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ASSET PURCHASE
AGREEMENT
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BY AND AMONG
HIGH SPEED NET SOLUTIONS, INC.
SUMMUS, LTD.
AND
THE STOCKHOLDERS NAMED HEREIN
DATED AS OF OCTOBER 30, 2000
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "AGREEMENT") is made and entered
into as of the 30th day of October, 2000, by and among HIGH SPEED NET SOLUTIONS,
INC., a Florida corporation ("HSNS"), SUMMUS, LTD., a Delaware corporation
("SUMMUS"), and certain of Summus' stockholders identified on the signature page
below (collectively, the "STOCKHOLDERS" and individually a "STOCKHOLDER").
W I T N E S S E T H:
WHEREAS, HSNS provides, among other things, Internet solutions and
related services; and Summus is engaged in the business of developing and
marketing digital media technology ("SUMMUS' SERVICES") (such term and other
capitalized terms used herein being defined either in Article 11 or where used
in this Agreement); and
WHEREAS, Summus desires to sell and transfer to HSNS, and HSNS desires
to acquire from Summus, all of the assets of Summus (the "ACQUIRED Business"),
upon the terms and conditions contained herein; and
WHEREAS, the parties deem it advisable and in their respective best
interests to consummate the transactions described herein and intend that the
transactions be a transaction as described in Section 368(a)(1)(C) of the
Internal Revenue Code;
NOW, THEREFORE, for and in consideration of the premises, and the
mutual covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1 ACQUIRED ASSETS. Subject to the terms and conditions contained
herein, Summus shall sell, transfer, convey and assign to HSNS, and HSNS shall
purchase and acquire from Summus, at the Closing, free and clear of all liens,
claims and encumbrances, other than those described on SCHEDULE 1.1
(collectively, "PERMITTED ENCUMBRANCES"), all right, title and interest in and
to all of the assets and properties of Summus, including but not limited to the
assets as set forth herein below (collectively, the "ACQUIRED ASSETS") but
excluding the Excluded Assets described below:
(a) cash and cash equivalents, including without
limitation, all bank accounts, cash, securities, investments of Summus in mutual
funds, treasury funds, money market funds, certificates of deposit and other
similar investment instruments (whether negotiable or non-negotiable), owned by
Summus at the Closing, and earnings thereon;
(b) accounts or notes receivable relating to goods or
services rendered or fees earned prior to the Closing;
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(c) all equipment, computer hardware and software (and
any rights under any licenses related thereto), tools, vehicles (except for any
leased vehicles), equipment, furniture, office equipment and other tangible
personal property and supplies not included in inventory (and any documents,
records or warranties related thereto);
(d) all inventories of Summus used or usable in
connection with the Acquired Business ("INVENTORY"), including all raw
materials, work in process, finished products, goods, spare parts, at any
location controlled by Summus or which have been purchased by and are in transit
to Summus;
(e) proprietary or confidential information, including,
without limitation (i) trade secrets, technical information, know-how, ideas,
designs, processes, procedures, algorithms, discoveries, patents, patent
applications, and copyrights, and all improvements thereof; (ii) all data,
files, books and records, customer lists, and other client information; (iii)
all source code, object code, flow charts, and documentation for computer
software owned by Summus; and (iv) all of Summus' other information and
intangible property rights; (together with the assets of the type listed in
PARAGRAPH 1.1(F) below, the "INTELLECTUAL PROPERTY"):
(f) trademarks, service marks, domain names, URL
addresses, and trade names (including, without limitation, Summus' corporate
name and all fictitious names used by Summus) and all variations thereof, all
registrations and pending applications therefor, and all goodwill associated
therewith;
(g) each of the contracts, contractual rights, purchase
orders and sales orders, written or oral contracts of Summus entered into as
part of or in connection with the Acquired Business (collectively, the "ACQUIRED
CONTRACTS" and individually an "ACQUIRED CONTRACT"), set forth on SCHEDULE
1.1(G);
(h) choses in action, causes of action, suits,
proceedings, claims and demands, whether known or unknown, matured or unmatured,
accrued or contingent, against third parties;
(i) to the extent transferable, all licenses, permits,
orders and approvals from any federal, state or local governments or any agency,
quasi-agency, public corporation or bureau thereof;
(j) websites, telephone and facsimile numbers, post
office boxes, stationery, forms, labels, shipping material, supplies, catalogs,
brochures, art work, photographs and advertising and promotional materials;
(k) all escrowed funds, funds held in trust, or other
funds belonging to third parties, and all documents and instruments related
thereto, including, without limitation, any cash or cash equivalents relating to
future commissions owed to others, whether in Summus' possession or the
possession of third parties;
(l) all of Summus' real property, including fixtures,
buildings and improvements, and all appurtenant rights owned by Summus;
(m) 8,239,360 shares of HSNS common stock, $0.001 par
value ("COMMON STOCK"), held by Summus.
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(n) all books and records of Summus; and
(o) all other assets, securities, prepaid expenses,
advances and deposits of every kind and nature, except to the extent expressly
excluded.
2. PURCHASE PRICE; ASSUMPTION OF LIABILITIES
2.1 PURCHASE PRICE. In consideration of the sale, assignment,
transfer and conveyance of the Acquired Assets, and in reliance upon the
covenants, representations and warranties made herein by Summus and the
Stockholders, HSNS shall:
(a) Issue and deliver a total of 21,505,241 shares of
Common Stock to Summus pursuant to PARAGRAPH 3.2 below;
(b) Issue and deliver 2,000,000 shares of Common Stock to
the Escrow Agent (as defined in the Escrow Agreement referred to below) to be
held and distributed by the Escrow Agent pursuant to the terms of this Agreement
and the Escrow Agreement attached to this Agreement as EXHIBIT D to be executed
and delivered by the parties pursuant to PARAGRAPH 3.2 below as security for
obligations of Summus and the Stockholders under this Agreement (the "ESCROW
AGREEMENT").
(i) The shares of Common Stock issued pursuant
to this Clause 2.1(b) (the "ESCROWED SHARES") shall be issued in the name of the
Escrow Agent, as escrow agent under the Escrow Agreement. The Escrowed Shares
shall be held for twelve (12) months from the Closing Date.
(ii) The parties hereby appoint BB&T, effective
as of the Closing Date, to serve as the Escrow Agent for purposes of
administering the escrow arrangements contemplated by the Escrow Agreement (such
representative, or any successor representative appointed under the Escrow
Agreement, the "ESCROW AGENT").
(c) Issue and deliver warrants to purchase a total of
500,000 shares of the Common Stock, exercisable at the closing market price on
the Closing Date (the "WARRANT EXERCISE PRICE") for a period of five (5) years
from the date of this Agreement (the "WARRANT EXERCISE PERIOD") (the "WARRANTS")
on a pro-rata basis to shareholders of Summus other than HSNS and Xxxxx Xxxxxxx;
and
(d) Assume the Assumed Liabilities as defined in
PARAGRAPH 2.2 below.
The shares of Common Stock referred to in the foregoing clauses (a) and (b) are
collectively referred to as the "STOCK PURCHASE PRICE," and together with the
items referred to in the foregoing clauses (c) and (d), the "PURCHASE PRICE."
2.2 ASSUMPTION OF CERTAIN LIABILITIES. Except as provided in
PARAGRAPH 2.3, HSNS agrees to assume at the Closing, and to pay or perform, in
accordance with their terms, only the following obligations and liabilities of
Summus (collectively, the "ASSUMED LIABILITIES"):
(a) the obligations, liabilities, agreements, contracts
and commitments which are identified on SCHEDULE 2.2(A); and
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(b) all liabilities and obligations of Summus arising
after the Closing under the Acquired Contracts.
2.3 OBLIGATIONS NOT ASSUMED. Except for the Assumed Liabilities,
HSNS shall not assume any obligation or liability of Summus of any kind. Without
limiting the generality of the foregoing, under no circumstances shall HSNS be
deemed to assume any liability or obligation of Summus (i) with respect to
Summus' employee benefit plans or agreements, (ii) under any contract that is
not an Acquired Contract, or (iii) not specifically assumed under this Agreement
(collectively, the "EXCLUDED LIABILITIES"), except to the extent it may be
required to do so by applicable law.
3. CLOSING
3.1 CLOSING. The parties shall use their best efforts to obtain
and be prepared to deliver the documents described in PARAGRAPH 3.2(A) and
PARAGRAPH 3.2(B) below, and to satisfy the conditions to Closing set forth in
PARAGRAPH 8 and PARAGRAPH 9, at the earliest possible date. The Closing shall
take place on the earliest date that the Closing conditions and delivery
requirements in XXXXXXXXX 0, XXXXXXXXX 8 and PARAGRAPH 9 can be satisfied or are
waived in writing (the "Closing Date").
3.2 TRANSACTIONS AND DOCUMENTS AT CLOSING.
(a) HSNS' DELIVERIES. At the Closing, HSNS shall issue
and deliver the Common Stock and Warrants pursuant to the provisions of
PARAGRAPH 2.1 above and the Escrow Agreement; and execute and deliver the
following documents:
(i) CERTIFICATES OF HSNS. A certificate executed
by one of its officers, dated the Closing Date, certifying in such detail as
Summus may reasonably request that (A) the representations and warranties of
HSNS contained in this Agreement and any Other Agreement are true and correct in
all material respects; and (B) HSNS has performed and complied with in all
material respects all covenants, agreements and conditions required by this
Agreement to be performed or complied with by HSNS prior to or on the Closing
Date.
(ii) RESOLUTIONS. Duly adopted resolutions of the
Board of Directors of HSNS, certified by the Secretary or an Assistant Secretary
of HSNS as of the Closing Date, authorizing and approving the execution hereof
and the taking of all other actions necessary to enable HSNS to comply with the
terms hereof and to consummate the transactions contemplated herein.
(iii) ASSIGNMENT OF CONTRACTS. An Assignment and
Assumption of Contracts in substantially the form attached hereto as EXHIBIT J,
pursuant to which HSNS shall assume the rights and obligations of Summus under
the Acquired Contracts.
(iv) ASSUMPTION AGREEMENT. An Assumption
Agreement in substantially the form attached hereto as EXHIBIT A, pursuant to
which HSNS shall assume the Assumed Liabilities.
(v) EMPLOYMENT AND NONCOMPETITION AGREEMENTS. An
executed employment agreement with Xxxxx Xxxxxxx and signed employment offer
letters and
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confidentiality and invention assignment agreement with the employees identified
on SCHEDULE 3.2(A)(V), in substantially the forms attached hereto as EXHIBITS
B-1 AND B-2 AND EXHIBIT C.
(vi) STOCK CERTIFICATE(S) WITH RESPECT TO STOCK
PURCHASE PRICE. The following certificates:
(A) to Summus, one or more certificates
representing the number of shares of Common Stock with respect to the Stock
Purchase Price in accordance with PARAGRAPH 2.1(A); and
(B) to the Escrow Agent, one or more
certificates representing the number of shares of Common Stock with respect to
the Escrowed Shares in accordance with PARAGRAPH 2.1 (B).
(vii) WARRANTS TO PURCHASE COMMON STOCK.
Certificates representing the Warrants in accordance with PARAGRAPH 2.1(C).
(viii) STOCK ESCROW AGREEMENT. The Escrow Agreement
pursuant to the provisions of PARAGRAPH 2.1(B) above.
(ix) RELEASE FROM HSNS'S SHAREHOLDERS. Releases
substantially in the form of EXHIBIT G-1 attached to this Agreement, executed by
HSNS and certain HSNS shareholders identified on SCHEDULE 3.2(A)(IX).
(x) RESOLUTIONS ADOPTING INVENTIONS AWARDS PLAN
REGARDING NEW TECHNOLOGY. Duly adopted resolutions of the Board of Directors of
HSNS, certified by the Secretary or an Assistant Secretary of HSNS as of the
Closing Date, approving of and authorizing the execution and delivery of the
Inventions Awards Plan attached to this Agreement as EXHIBIT I hereof and the
taking of all other actions necessary to enable HSNS to comply with the terms
hereof and to consummate the transactions contemplated herein.
(xi) TAX OPINION. The tax opinion of Xxxxxxxxxx
Xxxxxxxx L.L.P. to the effect that the transaction will qualify as a tax-free
reorganization under Section 368(a)(1)(c) of the Code.
(b) SUMMUS' AND STOCKHOLDERS' DELIVERIES. At the Closing,
Summus and the Stockholders shall execute and deliver to HSNS the following
documents:
(i) CERTIFICATES OF SUMMUS AND STOCKHOLDERS.
Certificates executed by Summus and each such Stockholder, dated the date of the
Closing, certifying in such detail as HSNS may reasonably request that (i) the
representations and warranties of Summus or such Stockholder contained in this
Agreement and any Other Agreement are true and correct in all material respects,
(ii) Summus or such Stockholder have performed and complied with in all material
respects all covenants, agreements and conditions required by this Agreement to
be performed or complied with by him or it prior to or on the date of the
Closing, (iii) to the knowledge of Summus or such Stockholder, there has been no
material adverse change in the business, assets, properties, Assumed
Liabilities, results of operations, condition (financial or otherwise), cash
flows or prospects of Summus prior to the Closing; and (iv) that the shares
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representing the Stock Purchase Price have been acquired for investment and not
with a view to resale, except as provided in Paragraphs 9.12 and 9.13 below.
(ii) RESOLUTIONS. Duly adopted resolutions of the
Board of Directors and the stockholders of Summus, certified by the Secretary of
Summus as of the date of the Closing, authorizing and approving the execution
hereof and all other documents executed by it, including, without limitation,
the Other Agreements, and the taking of any and all other actions necessary to
enable Summus to comply with the terms hereof and to consummate the transactions
contemplated herein.
(iii) CONSENTS. All authorizations, consents
(including estoppel letters from lenders, suppliers, lessors, and others), and
approvals from each of the Persons listed on SCHEDULE 3.2.(B)(III).
(iv) EMPLOYMENT AND NONCOMPETITION AGREEMENTS. An
executed employment agreement with Xxxxx Xxxxxxx and signed employment offer
letters and confidentiality and invention assignment agreement with the
employees identified on SCHEDULE 3.2(B)(IV), in substantially the forms attached
hereto as EXHIBITS B-1 AND B-2 AND EXHIBIT C.
(v) INVENTIONS ASSIGNMENT AGREEMENTS. An
Inventions Agreement in substantially the form of EXHIBIT C attached to this
Agreement executed by each employee of Summus who is to become an employee of
HSNS (each, an "INVENTIONS AGREEMENT"), except as waived by HSNS with regard to
particular employees.
(vi) RELEASE FROM NEW EMPLOYEES. Releases
substantially in the form of EXHIBIT G-2 attached to this Agreement, executed by
each employee of Summus who is to become an employee of HSNS.
(vii) XXXX OF SALE AND OTHER TRANSFER DOCUMENTS. A
General Xxxx of Sale and Assignment in substantially the form attached to this
Agreement as EXHIBIT E, pursuant to which Summus shall convey to HSNS all of
Summus' right, title and interest in and to the Acquired Assets, free and clear
of any and all liens, claims, charges and encumbrances, other than Permitted
Encumbrances, and such other deeds, bills of sale, assignments, certificates of
title, documents and other instruments of transfer and conveyance as HSNS and
its legal counsel shall reasonably request.
(viii) ASSIGNMENT OF CONTRACTS. The Assignment and
Assumption of Contracts referred to in PARAGRAPH 3.2(A).
(ix) STOCK ESCROW AGREEMENT. The Stock Escrow
Agreement pursuant to the provisions of PARAGRAPH 2.1.
(x) RELEASES FROM STOCKHOLDERS OF SUMMUS.
Releases substantially in the form of EXHIBIT G-1 attached to this Agreement
executed by Summus and each of the Summus shareholders listed on Schedule
3.2(b)(x).
(xi) VOTING TRUST AGREEMENT. A Voting Trust
Agreement substantially in the form of EXHIBIT F attached to this Agreement (the
"VOTING TRUST AGREEMENT") executed by Xxxxx Xxxxxxx.
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(xii) SECURITIES REPRESENTATIONS. A representation
of each shareholder of Summus substantially in the form of EXHIBIT K attached to
this Agreement, if the NORTH CAROLINA PERMIT referred to in PARAGRAPH 4.11(A)
has not been obtained prior to the Closing Date.
(c) All deliveries, payments and other transactions and
documents relating to the Closing shall be interdependent and none shall be
effective unless and until all are effective (except to the extent that the
party entitled to the benefit thereof has waived in writing satisfaction or
performance thereof as a condition precedent to Closing).
(d) Each party shall, at the request of any other party
from time to time and at any time, whether on or after the Closing, and without
further consideration, execute and deliver such deeds, assignments, transfers,
assumptions, conveyances, powers of attorney, receipts, acknowledgments,
acceptances and assurances as may be reasonably necessary to procure for the
party so requesting, and its successors and assigns, or for aiding and assisting
in collecting and reducing to possession, any and all of the Acquired Assets or
the Acquired Business, or for the assumption of the Assumed Liabilities, or to
otherwise satisfy and perform the obligations of the parties hereunder.
4. ADDITIONAL PROVISIONS
4.1 EXPENSES. Except as may be otherwise provided herein, each
party hereto shall pay all of its own expenses in connection with the
negotiations among the parties, and the authorization, preparation and execution
of this Agreement and the consummation of the transactions contemplated by this
Agreement, including without limitation the fees and expenses of its respective
counsel.
4.2 BROKERS. HSNS shall indemnify the Stockholders and hold them
harmless from and against all claims or demands for commissions or other
compensation by any broker, finder, or similar agent claiming to have been
employed by or on behalf of HSNS. Summus and the Stockholders shall indemnify
HSNS and hold it harmless from and against all claims or demands for commissions
or other compensation by any broker, finder or similar agent claiming to have
been employed by or on behalf of the Stockholders (or any of them) or Summus.
