<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number:
HIGH SPEED NET SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0185306
- ------------------------------- --------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two Hannover Square, Suite 2120,
434 Fayetteville Street Mall, Raleigh, NC 27601
- ----------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(919) 807-0507
----------------------------------------------------
(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), [x] Yes [ ] No; and (2) has been
subject to such filing requirements for the past 90 days. [ ] Yes [x] No
The number of shares outstanding of the registrant's common stock, par value
$0.001 per share, as of April 13, 2000 were 21,062,149.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [x] No
<PAGE> 2
HIGH SPEED NET SOLUTIONS, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Balance Sheets as of December 31, 1999 and March 31, 2000
(Unaudited) 3
Statements of Operations for the three months ended
March 31, 1999 and 2000 and the period from January 2, 1998
(Inception) through March 31, 2000 (Unaudited) 4
Statements of Stockholders' Equity (Deficit) 5
Statements of Cash Flows for the three months ended
March 31, 1999 and 2000 and the period from January 2, 1998
(Inception) through March 31, 2000 (Unaudited) 7
Notes to Condensed Financial Statements (Unaudited) 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 3. Quantitative And Qualitative Disclosures About Market Risk 37
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 38
Item 2. Changes in Securities 38
Item 3. Defaults Upon Senior Securities 39
Item 4. Submission of Matters to a Vote of Securities Holders 39
Item 5. Other Information 39
Item 6. Exhibits and Reports on Form 8-K 39
Signatures 41
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
High Speed Net Solutions, Inc.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
-------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,427,606 $ 248,740
Other current assets 19,000 --
-------------------------------
Total current assets 1,446,606 248,740
Furniture and equipment, net 19,101 3,720
Investment in common stock of related party 1,894,127 1,894,127
Prepaid royalties 4,528,125 4,528,125
Licensing rights, net 36,606 43,060
-------------------------------
Total assets $ 7,924,565 $ 6,717,772
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Payables to related parties $ 435,815 $ 589,815
Accounts payable and accrued expenses 479,738 99,876
Loss contingency accrual 984,375 800,000
-------------------------------
Total current liabilities 1,899,928 1,489,691
Stockholders' equity:
Preferred stock, no par value; 10,000 shares authorized, 2,000
shares issued and outstanding 1,892,202 --
Common stock, $.001 par value, authorized 50,000,000 shares;
21,062,149 shares issued and outstanding 21,062 21,062
Additional paid-in capital 17,567,720 17,272,820
Preferred stock subscription receivable (250,000) --
Deficit accumulated during the development stage (12,978,728) (11,838,182)
Treasury stock, at cost (38,500 shares) (227,619) (227,619)
-------------------------------
Total stockholders' equity 6,024,637 5,228,081
-------------------------------
Total liabilities and stockholders' equity $ 7,924,565 $ 6,717,772
===============================
</TABLE>
See accompanying notes.
3
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High Speed Net Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations
<TABLE>
<CAPTION>
THREE THREE PERIOD FROM
MONTHS MONTHS JANUARY 2, 1998
ENDED ENDED (INCEPTION)
MARCH 31 MARCH 31 TO MARCH 31
2000 1999 2000
--------------------------------------------------
<S> <C> <C> <C>
Selling, general and administrative expenses $ 839,890 $ 2,125,437 $ 8,756,358
Interest expense (income), net (7,577) -- 2,648,749
--------------------------------------------------
Loss from continuing operations (832,313) (2,125,437) (11,404,530)
Loss from discontinued operations -- -- (1,265,965)
--------------------------------------------------
Net loss $ (832,313) $ (2,125,437) (12,670,495)
==================================================
Net loss applicable to common shareholders:
Net loss $ (832,313) $ (2,125,437) $(12,670,495)
Beneficial conversion feature of preferred stock (294,900) -- (294,900)
--------------------------------------------------
Net loss applicable to common shareholders $ (1,127,213) $ (2,125,437) $(12,965,395)
==================================================
Per share amounts (basic and diluted):
Loss applicable to common shareholders from continuing
operations $ (0.05) $ (0.12) $ (0.81)
Loss applicable to common shareholders from discontinued
operations -- -- $ (0.09)
--------------------------------------------------
Net loss $ (0.05) $ (0.12) $ (0.90)
==================================================
Weighted average shares outstanding 21,062,149 17,170,996 14,451,381
==================================================
</TABLE>
See accompanying notes.
4
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High Speed Net Solutions, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
PREFERRED
SERIES A CONVERTIBLE STOCK
DATE OF PREFERRED STOCK SUBSCRIPTION COMMON STOCK
TRANSACTION SHARES AMOUNT RECEIVABLE SHARES PAR VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 -- $ -- $ -- 21,062,149 $ 21,062
Issuance of preferred stock at
$1,000 per share February 2000 2,000 2,000,000 -- -- --
Preferred stock subscription February 2000 -- -- (250,000) -- --
Preferred stock issuance costs February 2000 -- (107,798) -- -- --
Beneficial conversion feature
related to preferred stock February 2000 -- -- -- -- --
Preferred stock dividend March 2000 -- -- -- -- --
Net loss -- -- -- -- --
-----------------------------------------------------------------------------------------
Balance at March 31, 2000
(unaudited) 2,000 $ 1,892,202 $ (250,000) 21,062,149 $ 21,062
=========================================================================================
</TABLE>
5
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DEFICIT
ACCUMULATED
DURING THE
PAID-IN DEVELOPMENT TREASURY
CAPITAL STAGE STOCK TOTAL
- --------------------------------------------------------------------------
$17,272,820 $ (11,838,182) $ (227,619) $ 5,228,081
-- -- -- 2,000,000
-- -- -- (250,000)
-- -- -- (107,798)
294,900 (294,900) -- --
-- (13,333) -- (13,333)
-- (832,313) -- (832,313)
- --------------------------------------------------------------------------
$17,567,720 $ (12,978,728) $ (227,619) $ 6,024,637
==========================================================================
See accompanying notes.
6
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High Speed Net Solutions, Inc.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 2, 1998
(INCEPTION)
THREE MONTHS ENDED THROUGH
MARCH 31 MARCH 31
2000 1999 2000
------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Loss from continuing operations $ (832,313) $(2,125,437) $(11,404,530)
Adjustments to reconcile net loss to net cash used in operating
activities:
Loss on disposal of equipment -- -- 36,858
Non cash compensation and consulting charges relating to
stock awards and stock subscriptions -- 2,000,000 5,698,038
Depreciation and amortization 8,989 6,459 57,051
Common stock issued for services -- -- 116,064
Interest expense relating to beneficial conversion feature
of convertible debt -- -- 2,655,749
Changes in operating assets and liabilities:
Prepaid royalties -- -- (60,000)
Accounts receivable and other current assets (19,000) 7,559 (19,000)
Accounts payable and accrued expenses 366,529 (8,457) 466,135
Loss contingency 184,375 -- 984,375
------------------------------------------------
Net cash used in operating activities from continuing operations (291,420) (132,794) (1,468,990)
Net cash used in discontinued operations -- -- (1,265,965)
------------------------------------------------
Total net cash used in operating activities (291,420) (132,794) (2,734,955)
INVESTING ACTIVITIES
Capital expenditures (17,916) -- (72,116)
Cash investment in related party -- -- (102,000)
------------------------------------------------
Net cash used in investing activities (17,916) -- (174,116)
FINANCING ACTIVITIES
Net proceeds from sale of preferred stock 1,642,202 -- 1,642,202
Proceeds from sale of common stock -- 127,500 559,062
Shareholder capital contributions -- -- 1,091,648
Advances from stockholders -- -- 876,230
Repayments to stockholders (154,000) -- (163,486)
Proceeds from issuance of convertible debentures -- -- 558,640
Purchase of treasury stock -- -- (227,619)
------------------------------------------------
Net cash provided by financing activities 1,488,202 127,500 4,336,677
------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,178,866 (5,294) 1,427,606
Cash and cash equivalents at beginning of period 248,740 18,609 --
------------------------------------------------
Cash and cash equivalents at end of period $ 1,427,606 $ 13,315 $ 1,427,606
================================================
</TABLE>
7
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High Speed Net Solutions, Inc.
(A Development Stage Company)
Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 2, 1998
(INCEPTION)
THREE MONTHS ENDED TO
MARCH 31 MARCH 31
2000 1999 2000
------------------------------------------------------
<S> <C> <C> <C>
NONCASH INVESTING AND FINANCING ACTIVITIES
Common shares issued for investment in related party $ -- $ -- $ 1,792,127
======================================================
Common stock issued in exchange for convertible debentures $ -- $ -- $ 2,665,749
======================================================
Common stock issued for prepaid royalties $ -- $ -- $ 2,278,125
======================================================
Prepaid royalties paid by shareholder on behalf of company $ -- $ 750,000 $ 2,190,000
======================================================
Debentures issued for shareholder advances on behalf of company $ -- $ -- $ 2,097,109
======================================================
Common stock issued for licensing rights $ -- $ -- $ 77,500
======================================================
Common stock issued for payment of debt to stockholder $ -- $ -- $ 149,000
======================================================
</TABLE>
See accompanying notes.
8
<PAGE> 9
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. Prior to the merger, HSNS was a non-operating public shell and
MWI was a private operating company. In legal form, this merger was effected by
HSNS issuing its shares in exchange for 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.
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 dissolved in September 1998. Accordingly, the operating results of
MWI have been presented as discontinued operations during 1998. These amounts
have been presented in the Statement of Operations for the period from January
2, 1998 (inception) to March 31, 2000. Revenues of MWI during 1998 were
approximately $1,335,300 and the loss totaled $1,265,965. As of December 31,
1998, the Company had completed its disposal of the discontinued operations of
MWI. There were no remaining assets or liabilities related to MWI at December
31, 1998. Since the Company has not yet completed 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 the opinion of management, all normal and recurring adjustments necessary to
present fairly the financial position, results of operations and cash flow of
the Company at March 31, 2000 and for all periods presented have been recorded.
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 flows 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.
9
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High Speed Net Solutions, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICES (CONTINUED)
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 or awards.
INCOME TAXES
Income taxes are accounted for using the liability method in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes.
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 presented 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. 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.
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 operations
or the financial position of the Company.
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High Speed Net Solutions, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
3. SIGNIFICANT ACCOUNTING POLICES
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 is computed using the
straight-line method over the estimated useful lives of the assets beginning
when assets were placed in service. Based on the discontinuance 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.
PREPAID ROYALTIES AND LICENSING RIGHTS
Prepaid royalties represent prepayments made to Summus Ltd, ("Summus"), a
related party, under various licensing agreements. 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, which was initially a three-year
agreement and was extended to six years in January 2000.
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.
11
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High Speed Net Solutions, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
4. CONVERTIBLE DEBENTURES
During 1998, the company issued convertible debentures to officers, stockholders
and third parties. These 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
debenture were issued. The resulting interest expense was immediately recognized
in 1998 because the debentures were convertible upon issuance.
5. PREFERRED STOCK
On February 28, 2000, the Company sold 2,000 shares of its no par value Series
A Convertible Preferred Stock ( the "Preferred Stock") at a price of $1,000 per
share. Proceeds, net of issuance costs of $107,798 and a subscription receivable
in the amount of $250,000 for 250 shares, were $1,642,202. The subscription
receivable is expected to be collected in June 2000.
The Preferred Stock holders are entitled to receive cumulative cash dividends at
rate 8% per annum of the initial liquidation preference of $1,000 per share (the
"Liquidation Preference"). Dividends shall be cumulative from the date of
issuance and shall be payable, when, as and if declared by the Board of
Directors on March 31 and September 31 of each year commencing on September 30,
2000. As of March 31, 2000 cumulative dividends accrued were $13,333.
Each share of the Preferred Stock shall be convertible at the option of the
holder, at any time after the date of issuance, into shares of common stock
equal to the Liquidation Preference divided by initial conversion price of
$14.24. The conversion price is subject to adjustment as defined in the
Company's articles of incorporation. Since the Preferred Stock was convertible
at the date of issuance and since the conversion price was below the fair value
of the common stock, the Company recorded a beneficial conversion feature in the
amount of $294,900. The beneficial conversion feature has been added to the
historical net loss for the three month period ended March 31, 2000, for
purposes of computing the net loss applicable to common shareholders.
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High Speed Net Solutions, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
6. LITIGATION CONTINGENCY
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 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 has accrued approximately $985,000 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.
7. SUBSEQUENT EVENT
On April 24, 2000, the Company acquired 100% of the issued and outstanding
shares of common stock of JSJ Capital Corp., a Nevada Corporation ("JSJ"), in
exchange for 50,000 shares of 144 restricted common stock of the Company. As a
result of HSNS's 100% ownership of JSJ, the Board of Directors of HSNS approved
the merger of JSJ into HSNS whereby HSNS will be the surviving corporation. The
acquisition was accounted for as an issuance of HSNS common stock in exchange
for the net monetary assets of JSJ, accompanied by a recapitalization.
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ITEM 2. 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
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.
Pursuant to an Agreement and Plan of Merger dated as of April 18, 2000
between High Speed and J.S.J Capital Corp. ("JSJ"), a Nevada corporation, High
Speed has acquired all the outstanding shares of common stock of JSJ from the
sole stockholder thereof in an exchange for 50,000 shares of 144 restricted
common stock of High Speed and legal fees of $420,000 in a transaction in which
High Speed was the successor corporation.
We are a development stage company. We did not operate as an active
business for the three months ended March 31, 1999. The statement of
operations for the three months ended, March 31, 2000 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.
In January of 2000, we launched an Internet service for rich media
direct marketing and content delivery. Our service currently allows us to
deliver video advertisements, through electronic mail, to targeted e-mail lists.
We can also provide customers consulting services for creating video
advertisements that maintain a high quality visual experience when compressed
and delivered over the Internet. 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 have not generated any revenue to date from these
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
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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. as
discussed below. The new license 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, the new license agreements with Summus give us a 10% revenue share of
all upfront or royalty based license revenue that might result from Summus
licensing MaxxSystem to a 3rd party. As part of this agreement, Summus cannot
license MaxxSystem to a 3rd party who wants to establish an online advertising
service bureau until July 1, 2001. In addition, the new license agreements give
High Speed a percentage of the revenue Summus may derive from licensing wavelet
technology to Samsung Electronics of America, Inc. if Samsung signs an agreement
with Summus. No revenue has been derived from Summus under the new license
agreements.
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 and a letter agreement between High Speed and Summus, dated
March 13, 2000, 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"). Under the terminated Marketing
License Agreement, we made prepaid royalty payments of $2,250,000 in cash toward
the initial required upfront royalty payment of the $3,000,000. We
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<PAGE> 16
satisfied the final $750,000 due under the Marketing License Agreement by
issuing 1,500,000 shares of our common stock to Summus. The purpose of the
prepayment of royalties was to provide Summus with general operating capital.
The New Agreements give us a nonexclusive license to a suite of
products Summus has labeled MaxxSystem. MaxxSystem allows us to perform various
services for our customers. We can create audio, video, animation, and graphical
content. With MaxxSystem, we can manage, categorize, and track this content to
organize it for delivery to recipient lists. We will deliver this content for
our customers over the Internet or over private networks using MaxxSystem. To
perform this delivery, MaxxSystem uses a compression technique developed by
Summus and marketed under the brand name of Dynamic Wavelets.
We have entered into a "Letter of Intent" with Samsung Electronics of
America, Inc. and Summus Ltd. The Letter of Intent is for the purposes of
integrating and optimizing Summus Dynamic Wavelet technology onto Samsung's
strategic digital signal processor ("DSP") platform for sale as a semiconductor
component. No definitive agreement has been reached as a result of this Letter
of Intent, and no revenue has been derived from this relationship.
With regards to the Samsung relationship, High Speed acted as a
marketing agent for Summus. High Speed was responsible for marketing Summus
technology to Samsung and developing the proposed business venture. As part of
the Revenue Sharing Agreement, High Speed will receive the following revenue
streams from any revenue derived if Summus and Samsung sign an agreement: Year 1
- - 50% of all revenue, Year 2 - 50% of all revenue, Year 3 - 40% of all revenue -
Year 4 through 6 - 20% of all revenue.
We have entered into a contract with BuyitNow.com, LLC. The contract
calls for High Speed to deliver media advertisements through e-mail for
BuyitNow's E-commerce campaigns.
We have entered into a contract with WorldQuest Networks. The contract
calls for High Speed to deliver media advertisements through e-mail for
WorldQuest Networks E-commerce campaigns.
We have entered into a contract with New Millennium Health Services.
The contract calls for High Speed to deliver media advertisements through e-mail
for New Millennium Health Services E-commerce campaigns.
On February 28, 2000, we sold 2,000 shares of Series A Convertible
Preferred Stock to an investor at a price of $1,000 per share, resulting in net
proceeds of $1,642,202. In connection with this financing, we entered into a
subscription agreement and now have a receivable in the amount of $250,000 which
will be collected in June of 2000. The holder of the preferred stock is
unrelated and not affiliated with High Speed Net Solutions, Summus Ltd. or
counterparty to any agreement of High Speed. The rights of the Series A
Convertible Preferred Stock include the following rights: (i) a cumulative
dividend of $80.00 each year per share of Series A Convertible Preferred Stock,
and we have the right to pay this dividend by issuing additional shares of
Series A Convertible Preferred Stock; (ii) the right to convert the Series A
Convertible Preferred Stock into shares of our common stock at a conversion
price of $14.24, subject to
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antidilution adjustment in the case of common stock dividends, splits and
reorganizations; and (iii) a liquidation preference of $1,000 per share of
Series A Convertible Preferred Stock, plus accrued unpaid dividends, payable in
the event of any liquidation, dissolution, or winding up of High Speed. After
March 1, 2002, we have the right to redeem any outstanding shares of the Series
A Convertible Preferred Stock at a redemption price of $1,000 per share of
Series A Convertible Preferred Stock plus accrued dividends that have not been
paid. A total of 10,000 shares of Series A Convertible Preferred Stock are
authorized. The 2000 shares of Series A Convertible Preferred Stock are
convertible to 140,449 common shares of High Speed Net Solutions stock.
THREE MONTHS ENDED MARCH 31, 2000
REVENUE
We had no revenue during the three months ended March 31, 2000. During
the quarter we launched Rich Media Direct 1.0 and have been working with
customers to sign contracts.
NET LOSS
Our net loss during the year ended three months ended March 31, 2000
was $832,313 , or $(0.05) per share. The net loss was primarily attributable to
general and administrative expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $839,890 for the three months
ended March 31, 2000. This amount includes an increase to the loss contingency
accrual associated with the anticipated Dunavant settlement of $184,375, as well
as substantial fees for legal, accounting and other professional services. We
expect professional services fees will continue to be high for the second or
third quarter of 2000 due to the merger with JSJ and as we implement disclosure,
financial reporting and other related activities. The remaining balance of the
general and administrative expenses relate to salaries and other operating
costs.
INTEREST INCOME
Interest income of $7,577 for the three months ended March 31, 2000
represents interest earnings on cash balances in demand deposit accounts.
REVENUES
We had no revenues during the three months ended March 31, 1999,
because we had no products to sell nor any capacity to provide services during
this period.
NET LOSS
Our net loss for the three months ended March 31, 1999 of $2,125,437
was primarily attributable to general and administrative expenses. The net loss
included a non-cash compensation cost of $2,000,000 related to the granting of a
stock option to an employee for services rendered. The stock option had no
exercise price. The remaining loss was attributable to salary and other
operating costs.
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PERIOD FROM JANUARY 2, 1998 (INCEPTION) TO MARCH 31, 2000
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. Prior to
the merger, High Speed was a non-operating public shell and MWI was a private
operating company. In legal form, this merger was effected by High Speed issuing
its shares in exchange for the net assets of MWI. 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.
MWI, which was incorporated in January 1998, was not able to execute
its planned activities and consequently ceased all operating activities in
December 1998. Accordingly, the operating results of MWI have been presented as
discontinued operations from January 2, 1998 through December 1998.
REVENUE
We had not generated any revenue from our inception on January 2, 1998
through March 31, 2000, because we had no products to sell nor any capacity to
provide services during this period.
NET LOSS
Our net loss from continuing operations from our inception on January
2, 1998 through March 31, 2000 was $11,404,530. This loss was primarily
attributable to general and administrative expenses and non-cash interest
expense.
The net loss from discontinued operations of $1,265,965 reflects the
operating results of MWI for 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 expenses subsequent to
December 31, 1998.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $8,756,348 for the period from
January 2, 1998 to March 31, 2000. Of this amount, $6,019,914 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. The remaining
balance of
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the general and administrative expenses incurred during this period of
approximately $2,736,434 related to salary and other operating expenses.
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 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 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our operations to date have been primarily funded by private placements
of our preferred and common stock and related party loans and debentures. As of
March 31, 2000, we had cash and cash equivalents of $1,427,606, and other
current assets of $19,000 and current liabilities of $1,886,595 resulting in a
working capital deficiency of $453,322.
Net cash used in operating activities of $291,420 during the year three
months ended March 31, 2000 reflects cash paid for salaries and our other
operating expenses.
