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Xx. Xxxxxxxx X. Xxxxxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxx Xxxxx, XX 00000
Xxxxxxx X. Xxxxxx
President, Xxxx.xxx, Inc.
0000 Xxxx Xxxxxxxxxxxxx Xxxxxxxx Xxxx.
Daytona Beach, FL 32114
Dear Xxxx and Xxxxxxx:
This letter confirms our agreement relating to Summus, Ltd. and Summus
Technologies, Inc. As we discussed, we have agreed to the following:
1. Xxxx Xxxxxxxx personally will lend $250,000 in cash in immediately
available funds to Summus Ltd. upon the execution of this agreement.
Contemporaneously with payment of this $250,000 to Summus Ltd., Summus
Ltd. will execute a convertible note for the $250,000. The note will
bear interest at 8% per annum and will be payable from the first
$750,000 payment regarding the Marketing Agreement referred to in
Section 2 below. If this note is not repaid when due, you will have the
option to convert it into 0.9% of the issued and outstanding shares of
Summus Ltd. common stock. It is understood that the $250,000 will be
used by Summus, Ltd. primarily to fund its operating expenses.
2. Summus, Ltd. and High-Speed Net Solutions, Inc., currently named
Xxxx.xxx, Inc. ("Net Solutions") will enter into a Marketing License
Agreement (the "Marketing Agreement") no latter than 40 days from the
execution of this agreement. This Marketing Agreement will contain
non-business terms and conditions substantially similar to the final
draft of the Marketing License Agreement from December 10, 1998,
relating to the previous ZAP transaction (the "Previous Agreement"). In
this regard, Net Solutions will have the sublicense rights specified in
and in accordance with the Previous Agreement. The basic business terms
of the Marketing Agreement will be as follows:
a. An initial three year term. After the initial three year term,
Net Solutions will have the option to renew the Marketing
Agreement for an upfront payment per year repayable against
royalties of the greater of (i) $2.5 Million or (ii) 15% of
the prior year's royalty payments to Summus, Ltd. under the
Agreement. The $2.5 Million will be paid in four equal monthly
installments, with the first payment being made at the
beginning of the additional term. This upfront
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payment will be repaid pursuant to the same formula used in
the repayment of the initial $3 Million advance as stated in
Section 2b hereof.
b. Net Solutions will have an exclusive right to sell the video
streaming product as such product was defined in the Previous
Agreement, except for the government market. Summus, Ltd. will
also have the right to market the video streaming products in
the OEM market. OEM video streaming sales royalties will be
divided 50/50 of net, with each party recouping direct costs
as documented. Until New Solutions recoups the initial $3
Million payment for the Marketing Agreement, the royalty
payment shall be split 70/30 of net, with Summus, Ltd.
receiving 30%, and the other 20% which otherwise would be
payable to Summus, Ltd. being applied to pay down the $3
Million. Summus, Ltd. retains the exclusive rights to sell the
video streaming product in the government market.
c. Net Solutions will have a non-exclusive license to sell the
other products, including newly developed products, of Summus,
Ltd. as defined in the previous Agreement.
d. Summus, Ltd. will receive seven and a half percent (7 1/2%) of
the Adjusted Gross Revenue (as defined in the Binding Letter
Agreement dated October 28, 1998) generated relating to Summus
products by Net Solutions outside of the OEM market. The full
amount of this seven and one-half percent (7 1/2%) will be
paid to Summus, Ltd. on a monthly basis, and there will be no
deductions from the royalties.
e. The terms and conditions of any OEM sale not involving video
streaming in which Net Solutions has involvement, including
the appropriate compensation for Net Solutions and Summus,
Ltd, will be determined through reasonable good faith
negotiations between Summus, Ltd. and Net Solutions on a case
by case basis.
f. With respect to the OEM Market, Net Solutions and Summus, Ltd
will work together and keep one another informed so that there
is no duplication of effort or confusion in the marketplace.
g. The parties will work together to develop appropriate pricing
so that neither party undercuts one another in the
marketplace.
h. The Marketing Agreement cannot be assigned or transferred
without the prior written consent of Summus, Ltd., which
consent will not be unreasonably withheld. Notwithstanding the
foregoing, the Marketing Agreement can be assigned to an
entity capable of performing under the Marketing Agreement
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that is not a direct competitor of Summus, Ltd. if Summus,
Ltd. receives a nonrefundable cash payment of the greater of
(i) $10 Million or (ii) 15% of the prior year's royalties paid
under the Marketing Agreement.
i. Net Solutions will pay $3,000,000 for this Marketing
Agreement. The $3,000,000 will be paid by Net Solutions in
installments of $750,000 over four months with the first
installment due upon the execution of the Marketing Agreement
and each remaining installment due at the end of each
successive one month period thereafter. The Marketing
Agreement will not be effective until the first $750,000
payment is made. Except for the first payment, with respect to
these payments, there is a thirty day cure period before the
Marketing Agreement terminates, but interest at 8% per annum
will accrue on any late payments. The $3 Million advance
payment is only recoverable from or against the royalties as
specified in Section 2b hereof.
