, an
office duly authorized to administer oaths and take acknowledgments, Andrew, of
HIGH SPEED NET SOLUTIONS, INC., on behalf of the corporation, he/she, is
personally known to me or produced a driver's license as identification and
executed the foregoing Settlement Agreement and acknowledged before me that
he/she executed the same for the purposes therein expressed.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at
said County and State, this the 7th day of January, 2000.
NOTARY PUBLIC
Sign: /s/ Livia J. Miranda
Print: Livia J. Miranda
State of North Carolina at Large
My Commission expires: 3-24-2001
<PAGE>
PETER ROGINA
/s/ Peter R. Rogina
STATE OF NEW JERSEY
COUNTY OF SOMERSET
I HEREBY CERTIFY, that on this day personally appeared before me, an
officer duly authorized to administer oaths and take acknowledgments, Peter
Rogina. He is personally known to me or produced a driver's license as
identification and executed the foregoing Settlement Agreement and acknowledged
before me that he executed the same for the purposes therein expressed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at said County and State, this 22nd day of September, 2000.
NOTARY PUBLIC
Sign: /s/ Almomen Zagha
Print: ALMOMEN ZAGHA
State of California at Large
My Commission expires: Almomen Zagha
Commission # 1168075
Notary Public - California
San Francisco County
My Comm. Expires Jan 6, 2002
<PAGE>
SUMMUS LTD.
By: /s/ William B. Silvernail
Its: CEO
STATE OF NORTH CAROLINA
COUNTY OF WAKE
I HEREBY CERTIFY, that on this day personally appeared before me, an
officer duly authorized to administer oaths and take acknowledgments, William B.
Silvernail, who is personally known to me or produced a driver's license as
identification and executed the foregoing Settlement Agreement and acknowledged
before me that he executed the same for the purposes therein expressed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at said County and State, this 7th day of January, 2000.
NOTARY PUBLIC
Sign: /S/ LIVIA J. MIRANDA
Print: LIVIA J. MIRANDA
State of North Carolina at Large
My Commission expires: 3-24-2001
EMPLOYMENT AND STOCK OPTION AGREEMENT
THIS EMPLOYMENT AND STOCK OPTION AGREEMENT (the "Agreement") is made
and entered into as of this 1st day of March 1999, by and between HIGH SPEED NET
SOLUTIONS, INC., a corporation organized under the laws of the State of Florida,
with principal executive offices located at 233 Oakridge Street, Holly Hill,
Florida 32117 (the "Company") and PETER ROGINA, an individual residing at 1
Waldron Drive, Martinsville, New Jersey 08836 (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company wishes to employ the Executive as its
Vice-President - Sales and Marketing and the Executive wishes to be so employed
by the Company in such capacity; and
WHEREAS, the Company and the Executive each believe it to be in their
respective best interest to enter into this Agreement setting forth the mutual
understandings and agreements reached between the Company and the Executive with
respect to Executive's employment with the Company and the consideration granted
to the Executive in connection therewith, all on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants contained herein and other good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree as follows:
Section 1. EMPLOYMENT; POSITION AND DUTIES. Commencing as of March 15,
1999 (the "Commencement Date"), the Company shall employ the Executive, and the
Executive shall be employed by the Company, upon the terms and conditions
hereafter provided. The Executive shall serve as the Vice-President - Sales and
Marketing for the Company, and have such duties, responsibilities and authority
customary to such position and as are reasonably necessary for the performance
of his obligations hereunder, subject at all times to the authority of the
President and the board of directors of the Company. The Executive shall devote
substantially all of his time, energy, skill and efforts during normal business
hours to the Company and shall use his best efforts in the performance of his
duties hereunder.
Section 2. COMPENSATION - SALARY AND BONUS. The Company shall pay the
Executive a fixed salary at the rate of One Hundred Fifty Thousand Dollars
($150,000.00) (the "Salary") per annum. Salary shall be payable in accordance
with the customary payroll practices of the Company (but in no event less
frequently than bi-weekly) and shall be subject to all employee payroll
deductions required by law. In addition, the Executive shall be eligible in the
same manner as similarly situated employees for an annual cash bonus, which
shall be awarded in the sole discretion of the board of directors of the
Company, based upon the performance of the Executive, the financial performance
of the Company, and such other factors that the board of directors deems
relevant.
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Section 3. BENEFITS AND CERTAIN PERQUISITES. The Executive shall be
eligible to participate in the medical, health, insurance, 401(k) and similar
plans and benefits of the Company from time to time in effect for executives of
the Company, subject to and in accordance with the terms and conditions of each
such plan or benefit. Until such time as the Company provides medical and health
insurance plans and benefits to the Executive, the Company shall, at the option
of the Company, either reimburse the Executive for or pay directly all payments,
costs and expenses associated with the Executive's continuing coverage for
himself and his family pursuant to the Comprehensive Omnibus Budget and
Reconciliation Act (COBRA) under all plans and benefits utilized by the
Executive during his employment with his most-recent employer (including without
limitation dental coverage). The Company shall provide to the Executive a
non-accountable automobile expense allowance of Five Hundred Dollars ($500.00)
per month, payable to the Executive on the first day of each month during the
term of this Agreement. The Executive will receive twenty (20) days of paid time
off per annum, which shall be available to the Executive upon the Commencement
Date and, thereafter, upon each anniversary of the Commencement Date during the
term of this Agreement. Any unused paid time off, up to a maximum of forty (40)
days, will accrue to the benefit of the Executive during the term hereof.
Section 4. SALES COMMISSION. During the term hereof, in addition to the
Salary set forth above, the Company shall pay to the Executive a sales
commission (the "Sales Override") equal to the Determined Percentage (as defined
in this Section 4) of Gross Receipts (as defined in this Section 4) of the
Company. For the purpose of this Section 4, the term "Gross Receipts" shall mean
the total revenues actually received by the Company from (i) the sales made by
salespersons under the Executive's supervision and control and (ii) certain
sales identified by mutual agreement of the Company and the Executive which were
in progress prior to the Commencement Date (together, "Identified Sales"), less
refunds, returns, chargebacks, and bad debt, and excluding liquidation sales and
certain sales made below cost as identified by the Company and reasonably
acceptable to the Executive, as such Gross Receipts are determined by the mutual
agreement of the Company and the Executive. For the purpose of this Section 4,
the term "Determined Percentage" shall mean the percentage of sales commissions
available under the Company's commission structure which the Executive has not
granted to the salespersons and which are retained by the Executive for the
purpose of the Executive earning the Sales Override. The Company will establish
a commission structure for inside and outside Identified Sales. For inside sales
(which include sales made directly by the Company), the Company will allocate a
commission of ten percent (10%) of Gross Receipts. For outside sales (which
include sales made solely by entities other than the Company), the Company will
allocate a commission of up to sixteen percent (16%) of Gross Receipts, from
which the Executive's Determined Percentage shall be 1%. Payment of the Sales
Override shall be made monthly by the Company to the Executive not later than
the fifteenth (15th) day after the end of each month during which the Executive
is employed by the Company pursuant to the terms of this Agreement.
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Section 5. EXPENSE REIMBURSEMENT. The Company shall reimburse the
Executive for all reasonable costs and expenses incurred by him in the
performance of his duties hereunder upon the presentation of appropriate
invoices or receipts for such costs actually incurred by the Executive. Such
reimbursements shall be made in accordance with the expense reimbursement
policies of the Company in effect from time to time. Unless circumstances render
it impractical for the Executive to do so, any single expenditure of more than
Two Thousand Dollars ($2,000.00) shall require the advance written approval of
either the Chairman of the Board or the President of the Company or any
executive officer designated by either of them for such purpose.
Section 6. TERM OF EMPLOYMENT; TERMINATION. Except as otherwise
provided below, this Agreement shall continue in full force and effect until the
third (3rd) anniversary of the Commencement Date (the "Termination Date").
Except as otherwise set forth in this Section 6, upon the termination of the
Executive's employment, the Company shall pay to the Executive, in the normal
manner that such payments become due, but no later than thirty (30) days after
the date of termination, all Salary and Sales Override accrued but not paid
through the date of termination.
Section 6.1 TERMINATION OF CAUSE. Notwithstanding anything set
forth in this Agreement to the contrary, the Company shall have the
right to terminate the Executive's employment for Cause (as defined in
this Section 6.1) at any time prior to the Termination Date,
immediately upon notice to the Executive, which such notice shall state
with reasonable specificity the grounds pursuant to which the Company
has elected to terminate the Executive's employment for Cause. For the
purposes of this Agreement, "Cause" shall mean (i) the willful and
material breach or the willful and material failure by the Executive to
perform his duties and obligations under this Agreement (including if
by reason of habitual intoxication or addition to any controlled
substance or other drug) which such willful and material breach or
failure is not cured within a reasonable period of time after the
Company has provided notice of such breach or failure to the Executive,
(ii) the commission by the Executive of a material act of dishonesty in
the performance of his duties hereunder (such as, for example, the
willful misappropriation of funds or property of the Company), (iii)
the Executive being convicted of a crime involving the Company, (iv)
the Executive willfully violating any material provision of this
Agreement, which such willful and material violation is not cured
within a reasonable period of time after the Company has provided
notice of such violation to the Executive, or (v) in the event the
Executive has been convicted of any felony or any crime involving moral
turpitude or dishonesty. Notices required to be provided by the Company
to the Executive under this Section 6.1 shall state the specific nature
of the alleged "Cause".
Section 6.2 PAYMENT OF SALARY IN EVENT OF TERMINATION WITHOUT
CAUSE. In the event the Company terminates the employment of the
Executive for any reason other than for Cause during the first year of
the Executive's employment hereunder, the Company shall pay to the
Executive all Salary, and the Executive shall be entitled to all
benefits (other than Sales Override), that the Executive would
otherwise have been entitled to and have received pursuant to this
Agreement for a period of one year, ending on the anniversary of the
date of such termination. In the event the Company terminates the
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employment of the Executive for any reason other than for Cause prior
to Termination Date, at any time during the term of this agreement
after the completion of the first year of the Executive's employment
hereunder, the Company shall pay to the Executive all Salary, and the
Executive shall be entitled to all benefits (other than Sales
Override), that the Executive would otherwise have been entitled to and
have received pursuant to this Agreement for a period of six months,
ending on the six-month anniversary of the date of such termination.
Section 7. CERTAIN OBLIGATIONS OF EXECUTIVE DURING AND AFTER TERM
OF EMPLOYMENT.
(a) CONFIDENTIAL INFORMATION. The Executive recognizes that
due to his employment by the Company and the nature of the services to be
provided hereunder, he will have access to and will acquire, and may assist in
developing, Proprietary Information (as defined in this Section 7(a)). The
Executive acknowledges that the Proprietary Information has been and will
continue to be of importance to the operations of the Company and its business.