Net cash used in investing activities of $17,912 during the three
months ended March 31, 2000 represents capital expenditures for office furniture
and computer equipment..
Net cash provided by financing activities of $1,488,202 during the
three months ended March 31, 2000 resulted from the net proceeds of the sale of
our preferred stock of $1,642,202, net of a reduction in the amounts due to
related parties of $154,000
Net cash used in operating activities from continuing operations during
the three months ended March 31, 1999 of $132,794, resulted from the payment of
salaries and other operating costs. Net investing activities for the three
months ended March 31, 1999 included the purchase of equipment. Net cash used in
operating activities from continuing operations from January 2, 1998 through
March 31, 2000 of $1,468,990 reflects cash paid for salaries and our other
operating expenses plus $60,000 paid to Summus as a prepaid royalty. Net cash
used in discontinued operations of $1,265,965 represents the net cash used to
operate MWI during 1998.
Net cash used in investing activities from January 2, 1998 to March 31,
2000 of $174,116 reflects capital expenditures for office furniture and
computer equipment.
Net cash provided by financing activities from January 2, 1998 to March
31, 2000 was $4,336,677 and resulted from the net proceeds of the sale of our
preferred stock of $1,642,202, net proceeds from the sale of our common stock of
$559,062, shareholder capital contributions of $1,091,648 and net advances from
shareholders of $712,744. Additionally, during 1999 we received $558,640 from
the issuance of convertible debentures and during 1998 we purchased 38,500
shares of our stock for $227,619.
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On February 28, 2000, we issued, 2,000 shares of our Series A
Convertible Preferred stock at a price of $1,000 per share. We received proceeds
from this issuance of $1,642,202 which is net of stock issuance costs and a
stock subscription receivable totaling $250,000. We expect the subscription
receivable to be collected in June 2000, at which time all issued stock will be
delivered to the investing party. The proceeds from this issuance will not be
sufficient to fund operations for the next 12 months. We believe we will
generate cash from operations over the next 12 months as a result of revenue
sharing contracts that we have signed with customers for rich media direct
marketing campaigns. 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.
At March 31, 2000 the company had positive adjusted working capital of
$531,000. This working capital was calculated exclusive of the loss contingency
accrual of $984,000 which we expect to settle primarily through the issuance of
additional stock rather than cash. In June 2000, we expect to collect the
preferred stock subscription receivables of $250,000. In addition to these
amounts we anticipate cash generated from operations and additional private
placement offerings of our securities to fund us over the next 12 months. We
expect all infrastructure investments, necessary for us to deliver our products
and services, to take place over the next 12 months. There can be no assurances
we will be able to sell securities or if we can that the terms will be favorable
to us.
Liquidity on a long term basis is expected to be provided by cash
generated through operations and from additional debt and/or equity financing.
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, or that additional capital will be available.
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
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.
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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.
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RISK FACTORS
This Form 10-Q 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-Q, 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 HIGH SPEED'S DEPENDENCY ON OUR RELATIONSHIP WITH SUMMUS LTD.
OUR CURRENT SYSTEM REQUIRES ENHANCEMENTS TO ALLOW US TO PROVIDE
SERVICES THAT WILL REMAIN ATTRACTIVE TO POTENTIAL CUSTOMERS.
The services that our current system allows us to provide for customers
involves attaching video commercials to e-mails. We believe that the method we
use to deliver video commercials with e-mails will need to be enhanced for our
services to compete with competitive services. The primary enhancement we need
to remain competitive is the ability for a recipient of an e-mail to immediately
begin viewing the video commercial upon initial receipt of the e-mail. Since we
depend on Summus for the software products we use to deliver our services, we
are dependent on Summus to add the capability to the software we use to
immediately view the video.
Our capabilities must be enhanced to increase the speed of delivery of
video commercials. Our enhancement goal is to produce a video commercial that is
immediately viewable. Our current technology forces a viewer to wait until the
entire video has been downloaded before it can be viewed. While this time period
varies, it can sometimes be onerously long. We believe that to keep our product
competitive, we will need to use technology that allows the video to begin to
play concurrent with its downloading. That is to say, it should be viewable as
it is being received instead of making a recipient wait for downloading first.
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.
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Because our staff does not include software product developers, we
depend entirely on the software products developed by Summus Ltd. If Summus did
not provide us with these products, then we would be entirely dependent on the
products other companies. Because of this total dependency on the software
products of other companies, any unfavorable event at Summus that delays or
prevents development of Summus' products would have a material adverse effect on
us. If Summus were to stop developing the software products we use, and if we
were not able to acquire equivalent software products from a third party source,
then we would be unable to execute our business plan.
OUR TECHNOLOGY SUPPLIER, SUMMUS, HAS NO CONTRACTUAL OBLIGATION TO
DELIVER NEW TECHNOLOGY OR ENHANCEMENTS OF OLD TECHNOLOGY TO US.
The agreements between Summus and us give us non-exclusive 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.
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 non-exclusive.
Summus retains ownership of all intellectual property rights related to the
software products we license. We only have a license to use their products for a
finite amount of time. We do not have the right to modify or sell their products
nor do we have the right to license its use by third parties.
The only exclusive rights we have to Summus technology are the rights
we have to MaxxSystem. Our rights to MaxxSystem are only exclusive for a finite
amount of time. After July 1, 2001, Summus is free to license MaxxSystem to our
competitors.
CONFLICTS OF INTEREST BETWEEN SUMMUS AND US MAY LIMIT OUR OPPORTUNITIES
AND THEREFORE HARM OUR ABILITY TO GENERATE REVENUE.
As of April 13, 2000, Summus held 8,574,360 shares of our common stock
(40.7% of our outstanding common stock, and 38.5% on a fully diluted basis).
Summus also has the right to vote an additional 1,577,167 shares of our common
stock under voting agreements with and/or proxies from 14 persons. Total Summus
voting power is 48.2% of our outstanding common stock. Two members of our Board
of Directors are officers of Summus, William Bradford Silvernail and Dr. Bjorn
Jawerth. Our Board of Directors only has six members and two are Summus
officers. In addition, one of our officers, Alan Kleinmaier, owns Summus stock
and stock options. Andrew Fox, our Chief Executive Officer was 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. The duty these Summus officers have to
Summus obligates them to act in Summus' financial interest. Summus'
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financial interest may be adverse to our financial interests in some instances
but not in others. If a situation were to arise where a revenue-generating
opportunity could be presented to either Summus or us, but not both, then
members of our Board of Directors who are also officers of Summus have
incentives and duties arising from their relationships with Summus to protect
Summus' interests, possibly to the detriment of High Speed. As a result of this
situation, it is possible that decisions of our Board of Directors may favor
Summus over us in the event that there is a conflict.
Dr. Bjorn Jawerth owns 53.6% of the outstanding shares of Summus.
William Bradford Silvernail has options for 40,000 shares of Summus' common
stock. Both of these individuals are on our Board of Directors. The fact that
these persons also benefit personally from Summus' financial success means that
they have a personal financial incentive to maximize profits in Summus, which
could be adverse to maximizing profits at High Speed. For example, situations
could arise where Summus and High Speed negotiate an agreement between the two
companies to allocate an opportunity in the market.
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, Summus could decide to focus on another unrelated type of technology that
Summus determines to be more advantageous for them than the technology that
benefits us. In that case, improvements to the technology that are necessary for
us to remain competitive may not or will not be made.
OUR RELATIONSHIP WITH SUMMUS MAY PREVENT US FROM ENTERING INTO
BENEFICIAL LONG-LASTING BUSINESS AGREEMENTS WITH OTHER COMPANIES.
It may be in our interest to enter into 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. For example,
because our Board of Directors and other officers have access to our
confidential business information, including trade secrets, other businesses who
wish to keep information away from Summus may choose to keep the same
information away from us. Our relationship with Summus, therefore, could cause
us to miss opportunities to enter into alliances with other companies that would
allow us to generate revenue.
Even though our close relationship with Summus may dissuade some
companies from entering into a relationship with us, our agreements with Summus
do not prevent us from entering into these relationships. However, the overlap
in directors between us and Summus could prevent the formation of beneficial
relationships between us and other companies.
SALES OF OUR SHARES BY SUMMUS MAY HAVE AN ADVERSE EFFECT ON THE MARKET
PRICE OF OUR COMMON STOCK.
As of April 13, 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
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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.
SHAREHOLDERS MAY NOT BE ABLE TO EXERCISE CONTROL BECAUSE SUMMUS OWNS OR
HAS VOTING POWER FOR 48.5% OF OUR COMMON STOCK.
As of April 13, 2000 our business partner and technology source,
Summus, owns 8,574,360 shares of our common stock (40.7% of our outstanding
common stock, and 38.5% on a fully diluted basis). Dr. Bjorn Jawerth, the
founder and chairman of the board of Summus, beneficially owns approximately
38.5% of our common stock. Summus can also vote an additional 1,577,167 shares
of our common stock under voting agreements with and/or proxies from 14 persons.
Total Summus voting power is 48.2% of our outstanding common stock. As a result,
Dr. Jawerth and Summus will likely have the power 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 RELATIONSHIPS WITH ADDITIONAL COMPANIES IN ORDER
TO BE ABLE TO IMPLEMENT OUR BUSINESS PLAN.
In addition to our relationship with Summus, if we do not enter into
beneficial business relationships with other companies we will:
- Decrease the adoption rate of our services due to a lack of
distribution arrangements;
- Be limited in the type of e-mail video commercial content we
can develop;
- Lose the quantity and availability of attractive video and
graphics content that is available for our e-mail video
commercial direct marketing;
- Not achieve recognition and value of our brand name;
- Decrease the range of businesses that may rely on our
technology;
- Not achieve a high degree of quality, performance, and
usefulness of our services.
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RISK RELATED TO OTCBB STATUS AND MARKET FACTORS
OUR STOCK MAY CEASE TO BE QUOTED IN THE OTCBB, RESULTING IN A SEVERE
LOSS OF LIQUIDITY AND VALUE.
Under current rules, our common stock will cease to be quoted on the
OTCBB if we do not become an SEC reporting company on or before May 17, 2000.
There can be no assurance we will be a reporting company before this date. If
our stock ceases to be quoted on the OTCBB, our shareholders will lose
liquidity, and as trading stops the market value of our stock is likely to
decrease substantially.
In addition, our stock is currently trading on the OTCBB with a warning
that it may cease to be quoted on the OTCBB.
THE VALUE OF OUR STOCK MAY BE LIMITED BECAUSE OUR STOCK ONLY TRADES IN
THE OTCBB 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.
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 securities.
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OUR STOCK PRICE MAY BE VOLATILE AS A RESULT OF OTHER FACTORS.
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 our quarterly operating
results;
- Announcements of technological innovations, new products or
services by us or our competitors;
- Changes in our financial estimates or recommendations by
securities analysts;
- Conditions or trends in e-mail video commercial delivery over
the Internet;
- Changes in the market valuations of similar companies;
- Additions of key personnel;
- If key personnel such as, Andrew Fox, our President and Chief
Executive Officer, and Alan Kleinmaier, our Chief Financial
Officer were ceased to be employed;
- Sales of our common stock;
- Better understanding of our business by the investing public
as the information disclosed in this document becomes
available to the market.
RISKS RELATED TO FINANCIAL RESULTS AND CONDITION
OUR OPERATING HISTORY IS BRIEF, 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 video commercial delivery
services market. We have extremely limited financial results on which future
performance can be predicted as a result of our brief history.
The risks and uncertainties we face include the following:
- Market acceptance of our services is not established and there
is no indication that even if our services were established
that they could be profitable;
- Target markets have not been determined nor have channels of
distribution to those markets been established, in fact they
may not exist;
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- We have no brand name recognition;
- We may not be able to develop new services when they are
needed or be able to increase the value of existing services
before they become archaic or obsolete;
- There is no evidence that we can successfully compete with any
competitor company.
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 and in order to continue we
will require additional funding through either debt or equity financing.
On April 13, 2000, we had approximately $750,000 of cash. Summus has
advanced us approximately $250,000 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. Currently, we only have enough cash to continue operations until
October unless we receive additional funds either through earnings or financing.
WE HAVE A HISTORY OF LOSSES AND MAY NOT BECOME PROFITABLE.
We have not yet generated any revenue and we may never become
profitable. As of March 31, 2000, we had an accumulated deficit of approximately
$12,978,728.
During the three-months ended March 31, 2000 and 1999, our net loss
was $832,313 and $2,125,437, respectively.
OUR OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY.
As a result of our brief 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. Our revenue
stream will be generated by work we do for our customers. This work will be done
on a project by project basis. Our ability to succeed financially will be
dependent on our customers willingness and ability to pay us.
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 Internet video e-mail 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
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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 INTERNET VIDEO
COMMERCIAL MARKET.
The market for software and services for video commercial advertising
and direct marketing over the Internet is relatively new and has existed for
only 5 years. Video commercial direct marketing services are a specialized form
of Internet media delivery and as such, the demand for it is limited by the
knowledge potential customers have regarding its existence.
Our services may apply an advertising model to Internet e-mail
commercials by adding high quality video content to enhance the viewer's
experience and give the viewer the option to choose to obtain more information,
provide feedback, or even buy something. There has been no research to date that
indicates that viewers will examine or watch video delivered via email. We may
be unable to develop a successful revenue model or sufficient demand for video
delivered via e-mail to take advantage of any market opportunity that may or may
not exist.
Our business success depends on the general growth of Internet
advertising and the frequency at which consumers visit websites and use e-mail.
Other Internet content and advertising services that compete with our service
may be more attractive to advertisers, which would harm our ability to generate
revenue.
Our video commercial Internet delivery service will also compete with
other 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. If we lose
advertising customers, fail to attract new customers, are forced to reduce
advertising rates or otherwise modify what we charge to retain or attract
customers, our revenues or earnings, if any, 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 revenues or earnings, if any.
The dominant competitors in the online advertising and direct marketing
space include companies that provide banner advertising services such as
DoubleClick and 24/7, and companies that provide email direct marketing services
such as YesMail and Myriad Media. These companies compete on their ability to
enhance the reach of the advertisement either through access to banner ad spaces
(as in the case of DoubleClick and 24/7) and through the acquisition of email
names (as in the case of YesMail and Myriad Media).
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WE MAY BE UNABLE TO SUCCESSFULLY COMPETE WITH OTHER COMPANIES THAT
OPERATE IN THE BROADER MEDIA DELIVERY MARKET.
Because we only offer one kind of advertising medium, the video
commercial sent by e-mail, we may not be able to compete with companies who
distribute advertisements through multiple media outlets. For example, a company
that has revenue from placing advertisements on television, radio, magazines as
well as the Internet will be able to spread its risks better than us because we
are limited to one type of communication, Internet based video content.
WE MAY NOT SUCCESSFULLY DEVELOP NEW SERVICES.
To date, technology we license from Summus only allows video commercial
messages to be attached to e-mails. 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
acting chief executive officer and president, Andrew Fox. The loss of the
services of Mr. Fox would harm our business.
Our success substantially depends on the continued employment of our
chief financial officer, Alan Kleinmaier. The loss of the services of Mr.
Kleinmaier would 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. Messrs. Fox and
Kleinmaier have not signed non-competition agreements with us.
WE DO NOT HAVE THE KEY EMPLOYEES REQUIRED TO IMPLEMENT OUR BUSINESS
PLAN AND WE MUST RECRUIT AN ENTIRE NEW TEAM.
We have only thirteen employees, which represent an increase of ten
employees over the last several months. 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
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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
where we are located in Raleigh, North Carolina near the Research Triangle Park,
Durham and Chapel Hill, North Carolina.
In making employment decisions, particularly in the Internet and
high-technology industries, job candidates 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 are
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 NEED TO BUILD OR ACQUIRE A WEBSITE AND NETWORK INFRASTRUCTURE FOR
OUR BUSINESS TO SUCCEED.
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. We
estimate that within 5 months we will have a working website and sufficient
infrastructure to generate revenue. In addition, 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, once acquired, will be located at a single leased facility in
Raleigh. 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. We do not carry any business interruption insurance.
If we had a back-up system or systems then the failure of our single and only
system would not be fatal to our operations. Due to insufficient capital, we do
not plan to have fully redundant systems, we have only one system located in
only one place. Operating from a single location makes our business vulnerable
to site specific disturbances such as fire, natural disasters or power-outages.
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
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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 planned websites
could strain the capacity of the software, hardware and telecommunications
systems that we plan to use in the future. This could lead to slower response
times or system failures. Our operations will also depend on receipt of timely
content feeds from the content providers we plan to hire in the future, and any
failure or delay in the transmission or receipt of such content feeds could
disrupt our planned operations. In addition, many different factors could
temporarily interrupt our planned website operations in response to a heavy load
of video commercial e-mail 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. For example, our own or
licensed encryption and authentication technology may be compromised, breached
or otherwise be insufficient to secure customer information. We could also
potentially experience unauthorized access, computer viruses and other
disruptive problems, whether intentional or accidental. It would also be
possible for a third party to circumvent our security measures and
misappropriate proprietary information or interrupt operations.
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.
We will depend on third parties to develop or offer content such as
audio, video, graphics, and animation to be delivered by us over the Internet.
Currently, we do not have any content creators or any advertisers working for
us, nor are any under any contract to do so in the future. We and our
anticipated future advertisers and anticipated future 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 formats that can be delivered using our services and viewed using our
services. We cannot guarantee that third-party content providers will decide to
rely on our technology or offer content using our technology. If they do not use
our technology, then we will not be able to generate revenue.
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RISKS RELATED TO OUR INDUSTRY
THE GROWTH OF OUR BUSINESS DEPENDS ON THE INCREASED USE OF THE INTERNET
BY CONSUMERS FOR COMMUNICATIONS AND ELECTRONIC COMMERCE.
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 information and entertainment and as a vehicle for
trade 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 the same content consumers are used to receiving via television.
In addition, we believe that other issues, such as security,
reliability, cost, ease of use and quality of service and privacy contribute to
the lack of establishment of the Internet and its related risks. These risks 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 e-mail video commercials. 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. 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 not grow at all.
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 capacity or faster data transmission speeds (also known as broadband
transmission). If broadband access becomes widely available, we believe it
presents a significant business challenge for us. Development of video
commercial services for a broadband transmission infrastructure involves a
number of additional risks. We have not yet begun to develop video commercial
services for broadband transmissions.
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 video commercial services for Internet 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.
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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 (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 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. If such laws or regulations are enacted
or created by case law, they may 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 will be applied to the Internet by case law or regulatory
bodies. 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. Many judges who may decide
cases dealing with Internet issues may have no knowledge or understanding of
computer technology or the Internet. The nature of controlling legal precedent
could cause unexpected results such as exposing us to significant liabilities
associated with content available on our planned websites or distributed or
accessed through our services.
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 video commercial e-mail
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)
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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 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 REGISTERED TRADEMARKS.
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 in the mark Rich Media Direct(TM). 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
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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.
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
video commercial e-mail 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.
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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-Q.
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-Q could materially and
adversely affect our business, financial condition and operating results.
ITEM 3. 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 exposure to market risk is immaterial and does not effect
our operations. However, our investment in Summus is subject to changes in
market conditions since a private company can be subject to market risk despite
not being publicly traded.
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PART II - OTHER INFORMATION
ITEM 1. 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. As of March 31, 2000, High Speed and Mr. Dunavant were discussing
possible settlement of this dispute. There can be no assurances, however, that
the dispute will be settled or if settled, that the terms will be favorable to
us. 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 result of operations.
ITEM 2. CHANGES IN SECURITIES.
(a) Not applicable.
(b) On February 28, 2000, we designated a series of Preferred
Stock called Series A Convertible Preferred Stock consisting of 10,000 shares.
The rights of the Series A Convertible Preferred Stock include the following
rights: (i) a cumulative dividend of $80 each year per share of Series A
Convertible Preferred Stock, and we have the right to pay this dividend by
issuing additional shares of Series A Convertible Preferred Stock; (ii) no
voting rights except for the right to approve by a majority vote of the holders
of the Series A Convertible Preferred Stock our issuance of any shares of a
series or class of preferred stock that ranks senior to the Series A Convertible
Preferred Stock and any voting rights required under Florida law; (iii) the
right to convert the Series A Convertible Preferred Stock into shares of our
common stock at a conversion price of $14.24, subject to anti dilution
adjustment in the case of common stock dividends, splits and reorganizations;
and (iv) a liquidation preference of $1,000 per share of Series A Convertible
Preferred Stock, plus accrued unpaid dividends, payable in the event of any
liquidation, dissolution, or winding up of High Speed. After March 1, 2002, we
have the right to redeem any outstanding shares of the Series A Convertible
Preferred Stock at a redemption price of $1,000 per share of Series A
Convertible Preferred Stock plus accrued dividends that have not been paid.
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(c) Since January 1, 2000, we have issued the following securities
as described below.
