<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 2)
HIGH SPEED NET SOLUTIONS, INC.
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(Name of Issuer)
COMMON STOCK, $.001 PAR VALUE
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(Title of Class of Securities)
429793-10-2
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(CUSIP Number)
Gerald F. Roach, Esq.
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.
2500 First Union Capitol Center
150 Fayetteville Street Mall
Raleigh, North Carolina 27601
(919) 821-1220
(Name, Address and Telephone Number
of Person Authorized to Receive Notices and Communications)
October 30, 2000
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of (S). 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box. [_]
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See (S) 240.13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following page(s))
Page 1 of 12
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<S> <C>
CUSIP No. 429793-10-2 Page 2 of 12
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1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only).
Summus, Ltd., Inc.
I.R.S. Employer Identification No.: 57-0942645
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2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b)
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3) SEC USE ONLY
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4) SOURCE OF FUNDS (See Instructions)
00
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5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
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6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7) SOLE VOTING POWER
NUMBER OF 8,389,360
SHARES -------------------------------------------------------
BENEFICIALLY 8) SHARED VOTING POWER
OWNED BY 1,279,667/1/
EACH -------------------------------------------------------
REPORTING 9) SOLE DISPOSITIVE POWER
PERSON 8,289,360
WITH: -------------------------------------------------------
10) SHARED DISPOSITIVE POWER
-0-
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11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,669,027/1/
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12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
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13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
40.8%/2/
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14) TYPE OF REPORTING PERSON (See Instructions)
CO
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</TABLE>
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/1/ Includes 1,279,667 shares of Common Stock, par value $.001 per share
("Common Stock") of High Speed Net Solutions, Inc. (the "Issuer"), over which
Summus Ltd., Inc. ("Summus") believes it has the power to vote under voting
agreements with and/or proxies from 14 persons. Such agreements and/or proxies
are not in the possession or control of Summus at this time. Summus bases its
belief on the beneficial ownership reported for Summus by the Issuer in its
Registration Statement on Amended Form S-1, File No. 333-41730, filed with the
SEC on October 18, 2000.
/2/ Calculated based on 23,685,231 shares of Common Stock of the Issuer
outstanding on November 10, 2000, as reported in the Issuer's Amended Quarterly
Report on Form 10-Q, for the quarter ended September 30, 2000, filed with the
Securities and Exchange Commission on November 14, 2000.
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CUSIP No. 429793-10-2 Page 3 of 12
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1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only).
Dr. Bjorn Jawerth
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2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b)
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3) SEC USE ONLY
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4) SOURCE OF FUNDS (See Instructions)
OO
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5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
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6) CITIZENSHIP OR PLACE OF ORGANIZATION
[has any of the information listed below changed?] United States
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7) SOLE VOTING POWER
NUMBER OF -0-
SHARES -------------------------------------------------------
BENEFICIALLY 8) SHARED VOTING POWER
OWNED BY 9,669,027/3/
EACH -------------------------------------------------------
REPORTING 9) SOLE DISPOSITIVE POWER
PERSON -0-
WITH: -------------------------------------------------------
10) SHARED DISPOSITIVE POWER
9,669,027/3/
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11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,669,027/3/
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12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
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13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
40.8%/4/
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14) TYPE OF REPORTING PERSON (See Instructions)
IN
</TABLE>
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/3/ Includes 8,289,360 shares of the Issuer's Common Stock held by Summus and
1,279,667 shares of the Issuer's Common Stock for which Summus believes it has
voting power under voting agreements and/or proxies from 14 persons. Summus
bases its belief on the beneficial ownership reported for Summus by the Issuer
in its Registration Statement on Amended Form S-1, File No. 333-41730, filed
with the SEC on October 18, 2000. Dr. Bjorn Jawerth ("Dr. Jawerth") owns
approximately 40.0 percent of the outstanding shares of Summus on a non-diluted
basis and is the President and Chairman of Summus' Board of Directors. Dr.
Jawerth exercises shared voting and investment power with respect to those
shares of the Issuer's Common Stock beneficially owned by Summus.
/4/ Calculated based on 23,685,231 shares of Common Stock of the Issuer
outstanding on November 10, 2000, as reported in the Issuer's Amended Quarterly
Report on Form 10-Q, for the quarter ended September 30, 2000, filed with the
Securities and Exchange Commission on November 14, 2000.
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CUSIP No. 429793-10-2 Page 4 of 12
This Amendment No. 2 amends and supplements the Schedule 13D filed by
Summus, Ltd. on August 23, 2000 as amended, on September 8, 2000 (the "Schedule
13D"), with respect to the Common Stock, par value $.001 per share (the "Common
Stock"), of High Speed Net Solutions, Inc. (the "Issuer").
Item 2. Identity and Background
Item 2 shall be deleted in its entirety and replaced with the following:
(a) The names of the persons filing this report are Summus, Ltd., a
Delaware corporation ("Summus") and Dr. Bjorn Jawerth ("Dr. Jawerth"), who is
President and Chairman of the Board of Directors of Summus, as well as the
holder of approximately 40 percent of Summus' capital stock.
(b) Summus' principal offices are located at Two Hannover Square, Suite
600, 434 Fayetteville Street Mall, Raleigh, North Carolina 27601, which is also
Dr. Jawerth's business address.
(c) Summus is in the business of developing and marketing media compression
and pattern recognition software used to compress and decompress image, video
and other data. Dr. Jawerth is President and Chairman of the Board of Directors
of Summus.