4.3 PUBLICITY. The parties will not make, and will cause their
respective representatives, officers, directors, employees and Affiliates not to
make, any public disclosure (whether or not in response to an inquiry) regarding
the subject matter of this Agreement without the prior written consent of the
other parties unless required to do so under applicable law (in which event the
disclosing party shall provide to the other parties reasonable prior notice of
the content of the disclosure and the opportunity to review and comment on the
disclosure. The parties shall (x) file a single joint press release upon
execution of this Agreement (the "JOINT PRESS RELEASE"), in form and content
reasonably acceptable to each party, subject to applicable law; and (y) refrain
from, and cause their respective representatives, officers, directors, employees
and affiliates to refrain from, making any other public disclosure regarding the
transactions contemplated by this Agreement until the Closing; provided,
however, that HSNS shall have sole authority at its discretion (i) to make any
changes to the Joint Press Release and to control the timing of the Joint Press
Release to the extent necessary to comply with applicable law; and (ii) to file
a Form 8-K with the Securities and Exchange Commission ("SEC") describing the
Transaction and to make disclosures in other filings with the SEC and provided,
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however, that Summus shall have sole authority at its discretion to amend its
Schedule 13D as necessary to comply with applicable law. Notwithstanding the
foregoing, communications with customers shall not be considered public
disclosure to the extent that such communications are of a type necessary to
maintain good relationships with such customers and do not disclose any
information which would be relevant to such customers as investors.
4.4 ACCESS AND INSPECTION; COOPERATION. The parties shall
cooperate fully with each other and with their respective counsel and
accountants in connection with any steps required to be taken as part of their
respective obligations hereunder, and all parties shall use their best efforts
to consummate the transactions contemplated herein and to fulfill their
obligations hereunder. From time to time and at any time, at HSNS' reasonable
request, whether on or after the date hereof or the Closing Date, and without
further consideration, the Stockholders shall, at HSNS' expense, execute and
deliver such further documents and instruments of conveyance, assignment, and
transfer and shall take such further reasonable actions as may be necessary or
desirable, in the reasonable opinion of HSNS, in connection with the
consummation of the transactions described herein.
4.5 COVENANT AGAINST COMPETITION AND SOLICITATION.
(a) In order to induce HSNS to enter into this Agreement
and to issue the Common Stock and make payments as provided herein, Summus and
each Stockholder hereby agrees that, for the period of eighteen (18) months
immediately following the Closing Date, each of them will not, without the prior
written consent of HSNS, for his own account or jointly with another, directly
or indirectly, for or on behalf of any Person, as principal, agent or otherwise:
(i) participate in the control or management of
or assist a business that develops, markets, licenses out or sells digital media
compression products or services within the Territory (the "BUSINESS"), or
assist such a business in the development of digital media compression products
or services, or accept employment as a consultant, director, officer or manager
by a business engaged in the Business, except HSNS;
(ii) solicit or induce, or in any manner attempt
to solicit or induce, any person employed or engaged by HSNS in any capacity
(including, without limitation, as an employee, distributor, independent
contractor or agent), to leave such employment or engagement, whether or not
such employment or engagement is pursuant to a contract or is at will.
(b) Although the parties have, in good faith, used their
best efforts to make the provisions of this PARAGRAPH 4.5 reasonable in the
scope of activities, geographic area and in duration, and it is not anticipated,
nor is it intended, by any of the parties hereto that a Forum of competent
jurisdiction would find it necessary to reform the provisions hereof to make it
reasonable in respect to the scope of activities, geographic area and in
duration, or otherwise, the parties understand and agree that if a Forum of
competent jurisdiction determines it necessary to reform the scope of this
PARAGRAPH 4.5 in order to make it reasonable in respect to the scope of
activities, geographic area or duration, or otherwise, damages, if any, for a
breach hereof, as so reformed, would be deemed to accrue to HSNS as of and from
the date of such a breach only insofar as the damages for such breach relate to
an action which occurred within the scope of activities, geographic area and
duration as so reformed.
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(c) The parties acknowledge that the Acquired Business is
international in scope, and that eighteen (18) months is a reasonable duration
for the provisions of PARAGRAPH 4.5 above in order for HSNS to commercialize and
exploit the technology acquired as part of the Acquired Assets.
4.6 NONDISCLOSURE AGREEMENT. HSNS, Summus and each Stockholder
acknowledge and agree to abide by and be bound by each of the terms and
conditions contained in the nondisclosure agreement previously entered into by
certain of the parties hereto.
4.7 CURRENT SUMMUS EMPLOYEES. Summus and the Stockholders shall
use their best efforts after the Closing to cause each of the persons employed
by Summus as of the Closing Date and set forth on SCHEDULE 4.7 to accept
employment by HSNS if offered by HSNS.
4.8 EMPLOYEE OPTIONS. All Summus stock options will be cancelled
at Closing in accordance with the Summus stock option plan. HSNS shall issue
stock options to Summus option holders, to replace stock options in Summus stock
that are cancelled at Closing. The former Summus option holders will be given
options on the number of HSNS shares equal to 18.6305 times the number of Summus
shares covered by the cancelled options, including credit for vested options
that were not exercised prior to cancellation. The share purchase price will be
the lesser of the fair market value of HSNS Common Stock on the date of Closing
or on the date of this Agreement. Time to vesting shall not be longer than the
period provided in the cancelled Summus option agreements, and credit will be
given for time passed under the Summus agreements. Other terms shall be in
accordance with standard HSNS stock option agreements.
4.9 CONFIDENTIAL INFORMATION. Summus and each Stockholder shall
use its or his best efforts to protect Confidential Information (as defined
below). Summus and each Stockholder will not use (other than for HSNS' benefit)
or disclose any of Summus' Confidential Information. For purposes of this
Agreement, "CONFIDENTIAL INFORMATION" shall mean information, without regard to
form, relating to Summus' customers, operation, finances, and business that
derives economic value, actual or potential, from not being generally known to
other persons, including, but not limited to, technical or nontechnical data,
formulas, patterns, compilations (including compilations of customer
information), programs, devices, methods, techniques, processes, financial data
or lists of actual or potential customers (including identifying information
about customers), whether or not in writing. Confidential Information includes
information disclosed to Summus or the Stockholders by third parties that Summus
is obligated to maintain as confidential. Confidential Information subject to
this Agreement may include information that is not a trade secret under
applicable law, but information not constituting a trade secret only shall be
treated as Confidential Information under this Agreement for a period of two (2)
years after the Closing.
4.10 BOARD OF DIRECTORS & SENIOR MANAGEMENT.
(a) Prior to the Closing, HSNS and Summus agree that each
party shall maintain its own Board of Directors having a majority of members who
are not "INSIDERS." Until the Closing, a Special Committee of the Summus Board
of Directors will set guidelines for Summus' expenditures and must approve any
proposed deviation from these guidelines before any such expenditure are made.
Immediately following the Closing, the size of the HSNS Board shall be increased
to ten, current members of the Board of Directors of HSNS (the "HSNS BOARD"),
Xxxxxx Xxxx, Xxxxxxx Xxxxxxx, Xxxxxxxx Xxxxxxxx, Xxxxxx Xxx, and Xxxxx Xxxxxxx,
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shall remain on the HSNS Board. Xxxxxxx Xxxxx, Xxxxxx Xxxxxxx, Xxxxx Xxxxxxxx,
Xxxxx Xxxx, and a new CEO shall be elected to the HSNS Board. All directors must
stand for re-election after one year at the annual shareholder meeting as per
HSNS' by-laws.
(b) The following provision shall terminate one hundred
twenty (120) days after the Closing: Two Directors from each of HSNS and Summus
(other than Xxxx Xxx and Xxxxx Xxxxxxx (hereafter referred to as "INSIDERS")
shall be appointed as a committee to evaluate management changes and additions.
The current management as of the date of this Agreement shall remain in place,
unless a majority of the Members of the HSNS Board of Directors who are not
Insiders decide otherwise. Members of the HSNS Board of Directors who are not
Insiders must approve all proposed significant deviations from HSNS's business
strategy. Both HSNS directors (Rush, Siefert, Wittress, Fox) and Summus
directors (Jawerth, Diamond, Marks) must approve all contracts having a value in
excess of $50,000.
4.11 FAIRNESS HEARING
(a) As soon as reasonably practicable following the
execution of this Agreement, HSNS and Summus shall prepare, and the Stockholders
shall cause Summus to prepare, the necessary documents and HSNS shall apply to
obtain an order of approval (a "NORTH CAROLINA PERMIT") from the Secretary of
State of the State of North Carolina (after a hearing before such Secretary)
pursuant to Section 78A-30 of the North Carolina Securities Act. Summus and HSNS
will respond to, and the Stockholders will cause Summus to respond to, any
comments from the Secretary of State of North Carolina and use their
commercially reasonable efforts to have the North Carolina Permit granted as
soon as practicable after such filing, if applicable.
(b) In the event the Secretary of State of the State of
North Carolina shall fail to grant a North Carolina Permit in a timely manner,
or the North Carolina Permit is not available prior to the Closing, HSNS in its
sole and absolute discretion may issue the Stock Purchase Price in a private
placement in accordance with applicable federal and state securities laws.
4.12 RESTRICTIONS ON TRANSFER. All certificates representing HSNS
Common Stock deliverable to Summus and/or the Stockholders pursuant to this
Agreement and in connection with the transactions described herein and any
certificates subsequently issued with respect thereto or in substitution
therefor (including any shares issued or issuable in respect of any such shares
upon any stock split, stock dividend, recapitalization, or similar event) shall
bear any legend required by the Secretary of State of the State of North
Carolina or such as are required pursuant to any federal, state, local or
foreign law governing such securities.
4.13 EMPLOYEE BENEFITS. Following the Closing, HSNS shall provide
to officers and employees of Summus employee benefits based on the positions
they hold with HSNS after the Closing under employee benefit plans on terms and
conditions which are substantially similar in the aggregate to those provided by
HSNS to their similarly situated officers and employees after the Closing. With
respect to any benefits plans of HSNS in which the officers and employees of
Summus participate after the Closing, HSNS shall use reasonable efforts to: (i)
waive any limitations as to pre-existing conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
such officers and employees under any welfare benefit plan in which such
employees may be eligible to participate after the Closing
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(provided, however, that no such waiver shall apply to a pre-existing condition
of any such officer or employee who was, as of the Closing, excluded from
participation in a Summus benefit plan by nature of such pre-existing
condition), (ii) provide each such officer and employee with credit for any
co-payments and deductibles paid prior to the Closing during the year in which
the Closing occurs in satisfying any applicable deductible or out-of-pocket
requirements under any welfare benefit plan in which such employees may be
eligible to participate after the Closing, and (iii) other than with respect to
vesting credit with respect to HSNS options granted to such officers and
employees, recognize all service of such officers and employees with Summus for
all purposes (including, without limitation, purposes of eligibility to
participate, vesting credit, entitlement for benefits, and benefit accrual) in
any benefit plan in which such employees may be eligible to participate after
the Closing, except to the extent such treatment would result in duplicative
accrual of benefits for the same period of service.
4.14 INTERIM FINANCING.
(a) HSNS has previously provided to Summus a loan of
$500,000 (the "PRIOR LOAN") pursuant to a loan agreement dated August, 2000 (the
"LOAN AGREEMENT"). Under the Loan Agreement, Summus is required to provide
security for repayment, in the form of HSNS Common Stock owned by Summus, in
value at least 2.5 times the amount of the debt under the Loan Agreement.
(b) HSNS agrees to provide to Summus, under the terms of
the Loan Agreement, an additional $235,000 on October 30, 2000, and every two
weeks thereafter (the "INTERIM FINANCING") until the earlier of (i) the Closing
Date or (ii) three months after the date of this Agreement. A condition to each
advance of Interim Financing by HSNS is the provision of adequate security to
HSNS, in the form of HSNS Common Stock, so that the total value of security held
by HSNS will be at least 2.5 times the total of the Prior Loan and the amount of
Interim Financing that will have been provided after that advance, plus any
accrued interest.
(c) The sole and exclusive remedy for failure of HSNS to
make any advance of Interim Financing when scheduled shall be termination of
this Agreement. Acceptance by Summus of any advance shall be deemed a waiver of
any right to terminate that had previously arisen under this PARAGRAPH 4.14(C).
(d) On the Closing Date, the Prior Loan and any interest
thereon shall be paid by cancellation of Common Stock held as security therefor,
having Market Value equal to the debt being repaid and the remaining Common
Stock serving as security for the Prior Loan, provided to HSNS prior to October
30, 2000, shall be returned to Summus.
(e) If the Closing occurs, the debt represented by the
Interim Financing shall be cancelled, and Common Stock held as security therefor
shall be returned to Summus.
(f) If the Closing does not occur within sixty (60) days
of the date of this Agreement, due to termination of this Agreement or
otherwise, the Interim Financing shall be paid by cancellation of Common Stock
held as security therefor, having Market Value equal to the debt being repaid.
Any remaining Common Stock held as security shall be returned to Summus.
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4.15 PIGGYBACK REGISTRATION.
(a) Company Registration. If a North Carolina Permit is
not obtained as described above, and the Stock Purchase Price is provided by
private placement of Common Stock, and at any time or from time to time HSNS
shall determine to register any of its securities, either for its own account or
for the account of security holders, other than a registration relating solely
to employee benefit plans, a registration on Form S-4 relating solely to an SEC
Rule 145 transaction, or a demand registration by stockholders who may have
demand rights, HSNS will:
(i) Promptly (but in any event within 10
business days) give to each Stockholder written notice thereof; and
(ii) Include in such registration (and any
related qualification under state securities laws or other compliance), and in
any underwriting involved therein, all the Common Stock included in the Stock
Purchase Price specified in a written request or requests, made within 30 days
after receipt of such written notice from HSNS, by any Stockholder or
Stockholders, except as set forth in part (b) below.
Such Common Stock shall only be included to the extent that inclusion
will not diminish the number of securities included by HSNS.
(b) Underwriting. If the registration of which HSNS gives
notice is for a registered public offering involving an underwriting, HSNS shall
so advise the Stockholders as a part of the written notice given pursuant to
part (a)(i) above. In such event the right of any Stockholder to registration
pursuant to this PARAGRAPH 4.15 shall be conditioned upon such Stockholder's
participation in such underwriting and the inclusion of such Stockholder's
Common Stock in the underwriting to the extent provided herein.
All Stockholders proposing to distribute their Common Stock through
such underwriting shall, together with HSNS and the other parties distributing
their securities through such underwriting, enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by HSNS. Notwithstanding any other provision of this PARAGRAPH
4.15, if the underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the underwriter may limit the number
of Stockholder's Common Stock to be included in the registration and
underwriting, or may exclude Stockholder's Common Stock entirely from such
registration and underwriting subject to the terms of this Section 2.3. HSNS
shall so advise all holders of HSNS's securities that would otherwise be
registered and underwritten pursuant hereto, and the number of shares of such
securities, including Stockholder's Common Stock, that may be included in the
registration and underwriting shall be allocated in the following manner:
shares, other than Stockholder's Common Stock and other securities that have
contractual rights with respect to registration similar to those provided for in
this PARAGRAPH 4.15, requested to be included in such registration by
shareholders shall be excluded, and if a limitation on the number of shares is
still required, the number of Stockholder's Common Stock and other securities
that have contractual rights with respect to registration that may be included
shall be allocated among the holders thereof in proportion, as nearly as
practicable, to the amounts of Stockholder's Common Stock and such other
securities held by each such holder at the time of filing the Registration
Statement. For purposes of any such underwriter cutback, all Common Stock and
other securities held by any holder that is a partnership or corporation, shall
also include any
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Stockholder's Common Stock and other securities held by the partners, retired
partners, shareholders or affiliated entities of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons, and such holder and other persons shall
be deemed to be a single "selling holder," and any pro rata reduction with
respect to such "selling holder" shall be based upon the aggregate amount of
shares carrying registration rights owned by all entities and individuals
included in such "selling holder," as defined in this sentence. No securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. Nothing in this SECTION
2.3(B) is intended to diminish the number of securities to be included by HSNS
in the underwriting.
If any Stockholder disapproves of the terms of the underwriting, it may
elect to withdraw therefrom by written notice to HSNS and the underwriter. The
Stockholder's Common Stock so withdrawn shall also be withdrawn from
registration.
(c) Right to Terminate Registration. HSNS shall have the
right to terminate or withdraw any registration initiated by it under this
PARAGRAPH 4.15 prior to the effectiveness of such registration whether or not
any Stockholder has elected to include securities in such registration.
4.16 MARKET STAND-OFF AGREEMENT. Summus and each Stockholder agree
that none of the Common Stock included in the Share Purchase Price may be sold
in public market transactions during the twelve (12) months following the
Closing, provided that one and one-half percent (1.5%) of the shares included in
the Share Purchase Price (excluding those shares referred to in Paragraphs 9.12
and 9.13) may be sold or otherwise disposed of in each of the third through
twelfth months following Closing. Notwithstanding the foregoing, the sale
restriction shall not apply to Common Stock obtained through exercise of options
converted from agreements with Xxxxx Xxxxxxxx for 2,500 Summus options, Xxxxxx
Xxxxxxx for 10,000 Summus options, and Xxxxxxx Xxxxx for 5,000 Summus options.
4.17 SALARIES RESERVE. HSNS agrees that for a period of twelve (12)
months following Closing, HSNS guarantees payment of the salaries of employees
acquired from Summus and listed on Schedule 3.2(b)(iv) so long as they remain
employed by HSNS. Throughout such twelve (12) month period, HSNS shall maintain
a reserve, in cash or cash equivalents, of at least $800,000 for the purpose of
paying such salaries.
4.18 MODIFICATIONS TO SCHEDULES. Changes to Schedules may be made
by the parties prior to Closing by written agreement of the parties.
4.19 RETIREMENT OF SHARES. Following Closing, HSNS shall retire the
8,239,360 shares of Common Stock purchased as part of the Acquired Assets, and
will retire the Common Stock (expected to be 3,111,293 shares) that HSNS
receives in distributions by Summus to its shareholders upon liquidation.