On February 28, 2000, we sold 2,000 shares of Series A Convertible
Preferred Stock to an investor at a price of $1,000 per share, for a gross
aggregate consideration of $2,000,000. If the 2,000 shares of Series A
Convertible Preferred Stock issued and outstanding were to convert to common
stock, then an additional 140,449 shares of our common stock would be issued and
outstanding. The sale and issuance of the Series A Convertible Preferred Stock
was made in reliance on Rule 506 of Regulation D.
In April 2000, we issued an aggregate of 50,000 shares of rule 144
restricted common stock to the sole stockholder of J S J Capital Corp. pursuant
to an Agreement and Plan of Merger dated April 19, 2000. The 50,000 shares of
common stock were issued in a transaction exempt under section 4(2).
The purchasers of the restricted securities described above 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 of
restricted securities had adequate access, through employment or other
relationships, to information about High Speed to make an informed investment
decision.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Our stockholders approved the following two matters by written consent,
effective January 21, 2000: (i) amend and restate the Certificate of
Incorporation of High Speed Net Solutions, Inc.; and (ii) adopt the High Speed
Net Solutions, Inc. Equity Compensation Plan. As of January 21, 2000 we had an
aggregate of 21,062,149 shares of common stock issued and outstanding. The
number of shares voting in favor of the foregoing matters were 11,336,527 shares
of common stock. Votes were not received with respect to 9,725,622 shares of
common stock.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Furnish the exhibits required by Item 601 of Regulation S-K
On May 8, 2000, we filed a report on Form 8-K reporting the merger of
JSJ Capital Corp. with and into High Speed Net Solutions, Inc. We included with
this report on Form 8-K
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audited financial statements since inception for the time period of January 2,
1998-December 31, 1999, and unaudited, proforma financial statements for the
year ended December 31, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report 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
Date: May 15, 2000
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EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------- -------------------
2.01* Agreement and Plan of Merger between High Speed Net Solutions,
Inc. and J S J Capital Corp., dated as of April 19, 2000
2.02* Certificate of Merger between High Speed Net Solutions, Inc. and
JSJ Capital Corp., dated April 21 2000
3.01 Restated Articles of Incorporation, filed February 28, 2000 (as
currently in effect)
3.02 Amended and Restated Bylaws
3.03 Statement of Rights and Preferences of the 8% Series A Convertible
Preferred Stock
10.01 Master Agreement ("MA") with Summus, Ltd. ("Summus"), dated
February 18, 2000
10.02 Software License Agreement ("SLA") with Summus, dated February 18,
2000
10.03 Software Maintenance Agreement ("SMA") with Summus, dated February
18, 2000
10.04 Revenue Sharing Agreement ("RSA") with Summus, dated February 18,
2000
10.05 Equity Compensation Plan, effective January 31, 2000
10.06 Employment Offer Letter with Andrew Fox, dated January 20, 2000.
10.07 Stock Option Award Agreement with Andrew Fox, dated August 25, 1999.
10.08 Employment Offer Letter with Alan R. Kleinmaier, dated February 7,
2000.
10.09 Stock Option Award Agreement with Alan Kleinmaier, dated August 25,
1999.
10.10 Letter of Intent among High Speed, Samsung Electronics of America,
Inc. and Summus, dated February 15, 2000.
10.11 Software Escrow Agreement with Summus and Fort Knox Escrow Services,
Inc., dated February 18, 2000
10.12 Letter Agreement with Summus, dated March 13, 2000
27 Financial Data Schedule
* Included as an Exhibit to Form 8-K filed with the Securities and Exchange
Commission on May 8, 2000.
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EXHIBIT 3.01
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.
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(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 left intentionally 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 31st 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
<PAGE> 1
EXHIBIT 3.02
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> 2
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.
<PAGE> 1
EXHIBIT 3.03 or 3.06?
ARTICLES OF AMENDMENT
(Pursuant to Sections 607.0601 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.
2. The terms and provisions of Statement Of Rights and Preferences of
8% Series A Convertible Preferred Stock have been duly approved by written
consent of the board of directors of the Corporation pursuant to Section 607.601
of the Florida General Corporation Act.
3. The text of the resolution establishing and designating the 8%
Series A Convertible Preferred Stock, and fixing and determining the relative
rights and preferences of the 8% Series A Convertible Preferred Stock is
attached hereto as EXHIBIT A.
IN WITNESS WHEREOF, the Corporation has caused this statement relating
to the Statement of Rights and Preferences of 8% Series A Convertible Preferred
Stock to be executed in its name and on its behalf by its President and attested
to by its Secretary this 24th day of February, 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
<PAGE> 2
Exhibit A to Exhibit 3.06
EXHIBIT A
WRITTEN CONSENT
OF THE BOARD OF DIRECTORS
OF
HIGH SPEED NET SOLUTIONS, INC.
The undersigned, being all of the Directors of High Speed Net
Solutions, Inc., a Florida corporation, (the "Corporation"), do hereby adopt the
following resolutions by signing their written consent hereto, which action by
written consent is taken in lieu of holding a special meeting of the Board of
Directors of the Corporation:
APPROVAL OF THE ARTICLES OF AMENDMENT
WHEREAS, the Directors of the Corporation have been presented with the
form of a Statement of Rights and Preferences of the 8% Series A Convertible
Preferred Stock (the "Statement"), a copy of which is attached hereto which
describes the terms of the 8% Series A Convertible Preferred Stock; and
WHEREAS, the Directors of the Corporation believe that the adoption of
the Statement is in the best interests of the Corporation;
NOW, THEREFORE, BE IT RESOLVED, that the Statement be, and hereby is,
approved and adopted in the form attached hereto; and
RESOLVED, FURTHER, that the officers of the Corporation be, and hereby
are, authorized to execute a Statement of Rights of Preferred Stock of the
Corporation and to file such Certificate with the Department of State of the
State of Florida as is required by the Florida General Corporation Act.
These actions and resolutions are effective as of the 24th day of
February, 2000. This written consent may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
- ---------------------------------- ----------------------------------
Rick Seifert William Bradford Silvernail
- ---------------------------------- ----------------------------------
Andrew Fox Dr. Bjorn Jawerth
ALL OF THE DIRECTORS
<PAGE> 3
STATEMENT OF RIGHTS AND PREFERENCES OF THE
8% SERIES A CONVERTIBLE PREFERRED STOCK
OF HIGH SPEED NET SOLUTIONS, INC.
1. NUMBER AND DESIGNATION. A series consisting initially of Ten Thousand
(10,000) shares of the authorized preferred stock of the corporation,
no par value, is designated "8% Series A Convertible Preferred Stock"
(the "Series A Preferred Stock"). The number of shares of Series A
Preferred Stock shall not be increased but may be decreased from time
to time by resolution of the Board of Directors; PROVIDED, that the
number of authorized shares of Series A Preferred Stock shall be
increased by the number of shares of Series A Preferred Stock issued in
respect of dividends pursuant to Section 3(b) hereof.
2. RANKING. For purposes of this Statement of Rights and Preferences, any
stock of any class or classes of the corporation shall be deemed to
rank:
(a) prior to the Series A Preferred Stock, either as to
dividends or upon liquidation, if the holders of such class or classes
shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
corporation, as the case may be, in preference or priority to the
holders of Series A Preferred Stock (such stock is hereinafter referred
to as "Senior Stock");
(b) on a parity with Series A Preferred Stock, either as to
dividends or upon liquidation, whether or not the dividend rates,
dividend payment dates or redemption or liquidation prices per share or
sinking fund provisions, if any, shall be different from those of
Series A Preferred Stock, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the corporation, as the case
may be, without preference or priority, one over the other, as between
the holders of such stock and the holders of Series A Preferred Stock
(such stock is hereinafter referred to as "Parity Stock"); or
(c) junior to Series A Preferred Stock, either as to dividends
or upon liquidation, if such class shall be the common stock, $.001 par
value, of the corporation (the "Common Stock") or if the holders of
Series A Preferred Stock shall be entitled to receipt of dividends or
of amounts distributable upon dissolution, liquidation or winding up of
the corporation, as the case may be, in preference or priority to the
holders of shares of such class or classes (such stock is hereinafter
referred to as "Junior Stock").
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3. DIVIDEND AND DISTRIBUTIONS.
(a) For each semi-annual dividend period (a "Dividend Period")
dividends payable on each share of Series A Preferred Stock shall be
payable at a rate of 8% per annum of the initial liquidation preference
of $1,000 per share divided by two. Each Dividend Period shall commence
on the April 1 and October 1 following the last day of the preceding
Dividend Period and shall end on and include the day next preceding the
first day of the next Dividend Period. Dividends shall be cumulative
from the date of original issue and shall be payable, when, as and if
declared by the Board of Directors or by a duly authorized committee
thereof, on March 31 and September 30 of each year, commencing on
September 30, 2000. Each such dividend shall be paid to the holders of
record of shares of Series A Preferred Stock as they appear on the
stock register of the corporation on such record date, not exceeding 45
days preceding the payment date thereof, as shall be fixed by the Board
of Directors of the corporation or by a duly authorized committee
thereof. Dividends on account of arrears for any past Dividend Periods
may be declared and paid at any time, without reference to any regular
dividend payment date, to holders of record on such date, not exceeding
45 days preceding the payment date thereof, as may be fixed by the
Board of Directors of the corporation or by a duly authorized committee
thereof.
(b) Dividends payable on shares of Series A Preferred Stock
for any period greater or less than a full Dividend Period, shall be
computed on the basis of a 360-day year consisting of twelve 30-day
months and the actual number of days elapsed in the period.
Notwithstanding paragraph (a) of this Section 3, any dividends payable
on the shares of Series A Preferred Stock may be paid in additional
shares of Series A Preferred Stock at the option of the corporation.
The corporation shall pay such dividend by issuing to such holder of
Series A Preferred Stock additional shares of Series A Preferred Stock
having an aggregate initial liquidation preference equal to the amount
of cash dividends otherwise payable to such holder.
(c) No full dividends shall be declared or paid or set apart
for payment on the Preferred Stock of any series ranking, as to
dividends, on a parity with or junior to the Series A Preferred Stock
for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the
Series A Preferred Stock for all Dividend Periods terminating on or
prior to the date of payment of such full cumulative dividends. When
dividends are not paid in full, as aforesaid, upon the shares of Series
A Preferred Stock and any other series of Parity Stock, all dividends
declared upon shares of this Series and such other series of Parity
Stock shall be declared pro rata so that the amount of dividends
declared per share on the Series A Preferred Stock and such other
Parity Stock shall in all cases bear to each other the same ratio that
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accrued and unpaid dividends per share on the shares of Series A
Preferred Stock and such other Parity Stock bear to each other. Holders
of shares of Series A Preferred Stock shall not be entitled to any
dividend, whether payable in cash, property or stock, in excess of full
cumulative dividends, as herein provided, on the Series A Preferred
Stock. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series A
Preferred Stock which may be in arrears.
(d) So long as any shares of Series A Preferred Stock are
outstanding, no dividend (other than a dividend in Common Stock or in
any other stock ranking junior to this series as to dividends and upon
liquidation and other than as provided in paragraph (c) of this Section
3) shall be declared or paid or set aside for payment or other
distribution declared or made upon the Common Stock or upon any other
stock ranking junior to or on a parity with this Series as to dividends
or upon liquidation, nor shall any Common Stock or any other stock of
the corporation ranking junior to or on a parity with this Series as to
dividends or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any
such stock) by the corporation (except by conversion into or exchange
for stock of the corporation ranking junior to the Series A Preferred
Stock as to dividends and upon liquidation) unless, in each case, the
full cumulative dividends on all outstanding shares of Series A
Preferred Stock shall have been paid in cash or shares of Series A
Preferred Stock or declared and set aside for payment for all past
Dividend Periods.
4. VOTING RIGHTS.
(a) Except as otherwise expressly provided herein or as
required by law, the holders of each share of Series A Preferred Stock
shall not be entitled to vote on matters submitted to shareholders for
voting. However, the approval of holders of a majority of the
outstanding shares of Series A Preferred Stock shall be required prior
to the corporation's issuing any shares of a class of preferred stock
that ranks senior to the Series A Preferred Stock. The corporation may
not amend or alter any provision of this Statement of Rights and
Preferences without the approval of the holders of a majority of the
outstanding Series A Preferred Stock.
5. RIGHT TO CONVERT. Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the
date of issuance of such share at the office of the corporation or any
transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is equal to the Liquidation
Preference on the date of conversion divided by $14.24, as adjusted
pursuant to Section 5(e) below (the "Conversion Price").
(a) MECHANICS OF CONVERSION. To convert shares of Series A
Preferred Stock into shares of Common Stock, the holder of such shares
of Series A Preferred Stock shall (A) surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation
or of any transfer agent for such stock, (B) give written notice to the
3
<PAGE> 6
corporation at such office that it elects to convert the same, and (C)
state therein the name or names in which it wishes the certificate or
certificates for shares of Common Stock to be issued. The corporation
shall, as soon as practicable thereafter and at its expense, issue and
deliver to such holder a certificate or certificates for the number of
shares of Common Stock to which such holder is entitled. Such
conversion shall be deemed to have been made immediately prior to the
close of business on the date of surrender of the shares of Series A
Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such
shares of Common Stock on such date.
(b) 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, free of preemptive
rights, solely for the purpose of effecting the conversion of the
shares of Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Series A Preferred Stock; and 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 Series A Preferred Stock, the corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose, including,
without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to these Articles of
Incorporation.
(c) FRACTIONAL SHARES. No fractional share shall be issued
upon the conversion of any share or shares of Series A Preferred Stock.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series A Preferred Stock by a
holder thereof shall be aggregated for purposes of determining whether
the conversion would result in the issuance of any fractional share.
If, after the aforementioned aggregation, the conversion would result
in the issuance of a fraction of a share of Common Stock, the
corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the
same fraction of the fair market value per share as of the date of
conversion.
(d) NO IMPAIRMENT. The corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, share exchange, dissolution, issue or
sale of securities 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, including without limitation
the adjustments required under this Section 5, and will at all times in
good faith assist in the carrying out of all the provisions 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
Series A Preferred Stock set forth in this Section 5 against
impairment.
4
<PAGE> 7
(e) ADJUSTMENT TO CONVERSION PRICE. The Conversion Price
shall be adjusted as follows:
(i) If, at any time during the period when the Series
A Preferred Stock remains outstanding, the corporation shall
declare and pay on shares of Common Stock a dividend payable
in shares of Common Stock or shall split the then outstanding
shares of Common Stock into a greater number of shares, then
the number of shares of Common Stock which the holders of the
Series A Preferred Stock would receive upon conversion
thereof, as in effect at the time of taking of a record for
such dividend or at the time of such stock split, shall be
proportionately increased and the Conversion Price shall be
proportionately decreased, and conversely, if at any time the
corporation shall contract or reduce the number of outstanding
shares of Common Stock by combining such shares into a smaller
number of shares, then the number of shares which may be
purchased upon the conversion of the Series A Preferred Stock
at the time of such action shall be proportionately decreased
as of such time, and the Conversion Price shall be
proportionately increased.
(ii) Whenever the Conversion Price shall be adjusted
as provided in this Section 5(e), the corporation shall as
soon as practicable thereafter file at its principal office, a
statement signed by its Chief Financial Officer, showing in
reasonable detail the basis for such adjustment and the actual
Conversion Price that shall be in effect after such adjustment
and shall cause a copy of such statement to be sent to the
holders of the Series A Preferred Stock at their addresses on
the books and records of the corporation.
(f) CHANGES IN COMMON STOCK. In case at any time the
corporation shall initiate any transaction or be a party to any
transaction (including, without limitation, a merger, consolidation,
share exchange, sale, lease or other disposition of all or
substantially all of the corporation's assets, charter amendment,
recapitalization or reclassification of the Common Stock) in connection
with which the previously outstanding Common Stock shall be changed
into or exchanged for different securities of the corporation or
capital stock or other securities of another corporation or interests
in a non-corporate entity or other property (including cash) or any
5
<PAGE> 8
combination of the foregoing (each such transaction being herein called
a "Transaction"), then, as a condition of the consummation of the
Transaction, lawful, enforceable and adequate provision shall be made
so that the holders of Series A Preferred Stock shall be entitled to
receive upon conversion of their shares of Series A Preferred Stock at
any time on or after the consummation of the Transaction, in lieu of
the shares of Common Stock issuable upon such conversion prior to such
consummation, the securities or other property (including cash) to
which such holders of Series A Preferred Stock would have been entitled
upon consummation of the Transaction if such holders had converted
their shares of Series A Preferred Stock immediately prior thereto
(subject to adjustments from and after the consummation date as nearly
equivalent as possible to the adjustments provided for in this Section
5). The corporation will not effect any Transaction unless prior to the
consummation thereof each corporation or entity (other than the
corporation) which may be required to deliver any securities or other
property upon the conversion of Series A Preferred Stock as provided
herein shall assume, by written instrument delivered to the holders of
Series A Preferred Stock, the obligation to deliver to such holders
such securities or other property as in accordance with the foregoing
provisions such holders may be entitled to receive.
(g) OTHER ACTION AFFECTING COMMON STOCK. In case at any time
or from time to time the corporation shall take any action affecting
the Common Stock, other than an action described in Section 5(f)
hereof, then, unless in the opinion of the Board of Directors of the
corporation such action will not have a material adverse effect upon
the rights of the holders of Series A Preferred Stock (taking into
consideration, if necessary, any prior actions which the Board of
Directors deemed not to materially adversely affect the rights of the
holders), the conversion formula set forth in Section 5(a) shall be
adjusted in such manner and at such time as the Board of Directors of
the corporation may in good faith determine to be equitable in the
circumstances.
(h) Any shares of Series A Preferred Stock which shall at any
time have been converted pursuant to this Section 5 shall, after such
conversion, have the status of authorized but unissued shares of
preferred stock, without designation as to series until such shares are
once more designated as part of a particular series by the Board.
6. LIQUIDATION PREFERENCE.
(a) SERIES A PREFERRED STOCK. In the event of any liquidation,
dissolution or winding up of the corporation, either voluntary or
involuntary, the holders of the Series A Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any
of the assets or surplus funds of the corporation to the holders of any
stock ranking junior to the Series A Preferred Stock, an amount equal
to $1,000 per share plus the amount of accrued and unpaid dividends
thereon (the "Liquidation Preference")(such Liquidation Preference to
be adjusted for any combinations, consolidations, stock distributions
or stock dividends with respect to shares of the Series A Preferred
Stock). Upon the occurrence of any such liquidation, dissolution or
winding up of the corporation, the funds and assets of the corporation
shall be used first to repay all indebtedness and other obligations,
then to pay the liquidation preferences of any Senior Stock and then to
pay the liquidation preferences of Series A Preferred Stock and Parity
Stock. If the assets and funds to be distributed among the holders of
the Series A Preferred Stock and the holders of Parity Stock shall be
insufficient to permit the payment to such holders of the full
liquidation preference, then the entire assets and funds of the
corporation legally available for distribution (after payment of any
amounts due and owing to holders of any Senior Stock) shall be
distributed ratably among the holders of Series A Preferred Stock and
any Parity Stock based upon the relative liquidation preferences of the
Series A Preferred Stock and shares of Parity Stock then held by them.
6
<PAGE> 9
Any funds or assets legally available for distribution after payment in
full of the liquidation preferences of the Series A Preferred Stock and
any Parity Stock shall be distributed among the holders of Junior Stock
in accordance with the liquidation rights of the Junior Stock.
(b) CONSOLIDATION, MERGER, ETC. NOT A LIQUIDATION. The
consolidation or merger of the corporation with or into any other
entity, the acquisition of the capital stock of the corporation in a
share exchange or the sale, lease or other disposition of all or
substantially all of the assets, property or business of the
corporation shall not be deemed to be a liquidation, dissolution or
winding up of the corporation within the meaning of this Section 6.
(c) VALUATION OF SECURITIES. Any securities to be distributed
pursuant to this Section 6 in a liquidation, dissolution or winding up
of the corporation shall be the fair market value thereof, as
determined in good faith by the Board of Directors of the corporation.
(d) NOTICE. Written notice (the "Notice") of any such
liquidation, dissolution or winding up of the corporation within the
meaning of this Section 6, which states the payment date, the place
where said payments shall be made and the date on which conversion
rights (as defined in Section 5) terminate as to such shares (which
shall be not less than 20 days after the date such notice is given),
shall be given by first class mail, postage prepaid, or by telecopy,
facsimile or recognized overnight courier, not less than 30 nor more
than 60 days prior to the payment date stated therein, to the then
holders of record of Series A Preferred Stock and Common Stock, such
Notice to be addressed to each such holder at its address as shown on
the records of the corporation.
7. REDEMPTION RIGHTS.
(a) The corporation shall have the right at any time after
March 1, 2002 to redeem, out of funds legally available therefor, any
outstanding shares of Series A Preferred Stock, in whole or in part,
for a redemption price equal to the Liquidation Preference per share of
the Series A Preferred Stock (calculated as if the corporation
liquidated on the date of redemption).