(d) During the last five years, neither Summus, Dr. Jawerth, nor any of
Summus' other executive officers or directors, has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
(e) During the last five years, neither Summus, Dr. Jawerth, nor any of
Summus' other executive officers or directors has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and,
as a result of such proceeding, was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
(f) Summus is a Delaware corporation. Dr. Jawerth is a citizen of the
United States.
Please see Schedule I for additional information pertaining to Summus'
executive officers and directors.
Item 4. Purpose of Transaction
Item 4 shall be deleted in its entirety and replaced with the following:
Summus acquired (i) 9,542,360 shares of Common Stock pursuant to the Stock
Purchase Agreement dated July 30, 1999 between Mr. Bradford Richdale, Mrs.
Debbie Richdale and various entities affiliated with Mr. Richdale (the "Stock
Purchase Agreement") (which Stock Purchase Agreement was filed as an Exhibit to
the Schedule 13D, filed by Summus on August 23, 2000, and is incorporated herein
by reference), (ii) 1,500,000 shares of Common Stock in satisfaction of payments
due under the Marketing License Agreement and (iii) voting rights associated
with 1,279,667 shares of Common Stock for investment purposes only. Summus
previously disposed of 2,568,000 shares of Common Stock in private transactions
as well as 85,000 shares of Common Stock in brokered sales under Rule 144 of the
Securities Act of 1933. It is Summus' understanding that it does not own voting
control of the Issuer. Neither Summus nor its officers exercise control over the
Issuer, and the Issuer is managed and operated independently of Summus. In fact,
the Issuer, its management and certain shareholders of the Issuer attempt to
exercise control over Summus.
Beginning on or about August 14, 2000 and continuing thereafter, Summus
began actively reviewing its investment in the Issuer and considering (i)
further dispositions of Common Stock, (ii) taking actions to effect a change in
the directors and officers of the Issuer, (iii) entering into a possible merger,
stock purchase, asset purchase or other similar transaction with the Issuer that
would result in a change in control of the Issuer, or (iv) bringing legal action
against the Issuer and some of its officers, directors, employees and
shareholders with respect to matters under review. In addition, (i) Summus, the
Issuer and certain shareholders of the Issuer engaged in discussions regarding a
potential transaction that would
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CUSIP No. 429793-10-2 Page 5 of 12
result in a merger of Summus and the Issuer or in an acquisition of one party or
its assets by the other, (ii) Summus and the Issuer exchanged threats of
litigation, (iii) Summus' Board of Directors expanded from one to three members,
adding two outside directors, and appointed a Special Committee of independent
directors (the "Special Committee") to evaluate and negotiate any potential
merger, stock purchase, asset purchase or other similar transaction with the
Issuer (a "Potential Transaction"), (iv) certain shareholders of the Issuer made
proposals to the Special Committee related to such a Potential Transaction, (v)
negotiations between the Special Committee and the Issuer and certain of its
shareholders are ongoing and may continue or cease at any time, and (vi) the
Special Committee and the Issuer considered financing alternatives in connection
with a Potential Transaction, as well as transactions with third parties, either
of which would effect a change of control of the Issuer shares owned by Summus.
On September 1, 2000, Summus and the Issuer entered into a non-binding
letter of intent (the "Letter of Intent") with regard to a proposed merger or
asset purchase between Summus and the Issuer (the "Proposed Merger"), which is
discussed below, and other related transactions. Also on September 1, 2000,
Summus and the Issuer entered into a Loan and Security Agreement and related
documents pursuant to which the Issuer agreed to loan Summus $500,000 for a term
of 60 days, as well as an additional $500,000 upon execution of a definitive
agreement in connection with the Proposed Merger (the "Loan Transactions").
Summus and the Issuer entered into the following documents on September 1,
2000: (i) a Loan and Security Agreement, between the Issuer, including its
majority-owned subsidiaries, Dr. Jawerth and Summus (the "Loan and Security
Agreement"), (ii) a Standstill Agreement, between the Issuer, Summus and Dr.
Jawerth (the "Standstill Agreement"), (iii) a Stock Pledge and Security
Agreement, between Summus, Dr. Jawerth and the Issuer, including its
majority-owned subsidiaries (the "Stock Pledge and Security Agreement"), and
(iv) an Escrow Agreement, between Summus, Dr. Jawerth, the Issuer and Kilpatrick
Stockton, LLP (the "Escrow Agreement"). In addition, Summus issued a Promissory
Note to the Issuer in the principal amount of $500,000 (the "Promissory Note").
The Letter of Intent, the Loan and Security Agreement, the Standstill
Agreement, the Stock Pledge and Security Agreement and the Escrow Agreement were
attached to Amendment No. 1 to Schedule 13D (filed September 8, 2000) as
Exhibits A, B, C, D, and E, respectively, and are incorporated herein by
reference. The description of the Letter of Intent, the Loan and Security
Agreement, the Standstill Agreement, the Stock Pledge and Security Agreement and
the Escrow Agreement contained herein is not intended to be complete and is
qualified in its entirety by reference to such exhibits. Furthermore, the Letter
of Intent has been superseded by the Asset Purchase Agreement and certain other
agreements have been modified as described herein.
Pursuant to the Loan and Security Agreement, (i) Summus agreed to repay the
$500,000 it borrowed from the Issuer, together with interest, within 60 days,
(ii) Summus granted the Issuer a security interest in up to 500,000 shares of
the Issuer's Common Stock, which Summus pledged as collateral for the Loan
Transactions (the "Pledged Shares") and (iii) Summus agreed that for a period of
30 days neither Summus nor any of its directors, officers, advisors or other
representatives would (a) take any action to facilitate any inquiry or proposal
that constitutes or might reasonably be expected to lead to any acquisition,
purchase or exclusive license of a substantial portion of Summus' assets, a
merger with Summus or any other investment in Summus (collectively, an
"Acquisition Proposal"), (b) provide any non-public information concerning
Summus with respect to any Acquisition Proposal, or (c) enter into an agreement
with any person other than the Issuer regarding a possible Acquisition Proposal.