4.20 CERTAIN OPTIONS. HSNS agrees that with regard to options on
Common Stock obtained through conversion of certain options on Summus stock held
by Xxxxx Xxxxxxxx (2,500 Summus options), Xxxxxx Xxxxxxx (10,000 Summus
options), and Xxxxxxx Xxxxx (5,000 Summus options), when the Company becomes
current on its reports required under the
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Securities Exchange Act of 1934, and provided in each case that the person in
question is eligible to use such form, the Company shall file an Form S-8 with
regard to such options.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
STOCKHOLDERS AND SUMMUS
The Stockholders and Summus have delivered to HSNS the disclosure
memorandum attached hereto and made a part hereof (the "DISCLOSURE MEMORANDUM"),
which contains certain information regarding Summus and the Stockholders. The
information contained in the Disclosure Memorandum shall be deemed to be part of
these representations and warranties if the specific paragraph of this Agreement
refers to the Disclosure Memorandum. In addition to the Disclosure Memorandum,
the Stockholders and Summus have delivered to HSNS certain documents and
materials as a part of HSNS' due diligence investigation, and the Disclosure
Memorandum and all such documents and materials are or were true, correct and
complete in all material respects as of the date furnished, and any and all
modifications or amendments thereto have been or will be delivered to HSNS. To
induce HSNS to enter into and perform this Agreement, the Stockholders and
Summus further represent and warrant to HSNS as follows:
5.1 ORGANIZATION, AUTHORITY AND QUALIFICATION.
(a) Summus is a corporation duly organized and validly
existing under the Laws of the state set forth in the preamble. Summus has
offices and places of business at the locations specified in the Disclosure
Memorandum. Summus has full corporate power and authority and is entitled to own
or lease its properties and to carry on its business as and in all places where
such business is conducted and such properties are owned or leased. Summus is
not required to be qualified as a foreign corporation in any jurisdiction except
as set forth in the Disclosure Memorandum and except where failure to be
qualified would not have a material adverse effect on the Acquired Business.
Summus has previously furnished to HSNS true, correct and complete copies of (i)
the articles or certificate of incorporation and bylaws of Summus, as amended to
date; (ii) the minutes and other similar records of meetings of the shareholders
of Summus and its board of directors, which contain all records of meetings and
actions taken in lieu thereof by Summus' shareholders and show all corporate
actions taken by Summus' shareholders, the Board of Directors, or any committees
thereof, and (iii) the share transfer records, which reflect fully all
issuances, transfers and redemptions of Summus' shares since the date of its
incorporation.
(b) Summus has the full corporate power and authority to
execute, deliver and perform this Agreement and any other agreements or
instruments contemplated by this Agreement ("OTHER AGREEMENTS") to which it is a
party. This Agreement has been and the Other Agreements have been duly and
validly executed and delivered by Summus and constitute the valid and legally
binding obligations of Summus, subject to general equity principles, enforceable
in accordance with their respective terms, except as the same may be limited by
bankruptcy, insolvency, reorganization or similar Laws affecting the rights of
creditors generally.
5.2 OWNERSHIP OF SHARES; SUBSIDIARIES.
(a) The total authorized capital stock of Summus is as
set forth in the Disclosure Memorandum.
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(b) All of the issued and outstanding Shares of Summus
are owned of record and beneficially by the stockholders as set forth in the
Disclosure Memorandum.
(c) All of the outstanding Shares are duly authorized,
validly issued, fully paid and nonassessable and were authorized, offered,
issued and sold in accordance with all applicable securities and other Laws and
all rights of Summus' shareholders and other Persons. No Person has any
preemptive rights with respect to shares of Summus. Except as set forth in the
Disclosure Memorandum, there are no outstanding securities convertible into the
capital stock or rights to subscribe for or to purchase, or any options for the
purchase of, or any agreements or arrangements providing for the issuance
(contingent or otherwise) of, or any Actions relating to, the capital stock of
Summus. Summus is not subject to any obligation to repurchase or otherwise
acquire or retire any of its capital stock, and Summus has no Liability for
dividends declared or accrued, but unpaid, with respect to its capital stock.
Except as set forth on the Disclosure Memorandum, Summus has not purchased or
redeemed any of its capital stock, and except as set forth in the Disclosure
Memorandum has not paid any dividend or made any other payment to any of the
Stockholders or other Related Parties within the past two years.
(d) Summus does not own or have an interest, direct or
indirect, or any commitment to purchase or otherwise acquire, any capital stock
or other equity interest, direct or indirect, in any other Person, except as set
forth in the Disclosure Memorandum. All such interests so set forth are owned of
record and beneficially by Summus as set forth in the Disclosure Memorandum and
are duly authorized, validly issued, fully paid and nonassessable, and, to the
knowledge of Summus, were authorized, offered, issued and sold in accordance
with all applicable securities and other Laws.
(e) Each stockholder of Summus is the legal and
beneficial owner of the Shares as set forth on the Disclosure Memorandum. Except
as set forth in the Disclosure Memorandum, Summus is the owner of all
investments disclosed under Paragraph 5.2(d), free and clear of any and all
Liens. Except as set forth in the Disclosure Memorandum, there are no
outstanding contracts, demands, commitments or other agreements or arrangements
under which Summus is or may become obligated to sell, transfer or assign any of
such investments.
5.3 CAPACITY; INCONSISTENT OBLIGATIONS.
(a) Summus and each Stockholder has the full right, power
and legal capacity to execute, deliver and perform his or its obligations under
this Agreement and the Other Agreements to which Summus or such Stockholder is a
party. This Agreement and the Other Agreements have been duly and validly
executed and delivered by Summus and each such Stockholder and constitute the
valid and legally binding obligations of Summus and each such Stockholder,
subject to general equity principles, enforceable in accordance with their
respective terms, except as the same may be limited by bankruptcy, insolvency or
similar Laws affecting the rights of creditors generally.
(b) The execution, delivery and performance of this
Agreement and the Other Agreements to which any Stockholder or Summus is a party
will not (i) result in a violation of Summus' articles of incorporation or
bylaws, or any Law, or (ii) result in a material breach of, conflict with or
default under any term or provision of any indenture, note, mortgage, bond,
security agreement, loan agreement, guaranty, pledge, or other material
instrument, contract, agreement or commitment or any Order, to which Summus or
any Stockholder is a party or by
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which any of them or any of their respective assets and properties, including,
without limitation, the Shares, is subject or bound; nor will such actions
result in (w) the creation of any Lien on any of the Shares or any of Summus'
assets or properties, (x) the acceleration or creation of any Liability of
Summus, (y) the forfeiture of any right or privilege of Summus, or (z) the
forfeiture of any right or privilege of any Stockholder which may affect such
Stockholder's ability to perform under this Agreement, other than such Liens,
Liabilities or forfeitures that, individually or in the aggregate, would not
have a material adverse effect on the Acquired Business or prevent the
consummation of the transactions contemplated hereby.
5.4 CONSENTS. Except as set forth in the Disclosure Memorandum,
the execution, delivery and performance by each Stockholder and Summus of this
Agreement and the Other Agreements to which he or it is a party, and the
consummation of the transactions contemplated herein and therein does not (a)
require the consent, approval or action of, or any filing with or notice to, any
Government or other Person by Summus or any Stockholder, or (b) impose any other
term, condition or restriction on HSNS pursuant to any business combination or
takeover Law, except where the failure to obtain such consent or the violation
of such restriction would not have a material adverse effect on the Acquired
Business.
5.5 NO VIOLATION; COMPLIANCE WITH LAWS. Except as set forth in the
Disclosure Memorandum, Summus is not in default under or in violation of (a) its
articles of incorporation or bylaws or (b) any Order. Except as set forth in the
Disclosure Memorandum, the operations of Summus have been conducted in all
material respects in compliance with all applicable Laws. (For purposes of this
paragraph, any violation of applicable Law that could result in imposition of a
fine or other monetary penalty upon Summus in excess of $1,000 shall be deemed
to be a material non-compliance). Except as set forth in the Disclosure
Memorandum, neither Summus nor any Stockholder has received any notification of
any asserted past or present failure by Summus to comply with any applicable Law
other than any failure to comply that would not have a material adverse effect
on the Acquired Business.
5.6 POSSESSION OF LICENSES. Except as set forth in the Disclosure
Memorandum, Summus possesses all franchises, certificates, licenses, permits and
other authorizations from Governments and all other Persons, that are necessary
for the ownership, maintenance and operation of its properties and assets and
the conduct of its business except where failure to have such franchises,
certificates, licenses, permits and other authorization would not have a
material adverse effect on the Acquired Business, and Summus is not in material
violation thereof.
5.7 BOOKS AND RECORDS; FINANCIAL STATEMENTS, FINANCIAL CONDITION.
Prior to the date hereof, the Stockholders have delivered to HSNS copies of
Summus' financial statements and related documents, as amended, as identified in
the Disclosure Memorandum (collectively, the "FINANCIAL STATEMENTS"). The
Financial Statements include Summus' most recent Balance Sheet as of September
30, 2000, (the "REFERENCE DATE BALANCE SHEET"). The date of the Reference Date
Balance Sheet is referred to herein as the "REFERENCE DATE".
The Financial Statements (i) have been prepared from the books and
records of Summus in accordance with GAAP, (ii) reflect all Liabilities of the
Company required to be reflected therein on such basis as at the date thereof
and (iii) fairly present in all material respects the financial position of
Summus as of the respective dates of the balance sheets included in the
Financial Statements and the consolidated results of its operations for each of
the periods then ended. There has been no material adverse change since the
Balance Sheet Date in the amount
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or delinquency of accounts payable of Summus (either individually or in the
aggregate), except as set forth in the Disclosure Memorandum. Except as set
forth in the Disclosure Memorandum, the Financial Statements are true and
correct, in all material respects, present fairly the financial condition of
Summus as at the respective dates thereof and the results of Summus' operations
for the periods then ended, and are consistent with the books and records of
Summus.
The books and records of Summus are true, correct and complete in all
material respects. The stock book of Summus is correct and complete. At the
Closing, all of such books and records will be in the possession of Summus.
5.8 LIABILITIES. Summus has no Liabilities, except (i) those
reflected on the Reference Date Balance Sheet, (ii) Liabilities incurred in the
ordinary course of business since the Reference Date consistent with Summus'
past experience during the periods covered by the Financial Statements (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any material breach of contract, material breach of representation or
warranty, tort, product liability, infringement or material violation of Law or
Order), and (iii) as may be set forth in the Disclosure Memorandum.
5.9 TITLE TO PROPERTIES. Summus has good and complete title to all
properties and assets reflected in the Reference Date Balance Sheet, except
inventories and other immaterial assets which have been disposed of in the
ordinary course of business since the Reference Date, and all other properties
and assets necessary to conduct its business as currently being conducted and as
conducted during the periods covered by the Financial Statements (other than any
leased property), free and clear of Liens, except as may be set forth in the
notes to the Reference Date Balance Sheet or as set forth in the Disclosure
Memorandum.
5.10 RECEIVABLES. Except as set forth in the Disclosure Memorandum,
all notes and accounts receivable shown on the Reference Date Balance Sheet and
all such receivables now held by Summus are, to the knowledge of Summus, valid
and collectible obligations and were not and are not subject to any offset or
counterclaim, except for amounts reserved against such receivables which are
reflected on the Reference Date Balance Sheet or as otherwise set forth in the
Disclosure Memorandum and, with respect to notes and accounts receivable arising
after the Reference Date and now outstanding, except for a percentage thereof
equal to the percentage which said reserved amounts on the Reference Date
Balance Sheet or as set forth in Disclosure Memorandum constituted of the
aggregate of notes and accounts receivable on such Reference Date Balance Sheet.
5.11 PERSONAL PROPERTY.
(a) Except as set forth in the Disclosure Memorandum, all
machinery, equipment, vehicles, and other items of tangible personal property
which are owned or leased by Summus are in good condition and repair, subject to
normal wear and tear, suited for the use intended and are and have been operated
in conformity with all applicable Laws. To the knowledge of Summus, there are no
defects or conditions except as set forth in the Disclosure Memorandum which
would cause such tangible personal property to be or become inoperable or
unsafe.
(b) To the knowledge of Summus, all lessors of machinery,
equipment or other tangible personal property leased by Summus have performed
and satisfied their respective
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duties and obligations under such leases. Summus has not brought or threatened
any Action against any such lessor for failure to perform and satisfy its duties
and obligations thereunder.
5.12 REAL PROPERTY.
(a) Summus has good title to all of the real property
reflected on the Reference Date Balance Sheet as owned by Summus (collectively,
the "OWNED REAL PROPERTY"), free and clear from all defects and Liens, except as
may be set forth in the notes to the Reference Date Balance Sheet or in the
Disclosure Memorandum. The Disclosure Memorandum lists all Real Property,
whether or not owned by Summus, and provides the true and correct street address
and name of the owner or lessor of such Real Property.
(b) Each parcel or tract of real property which is used
by Summus in its business and that is not Owned Real Property (the "LEASED REAL
PROPERTY," and collectively with the Owned Real Property, the "REAL PROPERTY")
is subject to a written lease or sublease to which Summus is a party as lessee
or sublessee (individually a "REAL PROPERTY LEASE"). All such Real Property
Leases are valid and in full force and effect in accordance with their terms.
The Stockholders have previously furnished HSNS with true, correct and complete
copies of all Real Property Leases. There is not, with respect to any Real
Property Lease (i) any material default by Summus, or any event of default or
event which with notice or lapse of time, or both, would constitute a material
default by Summus or (ii) to the knowledge of Summus, any existing material
default by any other party to any Real Property Lease, or event of default or
event which with notice or lapse of time, or both, would constitute a material
default by any other party to any Real Property Lease.
(c) All of the Owned Real Property is free from
development, use or occupancy restrictions, except those imposed by applicable
Law, and from special taxes or assessments, except those generally applicable to
other properties in the tax districts in which the Owned Real Property is
located except where such restrictions or assessments would not have a material
adverse effect on the Acquired Business. No options have been granted to others
to purchase, lease or otherwise acquire any interest in the Owned Real Property.
Summus has the exclusive right of possession of each tract or parcel comprising
its Owned Real Property.
(d) Except as set forth in the Disclosure Memorandum, the
present use, occupancy and operation of the Real Property, and all aspects of
the Improvements to the Real Property, are in material compliance with all Laws
and private restrictive covenants, and to Summus' knowledge there has not been
any proposed change thereto that would affect any of the Real Property or its
use, occupancy or operation. There exists no material conflict or dispute with
any Government or other Person relating to any Real Property or the activities
thereon. To the knowledge of Summus, no portion of the Real Property is subject
to any classification, designation or preliminary determination of any
Government or pursuant to any Law which would materially restrict its use,
development, occupancy or operation in connection with Summus' business. Except
as set forth in the Disclosure Memorandum, all Improvements are in good
condition and repair, and are suited for the operation of Summus' business.
(e) Except as set forth in the Disclosure Memorandum,
neither Summus nor any other Person has caused any work or improvements to be
performed upon or made to any of the Real Property for which there remains
outstanding any payment obligation that would or might serve as the basis for
any Lien in favor of the Person who performed the work.
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(f) Except as set forth in the Disclosure Memorandum, all
requisite certificates of occupancy and other permits and approvals required
with respect to the Real Property or the Improvements and the use, occupancy and
operation thereof have been obtained and paid for and are currently in effect
and free of restrictions, except where the lack of such certificates or the
presence of such restrictions would not have a material adverse effect on the
Acquired Business.
5.13 ABILITY TO CONDUCT BUSINESS AND INTELLECTUAL PROPERTY RIGHTS.
(a) The Disclosure Memorandum includes a true and
complete list of all Summus Owned Intellectual Property, Summus Licensed
Intellectual Property, and Summus Software, all as defined below, separately
specified.
(i) "SUMMUS LICENSED INTELLECTUAL PROPERTY"
means all (A) licenses of Intellectual Property and Summus Software to Summus by
any third party, other than licenses of commercial off-the-shelf computer
software, and (B) agreements between Summus and a third party relating to the
development or use of Intellectual Property by Summus, the development or
transmission of data, or the use, modification, framing, linking, advertisement
or other practices with respect to Internet web sites.
(ii) "SUMMUS OWNED INTELLECTUAL PROPERTY" means
all Intellectual Property owned by Summus.
(iii) "SUMMUS SOFTWARE" means all Software (A)
developed by or for Summus, ownership of which has not been transferred to any
third party, or (B) material to the conduct of the business of Summus, or (C)
manufactured, distributed, sold, licensed or marketed by Summus.
(iv) "SOFTWARE" means computer software, programs
and databases in any form, including Internet web sites, web site content,
member or user lists and information associated therewith and links, source
code, object code, operating systems and specifications, data, databases,
database management code, utilities, graphical user interfaces, menus, images,
icons, forms, methods of processing, software engines, platforms, and data
formats, all versions, updates, corrections, enhancements, and modifications
thereof, and all related documentation, developer notes, comments and
annotations.
(b) The operation of the business of Summus as currently
conducted or as presently contemplated to be conducted and the use of Summus
Owned Intellectual Property and Summus Licensed Intellectual Property in
connection therewith do not infringe, misappropriate or otherwise violate the
Intellectual Property rights of any third party, and no Action is pending or, to
the knowledge of Summus, threatened alleging that the operation of such
business, or such use of Summus Owned Intellectual Property or Summus Licensed
Intellectual Property by Summus, does or may interfere with, conflict with,
infringe, misappropriate or otherwise violate the Intellectual Property rights
of any third party.
(c) Except as set forth in the Disclosure Memorandum,
Summus is the sole and exclusive owner of the entire and unencumbered right,
title and interest in and to Summus Owned Intellectual Property and has the
right to use Summus Owned Intellectual Property in the ordinary course of its
business as conducted or presently contemplated to be conducted.