(b) In the event that fewer than all the outstanding Series A
Preferred Stock are to be redeemed, except as otherwise provided by
law, the number of shares to be redeemed shall be determined by the
Board and the shares to be redeemed shall be determined by lot or pro
rata as may be determined by the Board or by any other method as may be
determined by the Board in its sole discretion to be equitable.
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<PAGE> 10
(c) In the event the corporation shall redeem shares of Series
A Preferred Stock, notice of such redemption shall be given by first
class mail, postage prepaid, mailed not less than 30 nor more than 60
days prior to the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as the same appears on
the stock register of the Corporation. Each such notice shall state:
(i) the redemption date; (ii) the number of shares of Series A
Preferred Stock to be redeemed and, if fewer than all the shares held
by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the redemption price; and (iv) the
place or places where certificates for such shares are to be
surrendered for payment of the redemption price.
(d) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the corporation in
providing money for the payment of the redemption price), the redeemed
shares of Series A Preferred Stock shall no longer be deemed to be
outstanding, and all rights of the holders thereof as stockholders of
the corporation (except the right to receive from the corporation the
redemption price) shall cease. Upon surrender in accordance with said
notice of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board shall so require and
the notice shall so state), such shares shall be redeemed by the
corporation at the redemption price aforesaid. In case fewer than all
the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without
cost to the holder thereof.
(e) Any shares of Series A Preferred Stock which shall at any
time have been redeemed shall, after such redemption, have the status
of authorized but unissued shares of preferred stock, without
designation as to series until such shares are once more designated as
part of a particular series by the Board.
<PAGE> 1
EXHIBIT 10.01
MASTER AGREEMENT
This Master Agreement (the "Agreement") is made and entered into as of
this 18th day of February, 2000 (the "Effective Date"), by and between Summus,
Ltd., a Delaware corporation ("Summus"), and High Speed Net Solutions, Inc., a
Florida corporation ("HSNS"):
1. Summus and HSNS have previously entered into a Marketing
License Agreement ("MLA") dated in February of 1999 and
certain Related Agreements. "Related Agreements" means
agreements between Summus and HSNS related to or incorporated
by the MLA and agreements based on either Summus' or HSNS's
rights and obligations under the MLA, including, but not
limited to, the Letter Agreement incorporated by the MLA and
any agreements relating to or arising from opportunities to
sell or license products or services to Samsung.
2. The MLA contemplated that HSNS will act as a reseller of
Summus products. The parties have concluded that it would be
to their mutual benefit, instead, for HSNS to primarily use
Summus products and services to conduct a service bureau
business and for HSNS and Summus to share revenues derived
from each party's business activity with Summus' products. As
a service bureau, HSNS will not act as a reseller of Summus'
products.
3. In order to enable the proposed service bureau business of
HSNS and proposed revenue sharing between the parties, Summus
and HSNS hereby agree to enter into the Software License
Agreement, Software Maintenance Agreement, and Revenue Sharing
Agreement attached to this Agreement as Exhibits A, B, and C
respectively (collectively, the "New Agreements"). Terms not
otherwise defined herein shall have the meanings specified in
the New Agreements.
4. Upon execution of the New Agreements, the MLA and the Related
Agreements shall terminate and have no further force or
effect. Neither party shall have any obligation of further
performance under the MLA or the Related Agreements.
5. "License Fee Credit" - shall mean the amount of One Million
Dollars ($1,000,000) as a one-time credit granted Customer by
Licensor in recognition of payments made under the MLA. The
License Fee Credit shall be applied against license fees due
under the Software License Agreement.
6. "Revenue Based Fee Credit" - shall mean the amount of One
Million Dollars ($1,000,000) as a one-time credit granted the
Customer by Licensor in recognition of payments made under the
MLA. The Revenue Based Fee Credit shall be applied against
Revenue Based Fee payments due from Customer to Licensor under
the Software License Agreement.
<PAGE> 2
7. "Annual Maintenance Fee Credit" - shall mean the amount of One
Hundred Fifty Thousand Dollars ($150,000) as a one-time credit
granted to the Customer by Licensor in recognition of payments
made under the MLA. The Annual Maintenance Fee Credit may be
applied against payments due from Customer to Licensor under
the Software Maintenance Agreement.
8. "Customer Credit" - shall mean any amounts to be paid to the
Customer by the Licensor as a result of the Revenue Sharing
Agreement, Exhibit C, in excess of amounts to be paid to the
Licensor by the Customer as a result of the Revenue Fee in the
Software License Agreement, Exhibit A. Such Customer Credit
may be used at the discretion of the Customer to pay any
charges due to Licensor in connection with the New Agreements.
9. Any portion of the Customer Credit that is not credited
against payments due to Licensor shall be available to
Customer to be applied against purchase of other products
and/or services of Licensor. In the event that the Software
License Agreement is terminated by Customer for material
failure of Licensor to deliver (including the cure period of
60 days) the products as described in Exhibit A.1, the License
Fee Credit, Revenue Based Fee Credit, and Annual Maintenance
Fee Credit shall increase by 1.5% per month for up to twelve
(12) months or until such time as Customer selects other
products and/or services of Licensor to be paid through the
application of the Credit, whichever occurs first. Customer
and Licensor shall cooperate to select such other products or
services of Licensor promptly in order to apply the credits
without undue delay, but Customer shall not be required to
apply the credits against products and/or services that are
not needed or useful in Customer's business.
10. Licensor will provide to Customer additional resource support
through provision of ancillary services, in an approximate
fair market value of Two Hundred Fifty Thousand Dollars
($250,000). The ancillary services may consist of, at the
discretion of Licensor, cash payments, credits against charges
due for services under the New Agreements, computer hardware,
third party software licenses, or other services requested by
Customer. Licensor shall provide the ancillary services
reasonably requested by Customer in prompt commercial fashion.
The total value of all ancillary services provided, whether
delivered in cash, services, or products, shall be deemed to
be an advance amount to be offset by payments due Customer
from Licensor under the Revenue Sharing Agreement and shall be
accounted for without interest or any other charges
whatsoever. To the extent any Customer Credit amounts are
available, Customer may at its sole discretion apply such
amounts to reduce the ancillary service advance amount total.
11. This Agreement shall be construed and enforced in accordance
with the laws of the State of North Carolina, but without
giving effect to its laws or rules relating to conflicts of
laws. In the event of any dispute or controversy arising under
or in connection with this Agreement or any New Agreement, the
dispute resolution procedures set forth in Exhibit A shall be
followed
<PAGE> 3
12. Any dispute or controversy arising under or in connection with
this Agreement shall be settled in Wake County, North
Carolina. The parties hereby generally submit to the in
personam jurisdiction of the Superior Court of the State of
North Carolina and the Federal District Court for the Eastern
District of North Carolina located in Wake County.
13. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14. This Agreement and the New Agreements contain the full
understanding of the parties and supersede all prior or
contemporaneous agreements and understandings, written or
oral, between the parties with respect to the subject matter
of this Agreement; and there are no representations,
warranties, agreements or understandings other than those
expressly contained herein. No alteration, modification,
variation or waiver of this Agreement, or any of the
provisions hereof shall be effective unless executed by both
parties in writing.
SUMMUS, LTD. HIGH SPEED NET SOLUTIONS, INC.
By: /s/ Dr. Bjorn Jawerth By: /s/ Andrew L. Fox
(Signature) (Signature)
Date: March 13, 2000 Date: February 18, 2000
Name: Dr. Bjorn Jawerth Name: Andrew L. Fox
Title: CEO Title: Acting President and
CEO, Executive Vice
President
<PAGE> 4
EXHIBIT A
SOFTWARE LICENSE AGREEMENT
<PAGE> 5
EXHIBIT B
SOFTWARE MAINTENANCE AGREEMENT
<PAGE> 6
EXHIBIT C
REVENUE SHARING AGREEMENT
<PAGE> 1
EXHIBIT 10.02
SOFTWARE LICENSE AGREEMENT
This Software License Agreement (the "Agreement") is made and entered into as of
this 18th day of February, 2000 (the "Effective Date"), by and between Summus,
Ltd., a Delaware corporation ("Licensor"), and High Speed Net Solutions, Inc., a
Florida corporation ("Customer"), with reference to the following facts and
circumstances:
A. Licensor has developed certain software programs and anticipates developing
certain software programs and will promote licensing of such programs through
the distribution of materials substantially in the form as those attached to
this Agreement as Exhibit A.1 ("Description Materials"). In reliance on such
Description Materials, Customer desires to license such software.
B. Licensor and Customer envision a close working relationship with respect to
Licensor's software such that Customer anticipates regularly: (i) acting as a
beta-version user of Licensor's software; (ii) providing prospective licensees
for Licensor's software; and (iii) providing references for or demonstrations of
Licensor's software. Licensor desires to create an incentive for Customer to
participate in these activities and, as such, Customer desires that Licensor
share with Customer revenues received from third party users of Licensor's
software and pay Customer for certain agency activities. To effect these
incentives, Licensor and Customer have entered into a Revenue Sharing Agreement
simultaneously with executing this Agreement.
C. Licensor desires to grant certain software license rights to Customer in
return for certain fees and on the terms and conditions contained in this
Agreement.
NOW THEREFORE, based on the above premises and in consideration of the mutual
covenants and agreements contained herein, the parties agree as follows:
1. DEFINITIONS. As used herein, the following terms, when used in the
singular, plural, or possessive form shall have the respective meanings set
forth below:
1.1 "Designated Activities" shall mean operating the MaxxSystem, any of the
MaxxSystem functional components, or the Reader Software, either alone or in any
combination, to perform any of the activities described by Exhibit A.1 or the
functional equivalents thereof, for clients/customers of Customer or for
Customer's own benefit, including but not limited to, creating content for,
developing, sending, tracking, viewing, receiving, reading cataloging,
distributing and streaming Rich Media Messages or other digital content as may
be supported, and distributing Reader Software to clients/customers and members
of the public.
1.2 "Documentation" shall mean the complete set of operating manuals necessary
to enable Customer to properly use the Licensed Software. The initial
documentation to be provided by Licensor shall include a Users Manual and a
<PAGE> 2
Reference Manual for each of the components of the Licensed Server Software and
Reader Software. Such manuals may be provided in electronic form as help files
or in other electronic format.
1.3 "Fees" shall mean the total of the following fees (all as defined either in
this Section 1.3 or below in the text of this Agreement, including Exhibits):
"License Fee," "Software Maintenance Fee," and "Revenue Based Fee."
1.4 "License Fees" shall have the meaning given in Section 3.1.
1.5 "Licensed Server Software" shall mean the Licensed Software other than the
Reader Software.
1.6 "Licensed Software" shall mean the Licensed Server Software and Reader
Software collectively, consisting of the first generally available version of
the MaxxSystem program, as more fully described on Exhibit A, in Object Code
form, and any released New Versions provided under this Agreement.
1.7 "New Versions" shall mean any versions of the Licensed Software that
Licensor releases after the Effective Date of this Agreement including (a) error
corrections, maintenance releases, and major and minor releases and products
that supersede the Licensed Software; (b) any migration aids for users migrating
from the prior version of the Licensed Software; and (c) any Documentation
related to either (a) or (b). A product shall be considered to supersede the
Licensed Software if (i) Licensor ceases actively marketing the Licensed
Software, (ii) persons inquiring about licensing the Licensed Software are
offered the new product instead, and (iii) the new product handles creation
and/or delivery of Rich Media Messages.
1.8 "Object Code" shall mean the code that can be executed directly or
indirectly by a computer's central processing unit, which may include without
limitation such things as compiled machine readable binary code, human readable
scripts, and interpreted code or other code that does not need to be compiled
before execution. Object Code shall not include code in human-readable form that
would normally be compiled before execution on a computer.
1.9 "Premier Partner" shall mean a customer, including Customer, with whom we
envision a close working relationship and with whom the Licensor desires to
create incentives to participate in certain activities to such as beta testing
or demonstration of the Licensed Software. The incentives may include certain
exclusive and non-exclusive marketing benefits or payments.
1.10 "Quarterly Period" shall mean each calendar quarter (i.e., a period of
three (3) consecutive calendar months commencing on January 1, April 1, July 1
or October 1 of each year) during the term of this Agreement, with the exception
of the first Quarterly Period, which shall commence on the Effective Date and
end on the last day of that calendar quarter. The last Quarterly Period shall
end on the date of expiration or termination of this Agreement, thereby possibly
comprising fewer than three (3) months.
<PAGE> 3
1.11 "Reader Software" shall mean any version of any part or component of the
MaxxSystem program or a separate program designed to be used in conjunction with
MaxxSystem or inter-operate with MaxxSystem, in Object Code form and any
released New Versions and/or Software Updates, that is: (i) distributed or
intended to be distributed by the Licensed Server Software with a Rich Media
Messages or other digital content as may be supported; (ii) is downloaded or
sent from the Licensed Server Software to a remote computer or
internet-connected device for execution in connection with viewing or
interacting with a Rich Media Messages or other digital content as may be
supported; or (iii) installable or required to be installed on the recipient's
computer or internet-connected device to enable the recipient of the Rich Media
Messages to view Rich Media Content, including but not limited to a 'thin' or
'thick' client player, any self-extracting executable files with embedded Rich
Media Content, any plug-ins or applets, or any similar viewing technology.
1.12 "Related Agreements" shall mean agreements between Licensor and Customer
related to or incorporated by the MLA and agreements based on either Licensor or
Customer's rights and obligations under the MLA, including, but not limited to,
the Letter Agreement incorporated by the MLA and any agreements relating to or
arising from the Samsung opportunity.
1.13 "Revenue Based Fee" shall have the meaning given in Section 3.2 of this
Agreement.
1.14 "Rich Media Content" shall mean any visual or graphic or multi-media
content and user interaction metaphor beyond a plain ASCII text representation
of information, including but not limited to video, still images of any format
or type, audio, streaming content, compressed content, animation, and color
graphics, any of which may contain interactive controls, user response/selection
targets and hotspots, dialog and information display capabilities, voice
response capability, and similar user interaction features.
1.15 "Rich Media Message" shall mean electronic Rich Media Content delivery
transmitted in any manner and through any portion of the Internet or any
entities' internal network that delivers and presents Rich Media Content for the
intended recipient.
1.16 "Software Maintenance Agreement" shall mean the agreement for maintenance
of the Licensed Software entered into between Customer and Licensor concurrently
with this Agreement.
1.17 "Software Maintenance Fee" shall mean the Maintenance Fee payable under the
Software Maintenance Agreement.
1.18 "Source Code" shall mean the human-readable code that produces the compiled
machine readable form of Object Code.
1.19 "Use Level Percentage" shall mean ten percent (10%).
1.20 "Virus" shall mean any computer code intentionally designed to disrupt,
disable, harm, or otherwise impede in any manner, including aesthetical
disruptions or distortions, the operation of the computer program, or any other
associated software, firmware, hardware, or computer system (including local
area or wide-area networks), in a manner not intended by its creator(s).
<PAGE> 4
1.21 "Volume of Use" shall mean unlimited use of the Licensed Software for the
Designated Activities
2. LICENSE.
2.1 LICENSED SERVER SOFTWARE. Subject to Customer fulfilling its
obligations hereunder, Licensor hereby grants to Customer a world-wide,
non-exclusive, irrevocable (subject to the termination provisions set forth
herein) license (1) to use the Licensed Server Software in Object Code form
only, and Documentation to perform the Designated Activities at the Volume of
Use; (2) to use the Licensed Server Software and the Documentation in connection
with backup and disaster recovery procedures in the event of destruction or
corruption of the Licensed Server Software or disasters or emergencies which
require Customer to initiate disaster recovery procedures; and (3) to make,
reproduce and internally distribute copies of the Licensed Server Software and
related Documentation, either electronically or otherwise, as reasonably
required to support Customer's use of the Licensed Server Software for backup
purposes. Customer shall not have the right or license to make any derivative
works (within the meaning of 17 U.S.C 101) incorporating or based on any of the
Licensed Server Software, or any portion thereof, except as may be necessary for
the use of the Licensed Server Software for its normal, intended use.
2.2 READER SOFTWARE LICENSE. Subject to the Customer fulfilling its
obligations hereunder, Licensor hereby grants to Customer a world-wide,
non-exclusive, non-transferable irrevocable license to (1) to use the Reader
Software, in Object Code form only, to perform the Designated Activities at the
Volume of Use; (2) to use the Reader Software and the Documentation in
connection with backup and disaster recovery procedures in the event of
destruction or corruption of the Reader Software or disasters or emergencies
which require Customer to initiate disaster recovery procedures; (3) to make,
reproduce and distribute to the public-at-large an unlimited number of copies of
the Reader Software and any related Documentation, either electronically or
otherwise, to the extent necessary to fully utilize the license rights granted
in (1) through (2); and (4) to authorize third party vendors to make, reproduce
and distribute to the public-at-large an unlimited number of copies of the
Reader Software and any related Documentation, either electronically or
otherwise, together with the products of such third party vendors. Customer
shall not have the right or license to make any derivative works (within the
meaning of 17 U.S.C 101) incorporating or based on any of the Reader Software,
or any portion thereof, except as may be necessary for the use of the Reader
Software for its normal, intended use.
2.3 NEW VERSIONS. New Versions will be provided to Customer under the
terms of the Software Maintenance Agreement. When provided to Customer under the
Software Maintenance Agreement, New Versions will be treated as Licensed
Software under this Agreement.
<PAGE> 5
2.4 OUTSOURCING. Customer shall not have the right to sublicense to
third parties any or all of the license rights granted to Customer hereunder;
provided, however, that Customer may outsource to a third party performance of
Designated Activities for Customer under Customer's license.
2.5 SOFTWARE PLATFORM PORTABILITY. Customer shall have the right, under
the grant of license rights in this Article 2, to operate the Licensed Software
on any operating systems for which Licensor makes a generally available version
of the Licensed Software generally available to its customers. Customer shall
have the right to receive the Licensed Software version for each such operating
system. At Customer's request Licensor shall promptly deliver the Licensed
Software version for such operating systems to Customer.
2.6 READER SOFTWARE MODIFICATIONS. Upon request of Customer, Licensor
shall perform in prompt commercial fashion modifications of the Reader Software
requested by Customer in order to allow the Reader Software to function in
integrated fashion with the software products of a customer of Customer.
Customer shall pay Licensor's standard consulting fees for such service, subject
to the Most Favored Customer clause of this Agreement.
3. LICENSE FEE.
3.1 LICENSED SOFTWARE. In partial consideration of licenses granted
hereunder, Customer shall pay to Licensor a one- time license fee of One Million
Dollars ($1,000,000) at the Volume of Use (the "License Fee").
3.2 REVENUE BASED FEE. In addition to the License Fee, Customer shall
pay to Licensor an ongoing use fee (the "Revenue Based Fee") for the Licensed
Software in an amount equal to the greater of: (a) the gross revenues generated
by Customer with the Licensed Software multiplied by the Use Level Percentage;
or (b) the amount equal to Three Cents (3(cent)) multiplied by the number of
Rich Media Messages actually delivered to recipients. The Customer shall
reconcile accounts each Quarterly Period and shall pay the Revenue Based Fee
within one month following the end of the Quarterly Period. The Customer shall
have the right at its sole discretion to apply any Customer Credit amounts in
lieu of paying the Revenue Based Fee until any such Customer Credit as defined
in the Master Agreement amounts are exhausted.
4. DELIVERY.
4.1 DELIVERABLES; TIMETABLE. For each of the components of MaxxSystem,
as described in Exhibit A.1, on the "Release Dates" described in Exhibit A.3
Licensor shall deliver to Customer the Licensed Software and Documentation in a
form and with sufficient reliability to constitute a commercial release of the
Licensed Software ("Deliver" or "Delivery").
4.2 OBLIGATION AND RIGHT TO TEST. If before the Release Date Licensor
requests Customer to perform tests of the software in alpha version, and tests
of the software in beta version, Customer shall use its best efforts to perform
<PAGE> 6
such tests, provided, however, Customer shall not be required to perform more
than one such test in a one (1) month period. Regardless of whether Licensor
requests Customer to perform such tests, Customer shall have the right to
perform one (1) test of a beta version of the Licensed Software before the
Release Date. Customer shall promptly notify Licensor in writing of the results
of any tests performed pursuant to this Section 4.2. During such "beta" test
period, Licensor shall dedicate Level III support resources to Customer;
4.3 DELIVERY DELAY. In the event that Licensor fails to Deliver each
component of the Licensed Software within 90 days of the date stipulated in
Exhibit A.3, , Licensor shall be deemed in material breach of this Agreement and
Customer shall have the option at its sole discretion to terminate this
Agreement.
5. MARKETING BENEFITS.
5.1 TIME TO MARKET. In consideration of the Customer being a Premier
Partner:
o Licensor shall provide the "beta" version of MaxxSystem, under
licensing instructions appropriate to beta testing, to
Customer for a period of not less than 30 days prior to
production (general) availability. During such "beta" test
period, Licensor shall dedicate Level III support resources to
Customer;
o Licensor shall use its commercially reasonable efforts to
cause all other licensees of the Licensed Software to be
limited as to the date upon which such licensees can publicly
announce their use of the Licensed Software. Licensor shall
further provide Customer with the right and opportunity to
publicly announce Customer's use of the Licensed Software,
such announcement being on or before a date two weeks in
advance of the date upon which Licensor allows such other
licensees to announce their use.