Accordingly, except as otherwise required by lawful process, the Executive shall
keep confidential any and all Proprietary Information that is now known or that
may hereafter become known by the Executive, whether or not learned during the
performance of this Agreement, and shall not, without the express prior written
consent of the Company, disclose directly or indirectly any Proprietary
Information to any other person or use directly or indirectly any such
Proprietary Information, to benefit him or any third party. Upon the termination
of this Agreement or the termination of employment with the Company, the
Executive, or his heirs or legal representatives, shall return to the Company
all Proprietary Information embodied in a tangible form. The Executive's
obligation to maintain the confidentiality of the Proprietary Information shall
survive the termination or expiration of this Agreement. For the purposes of
this Agreement, "Proprietary Information" shall mean all information relating to
the business and affairs of the Company, including, but not limited to,
technical data, specifications, designs, concepts, discoveries, copyrights,
improvements, product plans, research and development, personal information,
personnel information, financial information, customer lists, leads, and/or
marketing programs; and/or all documents marked as confidential and/or
containing such information; and/or all information the Company has acquired or
received from a third party in confidence, provided, that Proprietary
Information shall not include information which (i) is or becomes generally
available to the public, other than as a result of a disclosure by the Executive
in violation of this Agreement, (ii) becomes available to the Executive on a
non-confidential basis from a source which was not under an obligation of
confidentiality, (iii) was available to the Executive on a non-confidential
basis prior to its disclosure in the course of his employment by the Company or
was previously known to the Executive other than as a result of his employment
by the Company, (iv) is developed by the Executive independently and is not
based upon or derived from confidential information, or (v) is otherwise in the
public domain.
(b) NON-SOLICITATION AND NON-COMPETITION. Throughout the term
of his employment with the Company pursuant to this Agreement and for a period
of one (1) year thereafter, the Executive shall not, of himself or for the
benefit or account of any person or entity, (i) solicit or encourage any
employee or other person rendering services to the Company to terminate or
materially modify his or her relationship with the Company, or (ii) directly
engage in selling or providing video compression technology products or services
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which are sold or provided by the Company as of the date of termination of the
Executive's employment. Notwithstanding the foregoing, the provisions of this
Section 7(b) shall not apply and shall be no force or effect in the event the
Executive's employment is terminated by the Company without Cause prior to the
Termination Date.
(c) CONFLICT OF INTEREST. The parties agree that the Executive
may not, during the term of this Agreement, engage in any business activity
which would interfere with his obligations hereunder, including without
limitation management or management consulting activities; provided, however,
the Executive may invest his personal assets in businesses where the form or
manner of such investment will not require services on the part of the Executive
conflicting with the duties the Executive under this Agreement and in which his
participation is solely that of a passive investor, and the Executive may engage
in activities related to enhancement, protection or broadening the scope of
works set forth on the Schedule of Separate Works annexed hereto as Schedule 2.
The Executive agrees to abide by the rules and regulations applicable to
employees of the Company established from time to time by the President or the
board of directors of the Company.
(d) REMEDIES. The Executive acknowledges that, in the event of
any breach of this Section 7 by him, the Company would be harmed irreparably and
immediately and could not be made whole by monetary damages. Accordingly, the
Company, in addition to any other remedy to which it may be entitled, shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Section 7 and to compel specific performance of the provisions hereof.
The Company shall not be required to post a bond or other security in connection
with any action for such relief. These remedies shall not be deemed to be
exclusive remedies for a violation of this Agreement but shall be in addition to
all other remedies available to the Company at law or in equity. The Executive's
agreement as set forth in this Section 7 shall survive termination of the
Executive's employment with the Company.
(e) COVENANT OF THE COMPANY. Throughout the term of the
Executive's employment with the Company and thereafter, regardless of the reason
for the termination of his employment, the Company shall not make any statement
about the Executive to any person or entity which could reasonably be foreseen
to result in an adverse effect on the Executive or otherwise disparage the
Executive. Throughout the term of the Executive's employment with the Company
and thereafter, regardless of the reason for the termination of his employment,
the Executive shall not make any statement about the Company to any person or
entity which could reasonably be foreseen to result in an adverse effect on the
Company or otherwise disparage the Company, or its employees, offices, or
directors.
Section 8. EXECUTIVE REPRESENTATIONS. The Executive hereby represents
and warrants that (i) he has the legal capacity to execute and perform this
Agreement; (ii) that this Agreement (other than Section 7 for which the
Executive does not make the representation and warranty set forth in this clause
(ii)) is a valid and binding agreement enforceable against him according to its
terms; (iii) that the execution and performance of this Agreement by him does
not, and will not, violate or conflict with the terms of any existing agreement
or understanding to which the Executive is a party; (iv) that the execution and
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performance of this Agreement (other than Section 7 for which the Executive does
not make the representation and warranty set forth in this clause (iv)) by him
does not, and will not, violate or conflict with any law, rule, regulation,
judgment or order of any court or other adjudicative entity binding on him; and
(v) that the Executive knows of no reason why he is in any way (physically,
legally or otherwise) precluded from performing his obligations under this
Agreement in accordance with its terms.
Section 9. STOCK OPTIONS. The Company hereby grants to the Executive
the following options to purchase shares of the common stock of the Company, par
value $.001 per share (the "Common Stock") at an exercise price of One Cent
($.01) per share (collectively, the "Options"). The Option shall be governed by
the terms set forth in this Section 9.
(a) OPTION GRANTS. On the Commencement Date, the Executive
shall be granted:
(i) fully-vested, immediately exercisable Options
to purchase up to One Hundred Thousand (100,000) shares of Common Stock (the
"First Options");
(ii) Options to purchase up to an additional One
Hundred Thousand (100,000) shares of Common Stock, (the "Second Options"), which
such Second Options shall fully-vest and be exercisable in five (5) equal
installments of Twenty Thousand (20,000) Second Options each, in each case based
upon the satisfaction of the milestones set forth on Schedule 1 attached hereto;
provided, however, that any exercisable Second Option may, at any time at the
option of the Executive, be surrendered to the Company in exchange for an
immediate cash payment from the Company to the Executive in an amount of Two and
50/100 Dollars ($2.50) for each Second Option so surrendered; and
(iii) Options to purchase up to an additional Four
Hundred Twenty Five Thousand (425,000) shares of Common Stock (the "Third
Options"), of which (x) Seventy Five Thousand (75,000) Third Options shall
fully-vest and be exercisable on September 1, 1999, (y) One Hundred Fifty
Thousand (150,000) Third Options shall fully-vest and be exercisable on March 1,
2000 and (z) Two Hundred Thousand (200,000) Third Options shall fully-vest and
be exercisable on March 1, 2001.
(b) TERMS GOVERNING EXERCISE OF OPTION; VESTING. The Options
shall expire and cease to be exercisable ten (10) years after the Commencement
Date. The Options may be exercised from time to time as to all or part of the
shares underlying such Options (the "Option Shares"). In order to exercise the
Options, the Executive must provide written notice to the Company of his
election, setting forth the number of whole Option Shares with respect to which
the Option is being exercised, and accompanied by payment of the full purchase
price for the number of Option Shares being purchased. In addition, in the event
the employment of the Executive is terminated without Cause, any Options not
then exercisable shall become immediately exercisable.
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(c) NON-ASSIGNABILITY. No rights granted to the Executive
hereunder are assignable or transferable (whether by operation of law or
otherwise and whether voluntarily or involuntarily), except that the Executive
may transfer all or any portion of the Options to members of his immediate
family or to one or more trusts, partnerships or other entities for the benefit
of the Executive or members of his immediately family (the "Permitted
Transferees"), provided all such Permitted Transferees agree in writing to be
bound by the terms of this Agreement. All rights granted to the Executive
hereunder may be exercised only by the Executive, his estate, heirs or personal
representative, or a Permitted Transferee.
(d) EFFECT OF TERMINATION OF EMPLOYMENT ON OPTION AND OPTION
SHARES. The termination of the Executive's employment with the Company,
regardless of the reason therefor, shall have no effect on the Option's which
have vested at or prior to such time.
(e) CONDITIONS OF PURCHASE; REGISTRATION STATEMENT. Upon the
Executive's request, the Company shall furnish copies of such financial and
other information concerning the Company and its business and prospects as may
be reasonably requested by the Executive in connection with the exercise of any
Option. Because the Company has registered the Common Stock under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Company shall make
reasonable efforts to promptly register the Option Shares for resale by the
Executive pursuant to the Securities Act of 1933, as amended (the "Securities
Act") (whether on Form S-8 or otherwise).
(f) WITHHOLDING. The Executive agrees that the exercise of the
Option in whole or in part will not be effective, and no Option Shares will
become transferable to the Executive, until the Executive makes appropriate
arrangements with the Company for such income tax withholding as may be required
of the Company under federal, state, or local law on account of such exercise.
(g) ADJUSTMENTS. The adjustments and other provisions required
by the terms set forth on Annex A shall be made in accordance with the
provisions set forth on Annex A, which are hereby incorporated herein in their
entirety.
Section 10. CONSOLIDATION, MERGER, OR SALE OF ASSETS. Nothing in this
Agreement shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, another business
entity. In addition, in the event such successor entity assumes this Agreement
and all obligations and undertakings of the Company hereunder, upon such a
consolidation, merger or transfer of assets and assumption, the term "Company"
as used herein shall mean such other business entity and this Agreement shall
continue in full force and effect, subject to the provisions of Annex A. In the
event such successor entity does not assume this Agreement, then, in addition to
the provisions set forth in Annex A preserving for the Executive all rights with
respect to the Options and the Option Shares: (a) the Company shall treat the
event as a termination without Cause of this Agreement and pay to the Executive
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(i) any accrued but unpaid Salary and any accrued but unpaid Sales Override
through the date of such transaction in accordance with the provisions of
Section 6 and (ii) his Salary and benefits as provided in Section 6.2 hereof,
and (b) the Executive shall be relieved of his non-competition and
non-solicitation obligations pursuant to Section 7 of this Agreement.
Section 11. BOARD OF DIRECTORS. At all times during the term hereof,
the Executive shall be a voting member of the board of directors of the Company.
Section 12. INVENTION ASSIGNMENT. The Executive hereby grants,
transfers and assigns to the Company all of his right, title and interest, if
any, in any and all Developments (as defined herein), including rights to
translation and reproductions in all forms or formats and the copyrights,
patents and other intellectual property rights therein, if any, and the
Executive agrees that the Company may copyright or patent such materials in the
Company's name and secure renewals, reissues and extensions of such copyrights
or patents for such periods of time as the law may permit. For the purpose of
this Agreement, the term "Development" shall mean any idea, invention, process,
design, concept, program, documentation or work expressed, made or conceived by
the Executive during his term of employment with the Company which are directly
related to the actual business, research or development of the Company. All
Developments shall be considered works made for hire by the Executive in the
scope of the Executive's employment hereunder and shall belong to the Company.
The Executive shall promptly disclose all Developments to the Company and, upon
the request of the Company, shall execute separate written assignments to the
Company of such Developments, and shall assist the Company in obtaining any and
all intellectual property protection for such Developments as may be reasonably
requested by the Company from time to time. To the extent the Company
disseminates, distributes or otherwise makes available to any third party any
Development during the term of this Agreement, the Company shall designate the
Executive as the principal author of such Development. Notwithstanding anything
set forth in this Section 12 to the contrary, each of the items set forth on
Schedule 2 annexed to this Agreement (the "Schedule of Separate Works") are and
shall at all times remain the sole and exclusive property of the Executive,
shall not be considered Developments for the purposes hereof and the Company
shall have no right, title or interest whatsoever in any such property set forth
or described on such Schedule of Separate Works.