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Summus has a valid license or other legal right to use Summus Licensed
Intellectual Property in the ordinary course of its business as conducted or as
presently contemplated to be conducted, subject to the terms of the license
agreements governing Summus Licensed Intellectual Property.
(d) Summus Owned Intellectual Property and Summus
Licensed Intellectual Property include all of the Intellectual Property used in
the ordinary course of the business of Summus, and there are no other items of
Intellectual Property that are material to such ordinary course of such
business. Summus Owned Intellectual Property and, to the knowledge of Summus,
any Intellectual Property licensed to Summus under Summus Licensed Intellectual
Property, are subsisting, valid and enforceable, and have not been adjudged
invalid or unenforceable in whole or in part.
(e) No Actions have been asserted, are pending, or, to
the knowledge of Summus or the Stockholders, threatened against Summus (i) based
upon or challenging or seeking to deny or restrict the use by Summus of any of
Summus Owned Intellectual Property or Summus Licensed Intellectual Property,
(ii) alleging that any services provided by, processes used by, or products
manufactured or sold by Summus infringe or misappropriate any Intellectual
Property right of any third party, or (iii) alleging that Summus Licensed
Intellectual Property is being licensed or sublicensed in conflict with the
terms of any license or other agreement.
(f) To the knowledge of Summus, no person is engaging in
any activity that infringes or misappropriates Summus Owned Intellectual
Property or Summus Licensed Intellectual Property. Except as set forth in the
Disclosure Memorandum, Summus has not granted any license or other right to any
third party with respect to Summus Owned Intellectual Property or Summus
Licensed Intellectual Property. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement by Summus will not breach, violate or conflict with any instrument or
agreement concerning Summus Owned Intellectual Property, except as set forth in
the Disclosure Memorandum, will not cause the forfeiture or termination or give
rise to a right of forfeiture or termination of any of Summus Licensed
Intellectual Property or impair the right of HSNS to make, use, sell, license or
dispose of, or to bring any action for the infringement of, any Summus Owned
Intellectual Property.
(g) Summus has delivered or made available to HSNS
correct and complete copies of all the licenses of Summus Licensed Intellectual
Property. With respect to each such license:
(i) To Summus' knowledge, such license is valid
and binding and in full force and effect and represents the entire agreement
between the respective licensor and Summus with respect to the subject matter of
such license;
(ii) such license will not cease to be valid and
binding and in full force and effect on terms identical to those currently in
effect as a result of the consummation of the transactions contemplated by this
Agreement, nor will the consummation of the transactions contemplated by this
Agreement constitute a breach or default under such license or otherwise give
the licensor a right to terminate such license, except as set forth in the
Disclosure Memorandum;
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(iii) Summus has not (A) received any notice of
termination or cancellation under such license, (B) received any notice of
breach or default under such license, which breach has not been cured, or (C)
granted to any other third party any rights, adverse or otherwise, under such
license that would constitute a breach of such license; and
(iv) neither Summus, nor, to the knowledge of
Summus, any other party to such license is in material breach or default
thereof, and, to Summus' knowledge, no event has occurred that, with notice or
lapse of time, would constitute such a material breach or default or permit
termination, modification or acceleration under such license.
(h) Summus Software intended for distribution to
customers is free of all viruses, worms, Trojan horses and other material known
contaminants, and to the knowledge of Summus does not contain any bugs, errors,
or problems of a material nature. Summus has obtained all approvals necessary
for exporting Summus Software outside the United States and importing Summus
Software into any country in which Summus Software is now sold or licensed for
use, and all such export and import approvals in the United States and
throughout the world are valid, current, outstanding and in full force and
effect, except where the failure to keep such approvals in effect would not have
a material adverse effect on Summus' business. Except as specified in the
Disclosure Memorandum, no rights in Summus Software have been transferred to any
third party except to the customers of Summus to whom Summus has licensed such
Summus Software in the ordinary course of business. Except as described in the
Disclosure Memorandum, none of Summus Software is licensed pursuant to an "open
source" or "GNU" license, or incorporates or is based on any Software that is
licensed pursuant to an "open source" or "GNU" license.
(i) Summus has the right to use all software development
tools, library functions, compilers, and other third party software that is
material and necessary to the business of Summus, or that is required to operate
or modify Summus Software.
(j) Summus has taken reasonable steps in accordance with
normal industry practice to maintain the confidentiality of its trade secrets
and other confidential Intellectual Property. To the knowledge of Summus, (i)
there has been no misappropriation of any material trade secrets or other
material confidential Summus Owned Intellectual Property or Summus Licensed
Intellectual Property by any person; (ii) no employee, independent contractor or
agent of Summus has misappropriated any trade secrets of any other person in the
course of such performance as an employee, independent contractor or agent of
Summus; and (iii) no employee, independent contractor or agent of Summus is in
default or breach of any term of any employment agreement, non-disclosure
agreement, assignment of invention agreement or similar agreement or contract
relating in any way to the protection, ownership, development, use or transfer
of Summus Owned Intellectual Property or Summus Licensed Intellectual Property.
(k) Summus Software, and every portion thereof, was
authored (i) by an employee or employees of Summus working within the scope of
their employment such that the contribution of such employee or employees to
Summus Software constitutes a "work made for hire" as that term is defined under
U.S. Copyright Law or (ii) by a person that has executed a written assignment
assigning all right, title, and interest in and to the portion of the software
authored by that person to Summus, and Summus has provided copies of all such
written assignments to HSNS. Summus has provided HSNS with (i) a complete
history of development of the source code of Summus Software, including all
versions thereof and modifications thereto,
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(ii) a list of all software tools, library functions, and other software
developed by Summus or by any third party that is or was utilized in the
development of Summus Software or that is required to operate or modify Summus
Software and (iii) a description of the location and custodian of all such
source code, software tools, library functions, and other software. All such
source code, software tools, library functions, and other software, is in the
possession of Summus. Summus has the right to use such source code, software
tools, library functions, and other software to the extent necessary to conduct
and to continue to conduct the Business, and Summus has provided HSNS with
copies of all written agreements concerning the right to use such source code,
software tools, library functions, and other software.
(l) SUMMUS AND THE STOCKHOLDERS MAKE NO REPRESENTATIONS,
EXPRESS OR IMPLIED, REGARDING THE PERFORMANCE OF THE SUMMUS SOFTWARE, SUMMUS
LICENSED INTELLECTUAL PROPERTY OR SUMMUS OWNED INTELLECTUAL PROPERTY INCLUDING,
WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, AND HEREBY DISCLAIM SUCH WARRANTIES.
(m) There have been no transfers of intellectual property
owned or developed by Summus since January 1, 2000, except licenses by Summus
included in the Acquired Contracts.
5.14 CONTRACTS.
(a) Except as set forth in the Disclosure Memorandum, all
Acquired Contracts have been entered into in the ordinary course of Summus'
business, are valid and enforceable in all material respects in accordance with
their terms, are in full force and effect, and will continue to be valid and
enforceable and in full force and effect on identical terms following the date
of the Closing. Assuming that each such Acquired Contract is completed by HSNS
in a manner that consistent with Summus' historical business practices, no
Acquired Contract is likely to result in a loss to Summus upon completion of
performance and all Acquired Contracts can be materially fulfilled or performed
by Summus in accordance with their respective terms without undue or unusual
expenditures of money or effort. All Acquired Contracts are listed on the
Disclosure Memorandum, and true, correct and complete copies of all Acquired
Contracts have been delivered to HSNS.
(b) Except as set forth on the Disclosure Memorandum, to
the knowledge of Summus and the Stockholders, there are no existing material
defaults, events of default or events which, with the giving of notice or lapse
of time, or both, would constitute a material default by Summus under any
Acquired Contract. To the knowledge of Summus and the Stockholders, no event has
occurred which may hereafter give rise to any right of termination,
acceleration, damages or any other remedy under any Acquired Contract.
(c) Except as set forth on the Disclosure Memorandum, to
Summus' and the Stockholders' knowledge, neither this Agreement, the Closing or
the relationship between Summus and HSNS has caused or is likely to cause the
termination or nonrenewal of any Acquired Contract.
5.15 INSURANCE. Summus has obtained and maintains insurance
policies which it believes provide adequate coverage to insure its assets,
properties and business, and all such
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policies are in full force and effect. Except as set forth on the Disclosure
Memorandum, all premiums due on such policies have been paid, and Summus has not
received any notice of cancellation with respect thereto. Except for workers'
compensation premiums that have not yet been determined, Summus has no Liability
for premiums or for retrospective premium adjustments for any period. The
Disclosure Memorandum lists the types, amounts of coverage and deductibles of
all material insurance policies, and true, correct and complete copies thereof
have been delivered to HSNS prior to the date hereof.
5.16 LITIGATION; CONTINGENCIES. Except as set forth in the
Disclosure Memorandum, no Action is pending or, to the knowledge of the
Stockholders and Summus, threatened against, by or affecting Summus or the
Acquired Assets. There are no unsatisfied judgments or Orders against Summus to
which it or its assets and properties are subject.
5.17 TAXES. Except as set forth in the Disclosure Memorandum,
Summus and any entity at any time eligible or required to file a consolidated or
combined Tax return with Summus (individually, an "AFFILIATED ENTITY" and
collectively, the "AFFILIATED ENTITIES"), have duly and timely filed all
federal, state, municipal, local and foreign, if any, Tax returns and reports
(including returns for estimated tax), and all reports and returns of all other
Governments having jurisdiction (collectively, "RETURNS") with respect to all
Taxes (including, without limitation, consolidated or combined Tax returns of
some or all of Summus and the Affiliated Entities); all such Tax returns and
reports show the correct and proper amount due; and the Taxes shown on all Tax
returns and reports and all Tax assessments received by Summus or any Affiliated
Entities have been paid to the extent that such Taxes or estimates are due.
Except as set forth in the Disclosure Memorandum, Summus has previously provided
to HSNS true, correct and complete copies of all Returns filed since inception.
Except as set forth on the Disclosure Memorandum, all Taxes imposed on Summus
and its Affiliated Entities by any Government (including all deposits in
connection therewith required by applicable Law, and all interest and penalties
thereon) which have become due and payable by Summus for all periods through the
date hereof have been paid in full, and adequate reserves for all other Taxes,
whether or not due and payable, and whether or not disputed, have been set up on
the books of Summus, and such reserves will be adequate to pay all Taxes of
Summus for all periods through the Closing. Except as set forth on the
Disclosure Memorandum, to the knowledge of Summus, there is not now any proposed
assessment against Summus or any Affiliated Entity of additional Taxes of any
kind. Summus is not a party to any Tax sharing or Tax allocation agreement,
understanding, arrangement or commitment. Except as set forth on the Disclosure
Memorandum, to the knowledge of Summus, there is no dispute or Action concerning
any Tax Liability of Summus raised by a Government in writing.
5.18 EMPLOYMENT AND LABOR MATTERS.
(a) Summus and the Stockholders shall encourage each
employee, agent, consultant or independent contractor who performs services on a
regular basis for Summus, if offered the opportunity, to continue such
relationship with HSNS after the Closing.
(b) Summus is not a party to any agreement of any kind
which deals with wages, conditions of employment, benefits or other matters
affecting the employer/employee relationship with any union, labor organization
or employee group. There are no controversies pending, or to Summus' and the
Stockholders' knowledge threatened, between Summus and any union, labor
organization or employee group representing, or seeking to represent, any of its
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employees, and there has been no attempt by any union, labor organization or
employee group to organize any of Summus' employees at any time in the past five
years. Except as set forth in the Disclosure Memorandum, Summus has
substantially complied with all applicable Laws relating to wages, hours, health
and safety, payment of social security withholding and other taxes, maintenance
of workers' compensation insurance, labor and employment relations and
employment discrimination except where such failure would not have a material
adverse effect on the Acquired Business.
(c) The Disclosure Memorandum lists all contracts,
agreements or arrangements (written or oral) concerning the employment of any
individual by Summus, including each such individual's title, compensation and
duties other than any contracts, agreements or arrangements (written or oral)
that are not, individually or in the aggregate, material in amount.
5.19 EMPLOYEE BENEFIT MATTERS.
(a) The Disclosure Memorandum lists all "employee benefit
plans" within the meaning of Section 3(3) of Employee Retirement Income Security
Act of 1974, as amended ("ERISA") to which Summus contributes or is required to
contribute (the "SUMMUS PLANS") and all other material practices, commitments,
arrangements and agreements pursuant to which Summus provides, directly or
indirectly, any benefits for employees. Summus is not required to contribute,
and has never been required to contribute, to any multi-employer plan within the
meaning of Section 3(37)(A) of ERISA. True, correct and complete copies of all
Summus Plans, together with related trusts, insurance contracts, summary plan
descriptions, annual reports and Form 5500 filings for the past three years,
have been delivered to HSNS.
(b) Each Summus Plan has been operated and administered
in all material respects in accordance with all applicable Laws, including,
without limitation, ERISA and the Code except where the failure to comply with
such Laws would not have a material adverse effect on the Acquired Business. To
the knowledge of Summus and the Stockholders after due inquiry, each Summus Plan
that is a group health plan within the meaning of Section 607(1) of ERISA and
Section 4980B of the Code has complied and is in compliance in all material
respects with the continuation coverage requirements of Section 601 of ERISA and
Section 4980B of the Code. There are no pending claims or, to Summus' and the
Stockholders' knowledge threatened claims, by or against any of Summus Plans by
any employee or beneficiary covered under such Summus Plan, or by any Government
or otherwise involving such Summus Plan or any of its fiduciaries (other than
for routine claims for benefits).
(c) The Disclosure Memorandum separately identifies any
Summus Plan that is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA ("SUMMUS PENSION PLAN") and also lists any "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA formerly
sponsored by Summus which has been terminated during the last 5 years. All
Summus and employee contributions required to be made to each Summus Pension
Plan have been made in a timely manner.
(d) Except for a Summus Pension Plan, Summus is not bound
to provide, and Summus does not provide, benefits, including, without
limitation, death, health or medical benefits (whether or not insured), with
respect to current or former employees of Summus beyond their retirement or
other termination of service with Summus other than as required by
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applicable Law. Neither this Agreement nor any transaction contemplated hereby
will entitle any current or former employee, officer or director of Summus to
severance pay, unemployment compensation or any similar payment under any plan,
practice, commitment, arrangement or agreement of Summus described in PARAGRAPH
5.19(A).
5.20 ENVIRONMENTAL MATTERS. Except as set forth in the Disclosure
Memorandum, Summus holds all Environmental Permits necessary for conducting its
business and operations and has conducted, and is presently conducting, its
business and operations in substantial compliance with all applicable
Environmental Laws and Environmental Permits, including, without limitation, all
record keeping and filing requirements. To the knowledge of Summus, all
Hazardous Materials generated by Summus, wherever located, have been properly
removed and disposed of, and, to the knowledge of Summus, no past or present
disposal, discharge, spill or other release of, or treatment, transportation or
other handling of Hazardous Materials from any Real Property, will subject
Summus to corrective or compliance action or any other Liability. There are no
presently pending, or to Summus' and the Stockholders' knowledge, threatened
Actions or Orders against or involving Summus (including any Person for whose
acts or omissions Summus is responsible) relating to any alleged, past or
ongoing violation.
5.21 ABSENCE OF CERTAIN BUSINESS PRACTICES. To the knowledge of
Summus and the Stockholders, except as set forth on the Disclosure Memorandum,
neither Summus nor any officer, employee or agent of Summus, nor any other
person acting on behalf of Summus, has, directly or indirectly, within the past
five years, given or agreed to give any gift or similar benefit to any Person
who is or may be in a position to help or hinder Summus' business (or assist
Summus in connection with any actual or proposed transaction) which (a) might
subject Summus to any material damage or penalty in any Action or which might
have a material adverse effect on Summus or its assets and properties, (b) if
not given in the past, might have had a material adverse effect on Summus'
business or its assets and properties, or (c) if not continued in the future,
might have a material adverse effect on Summus or which might subject Summus to
suit or penalty in any Action.
5.22 AGREEMENTS AND TRANSACTIONS WITH RELATED PARTIES. Except as
set forth in the Disclosure Memorandum, Summus is not directly or indirectly a
party to any contract, agreement or lease with, or any other commitment to, (a)
any Person owning, or formerly owning, beneficially or of record, directly or
indirectly, any of the Shares of or other equity interest in Summus, (b) any
Affiliate of such Person, (c) any director or officer of Summus, (d) any Person
in which any of the foregoing Persons has, directly or indirectly, at least a
ten percent (10.0%) beneficial interest in the capital stock or other type of
equity interest of such Person, or (e) any partnership in which any of the
foregoing Persons is a general partner or has at least a ten percent (10.0%)
beneficial interest (any or all of the foregoing being referred to herein as
"RELATED PARTIES"). Without limiting the generality of the foregoing, except as
set forth in the Disclosure Memorandum, (x) no Related Party, directly or
indirectly, owns or controls any assets or properties which are or have been
used in Summus' business, and (y) no Related Party, directly or indirectly,
engages in or has any significant interest in or connection with any business
(i) which is or which within the last three years has been a competitor,
customer or supplier of Summus or has done business with Summus, or (ii) which
as of the date hereof sells or distributes products or services which are
similar or related to Summus' products or Services.