6. COMPLIANCE WITH LAWS. Licensor shall modify the Licensed Software on a
timely basis in the event that any change in the laws, rules, or
regulations reflected in any features of the Licensed Software make
such modification necessary and shall provide such modification to
Customer as a New Version.
7. TERMINATION OF MLA AND RELATED AGREEMENTS.
7.1 TERMINATION OF PRIOR AGREEMENTS. By this Agreement, Licensor and
Customer specifically terminate the MLA and the Related Agreements and all
obligations, rights and interests of the parties thereunder; provided, however,
that provisions related to confidentiality and limitation of liability shall
survive.
<PAGE> 7
8. PROPRIETARY RIGHTS.
8.1 SCOPE. All right, title, and interest to the Licensed Software
shall remain with Licensor and Customer obtains only the license as specified in
Article 2 hereof.
8.2 LEGENDS. Customer shall not remove, deface, or otherwise obscure
any copyright, patent, trademark, service mark, or other proprietary legend
("Proprietary Legends") on either the Licensed Software or Documentation.
Furthermore, Customer shall include such Proprietary Legends in any
reproductions of either the Licensed Software or Documentation that Customer is
permitted to make. Customer's obligation under this Section 8.2 shall survive
the expiration or termination of this Agreement for any reason.
9. INDEMNIFICATION.
9.1 SCOPE. Licensor shall indemnify and hold harmless Customer, and its
directors, officers, employees, agents, successors, assigns, licensees and
customers against any and all claims, penalties, losses, liabilities, judgments,
settlements, awards, damages and costs (including but not limited to reasonable
legal fees, expert witness fees and expenses) arising out of or related to any
claim of patent, trademark or copyright infringement and claims of unfair
competition or trade secret violation, and any other claim arising out of the
sale, possessions or use of the Licensed Software (collectively "Claims") and
will reimburse Customer from time to time for any reasonable legal fees, expert
witness fees or other expenses (including the reasonable value of the services
of in-house counsel) reasonably incurred by Customer in connection with
investigating any such action or Claim as such expenses are incurred.
Customer shall indemnify and hold harmless Licensor, and its directors,
officers, employees, agents, successors, assignees, licensees and customers
against any and all claims, penalties, losses, liabilities, judgements,
settlements, awards, damages and costs (including but not limited to reasonable
legal fees, experts witness fees and expenses) arising out of or related to its
use of the Licensed Software, except for Claims covered by the preceding
paragraph, unless such Claims are Excepted Claims (as defined below). Customer
expressly indemnifies Licensor for any and all claims, penalties, losses,
liabilities, judgements, settlements, awards, damages, and costs (including but
not limited to reasonable legal fees, experts witness fees and expenses) arising
our of or related to any claim of patent, trademark or copyright infringement
and claims of unfair competition or trade secret violation, and any other claim
arising out of the development, sale, possession, use or distribution of
MaxxNote or MaxxAd content, Customer's web site content and the like. Customer
will reimburse Licensor from time to time for any legal fees, expert witness
fees or other expenses (including the reasonable value of the services of
in-house counsel) reasonably incurred by Licensor in connection with
investigating any such action or claim as such expenses are incurred.
9.2 ADDITIONAL INDEMNITY TERMS. Moreover, Licensor shall defend, at its
expense, any action or proceeding brought against Customer based upon a Claim,
including the payment of reasonable attorney's fees, expert witness fees and
costs of suit incurred thereby. In defending or settling any such Claim,
<PAGE> 8
Licensor may elect to (i) obtain the right of continued use of Licensed
Software, or part thereof, which is alleged to be infringing, or (ii) replace or
modify the Licensed Software, or part thereof, so as to avoid such Claim and
thereupon Customer shall cease to use the version of the Licensed Software, or
part thereof, that was replaced or modified. Licensor will not be obligated to
indemnify, defend or settle any Claim resulting from or related to any
additions, modifications, or changes to the Licensed Software made by Customer,
its affiliates, successors or assigns, or resulting from the use of the Licensed
Software with any third party materials (collectively, the "Excepted Claims").
Licensor shall have the option to control such defense with counsel of its
choice, but shall not settle any such Claim without the consent of Customer,
which shall not be unreasonably withheld, unless such settlements involve only
the payment of money damages for which Customer is fully indemnified. Customer
shall provide reasonable cooperation, at Licensor's expense, to Licensor with
respect thereto. Customer may participate in such defense at its own expense
subject at all times to Licensor's right to control the defense of the
proceeding.
9.3 FAILURE OF INDEMNIFICATION PROVISIONS. If for any reason the
foregoing indemnification is unavailable to Customer or insufficient to hold it
harmless, then Licensor shall reimburse Customer for all amounts paid or payable
by Customer as a result of such Claims, which shall include, for example, the
costs of defending against any Claims because of Licensor's failure to provide
the defense specified in Section 9.2 above.
9.4 DUTIES. Each party's right to indemnification under Sections 9.1
and 9.2 above is conditioned upon the indemnified party (i) promptly notifying
the indemnifying party in writing of any Claim, (ii) providing the indemnifying
party with all reasonable assistance for the defense or settlement of such
Claims, (iii) with respect to Claims, Customer granting to Licensor reasonable
authority and control for the defense or settlement of such Claims, and (iv)
each party fully observing all material terms and conditions of this Agreement.
9.5 WORK AROUND. With respect to a Claim, if a final injunction is
obtained against Customer, Licensor will, at Licensor's option and expense,
either (i) procure for Customer the right to continue using the Licensed
Software or (ii) replace or modify the infringing portion of the Licensed
Software so that it becomes non-infringing yet functionally equivalent, or, if
the foregoing options are not available without undue expense, or (iii) refund
all monies paid by Customer to Licensor with respect to that portion of the
Designated Activities affected by such injunction under this Agreement; provided
that any such procurement, modification or refund by Licensor will not relieve
it of any other liability under this Agreement.
10. WARRANTIES.
10.1 TITLE. Licensor represents and warrants that it has full title to
and ownership of the Licensed Software, Reader Software, and Documentation and
all intellectual property rights embodied in or used in connection therewith,
free and clear of liens (except those that may be established by this
Agreement), claims and encumbrances, and that it has full power and authority to
grant the licenses in Article 2 above.
<PAGE> 9
10.2 CONFORMITY TO REPRESENTATIONS. Licensor represents and warrants
that the Licensed Software is in material compliance with all specifications and
all other statements or claims found in the Description Materials of Licensor
given in Exhibit A.1, and found in the Documentation. The Documentation fully
describes the proper procedure for using the Licensed Software and is
comprehensive enough to enable a person of average intelligence to operate the
Licensed Software in an efficient manner.
10.3 WARRANTY. Licensor represents and warrants that the Licensed
Software shall operate and function in material compliance with the
Documentation. Notwithstanding the foregoing, Licensor makes no warranty that
all errors have been or can be eliminated from the Licensed Software.
10.4 PHYSICAL MEDIA. Licensor represents and warrants each copy of the
Licensed Software, including New Versions, is and will be free from physical
defects in the media that tangibly embodies the Licensed Software for a period
of ninety (90) days after delivery.
10.5 VIRUS FREE; NO DISABLING CODE. Licensor hereby represents,
warrants and covenants that the Licensed Software delivered under this Agreement
shall contain no Viruses. Licensor hereby represents, warrants and covenants
that the Licensed Software does not and will not contain any computer code that
would disable the Licensed Software or impair in any way its operation based on
the elapsing of a period of time, exceeding an authorized number of copies,
advancement to a particular date or other numeral, or other similar self-
destruct mechanisms (sometimes referred to as "time bombs", "time locks", or
"drop dead" devices) or that would permit Licensor to access the Licensed
Software to cause such disablement or impairment (sometimes referred to as a
"trap door" device). Licensor agrees that in the event of a breach or alleged
breach of this Section 10.5 that Customer shall not have an adequate remedy at
law, including monetary damages, and that Customer shall consequently be
entitled to seek a temporary restraining order, injunction, or other form of
equitable relief against the continuance of such breach, in addition to any and
all remedies to which Licensor shall be entitled.
10.6 MOST FAVORED CUSTOMER. Licensor represents and warrants that,
taken in the aggregate, all prices, charges, benefits, credits, warranties and
terms granted to Customer pursuant to this Agreement are comparable to, or more
favorable to, Customer than the prices, charges, benefits, credits, warranties
and terms in the aggregate that Licensor has heretofore offered to any person or
entity for the Licensed Software, maintenance for the Licensed Software, and
Documentation covered by this Agreement. If at any time during this Agreement,
Licensor shall contract with any other person or entity for (a) license fees for
service bureau use of Licensed Software; (b) maintenance fees for maintenance of
licensed software; (c) warranty and/or indemnity terms; or (d) prices, charges,
benefits, warranties or other terms taken in the aggregate; that are more
favorable to such person or entity than the corresponding provisions of this
Agreement or the Software Maintenance Agreement, Licensor shall notify Customer
of such more favorable provisions and Customer, at its option, may require that
such more favorable provisions be available to Customer under this Agreement or
the Software Maintenance Agreement.
<PAGE> 10
10.7 NO OTHER WARRANTIES. OTHER THAN AS PROVIDED IN THIS ARTICLE 10,
LICENSOR DISCLAIMS ALL OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, WITH RESPECT TO THE LICENSED SOFTWARE, SOFTWARE UPGRADES, AND THE
DOCUMENTATION. 11. LIMITATION OF LIABILITY.
11.1 EXCLUDED LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY, ITS AFFILIATES, OR ANY THIRD PARTY BENEFICIARY, FOR CONSEQUENTIAL DAMAGES
OF ANY KIND (INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS,
BUSINESS INTERRUPTION, OR LOSS OF BUSINESS INFORMATION), REGARDLESS OF WHETHER
THE PARTY LIABLE OR ALLEGEDLY LIABLE WAS ADVISED, HAD REASON TO KNOW, OR IN FACT
KNEW OF THE POSSIBILITY THEREOF.
12. ESCROW AGREEMENT.
12.1 FORM OF ESCROW AGREEMENT. The parties hereto will promptly upon
the execution of this Agreement enter into an escrow agreement in a form
substantially similar to the one attached to this Agreement as Exhibit A.4
("Escrow Agreement") with Fort Knox Escrow Services as an escrow agent.
13. CONFIDENTIALITY. This Article 13 sets forth the procedures by which
information regarded as confidential by one party hereto (a "Disclosing Party")
may be disclosed to the other party hereto (the "Receiving Party").
13.1 GENERAL REQUIREMENTS AND EXCLUSIONS. During the term of this
Agreement and at all times thereafter, the parties will not, except as permitted
by the terms of this Agreements, disclose or use, either for itself or for the
benefit of any third party (whether in competition with Licensor of Customer or
otherwise), any confidential information of the other party or its business or
affairs, nor will any party assist any person or entity other than the
Disclosing Party to secure any benefit from such confidential information. Any
oral, written, graphic, or electronically transmitted information not generally
available to the public shall be construed as confidential for purposes of this
Agreement, which information shall include, without limitation, information
relating to a Disclosing Party's products, processes, techniques, technology,
formulas, research data, passwords, passcodes, user identification numbers,
e-mail addresses, programming methods, know-how, trade secrets, customers and
suppliers, information relating to sales and profits, other financial data, and
the terms and conditions of this Agreements. All such information shall be
collectively referred to herein as "Confidential Information." The provisions of
this paragraph, however, shall not prevent the Receiving Party from use or
disclosure of information (i) as necessary in the ordinary course of such
party's performance under this Agreement, (ii) that is in the public domain
(other than information in the public domain as a result of a violation of this
Agreement by the Receiving Party), (iii) that the Receiving Party can
<PAGE> 11
demonstrate that it acquired outside of its affiliation with the disclosing
Party from a third party in rightful possession of such information and who was
not prohibited from disclosing such information, or (iv) disclosure of which is
required by law or court order. The parties acknowledge that the Object Code of
generally available versions of the Licensed Software are not required to be
treated as Confidential Information, but that Object Code of versions not
generally available to the public of Licensed Software will be Confidential
Information. In the event that the Receiving Party is requested or required (by
oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose Confidential Information, the Receiving Party will notify the
Disclosing Party promptly of such request or requirement so that the Disclosing
Party may seek an appropriate protective order, and if, in the absence of a
protective order, the Receiving Party is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, the Receiving Party may disclose Confidential Information to such
tribunal; provided, however, that the Receiving Party shall use its best efforts
to obtain an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed. Customer shall be entitled to file this Agreement as an exhibit to
one or more filings with the SEC, as recommended by its counsel, in which case
Customer shall consult with Licensor concerning the redaction of terms of this
Agreement under a confidentiality request associated with such filing, but the
implementation of any such redaction shall be at the SEC's discretion. The
obligation of confidentiality stated above shall survive termination of this
Agreement.
13.2 OUTSOURCERS. Notwithstanding Section 13.1 above, Customer shall
have the right to discuss the scope of the license granted by Licensor under
this Agreement and the maintenance obligations of Licensor under the Software
Maintenance Agreement with any third party that potentially may perform
information processing services for Customer.
13.3 NO UNAUTHORIZED COPYING. Except as may be otherwise permitted by
this Agreement, the Receiving Party shall not copy, duplicate, reverse engineer,
reverse compile, disassemble, record, or otherwise reproduce any part of the
Disclosing Party's Confidential Information or any of the Licensed Software, nor
attempt to do any of the foregoing, without the prior written consent of the
Disclosing Party. Any tangible embodiments of the Disclosing Party's
Confidential Information that may be generated by a Receiving Party, either
pursuant to or in violation of this Agreement, will be deemed to the sole
property of the Disclosing Party and fully subject to the obligation of
confidence set forth in this Article 13.
13.4 NO REMOVAL OF PROPRIETARY LEGENDS. No Receiving Party shall
remove, obscure, or deface any proprietary legend relating to the Disclosing
Party's rights, on or from any tangible embodiment of any of the Disclosing
Party's Confidential Information, without the Disclosing Party's prior written
consent.
13.5 REPORTS OF THIRD-PARTY MISAPPROPRIATION. A Receiving Party shall
immediately report to the Disclosing Party any attempt by any third party of
which the Receiving Party has knowledge to use or disclose any of the Disclosing
Party's Confidential Information without authorization from the Disclosing
Party.
<PAGE> 12
13.6 POST-TERMINATION PROCEDURES. Upon any termination of the Receiving
Party's right to possess and/or use Confidential Information through either
termination or expiration of this Agreement, the Receiving Party shall turn over
to the Disclosing Party (or, if agreed by the Disclosing Party, destroy) any
disks, tapes, Documentation, drawings, blueprints, notes, memoranda,
specifications, devices, documents, or any other tangible embodiments of any
Confidential Information of the Disclosing Party, except for Source Code
available to Customer under the terms of the Escrow Agreement described in
Section 12.
14. TERM AND TERMINATION.
14.1 TERM. This Agreement shall become effective as of the Effective
Date hereof and shall continue in force until the sixth (6th) anniversary of the
Effective Date, unless earlier terminated in accordance with this Article 14.
After this initial term, this Agreement shall be automatically renewed for
additional one (1) year periods unless thirty (30) days prior to the expiration
of this Agreement, either party provides written notice to the other party of
its intent to terminate this Agreement.
14.2 DEFAULT. Subject to the dispute resolution procedures set forth in
Exhibit A.5, the non-defaulting party shall be entitled to terminate this
Agreement at any time prior to the expiration of its term upon written notice to
the defaulting party if the defaulting party breaches any material obligation
hereunder, which breach continues or remains uncured for a period of sixty (60)
days after receipt of written notice from the non-defaulting party, unless such
breach cannot by its nature be cured, in which event the defaulting party shall
be deemed in default hereof upon the occurrence of such breach. Notwithstanding
the foregoing, if Customer shall be in breach of its obligation to make any
payment owing to Licensor hereunder, Licensor may terminate this Agreement upon
ten (10) days prior written notice to Customer. Any such termination shall not
relieve Customer of any such obligation to pay.
14.3 FAILURE TO DELIVER. Customer shall be entitled to terminate this
Agreement in the event Licensor has not Delivered the Licensed Software within
sixty (60) days after the date specified in this Agreement.
14.4 EFFECT OF TERMINATION. Upon the expiration or termination, for any
reasons, of this Agreement, the license and rights granted hereunder shall
immediately terminate as of the effective date of such expiration or
termination. Survival of any provisions of this Agreement shall be set forth in
Section 17.8 hereof.
15. EXPORT CONTROLS. Customer shall cooperate with Licensor as reasonably
requested and at Licensor's expense to permit Licensor to comply with the laws
and administrative regulations of the United States controlling the export of
commodities and technical data ("Export Laws"). Licensor shall prepare
<PAGE> 13
reasonable instructions for its licensees concerning actions licensees of the
Licensed Software should take to comply with all Export Laws prior to exporting
the Licensed Software, whether by remote access or otherwise, to a destination
outside the United States. Customer shall comply with Licensor's reasonable
instructions concerning such Export Laws. Notwithstanding any other provision of
this Agreement, Customer agrees not to export, directly or indirectly, any
United States source technical data acquired from Licensor or any products
utilizing such data to any countries outside of the United States, if such
export would be in violation of the United States Export Control Laws or
Regulations then in effect.
16. SALES TAXES; SHIPPING; RISK OF LOSS. In addition to all other amounts
due to Licensor hereunder, Customer shall pay to or reimburse Licensor for all
federal, state, local, or other taxes (exclusive of income, business privilege,
or similar tax) including, but not limited to, sales, use, value added, lease,
or similar taxes or assessments, based on the License Fee(s) or other charges
payable hereunder, the Licensed Software's use, or services performed hereunder.
Customer shall have the right to contest the imposition of any such taxes or
assessments and Licensor shall provide Customer with reasonable cooperation in
contesting such taxes or assessments. Licensor shall, however, pay for all
shipping or transportation costs for delivery of all Licensed Software and all
copies of the Documentation purchased by Customer. Prior to Delivery of the
Licensed Software, Licensor and its insurers shall accept responsibility for
loss or damage.
17. GENERAL PROVISIONS.
17.1 CONSTRUCTION AND VALIDITY; DISPUTE RESOLUTION. This Agreement
shall be construed and enforced in accordance with the laws of the State of
North Carolina (including its Uniform Commercial Code), but without giving
effect to its laws or rules relating to conflicts of laws or to the United
Nations Convention on Contracts for the International Sale of Goods. In the
event of any conflict or inconsistency between the provisions of this Agreement
and the provisions of any Exhibit annexed hereto or any document referred to in
this Agreement or in any Exhibit hereto, the provisions of this Agreement shall
prevail and govern its interpretation and construction. In the event of any
dispute or controversy arising under or in connection with this Agreement, the
dispute resolution procedures set forth in Exhibit A.5 shall be followed.
Pending resolution of any such dispute or controversy, both parties will
continue their performance under this Agreement including but not limited to the
payment of all amounts due to the other party that are not in dispute (provided
that Customer may make such payments under protest, reserving any rights it may
have to seek reimbursement from Licensor).
17.2 ATTORNEYS' FEES. In the event of any dispute, controversy,
litigation or other proceedings (including proceedings in bankruptcy) concerning
or related to this Agreement, the prevailing party shall be entitled to
reimbursement of all of its costs, including reasonable attorney and expert
witnesses fees and costs (including the reasonable value of the services of
in-house counsel), and court or arbitration fees and costs.
17.3 VENUE. Any dispute or controversy arising under or in connection
with this Agreement shall be settled in Wake County, North Carolina. The parties
hereby generally submit to the in personam jurisdiction of the Superior Court of
the State of North Carolina and the Federal District Court for the Eastern
District of North Carolina.
<PAGE> 14
17.4 NO JOINT VENTURE. Nothing contained in this Agreement shall be
construed as creating a joint venture, partnership or employment relationship
among the parties hereto nor shall any party have the right, power or authority
to create any obligation or duty, express or implied, on behalf of any other
party.
17.5 ASSIGNMENT. Neither party hereto shall assign any of its rights
under this Agreement nor delegate its duties hereunder to another person or
legal entity without the prior written consent of the other party, which consent
shall not be unreasonably withheld. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective trustees, successors,
permitted assigns and legal representatives.
17.6 NON-WAIVER. A failure of any party hereto to exercise any right
given to it hereunder, or to insist upon strict compliance by another party of
any obligation hereunder, shall not constitute a waiver of the first party's
right to exercise such a right, or to exact compliance with the terms hereof.
Moreover, waiver by any party of a particular default by another party shall not
be deemed a continuing waiver so as to impair the aggrieved party's rights in
respect to any subsequent default of the same or a different nature.
17.7 CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings
used in this Agreement are for convenience only and are not a part of this
Agreement and shall not be used in construing it.