Section 13. BINDING AGREEMENT. This Agreement shall be binding upon,
and shall inure to the benefit of, the Executive and the Company and their
respective permitted successors, assigns, heirs, beneficiaries and
representatives. This Agreement may not be assigned by the Executive.
Section 14. ENTIRE AGREEMENT; AMENDMENT AND MODIFICATION; WAIVER. This
Agreement constitutes the entire agreement among the parties hereto pertaining
to the subject matter hereof and supersedes all other prior and contemporaneous
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. There are no other agreements between the parties in
connection with the subject matter hereof except as specifically set forth
herein. This Agreement may only be amended or modified in a writing signed by
the party against whom enforcement of such amendment or modification is sought.
Any of the terms or conditions of this Agreement may be waived at any time by
the party entitled to the benefit thereof, but only by a writing signed by the
party waiving such terms or conditions.
Section 15. GOVERNING LAW; JURISDICTION; ENFORCEMENT COSTS. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Florida without reference to choice of law principles thereof and the
parties agree to submit to the non-exclusive jurisdiction and venue of the
courts located in the State of Florida. The prevailing party in any litigation
or other legal proceeding shall be entitled to receive its reasonably attorneys'
fees and all other costs and expenses associated therewith from the
non-prevailing party, in each case if so awarded by the court having
jurisdiction thereover.
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Section 16. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
Section 17. SEVERABILITY. In the event that any court having
jurisdiction shall determine that one or more of the restrictive covenants
contained herein shall be unreasonable in any respects, then such covenant or
covenants shall be deemed limited and restricted to the extent that such court
shall deem to be reasonable. As so limited or restricted, the covenants
contained herein shall remain in full force and effect. In the event that any
covenant or covenants shall be wholly unenforceable, the remaining covenants
shall remain in full force and effect.
Section 18. NOTICES. All notices or other communications permitted or
required to be given hereunder shall be delivered personally or sent by
certified, registered or express air mail, postage prepaid, and shall be deemed
given when so delivered personally or, if mailed, three days after the date of
mailing to the address of the recipient party as set forth herein, or to such
other address for such party as such party may have notified the other parties
hereto (as provided above) from time to time.
Section 19. LEGAL FEES. Upon the execution hereof, the Company shall
pay to counsel to the Executive one-half of the fees incurred by the Executive
in connection with the preparation of this Agreement.
Section 20. NO STRICT CONSTRUCTION. Each of the parties hereto
acknowledge that this Agreement has been prepared jointly by the parties hereto
and their respective counsel, and this Agreement shall not be strictly construed
against either party.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has signed this
Agreement, all as of the first date above written.
HIGH SPEED NET SOLUTIONS, INC.
By: /s/ Michael M. Cimino
Name: Michael M. Cimino
Title: President
/s/ Peter R. Rogina
Peter Rogina
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SCHEDULE 1
MILESTONES FOR THE EXERCISABILITY OF THE SECOND OPTIONS PURSUANT TO SECTION 9
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Performance Objectives:
1) HSNS receives $10M in outside investment/funding:
-- unless it is decided by the BOD to pursue a lesser amount
-- HSNS will use best efforts to pursue investment/funding
2) Signed agreements with four (4) international distributors/re-sellers
with gross revenues from international distributors/re-sellers totaling
$4M
3) Successful integration of Summus technology into adult industry
-- measured by signed agreements with at least two (2) companies
serving the adult industry
-- measured by $3M
NOTE: Objectives #2 and #3 will both be considered to be completed
if the total revenues generated between the two exceeds $7M.
4) Integration of Summus technology into at least two (2) Internet Service
Providers.
5) Successful showing at Comdex Trade Show
-- measured by at least 100 raw leads AND 20 qualified leads
-- qualified leads to be determined by meeting certain criteria to
be agreed between the parties prior to Comdex
S-1
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SCHEDULE 2
SCHEDULE OF SEPARATE WORKS
[TO BE PROVIDED BY THE EXECUTIVE CONTEMPORANEOUSLY
AS OF THE COMMENCEMENT DATE OF THIS AGREEMENT]
S-2
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ANNEX A
ADJUSTMENT AND ANTI-DILUTION PROVISIONS
The number of Option Shares issuable upon the exercise of each Option
are subject to adjustment from time to time upon the occurrence of any of the
events enumerated herein.
(a) REORGANIZATION OF THE COMPANY.
-----------------------------
In the event of any capital reorganization, recapitalization
or reclassification of the capital stock of the Company, or consolidation,
merger or amalgamation of the Company with another entity, any acquisition of
capital stock of the Company by means of a share exchange, or the sale, lease,
transfer, conveyance or other disposition of all or substantially all of its
asserts to another entity, then, as a condition of such reorganization,
recapitalization, reclassification, consolidation, merger, amalgamation, share
exchange or sale, lease, transfer, conveyance or other disposition, lawful and
adequate provision shall be made whereby the Executive shall thereafter have the
right to purchase and receive, on the basis and upon the terms and conditions
specified in this Agreement and in lieu of the Option Shares immediately
theretofore purchasable and receivable upon the exercise of the rights
represented by the Options (i) such shares of stock, securities, cash or
property as may be issued or payable with respect to or in exchange for a number
of outstanding Option Shares equal to the number of Option Shares immediately
theretofore purchasable and receivable upon the exercise of the rights presented
by the Options had such reorganization, recapitalization, reclassification,
consolidation, merger, amalgamation, share exchange or sale, lease, transfer,
conveyance or other disposition not taken place, and (ii) if such consolidation,
merger, amalgamation, share exchange, sale, lease, transfer, conveyance or other
disposition is with any person or entity (or any affiliate thereof) who shall
have made a purchase, tender or exchange offer which was accepted by the holders
of not less than twenty percent (20%) of the outstanding shares of Common Stock,
the Executive shall have been given a reasonable opportunity (and, in no event,
less than 30 days) to elect to receive, either (x) the stock, securities, cash
or property it would have received pursuant to clause (i) immediately preceding
or (y) the stock, securities, cash or property issued to previous holders of the
Common Stock in accordance with such offer, or the equivalent thereof. In any
such case appropriate provision shall be made with respect to the rights and
interests of the Executive to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the number and type of
securities purchasable upon the exercise of the Options) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities,
cash or property thereafter deliverable upon the exercise of the Options. The
Company shall not effect any such consolidation, merger, amalgamation, share
exchange or sale, lease, transfer, conveyance or other disposition unless prior
to or simultaneously with the consummation thereof the successor entity (if
other than the Company) resulting from such consolidation, merger or
amalgamation, share exchange or the entity purchasing or otherwise acquiring
such assets or shares (i) shall assume by a supplemental Option Agreement,
satisfactory in form, scope and substance to the Executive the obligation to
deliver to the Executive such shares of stock, securities, cash or property as,
in accordance with the foregoing provisions, the Executive may be entitled to
purchase (the "Substitute Securities") and (ii) shall assume all of the other
obligations of the Company set forth in this Agreement. Following such
assumption such obligations shall apply to the Substitute Securities rather than
to the Options and the Option Shares. The foregoing provisions of this paragraph
shall similarly apply to successive reorganizations, recapitalizations,
reclassifications, consolidations, mergers, amalgamations, share exchanges,
sales, leases, transfers, conveyances or other dispositions.
A-1
<PAGE>
(b) COMMON STOCK ISSUES.
-------------------
If the Company issues shares of Common Stock in any one
transaction or a series of related transactions for a consideration per share
less than 67% of the Fair Market Value per Share (as defined herein) on the date
the Company fixes the offering price of such additional shares, the number of
Option Shares issuable upon the exercise of the Options shall be adjusted in
accordance with the following formula:
E' = Ex AXM
---
P+(MxO)
where:
E' = the adjusted number of Option Shares.
E = the then current number of Option Shares.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the Fair Market Value per Share on the date the Company
fixes the offering price of such additional shares.
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance.
(c) CONVERTIBLE SECURITIES ISSUES.
-----------------------------
If the Company issues any securities exchangeable for or
convertible into shares of Common Stock, directly or indirectly, whether or not
the right to convert or exchange thereunder is immediately exercisable or is
conditioned upon the passage of time, the occurrence or non-occurrence of some
other event, or both ("Convertible Securities"), in any one transaction or a
A-2
<PAGE>
series of related transactions for a consideration per share of Common Stock
initially deliverable upon conversion or exchange of such Convertible Securities
less than 67% of the Fair Market Value per Share on the date of issuance of such
Convertible Securities, the number of Option Shares issuable upon the exercise
of the Options shall be adjusted in accordance with the following formula:
E' = Ex (O+D) X M
---------
(OxM) + (P+MP)
where:
E' = the adjusted number of Option Shares.
E = the then current number of Option Shares.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such Convertible Securities.
P = the aggregate consideration received for the issuance of such
Convertible Securities.
M = the Fair Market Value per Share on the date of issuance of such
Convertible Securities.
MP = the Minimum Price multiplied by D.
D = the maximum number of shares of Common Stock deliverable
upon exercise, conversion or in exchange of such Convertible
Securities at the Minimum Price (as defined below).
In this paragraph (c), the term "Minimum Price" means the lowest price at which
the Convertible Securities can be converted into or exchanged for Common Stock,
regardless of whether that is the initial rate or is conditioned upon the
passage of time, the occurrence or non-occurrence of some other event, or both.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance.
(d) RIGHTS, OPTIONS AND WARRANT ISSUES.
----------------------------------
If the Company issues any rights, options or warrants to
subscribe for or purchase or otherwise acquire Common Stock or Convertible
Securities, whether or not the right to exercise such rights, options or
warrants or to convert or exchange such Convertible Securities is immediately
exercisable or is conditioned upon the passage of time, the occurrence or
non-occurrence of some other event, or both (the "Option Securities"), in any
one transaction or a series of related transactions for a consideration per
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<PAGE>
share of Common Stock initially deliverable upon exercise of such Option
Securities or conversion or exchange of such Convertible Securities less than
67% of the Fair Market Value per Share on the date of issuance of such Option
Securities, except for the issuance of options to offices, directors and/or
employees of the Company in their capacities as such, the number of Option
Shares issuable upon the exercise of the Options shall be adjusted in accordance
with the following formula:
E' = Ex (O+D) X M
---------
(OxM) + (P+MP)
where:
E' = the adjusted number of Option Shares.
E = the then current number of Option Shares.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such Option Securities.
P = the aggregate consideration received for the issuance of such
Option Securities.
M = the Fair Market Value per Share on the date of issuance of such
Option Securities.
MP = the Minimum Price multiplied by D.
D = the maximum number of shares of Common Stock deliverable
upon exercise, conversion or in exchange of such Option
Securities at the Minimum Price (as defined below).