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5.23 ABSENCE OF CHANGES. Except as expressly provided for in this
Agreement, or as set forth in the Disclosure Memorandum, since the Reference
Date:
(a) There has been no material change in the business,
assets, properties, Liabilities, affairs, results of operations, condition
(financial or otherwise), cash flows or prospects of Summus or in its respective
relationships with suppliers, customers, employees, lessors or others, other
than changes in the ordinary course of business, none of which have had or will
have a material adverse effect on the Acquired Business, in the aggregate;
(b) There has been no material damage, destruction or
loss to the assets, properties, or business of Summus, whether or not covered by
insurance;
(c) The business of Summus has been operated in all
material respects in the ordinary course and consistent with its prior
practices;
(d) The books, accounts and records of Summus have been
maintained in the usual, regular and ordinary manner on a basis consistent with
prior years and with the basis in which the Financial Statements were prepared,
and there has been no amendment to the articles of incorporation or bylaws of
Summus;
(e) There has been no declaration, setting aside or
payment of any dividend or other distribution on or in respect of the capital
stock of Summus, nor has there been any direct or indirect redemption,
retirement, purchase or other acquisition of any of the capital stock or other
securities of Summus;
(f) Summus has not discontinued or determined to
discontinue selling any products or services previously sold by Summus, the
sales of which have been material to Summus;
(g) There has been no Lien that would have a material
adverse effect on the Acquired Business;
(h) There has been no sale, transfer, lease or other
disposition of any asset of Summus to any Related Party or, except in the
ordinary course of Summus' business, to any other Person, and no debt to, or
material claim or right of, Summus has been canceled, compromised, waived or
released;
(i) There has been no amendment, termination or waiver
of, or any notice of any amendment, termination or waiver of, any right of
Summus under any Summus contract or under any franchise, certificate, license,
permit or authorization from any Government, except that which would not have a
material adverse effect on the Acquired Business;
(j) Summus has not delayed or postponed the payment of
any accounts payable or other Liabilities outside the ordinary course of
business;
(k) Summus has not paid or committed to pay any bonus,
profit-share or other extraordinary compensation payment or other arrangement
(except in the ordinary course of business and consistent with past practices),
nor has Summus entered into any agreement, contract or commitment with any
Stockholder or any Related Party or amended the terms of any existing agreement,
contract or commitment with any Stockholder or any Related Party; and
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(l) There has been no change in the authorized, issued or
outstanding capital stock or other securities of Summus.
5.24 BANK ACCOUNTS AND SAFETY DEPOSIT BOXES. The Disclosure
Memorandum lists each bank in which Summus maintains an account or safety
deposit box, the account numbers, and the names of all persons authorized to
draw thereon or have access thereto.
5.25 [DELETED]
5.26 CUSTOMERS. The Disclosure Memorandum sets forth (a) the number
of customers served by Summus by type of business (b) lists the names of all of
Summus' customers by dollar value of sales for the twelve-month period ended
December 31, 1999, and Summus' standard rates for such customers for each type
of business. Except as set forth in the Disclosure Memorandum, neither Summus
nor any Stockholder has received any indication from any customer to the effect
that, and neither Summus nor any Stockholder has any reason to believe that,
such customer will stop or materially decrease the rate of, buying products or
services of Summus as a result of or related to the transactions contemplated
herein.
5.27 FULL DISCLOSURE. No representation or warranty of any
Stockholder or Summus contained in this Agreement, the Other Agreements, the
Disclosure Memorandum, or any instrument, certificate, agreement or other
writing delivered at the Closing by or on behalf of any Stockholder or Summus
pursuant to this Agreement or any Other Agreement or in connection with the
transactions contemplated herein or therein contains any untrue or incomplete
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein and therein, in light of the circumstances in
which they were made, not misleading. To Summus' and the Stockholders'
knowledge, there is no fact which materially adversely affects, or in the future
may materially adversely affect, the business, assets, properties, Liabilities,
affairs, results of operations, condition (financial or otherwise), cash flows
or prospects of Summus which has not been or is not disclosed in this Agreement,
the Disclosure Memorandum or in the other instruments, certificates, agreements
or writings furnished to HSNS at the Closing by or on behalf of the Stockholders
pursuant to this Agreement or the Other Agreements or in connection with the
transactions contemplated herein.
5.28 NOTICE OF FAIRNESS HEARING. The information supplied by Summus
for inclusion in the notice of the Fairness Hearing (as defined in PARAGRAPH
4.12 hereof) to be provided to Summus (the "NOTICE") on the date that the Notice
is first mailed to Summus, and on the Closing Date, will not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statement therein not
misleading, in light of the circumstances under which they are made.
6. REPRESENTATIONS AND WARRANTIES OF HSNS
As an inducement to Summus and the Stockholders to enter into and
perform this Agreement, HSNS hereby represents and warrants as follows:
6.1 ORGANIZATION. HSNS is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Florida. HSNS has
full corporate power and authority and is entitled to own or lease its
properties and carry on its business as and in all places where such business is
conducted and such properties are owned and leased. HSNS does
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not own or have an interest, direct or indirect, or any commitment to purchase
or otherwise acquire, any capital stock or other equity interest, direct or
indirect, in any Person other than Summus and Dial2go.
6.2 AUTHORIZATION; NO INCONSISTENT AGREEMENTS. HSNS has full
corporate power and authority to execute, deliver and perform this Agreement and
the Other Agreements to which it is a party. This Agreement has been, and such
Other Agreements have been duly and validly executed and delivered by HSNS and
constitute the valid and legally binding obligations of HSNS, subject to general
equity principles, enforceable in accordance with their respective terms, except
as the same may be limited by bankruptcy, insolvency, reorganization or similar
Laws affecting the rights of creditors generally.
6.3 INCONSISTENT OBLIGATIONS. The execution, delivery and
performance of this Agreement and the Other Agreements to which HSNS is a party,
will not (i) result in a violation of its charter or certificate of
incorporation or bylaws or any Law, or (ii) result in a material breach of,
conflict with or default under any term or provision of any indenture, note,
mortgage, bond, security agreement, loan agreement, guaranty, pledge or other
material instrument, contract, agreement or commitment or any Order to which
HSNS is a party or by which any of the assets of HSNS is subject or bound, nor
will such actions result in the creation of any Lien on any of the assets of
HSNS or the acceleration or creation of any Liability of HSNS, other than such
Liens or Liabilities that, individually or in the aggregate, would not have a
material adverse effect on HSNS or prevent the consummation of the transactions
contemplated hereby.
6.4 AUTHORIZATION OF COMMON STOCK. The shares of Common Stock to
be issued pursuant to this Agreement will be duly authorized and reserved for
issuance at or before the Closing and upon issuance pursuant to the terms of
this Agreement will be (a) validly issued, fully paid and nonassessable; (b)
free of any preemptive rights or rights of first refusal, with the exception of
encumbrances contemplated by the Escrow Agreement and the Voting Trust
Agreement, the forms of which are attached hereto, and securities law
restrictions, free of any Liens or encumbrances.
6.5 LITIGATION. Except as disclosed on HSNS' financial statements,
as have been previously provided to Summus and each Stockholder, there is no
material claim, suit, action, arbitration, governmental inquiry, injunction,
consent decree or legal, administrative or other proceeding existing, pending,
or threatened against or relating to HSNS or its financial condition, nor does
HSNS know of or have reasonable grounds for believing that there is any basis
for any such action, arbitration, proceeding or inquiry. There is not
outstanding any material order, writ, injunction or decree of any court,
governmental agency or arbitration tribunal against or affecting HSNS or any of
its assets.
6.6 CONSENTS. The execution, delivery and performance by HSNS of
this Agreement and the Other Agreements to which it is a party, and the
consummation of the transactions contemplated herein and therein does not (a)
require the consent, approval or action of, or any filing with or notice to, any
Government or other Person, or (b) impose any other term, condition or
restriction on HSNS pursuant to any business combination or takeover Law.
6.7 CAPITAL STRUCTURE OF HSNS. As of the Closing Date, the capital
structure of HSNS consists of 50,000,000 authorized shares of common stock, par
value $0.001 per share, and 5,000,000 authorized shares of preferred stock, par
value $0.001 per share. As of October
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30, 2000, 23,685,281 shares of HSNS' common stock were outstanding, which
includes 1,425,000 shares instructed to be issued on October 30, 2000 in
settlement of a claim, and no shares of HSNS' preferred stock were outstanding.
There are no outstanding securities convertible into the capital stock or rights
to subscribe for or to purchase, or any options for the purchase of, or any
agreements or arrangements providing for the issuance (contingent or otherwise)
of, or any Actions relating to, the capital stock of HSNS other than this
Agreement.
6.8 ACKNOWLEDGEMENT. HSNS acknowledges that HSNS, and its
employees, representatives and agents, have been given the opportunity to
review, operate, test and evaluate the Summus Software, Summus Owned
Intellectual Property and Summus Licensed Intellectual Property to their
satisfaction and that HSNS is acquiring the Summus Software, Summus Owned
Intellectual Property and Summus Licensed Intellectual Property in reliance
solely on HSNS' own review, operation, testing and evaluation of the Summus
Software, Summus Owned Intellectual Property and Summus Licensed Intellectual
Property and the express representations and warranties set forth in PARAGRAPH
5.13. HSNS acknowledges that the Summus Software, Summus Owned Intellectual
Property and Summus Licensed Intellectual Property are being acquired without
any warranties, except to the extent provided under PARAGRAPH 5.13.
6.9 SEC DOCUMENTS; HSNS FINANCIAL STATEMENTS. HSNS has furnished
or made available to Summus true and complete copies of all reports or
registration statements filed by it with the Securities and Exchange Commission
(the "SEC") since January 1, 2000, all in the form so filed (all of the
foregoing being collectively referred to as the "SEC DOCUMENTS"). As of their
respective filing dates, the SEC Documents complied in all material respects
with the requirements of the Securities Exchange Act of 1934 (the "EXCHANGE
ACT"), and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading, except to the extent corrected by a
document subsequently filed with the SEC. The financial statements of HSNS,
including the notes thereto, included in the SEC Documents (the "HSNS FINANCIAL
STATEMENTS") have been prepared in accordance with generally accepted accounting
principles consistently applied (except as may be indicated in the notes thereto
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC),
present fairly the consolidated financial position of HSNS at the dates thereof
and the consolidated results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal audit
adjustments), and reflect all Liabilities of HSNS required to be reflected
therein in accordance with GAAP as at the date thereof. There has been no change
in HSNS accounting policies except as described in the notes to the HSNS
Financial Statements; provided, however, HSNS may have restated or may restate
one or more of the HSNS Financial Statements to reflect acquisitions entered
into subsequent to the respective dates thereof. Since the date of the HSNS
Financial Statements, there has not been a material increase in the Liabilities
of HSNS and there has been no material adverse change in the financial condition
of HSNS, other than expenditure of funds and incurring of debt in the normal
course of business.
6.10 NOTICE OF FAIRNESS HEARING. The information supplied by HSNS
for inclusion in the Notice on the date that the Notice is first mailed to
Summus, and on the Closing Date, will not contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading, in light of
the circumstances under which they are made.
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6.11 FULL DISCLOSURE. No representation or warranty of HSNS
contained in this Agreement, the Other Agreements, the SEC Documents, or any
instrument, certificate, agreement or other writing delivered at the Closing by
or on behalf of HSNS pursuant to this Agreement or any Other Agreement or in
connection with the transactions contemplated herein or therein contains any
untrue or incomplete statement of a material fact or omits to state a material
fact necessary to make the statements contained herein and therein, in light of
the circumstances in which they were made, not misleading. To HSNS' knowledge,
there is no fact which materially adversely affects, or in the future may
materially adversely affect, the business, assets, properties, Liabilities,
affairs, results of operations, condition (financial or otherwise), cash flows
or prospects of HSNS which has not been or is not disclosed to Summus or the
Stockholders by HSNS, including but not limited to any such disclosures made in
this Agreement or in the other instruments, certificates, agreements or writings
furnished to Summus or the Stockholders by or on behalf of HSNS. HSNS is a
publicly traded company, and Summus has access to all public company reports
filed by HSNS.
7. INDEMNITIES
7.1 INDEMNIFICATION AND PAYMENT OF INDEMNIFIED LOSSES BY SUMMUS.
(a) In accordance with and subject to the provisions of
this Article 7, Summus hereby agrees to indemnify and hold harmless HSNS, its
Affiliates, and the officers, directors, and agents of HSNS, and their
Affiliates (collectively, the "HSNS INDEMNITEES") from and against, and will pay
to the HSNS Indemnitees the amount of any loss, liability, claim, damage, cost
or expense (including reasonable costs of investigation and defense and
reasonable attorneys' and experts' fees and expenses and amounts paid in
settlement) or diminution of value, whether or not involving a third-party claim
(collectively, the "INDEMNIFIED LOSSES"), arising, directly or indirectly, from
or in connection with or incurred as a result of:
(i) any breach of any representation or warranty
made by Summus or the Stockholders in this Agreement, the Disclosure Memorandum
or in any certificate delivered by Summus or the Stockholders pursuant to this
Agreement; or
(ii) any breach by Summus or the Stockholders of
any covenant or obligation of Summus or the Stockholders in this Agreement; or
(iii) any obligation of Summus that was not an
Assumed Liability.
(b) Notwithstanding any provision herein to the contrary,
Summus (and not the Stockholders) shall be solely responsible for
indemnification under this Section 7.1. Furthermore, Summus shall not have any
obligation to indemnify the HSNS Indemnitees for any Indemnified Losses
resulting from the breach or breaches of any representation or warranty of
Summus or the Stockholders contained in this Agreement or in the Disclosure
Memorandum or in any certificate relating thereto and delivered by Summus or the
Stockholders pursuant to this Agreement: (i) until the HSNS Indemnitees have
suffered Indemnified Losses, by reason of such breach or breaches, in excess of
$25,000 in the aggregate (the "SUMMUS BASKET"); provided that once the HSNS
Indemnitees' aggregate Indemnified Losses exceed the Summus Basket, Summus shall
indemnify the HSNS Indemnitees for all such Indemnified Losses suffered, and
(ii) to the extent that the aggregate Indemnified Losses the HSNS Indemnitees
have suffered by reason of all such breaches of representations and warranties
of Summus and the Stockholders
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exceed the value of the Escrowed Shares (the "SUMMUS CAP"), in the absence of
fraud or intentional misrepresentation, Summus and the Stockholders will have no
obligation to indemnify the HSNS Indemnitees for further Indemnified Losses in
excess of the Summus Cap. Such indemnification shall be payable by Summus
exclusively by relinquishing that number of the Escrowed Shares to HSNS equal to
the amount of such Indemnified Losses (subject to the Summus Cap) divided by the
Market Price of the Escrowed Shares.
7.2 INDEMNIFICATION AND PAYMENT OF LOSSES BY HSNS.
(a) In accordance with and subject to the provisions of
this Article 7, HSNS hereby agrees to indemnify and hold harmless Summus, its
Affiliates, and the officers, directors, and agents of Summus, and their
Affiliates (collectively, the "SUMMUS INDEMNITEES") from and against, and will
pay to the Summus Indemnitees the amount of any Indemnified Losses, arising,
directly or indirectly, from or in connection with or incurred as a result of:
(i) any breach of any representation or warranty
made by HSNS in this Agreement, the Disclosure Memorandum or in any certificate
delivered by HSNS pursuant to this Agreement; and
(ii) any breach by HSNS of any covenant or
obligation of HSNS in this Agreement.
(b) Notwithstanding anything in this PARAGRAPH 7.2(B) to
the contrary, HSNS shall have no obligation to indemnify the Summus Indemnitees
for any Indemnified Losses resulting from the breach or breaches of any
representation or warranty of HSNS contained in this Agreement or in the
Disclosure Memorandum or in any certificate relating thereto and delivered by
Summus or the Stockholders pursuant to this Agreement: (i) until the Summus
Indemnitees have suffered Indemnified Losses, by reason of such breach or
breaches, in excess of $25,000 in the aggregate (the "HSNS BASKET"); provided
that once the Summus Indemnitees' aggregate Indemnified Losses exceed the HSNS
Basket, HSNS shall indemnify the Summus Indemnitees for all such Indemnified
Losses suffered, and (ii) to the extent that the aggregate Indemnified Losses
the Summus Indemnitees have suffered by reason of all such breaches of
representations and warranties of HSNS exceed the value of 2,000,000 shares of
Common Stock (the "HSNS CAP"), in the absence of fraud or intentional
misrepresentation, HSNS will have no obligation to indemnify the Summus
Indemnitees for further Indemnified Losses in excess of the HSNS Cap. Such
indemnification shall be payable by HSNS exclusively by issuing an additional
number of shares of Common Stock to Summus equal to the amount of such
Indemnified Losses (subject to the HSNS Cap) divided by the Market Price of the
Common Stock.
7.3 SURVIVAL.
(a) The representations and warranties of each
Stockholder and Summus contained in this Agreement, any Other Agreement, the
Disclosure Memorandum or in any certificate, instrument, agreement or other
writing delivered by or on behalf of any Stockholder or Summus pursuant to this
Agreement or in connection with the transactions contemplated herein are made as
of the date of this Agreement and shall survive the consummation of the
transactions contemplated herein and all such representations and warranties
shall be of no further force and effect after the expiration of one (1) year
from the date of the Closing (the
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"SURVIVAL PERIOD"); provided, however, that the Survival Period shall not apply
to the representations, warranties, covenants, agreements and indemnifications
set forth in PARAGRAPH 5.17, PARAGRAPH 5.19 and PARAGRAPH 5.20 hereof, which
shall survive for the applicable statute of limitations on claims by third
parties.
(b) The representations and warranties of HSNS contained
in this Agreement, any Other Agreement, or in any certificate, instrument,
agreement or other writing delivered by or on behalf of HSNS pursuant to this
Agreement or in connection with the transactions contemplated herein shall
survive any investigation heretofore or hereafter made by or on behalf of Summus
and the Stockholders and the consummation of the transactions contemplated
herein and all such representations and warranties shall be of no further force
and effect after the expiration the Survival Period.
(c) Anything to the contrary notwithstanding, a claim for
indemnification which is made but not resolved prior to the expiration of either
the Survival Period, as applicable, may be pursued and resolved after such
expiration. Anything in this PARAGRAPH 7.5 to the contrary notwithstanding,
Summus shall remain liable, during the Survival Period and thereafter, for all
liabilities and obligations of Summus not assumed pursuant to PARAGRAPH 2.2,
including, without limitation, the Excluded Liabilities specified in PARAGRAPH
2.3.