However, Summus would not be prohibited from taking any action in connection
with the sale of securities of Summus that does not transfer control of Summus,
even if such action otherwise would be prohibited. The number of Pledged Shares
is to be determined as of a particular date based on a formula set forth in the
Escrow Agreement.
Under the Stock Pledge and Security Agreement, Summus agreed not to
transfer or further encumber the Pledged Shares so long as the Stock Pledge and
Security Agreement is in effect. Although Summus granted the Issuer a security
interest in the Pledged Shares, Summus remains the record owner and continues to
possess all voting and dividend rights associated with the Pledged Shares,
unless and until ownership is transferred to enforce the Issuer's security
interest following a default pursuant to the Stock Pledge and Security
Agreement. In the event of a default under the Stock Pledge and Security
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CUSIP No. 429793-10-2 Page 6 of 12
Agreement, following the expiration of the applicable cure period under such
agreement, Summus' voting rights and rights to receive dividends associated with
the Pledged Shares shall be immediately transferred to the Issuer.
Under the Standstill Agreement, Summus, the Issuer and Dr. Jawerth agreed
that they would not enter into any public market transaction for the sale or
disposition of Common Stock from September 1, 2000 until the third trading day
after a public announcement to the effect that either the Issuer and Summus
intend to effect a business combination or that negotiations for such a
combination have been terminated. The Standstill Agreement terminates on the
earlier of the final closing of the Proposed Merger or payment of all of Summus'
obligations under the Loan and Security Agreement and related Promissory Note.
The Letter of Intent called for, among other things, (i) the Issuer and
Summus to be valued the same for purposes of the Proposed Merger, (ii) the
Issuer to issue 8,000,000 shares of Common Stock to Summus' shareholders (other
than the Issuer) in connection with the Proposed Merger of Summus and the
Issuer, (iii) the Issuer to issue warrants for 500,000 shares with a strike
price of $5.50 to Summus' shareholders (other than the Issuer and Dr. Jawerth),
also in connection with the Proposed Merger, (iv) at completion of the Proposed
Merger, Summus and its shareholders other than the Issuer to own in excess of a
majority of the Issuer's Common Stock, (v) the Issuer to provide certain resale
rights and compensation to Dr. Jawerth, (vi) the Issuer to procure $15,000,000
in additional financing as a condition of the Proposed Merger, (vii) the Issuer
to remain publicly traded (on the OTC Bulletin Board or better), and (viii) the
board of directors of the Issuer to include six independent directors designated
equally by the Issuer and Summus and one inside director from each party. If the
Issuer hires a new Chief Executive Officer pursuant to a national search or
otherwise, the new Chief Executive Officer shall be the ninth director. The
Letter of Intent was non-binding and all of its terms are not included in the
Asset Purchase Agreement. Thus, the Letter of Intent does not reflect the
current agreement between the parties.
On October 30, 2000, Summus and the Issuer signed an Asset Purchase
Agreement pursuant to which Summus has agreed to sell substantially all of its
assets to the Issuer (the "Sale"). The proposed Sale was approved by the Summus
Special Committee and the full Board of Directors. The Special Committee
determined that Summus had reasonably exhausted pursuit of immediate
alternatives. The Special Committee considered the substantial risks associated
with the proposed Sale and the personal benefit of Dr. Jawerth. The Special
Committee ultimately determined that approval of the proposed sale was in the
best interest of Summus and its shareholders. The following summary of the Asset
Purchase Agreement and the Sale is not intended to be complete and is qualified
in its entirety by reference to the Asset Purchase Agreement, a copy of which
has been filed as an exhibit hereto and is incorporated by reference herein.
Under the Asset Purchase Agreement, Summus has agreed to transfer substantially
all of its assets to the Issuer, including shares of the Issuer's common stock
held by Summus, in exchange for 22,235,083 shares of Common Stock (the "Stock
Purchase Price"), warrants to purchase a total of 500,000 shares of the Issuer's
Common Stock to be issued on a pro-rata basis to the Summus stockholders except
for the Issuer and Dr. Jawerth and exercisable for a period of five years
following the date of the Asset Purchase Agreement and assumption of certain
liabilities of Summus. To secure Summus' indemnification obligations under the
Asset Purchase Agreement, 2,000,000 shares of Common Stock will be placed in
escrow at closing. Closing is expected to occur at the earliest possible date.
The Asset Purchase Agreement and related documents supersede the Letter of
Intent.