In this subparagraph (d), the term "Minimum Price" means the lowest price at
which the Option Securities may be exercised (directly or through the conversion
or exchange of Convertible Securities which may be acquired upon exercise of the
Option Securities) to purchase or otherwise acquire Common Stock, regardless of
whether that is the initial price or is conditioned upon the passage of time,
the occurrence or non-occurrence of some other event, or both. The adjustment
shall be made successively whenever any such issuance is made, and shall become
effective immediately after such issuance.
(e) CONSIDERATION RECEIVED.
----------------------
For purposes of any computation respecting consideration
received pursuant to any provisions hereof, the following shall apply:
(i) in the case of the issuance of shares of Common Stock for
cash, the consideration received shall be the amount of cash received by the
Company therefor, without deduction therefrom of any reasonable expenses
incurred by the Company in connection therewith or any reasonable underwriters'
discounts, fees and commissions paid or allowed by the Company in connection
therewith;
A-4
<PAGE>
(ii) in the case of the issuance of shares of Common Stock for
a consideration consisting in whole or in part of other than case, the
consideration other than cash shall be initially determined by the board of
directors of the Company in good faith, such good faith determination by the
board of directors of the Company shall be binding, absent manifest error; and
(iii) in the case of the issuance of Convertible Securities or
securities issuable upon the exercise of Option Securities, the aggregate
consideration received therefor shall be deemed to be the consideration received
by the Company for the issuance of such Convertible Securities, plus the
consideration, if any, received by the Company for the issuance of such Option
Securities, plus the additional minimum consideration, if any, to be received by
the Company upon the conversion, exchange or exercise thereof (the consideration
in each case to be determined in the same manner as provided in paragraphs (i)
and (ii) of this subparagraph (e)).
(f) NOTICES TO EXECUTIVE.
--------------------
Upon any adjustment of the number of Option Shares purchasable
upon exercise of the Options, the Company shall promptly thereafter prepare a
statement setting forth the number and type of securities or other property
constituting Option Shares after such adjustment and setting forth in reasonable
detail the method of calculation and the facts upon which such calculations are
based and provide to the Executive written notice of such adjustments, together
with a copy of such statement. Where appropriate, such notice may be given in
advance and included as a part of the notice required to be given under the
other provisions of this Annex A.
In the event:
(i) the Company shall authorize the issuance to holders
(although upon necessarily to all such holders) of shares of Common Stock or
rights, options or warrants to subscribe for or purchase or otherwise acquire
shares of Common Stock or of any other securities or property (including
securities of any other issuer) or of any other subscription rights, options or
warrants: or
(ii) the Company shall authorize the payment of any dividend
or distribution to holders of shares of Common Stock of cash, capital stock or
other securities or property (including securities of any other issuer) of the
Company; or
(iii) of any other capital reorganization, reclassification or
recapitalization of the capital stock of the Company, or any amalgamation,
consolidation or merger to which the Company is a party, or any acquisition of
capital stock of the Company through a share exchange, or of the sale, lease,
conveyance, transfer or other disposition of the properties and assets of the
Company substantially as an entirety, or a purchase, tender or exchange offer
for shares of Common Stock or other securities constituting part of the Option
Shares (whether by the Company or some other party); or
A-5
<PAGE>
(iv) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(v) the Company proposes to take action which would require an
adjustment of the number of Option Shares purchasable upon exercise of the
Options pursuant hereto;
then the Company shall cause to be given to the Executive, at least twenty (20)
days prior to the applicable record date hereinafter specified (or promptly in
the case of events for which there is no record date), a written notice stating
(as applicable) (i) the date as of which the holders of record of shares of
Common Stock entitled to receive any such rights, options, warrants or dividends
or distribution are to be determined, (ii) the date on which any such
reclassification, recapitalization or reorganization, consolidation, merger,
amalgamation, share exchange, sale, lease, conveyance, transfer, disposition,
dissolution, liquidation or winding up is expected to become effective or be
consummated, or (iii) the initial expiration date set forth in any purchase,
tender or exchange offer for shares of Common Stock, and the date as of which it
is expected that holders of record of shares of Common Stock or other securities
constituting a part of the Option Shares (or securities into which the Option
Shares may be converted) shall be entitled to exchange such shares or securities
for securities or other property, if any, deliverable upon such
reclassification, recapitalization, reorganization, consolidation, merger,
amalgamation, share exchange, sale, lease, conveyance, transfer, disposition,
dissolution, liquidation or winding up.
(g) CASH DISTRIBUTIONS AND DIVIDENDS.
--------------------------------
If the Company pays a dividend or makes a distribution to the
holders of its Common Stock of any securities (other than capital stock for
which an adjustment is otherwise made hereunder) or property (including cash and
securities of other companies) of the Company, or any rights, options or
warrants to subscribe for or purchase securities (other than Common Stock) or
property (including securities of other companies) of the Company, then,
simultaneously with the payment of such dividend or the making of such
distribution, and as a condition precedent to its right to do so, it will pay or
distribute to the Executive an amount of property (including, without
limitation, cash) and/or securities (including, without limitation, securities
of other companies) of the Company as would have been received by the Executive
had he exercised all of the Options exercisable by him, in each case immediately
prior to the record date (or other applicable date) used for determining
stockholders of the Company entitled to receive such dividend or distribution.
(h) FAIR MARKET VALUE PER SHARE.
---------------------------
For the purpose hereof, the term "Fair Market Value per Share"
means the average of the closing sale price (or, if no such closing sale price
exists, the average of the closing bid and asked prices) of the Common Stock for
the thirty (30) consecutive trading days commencing forty-five (45) trading days
before the date of determination. However, if (but only if) the Company is not a
public company, the Fair Market Value per Share determined pursuant to this
paragraph shall be the quotient of (A) the fair machete value of the Company and
its subsidiaries taken as a whole on the date of determination, taking into
account all the factors relevant thereto, including, without limitation, the
A-6
<PAGE>
highest price that could be obtained from an arms' length sale without time
constraints of (i) all or substantially all of the assets of the Company and the
subsidiaries subject to or after satisfaction of all liabilities of the Company
and the subsidiaries, excluding any tax or other liabilities incurred in
connection with such sale or (ii) all of the stock of the Company, whether by
stock sale, merger, consolidation or otherwise, divided by the sum of (1) the
number of outstanding shares of Common Stock on a fully diluted basis on the
date of determination. In no event shall the Fair Market Value per Share
determined pursuant to this paragraph be reduced or discounted on the basis that
any securities to be valued on the basis of such Fair Market Value per Share may
represent the right to acquire a minority interest in the Company or may not be
freely transferable under federal or state securities laws, or for any other
reason.
A-7
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") made and entered into as of
the 24th day of September 1999 by and between Kyoung Bum Park (the
"Consultant"), Summus, Ltd. a Delaware corporation ("Summus") and High Speed Net
Solutions, Inc., a Florida corporation ("HSNS"). Summus and HSNS shall be
referred to collectively as the "Companies".
W I T N E S S E T H
WHEREAS, the Companies are desirous of engaging Consultant to provide
certain consulting services to the Companies and Consultant is desirous of
accepting such engagement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereby agree as follows:
1. ENGAGEMENT AS CONSULTANT. The Companies hereby engage Consultant to
perform consulting services to the Companies and Consultant hereby accepts such
engagement and agrees to provide consulting services for the benefit of the
Companies, in accordance with the terms of this Agreement.
2. DUTIES OF CONSULTANT. Consultant agrees to make reasonable and best
efforts to advise and assist the Companies in obtaining funding (the "Funds")
from Samsung Group ("Samsung"). For purposes of this Agreement, all references
to Funds shall include, but not be limited to, equity capital or equity
investments or any funding accepted by either of the Companies, including
license fees and/or royalties paid to either or both of the Companies by Samsung
pursuant to an agreement initiated and closed by Consultant's efforts.
Consultant agrees not to represent or introduce the wavelet technology of any
other individuals or companies to Samsung.
3. TERM. This Agreement shall commence as of the date hereof and shall
continue until June 30, 2000, at which time this Agreement shall terminate,
unless sooner terminated in accordance with the provisions hereof.
4. CONSULTING FEE: For services rendered hereunder, each Company will
pay or cause to be paid to Consultant an amount equal to the following formula:
As to Summus:
------------
Twelve percent (12%) of all Funds accepted and received by
Summus from Samsung.
As To HSNS:
----------
Four percent (4%) of all Funds accepted and received by HSNS
from Samsung. Two thousand share of HSNS common stock
(unregistered) for each One Hundred Thousand Dollars
($100,000.00) accepted and received by HSNS from Samsung.
<PAGE>
Payments owed to Consultant under this Agreement will be made only from
collected Funds received from Samsung and shall be paid over the time period
during which payments from Samsung are received by either of the Companies. Each
Company agrees to make payments to Consultant within seven (7) business days of
receipt of cleared funds from Samsung in the Company's account. If there is a
failure by either Company to make any payment to Consultant within the time
required, the delinquent amount shall bear interest at the rate of ten percent
(10%) per annum and shall be owed to Consultant by the defaulting Company. In
addition, the Companies will reimburse Consultant for all normal, pre-approved,
out of pocket business expenses, including travel, meals, lodging and similar
expenses incurred while on business for the Companies upon documentation by
Consultant of such expenses.
5. INDEPENDENT CONTRACTOR STATUS. The parties expressly intend and
agree that Consultant is acting as an independent contractor and not as an
employee of either of the Companies. Consultant understands and agrees that he
shall not be entitled to any of the rights and privileges established for the
employees of the Companies (if any), including but not limited to the following
retirement benefits, medical insurance coverage, severance pay benefits, paid
vacation and sick pay, overtime pay or any of the foregoing items. Consultant
understands and agrees that neither Company will pay or withhold from the
compensation paid to Consultant pursuant to this Agreement any sums customarily
paid or withheld for or on behalf of employees for income tax, unemployment
insurance, social security, worker's compensation or any other withholding tax,
insurance or payment pursuant to any law of governmental requirement, and all
such payments as may be required by law are the sole responsibility of
Consultant. Consultant agrees to hold the Companies harmless against, and
indemnify the Companies for any of such payments of liabilities for which the
Companies, or either of them, may become liable with respect to such matters.
This Agreement shall not be construed as a partnership agreement.
The Companies shall have no responsibility for any of Consultant's
debts, liabilities or other obligations, or for the intentional, reckless,
negligent or unlawful acts or omissions of Consultant or Consultant's employees
or agents.