17.8 SURVIVAL. Any terms or conditions of this Agreement which by their
express terms extend beyond termination or expiration of this Agreement or which
by their nature should so extend shall survive and continue in full force and
effect after any termination or expiration of this Agreement. Without limiting
the generality of the foregoing, the following articles and sections shall
survive this Agreement: 2.2, 7, 8, 9, 10.1, 10.5, 10.7, 11, 13, 15, and 17.
17.9 AUTHORIZATION. Customer and Licensor represent that all necessary
corporate proceedings have been taken by each party to authorize the
transactions contemplated by this Agreement and that this Agreement has been
executed by a duly-authorized representative of each party and upon such
execution shall constitute a valid and binding Agreement.
17.10 EXHIBITS INCORPORATED. All Exhibits referenced in this Agreement
are hereby incorporated into this Agreement by this reference and made part of
this Agreement.
17.11 NOTICES. All notices or other communications that shall or may be
given pursuant to this Agreement, shall be in writing, in English, shall be sent
by certified or registered air mail with postage prepaid, return receipt
requested, by facsimile, telex or cable communication, or by hand delivery. Such
communications shall be deemed given and received upon confirmation of receipt,
if sent by facsimile, telex, or cable communication; or upon delivery if hand
delivered; or upon receipt of mailing, if sent by certified or registered mail,
and shall be addressed to the parties to such addresses as the parties may
designate in writing from time to time.
<PAGE> 15
17.12 INVALIDITY. Should any of the non-material provisions of this
Agreement, or portions thereof, be found invalid by any court of competent
jurisdiction, the remainder of this Agreement shall nonetheless remain in full
force and effect.
17.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17.14 ENTIRE AGREEMENT. This Agreement and the Revenue Sharing
Agreement contain the full understanding of the parties and supersedes all prior
or contemporaneous agreements and understandings, written or oral, between the
parties with respect to the subject matter hereof; and there are no
representations, warranties, agreements or understandings other than those
expressly contained herein. No alteration, modification, variation or waiver of
this Agreement, or any of the provisions hereof shall be effective unless
executed by both parties in writing.
(The remainder of this page is left intentionally blank.)
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the dates indicated below.
SUMMUS, LTD. ("LICENSOR") HIGH SPEED NET SOLUTIONS, INC. ("CUSTOMER")
By: /s/ Dr. Bjorn Jawerth By: /s/ Andrew L. Fox
(Signature) (Signature)
Date: March 13, 2000 Date: February 18, 2000
Name: Dr. Bjorn Jawerth Name: Andrew L. Fox
Title: CEO Title: Acting President and CEO,
Executive Vice President
<PAGE> 17
EXHIBIT A.1
LICENSOR'S DESCRIPTION MATERIALS
MAXXSYSTEM SUMMARY
The Summus Ltd. online advertising microcast media product suite,
MaxxSystem, provides digital content management solutions for targeted
media distribution. The product suite establishes an easily integrated
infrastructure to increase the effectiveness of digital advertising,
direct marketing, campaigns and content distribution. While these
products showcase the benefits of faster wavelet technology, they also
integrate well with existing media compression, streaming and
manipulation tools in the marketplace. In addition, other forms of
media such as flash, animations, and audio content will be fully
integrated into the product suite over time.
These products are based on a `permission marketing' approach.
Customers opt in to participate and are encouraged to do so because
they have self-solicited interest in the content provided. The user
experience is enhanced through faster downloads and adaptive
transmission of media to the user's environment. All media is
distributed through a single player, regardless of media type. The
player can be customized (`re-skinned') to meet the needs of the
client.
The MaxxSystem product suite version 1.0 will have five components.
Refer to the diagram below for more information:
1. MAXXNOTE Version 2.5 - this is the currently
available Summus video e-mail software. MaxxNote
allows the user to import, create and compress
content, bundle a player, then e-mail it via a MAPI
compliant software program to distribution lists.
MaxxNote Version 2.5 is available for Windows
95/98/NT
2. The MAXXAD itself - this will be the advertisement
that is built and sent to an end user via e-mail.
MAXXADS are targeted e-mails that encapsulate rich
media (images, video, slide shows, text) with
electronic commerce capabilities, web site referrals
and campaign effectiveness measurement collection. A
maxxAd is rendered directly in an e-mail, therefore
no executable (.exe) files are sent. The MaxxAd
contains content and code streamed to the client on
demand. MaxxAd Version 1.0 will be available for
Windows 95/98/NT.
3. MAXXSHOW Version 1.0 is a completely integrated media
presentation, designed to be launched from a web
site. It encapsulates rich media (images, video,
slide shows, text) with electronic commerce
capabilities, web site referrals and e-commerce sales
effectiveness measurement collection. MaxxShow is
rendered directly from product selection on a web
page, delivered via caching (release 1) and streaming
based on bandwidth (release 2). MaxxShow is available
for the Windows NT/95/98 platforms with support for
Internet Explorer 4.0, Netscape 4.05 and AOL 4.0
browsers and above. Support for the Macintosh
platform is planned for late 2Q00.
<PAGE> 18
4. The MAXXSERVER infrastructure - MaxxServer will
stream and cache JAVA-code and media content to
MaxxAd. The server will collect and process
measurement information, handle opt-in and opt-outs,
integrate with existing online advertising tools and
process e-commerce transactions and links to web
sites. Additionally, the MaxxServer infrastructure
may handle forwarding of MaxxAdvertisements to ensure
measurement tracking for forwarded MaxxAds is counted
and measured. As needed, advertisements will be
cached for faster rendering and distribution of
content.
5. The MAXXORCHESTRATOR product will allow the content
creators to format existing content into MaxxAds,
allowing them to combine text, images, slide shows
and video into a compelling advertisement utilizing
the benefits of Summus wavelet technology or
inserting banners and flash as required. It will
allow the user to test the MaxxAd and request
distribution through an e-mail list server.
MaxxOrchestrator Version 1.0 will be available for
Windows 98/NT
The MaxxSystem also includes related Reader Software to the extent not
included above.
<PAGE> 19
EXHIBIT A.2
VOLUME-BASED PRICING STRUCTURE FOR THE LICENSED SOFTWARE
SERVICE BUREAU USE
LICENSE TERRITORY - WORLDWIDE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
VOLUME OF USE LICENSE FEE USE LEVEL PERCENTAGE
(Rich Media Messages) (one-time licensing payment) (multiply by gross revenue)
- ------------------------------------------ ----------------------------------------------------------------------
<S> <C> <C>
the right to deliver an unlimited number $1,000,000 10.0%
per month
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Any licensee of the License Software for Service Bureau use shall pay the
License Fee to Licensor to initially gain the rights to use the Licensed
Software, and shall also pay an ongoing Revenue Based Fee to the Licensor, which
shall be the greater of: (a) the gross revenues generated by the Licensee with
the Licensed Software multiplied by the Use Level Percentage; or (b) the amount
equal to Three Cents ($.03) multiplied by the number of Rich Media Messages
actually delivered to recipients.
<PAGE> 20
EXHIBIT A.3
DELIVERY SCHEDULE
Product Delivery
1. MaxxNote Version 2.5 Upon the execution of this agreement
2. MaxxAd Version 1.0 September 1, 2000
3. MaxxServer Version 1.0 July 1, 2000
4. MaxxOrchestrator Version 1.0 September 1, 2000
5. MaxxShow Version 1.0 July 1, 2000
<PAGE> 21
EXHIBIT A.4
ESCROW AGREEMENT
<PAGE> 22
EXHIBIT A.5
DISPUTE RESOLUTION PROCEDURES
1. With respect to any dispute or disagreement between the parties arising out
of this Agreement other than a claim for rescission of the Agreement (a
"Disputed Matter"), the following internal mediation procedures shall be
followed:
(a) Either party shall have the right to submit a Disputed Matter to
Licensor's Chief Operating Officer and Customer's Chief Operating Officer or
such other senior executives as may be mutually agreed upon by the parties from
time to time. Such submission shall be delivered to such executives for both
parties in writing with a reasonably detailed explanation of the nature of the
Disputed Matter and its impact on the obligations under the Agreement. If such
executives do not agree upon a decision within fifteen (15) business days after
submission of the Disputed Matter to them by the party submitting the Disputed
Matter, then
(b) The Disputed Matter may be escalated by either party by submitting
it to Licensor's Chief Executive Officer and Customer's Chief Executive Officer
or such other senior executives as may be mutually agreed upon by the parties
from time to time. If such senior executives do not agree upon a decision within
ten (10) business days after submission of the Disputed Matter to them, then
(c) either party may initiate the binding arbitration procedures set
forth below.
ARBITRATION PROVISIONS
1. Rules; Jurisdiction. Any Disputed Matter shall be settled by final and
binding arbitration in the County of Wake, and, except as herein specifically
stated, in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA Rules") then in effect, subject to the provisions
of the United States Arbitration Act, 9 U.S.C. ss. 1 et seq. ("Title 9"). To the
extent the AAA Rules conflict with, or are supplemented by, the provisions of
Title 9, the provisions of Title 9 shall govern and be applicable. However, in
all events these Arbitration Provisions shall govern over any conflicting rules
which may now or hereafter be contained in either the AAA Rules or Title 9. Any
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction of the subject matter thereof. The arbitrators shall have
the authority to grant any equitable and legal remedies that would be available
in any judicial proceeding instituted to resolve a disputed matter. The parties
hereby submit to the in personam jurisdiction of the Superior Court of the State
of North Carolina and the Federal District Court for the Eastern District of
North Carolina for purposes of confirming any such award and entering judgment
thereon.
2. Compensation of Arbitrators. Any such arbitration shall be conducted before a
panel of three arbitrators who shall be compensated for their services at a rate
to be determined by the parties, or lacking such determination by the American
<PAGE> 23
Arbitration Association, but based upon normal and reasonable hourly or daily
consulting rates for the neutral arbitrator in the event the parties are not
able to agree upon his or her rate of compensation.
3. Selection of Arbitrators. Within five (5) business days of notice by a party
seeking arbitration under this provision, the party requesting arbitration shall
appoint one person as an arbitrator and within fifteen (15) business days
thereafter the other party shall appoint the second arbitrator. Within twenty
(20) business days after the appointment of the second arbitrator, the two
arbitrators so chosen shall mutually agree upon the selection of the third
impartial and neutral arbitrator, who must be a partner or principal of a
nationally recognized firm of independent certified public accountants from the
management advisory services department (or comparable department or group) of
such firm; provided, however, that such firm cannot be the firm of certified
public accountants then auditing the books and records of either party or
providing management or advisory services for either party.
In the event the chosen arbitrators cannot agree upon the selection of the third
arbitrator, the AAA Rules for the selection of such an arbitrator shall be
followed, except that the selection shall be from such departments or groups and
certified accounting firms as are described in the immediately preceding
paragraph. If the other party shall fail to designate the second arbitrator, the
sole arbitrator appointed shall have the power to appoint, in his or her sole
discretion, both the second and third arbitrators. If a party fails to appoint a
successor to its appointed arbitrator within ten (10) business days of the
death, resignation or other incapacity of such arbitrator, the remaining two
arbitrators shall appoint such successor. The majority decision of the
arbitrators will be final and conclusive upon the parties hereto.
4. Payment of Costs. Each party hereby agrees to pay one-half (1/2) of the
compensation to be paid to the arbitrators in any such arbitration and one-half
(1/2) of the costs of transcripts and other expenses of the arbitration
proceedings; provided, however, that the prevailing party in any arbitration
shall be entitled to an award of attorneys' fees and costs, arbitrators' fees
and costs, fees and costs of expert witnesses and all other costs of arbitration
(including the reasonable value of the services of in-house counsel) to be paid
by the losing party.
5. Evidence and Discovery. The arbitrators shall be instructed to conduct the
arbitration in as expeditious a manner as reasonably possibly, consistent with
the parties' intention to have a full and fair hearing on the merits of the
dispute. Each party agrees to supply the arbitrators in accordance with a
timetable to be established by the arbitrators such materials as the arbitrators
may reasonably require in order to render a decision, including those requested
by either party which the arbitrators determine are appropriate to consider, but
subject to appropriate claims of privilege. Each party shall supply to the other
party hereto copies of any and all materials which are supplied to the
arbitrators concurrently with delivery of such materials to the arbitrators.
Upon the written request of either party, the arbitrators shall conduct a
hearing at which representatives of both parties shall have the right to be
present and to make oral presentations to the arbitrators. Each party shall
supply to the other party at least twenty (20) business days prior to the
commencement of any arbitration proceeding copies of any and all documents which
such party intends to introduce or upon which such party intends to rely in
connection with such proceeding, as well as a list of any and all witnesses
whose testimony such party intends to introduce in connection with such
proceeding. Additional documents or witnesses may be introduced only if the
<PAGE> 24
arbitrators determine that good cause has been shown. Deposing of witnesses in
advance of such proceeding shall be permitted to the extent determined by the
arbitrators. Each party shall also have the right to submit written briefs to
the arbitrators in accordance with a timetable to be established by the
arbitrators. To the extent either party maintains in good faith that any
documents submitted or testimony introduced in connection with such arbitration
contain confidential information or trade secrets, the parties shall negotiate
in good faith in an effort to reach agreement regarding terms and conditions for
keeping such materials and testimony confidential. If the parties are unable to
agree upon such terms, the arbitrators shall have the right to impose
appropriate restrictions to maintain the confidentiality of any confidential
information or trade secrets in connection with the arbitration.
6. Burden of Proof. For any claim submitted to arbitration, the burden of proof
shall be as it would be if the claim were litigated in a judicial proceeding.
All testimony of witnesses shall be taken under oath and shall be subject to the
Federal Rules of Evidence.
7. Judgment. Upon the conclusion of any arbitration proceedings, hereunder, the
arbitrators shall render findings of fact and conclusions of law and a written
opinion setting forth the basis and reasons for any decision reached by them and
shall deliver such documents to each party to the Agreement along with a signed
copy of the award.
8. Terms of Arbitration. The arbitrators chosen in accordance with these
provisions shall not have the power to alter, amend or otherwise affect the
terms of these arbitration provisions or the provisions of the Agreement. 9.
Exclusive Remedy. Except as specifically provided in this exhibit or in the
agreement to which it is attached, arbitration shall be the sole and exclusive
remedy of the parties for any disputed matter arising out of such agreement.
9. Exclusive Remedy. Except as specifically provided in this exhibit or in the
agreement to which it is attached, arbitration shall be the sole and exclusive
remedy of the parties for any disputed matter arising out of such agreement.
<PAGE> 1
EXHIBIT 10.03
SOFTWARE MAINTENANCE AGREEMENT
BETWEEN
SUMMUS LIMITED AND HIGH SPEED NET SOLUTIONS
434 FAYETTEVILLE STREET MALL 434 FAYETTEVILLE STREET MALL
SUITE 600 SUITE 2120
RALEIGH, NORTH CAROLINA 27601 RALEIGH, NORTH CAROLINA 27601
(LICENSOR) (LICENSEE)
THIS SOFTWARE MAINTENANCE AGREEMENT (this "Agreement") is by and between Summus
Limited ("Licensor") and High Speed Net Solutions "HSNS" ("Licensee") and is
effective this 18th day of February, 2000. Licensor will provide Software
Maintenance Service for the MaxxSystem product suite (the "MaxxSystem Program")
licensed to Licensee pursuant to that certain Software License Agreement, dated
of even date herewith, by and between Licensor and Licensee (the "License
Agreement"). Capitalized terms herein not otherwise defined shall have the
meaning set forth in the License Agreement. The terms and conditions of the
License Agreement shall govern Licensee's use of the Program.
1. This Agreement shall serve as the exclusive definition of the
Maintenance Services for the MaxxSystem Program.
2. The term of this Agreement shall be coincident and conterminous with
the License Agreement (the "Term"). Maintenance Services shall be
provided without charge for the first year, and for a charge (the
"Maintenance Fee") of $ 180,000 for the second year. The Maintenance
Fee is payable in advance each year. Licensor shall invoice Licensee at
least thirty days prior to the renewal date, with the Maintenance Fee
payable on the renewal date. Licensor shall not be required to continue
providing Maintenance Services if Licensee is more than thirty days
late in payment. Licensor may increase the Maintenance Fee each year
after the second year by the increase in the Employment Cost Index of
the U.S. Bureau of Labor Statistics, for non- seasonally adjusted
private industry compensation for professional and technical
occupations, using the calendar year ending in the second year of
maintenance or the base year. Licensee may reinstate lapsed support and
maintenance for MaxxSystem Programs licensed from Licensor upon payment
for all support and maintenance fees in arrears and all costs invoiced
by Licensor on a time and materials basis for updating Licensee's
MaxxSystem Program to the then-current version.
3. During the Term, Licensee shall perform the Maintenance Services set
forth herein provided Licensee is not in breach of the terms of this
Agreement or the License Agreement. "MaxxSystem Program Upgrades" shall
mean bug fixes, new versions, and upgrades provided by Licensor to
Licensee under the License Agreement. those new versions of or
additions to the MaxxSystem Program together with such additional
Documentation as Licensor deems appropriate, which have been developed
by Licensor to enhance the MaxxSystem Program's operating performance
without changing its basic function and which may be provided to
Licensee under the Support Agreement.
4 Maintenance Services shall consist of the following:
A. SOFTWARE UPDATE SERVICE
Standard support only covers the latest version of the
Licensor developed software deliverables and third-party
software originally supplied by Licensor ("Covered Third-Party
Software") under the License Agreement. Maintenance for other
third-party software such as the computer operating system
must be obtained from the supplier and are the responsibility
of the Licensee. Licensor will specify the third party version
(operating system, ORACLE, etc.) required for each MaxxSystem
Program release.
SOFTWARE UPDATE SERVICE INCLUDES:
<PAGE> 2
o distribution and application of Covered Third-Party
Software maintenance modifications and enhancements,
when available from the third party vendors.
o delivery to Licensee on or before delivery to any
other customers of generally available versions of
the MaxxSystem Program and its component programs
that Licensor releases after the effective date of
the License Agreement, including (a) error
corrections, maintenance releases, major and minor
releases, and products that Licensor releases after
the effective date of the License Agreement that
supersede the MaxxSystem Program or its component
programs; (b) any migration aids for users migrating
from the prior version of the MaxxSystem Program; and
(c) any Documentation related to either (a) or (b).
Minor releases, containing incremental improvements
and minor new functionality, will be provided not
less than once a year.
B. SOFTWARE SUPPORT
MAXXSYSTEM PROGRAM support covers the latest version of the
Licensor developed software deliverables provided to Licensee
under the License Agreement and are defined by the Casual
Consulting services. Casual Consulting services for the
MAXXSYSTEM PROGRAM includes the following services:
o Level 2 and Level 3 technical assistance
regarding installation and operation of the
MaxxSystem Program.
o Level 2 and Level 3 Telephone 5 X 8 (5 days
a week, 8 hours a day) support in accordance
with published Summus Limited holidays.
o Replication of errors reported by Licensee,
if reasonably practical.
o Creation of a test case that generates the
reported error.
o Includes application updates and application
upgrades to current licensed functionality.
o Provide incident report and resolution time
frame statistics on technical support calls.
o Creation and supply of error corrections on
a prompt commercial basis.
Support is provided via telephone or web during normal
business hours Monday through Friday (8:00 AM to 12:00, 1:00
PM - 5:00 PM, Eastern Time) except for Summus Limited
holidays.
Support will be provided according to the following severity
schemes for both production and BETA release software:
- Severity 1: System is not operational and is
causing revenue impact to the customer. Response time
due within one hour. A fix must be provided within 24
hours.
- Severity 2: A portion of the system is not
operational and is causing business impact to the
customer. Response time due within 4 hours. A fix
must be provided within 3 days.
- Severity 3: A portion of the system is down with
limited to no impact on the customer's business
operations. Response time due within one business
day. A fix must be provided within 2 weeks.
<PAGE> 3
- Severity 4: Cosmetic problems. Response timE due
within 3 business days. A fix must be provided within
three months.
The following items, among others, are specifically excluded from
Casual Consulting:
o Interpretation of the MaxxSystem Program's results.
o Supply of typical or representative data.
o Assistance with computer hardware and peripheral
questions not related to the MaxxSystem Program's
use.
o Assistance with computer operating system questions
not directly pertinent to the MaxxSystem Program.
o Data debugging and/or correcting.
o Services necessitated as a result of any cause other
than the MaxxSystem Program's ordinary, proper use by
Licensee, including but not limited to neglect,
abuse, unauthorized maintenance, or electrical, fire,
water, or other damage.
o Special applications of the MaxxSystem Program not
part of its intended, normal use.
o On-Site Maintenance.
o Guidance on the MaxxSystem Program's intended, normal
use.
o Services resulting from the failure of Licensee to
provide a suitable environment for the MaxxSystem
Program or as associated equipment.
o Service on any release of the MaxxSystem Program
prior to the latest release provided to Licensee
under the License Agreement.