The obligations of Summus and the Issuer under the Asset Purchase Agreement
are each subject to the satisfaction of certain conditions, including but not
limited to: the fulfillment by both parties of all representations and
warranties and performances of all covenants listed in the Asset Purchase
Agreement, the approval of Summus' stockholders, the delivery of legal opinions
from both parties' counsel, the absence of any injunction or similar legal order
prohibiting or restraining consummation of any of the material transactions
contemplated by the Asset Purchase Agreement and the absence of any pending
legal action or governmental investigation or inquiry which is reasonably likely
to result in any such injunction or order. Additionally, it is a condition to
closing that Dr. Jawerth shall have entered into a private placement agreement
with the Issuer's investment banker for the private sale of $2,500,000 worth of
shares of Common Stock he owns. If a permit from the North Carolina Secretary of
State covering the issuance of the Stock Purchase Price is not obtained, Kirsten
Jawerth shall have entered into a private placement agreement with the Issuer's
investment banker to purchase $1,000,000 worth Common Stock
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CUSIP No. 429793-10-2 Page 7 of 12
she owns. Certain conditions, including those relating to the execution of
private placement agreements by Dr. and Ms. Jawerth, may each be waived by
Summus. Closing is also contingent upon the Issuer raising at least $7,500,000
to be invested in the Issuer immediately following the closing. The $7,500,000
includes the amounts to purchase Dr. Jawerth's and/or Ms. Jawerth's shares and
amounts raised by either Summus or the Issuer to provide interim financing for
Summus.
Summus and the Issuer also covenant to perform other obligations pursuant
to the Asset Purchase Agreement. For a period of eighteen months following
closing, Summus and the stockholders party to the Asset Purchase Agreement have
agreed that they will not, without the prior written consent of the Issuer, for
his own account or jointly with another, directly or indirectly, for or on
behalf of any person, as principal agent or otherwise: (i) participate in the
control or management of or assist a business that develops, markets, licenses
out or sells digital media compression products or services within a particular
territory, or assist such a business in the development of digital media
compression products or services, or accept employment as a consultant,
director, officer or manager by a business engaged in the Issuer's business,
except the Issuer; or (ii) solicit or induce, or in any manner attempt to
solicit or induce, any person employed or engaged by the Issuer in any capacity
(including, without limitation, as an employee, distributor, independent
contractor or agent), to leave such employment or engagement, whether or not
such employment or engagement is pursuant to a contract or is at will.
The Issuer will replace Summus options cancelled at closing with options to
purchase shares of the Issuer's Common Stock, the number of shares of Common
Stock subject to each replacement option to be equal to 18.5629 times the number
of Summus shares covered by the related cancelled option. Both Summus and the
Issuer have agreed to maintain individual Boards of Directors having a majority
of members who are not insiders. After the closing, the Issuer has agreed to
increase the size of its Board of Directors to ten and elect certain Summus
directors to the new Board. Immediately after closing, Kenneth Marks, Stuart
Diamond, Chris Gaertner, Wendi Tush and the Issuer's new Chief Executive Officer
will join the Issuer's Board of Directors in addition to the current members of
its Board of Directors: Herman Rush, Richard Seifert, Christine Wittress, Andrew
Fox and Dr. Jawerth. The terms and conditions set forth in the Letter of Intent
have been preempted by the Asset Purchase Agreement and the Letter of Intent
should not be viewed as part of the transaction. For example, there is no
condition to closing in the Asset Purchase Agreement that the Issuer remain
listed. The Issuer at this time has been deleted from the OTC Bulletin Board.
The Issuer must apply to obtain an order of approval from the Secretary of
State of North Carolina, after a fairness hearing, for the issuance of the
Issuer's shares in the Sale pursuant to Section 78A-30 of the North Carolina
Securities Act, and both parties must use commercially reasonable efforts to
have the North Carolina Permit (the "Permit") granted as soon as practicable
after such filing. If such Permit is not obtained in a timely manner, then the
Common Stock issued in the Sale will be issued in a private placement in
accordance with exemptions from registration under federal and state securities
laws. If such shares of Common Stock are issued in a private placement, the
Issuer must notify each of Summus' stockholders of any registration of its
Common Stock and include in such registration shares of Common Stock included in
the Stock Purchase Price as specified by each stockholder in a timely written
request.
Summus and its stockholders will agree that none of the shares of the
Common Stock received as part of the Stock Purchase Price will be sold in public
transactions during the twelve (12) months following the closing, provided that
one and one-half percent (1.5%) of the shares included in the Stock Purchase
Price may be sold or otherwise disposed of in public transactions in each of the
third through the twelfth months following the closing. This restriction will
not apply to the options to purchase the Issuer's Common Stock held by
directors, Stuart Diamond and Kenneth Marks, and consultant, Chris Gaertner,
described below.
Following the closing, the Issuer has agreed to retire the shares of its
Common Stock purchased as part of the acquired assets, as well as shares of
Common Stock it receives in distributions by Summus to its shareholders upon
liquidation. The Issuer has also agreed to file a Form S-8 when it becomes
current on its reports required under the Securities Exchange Act of 1934 with
regard to certain options to purchase Common Stock held by Messrs. Gaertner,
Diamond and Marks.
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CUSIP No. 429793-10-2 Page 8 of 12
Summus and the Issuer may terminate the Sale (i) by mutual consent, (ii) if
the closing does not occur within sixty days of the date of the Asset Purchase
Agreement, (iii) if any court or other governmental instrumentality of competent
jurisdiction shall have issued an order, decree or ruling or taken any other
action, restraining enjoining or otherwise prohibiting the Sale or (iv) by
Summus, if the Issuer has failed to provide the interim financing discussed
below. Accordingly, notwithstanding the execution of the Asset Purchase
Agreement, the Agreement may be terminated and the Sale may not close.
Consequently, Summus may continue to pursue alternative courses of action, such
as the sale of shares of Common Stock in private placements or otherwise,
consideration of financing alternatives or consideration of actions to effect a
change in the directors and officers of the Issuer, to the extent such actions
are not restricted by the Asset Purchase Agreement and the other agreements
described herein.