6. CONFIDENTIALITY. Consultant shall not for any reason or at any time,
whether during or after the term of this Agreement, disclose to any person
(except to the extent that the proper performance of this Agreement may require
disclosure to employees or agents of Samsung and such persons have entered into
a confidentiality agreement in form and substance satisfactory to the Companies)
any secret or confidential information obtained by Consultant in the course of,
or as a result of, performance of this Agreement, which secret or confidential
information relates to either Company or any subsidiary corporation of either
Company, unless so authorized by the President or Executive Vice President of
the Company to which such confidential information relates. Any information that
(a) was known prior to receipt from either Company free of any obligation to
keep such information confidential, or (b) is disclosed to third parties by the
Company to which such information relates without any requirement of
confidentiality or which becomes publicly available other than by unauthorized
disclosures, or (c) is independently developed by Consultant without reliance on
2
<PAGE>
any secret or confidential information as evidenced by his records, or (d) is
disclosed as compelled by law, shall not be deemed to be secret or confidential
for purposes of this Agreement. In the event of a breach or threatened breach by
Consultant of the provisions of this paragraph, the affected Company shall be
entitled to an injunction restraining Consultant from disclosing, in whole or in
part, any such secret or confidential information; provided, however, that
nothing herein shall be construed as prohibiting either Company from pursuing
any other remedies available for any such breach or threatened breach, including
the recovery of damages from Consultant.
7. RIGHTS TO MATERIALS. All records, files, memoranda, reports, price
lists, customer lists, plans, drawing, sketches, documents and the like
(together with all copies thereof) relating to the business of either Company or
any of their subsidiaries that Consultant shall use or prepare or come into
contact with in the course or, or as a result of, the performance of this
Agreement shall remain the sole property of the Company to whose business such
information relates. Upon termination of this Agreement or upon the prior demand
of either Company, Consultant shall immediately return all such materials to the
Company to which such materials belong.
8. RIGHTS TO INVENTIONS AND TECHNOLOGY. Any and all methods,
inventions, patents, trademarks, and other materials developed by the Companies,
their subsidiaries or any employees of the Companies or their subsidiaries that
Consultant shall use or come into contact with in the course or, or as a result
of, the performance of this Agreement shall be and at all times remain the sole
and absolute property of the Company that developed such patents, inventions or
materials.
9. TERMINATION FOR CAUSE. A nondefaulting party shall have the right to
terminate this Agreement upon the occurrence of any of the following events, and
the expiration of any applicable period of cure; (a) the failure of a Company to
make any payment within ten (10) days after the date when payment is due; (b)
the failure of Consultant to perform his duties to the reasonable satisfaction
of either of the Companies; (c) the failure of a party to comply with any other
term or condition of this Agreement within ten (10) days after written notice
specifying the nature of such default, without cure; and (d) any attempt by
Consultant to assign or otherwise transfer Consultant's rights hereunder.
In the event that after termination of this Agreement by the Companies
for cause, either of the Companies deals with or meets with Samsung, then this
Agreement shall continue to apply with respect to Samsung for a period of one
year after termination notwithstanding any notice of termination previously
given.
10. TERMINATION WITHOUT CAUSE.
(a) Any party may terminate this Agreement without cause upon not less
than thirty (30) days' prior written notice delivered to the other parties;
provided however that both Companies must agree to the termination of Consultant
provided for in this subsection.
(b) Upon termination without cause pursuant to subsection (a) of this
paragraph, Consultant shall remain entitled to any compensation calculated in
accordance with the formula in Paragraph 4 based on Funds already received by
3
<PAGE>
either Company from Samsung and expenses incurred by Consultant prior to
termination.
In the event that after termination of this Agreement by the Companies
without cause, either of the Companies deals with or meets with Samsung, then
this Agreement shall continue to apply with respect to Samsung for a period of
one year after termination notwithstanding any notice of termination previously
given.
11. REMEDIES UPON BREACH. In the event of any breach of this Agreement
by Consultant, the Companies shall be entitled, if they so elect, to institute
and prosecute proceedings in any court of competent jurisdiction, either in law
or in equity, to enjoin Consultant from violating any of the terms of this
Agreement, to enforce the specific performance by Consultant of any of the terms
of this Agreement and so to obtain damages, or any of the above, but nothing
herein contained shall be construed to prevent such remedy or combination of
remedies as the Companies may, in their discretion, choose to invoke. The
failure of either Company to promptly institute legal action upon any breach of
this Agreement shall not constitute a waiver of that or any other breach hereof.
12. MISCELLANEOUS PROVISIONS.
(a) All notices required or permitted to be given hereunder shall be
given in writing and either personally delivered, or delivered by confirmed fax
or overnight mail. If notices are given to the Companies, they shall be
addressed to:
Summus, Ltd.
434 Fayetteville Street Mall
Suite 600
Raleigh, North Carolina 27601
Attention: William B. Silvernail
High Speed Net Solutions, Inc.
434 Fayetteville Street Mall
Suite 600
Raleigh, North Carolina 27601
Attention: Andrew Fox
If notices are to Consultant, they shall be addressed to:
Kyoung Bum Park
283 Sunset Drive
Richboro, PA 18954
(b) This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and may not be modified or
amended except in writing signed by the party against whom such modification or
agreement is sought to be enforced.
4
<PAGE>
(c) Consultant acknowledges that this Agreement replaces in
its entirety that certain Consulting Agreement dated April 21, 1999 by and
between HSNS and Consultant, as amended by a letter dated April 26, 1999 from
HSNS to Consultant, agreed to by Summus, and that upon execution of this
Agreement, the former Consulting Agreement with HSNS shall be null and void and
of no further force and effect.
(d) This Agreement shall be governed and construed in
accordance with the laws of the State of North Carolina, without regard to
principles of conflicts of laws.
(e) In the event of any litigation concerning any controversy,
claim or dispute between the parties hereto arising out of or relating to this
Agreement or the breach hereof; or the interpretation hereof, the prevailing
party shall be entitled to recover from the losing party reasonable expenses,
attorney's fees, and costs incurred therein or in the enforcement or collection
of any judgment or award rendered therein.
(f) The rights and obligations of each Company under this
Agreement shall enure to the benefit of and shall be binding upon the successors
and assigns of that Company. Consultant may not assign his rights and duties
under this Agreement without the prior written consent of the Companies.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SUMMUS, LTD.
By:________________________________
William B. Silvernail,
Chief Executive Officer
HIGH SPEED NET SOLUTIONS, INC.
By:_______________________________
Andrew Fox, President
CONSULTANT
By:________________________________
Kyoung Bum Park
5
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered into as of
December 15, 1999, by and between High Speed Net Solutions, Inc. (HSNS ), a
Florida corporation, and RPC International ("Consultant").
W I T N E S S E T H:
------------------
WHEREAS, Summus is desirous of Consultant providing certain
services to HSNS; and
WHEREAS, Consultant desires to provide such services to HSNS;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. SERVICES. HSNS hereby retains Consultant to perform professional
and management services including but not limited to, business plan
development, recruitment and hiring of HSNS employees, customer
management of HSNS's Online Internet Advertising initiative, and any
other advisory and managerial responsibilities requested by HSNS.
2. COMPENSATION. In consideration for the services provided by the
Consultant hereunder, HSNS shall pay the Consultant:
2.1. A monthly retainer of $30,000 per month;
2.2 A sales commission as follows:
4% of the subtotal of all HSNS revenues up to and including
$2,000,000 that are attributable to Online Internet Advertising
accounts developed or managed by RPC;
5% of the subtotal of all HSNS revenues from $2,000,001 to
$5,000,000 that are attributable to Online Internet Advertising
accounts developed or managed by RPC;
6% of the subtotal of all HSNS revenues from $5,000,001 to
$10,000,000 that are attributable to Online Internet Advertising
accounts developed or managed by RPC;
7% of the subtotal of all HSNS revenues in excess of
$10,000,000 that are attributable to Online Internet Advertising
accounts developed or managed by RPC;
2.3. Incentive stock options to purchase from HSNS, up to 200,000
of its HSNS restricted shares currently held, at an exercise
price of Ten Dollars ($10.00) per share.
2.4 Vesting in the stock options will occur based on the following
schedule:
2.4.1. 50,000 shares when HSNS revenue attributable to
accounts developed or managed by RPC achieves
$2,000,000;
<PAGE>
2.4.2. 50,000 shares when HSNS revenue attributable to
accounts developed or managed by RPC achieves
$5,000,000;
2.4.3. 50,000 shares when HSNS revenue attributable to
accounts developed or managed by RPC achieves
$10,000,000;
2.4.4. 50,000 shares when HSNS revenue attributable to
accounts developed or managed by RPC achieves
$20,000,000;
3. EXPENSES. HSNS agrees to reimburse the Consultant for all travel
costs reasonably and actually incurred by the Consultant in performing
services under this Agreement, as well as any other expenses approved
by HSNS.
4. TERM. This Agreement shall be effective as of December 15, 1999, and
shall continue until December 15, 2000. This Agreement may be
terminated by either party upon ten days prior written notice;
provided, however, that the obligations arising under the
Confidentiality and Non-Disclosure Agreement between the Consultant and
HSNS, of even date herewith, shall survive the termination of this
Agreement.
4.1. In the event that this Agreement is terminated by HSNS prior
to March 31, 2000, then the compensation in Article 2. 1,
Monthly Retainer, shall continue for two months following said
termination. In the event that this Agreement is terminated
after March 31, 2000 but before June 30, 2000, then the
compensation in Article 2.1, Monthly Retainer shall continue
for 3 months following said termination. Any termination of
this agreement by HSNS after June 30, 2000 and prior to
December 15, 2000 shall result in Consultant receiving
compensation under Article 2. 1 for a period of 4 months
following said termination.
4.2. The compensation in Article 2.2, Sales Commission, shall apply
for one year following the termination of this agreement, but
for a period not less than two years from the signing date of
this agreement.
5. COOPERATION AND CONSULTANT. HSNS management and employees will
cooperate with tile Consultant in the performance of the services
including participating in one-on-one interviews and making available
any pertinent information from files on personnel history, salary
administration and benefits.
6. RELATIONSHIP OF THE PARTIES. The relationship between the Consultant
and HSNS shall be that of an independent contractor. Nothing contained
in this Agreement shall be deemed to constitute a relationship of
agency, joint venture, partnership or any other relationship than that
specified. Consultant shall be responsible for all income, social
security and other state, local and federal taxes that arise as a
result of the relationship contemplated hereby and the payments made
hereunder.
7. CONFIDENTIALITY. The Consultant shall maintain all information obtained
in connection with Consultant's performance under this Agreement
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<PAGE>
confidential in accordance with the terms of a Confidentiality and
Non-Disclosure Agreement of even date herewith, the form of which is
provided as Exhibit A to this Agreement.
8. NOTICE. Any notice or other communication under this Agreement shall be
sufficiently given if hand delivered, sent by prepaid certified mail or
sent via facsimile so long as a confirmation is received, to the
following:
If to the Consultant: RPC International LC
P.O. Box 3 RR3
Afton, OK 73162
If to HSNS: Alan R. Kleinmaier
HSNS Ltd.
Suite 2120
434 Fayetteville Street Mall
Raleigh, NC 27601
9. MODIFICATION; WAIVER; AMENDMENTS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing, signed by the Consultant and HSNS.
No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver
of any similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No amendments or additions to this
Agreement shall be binding unless in writing and signed by all parties
hereto, except as herein otherwise provided.
10. APPLICABLE LAW. This Agreement shall be governed in all respects
whether as to validity, construction, capacity, performance or
otherwise, by the laws of the State of North Carolina, without regard
to choice of law principles.
11. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions
hereof.
12. HEADINGS. The titles to the sections of this Agreement are solely for
the convenience of the parties and shall not be used to explain,
modify, simplify, or aid in interpretation of the provisions of this
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Consulting
Agreement to be effective as of the day and year first hereinabove written.
RPC International L.C.
/s/ illegible signature
By: President
HSNS, LTD.
/s/ Alan R. Kleinmaier
By:Alan R. Kleinmaier
Executive Vice President
4
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (the "Agreement") is made and entered into as of
this 16th day of August, 1999 by and among Summus, Ltd., a Delaware corporation
(the "Company"), High Speed Net Solutions, Inc., a Florida corporation; Sharon
Stairs; Ahmad Moradi; Antonio Bianco; Joseph Peretta; Rich, Bahman & Berger
(CPAs); David Anderson; Stephen Purkiss; Kerstin Jawerth; Ron Compton and such
other shareholders of the Company who become a party to this Agreement in
accordance with the terms hereof (collectively, the "Shareholders").
WITNESSETH:
WHEREAS, the Shareholders currently, or as part of the merger of the Company and
Summus Technologies, Inc. (the "Merger"), will own certain of the issued and
outstanding shares of capital stock of the Company; and
WHEREAS, the parties to this Agreement believe that it is in their mutual best
interests to restrict the sale and transfer of any capital stock of the Company,
thus to insure continuity and harmony in the management and policies of the
Company; and
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
Unless the context requires otherwise, capitalized terms used herein shall have
the meaning set forth in the Glossary attached to this Agreement.
ARTICLE II
TRANSFER OF SHARES
The provisions of this Agreement shall apply to all Shares currently issued (or
intended to be issued in the Merger) and which may be issued in the future.
ARTICLE III
COMPLIANCE WITH AGREEMENT
During the term of this Agreement, no Shareholder shall Transfer any Shares now
owned or hereafter acquired by it, except as permitted by, and in compliance
with, the terms and conditions of this Agreement and in accordance with any
Applicable Laws. Any purported Transfer not in compliance with the terms and
conditions of this Agreement shall be void and of no force and effect.
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ARTICLE IV
PERMITTED TRANSFERS
AND
LEGEND REQUIREMENTS
4.1 A Shareholder may Transfer its Shares in accordance with the
provisions of this Agreement to any other Person (a "Third Party"); PROVIDED,
HOWEVER, that (i) any Transfer (other than Involuntary Transfers in accordance
with Section 5. 1) shall be for consideration that shall consist of only cash or
Marketable Securities or any combination thereof, and (ii) no Transfer shall be
allowed until such time as the proposed transferee agrees in writing to be bound
by the terms and conditions of this Agreement.
4.2 As a result of this Shareholders Agreement, each certificate
evidencing Shares shall bear the following or a substantially similar legend:
The securities evidenced hereby are subject to the terms of a
Shareholders' Agreement among the Company and the shareholders of
the Company. A copy of the Shareholders' Agreement is on file at
the office of the Company and is available upon request. The
Shareholders' Agreement provides, among other things, for
restrictions on the sale, transfer, pledge, hypothecation or other
disposition of, the securities represented by this Certificate. Any
attempted sale, transfer, pledge, hypothecation or other
disposition of the securities represented by this Certificate not
in compliance with the terms and conditions of the Shareholders'
Agreement shall be void and of no force and effect.
ARTICLE V
INVOLUNTARY TRANSFER OF SHARES
5.1 COMPANY'S OPTION. If an Involuntary Transfer of any of the Shares
owned by any Shareholder (the "Transferred Shares") shall occur, the Company
shall have the right to purchase some or all of the Transferred Shares, which
right shall be exercisable by written notice given to the transferee of the
Transferred Shares (the "Involuntary Transferee") and the Shareholder who
suffered the Involuntary Transfer or his estate in the case of his death (in
either case, the "Involuntary Transferor") within thirty (30) days after receipt
by the Company of written notice of the Involuntary Transfer (or, in the event
no such notice is received, thirty (30) days after the Company becomes aware of
the Involuntary Transfer). The Company shall provide to each other Shareholder
(a "Continuing Shareholder") (i) a copy of any written notice of Involuntary
Transfer received by the Company (or, in the event no such notice is received, a
written notice of awareness of any Involuntary Transfer), within five (5) days
after the Company becomes aware of the Involuntary Transfer, and (ii) a copy of
any written notice of exercise given by the Company pursuant to this Section 5.
1. The failure of the Company to exercise such right within such thirty (30) day
time period shall be regarded as a waiver of its right to participate in the
purchase of the Transferred Shares.
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5.2 CONTINUING SHAREHOLDERS' OPTION. If the Company does not elect to
purchase all of the Transferred Shares as provided herein, each Continuing
Shareholder shall have the right to purchase any portion of the Transferred
Shares for which no such election has been made by the Company (the "Excess
Transferred Shares") pro rata based on the number of Shares owned by the
Shareholders which exercise the right, which right shall be exercisable by
written notice to the Involuntary Transferee and Involuntary Transferor given
within forty-five (45) days after receipt by such Continuing Shareholder of
written notice of the Involuntary Transfer from the Company. The exercising
Continuing Shareholder shall also provide a copy of such written notice of
exercise to the Company and the other Continuing Shareholders. A Continuing
Shareholder may also indicate in such notice, if it so elects, its desire to
purchase additional Excess Transferred Shares (indicating a maximum number, if
any) if any other Continuing Shareholder does not exercise its right to purchase
up to the full amount of its pro rata share of the Excess Transferred Shares. If
one or more Continuing Shareholders so elect, the additional Excess Transferred
Shares, if any, shall be allocated (pro rata if more than one, or less than pro
rata with respect to any such Continuing Shareholder requesting a lower number
of Excess Transferred Shares) to such Continuing Shareholder(s). The failure of
a Continuing Shareholder to exercise such right within such forty-five (45) day
period shall be regarded as a waiver of its right to participate in the purchase
of the Transferred Shares.
5.3 PURCHASE PRICE FOR TRANSFERRED SHARES. The purchase price per share
of any Transferred Shares shall be the "fair market value" thereof as determined
by mutual agreement of the Involuntary Transferee and each party participating
in such purchase, or if no such agreement can be reached within thirty (30) days
after the termination of the forty-five (45) day period provided in Section 5.2,
the purchase price shall be determined in accordance with the provisions of
Section 5.6.
5.4 TERMS OF PAYMENT OF PURCHASE PRICE TO THE COMPANY AND CONTINUING
SHAREHOLDERS. The Company and the exercising Continuing Shareholders shall pay
the purchase price for the Transferred Shares in cash; provided, however, that
the purchase price payable by the Company or any Continuing Shareholders for the
Transferred Shares of the Involuntary Transferor may be paid twenty-five percent
(25 %) percent down within thirty (30) days after the purchase price is
determined with the balance to be paid with interest at the rate of the lesser
of the Bank of America prime rate as adjusted from time to time, or the
applicable federal rate in three (3) equal annual installments of principal and
interest until paid in full. Notwithstanding the foregoing in no event shall the
amount paid as a down payment be less than the amount of any insurance proceeds
received by the Company or any Continuing Shareholder as a result of the death
of the Involuntary Transferor. Until the Transferred Shares have been paid for
in full, the Company and each exercising Continuing Shareholder shall pledge
back the Transferred Shares it purchases to the Involuntary Transferee as
collateral for payment pursuant to a Security and Pledge Agreement with
customary terms and conditions, as determined in the reasonable discretion of
the Company.
5.5 FIRST REFUSAL RIGHTS SURVIVE. In the event the provisions of this
Article V shall be held to be unenforceable with respect to any particular
Involuntary Transfer of any Shares, each Continuing Shareholder and the Company
shall have rights of first refusal if the Involuntary Transferee subsequently
obtains a bona fide offer for and desires to Transfer such Shares, and such
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Shares shall otherwise remain subject to the terms and conditions of this
Agreement, including this Article V.
5.6 DETERMINATION OF FAIR MARKET VALUE. For the purposes of this
Article V, the "fair market value" of the Transferred Shares shall be
determined, in the absence of mutual agreement, by an investment banking firm or
firm of professional business evaluators (the "Consultant") reasonably
satisfactory to each party participating in the transaction. If each such party
shall not agree upon a Consultant within the earliest of (i) thirty (30) days
after the delivery of the last applicable written notice from a Continuing
Shareholder or the Company with respect to such purchase and sale, (ii) fifteen
(15) days after such parties notify the Company in writing that mutual agreement
on such Consultant cannot be reached, or (iii) fifteen (15) days after the
expiration of the thirty (30) day period provided in Section 5.3, the Company's
auditors shall select a Consultant. The determination by the Consultant shall be
final and binding upon all parties to the purchase and sale. The fees of the
Consultant shall be paid by the Company.
5.7 NO PREJUDICE. If the Company or any Shareholder at any time fails
to exercise its right to repurchase in accordance with this Article V, the
Company or such Shareholder shall in no way be precluded from (i) exercising in
connection with any subsequent Involuntary Transfer its right to repurchase
pursuant to this Article V with respect to the Shares in question or any other
Shares or (ii) exercising its rights to repurchase generally in accordance with
the provisions of this Agreement with respect to any other Transfer of any
Shares.
ARTICLE VI
RIGHTS OF FIRST REFUSAL
6.1 RIGHT OF FIRST REFUSAL. Subject to Articles III and IV, any
Shareholder which desires to Transfer all or any of its Shares (the "Offering
Shareholder") to any Third Party shall first make an offer (the "Offer") to
Transfer the Shares (the "Offered Shares") to the Company and, if the Company
does not elect to purchase all of the Offered Shares, then to each other
Shareholder (a "Non-Offering Shareholder") pursuant to the provisions of this
Article VI.
6.2 OFFER TO COMPANY AND OTHER SHAREHOLDERS. The Offering Shareholder
shall send written notice of the Offer (the "Offering Shareholder's Notice") to
the Company and to each Non-Offering Shareholder within ten (10) days following
receipt of an offer for such Offered Shares from, or a making of an offer with
respect to the Offered Shares to, a Third Party. In addition to any other
information required to be provided by the Offering Shareholder pursuant to the
immediately following sentence, the Offering Shareholder's Notice shall state
the number of Offered Shares, the terms and conditions of the Offer, including
the price (stating the portion in cash and in Marketable Securities or any
combination thereof) and the name and address of the Third Party (together with
a copy of all writings between the Third Party and the Offering Shareholder
establishing the terms of the offer between such parties) and shall include a
description of any related transactions, understandings or relationships or a
statement that there are no such related items. The Offer shall be on the same
terms and conditions, as the offer from, or made by the Offering Shareholder to,
the Third Party.