5. Customer agrees that if Licensor performs the maintenance services
designated hereunder at Customer's site and Licensor determines that a
problem with the Licensed Software, or an apparent problem with the
Licensed Software, is or has been caused by (i) any software other than
the Licensed Software, or (ii) by hardware not provided by Licensor,
then Customer shall reimburse Licensor for its labor costs for such on-
site services at the Licensor's customary rates then in effect. In such
an event, Customer shall not be responsible for Licensor's labor costs
associated with other than on-site labor or for any travel costs
associated with such on-site labor.
6. The maximum liability of Licensor for any direct damages sustained by
the Licensee under this Software Maintenance Agreement arising from
Licensor negligence shall in no circumstance exceed the amount of the
annual maintenance fee payable by the Licensee to Licensor, plus the
fees paid by Licensee (including application of credits) under the
License Agreement depreciated on a straight-line basis over a six year
term. The Licensee and Licensor shall in no event be liable one to the
other for loss of revenue, profit, anticipated profit or indirect,
incidental, special or consequential damages, including but not limited
to, any losses to Licensee resulting from lost computer time or the
destruction or damage of records, or any claims or demands made against
the Licensee by a third party. Licensor shall maintain general
liability and property damage insurance in reasonable limits and shall
maintain proper worker's compensation insurance covering all employees
performing work under this Agreement and, upon request by Licensee,
shall furnish Certificates of Insurance evidencing such coverage.
<PAGE> 4
7. During the term of this Agreement, Licensee shall:
A. Provide Licensor with modem connection to Licensee's computer
systems for the sole purpose of performing Maintenance
Services. Such connection shall be made only at times mutually
agreed by Licensee and Licensor. Licensor agrees that with
respect to any access of Licensee's computer system by
Licensor, whether in person or through modem connection,
Licensor shall not (i) access portions of the system that are
not necessary for performance of Maintenance Services; (ii)
access any data of customers of Licensee; (iii) disable any
virus checker or security program; or (iv) provide to
Licensee, through download or CD-ROM or other media, software
or data in electronic form that has not been examined with an
up-to-date commercial virus checking program shortly before
delivery to Licensee.
B. Provide adequate Level 1 support for MaxxSystem Program to
support Licensee customer base;
C. Ensure that only personnel properly trained in the operation
and use of the MaxxSystem Program and its associated equipment
call Licensor for direct phone support and that such personnel
have sufficient access and computer time when using such
service in order to implement the corrections suggested by
Licensor;
D. Install all application updates and MaxxSystem Program
Upgrades within 90 days of delivery of same, provided that
Licensee is not obligated to install or use any upgrade for
which Licensor requires an extra fee that Licensee has not
agreed to pay;
E. Perform and install all diagnostic activities and routines
recommended by Licensor;
F. Ensure the proper MaxxSystem Program environment is maintained
and that Licensee's personnel who have access to the
MaxxSystem Program are properly trained in the operation and
usage of the MaxxSystem Program and the associated equipment;
and
G. Provide, at no cost to Licensor, adequate safeguards for the
protection of Licensee's data and files while the Maintenance
Services are being performed on the MaxxSystem Program.
8. Licensee shall be solely responsible to ensure that all of its files
and data are adequately duplicated or documented, and Licensor shall in
no way be responsible for Licensee's failure to do so, nor for the
costs or expenses of reconstructing data which are lost, destroyed or
otherwise damaged or rendered useless during the course of or as the
result of the performance of any services under this Agreement.
9. All data or other information of Licensee or Licensee's customers to
which Licensor is exposed in the course of providing Maintenance
Services shall be treated as confidential in accordance with the terms
of the article on confidentiality in the License Agreement.
10. Licensor warrants that the services provided under this Agreement will
be performed in professional fashion and in accordance with good
quality practices in the software industry.
<PAGE> 5
EXCEPT AS PROVIDED HEREIN, LICENSOR MAKES NO OTHER REPRESENTATIONS OR
WARRANTIES UNDER THIS AGREEMENT WHATSOEVER WHETHER STATUTORY, EXPRESSED OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OR MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE AND ALL WARRANTIES ARISING FROM COURSE OF
DEALING OR USAGE OF TRADE.
(the remainder of this page is left intentionally blank)
<PAGE> 6
IN WITNESS WHEREOF each of the parties has caused its duly authorized
officer to execute this Agreement as of the date and year first above written.
LICENSOR LICENSEE
SUMMUS, LTD. HIGH SPEED NET SOLUTIONS, INC.
By: /s/ Dr. Bjorn Jawerth By: /s/ Andrew L. Fox
(Signature)
Date: March 13, 2000 Date: February 18, 2000
Name: Dr. Bjorn Jawerth Name: Andrew L. Fox
Title: CEO Title: Acting President and CEO,
Executive Vice President
<PAGE> 1
EXHIBIT 10.04
REVENUE SHARING AGREEMENT
This Revenue Sharing Agreement (the "Agreement") is made and entered
into as of this 18th day of February, 2000 (the "Effective Date"), by and
between Summus, Ltd., a Delaware corporation ("Licensor"), and High Speed Net
Solutions, Inc., a Florida corporation ("Customer"), with reference to the
following facts and circumstances:
A. Licensor has developed certain software programs and anticipates developing
certain software programs and will promote licensing of such Licensed Software
as described in the Software License Agreement executed simultaneously with this
Agreement.
B. Licensor and Customer envision a close working relationship with respect to
Licensor's software such that Customer anticipates regularly: (i) acting as a
beta-version user of Licensor's software; (ii) providing prospective licensees
for Licensor's software; and (iii) providing references for or demonstrations of
Licensor's software. Licensor desires to create an incentive for Customer to
participate in these activities and as such Customer desires that Licensor share
with Customer revenues received from third party users of Licensor's software
and pay Customer for certain agency activities.
C. Therefore, to effect these incentives, Licensor and Customer have entered
into this Agreement simultaneously with executing the Software License
Agreement, and Customer desires to receive such payments and revenue sharing in
consideration for Customer's efforts on behalf of Licensor and on the terms and
conditions contained in this Agreement.
NOW THEREFORE, based on the above premises and in consideration of the
mutual covenants and agreements contained herein, the parties agree as follows:
1. DEFINITIONS.
As used herein, the following terms, when used in the singular, plural,
or possessive form shall have the respective meanings set forth below:
1.1 "Agency Payment" shall have the meaning given in Section 2.2 of
this Agreement.
1.2 "Licensed Software" shall have the meaning given in the Software
License Agreement executed simultaneously with this Agreement.
1.3 "Quarterly Period" shall mean each calendar quarter (i.e., a period
of three (3) consecutive calendar months commencing on January 1, April 1, July
1 or October 1 of each year) during the term of this Agreement, with the
exception of the first Quarterly Period, which shall commence on the Effective
Date and end on the last day of that calendar quarter. The last Quarterly Period
shall end on the date of expiration or termination of this Agreement, thereby
possibly comprising fewer than three (3) months.
<PAGE> 2
1.4 "Related Agreements" shall mean agreements between Licensor and
Customer related to or incorporated by the MLA and agreements based on either
Licensor or Customer's rights and obligations under the MLA, including, but not
limited to, the Letter Agreement incorporated by the MLA and any agreements
relating to or arising from business with Samsung or its affiliates.
1.5 "Revenue Sharing Payment" shall have the meaning given in Section
2.1 of this Agreement.
1.6 "Samsung Payment" shall have the meaning given in Section 2.3 of
this Agreement.
2. LICENSOR PAYMENTS TO CUSTOMER.
2.1 REVENUE SHARING. During the term of this Agreement, Licensor shall
pay to Customer twenty percent (20%) of all revenue received by Licensor in
connection with (i) licensing of the Licensed Software, or of the product
functionality contained in the Licensed Software, for creation and/or delivery
of Rich Media Content, for service bureau use or (ii) use by Licensor or any
affiliate of Licensor of the Licenseed Software, or the product functionality
contained in the Licensed Software, for the creation and/or delivery of Rich
Media content for service bureau use by Licensor or any affiliate of Licensor
("Revenue Sharing Payment"). For this purpose, "service bureau use" shall mean
use to provide Designated Activities (as defined in the Software License
Agreement) to or for the benefit of a licensee's unaffiliated customers;
provided, however, that service bureau use shall not include use by enterprise
licensees. An "enterprise licensee" is a licensed entity that provides the
Designated Activities on a not-for-profit basis in furtherance of the entity's
promotional goals, or those of its affiliates, and does not include the
circumstance where an entity provides the Designated Activities for an
unaffiliated third party. "Service bureau use" includes circumstances where a
licensee the Designated Activities through use of the Licensed Software, unless
the licensee and the outsource services provider are part of the same
wholly-owned corporate group. For the purpose of this Section 2.1, "affiliate"
is a person or entity that directly or indirectly controls, is controlled by, or
is under common control with a specified person.
2.2 AGENCY PAYMENTS. During the term of this Agreement, upon Customer
identifying to Licensor a qualified prospect that subsequently becomes a new
customer of Licensor within one year of such identification, Licensor shall pay
to Customer fifteen percent (15%) of all revenue received by Licensor until the
end of the first year of revenue receipts for such new customer (the "Agency
Payment"). The first year of revenue receipts shall be the time period beginning
on the date when Licensor signs an agreement with such new customer, and ending
on the first anniversary of such date.
2.3 SAMSUNG PAYMENTS. During the term of this Agreement, Licensor shall
pay to Customer the percentage, as given in the table below for progressive
years under this Agreement, of all revenues accruing to Licensor, excluding
non-recurring expenses, from business activity arising from Samsung or its
affiliates, including but not limited to, license fees, maintenance fees,
support fees, and royalties (the "Samsung Payment").
<PAGE> 3
YEAR PERCENTAGE PAID TO CUSTOMER
---- ---------------------------
1 Fifty Percent (50%)
2 Fifty Percent (50%)
3 Forty Percent (40%)
4 through 6 Twenty Percent (20%)
2.4 QUARTERLY RECONCILIATION. Licensor shall reconcile accounts each
Quarterly Period and shall pay the Revenue Sharing Payment, Agency Payment, and
Samsung Payment within one month following the end of the Quarterly Period. [TO
FACILITATE TRANSACTING SUCH PAYMENTS, LICENSOR SHALL KEEP ACCOUNTING RECORDS
ACCORDING TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO DOCUMENT ALL REVENUES
OF LICENSOR AND TO ALLOCATE GROSS REVENUES AMONG REVENUES GENERATED WITH THE
LICENSED SOFTWARE AND OTHER GROSS REVENUES.] Customer or its authorized agent or
representative shall have the right, at its expense and upon at least forty-five
(45) business days written notice to Licensor and during Licensor's normal
business hours and no more often than once during any twelve (12) month period,
to enter Licensor's premises for purposes of auditing all books of account,
documents, records, papers, and files, whether in printed or electronic form,
relating to Licensor's revenues from the Licensed Software, and Licensor shall
make all such items available to Customer or its authorized agent or
representative for that purpose. If such audit reveals that sufficient payments
have not been paid by Licensor, then Licensor shall pay any additional amount
found to be owed to Customer. Customer shall bear the expense of any such audit
unless such audit reveals that the payments actually paid by Customer in any
twelve (12) month period are less than what should have been paid to Customer by
an amount greater than five percent (5%) of the amount actually paid, in which
event the costs of such audit shall be borne by Licensor.
3. TERMINATION OF MLA AND RELATED AGREEMENTS.
3.1 TERMINATION OF PRIOR AGREEMENTS. By this Agreement and the Software
License Agreement, Licensor and Customer specifically terminate the MLA and the
Related Agreements.
4. LIMITATION OF LIABILITY.
4.1 EXCLUDED LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY , ITS AFFILIATES OR ANY THIRD PARTY BENEFICIARY FOR CONSEQUENTIAL DAMAGES
OF ANY KIND (INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS,
BUSINESS INTERRUPTION, OR LOSS OF BUSINESS INFORMATION), REGARDLESS OF WHETHER
THE PARTY LIABLE OR ALLEGEDLY LIABLE WAS ADVISED, HAD REASON TO KNOW, OR IN FACT
KNEW OF THE POSSIBILITY THEREOF.
5. CONFIDENTIALITY. This Article 5 sets forth the procedures by which
information regarded as confidential by one party hereto (a "Disclosing Party")
may be disclosed to the other party hereto (the "Receiving Party").
<PAGE> 4
5.1 GENERAL REQUIREMENTS AND EXCLUSIONS. During the term of this
Agreement and at all times thereafter, the parties will not, except as permitted
by the terms of this Agreements, disclose or use, either for itself or for the
benefit of any third party (whether in competition with Licensor or Customer or
otherwise), any confidential information of the other party or its business or
affairs, nor will any party assist any person or entity other than the
Disclosing Party to secure any benefit from such confidential information. Any
oral, written, graphic, or electronically transmitted information not generally
available to the public shall be construed as confidential for purposes of this
Agreement, which information shall include, without limitation, information
relating to a Disclosing Party's products, processes, techniques, technology,
formulas, research data, passwords, passcodes, user identification numbers,
e-mail addresses, programming methods, know-how, trade secrets, customers and
suppliers, information relating to sales and profits, other financial data, and
the terms and conditions of this Agreements. All such information shall be
collectively referred to herein as "Confidential Information." The provisions of
this paragraph, however, shall not prevent the Receiving Party from use or
disclosure of information (i) as necessary in the ordinary course of such
party's performance under this Agreement, (ii) that is in the public domain
(other than information in the public domain as a result of a violation of this
Agreement by the Receiving Party), (iii) that the Receiving Party can
demonstrate that it acquired outside of its affiliation with the disclosing
Party from a third party in rightful possession of such information and who was
not prohibited from disclosing such information, or (iv) disclosure of which is
required by law or court order. In the event that the Receiving Party is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose Confidential Information, the Receiving Party will
notify the Disclosing Party promptly of such request or requirement so that the
Disclosing Party may seek an appropriate protective order, and if, in the
absence of a protective order, the Receiving Party is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, the Receiving Party may disclose Confidential Information
to such tribunal; provided, however, that the Receiving Party shall use its best
efforts to obtain an order or other assurance that confidential treatment will
be accorded to such portion of the Confidential Information required to be
disclosed. Customer shall be entitled to file this Agreement as an exhibit to
one or more filings with the SEC, as recommended by its counsel, in which case
Customer shall consult with Licensor concerning the redaction of terms of this
Agreement under a confidentiality request associated with such filing, but the
implementation of any such redaction shall be at the SEC's discretion. The
obligation of confidentiality stated above shall survive termination of this
Agreement.
6. TERM AND TERMINATION.
6.1 TERM. This Agreement shall become effective as of the Effective
Date hereof and shall continue in force until the Termination, for any reason,
of the software license agreement executed of even date herewith.
6.2 DEFAULT. Subject to the dispute resolution procedures set forth in
Exhibit 0, the non-defaulting party shall be entitled to terminate this
Agreement at any time prior to the expiration of its term upon written notice to
<PAGE> 5
the defaulting party if the defaulting party breaches any material obligation
hereunder, which breach continues or remains uncured for a period of thirty (30)
days after receipt of written notice from the non-defaulting party, unless such
breach cannot by its nature be cured, in which event the defaulting party shall
be deemed in default hereof upon the occurrence of such breach.
7. GENERAL PROVISIONS.
7.1 CONSTRUCTION AND VALIDITY; DISPUTE RESOLUTION. This Agreement shall
be construed and enforced in accordance with the laws of the State of North
Carolina (including its Uniform Commercial Code), but without giving effect to
its laws or rules relating to conflicts of laws or to the United Nations
Convention on Contracts for the International Sale of Goods. In the event of any
conflict or inconsistency between the provisions of this Agreement and the
provisions of any Exhibit annexed hereto or any document referred to in this
Agreement or in any Exhibit hereto, the provisions of this Agreement shall
prevail and govern its interpretation and construction. In the event of any
dispute or controversy arising under or in connection with this Agreement, the
dispute resolution procedures set forth in an exhibit to the Software License
Agreement shall be followed. Pending resolution of any such dispute or
controversy, both parties will continue their performance under this Agreement
including but not limited to the payment of all amounts due to the other party
that are not in dispute (provided that Customer may make such payments under
protest, reserving any rights it may have to seek reimbursement from Licensor).
7.2 ATTORNEYS' FEES. In the event of any dispute, controversy,
litigation or other proceedings (including proceedings in bankruptcy) concerning
or related to this Agreement, the prevailing party shall be entitled to
reimbursement of all of its costs, including reasonable attorney and expert
witnesses fees and costs (including the reasonable value of the services of
in-house counsel), and court or arbitration fees and costs.
7.3 VENUE. Any dispute or controversy arising under or in connection
with this Agreement shall be settled in Wake County, North Carolina. The parties
hereby generally submit to the in personam jurisdiction of the Superior Court of
the State of North Carolina and the Federal District Court for the Eastern
District of North Carolina.
7.4 NO JOINT VENTURE. Nothing contained in this Agreement shall be
construed as creating a joint venture, partnership or employment relationship
among the parties hereto nor shall any party have the right, power or authority
to create any obligation or duty, express or implied, on behalf of any other
party.
7.5 ASSIGNMENT. Neither party hereto shall assign any of its rights
under this Agreement nor delegate its duties hereunder to another person or
legal entity without the prior written consent of the other party, which consent
shall not be unreasonably withheld. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective trustees, successors,
permitted assigns and legal representatives.
7.6 NON-WAIVER. A failure of any party hereto to exercise any right
given to it hereunder, or to insist upon strict compliance by another party of
any obligation hereunder, shall not constitute a waiver of the first party's
<PAGE> 6
right to exercise such a right, or to exact compliance with the terms
hereof. Moreover, waiver by any party of a particular default by another party
shall not be deemed a continuing waiver so as to impair the aggrieved party's
rights in respect to any subsequent default of the same or a different nature.
7.7 CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings
used in this Agreement are for convenience only and are not a part of this
Agreement and shall not be used in construing it.
7.8 SURVIVAL. Any terms or conditions of this Agreement which by their
express terms extend beyond termination or expiration of this Agreement or which
by their nature should so extend shall survive and continue in full force and
effect after any termination or expiration of this Agreement.
7.9 AUTHORIZATION. Customer and Licensor represent that all necessary
corporate proceedings have been taken by each party to authorize the
transactions contemplated by this Agreement and that this Agreement has been
executed by a duly-authorized representative of each party and upon such
execution shall constitute a valid and binding Agreement.
7.10 NOTICES. All notices or other communications that shall or may be
given pursuant to this Agreement, shall be in writing, in English, shall be sent
by certified or registered air mail with postage prepaid, return receipt
requested, by facsimile, telex or cable communication, or by hand delivery. Such
communications shall be deemed given and received upon confirmation of receipt,
if sent by facsimile, telex, or cable communication; or upon delivery if hand
delivered; or upon receipt of mailing, if sent by certified or registered mail,
and shall be addressed to the parties to such addresses as the parties may
designate in writing from time to time.
7.11 INVALIDITY. Should any of the non-material provisions of this
Agreement, or portions thereof, be found invalid by any court of competent
jurisdiction, the remainder of this Agreement shall nonetheless remain in full
force and effect.
7.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.13 ENTIRE AGREEMENT. This Agreement and the Master Agreement,
Software License Agreement and Software Maintenance Agreement contain the full
understanding of the parties and supersedes all prior or contemporaneous
agreements and understandings, written or oral, between the parties with respect
to the subject matter hereof; and there are no representations, warranties,
agreements or understandings other than those expressly contained herein. No
alteration, modification, variation or waiver of this Agreement, or any of the
provisions hereof shall be effective unless executed by both parties in writing.
(The remainder of this page is left intentionally blank.)
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the dates indicated below.
SUMMUS, LTD. ("LICENSOR") HIGH SPEED NET SOLUTIONS, INC. ("CUSTOMER")
By: /s/ Dr. Bjorn Jawerth By: /s/ Andrew L. Fox
(Signature) (Signature)
Date: March 13, 2000 Date: February 18, 2000
Name: Dr. Bjorn Jawerth Name: Andrew L. Fox
Title: CEO Title: Acting President and CEO,
Executive Vice President
<PAGE> 1
EXHIBIT 10.05
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.
<PAGE> 2
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
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(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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(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.
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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.
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<PAGE> 6
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:
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<PAGE> 7
(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
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<PAGE> 8
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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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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<PAGE> 23
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 respect
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.
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<PAGE> 25
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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<PAGE> 26
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
<PAGE> 1
EXHIBIT 10.06
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> 2
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> 3
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> 4
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
<PAGE> 1
EXHIBIT 10.07
Stock Option Award Agreement
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> 2
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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<PAGE> 3
(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
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<PAGE> 4
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
<PAGE> 5
(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
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<PAGE> 6
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 January 27, 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> 7
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> 8
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> 9
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.
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<PAGE> 10
(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]
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<PAGE> 11
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> 12
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]
<PAGE> 1
EXHIBIT 10.08
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> 2
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
<PAGE> 1
EXHIBIT 10.09
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> 2
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.
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<PAGE> 3
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.
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<PAGE> 4
(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> 5
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.