Under the Asset Purchase Agreement, the Issuer agreed to provide Summus,
under the terms of the Loan and Security Agreement described above, as amended,
with an additional $235,000 beginning on October 30, 2000 and every two weeks
thereafter until the earlier of the closing date or three months after the date
of the Asset Purchase Agreement. In connection with this agreement, Dr. Jawerth,
Summus and the Issuer have entered into an amendment to the Loan and Security
Agreement (the "Loan Amendment"). Under the Loan Amendment, the Issuer will make
an additional term loan to Summus in the principal amount of up to $1,175,000,
evidenced by a second promissory note. As security, Summus pledged 1,175,000
shares of the Issuer's Common Stock it owns, pursuant to an amendment to the
Stock Pledge and Security Agreement. If the Sale closes, this interim debt will
be cancelled and collateral having a value equal to the indebtedness under the
Loan Amendment will be returned to Summus. If the Sale does not close within
sixty days of October 30, 2000, then the interim financing will be paid by
cancellation of the collateral. Between September 1, 2000 and the execution of
the Loan Amendment on October 30, 2000, the Issuer made no additional loans to
Summus. The parties also amended the Escrow Agreement to increase the number of
shares held in escrow relating to the financing to 1,675,000 shares of Common
Stock. The Loan Amendment, the second promissory note, and the amendments to the
Pledge and Security Agreement and the Escrow Agreement are attached as exhibits
hereto and incorporated by reference herein. The description of such documents
contained herein is not intended to be complete and is qualified in its entirety
by reference to such exhibits.
In connection with the Asset Purchase Agreement, Summus, Dr. Jawerth and
the Issuer entered into a side letter, dated October 30, 2000, under which the
Issuer and Summus agreed not to commit to a sale of assets outside the ordinary
course of business or a purchase of substantially all of the assets of another
entity until the earlier of the closing of the Sale or the termination of the
Asset Purchase Agreement (the "Pre-closing Period"). Dr. Jawerth agreed not to
commit to transfer any of his interest in Summus during the Pre-closing Period.
The Issuer also agreed that, during the Pre-closing Period, it would not sell
Common Stock at a discount greater than 50% and would not sell more than $7.5
million worth of Common Stock for an average discount of 40% or more without
approval from both Summus and the Issuer's board of directors.
At the closing of the Sale, Dr. Jawerth has agreed to enter into a Voting
Trust Agreement, which will require Dr. Jawerth to assign the shares of Common
Stock he owns to a trustee who will vote the shares. Beginning one month from
the date of the Voting Trust Agreement, one-twelfth of the shares will be
released from the provisions of the agreement each month. Dr. Jawerth also has
agreed to enter into an Employment Agreement that will continue for a term of
three years from the closing date of the Sale. As part of his compensation Dr.
Jawerth is to receive (1) a salary equal to the greater of $350,000 or the
salary of the Issuer's Chief Executive Officer; (2) $500,000 in cash from the
Issuer at the closing and (3) an inventions award pursuant to an inventions
award plan adopted by the Issuer. As part of his compensation, Dr. Jawerth will
also be allowed to make a private sale of up to $2,500,000 worth of the Issuer's
Common Stock he owns (as described above in the summary of the Asset Purchase
Agreement). In addition, the Issuer will issue warrants to him to purchase three
times the number of shares of Common Stock he sells in the private sale. The
warrants will be exercisable during the second through the fifth year after the
warrants are issued. In the event Dr. Jawerth is terminated for cause or
terminates his employment without good reason within a year of the closing, he
must return all such warrants. Dr. Jawerth will also be entitled to the
following benefits: (1) a stock option package of no less value than the stock
option package provided to the Issuer's Chief Executive Officer; (2)
participation in the Issuer's employee benefits plan, including health, dental,
life, vision and disability insurance and the Summus 401(k) plan; (3) four weeks
of vacation per year; (4) a car allowance in the amount of $750 per month and
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CUSIP No. 429793-10-2 Page 9 of 12
(5) a corporate apartment and apartment expenses for six months up to $2,500 per
month. The Voting Agreement and Dr. Jawerth's Employment Agreement will not be
executed until closing and, as a result, the terms and provisions of such
agreements as described herein are subject to revision as agreed upon by Summus,
Dr. Jawerth and the Issuer prior to closing.
There is no assurance the conditions to closing the Asset Purchase
Agreement will be met or that the transaction will be completed. If the
transaction is completed, Summus presently intends to effect a distribution,
liquidation or dissolution which would result in the Issuer's Common Stock owned
or received by Summus to be distributed to Summus shareholders. If the
transaction closes, the substantial assets of Summus would be the Issuer's
Common Stock received as consideration from the Sale and that already held. The
Issuer's business and the value, if any, of Common Stock are subject to
substantial risks, including without limitation those set forth by the Issuer in
its Form S-1, as filed with the SEC on October 18, 2000 and accessible by
www.freeedgar.com. Such risk factors are incorporated herein by reference as
-----------------
risks identified by the Issuer. Summus is not responsible for the accuracy or
completeness of statements of the Issuer. The business of Summus also has
substantial risks. At this time, Summus is totally dependent on the Issuer for
all of its capital and cash requirements. Currently, Summus' liabilities exceed
its available cash.