7.4 PROCEDURE FOR INDEMNIFICATION - THIRD-PARTY CLAIMS.
(a) An indemnified party shall promptly give notice to
each indemnifying party after obtaining knowledge of any matter as to which
recovery may be sought against such indemnifying party because of the indemnity
set forth above, and, if such indemnity shall arise from the claim of a third
party, shall permit such indemnifying party to assume the defense of any such
claim or any Proceeding resulting from such claim; provided, however, that
failure to promptly give any such notice shall not affect the indemnification
provided under this PARAGRAPH 7 except to the extent such indemnifying party
shall have been actually and materially prejudiced as a result of such failure.
Notwithstanding the foregoing, an indemnifying party may not assume the defense
of any such third-party claim or Proceeding if it does not demonstrate to the
reasonable satisfaction of the indemnified party that it has adequate financial
resources to defend such claim or Proceeding and pay any and all damages that
may result therefrom, or if the claim or Proceeding (i) could result in
imprisonment of the indemnified party, (ii) could result in a criminal penalty
or fine against the indemnified party the consequences of which would be
reasonably likely to have a Material Adverse Effect on the indemnified party
unrelated to the size of such penalty or fine or (iii) could result in an
equitable remedy which would materially impair the indemnified party's ability
to exercise its rights under this Agreement, or impair HSNS's right or ability
to operate the Acquired Business. If an indemnifying party assumes the defense
of such third party claim or Proceeding, such indemnifying party shall agree
prior thereto, in writing, that it is liable under this PARAGRAPH 7 to indemnify
the indemnified party in accordance with the terms contained herein in respect
of such claim or Proceeding, shall conduct such defense diligently, shall have
full and complete control over the conduct of such claim or Proceeding on behalf
of the indemnified party and shall, in his or her or its sole discretion, have
the right to decide all matters of procedure, strategy, substance and settlement
relating to such claim or Proceeding; provided, however, that any counsel chosen
by such indemnifying party to conduct such defense shall be reasonably
satisfactory to the indemnified party. The indemnified party may participate in
such claim or Proceeding and retain separate co-counsel at its sole cost and
expense (except that the indemnifying party shall be
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responsible for the reasonable fees and expenses of one separate co-counsel for
the indemnified party to the extent the indemnified party is advised by its
counsel that the counsel the indemnifying party has selected has a conflict of
interest) and the indemnifying party will not without the written consent of the
indemnified party consent to the entry of any judgment or enter into any
settlement with respect to the matter which does not include a provision whereby
the plaintiff or the claimant in the matter releases the indemnified party from
all liability with respect thereto. Failure by an indemnifying party to notify
the indemnified party of its election to defend any such claim or Proceeding by
a third party within thirty (30) days after notice thereof shall have been given
to such indemnifying party by the indemnified party shall be deemed a waiver by
such indemnifying party of its right to defend such claim or Proceeding.
(b) If no indemnifying party is permitted or elects to
assume the defense of any such claim or Proceeding by a third party, the
indemnified party shall diligently defend against such claim or Proceeding in
such manner as it may deem appropriate and, in such event, the indemnifying
party or parties shall promptly reimburse the indemnified party for all
reasonable out-of-pocket costs and expenses, legal or otherwise, incurred by the
indemnified party and its affiliates in connection with the defense against such
claim or Proceeding, a such costs and expenses are incurred. Any counsel chosen
by such indemnified party to conduct such defense must be reasonably
satisfactory to the indemnifying party or parties, and only one counsel (in
addition to local counsel, if required) shall be retained to represent all
indemnified parties in an action (except that if litigation is pending in more
than one jurisdiction with respect to an action, one such counsel may be
retained in each jurisdiction in which such litigation is pending).
(c) The indemnified party will cooperate in all
reasonable respects with any indemnifying party in the conduct of any claim or
Proceeding as to which such indemnifying party assumes the defense. For the
cooperation of the indemnified party pursuant to this PARAGRAPH 7.4, the
indemnifying party or parties shall promptly reimburse the indemnified party for
all reasonable out-of-pocket costs and expenses, legal or otherwise, incurred by
the indemnified party or its affiliates in connection therewith, as such costs
and expenses are incurred.
7.5 SATISFACTION OF INDEMNITY OBLIGATIONS. Notwithstanding any
other provision of this PARAGRAPH 7, an indemnifying party shall have no
obligation to make a payment on indemnity obligations until the end of the
Survival Period. Indemnity obligations pursuant to this PARAGRAPH 7 shall be
satisfied at the end of the Survival Period by the release of Escrowed Shares to
HSNS, in the case of payments owed to HSNS Indemnitees, or the delivery by HSNS
of additional shares of Common Stock to Summus, in the case of payments owed to
Summus Indemnitees.
7.6 SOLE AND EXCLUSIVE REMEDY. The payment of indemnity
obligations by release of Escrowed Shares, or issue of new shares of Common
Stock by HSNS as described above, shall be the sole and exclusive remedies for
breach of any representation or warranty made in this Agreement, or breach of
any covenant or obligation under this Agreement.
8. CONDITIONS TO OBLIGATIONS OF HSNS
The obligations of HSNS under this Agreement to consummate the Closing
shall be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions:
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8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Summus and the Stockholders contained in this Agreement or in the
Disclosure Memorandum or in any certificate delivered pursuant to this Agreement
shall be complete and correct as of the date when made, shall be deemed repeated
at and as of the Closing Date as if made on the Closing Date and, without giving
effect to any qualification as to materiality (or any variation of such term)
contained in any representation or warranty, shall then be complete and correct
in all material respects.
8.2 PERFORMANCE OF COVENANTS. Summus and the Stockholders shall
have performed and complied in all material respects with each covenant,
agreement and condition required by this Agreement to be performed or complied
with by them prior to or on the Closing Date.
8.3 LACK OF ADVERSE CHANGE. Since the date of this Agreement,
there shall not have occurred any incident or event which, individually or in
the aggregate, has had or is reasonably likely to result in a Material Adverse
Effect on Summus, including the loss of any significant customer of Summus.
8.4 UPDATE CERTIFICATE. HSNS shall have received favorable
certificates, dated the Closing Date, signed by Summus and each of the
Stockholders as to the matters set forth in Paragraphs 8.1, 8.2 and 8.3.
8.5 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of
any governmental authority shall be in effect that restrains or prohibits any
transaction contemplated by this Agreement or that would limit or affect HSNS's
ownership or operation of the Acquired Business; no writ, action, investigation,
inquiry or proceeding by any governmental authority shall be pending or
threatened against HSNS, Summus or any Stockholder that challenges the validity
or legality, or that seeks to restrain the consummation, of the transactions
contemplated by this Agreement or that seeks to limit or otherwise affect HSNS's
right to own or operate the Acquired Business.
8.6 APPROVALS AND CONSENTS. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by Summus for the authorization, execution and delivery of this Agreement,
the consummation by it of the transactions contemplated by this Agreement and
the continuation in full force and effect of any and all material rights,
documents, agreements or instruments of Summus shall have been obtained and made
by Summus, except where the failure to receive such consents, waivers,
approvals, authorizations or orders could not reasonably be expected to have a
Material Adverse Effect on Summus.
8.7 OPINION OF COUNSEL. Summus and the Stockholders shall have
delivered to HSNS an opinion of Smith, Anderson, Blount, Dorsett, Xxxxxxxx &
Xxxxxxxx, L.L.P., dated the Closing Date and addressed to HSNS, as to such
matters as are customarily covered by opinions in connection with transactions
similar to this transaction, in form and substance reasonably satisfactory to
HSNS.
8.8 BOARD AND SHAREHOLDER APPROVAL. This Agreement shall have been
duly approved by the requisite votes of the Board of Directors and stockholders
of Summus, with no dissenting stockholders exercising appraisal rights, in
accordance with the Delaware General Corporation Law.
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8.9 DELIVERY OF DOCUMENTS. Summus and the Stockholder shall have
delivered the closing documents set forth in PARAGRAPH 3 and such other
certificates, documents and papers as HSNS or its counsel may reasonably
request.
8.10 TAX MATTERS RELATING TO TRANSACTIONS. Summus and the
Stockholders shall have provided a tax representation letter to Xxxxxxxxxx
Xxxxxxxx L.L.P. for purposes of rendering the tax opinion required by PARAGRAPH
3. The value of consideration considered to be "boot" for purposes of Section
368(a)(1)(C) of the Code shall not exceed the fair market value of the shares of
Common Stock included in the Stock Purchase Price.
8.11 PERMIT. The Secretary of State of the State of North Carolina
(or designee) shall have approved the terms and conditions of the transactions
contemplated by this Agreement, and the fairness of such terms and conditions
following a hearing for such purpose, and shall have issued a North Carolina
Permit, or in the event a North Carolina Permit shall not have been issued in a
timely manner, HSNS shall have determined in its sole and absolute discretion to
effect the issuance of the Stock Purchase Price in a private placement in
accordance with applicable federal and state securities laws, subject to the
execution and delivery of a Registration Rights Agreement as contemplated in
PARAGRAPH 8.12 below.
8.12 CHARTER AMENDMENT. The charter documents of HSNS have been
amended, if necessary, to increase the number of authorized shares to amounts
sufficient for the transactions contemplated in this Agreement and its Exhibits.
9. CONDITIONS TO OBLIGATIONS OF SUMMUS AND THE STOCKHOLDERS
The obligations of Summus under this Agreement to consummate the
Closing shall be subject to the satisfaction, on or before the Closing Date
(unless otherwise indicated), of each of the following conditions, unless said
conditions are waived by Summus:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of HSNS contained in this Agreement or in any certificate delivered
pursuant to this Agreement shall be complete and correct as of the date when
made, shall be deemed repeated at and as of the Closing Date as if made on the
Closing Date and, without giving effect to any qualification as to materiality
(or any variation of such term) contained in any representation or warranty,
shall then be complete and correct in all material respects.
9.2 LACK OF ADVERSE CHANGE. Since the date of this Agreement,
there shall not have occurred any incident or event, which, individually or in
the aggregate, has had or is reasonably likely to result in a Material Adverse
Effect on HSNS.
9.3 PERFORMANCE COVENANTS. HSNS shall have performed and complied
in all material respects with each covenant, agreement and condition required by
this Agreement to be performed or complied with by them prior to or on the
Closing Date, and HSNS shall have performed and complied with its financing
guarantee obligations as set forth in PARAGRAPH 4.11.
9.4 UPDATE CERTIFICATE. Summus and the Stockholders shall have
received favorable certificates, dated the Closing Date, signed by HSNS as to
the matters set forth in PARAGRAPH 9.1, PARAGRAPH 9.2 AND PARAGRAPH 9.3.
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9.5 NO GOVERNMENTAL OR OTHER PROCEEDING LITIGATION. No writ,
action, investigation, inquiry or proceeding by any Governmental Authority shall
be pending or threatened against HSNS, Summus or any Stockholder that challenges
the validity or legality or seeks to restrain or prohibit the transactions
contemplated under this Agreement.
9.6 OPINION OF COUNSEL. HSNS shall have delivered to Summus an
opinion of Xxxxxxxxxx Xxxxxxxx L.L.P, dated the Closing Date and addressed to
Summus, as to such matters as are customarily covered by opinions in connection
with transactions similar to this transaction, in form and substance reasonably
satisfactory to Summus.
9.7 DELIVERY OF DOCUMENTS. HSNS shall have delivered to Summus the
closing documents set forth in PARAGRAPH 3 and such other certificates,
documents and papers as Summus or their counsel may reasonably request.
9.8 TAX MATTERS RELATING TO TRANSACTION. HSNS shall have provided
a tax representation letter to Xxxxxxxxxx Xxxxxxxx L.L.P. for purposes of
rendering the tax opinion required by PARAGRAPH 3. The value of merger
consideration considered to be "boot" for purposes of Section 368(a)(1)(C) of
the Code shall not exceed the Market Value of the shares of Common Stock
included in the Stock Purchase Price.
9.9 BOARD AND SHAREHOLDER APPROVAL. This Agreement shall have been
duly approved by the requisite votes of the Board of Directors and stockholders
of Summus, with no dissenting stockholders exercising appraisal rights, in
accordance with the Delaware General Corporation Law.
9.10 PERMIT. The Secretary of State of the State of North Carolina
shall have approved the terms and conditions of the transactions contemplated by
this Agreement, and the fairness of such terms and conditions following a
hearing for such purpose, and shall have issued a North Carolina Permit, or in
the event a North Carolina Permit shall not have been issued in a timely manner,
HSNS shall have determined in its sole and absolute discretion to effect the
issuance of the Stock Purchase Price in a private placement in accordance with
applicable federal and state securities laws.
9.11 APPROVALS AND CONSENTS. All consents, waivers, approvals,
authorizations or orders required to be obtained, by Summus for the
authorization, execution and delivery of this Agreement, the consummation by it
of the transactions contemplated by this Agreement and the continuation in full
force and effect of any and all material rights, documents, agreements or
instruments of Summus shall have been obtained and made by Summus, except where
the failure to receive such consents, waivers, approvals, authorizations or
orders could not reasonably be expected to have a Material Adverse Effect on
Summus.
9.12 PRIVATE PLACEMENT AGREEMENT FOR THE SALE OF XXXXX XXXXXXX'X
HSNS COMMON STOCK. Xxxxx Xxxxxxx shall have entered into an agreement between
HSNS' investment banker for the private sale of $2,500,000 worth of shares of
HSNS Common Stock owned by Xxxxx Xxxxxxx, which agreement shall not be delayed
by Xxxxx Xxxxxxx.
9.13 PRIVATE PLACEMENT AGREEMENT FOR THE SALE OF XXXXXXX XXXXXXX'X
HSNS COMMON STOCK. If a North Carolina Permit has not been obtained, Xxxxxxx
Xxxxxxx shall have entered into an agreement between HSNS' investment banker for
the private sale of $1,000,000
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worth of shares of HSNS Common Stock owned by Xxxxxxx Xxxxxxx, which agreement
shall not be delayed by Xxxxxxx Xxxxxxx.
9.14 FINANCING CONTINGENCY. HSNS's investment banker shall have
advised HSNS that it has raised and has on deposit at least $7.5 million, which
will be invested in HSNS immediately following the Closing. This amount will
include (i) amounts to purchase shares of Xxxxx Xxxxxxx and/or Xxxxxxx Xxxxxxx
under PARAGRAPH 9.12 or PARAGRAPH 9.13; and (ii) amounts raised by Summus or
provided by HSNS as interim financing for Summus between October 23, 2000, and
the Closing Date.
9.15 CHARTER AMENDMENT. The charter documents of HSNS have been
amended, if necessary, to increase the number of authorized shares to amounts
sufficient for the transactions contemplated in this Agreement and its Exhibits.
10. MISCELLANEOUS
10.1 NOTICES. All notices or other communications required or
permitted to be given or made hereunder shall be in writing and delivered
personally or sent by pre-paid, first class certified or registered mail, return
receipt requested, or by facsimile transmission, receipt confirmed, to the
intended recipient thereof at its address or facsimile number set out below. Any
such notice or communication shall be deemed to have been duly given immediately
(if given or made in person or by facsimile confirmed by mailing a copy thereof
to the recipient in accordance with this PARAGRAPH 10.1 on the date of such
facsimile), or five days after mailing (if given or made by mail), and in
proving same it shall be sufficient to show that the envelope containing the
same was delivered to the delivery service and duly addressed, or that receipt
of a facsimile was confirmed by the recipient as provided above. The addresses
and facsimile numbers of the parties for purposes of this Agreement are set
forth on the signature page hereto below their respective signatures. Any party
may change the address to which notices or other communications to such party
shall be delivered or mailed by giving notice thereof to the other party hereto
in the manner provided herein.
10.2 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
10.3 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. The validity
and effect of this Agreement shall be governed by and construed and enforced in
accordance with the Laws of the State of North Carolina, without regard to its
conflicts of Laws rules. The parties hereby irrevocably and unconditionally
consent and submit to the personal jurisdiction of any state court sitting in
Wake County, North Carolina or any federal court sitting in the Eastern District
of North Carolina, with respect to any Action to enforce this Agreement and the
transactions contemplated hereby, and the parties also expressly consent and
submit to and agree that venue in any such Action is proper in said courts and
county, and the parties hereby expressly waive any and all personal rights under
applicable law or in equity to object to the jurisdiction and venue of said
courts and county. The jurisdiction and venue of the courts and county consented
and submitted to and agreed upon in this Paragraph are not exclusive, but are
cumulative and in addition to the jurisdiction and venue of any other court
under any applicable law or in equity.
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10.4 WAIVER OF RIGHT TO JURY TRIAL. Each party hereto waives all
right to trial by jury in any Action, proceeding or counterclaim (whether based
upon contract, tort or otherwise) related to or arising out of the transactions
contemplated by this Agreement, to the fullest extent permitted by law.
10.5 SUCCESSORS AND ASSIGNS. HSNS may not assign this Agreement
without the prior written consent of HSNS; provided that after the Closing Date,
HSNS may assign this Agreement to an affiliate of HSNS or as part of a sale or
transfer of the stock, assets, or business of HSNS without such consent being
required. Summus and the Stockholders may not assign this Agreement without the
prior written consent of HSNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
10.6 PARTIAL INVALIDITY AND SEVERABILITY. All rights and
restrictions contained herein may be exercised and shall be applicable and
binding only to the extent that they do not violate any applicable Laws and are
intended to be limited to the extent necessary to render this Agreement legal,
valid and enforceable. If any term of this Agreement, or part thereof, not
essential to the commercial purpose of this Agreement shall be held to be
illegal, invalid or unenforceable by a Forum of competent jurisdiction, it is
the intention of the parties that the remaining terms hereof, or part thereof,
shall constitute their agreement with respect to the subject matter hereof and
all such remaining terms, or parts thereof, shall remain in full force and
effect. To the extent legally permissible, any illegal, invalid or unenforceable
provision of this Agreement shall be replaced by a valid provision which will
implement the commercial purpose of the illegal, invalid or unenforceable
provision.