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6.3 COMPANY'S OPTION. Upon receipt of the Offering Shareholder's
Notice, the Company shall have the right to purchase some or all of the Offered
Shares at the price and upon the terms and conditions specified in such notice;
provided, however, that the Company shall have the option to match the price by
agreeing to pay in cash an amount equivalent to any portion of such price
payable in Marketable Securities. Notice of election to purchase the Offered
Shares shall be given by the Company to the Offering Shareholder and to each
Non-Offering Shareholder within thirty (30) days after receipt by the Company of
the Offering Shareholder's Notice. The failure of the Company to exercise its
right to purchase the Offered Shares within such thirty (30) day period shall be
regarded as a waiver of its right to participate in the purchase of the Offered
Shares.
6.4 NON-OFFERING SHAREHOLDERS' OPTION. If the Company does not elect to
purchase all of the Offered Shares, each of the Non-Offering Shareholders shall
have the right to purchase any portion of the Offered Shares pro rata based on
the number of Shares owned by the Non-Offering Shareholders who exercise the
right, for which no such election has been made (the "Excess Offered Shares") at
the price and upon the terms and conditions specified in the Offering
Shareholder's Notice; provided, however, that each of the Non-Offering
Shareholders shall have the option to match the price by paying in cash an
amount equivalent to any portion of such price payable in Marketable Securities.
A Non-Offering Shareholder's right to purchase Excess Offered Shares shall be
exercisable by written notice of exercise to the Offering Shareholder given
within forty-five (45) days after receipt of the Offering Shareholder's Notice.
The exercising Non-Offering Shareholder shall also provide a copy of such
written notice to the Company and the other Non-Offering Shareholders. A
Non-Offering Shareholder may also indicate in such notice, if it so elects, its
desire to purchase additional Excess Offered Shares (indicating a maximum
number, if any) if any other Non-Offering Shareholder does not exercise its
right to purchase up to the full amount of its pro rata amount of the Excess
Offered Shares. If one or more of the Non-Offering Shareholders so elect, the
additional Excess Offered Shares, if any, shall be allocated (pro rata if more
than one, or less than pro rata with respect to any such Non-Offering
Shareholder requesting a lower number of Excess Offered Shares) to such
Non-Offering Shareholder(s). The failure of a Non-Offering Shareholder to
exercise such right within such forty-five (45) day period shall be regarded as
a waiver of its right to participate in the purchase of the Offered Shares.
6.5 TERMS OF SALE TO THE COMPANY AND NONOFFERING SHAREHOLDER. The
purchase price payable by the Company or any Nonoffering Shareholder of the
Offered Shares of the Offering Shareholder may be paid twenty-five percent (25
%) percent down with the balance to be paid with interest at the rate of the
lesser of the Bank of America prime rate as adjusted from time to time, or the
applicable federal rate in three (3) equal annual installments of principal and
interest until paid in full. Until the Offered Shares have been paid for in full
by the Company and any exercising Non-Offering Shareholder, the Company and each
exercising Non-Offering Shareholder shall pledge back the Offered Shares it
purchases to the Offering Shareholder as collateral for payment pursuant to a
Security and Pledge Agreement with customary terms and conditions, as determined
in the reasonable discretion of the Company.
6.6 SURRENDER OF CERTIFICATES. At such time as the Company and the
Non-Offering Shareholders have agreed to purchase, in the aggregate, all of the
Offered Shares the Offering Shareholder shall surrender its certificate(s)
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representing the Offered Shares to the Company with duly executed assignments,
and the purchasers shall concurrently and therewith pay the Offering Shareholder
the purchase price (or appropriate portion thereof) for the Shares.
6.7 SALE. The Offering Shareholder may Transfer, subject to the
provisions of this Agreement, the Offered Shares that the Company and/or the
Non-Offering Shareholders do not elect to purchase on the terms and conditions
set forth in the Offering Shareholder's Notice delivered to the Company and the
Non-Offering Shareholders, provided that such sale is consummated within ninety
(90) days of the date of the Offering Shareholder's Notice. In accordance with
Articles II, III, and IV, the purchasing Third Party shall agree to be bound by
the terms and provisions of this Agreement before the Company can reflect the
Transfer on its stock transfer records. If such sale is not consummated within
such ninety (90) day period, all of the restrictions of this Agreement shall
again become effective with respect to the Offered Shares.
ARTICLE VII
EXCEPTION
Notwithstanding anything contained in this Shareholders Agreement to
the contrary, the shares owned by HSNS may be transferred through the sale of
HSNS by the sale of all of the outstanding capital stock of HSNS to a third
party so long as the payment required under Section 15.2 of the MLA is made to
the Company in accordance with the terms of the MLA (and the other terms and
conditions of Section 15.2 of the MLA are met), and the ownership by the third
party purchasing all of the capital stock of HSNS will not have an adverse
effect on the Company's business, financial condition, operations or prospects.
In the event of such a transaction, the shares of the Company shall continue to
remain subject to the first refusal rights contained in this Shareholders'
Agreement. Subject to a confidentiality agreement acceptable to HSNS, HSNS shall
provide the Company at least 30 days advance written notice of any intended
transfer in accordance with this Section and the Company shall have 15 days to
respond in writing to HSNS as to its specific reasons as to why it believes such
transfer would have an adverse effect on the Company. The burden of proving such
adverse effect shall be on the Company. The exception contained in this Article
shall not apply to the sale of HSNS to any entity with which Roger Dunavant is
an affiliate.
ARTICLE VIII
BOARD OF DIRECTORS; REQUIRED VOTING
8.1 REQUIRED VOTING. Except for HSNS, which shall control the voting of
the shares owned by HSNS, the Shareholders agree to vote their shares as
follows:
(a) BOARD OF DIRECTORS. The Shareholders agree to vote their shares
in such manner as to cause Jawerth and such other parties as he shall
select to be elected to the Board of Directors.
(b) OTHER MANNERS. On all matters submitted to a vote at a regular
or special meeting of shareholders of the Company or by written
consent, such shares shall be voted as determined by Jawerth.
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(c) PROXY GRANT. In connection with this Article VIII, if requested
at any time by Dr. Jawerth, all Shareholders, other than HSNS, shall
promptly grant Jawerth an irrevocable proxy with respect to the voting
of the shares, to be used in Jawerth's discretion.
ARTICLE IX
GENERAL PROVISIONS
9.1 TERMINATION OF AGREEMENT. This Agreement shall terminate upon the
occurrence of any one of the following events:
(a) The written agreement of the Company and those
Shareholders holding a majority of the issued and outstanding capital stock;
(b) The bankruptcy, receivership, or dissolution of the
Company; or
(c) The consummation of an underwritten public offering of the
Company's Common Stock.
9.2 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
certified mail, return receipt requested, first class postage prepaid, or sent
by Federal Express or similarly recognized overnight delivery service with
receipt acknowledged addressed as follows:
(a) If to the Company:
Summus, Ltd.
2000 Center Point Dr.
Suite 2200
Columbia, SC 29210
(b) If to the Shareholders:
As listed in the stock records of the Company.
(c) If delivered personally, the date on which a notice,
request, instruction or document is delivered shall be the date on which such
delivery is made and, if delivered by mail or by overnight delivery service, the
date on which such notice, request, instruction or document is received shall be
the date of delivery. In the event any such notice, request, instruction or
document is mailed or shipped by overnight delivery service to a party in
accordance with this Section 9.2 and is returned to the sender as
nondeliverable, then such notice, request, instruction or document shall be
deemed to have been delivered or received on the fifth day following the deposit
of such notice, request, instruction or document in the United States mails or
the delivery to the overnight delivery service provided that the delivering
party shall continue to make reasonable efforts to deliver the notice by other
commercially reasonable means.
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(d)Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 9.2.
9.3 AMENDMENTS. This Agreement, which constitutes the entire
understanding and agreement among the parties and supersedes all other previous
agreements among the parties, may only be altered, amended, changed or modified
by the written agreement of the Company and those Shareholders holding
two-thirds of the issued and outstanding shares of capital stock of the Company.
9.4 WAIVER. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived by any
other party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
9.5 BINDING EFFECT. Subject to the terms and conditions hereof, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, executors, administrators,
successors and assigns. This Agreement shall not be assignable by any party
without the prior written consent of each other party hereto, except in
accordance with the express terms and conditions hereof. The Company, the
Shareholders, personal representatives of any deceased Shareholder, and all
other parties bound by this Agreement shall promptly execute and deliver any and
all papers or instruments necessary or desirable to carry out the provisions of
this Agreement.
9.6 HEADING, ETC. Headings are for convenience only and do not affect
interpretation of this Agreement. The following rules of interpretation apply
unless the context requires otherwise:
(a) The singular includes the plural and conversely.
(b) A gender includes all genders.
(c) Where a word or phrase is defined, its other
grammatical forms have a corresponding meaning.
(d) A reference to any legislation or to any provision of
any legislation includes any modification or re-enactment of it, any legislative
provision substituted for it, and all regulations and statutory instruments
issued under it.
(e) A reference to conduct includes, without limitation,
any omission, representation, statement or undertaking, whether or not in
writing.
9.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto and supersedes and cancels any prior agreements,
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representations, warranties, or communications, whether oral or written, among
the parties hereto relating to the transactions contemplated hereby or the
subject matter herein.
9.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.9 NO AGREEMENT UNTIL EXECUTED. This Agreement shall not constitute or
be deemed to evidence a contract or agreement among the parties hereto unless
and until executed by all parties hereto irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement.
9.10 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining terms or provisions hereof, and any such invalidity
or unenforceability in any such jurisdiction shall not invalidate or render
unenforceable such term or provision in any other jurisdiction; provided,
however, that any such invalidity or unenforceability does not deny any party
hereto any of the basic benefits of the bargain contemplated by this Agreement.
9.11 CONFLICTS WITH ARTICLES OF INCORPORATION OR BY-LAWS. In the event
of any conflict between this Agreement and the Company's Articles of
Incorporation or By-Laws, respectively, the parties will take such action as may
be necessary and appropriate consistent with Applicable Laws to ensure that the
provisions of this Agreement will prevail.
9.12 COSTS OF SUIT. In the event any legal action is required to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover all costs of suit, including reasonable attorneys' fees.
9.13 INSURANCE. Any party hereto shall have the right to purchase life
insurance on the life of any Shareholder of the Company to the extent reasonably
necessary to finance any stock purchases provided for hereinabove. In such case,
such insured Shareholder shall cooperate fully by performing all of the
requirements of the life insurer which are necessary conditions precedent to the
issuance of life insurance policies.
9.14 SPECIFIC PERFORMANCE. The parties hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
by reason of a failure to perform any of the obligations under this Agreement.
Therefore, if any party hereto (or its representative) shall institute any
action or proceeding to enforce the provisions hereof, any person (including the
Company) against whom such action or proceeding is brought hereby waives the
claim or defense therein that such party or representative has an adequate
remedy at law and such person shall not urge in any such action or proceeding
the claim or defense that such remedy at law exists.
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9.15 UNDERWRITING RESTRICTIONS. In the event the Company undertakes an
underwritten public offering, the Shareholders agree to restrict the sale or
transfer of their shares for a period, not to exceed twelve months from the
initial closing of the offering, as agreed upon by the Company and the
underwriter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COMPANY:
SUMMUS, LTD.