Summus and Dr. Jawerth acquired beneficial ownership of the shares of the
Issuer's Common Stock for the purpose of investment. Pending closing, except as
set forth herein, Summus and Dr. Jawerth have no intention to influence or
direct the Issuer's affairs, modify its corporate structure or interfere with
the business decisions of its management. Except as may be set forth above and
in the Asset Purchase Agreement, neither Summus, Dr. Jawerth, nor to the best of
their knowledge, any executive officer or director of Summus, has any plans or
proposals which relate to or would result in: (a) the acquisition by any person
of additional securities of the Issuer or the disposition of securities of the
Issuer; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer; (c) a sale or transfer of a
material amount of assets of the Issuer; (d) any change in the present board of
directors or management of the Issuer, including any plans or proposals to
change the number or term of directors or to fill any existing vacancies on the
board; (e) any material change in the present capitalization or dividend policy
of the Issuer; (f) any other material change in the Issuer's business or
corporate structure; (g) changes in the Issuer's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Issuer by any person; (h) a class of securities of the Issuer
being delisted from a national securities exchange or ceasing to be authorized
to be quoted in an interdealer quotation system of a registered national
securities association; (i) a class of equity securities of the Issuer becoming
eligible for termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934; or (j) any action similar to any of those
enumerated above.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer
Summus believes it currently has the right to vote 1,279,667 shares of
Common Stock under voting agreements with and/or proxies from 14 people. Such
agreements and/or proxies are not in the possession or control of Summus at this
time. Summus bases its belief on the beneficial ownership reported for Summus by
the Issuer in its Amendment No. 1 to its Registration Statement on Form S-1,
File No. 333-41730, filed with the SEC on October 19, 2000.
The discussion of agreements Summus has entered with respect to securities
of the Issuer is incorporated by reference from the response provided pursuant
to Item 4 above.
Except as described herein, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the persons named in
Item 2 and between such persons and any person with respect to any securities of
the Issuer, including but not limited to transfer or voting of the securities,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantors of profit, division of profit or loss or the giving or withholding of
proxies.
<PAGE>
CUSIP No. 429793-10-2 Page 10 of 12
Item 7. Material to be Filed as Exhibits
Exhibit A Asset Purchase Agreement dated October 30, 2000, between High
Speed Net Solutions, Inc., Summus, Ltd. and the Stockholders
named therein, incorporated herein by reference from the Issuer's
Form 10-Q for the Quarter Ending September 30, 2000 (File Number:
000-29625).
Exhibit B Side Letter, dated October 30, 2000, between High Speed Net
Solutions, Inc., Dr. Bjorn Jawerth and Summus, Ltd.
Exhibit C Amendment No. 1 to Loan and Security Agreement, dated October 30,
2000, between High Speed Net Solutions, Inc., Dr. Bjorn Jawerth
and Summus, Ltd.
Exhibit D Amendment No. 1 to Stock Pledge and Security Agreement, dated
October 30, 2000, between High Speed Net Solutions, Inc., Dr.
Bjorn Jawerth and Summus, Ltd.
Exhibit E Second Promissory Note, dated October 30, 2000, between High
Speed Net Solutions, Inc., Dr. Bjorn Jawerth and Summus, Ltd.
Exhibit F Amendment No. 1 to Escrow Agreement, dated October 30, 2000,
between High Speed Net Solutions, Inc., Dr. Bjorn Jawerth and
Summus, Ltd.
<PAGE>
CUSIP No. 429793-10-2 Page 11 of 12
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: November 17, 2000
SUMMUS, LTD.
By: /s/ Bjorn Jawerth
-------------------------------
Name: Dr. Bjorn Jawerth
Title: President and Chairman of the
Board of Directors
/s/ Bjorn Jawerth
-----------------------------------
Dr. Bjorn Jawerth
<PAGE>
CUSIP No. 429793-10-2 Page 12 of 12
SCHEDULE I
Directors and Executive Officers of Summus, Ltd.
The name and principal occupation of each executive officer and director of
Summus, Ltd. are set forth below. Unless otherwise indicated, each occupation
set forth opposite an executive officer's name refers to employment with Summus,
Ltd. The business address of each person is c/o Summus, Ltd., Two Hannover
Square, Suite 600, 434 Fayetteville Street Mall, Raleigh, North Carolina 27601.
Each of the persons listed in Schedule I is a citizen of the United States of
America. Other than Dr. Jawerth, none of the executive officers or directors
beneficially own any shares of Common Stock.
Name Present Principal Occupation
---- ----------------------------
Dr. Bjorn Jawerth President, Chief Executive Officer and Director
Gary Ban Chief Operating Officer and Chief Information Officer
Leonard Mygatt Executive Vice President and Secretary
Kenneth Marks Director
Stuart Diamond Director
<PAGE>
Exhibit B
HSNS and Summus each agrees that it will not commit to a sale of assets other
than in the ordinary course of business, or a purchase of substantially all of
the assets of another firm, without the approval of the other during the period
starting October 30, 2000, and terminating on either the Closing under the Asset
Purchase Agreement dated October 30, 2000, or termination of the Asset Purchase
Agreement pursuant to Paragraph 10.11 of that agreement (the "Pre-Closing
Period"). Bjorn Jawerth agrees that he will not commit to a sale or other
transfer of any of his equity interest in Summus during the Pre-Closing Period.
During the Pre-Closing Period, HSNS agrees that it will not sell HSNS stock for
an average discount of greater than 50%, and will not sell more than $7.5
million worth of HSNS stock for an average discount of 40% or greater unless
approved by the board of directors of Summus and HSNS.
HSNS, Summus, and Bjorn Jawerth acknowledge that due to the urgency to complete
negotiations and execution of the Asset Purchase Agreement and related
documents, the documents as signed on October 30, 2000, may contain errors. The
parties agree that all material issues have been resolved in the negotiations
and that they will collaborate in good faith to ensure that the documents are
corrected or supplemented as appropriate to accurately reflect the intent of the
parties.