10.7 WAIVER. Any term or condition of this Agreement may be waived
at any time by the party which is entitled to the benefit thereof, but only if
such waiver is evidenced by a writing signed by such party. No failure on the
part of any party hereto to exercise, and no delay in exercising any right,
power or remedy created hereunder, shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or remedy by either party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. No waiver by either party hereto of any breach of or
default in any term or condition of this Agreement shall constitute a waiver of
or assent to any succeeding breach of or default in the same or any other term
or condition hereof.
10.8 HEADINGS. The headings of particular provisions of this
Agreement are inserted for convenience only and shall not be construed as a part
of this Agreement or serve as a limitation or expansion on the scope of any term
or provision of this Agreement.
10.9 NUMBER AND GENDER. Where the context requires, the use of the
singular form herein shall include the plural, the use of the plural shall
include the singular, and the use of any gender shall include any and all
genders.
10.10 ENTIRE AGREEMENT. This Agreement, together with the Schedules
and Exhibits attached hereto and the Other Agreements referenced herein,
supersedes all prior discussions and agreements between the parties with respect
to the subject matter hereof, and contains the sole and entire agreement between
the parties with respect to the matters covered hereby; provided, however, that
any nondisclosure agreement between HSNS and Summus shall continue in full force
and effect in accordance with its terms. This Agreement shall not be altered or
amended
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except by an instrument in writing signed by or on behalf of the party entitled
to the benefit of the provision against whom enforcement is sought.
10.11 TERMINATION OF AGREEMENT. The parties hereto shall be entitled
to terminate this Agreement as follows, provided that no such termination shall
limit or terminate any liability of one party to another for any breach hereof:
(a) the parties hereto may terminate this Agreement by
mutual consent at any time;
(b) either party may terminate this Agreement if the
Closing does not occur within sixty (60) days of the date of this Agreement;
(c) any party may terminate this Agreement by written
notice to the other parties hereto on or prior to the Closing Date if any court
or other governmental instrumentality of competent jurisdiction shall have
issued an order, decree, or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement; or
(d) by Summus, if HSNS has failed to provide Interim
Financing when scheduled, as provided in PARAGRAPH 4.14.
11. DEFINITIONS
11.1 For purposes of this Agreement, the following terms shall have
the meanings specified with respect thereto below:
"ACTION" shall mean any action, suit, litigation, complaint,
counterclaim, claim, petition, mediation contest, or administrative proceeding,
whether at Law, in equity, in arbitration or otherwise, and whether conducted by
or before any Government or other Person.
"ACQUIRED ASSETS" shall have the meaning set forth in PARAGRAPH 1.1.
"ACQUIRED BUSINESS" shall have the meaning set forth in the PREAMBLE.
"ACQUIRED CONTRACTS" shall have the meaning set forth in PARAGRAPH
1.1(G).
"AFFILIATE" of any specified Person shall mean any other Person
directly or indirectly Controlling, Controlled by, or under direct or indirect
common Control with such specified Person.
"AFFILIATED ENTITY" or "AFFILIATED ENTITIES" shall have the meaning set
forth in Paragraph 5.17.
"AGREEMENT" shall have the meaning set forth in the PREAMBLE.
"ASSUMED LIABILITIES" shall have the meaning set forth in PARAGRAPH
2.2.
"BUSINESS" shall have the meaning set forth in PARAGRAPH 4.5
39
41
"CEO" shall mean the Chief Executive Officer.
"CLOSING" shall have the meaning set forth in PARAGRAPH 3.1.
"CLOSING DATE" shall have the meaning set forth in PARAGRAPH 3.1.
"CODE" shall mean the United States Internal Revenue Code of 1986 and
the Rules and Regulations promulgated thereunder from time to time, in each case
as amended.
"COMMON STOCK" shall have the meaning set forth in PARAGRAPH 1.2.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in
PARAGRAPH 4.9.
"CONTROL" means a Person possesses, directly or indirectly, the power
to direct or cause the direction of the management and policies of another
Person, whether through the ownership of voting securities, by contract or
otherwise.
"DISCLOSURE MEMORANDUM" shall have the meaning set forth in the
introduction to ARTICLE 5.
"ENVIRONMENTAL LAWS" shall mean all Laws, general or particular
conditions, requirements, decrees, and covenants relating to health, safety and
the environment, including, without limitation, Laws and covenants relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or Hazardous Materials or wastes
of every kind and nature into the environment (including without limitation
ambient air, surface water, ground water, soil and subsoil), or otherwise
relating to the manufacture, generation, processing, distribution, application,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes,
or to occupational or worker safety and health, and any and all Laws,
directives, guidelines, policies, plans, Orders, stipulations, provisions and
conditions of Environmental Permits, licenses, stipulations, certificates of
authorization, and other operating authorizations, notices or demand letters
issued, entered, promulgated or approved thereunder.
"ENVIRONMENTAL PERMITS" shall mean all permits, licenses, certificates,
approvals, authorizations, regulatory plans or compliance schedules required by
applicable Environmental Laws, or issued by a Government pursuant to applicable
Environmental Laws, or entered into by agreement of the party to be bound,
relating to activities that affect human health or the environment, including,
without limitation, permits, licenses, certificates, approvals, authorizations,
regulatory plans and compliance schedules for air emissions, water discharges,
pesticide and herbicide or other agricultural chemical storage, use or
application, and Hazardous Material or Solid Waste generation, use, storage,
treatment and disposal.
"ERISA" shall have the meaning set forth in PARAGRAPH 5.19(A).
"ESCROW AGENT" shall have the meaning set forth in PARAGRAPH
2.1(B)(II).
"ESCROW AGREEMENT" shall have the meaning set forth in PARAGRAPH
2.1(B).
"ESCROWED SHARES" shall have the meaning set forth in PARAGRAPH
2.1(B)(I).
40
42
"EXCLUDED LIABILITIES" shall have the meaning set forth in PARAGRAPH
2.3.
"FINANCIAL STATEMENTS" shall have the meaning set forth in PARAGRAPH
5.7.
"FORUM" shall mean any federal, national, state, local, municipal or
foreign court, governmental agency, administrative body or agency, tribunal,
private alternative dispute resolution system, or arbitration panel.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GOVERNMENT" shall mean any federal, national, state, provincial,
local, municipal, or foreign government or any department, commission, board,
bureau, agency, instrumentality, unit, or taxing authority thereof.
"HAZARDOUS MATERIAL" shall mean any substance or material, including
without limitation raw materials, commercial products and wastes or waste
products that, because of its quantity, concentration, or physical, chemical or
infectious characteristics may cause or significantly contribute to an increase
in mortality or an increase in serious, irreversible or incapacitating illness,
or pose a substantial hazard to human health or the environment, including
without limitation petroleum and all substances and materials designated as
hazardous or toxic under any applicable Environmental Law.
"HEREOF," "HEREIN," "HEREUNDER" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and "ARTICLE," "PARAGRAPH," "EXHIBIT"
and like references are to this Agreement unless otherwise specified.
"HSNS" shall have the meaning set forth in the PREAMBLE.
"HSNS BASKET" shall have the meaning set forth in PARAGRAPH 7.2(B).
"HSNS BOARD" shall have the meaning set forth in PARAGRAPH 4.10.
"HSNS CAP" shall have the meaning set forth in PARAGRAPH 7.2(B).
"HSNS INDEMNITIES" shall have the meaning set forth in PARAGRAPH
7.1(A).
"IMPROVEMENTS" shall mean all buildings, structures and other
improvements of any and every nature located on the Real Property and all
fixtures attached or affixed, actually or constructively, to the Real Property
or to any such buildings, structures or other improvements.
"INDEMNIFIED LOSSES" shall have the meaning set forth in PARAGRAPH
7.1(A).
"INSIDER" shall have the meaning stated in 15 U.S.C.A.ss.78p(a).
"INTELLECTUAL PROPERTY" shall have the meaning set forth in PARAGRAPH
1.1(E).
"INVENTIONS AGREEMENT" shall have the meaning set forth in PARAGRAPH
3.2(B)(IV).
"INVENTORY" shall have the meaning set forth in PARAGRAPH 1.1(D).
41
43
"JOINT PRESS RELEASE" shall have the meaning set forth in PARAGRAPH
4.3.
"KNOWN," "TO THE KNOWLEDGE OF," "AWARE" or words of similar import
employed in this Agreement with reference to any individual or entity shall be
conclusively presumed to mean that the individual or entity is actually,
personally aware of such fact or other matter (other than by virtue of imputed
or constructive knowledge), without any obligation or duty to conduct any type
of investigation or make any inquiry; in the case of Summus, "KNOWLEDGE" shall
be deemed to be the individual and collective knowledge (as defined above) of
its directors and senior officers and managers.
"LAW" shall mean all federal, national, state, provincial, local,
municipal or foreign constitutions, statutes, rules, regulations, norms,
ordinances, acts, codes, legislation, treaties, conventions, common law
principles, judicial decisions and similar laws and legal requirements, whether
of the United States of America or any other jurisdiction as in effect from time
to time.
"LEASED REAL PROPERTY" shall have the meaning set forth in PARAGRAPH
5.12(B).
"LIABILITY" shall mean any liability or obligation whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due.
"LIEN" shall mean any mortgage, pledge, hypothecation, security
interest, encumbrance, claim, restriction on use, lien or charge of any kind, or
any rights of others, however evidenced or created (including any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the lien notice records or other similar
legislation of any jurisdiction).
"MARKET PRICE" shall mean the average of the closing bid and asked
price per share of the HSNS Common Stock for the ten trading days prior to the
relevant date.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse change in the
business, operations, properties, assets, prospects, liabilities, results of
operations or conditions, financial or otherwise.
"NOTICE" shall have the meaning set forth in PARAGRAPH 5.27.
"ORDERS" shall mean all applicable orders, writs, judgments,
injunctions, decrees, rulings, consent agreements, and awards of or by any Forum
or entered by consent of the party to be bound.
"OTHER AGREEMENTS" shall have the meaning set forth in PARAGRAPH
5.1(B).
"OWNED REAL PROPERTY" shall have the meaning set forth in PARAGRAPH
5.12.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in PARAGRAPH
1.1.
"PERSON" shall include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a Government.
42
44
"PROCEEDING" shall include any pending claims, action, investigation,
arbitration, litigation, review or other proceeding (i) that has been commenced
or against the party or that otherwise relates to or may affect the business of,
or any of the properties or assets owned or used by, the party; or (ii) that
challenges, or that is reasonably likely to have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the transactions
contemplated hereby.
"PURCHASE PRICE" shall have the meaning set forth in PARAGRAPH 2.1.
"REAL PROPERTY" shall have the meaning set forth in PARAGRAPH 5.12(B).
"REAL PROPERTY LEASE" shall have the meaning set forth in PARAGRAPH
5.12(B).
"REFERENCE DATE" shall have the meaning set forth in PARAGRAPH 5.7.
"REFERENCE DATE BALANCE SHEET" shall have the meaning set forth in
PARAGRAPH 5.7.
"RELATED PARTIES" shall have the meaning set forth in PARAGRAPH 5.22.
"RETURNS" shall have the meaning set forth in PARAGRAPH 5.17.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SHARES" shall mean all of the issued and outstanding shares of capital
stock of Summus.
"SOFTWARE" shall have the meaning set forth in PARAGRAPH 5.13(IV).
"STOCKHOLDER" or "STOCKHOLDERS" shall have the meaning set forth in the
PREAMBLE.
"STOCK PURCHASE PRICE" shall have the meaning set forth in PARAGRAPH
2.1.
"SUMMUS" shall have the meaning set forth in the PREAMBLE.
"SUMMUS BASKET" shall have the meaning set forth in PARAGRAPH 7.1(B).
"SUMMUS CAP" shall have the meaning set forth in PARAGRAPH 7.1(B).
"SUMMUS INDEMNITIES" shall have the meaning set forth in PARAGRAPH
7.2(A).
"SUMMUS LICENSED INTELLECTUAL PROPERTY" shall have the meaning set
forth in PARAGRAPH 5.13(A)(I).
"SUMMUS OWNED INTELLECTUAL PROPERTY" shall have the meaning set forth
in PARAGRAPH 5.13(A)(II).
"SUMMUS PENSION PLAN" shall have the meaning set forth in PARAGRAPH
5.19.
"SUMMUS PLANS" shall have the meaning set forth in PARAGRAPH 5.19(A).
"SUMMUS' SERVICES" shall have the meaning set forth in the PREAMBLE.
43
45
"SUMMUS SOFTWARE" shall have the meaning set forth in PARAGRAPH
5.13(A)(III).
"SUMMUS SURVIVAL PERIOD" shall have the meaning set forth in PARAGRAPH
7.3(A).
"TAXES" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges of whatever
nature, including without limitation income, gross receipts, excise, property,
sales, use, customs, value added, consumption, transfer, license, payroll,
employee income, withholding, social security, and franchise taxes, now or
hereafter imposed or levied by the United States of America or any Government or
by any department, agency or other political subdivision or taxing authority
thereof or therein, all deposits required in connection therewith, and all
interests, penalties, additions to tax, and other similar Liabilities with
respect thereto.
"TERRITORY" shall mean anywhere within the United States of America,
Canada or Mexico, the countries of the European Economic Union, East Asia and
India.
"VOTING TRUST AGREEMENT" shall have the meaning set forth in PARAGRAPH
3.2(B)(IX).
"WARRANT EXERCISE PERIOD" shall have the meaning set forth in PARAGRAPH
2.1(C).
"WARRANT EXERCISE PRICE" shall have the meaning set forth in PARAGRAPH
2.1(C).
"WARRANTS" shall have the meaning set forth in PARAGRAPH 2.1(C).
* * * * *
44
46
IN WITNESS WHEREOF, the parties have executed or caused this Agreement to be
executed by their duly authorized agents as of the day and year first above
written.
HIGH SPEED NET SOLUTIONS, INC. SUMMUS, LTD.
By: /s/ Xxxxxx Xxx By: /s/ Xxxxx Xxxxxxx
----------------------------- ------------------------
Xxxxxx Xxx, President Xxxxx Xxxxxxx, President
Address: 000 Xxxxxxxxxxxx Xxxxxx Xxxx Address: 000 Xxxxxxxxxxxx Xxxxxx Mall
Suite 2120 Suite 600
Raleigh, North Carolina 27601 Xxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile No: (000) 000-0000 Facsimile No: (000) 000-0000
STOCKHOLDER'S
PERCENTAGE: STOCKHOLDERS:
56.63% /s/ Xxxxx Xxxxxxx
-----------------------
Name: Xxxxx Xxxxxxx
Address: 000 Xxxxxxxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile No. (000) 000-0000
45
47
EXHIBIT A
ASSUMPTION AGREEMENT
46
48
EXHIBITS B-1 AND B-2
EMPLOYMENT AGREEMENTS
B-1 Form of Xxxxx Xxxxxxx agreement
B-2 General form of employment offer letter
47
49
EXHIBIT C
NONCOMPETITION, CONFIDENTIALITY AND ASSIGNMENT OF INVENTIONS AGREEMENT
48
50
EXHIBIT D
ESCROW AGREEMENT
49
51
EXHIBIT E
XXXX OF SALE AND ASSIGNMENT
50
52
EXHIBIT F
VOTING TRUST AGREEMENT
51
53
EXHIBITS G-1 AND G-2
RELEASES FROM STOCKHOLDERS OF SUMMUS AND HSNS/AND EMPLOYEES OF SUMMUS
G-1 FORM OF RELEASES BY SUMMUS AND HSNS SHAREHOLDERS
G-2 FORM OF RELEASES BY SUMMUS EMPLOYEES TO BE HIRED BY HSNS
52
54
EXHIBIT H
[RESERVED]
53
55
EXHIBIT I
INVENTIONS AWARDS PLAN
54
56
EXHIBIT J
ASSIGNMENT OF CONTRACTS
55
57
EXHIBIT K
SECURITIES REPRESENTATIONS
(a) Summus and each of the Stockholders (A) has such
knowledge, sophistication and experience in business and financial matters that
they are capable of evaluating the merits and risks of an investment in the
Warrants and the shares of Common Stock issuable upon exercise of the Warrants,
(B) fully understands the nature, scope and duration of the limitations on
transfer contained in this Agreement and (C) can bear the economic risk of an
investment in the Warrants and the shares of Common Stock issuable upon exercise
of the Warrants and can afford a complete loss of such investment.
(b) Summus and each Stockholder understands that the
Warrants to be acquired by them at the Closing pursuant to the terms of this
Agreement, and the shares of Common Stock to be issued upon exercise of the
Warrants, have not and will not be registered under the Securities Act or any
state securities laws and will be issued in reliance upon exemptions contained
in the Securities Act or interpretations thereof and in the applicable state
securities laws, and cannot be offered for sale, sold or otherwise transferred
unless the Warrants, or shares of Common Stock issuable upon exercise of the
Warrants, subsequently are so registered or qualify for exemption from
registration under the Securities Act.
(c) The Warrants, and the shares of Common Stock to be
issued upon exercise of the Warrants, are being acquired under this Agreement by
Summus and each of the Stockholders in good faith solely for its own account,
for investment and not with a view toward distribution within the meaning of the
Securities Act. Such securities will not be offered for sale, sold or otherwise
transferred by Summus or the Stockholders without either registration or
pursuant to an exemption from registration under the Securities Act and any
applicable state securities laws (and the delivery of investment representation
letters and legal opinions reasonably satisfactory to HSNS, as reasonably
requested by HSNS).
(d) Summus and each Stockholder has knowledge and
experience in financial and business matters such that it is capable of
evaluating the merits and risks of its investment in the Warrants, and the
shares of Common Stock to be issued upon exercise of the Warrants, being
acquired hereunder. Summus and each Stockholder is an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act. Summus and each
Stockholder understands and is able to bear any economic risks associated with
such investment (including, without limitation, the necessity of holding the
Common Stock for an indefinite period of time, inasmuch as the Common Stock has
not been registered under the Securities Act or any state securities laws).