By: /s/ Bjorn Jaweth
Its: President
SHAREHOLDERS:
HIGH SPEED NET SOLUTIONS, INC.
/s/ Michael M. Cimino
Michael Cimino, Chairman
------------------------
Sharon Stairs
-------------------------
Ahmad Moradi
-------------------------
Antonio Bianco
-------------------------
Joseph Peretta
-------------------------
Rich, Bahman & Berger (CPAS)
-------------------------
David Anderson
-------------------------
Stephen Purkiss
-------------------------
Kerstin Jawerth
-------------------------
Ron Compton
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GLOSSARY
The following definitions apply unless the context requires otherwise:
AGREEMENT shall mean this Shareholders' Agreement.
APPLICABLE LAWS shall mean all applicable (i) statutes, ordinances or otherwise
legislative enactments of the United States of America or other country or
foreign government, or of any state or political subdivision or agency thereof
(including any county, municipal or other local subdivisions), (ii) rules,
regulations, orders, permits, directives or other actions or approvals of any
Regulatory Authority, and (iii) judgments, awards, orders, decrees, writs and
injunctions of any court Regulatory Authority or arbitrator.
COMMON STOCK shall mean the common stock, $.0001 par value per share, of the
Company.
COMPANY shall mean Summus, Ltd., a Delaware Corporation.
CONTINUING SHAREHOLDER shall have the meaning set forth in Section 5.1.
CONSULTANT shall have the meaning set forth in Section 5.6.
EXCESS OFFERED SHARES shal have the meaning set forth in Section 6.4.
EXCESS TRANSFERRED SHARES shall have the meaning set forth in Section 5.2.
HSNS shall mean High Speed Net Solutions, Inc., a Florida corporation.
INVOLUNTARY TRANSFER shall mean any Transfer, proceeding or action (other than a
Transfer complying with the provisions of Article VI) by or as a result of which
a Shareholder shall be deprived or divested of any right, title or interest in
or to any of the Shares, including without limitation any seizure under levy of
attachment or execution, any Transfer in connection with bankruptcy (whether
pursuant to the filing of a voluntary or any involuntary petition under the
federal bankruptcy code) or other court proceeding to a debtor-in-possession,
trustee in bankruptcy or receiver or other officer or agency, any Transfer
pursuant to a separation agreement or the entry of a final court order in a
divorce proceeding from which there is no further right of appeal, any Transfer
upon or occasioned by the death of any Shareholder, or any Transfer to a legal
representative of any Shareholder.
INVOLUNTARY TRANSFEREE shall have the meaning set forth in Section 5.1.
INVOLUNTARY TRANSFEROR shall have the meaning set forth in Section 5.1.
JAWERTH shall mean Dr. Bjorn Jawerth.
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MARKETABLE SECURITIES shall mean investment grade securities freely tradable and
transferable without restriction and listed on a nationally recognized stock
exchange or quoted on the NASDAQ National Market System.
MLA shall mean the Marketing License Agreement between the Company and HSNS.
NON-OFFERING SHAREHOLDER shall have the meaning set forth in Section 6.1.
OFFER shall have the meaning set forth in Section 6.1.
OFFERED SHARES shall have the meaning set forth in Section 6.1.
OFFERING SHAREHOLDER shall have the meaning set forth in Section 6.1.
OFFERING SHAREHOLDER'S NOTICE shall have the meaning set forth in Section 6.2.
PERSON shall include, but is not limited to, an individual, a trust, an estate,
a partnership, an association, a company, a corporation, a sole proprietorship,
a professional corporation or a professional association.
REGULATORY AUTHORITY shall mean any national, federal, state, county, municipal
or local government, department, commission, board, agency, taxing authority or
other governmental, administrative or regulatory body (whether of the United
States of America or any other country or foreign government).
SECURITIES ACT shall mean the Securities Act of 1933, as amended, and the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder.
SHAREHOLDERS shall mean the current shareholders of the Company, except for Dr.
Jawerth, and any other Person who becomes bound by the terms hereof in
accordance with the terms hereof.
SHARES mean any and all shares of capital stock of the Company issued and
outstanding whether common stock, preferred stock, or any other type stock,
whether voting or nonvoting, as well as all shares of capital stock of the
Company issuable pursuant to outstanding options, warrants, other derivative
securities, convertible securities or similar arrangements, except for those
shares held from time to time by Jawerth.
THIRD PARTY shall have the meaning set forth in Section 4. 1.
TRANSFER shall mean any direct or indirect (including, without limitation,
through the transfer of ownership of the owner of the shares) sale, transfer,
assignment, gift, bequest, exchange of property, conveyance, pledge,
encumbrance, or any other form of disposition of any right, title or interest in
and to any of the Shares to any Person.
TRANSFERRED SHARES shall have the meaning set forth in Section 5. 1.
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Summus, Ltd.
434 Fayetteville Street mall - Suite 600, Raleigh, NC 27601
919-8077-5600 (main) 919-807-5601 (fax)
Mr. Hank Byun
Samsung Electronics of America, Inc.
105 Challenger Road
Ridgefield Park, NJ
Dear Mr. Byun:
We are pleased to present this non-binding letter of intent ("LOI")
which documents the proposal and intent of Summus, Ltd. ("SUMMUS"), Samsung
Electronics of America, Inc., ("SAMSUNG"), and High Speed Net Solutions, Inc.
("HSNS"), with respect to certain business relationships as described below. As
the parties have previously discussed, SUMMUS is engaged in the research,
development, licensing and sale of its Dynamic WaveletTM based technologies and
products ("SUMMUS Technology"), which technology embodies substantial know-how
and other intellectual property which are the sole and exclusive property of
SUMMUS, and which are protected by applicable domestic and foreign patent,
trademark and copyright laws. The parties to this letter envision a joint
development agreement or similar arrangement whereby SUMMUS Technologies may be
applied and modified, and other technologies developed, for particular
applications with respect to certain semiconductor, consumer electronics and
computer hardware and software products and systems of SAMSUNG. HSNS shall
participate in these negotiations and discussions in its role as a marketing
partner with SUMMUS. The parties to this letter intend to conduct good faith
negotiations to better define the terms and conditions of proposed business
projects outlined herein, with a goal of developing and executing a definitive
agreement (the "Agreement") containing the specific terms and conditions. This
letter is not intended to nor does it create any legal or binding obligations on
any of the parties hereto except as expressly herein.
Our understanding of the proposed project(s) and arrangements are as
follows:
1. Apply SUMMUS Dynamic WaveletTM technology to SAMSUNG products The
parties shall enter into a joint development agreement and related agreements to
integrate and optimize SUMMUS Dynamic WaveletTM technology on SAMSUNG's
strategic digital signal processor ("DSP") platform for sale as a semiconductor
component. The parties envision that SUMMUS will grant a nonexclusive,
royalty-bearing license to SAMSUNG for the use of such technology in such
applications. Such royalty shall be based upon the sale of the DSP chip set by
SAMSUNG containing SUMMUS technology. Such work will include payment of
nonrecurring engineering fees from SAMSUNG to SUMMUS in an amount to be agreed
upon.
2. This proposal is subject to the preparation and execution of a
mutually satisfactory definitive agreement (the "Agreement"), containing such
terms and conditions regarding licensing, ownership of inventions and payments
as the parties shall agree upon. This proposal is further subject to the
completion of a technical due diligence investigation by SUMMUS and SAMSUNG with
respect to each such party's technology and to fulfill the obligations of the
Agreement.
<PAGE>
Upon acceptance by you of this letter, we shall commence the drafting
of a definitive agreement for your review and comment. The parties will use the
their best efforts to complete negotiations and execute the Agreement on or
before April 15, 2000.
3. SAMSUNG and SUMMUS agree to provide each other with reasonable
access to each other's personnel, documents and technology to enable each party
to ascertain the feasibility of the above proposed Agreement. SAMSUNG and SUMMUS
mutually agree that each may become aware of information of the other of a
confidential nature concerning the technologies and business of such party
during the course of the technical due diligence investigation. SAMSUNG and
SUMMUS specifically agree that any such information will be used only for
purposes of effecting the transactions contemplated by this letter and for no
other purpose. No rights or licenses to any party's intellectual property are
granted or conveyed to any person in any respect by virtue of this letter or the
negotiations contemplated hereby. All parties to this letter agree that each
party will hold any information regarding the other in strict confidence and
will not disclose it except to persons participating in this transaction,
including the parties' attorneys and accountants or other advisors, until such
time as such information is no longer confidential other than by reason of a
violation of this paragraph or the Confidentiality Agreement executed March 15,
1999, by and between SAMSUNG and SUMMUS. SAMSUNG and SUMMUS acknowledge and
confirm the Confidentiality Agreement, and further acknowledge and agree that
the requirements of this paragraph 3 shall not diminish or limit any provisions
of such Confidentiality Agreement.
4. Each of the parties shall pay its own expenses in connection with
the negotiation and execution of the Agreement.
5. SAMSUNG and SUMMUS will make this relationship public at a mutually
agreeable time that will be communicated in writing, but no later than 30 days
after the signing of the definitive agreement.
6. SAMSUNG and SUMMUS acknowledge that HSNS has served as marketing
agent in assisting to develop the proposed business venture between the two
companies.
7. SUMMUS hereby acknowledges that it has entered into a Master License
Agreement ("MLA") with HSNS dated February 14, 2000 and that the terms and
conditions of the Agreement shall not violate HSNS's rights under the MLA.
8. As a pre-condition to the execution of the Agreement, SUMMUS shall
obtain an opinion from HSNS counsel that the term of the Agreement does not
violate the right so HSNS under the terms of the MLA and shall also obtain a
waiver from HSNS in which HSNS agrees not to enforce against Samsung or its
successors, assigns, licensees or sublicenses any rights of HSNS that may be
infringed by the exercise of rights under the Agreement.
If the foregoing is acceptable, SAMSUNG and HSNS should sign and date a
copy of this letter and return it to us. This letter is intended to evidence the
preliminary understandings that we have reached regarding the proposed
transactions and our mutual intent to negotiate in good faith to enter into the
Agreement. This letter does not obligate the parties to enter into any agreement
or engage in any business transactions or endeavors, including, without
limitation, those outlined herein. The parties hereto acknowledge and agree that
execution of the Agreement shall be subject to appraisal of upper management and
legal counsel of the parties. However, by acceptance of this letter, the parties
hereto each agree to be bound by paragraphs 6 and 7 and 8.
Sincerely,
/s/ W. Bradford Silvernail
W. Bradford Silvernail
Chief Executive Officer, Summus, Ltd.
SAMSUNG HSNS
By: /s/ Hank Byun By: /s/ Andrew Fox
----------------------- --------------
Date: 2/5/00 Date: 2/15/00
--------------------- -----------
cc: M. G. Boyd M.H. Baik
Dr. B. Jawerth K. Park
Exhibit 23.1
Consent of Independent Auditors
We consent to the use of our report dated February 15, 2000, in the Registration
Statement (Form 10) of High Speed Net Solutions, Inc., for the registration of
its common stock.
/s/ Ernst & Young LLP
Raleigh, North Carolina
February 18, 2000
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