October 30, 2000
High Speed Net Solutions, Inc. Summus, Ltd.
By: /s/ Andy Fox By: /s/ Bjorn Jawerth
------------------------------ ---------------------------
Title: Andy Fox, President and CEO Title: Bjorn Jawerth, President
--------------------------- ------------------------
/s/ Bjorn Jawerth
-------------------------------
Bjorn Jawerth
<PAGE>
Exhibit C
AMENDMENT NO. 1
To
LOAN AND SECURITY AGREEMENT
This AMENDMENT NO. 1 (this "Amendment") is made October 30, 2000, by and
among High Speed Net Solutions, Inc., including its majority-owned subsidiaries
("Lender"), Dr. Bjorn Jawerth and Summus, Ltd. ("Borrower"), and amends the
LOAN AND SECURITY AGREEMENT (the "Agreement") dated August 31, 2000 by and among
the Lender and the Borrower.
The Agreement is amended as follows:
1. Section 1.1 of the Agreement shall have the following sentence added
thereto:
Lender also makes an additional term loan to Borrower in the principal
amount of up to One Million One Hundred Seventy Five Thousand Dollars
($1,175,000.00) (the "Interim Financing", and collectively with the
Term Loan, the "Full Loan"), receipt of which is hereby acknowledged
by Borrower, and which is evidenced by that second promissory note
(the "Second Promissory Note") dated October 30, 2000 by Borrower in
favor of Lender substantially in the form attached hereto as Exhibit
-------
B.
-
2. Section 1.2 of the Agreement shall now read as follows:
Borrower agrees to repay the Term Loan on the earlier of the date that
the Interim Financing is due and payable or the Closing Date under
that certain Asset Purchase Agreement entered into by and between
Borrower, Lender and the other signatories hereto (the "Asset Purchase
Agreement"). Borrower's repayment will include all outstanding Term
Loan principal and accrued interest as of the date of repayment. On
the date of repayment, payment under this Section 1.2 will be made by
cancellation of a portion of the Collateral which, when taken at a
Market Price (as defined below) on the date of cancellation, shall
have a market value equal to the amount of such Term Loan principal
and accrued interest as of such date. "Market Price" shall mean the
average of the closing bid and asked price per share of the Lender's
Common Stock for the ten trading days prior to the relevant date.
3. All references to Term Loan in Section 1.3 of the Agreement shall now
be made to Full Loan.
4. Section 1.4 of the Agreement is hereby created and shall read:
<PAGE>
If the Closing under the Asset Purchase Agreement occurs, the Interim
Financing debt shall be cancelled, and the Collateral held as security
therefor shall be returned to Borrower. If the Closing does not occur
within sixty (60) days of October 30, 2000, the Interim Financing
shall be paid by cancellation of the Collateral held as security
therefore, which, when taken at a Market Price on the date of
cancellation, shall have a market value equal to the debt being
repaid. Any remaining Collateral held as security shall be returned
to Borrower.
[Signatures appear on the following page]
<PAGE>
BORROWER
SUMMUS, LTD.
By: /s/ Bjorn Jawerth
--------------------------
Title: President
/s/ Bjorn Jawerth
-----------------------------
Dr. Bjorn Jawerth
LENDER
HIGH SPEED NET SOLUTIONS, INC.
By: /s/ Andy Fox
---------------------------
Title: President & CEO
<PAGE>
Exhibit D
AMENDMENT NO. 1
to
STOCK PLEDGE AND SECURITY AGREEMENT
This AMENDMENT NO. 1 (this "Amendment") is made October 30, 2000, by and
among High Speed Net Solutions, Inc., ("HSNS"), Dr. Bjorn Jawerth and Summus,
Ltd. ("Pledgor"), and amends the STOCK PLEDGE AND SECURITY AGREEMENT (the
"Agreement") dated August 31, 2000 by and among the Lender and the Borrower.
The Agreement is amended as follows:
1. The first recital paragraph shall now read as follows:
WHEREAS, HSNS has loaned Pledgor the principal sum of $500,000 (the
"Term Loan"), and an additional sum of up to $1,175,000 (the "Interim
Financing") (the Interim Financing and the Term Loan together being
the "Loan"), such Loan being evidenced by a Loan and Security
Agreement, as amended (the "Loan and Security Agreement"), and two
related Promissory Notes (collectively, the "Promissory Note");
2. The following sentence shall be added to the end of Section 12:
If the Closing occurs under that certain Asset Purchase Agreement
dated October 30, 2000 by and among Pledgor, HSNS and the other
signatories thereto, the debt represented by the Interim Financing
shall be cancelled, and the Pledged Collateral described on Exhibit A
as security for the Interim Financing only shall be returned to
Pledgor.
3. The following clause is added to Exhibit A to the Agreement:
As security for the Interim Financing only, One Million One Hundred
Seventy Five Thousand (1,175,000) Shares of the Common Stock of High
Speed Net Solutions, Inc., owned by Pledgor and evidenced by Stock
Certificates delivered by Pledgor to HSNS equal to or in excess of
such amount. HSNS will facilitate the issuance and return of Stock
Certificates to Pledgor evidencing any excess amount of shares as soon
as practicable after such delivery.
[Signatures appear on the following page]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 to
the Agreement as of the date and year first above written.
PLEDGOR:
/s/ Bjorn Jawerth
------------------------------
Name: Bjorn Jawerth
Title: President, Summus, Ltd.
/s/ Bjorn Jawerth
------------------------------
Dr. Bjorn Jawerth
HSNS:
/s/ Andy Fox
------------------------------
Name: Andy Fox
Title: President & CEO, High Speed Net
Solution, Inc.