(e) Summus and each Stockholder acknowledges and agrees
that the Warrants and each certificate representing shares of Common Stock
issuable upon exercise of the Warrants shall bear a legend substantially similar
to the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS.
56
58
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
57
59
SCHEDULE 1.1
PERMITTED ENCUMBRANCES
1. Laws, ordinances and governmental regulations regulating the
use or occupancy of the Real Property.
2. Lease, conditions, easements, rights of way, restrictions, and
other exceptions which affect the Real Property but do not
prohibit the intended use thereof by Summus.
3. Rights of third parties under the Acquired Contracts.
4. Liens or encumbrances reflected on the Reference Date Balance
Sheet.
5. Pledge of HSNS shares to HSNS as loan collateral.
58
60
SCHEDULE 1.1(G)
ACQUIRED CONTRACTS
COMPANY NAME AGREEMENT NAME DATE
------------ -------------- ----
3D Cubed Runtime Software License Agreement 12/9/96
Software License Agreement 12/1/97
ADLabs Technology License Agreement 8/17/00
Master Consulting Agreement
Stock Warrant Agreement
BARAKA Intra Com License and Marketing Agreement No date
provided
XxxXxXxx.xxx
Canadian Bank Note Company Embedded Run Time License Addendum Not dated
Chori America Inc. Product Loan Agreement 5/15/98
Colorado Springs Concepts Corporation Software & Distribution License Agreement 10/16/99
Colorepo, Inc. Software License Agreement 12/4/95
Compaq Computer Corp. Product Loan Agreement 2/21/97
Compression Systems Product Loan Agreement 10/16/96
Computer Presentation Inc. License and Marketing Agreement 12/9/94
Computer Presentations, Inc. Software License Agreement 3/15/93
Concept Corp. Software License Agreement 10/17/96
Corel Corporation Software License Agreement 4/24/96
Datastrip Group, Inc. Software License Agreement 11/99
Digital Equipment Corp. Product Loan Agreement 7/24/97
Digital Equipment Corp. Product Loan Agreement 1/15/98
Advanced Integration of Pure MaxxNote(TM) Software License 3/1/00
Intelligence Co. Ltd. (Digitra Agreement - OEM Bundle
Systems)
Euclid Ltd. Software License Agreement 6/26/00
FujiFilm Software License Agreement 4/7//97
Xxxxxx Corporation, RF Embedded Run Time License Unexecuted
Communications Division Addendum and Undated
End User License Addendum 2/24/97
License Addendum No. 3 2/25/99
Xxxxxx GASD Consulting Agreement 1/19/94
Xxxxxx Corp. Consulting Agreement 1/19/94
Research & Development Agreement 4/12/94
HDS, Inc. Software License Agreement and Amendment 1 1/9/95 and 5/11/95
IBM Software License Agreement 11/30/95
ICC License and Marketing Agreement No date provided
59
61
COMPANY NAME AGREEMENT NAME DATE
------------ -------------- ----
Xxxxxxxx-CSF IDMatics Customer License Agreement for Wavelet Image 12/28/97
(WI) SDK
End User License Addendum 12/28/97
Embedded Run Time License Addendum 8/16/99
Image etc. Software License Agreement 1/8/96
Infogrames Telematique Software License Agreement 3/15/96
InMedia Presentations, Inc. Software License Agreement 7/1/97
Integrated Computing Engines Inc. Software License Agreement 12/19/96
Technical Rights Agreement 2/7/97
Technical Rights Agreement 2/24/97
Magnavox Research and Development Agreement 4/11/94
Magnavox Electronic Systems Letter of Agreement 1/13/95
Company, West Coast Division
Commercial Wavelet Technology Development and 8/11/95
Cross License Agreement
Consulting Agreement and Proprietary Disclosure 10/13/92
Agreement
Special Bailment Agreement 10/21/94
Xxxxxx Xxxxxxxx Technical Rights Agreement 5/26/97
Miledus
Office of Naval Research Award/Contract 1/00
PassTech, Inc. License Agreement 8/11/97
PEN-TECH Associates, Inc. Sales Agreement 9/18/95
Phiga Corporation Developer Software License Agreement 9/21/00
PlusStation, LLC Agreement for Transfer of All Rights and 9/4/00
Reservation of License in Software
Prosolvia Research & Technology AB Software License Agreement 10/31/98
Raytheon Company Software License Agreement 2/23/95
SAIC
Sandia National Laboratories Purchase Order (not signed by Sandia) 11/29/99
SanEsu Management Systems, Inc. (SEMS) Software License Agreement 9/9/96
SDK Software License Agreement 8/24/00
SolidStreaming Developer Software License Agreement 4/24/00
Sonetech Corporation Subcontract 2/1/99
Symbol Technologies, Inc. Software License & Distributor Agreement 9/17/96
Agreement for Development Services 9/25/97
Telia License and Marketing Agreement No date
provided
The Great Human Infocom Software License Agreement 9/22/97
60
62
COMPANY NAME AGREEMENT NAME DATE
------------ -------------- ----
TransCore Embedded Run Time License Agreement 10/26/99
VideosDotCom Inc. OEM Software License Agreement 4/5/00
Visual Mail Systems, Inc. Software License Agreement 10/15/97
Voxware Inc. License and Marketing Agreement 5/6/98
Xxxxx Group Inc. License and Marketing Agreement 7/15/96
World Connect License and Marketing Agreement No date
provided
61
63
SCHEDULE 2.2(A)
SPECIFIED ASSUMED LIABILITIES
Assumed Contracts as listed on Schedule 1.1(g).
SUMMUS, LTD.
10/25/00 UNPAID BILLS
AS OF OCTOBER 25, 2000
DEBTOR AMOUNT OWED
Accent Imaging 54.06
Accountemps 3,852.50
Accounting Solutiond 475.20
Accounting Solutions 158.40
Airborne Express 30.90
Aladdin Travel & Meeting Planners 33.89
Alarms Plus, Inc 1,207.10
Xxxxxx Xxxxxxxx & Co. 25,849.26
Allied Van Lines, Inc. 4,994.90
Alltel Communications, Inc. 1,039.62
Analysts International Corp. 359,436.50
Ascom Xxxxxx Leasing 181.23
AT & T 23,972.24
AVNET Electronics Marketing 3,174.70
B Jawerth 1,250.29
Xxxxxxxxx Xxxxxxx & Xxxxxxx 65.00
Xxxx South 11,163.48
BellSouth Wireless Data. 13,152.58
Bijorn Jawerth 287.18
Blue Wave Systems, Inc. 2,595.00
Box Electric Company 250.00
BSPEC Inc 1,500.00
BTI Telecommunications 1,368.91
Cananwill 1,350.01
Capital Associates 21,158.42
Capital City Club 301.88
Capitol Coffee Systems 289.05
XXXX Corporation 13.95
Centerpoint Staffing Solutions 20,500.00
COBWEB 1,080.00
62
64
DEBTOR AMOUNT OWED
XxxxxXxxxxx.Xxx, Inc 1,617.50
Xxxxx Xxxxxxxx 1,111.50
De Xxxx Xxxxxx 16,761.01
Dell Computers 47.65
Deutsche Financial Services 28,947.49
DFS Acceptance 2,410.67
DigiCom, Inc. 850.00
Do Xxxx Xxxxx 6,894.36
Duff & Xxxxxx, LLC 17,322.50
EarthLink/Mindspring Enterprise, Inc 281.40
eHelp Corporation 924.00
Xxxxxxxx Group Inc 34,483.50
Ernst & Young, LLP 11,710.00
ESG 712.80
XxxxxXxxx By Marriott 22,020.82
Federal Express 1,123.67
First Colony Life Insurance Company 11,170.00
Xxxxxx & Associates, LLC 720.49
Fort Xxxx Escrow Services Inc. 150.00
Fusion Studios 8,100.00
g.Neil Companies 55.19
Xxxx Ban 301.87
Gateway Services, Inc 200.26
Xxxxxx X Xxxxxx 14,755.63
Globe 185.31
Globe Corporate Stay International 16,228.28
Group Insurance Services, Inc 20,287.59
Xxxxxxxxx Xxxxxx 3,235.04
IMT Strategies Inc. 2,999.90
Insight 6,786.59
Insight Studios 1,750.00
Intergrators Inc 5,032.89
ITI Standards Operations 600.00
Xxxxx Xxxxxx Stroembeck 7,376.00
Xxxxxx Xxxxx 1,489.51
Xxxxx X. Xxxxx 249.46
Xxxxxxx Xxxxx 15,218.26
Xxxxx/Xxxxxx, Inc 21,773.55
63
65
DEBTOR AMOUNT OWED
Lands' End Corporate Sales 291.45
Lead Technologies Inc 1,939.35
Lucent Technologies Product Finance 21,548.98
Xxxxx 32,400.00
Marks & Company, Inc 1,098.00
Massachusetts Inst. of Technology 5,000.00
Xxxxxxx Xxxxxxx 479.79
Xxxx X. XxXxxx 48.41
Muzak - Charlotte 344.50
Xxxxx Xxxxx Xxxxxx & Sajovec P.A. 13,657.45
Myriad Media Designs Inc 340.00
Xxxx Ban, CPA 100.00
North Carolina Department of Revenue 13,407.00
Northwestern Mutual Life Insurance Co. 1,490.86
Office Max 196.06
Ogilvy Public Relations Worldwide 29,657.15
One Media Place 19,950.00
PageNet 259.57
Xxxxx Xxxxxxxxx 51.90
Phoenix Limited Partnership of Raleigh 507.50
POP Resources 6,750.00
Xxxxxx Xxxxxxx Convergence Group 36,260.55
PR NEWSWIRE 1,125.00
Print 53.00
Proview, Inc 522.90
R Xxxxx 737.75
Raytheon Co d/b/a Raytheon Systems Co. 49,698.70
Readme.Doc Computer Books, Inc. 326.44
XX XXXXXXXXX 2,910.62
Xxxxxx Xxxx Xxxxxx Xxxx & Xxxxxxxxxx P. 66,976.51
Smith, Anderson, Blount, Dorsett, Xxxxxxxx 44,590.72
Spectrum Digital, Inc 2,029.00
Spring Valley Water 335.18
SSDS 1,200.00
Staples Credit Plan 4,670.32
Strategic Technologies 8,707.50
Summit Lake Apartments 825.00
SUN Information Systems Inc. 9,375.00
64
66
DEBTOR AMOUNT OWED
Xxxxx CFO Partners, LLP 12,000.00
TechExcel 5,190.13
The Alternative Mailing Solutions 21.54
The America Scandinavian Foundation 4,000.00
The Day Group 2,495.00
The Magazine of Graphic Design Thinking 54.00
The Mall Flower Shop 47.40
Time Warner Cable 9.20
Triangle Quality Solutions Inc 21,250.00
Triangle Vending of N.C. 646.80
Trinity Property Management Inc 500.00
TSC 32,531.62
United Van Lines, Inc. 16,179.65
US Office Products 23.85
Verisign, Inc. 349.00
Verizon 65.62
VideoFonics --
Vision Service Plan Insurance Co 226.62
Wachovia 760.42
Wall Street Journal 175.00
Washington Duke Inn --
West's Durham Transfer & Storage Inc 2,661.20
Xxxxxxx X. Xxxxxxx 323.51
Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx 5,212.50
Xerox Corporation 4,521.50
X.Xxxx 88.33
Xxxxx & XxXxx, Inc 1,305.00
TOTAL 1,292,170.99
ACCRUED LIABILITIES:
LIABILITY AMOUNT OWED
2101 - Payroll Liabilities $ 150.00
2202 - *Sales Tax Payable $ 1,259.70
2207 - MA P/R Taxes Payable $ 999.24
2211 - WA P/R Taxes Payables $ 15.00
2215 - 401K Payable $ 34,990.45
65
67
LIABILITY AMOUNT OWED
2220 - Flex Accounts Payable $ 12,604.73
2300 - Accrued Salaries Payable $ 140,368.08
2302 - Accrued Bonuses Payable $ 304,584.00
2305 - Accrued Vacation Expense $ 110,382.00
2355 - ST Deferred Royalty Revenue $ 352,778.00
2360 - Accrued Software Licenses $ 95,000.00
2399 - Sales Tax Payable $ 77.81
2450 - Accrued Liabilities $ 22,666.35
2451 - ST- Lucent Lease $ 65,789.43
0000 - XX - Xx Xxxxx Xxxxxx Leases $ 51,132.64
2453 - ST - Xxxxxx Xxxxxxxx $ 198,284.96
2455 - N/P PlusStation $ 200,000.00
2456 - N/P Capital Associates $ 65,000.00
2500 - N/P Xxxx Xxxxxxxxxx $ 1,550.00
0000 - XX - NP DFS Acceptance $ 5,628.27
2525 - N/P Officer $ 81,050.62
2526 - N/P - High Speed Net Solution $ 500,000.00
2530 - ST - N/P Xerox $ 8,532.89
2700 - LT Deferred Royalty Revenue $4,036,458.10
2650 - Raytheon Stock Purchase $ 79,517.94
TOTAL $6,368,820.21
=============
TBD (ITEMS SUBJECT
TOTAL LIABILITIES TO BE ASSUMED TO FINAL REVIEW)
66
68
SCHEDULE 3.2(A)(V)
HSNS EMPLOYEES FROM XXXXXX
Xxxxx, Xxxxxxxxxxx
Xxxx, Xx
Xxxxx, Do Xxxx
Xxxxxxx, Xxxxx
Xxxxx, Xxxxx
Xxxxxx, Xxxxx
Xxxxxxx, Xxxxxxx
Xxxx, Xxxxxx
Xxxxxx, Xxxxxxx
Xxxxxxx, Xxxxx
Xxxxxxxxxx, Xxxxxxx
Xxxxxxxxxx, Xxxxxx
Xxxxx, Xxxx
Xxx, Peng
Xxxxx, Xxxxxxx
Xxxxxx, Xxxxxxx
Panda, Xxxxxxxxx
Xxxx, Xxxxx
Xxxxxxx, Xxxxx
Xxxxxxx, Xxxxx
Xxxxx, Xxxxxx
Xxxxxxxxx, Xxxxx
Xxxxx, Xxxxxx
Xxxx, Jiangying
67
69
SCHEDULE 3.2(A)(IX)
HSNS RELEASEES
Xxxxxxx Xxxxxxxx
Xxxxxxx May
Xxxx Xxx
Xxxx Xxxxxxxxxx
Xxxx Xxxxxxx
68
70
SCHEDULE 3.2(B)(III)
CONSENTS
Assumed Contracts as listed on Schedule 1.1(g).
Phoenix Limited Partnership of Raleigh - landlord
BellSouth
AT&TMIS
Lucent
Dell Financial Services
XxXxxx Xxxxxx Leasing
Deutsche Financial Services
Xerox
69
71
SCHEDULE 3.2(B)(IV)
CERTAIN EMPLOYEES
Xxxxx, Xxxxxxxxxxx
Xxxx, Xx
Xxxxx, Do Xxxx
Xxxxxxx, Xxxxx
Xxxxx, Xxxxx
Xxxxxx, Xxxxx
Xxxxxxx, Xxxxxxx
Xxxx, Xxxxxx
Xxxxxx, Xxxxxxx
Xxxxxxx, Xxxxx
Xxxxxxxxxx, Xxxxxxx
Xxxxxxxxxx, Xxxxxx
Xxxxx, Xxxx
Xxx, Peng
Xxxxx, Xxxxxxx
Xxxxxx, Xxxxxxx
Panda, Xxxxxxxxx
Xxxx, Xxxxx
Xxxxxxx, Xxxxx
Xxxxxxx, Xxxxx
Xxxxx, Xxxxxx
Xxxxxxxxx, Xxxxx
Xxxxx, Xxxxxx
Xxxx, Jiangying
70
72
SCHEDULE 3.2(B)(X)
SUMMUS STOCKHOLDERS GIVING RELEASES
Xxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
Xxxx Xxxxxxxx
Xxx Xxxxxxx
Xxxx Ban
71
73
SCHEDULE 4.7
LIST OF CURRENT SUMMUS EMPLOYEES
Xxxxxxx, Xxxxxxx
Xxxxx, Xxxxxxxxxxx
Ban, Xxxx
Xxxxxx, Xxxxx
Xxxxxxxxx, Xxxx
Xxx, Xxxxx-Xxxx
Xxxx, Xx
Xxxxx, Do Xxxx
Xxxxxxx, Xxxxx
Xxxxx, Xxxxxxx
Xxxxxx, Xxxxx
Xxxxxx, Xxx
Xxxxxxx, Xxxx
Xxxxx, Xxxxx
Xxxxxx, Xxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx, Xxxx
Xxxx, Xxxxxx
Xxxxxx, Xxxxxxx
Xxxxxxx, Xxxxx
Xxxxxxxx, Xxxxxxxx
Xxxxxxxxxx, Xxxxxxx
Xxxxxxxxxx, Xxxxxx
Xxxxx, Xxxxx
Xxxxxxxxxxx, Xxxxxx
Xxxxxxxxx, Xxxxx
Xxxxx, Xxxx
Xxx, Xxxx
Xxxxx, Xxxxxxx
Xx, Xxxxx
Xxxxxxx, Xxxx
XxXxxx, Xxxx
Xxxxxx, Xxxxxxx
Panda, Xxxxxxxxx
Xxxxx, Xxxxx
Xxxx, Johan (contractor)
Xxxxxxx, Xxxxx
Rajcani, Xxxxx
Xxxx, Xxxxx
Xxxxx, Xxxxxxx
Xxxxx, Xxxxxxx
Xxxxx, Xxxxxx
Xxxxxx, Xxxx
Xxxxx, Junmei
72
74
Zhou, Jiangying
73
75
DISCLOSURE MEMORANDUM
74