j. Except as specifically enlarged herein, the Marketing
Agreement shall also contain the Marketing Rights granted in
the Xxxx Xxxxxxxx Agreement dated March 2, 1998, but Xxxx
Xxxxxxxx and/or his designee Xxxx Xxxxxxxx Direct or Net
Solutions shall be relieved of the advertising requirements
contained in the Xxxx Xxxxxxxx Agreement.
k. Except with respect to the video streaming product, there will
be no first refusal rights. With respect to any new product,
including, but not limited to, a chip, that directly or
indirectly suppliants, replaces, competes with, is similar to
in its function or intended use, or obsoletes the video
streaming product defined in the Marketing Agreement, New
Solutions will have first refusal rights to fund the
development, and such funding will include the right to market
the new product on an exclusive basis, on terms and conditions
mutually agreed upon by Summus Ltd. and Net Solutions through
reasonable good faith negotiations.
Notwithstanding anything contained in this section two, if the
Marketing Agreement is not executed with two weeks of this agreement,
for whatever reason, then Xxxx Xxxxxxxx will personally lend an
additional $150,000 in cash in immediately available funds to Summus
Ltd. on the first day of the third week following the execution of this
agreement. The terms of this note will be the same as the terms
contained in the note referred in Section 1, except for the dollar
amount.
3. Except for the payments contemplated by this agreement, Summus, Ltd.
will agree to compensate individuals (to initially include Xxxx
Xxxxxxxx, Xxxxxxx Xxxxxx, and Xxxx Xxxxxx) for equity capital invested
in Summus Ltd. on terms agreeable to Summus Ltd., such compensation in
accordance with the following formula: 5% on
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1st Million, 4% on 2nd Million, 3% on 3rd Million, 2% on 4th Million,
and 1% on all amounts over $4 Million.
4. Summus Technologies shall, unequivocally, and with all due speed merge
with Summus, Ltd. (or a merger subsidiary thereof) structured to be tax
free, on appropriate terms and conditions, once the Marketing Agreement
has been executed and Summus, Ltd. has obtained the first two $750,000
payments under the Marketing Agreement in accordance with section 2i.
Xxxx Xxxxxxxx (or his designee) and Xxxx Xxxxxxxxxx will receive the
same percentage ownership in Summus, Ltd. as they respectively own in
Summus Technologies. It is anticipated that prior to the merger Summus,
Ltd. will be redomiciled in Delaware. In the meantime, Xxxx Xxxxxxxx
agrees that we should move forward with the steps pertaining to the
Florida operations of Summus Technologies as outlined in our fax dated
January 5, 1999. Following the merger, Xxxx Xxxxxxxx and a designee
(Xxxxxxx Xxxxxx) will serve on a seven member board as Class One
members of a classified board, whereby Class One Directors will have a
three year term. If the Board is increased, Xxxx Xxxxxxxx will retain
the equivalent of 18% (rounded up) representation on the Board.
5. Within one year from the execution of this agreement, Net Solutions
agrees to deliver a $2.5 Million factorable Purchase Order that is
satisfactory to Summus, Ltd. for products of Summus, Ltd. the
specifications of which will be mutually agreed upon by you and Summus,
Ltd. Upon your execution of this agreement, you will receive common
shares of Summus Technologies equal to 3% of the issued and outstanding
common shares of Summus Technologies. Upon delivery of the purchase
order to Summus Ltd. and its acceptance, which will not be unreasonably
withheld, by Xxxxx Xxxxxxx, as the President of Summus, Ltd., you will
receive additional common shares of Summus Technologies up to 6% of the
issued and outstanding common shares of Summus Technologies as cash is
received for the purchase of products under the Purchase Order at a
rate of 1% per $277,777.78. If the above referenced nine (%) percent is
not issued, then Xxxx Xxxxxxxx (and his designees) specifically do not
waive any rights they now may have with respect to their existing
ownership claim thereto.
Xxxx, I think these are terms that are mutually beneficial to both Summus, Ltd.,
you and to Net Solutions and hopefully these will help make the Summus companies
a success. If you agree to the foregoing, I would appreciate your signing where
indicated below and returning this executed agreement to me. At that time, I
would appreciate your forwarding to Summus, Ltd. the $250,000, at which time
this Agreement will become effective.
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Sincerely,
/s/ Xxxxx Xxxxxxx
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Xx. Xxxxx Xxxxxxx
President
Xxxxxx, Ltd.
Summus Technologies, Inc.
Agreed and Accepted:
/s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx, as it applies to him individually
/s/ Xxxxxxx X. Xxxxxx 1/14/99
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Xxxxxxx Xxxxxx, President, Xxxx.xxx, Inc. (to be renamed High-Speed Net
Solutions Inc.)
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