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<PAGE> 6
(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> 7
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> 8
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> 9
(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> 10
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> 11
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> 12
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]
<PAGE> 1
EXHIBIT 10.10
Letter of Intent
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> 2
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
<PAGE> 1
EXHIBIT 10.11
SOFTWARE ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made as of this 18th day of
February, 2000, by and between Summus, Ltd. ("Licensor"), Fort Knox Escrow
Services, Inc. ("Fort Knox") and High Speed Net Solutions, Inc. ("Licensee").
PRELIMINARY STATEMENT. Licensor and Licensee have entered into a
Software License Agreement and Software Maintenance Agreement, both dated
February 18, 2000 (together, the "License Documents"), pursuant to which
Licensee has rights to receive Licensor's MaxxSystem software product, including
New Versions as defined in the License Documents (all together, the "Licensed
Software"). Licensor intends to deliver to Fort Knox a sealed package containing
magnetic tapes, disks, disk packs, or other forms of media, in machine readable
form, and the written documentation prepared in connection therewith, containing
the source code of the Licensed Software (the "Deposit Materials"). Licensor
desires Fort Knox to hold the Deposit Materials, and, upon certain events,
deliver the Deposit Materials to Licensee, in accordance with the terms hereof.
Now, therefore, in consideration of the foregoing, of the mutual
promises hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. DELIVERY BY LICENSOR. Within thirty (30) days of each delivery of
each new object code version of Licensed Software to Licensee, Licensor shall
provide to Fort Knox a new set of Deposit Materials containing the complete
source code for the then current version of Licensed Software provided to
Licensee under the License Documents, together with a copy of Exhibit B to this
Agreement, completed with a description of the Deposit Materials. Each set of
Deposit Materials shall contain commented source code, proprietary Summus tools
and lists of any commercially available products required to compile the source
code, and all information in human-readable form and on suitable media to enable
a reasonably skilled programmer or analyst to understand, maintain and correct
the Licensed Software without the assistance of any other person. Licensor shall
be solely responsible for delivering to Fort Knox the Deposit Materials. Fort
Knox shall hold the Deposit Materials in accordance with the terms hereof. Fort
Knox shall have no obligation to verify the completeness or accuracy of the
Deposit Materials.
2. DUPLICATION. Fort Knox may duplicate the Deposit Materials by any
means in order to comply with the terms and provisions of this Agreement,
provided that Licensee shall bear the expense of duplication. Alternatively,
Fort Knox, by notice to Licensor, may require Licensor to reasonably promptly
duplicate the Deposit Materials.
3. NOTIFICATION OF DEPOSITS. Simultaneous with the delivery to Fort
Knox of each set of Deposit Materials, Licensor shall deliver to Fort Knox and
to Licensee a written statement specifically identifying all items deposited and
stating that the Deposit, so deposited have been inspected by Licensor and are
complete and accurate.
4. DELIVERY BY FORT KNOX
<PAGE> 2
4.1 DELIVERY BY FORT KNOX TO LICENSEE. Fort Knox shall deliver
the Deposit Materials, or a copy thereof, to Licensee only in the event that:
(a) Licensor notifies Fort Knox to effect such
delivery to Licensee at a specific address, the notification being accompanied
by a check payable to Fort Knox in the amount of one hundred dollars ($100.00);
or
(b) Fort Knox receives from Licensee:
(i) written notification that Licensor
has failed in a material respect to
support the Licensed Software as
required by the License Documents
or that Licensor has otherwise
defaulted in a material respect
under the License Documents
("Licensor Default") and any
applicable cure period under the
License Documents has expired;
(ii) evidence satisfactory to Fort Knox
that Licensee has previously
notified Licensor of such Licensor
Default in writing;
(iii) a written demand that the Deposit
Materials be released and delivered
to Licensee;
(iv) a written undertaking from the
Licensee that the Deposit Materials
being supplied to the Licensee will
be used only as permitted under the
terms of the License Agreement;
(v) specific instructions from the
Licensee for this delivery; and
(vi) a check payable to Fort Knox in the
amount of one hundred dollars
($100.00).
(c) If the provisions of paragraphs 4.1(a) or 4.1(b)
are satisfied, and Fort Knox does not receive an Objection Notice within the
Objection Period pursuant to paragraph (d) below, Fort Knox shall, within five
(5) business days after receipt of the notification and check specified in
paragraph 4.1(a) and expiration of the Objection Period, deliver the Deposit
Materials in accordance with the applicable instructions. Fort Knox shall not
release the Deposit Materials if it receives an Objection Notice within the
Objection Period absent a court order, final order of arbitration or joint
written instructions of the Licensor and Licensee.
(d) Fort Knox shall, within five (5) business days
after receipt of all the documents specified in paragraph 4.1(b), send by
certified mail to Licensor a photostatic copy of all such documents. Licensor
shall have fifteen (15) days from the date on which Licensor receives such
documents ("Objection Period") to notify Fort Knox of its objection ("Objection
Notice") to the proposed release of the Deposit Materials to Licensee and to
request that the issue of Licensee's entitlement to a copy of the Deposit
Materials be submitted to arbitration in accordance with the following
provisions:
<PAGE> 3
(i) If Licensor shall send an Objection
Notice to Fort Knox during the
Objection Period, the matter shall
be submitted to, and settled by
arbitration by, a panel of three
(3) arbitrators chosen by the
Atlanta Regional Office of the
American Arbitration Association in
accordance with the rules of the
American Arbitration Association.
The arbitrators shall apply Georgia
law. At least one (1) arbitrator
shall be reasonably familiar with
the computer software industry. The
decision of the arbitrators shall
be binding and conclusive on all
parties involved, and judgment upon
their decision may be entered in a
court of competent jurisdiction.
All costs of the arbitration
incurred by Fort Knox, including
reasonable attorneys' fees and
costs, shall be paid by the party
which does not prevail in the
arbitration; provided, however, if
the arbitration is settled prior to
a decision by the arbitrators, the
Licensor and Licensee shall each
pay 50% of all such costs.
(ii) The parties shall proceed in good
faith and with all due speed to
complete arbitration within one
month of the receipt by Fort Knox
of the Objection Notice. The
arbitrators shall have authority to
reasonably alter the arbitration
rules to achieve that goal. There
shall be no discovery, except as
directed by the arbitrators, and
the period for oral arguments shall
be limited to two days.
(iii) Licensor may, at any time prior to
the commencement of arbitration
proceedings, notify Fort Knox that
Licensor has withdrawn the
Objection Notice.
(e) Upon receipt of the Deposit Materials, Licensee
may use the Deposit Materials solely for the purpose of maintaining the Licensed
Software. The Deposit Materials will be considered confidential information of
Licensor to be treated by Licensee in accordance with the confidentiality
provisions of the License Documents.
(f) Both Licensor and Licensee agree that Fort Knox
shall not be required to deliver Deposit Materials until all such fees then due
Fort Knox have been paid.
4.2 DELIVERY BY FORT KNOX TO LICENSOR. Fort Knox shal release
and deliver the Deposit Materials to Licensor upon termination of this Agreement
in accordance with paragraph 7(a) hereof.
5. INDEMNITY. Licensor and Licensee shall, jointly and severally,
indemnify and hold harmless Fort Knox and each of its directors, officers,
agents, employees and stockholders ("Fort Knox Indemnities") absolutely and
forever, from and against any and all claims, actions, damages, suits,
liabilities, obligations, costs, fees, charges, and any other expenses
whatsoever, including reasonable attorneys' fees and costs, that may be asserted
against any Fort Knox Indemnitee in connection with this Agreement or the
performance of Fort Knox or any Fort Knox Indemnitee hereunder.
<PAGE> 4
6. DISPUTES AND INTERPLEADER.
(a) Fort Knox may submit any matter in an interpleader or
similar action other than a matter submitted to arbitration after Fort Knox's
receipt of an Objection Notice under Section 4 and the parties under this
Agreement submit the matter to such arbitration as described in Section 4 of
this Agreement. Any and all costs incurred by Fort Knox in connection therewith,
including reasonable attorneys' fees and costs, shall be borne 50% by each of
Licensor and Licensee.
(b) Fort Knox shall perform any acts ordered by any court of
competent jurisdiction, without any liability or obligation to any party
hereunder by reason of such act.
7. TERM AND RENEWAL.
(a) The term of this Agreement shall be coincident and
coterminous with the License Documents. [This Agreement shall be automatically
extended for an additional term of one year ("Additional Term") at the end of
the Initial Term and at the end of each Additional Term hereunder unless, on or
before ninety (90) days prior to the end of the Initial Term or an Additional
Term, as the case may be, any party notifies the other parties that it wishes to
terminate the Agreement at the end of such term.] At such time of termination,
all fees due under this Agreement to Fort Knox must be paid prior to
termination.
(b) In the event of termination of this Agreement in
accordance with paragraph 7(a) hereof, Licensee shall pay all fees due Fort Knox
and shall promptly notify Licensor that this Agreement has been terminated and
that Fort Knox shall return to Licensor all copies of the Deposit Materials then
in its possession.
8. FEES. Licensor and Licensee shall pay to Fort Knox the applicable
fees in accordance with Exhibit A as compensation for Fort Knox's services under
this Agreement. The first years fees are due upon receipt of the signed contract
or Deposit Materials, whichever comes first and shall be paid in U.S. Dollars.
(a) PAYMENT. Fort Knox shall issue an invoice to Licensee
following execution of this Agreement ("Initial Invoice"), on the commencement
of any Additional Term hereunder, and in connection with the performance of any
additional services hereunder. Payment is due upon receipt of invoice,
irrespective of when the Deposit Materials are received. All fees and charges
are exclusive of, and Licensee is responsible for the payment of, all sales, use
and like taxes. Fort Knox shall have no obligations under this Agreement until
the Initial Invoice has been paid in full by Licensee.
(b) NONPAYMENT. In the event of non-payment of any fees or
charges invoiced by Fort Knox, Fort Knox shall give notice of non-payment of any
fee due and payable hereunder to the Licensee and, in such an event, the
Licensee shall have the right to pay the unpaid fee within ten (10) days after
receipt of notice from Fort Knox. If Licensee fails to pay in full all fees due
during such ten (10) day period, Fort Knox shall give notice of non-payment of
any fee due and payable hereunder to Licensor and, in such event, Licensor shall
have the right to pay the unpaid fee within ten (10) days of receipt of such
notice from Fort Knox. Upon payment of the unpaid fee by either the Licensor or
<PAGE> 5
Licensee, as the case may be, this Agreement shall continue in full force
and effect until the end of the applicable term. Failure to pay the unpaid fee
under this paragraph 8(b) by both Licensor and Licensee shall result in
termination of this Agreement.
9. OWNERSHIP OF DEPOSIT MATERIALS. The parties recognize and
acknowledge that ownership of the Deposit Materials shall remain with Licensor
at all times.
10. AVAILABLE VERIFICATION SERVICES. Upon receipt of a written request
from Licensee, Fort Knox and Licensee may enter into a separate agreement
pursuant to which Fort Knox will agree, upon certain terms and conditions, to
inspect the Deposit Materials for the purpose of verifying its relevance,
completeness, currency, accuracy and functionality ("Technical Verification
Agreement"). Upon written request from Licensor, Fort Knox will issue to
Licensor a copy of any written technical verification report rendered in
connection with such engagement. If Fort Knox and Licensee enter into such
Technical Verification Agreement, Licensor shall reasonably cooperate with Fort
Knox by providing its facilities, computer systems, and technical and support
personnel for technical verification whenever reasonably necessary. If requested
by Licensee, Licensor shall permit one employee of Licensee to be present at
Licensor's facility during any such verification of the Deposit Materials.
11. BANKRUPTCY. Licensor and Licensee acknowledge that this Agreement
is an "agreement supplementary to" the License Agreement as provided in Section
365 (n) of Title 11, United States Code (the "Bankruptcy Code"). Licensor
acknowledges that if Licensor as a debtor in possession or a trustee in
Bankruptcy in a case under the Bankruptcy Code rejects the License Agreement or
this Agreement, Licensee may elect to retain its rights under the License
Agreement and this Agreement as provided in Section 365 (n) of the Bankruptcy
Code. Upon written request of Licensee to Licensor or the Bankruptcy Trustee,
Licensor or such Bankruptcy Trustee shall not interfere with the rights of
Licensee as provided in the License Agreement and this Agreement, including the
right to obtain the Deposit Material from Fort Knox.
12. MISCELLANEOUS.
(a) REMEDIES. Except for intentional misrepresentation, gross
negligence or intentional misconduct, Fort Knox shall not be liable to Licensor
or to Licensee for any act, or failure to act, by Fort Knox in connection with
this Agreement. Any liability of Fort Knox regardless of the cause shall be
limited to the fees exchanged under this Agreement. Fort Knox will not be liable
for special, indirect, incidental or consequential damages hereunder.
(b) NATURAL DEGENERATION; UPDATED VERSION. In addition, the
parties acknowledge that as a result of the passage of time alone, the Deposit
Materials are susceptible to loss of quality ("Natural Degeneration"). It is
further acknowledged that Fort Knox shall have no liability or responsibility to
any person or entity for any Natural Degeneration. For the purpose of reducing
the risk of Natural Degeneration, Licensor shall deliver to Fort Knox a new copy
of the Deposit Materials at least once every three years.
(c) PERMITTED RELIANCE AND ABSTENTION. Fort Knox may rely and
shall be fully protected in acting or refraining from acting upon any notice or
other document believed by Fort Knox in good faith to be genuine and to have
been signed or presented by the proper person or entity. Fort Knox shall have no
duties or responsibilities except those expressly set forth herein.
<PAGE> 6
(d) INDEPENDENT CONTRACTOR. Fort Knox is a independent
contractor, and is not an employee or agent of either the Licensor or Licensee.
(e) AMENDMENTS. This Agreement shall not be modified or
amended except by another agreement in writing executed by the parties hereto.
(f) ENTIRE AGREEMENT. This Agreement, including all exhibits
hereto, supersedes all prior discussions, understandings and agreements between
the parties with respect to the matters contained herein, and constitutes the
entire agreement between the parties with respect to the matters contemplated
herein. All exhibits attached hereto are by this reference made a part of this
Agreement and are incorporated herein.
(g) COUNTERPARTS; GOVERNING LAW. This Agreement may be
executed in counterparts, each of which when so executed shall be deemed to be
an original and all of which when taken together shall constitute one and the
same Agreement. This Agreement shall be construed and enforced in accordance
with the laws of the State of Georgia.
(h) CONFIDENTIALITY. Fort Knox will hold and release the
Deposit Materials only in accordance with the terms and conditions hereof, and
will maintain the confidentiality of the Deposit Materials.
(i) NOTICES. All notices, requests, demands or other
communications required or permitted to be given or made under this Agreement
shall be in writing and shall be delivered by hand or by commercial overnight
delivery service which provides for evidence of receipt, or mailed by certified
mail, return receipt requested, postage prepaid. If delivered personally or by
commercial overnight delivery service, the date on which the notice, request,
instruction or document is delivered shall be the date on which delivery is
deemed to be made, and if delivered by mail, the date on which such notice,
request, instruction or document is received shall be the date on which delivery
is deemed to be made. Any party may change its address for the purpose of this
Agreement by notice in writing to the other parties as provided herein.
(j) SURVIVAL. Paragraphs 5, 6, 8, 9 and 11 shall survive any
termination of this Agreement.
(k) NO WAIVER. No failure on the part of any party hereto to
exercise, and no delay in exercising any right, power or single or partial
exercise of any right, power or remedy by any party will preclude any other or
further exercise thereof or the exercise of any other right, power or remedy. No
express waiver or assent by any party hereto to any breach of or default in any
term or condition of this Agreement shall constitute a waiver of or an assent to
any succeeding breach of or default in the same or any other term or condition
hereof.
<PAGE> 7
IN WITNESS WHEREOF each of the parties has caused its duly authorized
officer to execute this Agreement as of the date and year first above written.
Fort Knox Escrow Services, Inc.
2100 Norcross Pkwy. Suite 150 Phone Number 1 770-239-9200
Norcross, Georgia 30071 Fax Number 770-239-9201
Attn: Keith Mobley
By: /s/ Chris Smith
------------------------------
Print Name: Chris Smith Title: Account Executive
---------------------- ----------------------
Licensor
By: /s/ Bjorn Jawerth
-----------------------------------
Print Name: Dr. Bjorn Jawerth Title: Chairman of Summus
--------------------------- ----------------------
Address: 434 Fayetteville Street Mall
------------------------------
Suite 600
------------------------------
Raleigh, NC 27601
------------------------------
Phone: 919-807-5600 Fax: 919-807-5601
------------------------------ ------------------------
Licensee
By: /s/ Andrew Fox
-----------------------------------
Print Name: Andy Fox Title: EVP & Acting CEO
--------------------------- ----------------------
Address: 434 Fayetteville Street Mall
------------------------------
Suite 2120
------------------------------
Raleigh, NC 27601
------------------------------
Phone: 919-807-5613 Fax: 919-807-0508
------------------------------ ------------------------
<PAGE> 8
EXHIBIT A
FEE SCHEDULE
Fees to be paid by Licensee shall be as follows:
Initialization fee (one time only) $ 850
($765 for current clients)
Annual maintenance fee
includes two Deposit Material updates $ 1000 product
includes one cubic foot of storage space
International (outside of U.S.) - $ 1000/product
Additional Updates $ 150
(above two per year)
Additional Storage Space $ 150/cubic foot
Payable by Licensee or Licensor:
Due Upon Licensee's or Licensor's
Request for Release of Deposit Materials $100 for initial 2 hrs
$50/hour for
additional hours
A ten percent discount is credited towards the initialization fee for current
Fort Knox clients. Fees due upon receipt of signed contract or Deposit Material,
whichever comes first and shall be paid in U.S. Dollars. The renewal date for
this Agreement will occur on the anniversary of the first invoice. Thereafter,
fees shall be subject to their current pricing, provided that such prices shall
not increase by more than 10% per year.
<PAGE> 9
EXHIBIT B
B1. Product Name: ___________________________________________________
Version #:_______________________________________________________
Prepared and Confirmed by: ______________________________________________
Title: _________________________________________ Date: _______________
Signature: _______________________________________________________________
Type of deposit:
____ Initial Deposit
____ Update Deposit to replace current deposits
____ Other (please describe)____________________________
ITEMS DEPOSITED:
Quantity Media Type Description of Material
A) ___________ ____________ _____________________________________
B) ___________ ____________ ____________________________________
C) __________ ____________ ____________________________________
B2. Product Name: ____________________________________________________
Version #: _______________________________________________________
Prepared and Confirmed by: _______________________________________________
Title: _________________________________________ Date: ________________
Signature: _______________________________________________________________
Type of deposit:
____ Initial Deposit
____ Update Deposit to replace current deposits
____ Other (please describe) ___________________________
ITEMS DEPOSITED:
Quantity Media Type Description of Material
A) ___________ ____________ ___________________________________
B) ___________ ____________ ___________________________________
C) ___________ ____________ ___________________________________
(please copy page as necessary)
<PAGE> 1
EXHIBIT 10.12
March 13, 2000
Mr. Andrew Fox
Acting President and CEO
High Speed Net Solutions, Inc.
434 Fayetteville Street Mall, Suite 2120
Raleigh, NC 27601
Dear Andy:
Summus, Ltd. ("Summus") hereby agrees that during the term of the Software
License Agreement (the "SLA") entered into between Summus, Ltd., and High Speed
Net Solutions, Inc. ("HSNS"), dated February 18, 2000, neither Summus nor any of
its Affiliates will directly engage in any use of the MaxxSystem Software or of
the product functionality contained in the MaxxSystem Software, either alone or
in any combination, for a purpose that is directly competitive with the business
of HSNS as it is presently constituted. Affiliate is a person or entity that
directly or indirectly controls, is controlled by, or is under common control
with Summus.
Furthermore, Summus hereby agrees that from the date of the SLA through the
earlier of July 1, 2001, or the effective date of termination of the SLA, Summus
shall not sell, license or grant any other rights to use the MaxxSystem software
or the product functionality contained in the MaxxSystem Software to entities
other than Summus for any use that is directly competitive with the business of
HSNS as presently constituted. In the case of Summus Affiliates, the restriction
contained in the preceding sentence shall continue throughout the term of the
SLA. Without limiting the foregoing, the prohibition in this paragraph shall not
apply to licenses of the MaxxSystem software to an entity solely for the purpose
of such entity marketing, advertising and/or promoting such entity's own
products, services or views and opinions.
In consideration for the above described commitments by Summus, HSNS agrees to
pay Summus $1,000 dollars concurrently with the execution of this letter and to
implement commercially viable sales and marketing facilities to promote its
Service Bureau use (as defined in the Revenue Sharing Agreement dated February
18, 2000) of the MaxxSystem Software.
Agreed to by: Agreed to by:
/s/ Dr. Bjorn Jawerth /s/ Andrew Fox
- ----------------------- ---------------------
Dr. Bjorn Jawerth Andrew Fox
President and Chairman of the Board Acting President and CEO,
Summus, Ltd. Executive Vice President
High Speed Net Solutions, Inc.
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<PERIOD-END> MAR-31-2000
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