<PAGE>
Exhibit E
SECOND PROMISSORY NOTE
Principal Amount October 30, 2000
Up to $1,175,000.00
Raleigh, North Carolina
FOR VALUE RECEIVED, Summus, Ltd., a Delaware corporation ("Maker"), hereby
promises to pay to the order of High Speed Net Solutions, Inc., a Florida
corporation, at its place of business at 484 Fayetteville Street Mall, Suite
2120, Raleigh, North Carolina ("Lender"), the aggregate principal amount
disbursed by Lender to Maker under this Note according to the disbursement
schedule set forth in Schedule A, together with interest on the unpaid principal
----------
amount from time to time outstanding prior to demand at a fixed rate per annum
equal to eight percent (8%), compounded monthly. All capitalized terms not
otherwise defined in this Note shall have the meanings provided in the Loan and
Security Agreement, amended as of the date hereof, between Maker and Lender (the
"Loan Agreement").
1. Payment. All outstanding principal and interest shall be due and payable in
-------
full on or before sixty (60) days from the date of this Note set forth above;
provided, however, that if the Closing occurs under that certain Asset Purchase
Agreement dated October 30, 2000 by and among Maker, Lender and the other
signatories thereto, the debt represented by this Note shall be cancelled. All
amounts due under this Note are subject to prepayment in full or in part at any
time without premium or penalty.
After the occurrence and during the continuance of an Event of Default,
principal outstanding hereunder shall bear interest at a fixed rate equal to
thirteen percent (13%) per annum, compounded monthly.
2. Interest. Interest and fees shall be calculated on the basis of a 365-day
--------
year times the actual number of days elapsed. In no event shall interest
payable hereunder exceed the highest rate permitted by applicable law. To the
extent any interest received by Lender exceeds the maximum amount permitted,
such payment shall be credited to principal, and any excess remaining after full
payment of principal shall be refunded to Maker.
3. Waiver of Presentment. Maker and all guarantors and endorsers hereby waive
---------------------
presentment, demand, notice, protest, and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, and assent to extensions of the time of payment or forbearance or other
indulgence without notice. No delay or omission of Lender in exercising any
right or remedy hereunder shall constitute a waiver of any such right or remedy.
Acceptance by Lender of any payment after demand shall not be deemed a waiver of
such demand. A waiver on one occasion shall not operate as a bar to or waiver
of any such right or remedy on any future occasion.
<PAGE>
4. No Offset, Etc. Maker acknowledges that, once disbursed and accrued, the
--------------
principal amount of the Note is fixed and unconditional, and is and shall remain
absolutely due and owing by Maker without any defense, deduction, offset or
counterclaim (and, to the extent Maker had any defense, deduction, offset or
counterclaim on the date hereof, the same are hereby waived).
5. Amendment. The terms and conditions of this Note shall not be altered,
---------
modified, amended, supplemented or terminated in any manner whatsoever except by
a written instrument, duly executed by Maker and Lender.
6. Currency. All amounts set forth herein shall be payable in currency of the
--------
United States of America.
Duly executed as of the date set forth above.
SUMMUS, LTD.
By: /s/ Bjorn Jawerth
--------------------------
Bjorn Jawerth, President
2
<PAGE>
SCHEDULE A TO THE PROMISSORY NOTE
DATED AS OF OCTOBER 30, 2000
FROM SUMMUS, LTD.
TO
HIGH SPEED NET SOLUTIONS, INC.
Loan by High Speed Net Solutions, Inc.
--------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Agreed Dollar Value of Date of Addition to Note Cumulative Aggregate
---------------------- ------------------------ --------------------
Advances (given in the number of days Principal Amount of Note
-------- after the date of the Note) -------------------------
--------------------------------------------------------------------------------------------
<S> <C> <C>
$235,000.00 On the date of the Note $ 235,000.00
--------------------------------------------------------------------------------------------
$235,000.00 14 $ 470,000.00
--------------------------------------------------------------------------------------------
$235,000.00 28 $ 705,000.00
--------------------------------------------------------------------------------------------
$235,000.00 42 $ 940,000.00
--------------------------------------------------------------------------------------------
$235,000.00 56 $1,175,000.00
--------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
Exhibit F
AMENDMENT NO. 1
to
ESCROW AGREEMENT
This AMENDMENT NO. 1 (this "Amendment") is made October 30, 2000, by and
among High Speed Net Solutions, Inc., ("HSNS"), Dr. Bjorn Jawerth, Summus, Ltd.
("Pledgor"), and Kilpatrick Stockton LLP (the "Escrow Agent") and amends the
ESCROW AGREEMENT (the "Agreement") dated August 31, 2000 by and among the HSNS,
Dr. Jawerth, the Pledgor and the Escrow Agent.
The first recital of the Agreement is to increase the number of Escrowed
Shares from Five Hundred Thousand (500,000) to One Million Six Hundred Seventy
Five Thousand (1,675,000).
IN WITNESS HEREOF, the parties hereto have executed this document on the
day and year first above written.
PLEDGOR:
/s/ Bjorn Jawerth
------------------------------
Name: Bjorn Jawerth
Title: President, Summus, Ltd.
/s/ Bjorn Jawerth
------------------------------
Dr. Bjorn Jawerth
HSNS:
/s/ Andy Fox
------------------------------
Name: Andy Fox
Title: President & CEO, High Speed Net
Solutions, Inc.
KILPATRICK STOCKTON, LLP
By: /s/ James F. Verdonik
---------------------------
James F. Verdonik, Partner
